Several new insurance solutions have potential to facilitate more investment flow towards sustainable energy Product
Africa Energy Guarantee Fund
Product
Geothermal Reservoir Output Insurance
Overview
New insurance pool, in the form of a Mutual Insurance Association, supported by capital from EIB, DFIs, and the European Commission.
Overview
Applicability
Renewable energy, energy efficiency, and energy access
There are high upfront costs and uncertainty around the success of initial drilling for geothermal reservoirs, a key stage for determining resource economic potential.
Applicability
Renewable energy in OECD and emerging markets
Enhance access to political and credit risk insurance for the African energy sector
Objective
Insurance can help overcome lenders hesitation given many project developers active in geothermal energy have insufficient balance-sheet strength. Also provides project developers with greater certainty that activities will be de-risked to enable secondstage financing to flow for geothermal power plants.
Approach
Insurance encourages private equity and other providers of third-party capital to help finance development of geothermal reservoirs by adjusting the risk-return expectations.
Providers
Parhelion-GeothermEx, KfW, Munich Re, Africa Union Commission ‘s Geothermal Risk Mitigation Facility
Insights
DFIs should identify other early stage risks that similar products could address with some tailored support
Objective Approach
Provides access to reinsurance capacity and by lowering reinsurance costs, helping to manage transaction and country limits, managing local and third country content issues (required for Export Credit Agencies), and giving access to local underwriting knowledge
Providers
European Investment Bank
Insights
DFI initiatives that help backstop mainstream private sector can form an effective mechanism to leverage public capital employed. Similar, linked funds could also be developed for Asia and Latin America, allowing experience to be shared and risk pooling to be broadened over time.
A Finance Committee Report 2015
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