Abstract
Combatting climate change necessitates a substantial global increase in renewable electricity capacity. Many low-income and lower-middle-income countries suffer from unfavorable green financing conditions. Fifteen of these countries possess substantial natural gas reserves. To overcome green financing constraints in such countries, we propose an integrated energy contract that awards a renewable energy project in parallel with an upstream natural gas project to interested energy companies. The state returns from the natural gas project provide a guarantee for renewable energy investments, reducing their associated risks. We conduct Monte Carlo simulations for each of the targeted countries after populating the input parameters for the upstream natural gas and renewable energy projects, including forecasting country-specific natural gas prices. When accounting for 10% of their existing natural gas reserves in the proposed contract, Nigeria, Myanmar, and Indonesia can achieve more than 60% of their 2030 renewable energy target capacity additions while countries with low access to electricity can significantly upscale their installed capacities. The guarantee mechanism provides protection levels exceeding 96% on renewable energy investments. The proposed contract enables the considered countries to increase their renewable energy capacities while inducing economic development.
Highlights
Academic Editor: David CarterClimate change is a global challenge that humanity faces and that necessitates a rapid transition to low-carbon energy systems [1]
To the best of our knowledge, this paper proposes, for the first time, a novel integrated energy contract that aims at overcoming green financing constraints by awarding a renewable energy project in parallel to an upstream natural gas project to an interested energy company
To illustrate the effect of r on the protection that the guarantee mechanism provides, we run the Monte Carlo simulations across the 15 countries for r = 0%, r = 25%
Summary
Academic Editor: David CarterClimate change is a global challenge that humanity faces and that necessitates a rapid transition to low-carbon energy systems [1]. When approaching the topic from the point of view of developing economies, especially those classified by the United Nations as lower-middle-income and low-income countries (referred to as lower-income countries in the rest of this paper), different considerations should be kept in mind. These countries are not the inducers of climate change [2]. At the energy systems level, increasing electricity production capacity and affordable access are on top of the energy agenda of these countries [5,6]. This favors the usage of fossil fuel-based solutions when these fuels are produced locally [6,7]
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