Unlocking Developing Countries’ Clean Energy Endowment: Funding structure for Renewable Energy Independent Power Producer Infrastructure Projects

Proceedings of The 5th International Conference on Business, Management and Finance

Year: 2022

DOI: https://www.doi.org/10.33422/5th.icbmf.2022.08.80

[PDF]

Unlocking Developing Countries’ Clean Energy Endowment: Funding structure for Renewable Energy Independent Power Producer Infrastructure Projects

Mohube Nkadimeng, Makgopa Tshehla

ABSTRACT: 

Emerging markets are facing energy challenges related to access to modern energy grids and funding for small independent power producers (IPPs). Existing funding structures and contributions by multidonor organisations are insufficient to scale up funding for the energy transition to renewable energy (RE) in the Southern African Development Communities (SADC) region. The main aim of this study is to examine the impact of current RE funding structures on the small IPP capital structure. Further, the study investigates how capital market and banking borrowing conditions affect the optimal capital structure of small IPP, particularly in rural communities. The research adopted qualitative methods and document analysis techniques to review and evaluate secondary material related to RE funding structures. The findings reveal that current energy funding structures fail to incorporate other financial instruments that attract the lowest interest, or no interest, denominated in local currency to fund energy projects in emerging economies. Therefore, this study will assist in bridging the funding gap for small IPP and promoting community involvement in RE projects. It contributes to developing a funding structure suitable for RE funding in emerging markets, particularly the SADC region.

keywords: capital structure, funding structure, independent power producers, renewable energy projects.