Norwegian consulting firm Multiconsult has authored a new report on the business climate in Scandinavia to realize clean energy investments in developing countries. The report was commissioned by the Zero Emission Resource Organization (ZERO), the Norwegian Solar Energy Cluster and Norfund.
According to a joint statement by the organizations, a significant finding was the emergence of an industrial cluster in Norway. The combination of public support channeled towards Norwegian industry players, as well as substantial financial and industrial leadership from stakeholders are driving forces in this development.
“In the struggle against climate change, one of the most important battles is over whether developing countries will base their growth out of poverty on fossil or renewable energy,” says Marius Holm, CEO at ZERO, adding, “The report shows that Norway is about to establish an important cluster of businesses investing in renewables in developing countries, and that interesting policies are in place also in Denmark and Sweden to help win this battle.”
The report further highlights that public support commitments have so far been a driving factor for the emergence of Scandinavian renewable energy companies, although more progress could be made with new innovative approaches and strengthened support.
Overall, it finds that Norway, Denmark and Sweden all offer a comprehensive set of tools and funding approaches to support international power sector development, although Denmark and Sweden are said to perform more highly when it comes to offering guarantees and reducing investor risks.
There are also tenets to be drawn from the Danish experience, to further unlock such investments in Sweden and Norway, they add. After providing guarantees to lower risk for investors Danish pension funds have started to make investments in the renewables sector in developing countries.
Such a development could be particularly interesting in Norway, as its pension fund is at $983 billion one of the world largest. Motivating its administrators to make larger investments in the renewables sector could have beneficial implications.
For instance, Denmark disperses risks across entire portfolios, rather than specific projects, thus allowing high-risk projects to gain access to public support. Its model of providing guarantees and risk-mitigating instruments for energy and climate change related projects in developing countries has also unlocked large investments from pension funds.
Norway and Denmark both mention utilizing their local industries to realize projects. While Norway says it seeks to benefit from the economies of scale, expertise and experience of its local players; Denmark says it seeks to work in the interest of its industry players. According to the report, Sweden makes no such preferences.
Aiming to improve its offerings, the Norwegian Parliament has asked its government to consider a guarantee mechanism for renewable energy in developing countries, according to Holm. He hopes it will respond with a plan by spring 2019, which lays down the groundwork for mechanisms to attract more investments.
“Norway is developing a competitive advantage within renewable energy in developing countries. As for solar energy, this is the fastest growing energy source in the world in terms of installed capacity and is a market we want to take part in,” Trine Kopstad Berentsen, CEO of the Norwegian Solar Energy Cluster said.
“We, therefore, challenge the Norwegian government to take advantage of this opportunity to fight climate change, fight poverty and create sustainable jobs, all in one.”