Renewable energy is ‘cost-competitive’ despite high interest rates, experts say

Strong policy signals and regulatory frameworks are required to build manufacturing capacity in new markets

Solar panels on the rooftop of a parking garage in Hanoi, Vietnam. EPA

Renewable energy is “cost-competitive” despite high interest rates driving up financing costs in emerging markets and developing economies, one of the industry's leading voices has said.

Bruce Douglas, chief executive of the Global Renewables Alliance, told The National on the sidelines of the Cop28 climate conference in Dubai that interest rates affect the cost of capital in developing economies

Setting up renewable energy projects in these countries can be “two to five times” more expensive than in other markets, he added.

“Even with that, we're cost competitive, but we need a new approach to financing,” Mr Douglas said.

The GRA is a coalition of over various nations and influential organisations.

Mr Douglas called for more grants and zero-interest loans in developing economies to increase renewable energy deployment.

On Saturday, the Cop28 Presidency said that 118 countries had signed the global renewables and energy efficiency pledge.

The countries will commit to work together to triple the world’s current renewable energy generation capacity to at least 11,000 gigawatts by 2030, considering “different starting points and national circumstances”.

“We've heard that some countries [are] still interested in joining that initiative. It's a great start,” Mr Douglas said.

The next step for the renewables alliance is to push for “strong” and “unambiguous” language in the negotiating text, which would also include a review process to monitor and report progress to 2030 annually, he added.

The global shift to renewable energy comes as solar and wind – two of the most widely used sources – face supply bottlenecks.

The development of solar projects worldwide stalled last year, in part due to strict lockdowns in China, the world’s largest manufacturer of solar components.

“Without strong [and] stable market signals, we as an industry find it difficult to invest enough at the right time [and] in the right place,” Mr Douglas said.

“We need those strong policy signals … but then we also need some regulatory frameworks in place that allow us to give us the investor confidence to build manufacturing capacity in new markets, and have that growth trajectory,” he said.

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Meanwhile, higher interest rates and persistent high inflation have hit global growth momentum.

Last week, US Federal Reserve chairman Jerome Powell said it was too soon to say if the central bank's key interest rates were at a high enough level to moderate inflation.

Inflation has sharply declined since the Fed began its tightening cycle last year amid lower energy prices.

The doubling of renewable energy capacity by 2030 is “inevitable”, but the tripling is a “significant challenge”, Mr Douglas said.

“In many markets, it takes longer to permit a wind farm than it is to build one, which is ridiculous,” he said.

“In this current situation, we have a climate emergency [and] very short time. We don't have time for ambiguity.”

The International Energy Agency expects renewable energy to make up nearly half of the global electricity mix by 2030 under current policies.

In its World Energy Outlook launched last month, the agency estimated that there would be 10 times as many electric cars on the road worldwide by the end of the decade, with the share of renewable energy in power generation rising to 50 per cent from the current 20 per cent.