The energy transition represents a transformative investment opportunity, with the world’s net-zero ambitions either coming to fruition or failing in the dynamic Asia-Pacific region, according to PricewaterhouseCoopers.
Funds are flowing into the region to help bridge the gaps in generation, transmission and other vital components of infrastructure.
With this at hand, financial leaders must understand that opportunities range from massively increasing new greenfield renewable energy projects such as solar and wind farms to pursuing less mature but equally appealing sectors such as green hydrogen and thermal energy.
Blended finance
According to PwC, the private sector cannot fund the transition on its own, especially in emerging markets, where the risk associated with new investments and new business models is high.
This is where blended finance, which is the combination of public- and private-sector capital, can help bridge the risk gap.
A recent PwC Strategy& report finds, by employing new types of financial instruments and engaging various stakeholders, such as multilateral institutions, blended finance can be a key tool in mitigating and allocating risk and in encouraging investors to engage with projects.
The pressing question for the entire Asia-Pacific region revolves around how it can raise and mobilise more blended finance in a more coordinated way, according to Jackie B. Surtani, regional director of the Asian Development Bank (ADB).
Focus on demand
Decarbonising energy supplies has long been the central focus of net-zero investment and activity.
For PwC, it has been increasingly noticeable that global investors and policymakers are expanding that focus to managing energy demand.
Managing energy demand will take effort on the part of both public-sector entities and private companies. Despite the significant potential for change, some chunk of the investments in demand management are unlikely to deliver immediately obvious returns for private finance. Some may even involve creative new funding structures and approaches.
Blended finance, therefore, will be essential in de-risking the capital investments needed and thus providing the incentive required for the private sector.
