– Breaking the world’s reliance on fossil fuels and accelerating the global uptake of renewable energy will play a decisive role in diminishing the threat of global warming to the survival of life on earth, according to experts. But turning the vision into reality will demand unwavering political will and, critically, massive investment, which can no longer be shouldered solely by aid and development partners.
It is a challenge that the Commonwealth Secretariat, the inter-governmental organisation representing 54 Commonwealth nations, has taken on. Now it is launching an initiative at the United Nations COP26 Climate Change Conference in Glasgow to propel the ability of Small Island Developing States (SIDS) to attract major investors with sound compelling business cases.
The summit will be a key setting to leverage “the toolkit into different partner working platforms, such as the Climate Investment Platform, increase collaboration among partners and drive joint action with SIDS on energy transition ahead of other key milestones in 2022 and beyond, including the Sustainable Energy for All (SEforALL) Forum in Rwanda and Commonwealth Heads of Government Meeting (CHOGM) to be held in 2022 and COP27 to be held in Africa,” Alache Fisho, the Commonwealth Secretariat’s Legal Adviser on Natural Resources in London told IPS.
The SIDS Toolkit, a digital tool for governments, developed by the Commonwealth Secretariat and the international development organisation, SEforALL, is currently being trialled in the Seychelles, an archipelago nation of 99,000 people, located in the Somali Sea east of the African continent.
Converting the country’s energy system to renewables is imperative for future stability and prosperity, as climate change threatens development gains. “The livelihood of the islanders is being threatened here with sea-level rise. What we are seeing is greater coastal erosion, increased temperature rises and coral bleaching. We are also getting an increasing frequency of cyclones in the region,” Tony Imaduwa, CEO of the Seychelles Energy Commission in the capital, Victoria, told IPS.
In Caribbean and Pacific Island nations, as well, air temperatures are becoming hotter, weather patterns more unpredictable, while sea-level rise is eroding finite land, destroying crops and contaminating freshwater resources.
Last year, an overwhelming 80 percent of the global energy supply was still generated by fossil fuels and only 12 percent by renewables. This puts the world on track toward a devastating temperature increase of 2.6 degrees Celsius by the end of the century, claims the International Energy Agency (IEA).
And the bill for importing oil, which comprises 95 percent of primary energy in the Seychelles, is an enormous fiscal burden on the government and its development goals. “It is a drain on our foreign exchange reserves, our earnings, and there is the whole volatile nature of the price. When the price goes up, you get the costs going up, the cost of food goes up, services go up, the electricity cost goes up, transportation goes up. There is the risk associated with the supply, too,” Imaduwa told IPS.
The Seychelles has a human development ranking of 67 out of 189 countries, the second-highest in the African region, and all citizens have access to electricity. But many other SIDS bear much higher levels of energy poverty. In the Pacific Islands, about 70 percent of households lack access to power.
It is, therefore, no surprise that clean energy, which will be more affordable to islanders, is a national priority. The majority of SIDS are committed to achieving 100 percent renewable energy by 2030.
Renewables, ideal for standalone systems, are a good fit for island nations where populations are often scattered across numerous islands separated by vast areas of the ocean. And weather conditions are a great advantage, especially for wind and solar energy. Despite clean energy only comprising 5 percent of the energy mix in the Seychelles, the momentum has begun. The first wind farm was established near the nation’s capital, Victoria, in 2013, and increasingly homes and businesses are installing rooftop solar panels.
But there are challenges to securing the large capital investment needed for complete conversion. In many cases, the lack of strong institutions, enabling regulatory frameworks and small energy markets limit the appeal of the energy sector in SIDS to the private sector and international financiers.
“The Seychelles is no longer considered a Least Developed Country; it is an emerging economy now. So, there is a slight concern from the government that it will not be able to access concessionary loans anymore from multilateral development banks and also that there will be fewer countries that are providing overseas development assistance to the country,” Dr Kai Kim Chiang, the Commonwealth Secretariat’s National Climate Finance Adviser in the Seychelles, told IPS. “The Seychelles is a small country, so they do have challenges in attracting investors because it is a really small market here, and so then the potential for the return of investment is potentially quite small.”
Yet, about US$4 trillion will have to be injected into clean energy growth by 2030, if the global temperature rise is to be restricted to 1.5 degrees Celsius above pre-industrial levels, reports the IEA. And 70 percent of this will need to be spent in developing and emerging countries.
To this end, the SIDS Toolkit empowers governments to draft investment-grade business cases. First, key data about the economic and energy status of the Seychelles, for example, about employment, Gross Domestic Product (GDP), utility electricity cost and carbon emissions, is entered into the digital application. The toolkit then analyses the data to provide a detailed cost-benefit analysis of development and transition scenarios and identifies the state’s key investment strengths. It also pinpoints where reforms are needed to boost investor confidence, such as deficiencies in legal and institutional capacity.
“It will assist in terms of formulating strategies to unlocking investment in the energy sector in the Seychelles, and that is something that is missing for us. We are focussing on a lot of plans and policies and implementation, but sometimes we struggle on how to bring these together and create a platform that allows us to say, OK, we have a plan, yes, we want to invest in this area, but how do we do it,” Imaduwa said.
The SIDS Toolkit is designed with a broad range of potential investors in mind, including multilateral and private sector financial institutions. However, Fisho emphasised that private sector involvement is “very important”, especially as many renewable energy technologies entail large capital expenditure. “Moreover, the renewable energy technologies are fast evolving. The private sector can bring the required finance and expertise in the deployment of modern technologies,” she said.
Despite the detrimental economic impact of the pandemic worldwide over the past two years, Fisho makes a strong case for the priority of spending on the energy transition. “The pandemic has highlighted the need to transition towards clean energy in SIDS to increase energy security and economic resilience. Investment in renewable energy is consistent with supporting recover better and more resilient economic development, thereby creating more sustainable green jobs and decent income opportunities for current and future generations,” she declared.