Private Sector Investment in the Clean Energy Sector in the Pacific Islands

Abstract

Most Pacific small island developing states (SIDS) have ambitious renewable energy targets which call for huge investment, a significant part of which is expected to come from the private sector (IFC, 2021). Although there are around 40 renewable energy projects across the Pacific SIDS either already operating, under construction, or planned for commissioning in the next decade, they are still heavily reliant on imported fuel. Given the huge funding gap in achieving the Sustainable Development Goals (SDGs) and climate objectives in developing countries, private financing has been advocated for as the solution for the shortfall, as it has a large pool of capital available and catalytic properties that could effectively scale-up the “reach” and the scope of influence of public financing (Samuwai, 2021). Private sector partners are particularly critical to supporting SIDS as they often struggle to access international capital markets due to their high debt levels, lack of creditworthiness or small market size (UN-OHRLLS, 2022). However, there is still a general lack of private sector financing in the renewable energy sector in the Pacific SIDS (PIFS, 2018; Samuwai, 2021). Whether private finance mobilisation for clean energy is realistic at the scales needed in the Pacific SIDS is not answered clearly in the literature, although much of it is based on the assumption that there is no real alternative to private sector investment. This rapid review hence explores some of the key drivers, constraints and opportunities to the mobilisation and scale-up of this private sector investment.