Smart Energy Finances: COP27 climate finance reports

Smart Energy Finances: COP27 climate finance reports
Photo: 123rf

This week’s Smart Energy Finances highlights the climate financing reports that were released to form an importance basis for discussions by governments at the UN Climate Change Conference (COP27).

Also on the radar are a green financing facility opened by the EBRD in Jordan and the announcement of a regional balancing market to be opened in Latvia by 2025.

Four climate reports for COP27

A key Committee dealing with climate finance published four new reports that are hoped to form an important basis for discussions by governments at the UN COP27 in Sharm el-Sheikh, Egypt, which has been taking place from 6 to 18 November 2022.

The reports provide clarity on where the world stands in its efforts to mobilise the billions of dollars needed every year to green economies and build resilience to the inevitable impacts of climate change.

The reports published by the UNFCCC’s Standing Committee on Finance (SCF) build upon the experiences of countries, multilateral development banks, climate funds and the financial community at large.

The reports evaluate current climate finance flows, progress towards achieving the goal of mobilising $100 billion per year, definitions on climate finance and efforts to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

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The reports show that while there has been an increase in the overall global climate finance flows, key targets to mobilise climate finance for developing countries have not been met.

At the same time, governments and multilateral institutions have been working on methodologies, policies and approaches to improve the implementation of climate finance targets and scale up the effectiveness of climate finance from all sources globally.

One of the reports, the Fifth Biennial Assessment and Overview of Climate Finance Flows, shows that global climate finance flows were 12% higher in 2019-2020 than the previous biennium, reaching an annual average of $803 billion. The increase was mainly driven by more investment in energy efficiency in buildings, electric vehicles and measures to adapt to climate change, such as building new defences against flooding.

A technical report on progress towards jointly mobilising $100 billion per year also found that the energy sector accommodated the vast majority of climate financing during the targeted period 2016 to 2020, with energy and transport amounting to a combined 46%.

And with COP27 currently underway, it will be interesting to see what more is needed to reach our net-zero targets.

Baltic TSOs to open regional balancing market

Latvian electricity transmission system operator JSC Augstsprieguma tīkls (AST) in cooperation with Estonian and Lithuanian TSOs will introduce a regional market by the beginning of 2025, where operators will buy balancing reserves necessary for the operation of the electricity transmission system.

Currently, maintenance of a stable power system frequency is provided centrally from the Russian power system. After synchronising with the European energy system, operators of the electricity transmission systems of the Baltic States will have to independently ensure frequency regulation and continuous, accurate balancing of consumption with electricity supplies.

Ensuring the balance of electricity will require use of more balancing reserves, along with the connection of rapidly increasing wind and solar power plants to the electricity grid.

“A regional balancing reserve market is being created to expand the circle of suppliers of balancing reserves, [to] increase competition and create favourable conditions for new investments in the infrastructure of balancing reserves”, explained AST board member Gatis Junghāns.

The Baltic TSOs (including Elering, AST, Litgrid, Svenska kraftnät, Statnett, Energinet, Fingrid, PSE and 50Hertz) predict that the amount of balancing reserves to be purchased will double in 2025, and will triple by 2030, compared to the amount of balancing reserves currently maintained in the Baltic energy system. The types of balancing reserves required are also expected to expand.

An adequacy assessment of balancing resources carried out jointly by Baltic TSOs in 2021 indicated a possible risk of a deficit of balancing reserves by 2025.

Therefore, as a temporary solution, the operators intend to use their resources for the partial provision of the necessary balancing reserves in the Baltics.

Initially, they plan to maintain approximately 20% of the total amount of necessary balancing reserves with their own infrastructure, then gradually reduce their participation and switch to purchasing all reserves in the market.

Green financing facility for Jordan

The European Bank for Reconstruction and Development (EBRD) and the Green Climate Fund (GCF) are together providing $10 million to Cairo Amman Bank (CAB) to strengthen climate investments in Jordan.

The financial package, of which $2.5 million was co-financed by the GCF, will enable CAB to extend sub-loans to small and medium-sized enterprises (SMEs) that invest in climate change mitigation and adaptation technologies and services.

This is the first facility to CAB under the GCF-GEFF Regional Framework in Jordan and will include a Technical Cooperation (TC) package funded by the EBRD, the European Union and GCF.

The TC package will include an assessment of the optimal technology for better integrating climate change practices into the local private MSMEs and households targeted. It will also include technical advice on the implementation of the proposed energy investments as well as sessions to raise awareness and build capacity in relation to climate change mitigation and adaptation technologies. Eligible sub-borrowers are also expected to receive investment incentives funded by the European Union.

The loan agreement was signed by Jürgen Rigterink, EBRD first vice president and head of client services group, and Kamal Al-Bakri, chief executive officer of Cairo Amman Bank.

Cairo Amman Bank is the sixth-largest bank in Jordan, with total assets of $5.2 billion as of 30 June 2022. While CAB focuses predominantly on retail operations, it is a universal bank that offers a wide range of products and services including micro, SME and corporate lending.

Also of interest:
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From unicorn to Gigacorn: the climate finance startup with a ‘secret sauce’

For this and more news on the finance and investment scene within the energy industry make sure to follow our column, Smart Energy Finances Weekly.

Yusuf Latief
Content Producer, Smart Energy International

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