How Green Financing is Changing the Renewable Energy Market?

Growing interest in renewables is rapidly changing how energy projects are financed in America and around the world.

One of the biggest shifts has been an influx in outside money into the industry in the form of “green financing” — bonds, loans and other assets earmarked for renewable energy projects around the world.

The rise of the green financing market shows how investors are starting to take renewables more seriously — and it could signal a major transformation of the renewable energy market over the next few years.

Green Finance

Green Financing May Accelerate Renewable Energy Projects

Green financing is a catch-all term for investment in financial vehicles related to renewables and other green industries. Assets, bonds and funds related to renewable energy and other green investments make up the green financing market. In recent years, a robust green financing market has become widely viewed as essential to accelerating the development of new renewable energy technology projects.

Green finance is growing fast. In 2012, the sustainable debt market — including “green” and sustainable bonds and loans — was worth only around $10 billion, according to data from BloombergNEF. In 2018, just six years later, the market was worth nearly $250 billion.

Most of these gains came in the form of new green bonds (sometimes also called “climate bonds”), which are fixed-income investments designed to raise money for new renewable energy projects.

The growth of green financing represents a slow but noticeable divestment away from fossil fuels.

The pivot may also represent a change in how businesses are structured. The growing popularity of bonds as an investment vehicle may enable community co-ops rather than corporations to become a more viable business model for renewable energy providers. For example, the Westmill Solar Cooperative in the United Kingdom has raised more than £6 million ($7.94 million) through bonds offered to investors.

While coil, oil and natural gas are likely to remain a good investment in the short-term, the strength of the green financing market does seem like a signal that, over the next 10 to 20 years, non-renewables will become less and less tempting for investors compared to renewable and sustainable investments.

How Green Financing May Change Energy Around the World?

As the green finance market grows, regulators are beginning to codify what counts as a green investment.

In the EU, for example, regulators recently debated whether plastics manufactured from entirely recycled materials could count as a “sustainable” investment under European finance laws.

These new definitions and regulations may determine which industries receive major funding and which are left out of the green financing boom.

Nuclear energy, for example, is generally not regarded as renewable energy, but is sometimes considered sustainable. Nuclear power plants generate waste, but they also produce zero emissions, unlike fossil fuel-fired power plants.

Natural gas is also not considered renewable or sustainable, as it is a fossil fuel and produces significant carbon emissions when burned for power. However, some proponents of the energy source argue that it should be considered sustainable, as it produces significantly less carbon dioxide than similar fossil fuels.

green-financing

In 2019, EU regulators reached a deadlock over whether or not nuclear and natural gas power plants should count as sustainable investments. In a final compromise, EU lawmakers ruled that both nuclear and natural gas projects were neither included nor excluded in the definition of sustainable by default. Instead, projects would need to prove that they “do no harm” on a case-by-case basis.

Similar rulings and legal challenges could shape the future of energy as governments around the world grapple with the challenge of shifting away from fossil fuels.

A Coming Sustainable Energy Revolution

The rise of the green finance market may change what alternative energy looks like around the world. Legal debates over what should count as “renewable” or “sustainable” may affect which projects receive funding, while bonds and loans may make community cooperatives that provide renewable energy more practical.

As fossil fuels become less attractive to investors and the renewable energy market grows, green financing is likely to have major impacts on the future of renewables.

Financing of Solid Waste Management Projects

Financing of solid waste management projects can be pretty overwhelming for the city government, especially if the government see it as a critical part of the service they should render to the citizen and if the citizen also hold it as a basis for measuring the performance of the government and using it as one of the conditions for re-election.

The increasing cost of waste disposal is a cause of major concern in developing nations

Solid waste management entails different aspects. Generally speaking, waste management consists of pre-collection, collection, transportation, storage, treatment, and disposal. The modern hierarchy of waste management includes prevention, minimization, reuse, recycling, energy recovery, and disposal.

All these aspects require proper funding in rendering a good waste management service to the society. As citizens, we hardly give any thought to the different aspects and what it takes to ensure it is carried out efficiently and effectively.

Financing Options for Solid Waste Management

There are four different options for financing of solid waste management projects. The option chosen will be dependent on various factors. The chief factor will be “what is the end goal of providing waste management service to citizen” and this is to be determined by the city government. Therefore, we say finance option is directly related to waste management goal of a city or State.

Public Financing

This primarily involves funding of waste management service entirely by the government through budgetary allocation. The government determines how it will generate the cash for service and this can be through taxation or redistribution of funds generated from other sources like sales of city natural resources or combination of various sources of funds.

In developing countries, this is generally inefficient due to the corruption within the government and lack of proper waste management capabilities in most instances. The government might decide to charge a service fee or not.

Private Financing

This involves infusing funds from the private sector into waste management service and also overseeing day-to-day running of the service. However, the hired company will charge a service fee which will be determined by calculating the amount of invested funds, operating cost, and profit envisaged. This will be spread over a period of time.

This financing option can deliver optimal result in providing waste management service but the private sector needs to be checked in order not to set a high fee that will end up scaring citizens which might lead to citizen abhorring the service.

Public-Private Partnership (PPP)

This is a special type of arrangement which brings together the government and private sector in providing funds and management capabilities for the delivery of waste management service.

All things being equal, this arrangement is best because the government will be able to regulate and have a say in how the service should be delivered especially as it relates to the setting of service fees which might be difficult in the solely private financing option. The PPP can equally be extended to be a Joint Venture (usually termed as Institutional PPP).

Donors and Grants

This funding mechanism is dependent on the interest of the donor organization. While it is a good way to develop a city’s waste management infrastructure, attracting and utilizing grants is solely reliant on what the donor considers as important. Hence, it might be difficult for a city government to dictate how the funds should be distributed among the various aspect of waste management.

Waste management projects based on public-private partnership (PPP) model has more chances of success in developing countries

However, this type of financing can be combined with a PPP arrangement to cater for a specific waste management aspect that is in tandem with the interest of the donor and can be part of the city government contribution to the PPP.

Conclusion

In conclusion, waste management financing is quite dynamic just like many other services and infrastructure provided by a city government and the best option for financing the provision of waste management service can only be made after appropriate due diligence and consultation with relevant stakeholders has been made and observed.