Continued rise of solar requires 'urgent' financial reforms: Global Solar Council

The emergence of solar energy as a top source of new generation to meet rising energy demand requires a fresh approach to financing, according to the Global Solar Council.

The group, in a June 24 report, called for "urgent reforms" of solar sector finance and broader financial systems to unlock global investments and value chains needed to reach climate and energy targets. That includes a goal set at the 2023 UN Climate Change Conference, or COP28, in Dubai to triple renewable energy generating capacity by 2030. Solar is expected to contribute about half of the resource additions.

Despite investments supporting the addition of nearly 700 GW of new solar capacity annually, there is a "significant finance gap" in developing countries, the Global Solar Council said. The report cited "perceived and actual risks" that undermine investor appetite, driven mainly by low credit ratings for governments and utilities and a lack of project pipelines.

"Finance must become the catalyst for energy equity -- not a barrier," CEO Sonia Dunlop said in a statement. "Our message to policymakers, development banks, and the private sector is simple: If we want to scale up solar deployment to 1 TW per year, we have to bring down the cost of finance for solar projects large and small around the world. A typical project that today gets 15% cost of finance needs to come down to 5%. We need to find ways of de-risking these projects."

Concessional and blended finance could lower the cost of capital to 5% from 15%, according to the council, a global solar industry association created on the sidelines of COP21 in Paris in 2015.

The report is the first from the Council's Finance Task Force, which is chaired by representatives of Chinese photovoltaic manufacturers JinkoSolar Holding and Trina Solar. Four of the report's authors are from Jinko, two are from the Global Solar Council and two are from sustainability data and tech company MioTech Information Technology (Shanghai).

Seeking solutions

The report found that scaling solar will depend on utilizing low-cost private capital for both solar and energy storage. Global investments should expand across the value chain, including into research and development, recycling, energy storage and workforce skills development.

"The global funding gap, especially in high-risk markets, is exacerbated by underutilization of concessional capital and skewed private-sector allocations that favor downstream project finance over upstream innovation and end-of-life solutions," the report said.

"Fragmented" environmental, social and governance requirements add to compliance burdens and investor uncertainty, reducing capital flows and increasing gaps across the solar value chain.

In addition, geopolitical uncertainties, including the fate of the US clean energy tax credits, are contributing to financing uncertainty, according to the trade group.

The Global Solar Council provided several recommendations, including bolstering capital flows through public-private coordination and addressing geographic and value chain imbalances to ensure fair access to capital in high-risk segments or underfunded solar segments.

The Council also called for streamlining ESG frameworks with global standards and disclosure tools, utilizing innovative financial models and expanding battery-backed solar projects through investment approaches that treat storage as a core infrastructure rather than as an add-on.