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Low-cost finance for the energy transition report

GS Paper 3

Syllabus: Infrastructure (Energy), Environment, Indigenisation of Technology and Developing New Technology


Source: IRENA


Context: The IRENA released the ‘Low-cost finance for the energy transition’ report.


The International Renewable Energy Agency (IRENA):

  • It is an intergovernmental organization (an official UN observer, founded in 2009, HQ – Masdar City, Abu Dhabi) mandated to facilitate cooperation, advance knowledge, and promote the adoption and sustainable use of renewable energy.
  • It is the first international organization to focus exclusively on renewable energy, addressing needs in both industrialized and developing countries.

Need for low-cost finance for the energy transition:

  • The energy transition is essential to achieve the 5°C climate target under the Paris Agreement.
  • Hence, for a sustained energy transition, it is essential to ensure that low-cost finance is available to both emerging markets and advanced economies.


Highlights of the report:

  • Success story: Renewable power generation technologies, notably solar photovoltaic and onshore wind power, have become mature and competitive.
  • Other technologies: Such as offshore wind, hydrogen electrolysers, energy storage and heat pumps, need to be deployed at faster speeds, and greater scales.



  • policies to support industry innovation: Particularly during the early R&D (in enabling technologies, business models, market design and system operation) to foster commercially mature solutions with reduced costs.
  • Green hydrogen: To enable end-use technologies utilising hydrogen, as well as the expansion of infrastructure to harness this potential.
  • Investment in energy transition technologies: With a focus on renewable energy, energy efficiency, electrification and enabling infrastructure – end-use electrification – to fully capture the benefit of renewable power.


Case of India:

  • The renewable energy sector:
    • It has seen unprecedented growth driven by national targets of 175 GW of renewable energy capacity by 2022 and 500 GW of non-fossil fuel capacity by 2030.
    • India ranked third on the Renewable Energy Attractive Index in 2021, and its solar and wind power base is the fourth largest in the world.
  • IREDA’s role in India’s Energy Transition: The Indian Renewable Energy Development Agency Limited (IREDA) was established by the Ministry of New and Renewable Energy as a renewable-energy-focussed non-bank finance corporation in 1987.
  • India Sovereign Green Bond Issuance: To mobilize private sector capital for sustainable development and lower the cost of capital for green projects by tapping into new investors.


Way ahead to ensure low-cost finance for the energy transition:

  • Blended capital needs to be urgently mobilised: From the domestic and international capital resources of the private and public sectors.
  • Domestic financial markets are critical: Since they provide diversified funding sources (corporate bond markets) to avoid currency risk and help mitigate macroeconomic shocks.
  • G20 members have a wealth of experience: In facilitating access to low-cost finance and can share valuable knowledge on innovative financing solutions to reduce the cost of capital.


Conclusion: Low-cost capital for financing energy transition projects could be possible through a deeper public-private collaboration on the journey to a net-zero future.


Insta Links:

India’s just energy transition is more than a coal story


Mains Links:

“Access to affordable, reliable, sustainable and modern energy is the sine qua non to achieve Sustainable Development Goals (SDGs)”. Comment on the progress made in India in this regard. (UPSC 2018)