Dubai: Foreign direct investment (FDI) and private public partnerships (PPP) will be “crucial” to transforming the renewable energy sector in emerging markets, a United Nations special representative said in Dubai on Monday. “If you want transformative change you have to look at FDI and PPPs,” said Kandeh Yumkella, UN undersecretary general and special representative for sustainable energy for all, at the 5th Annual Investment Meeting at the Dubai World Trade Centre.
Governments in emerging markets like Africa and Latin America will struggle to develop renewable energy projects without foreign investment and partnerships with private firms, he said.
In 2013, most of the $214 billion (Dh785.3 billion) invested into the renewable energy sector came from private investors, Yumkella said, of which $93 billion was invested in developing countries and $122 billion in developed countries.
FDI and PPPs are “more crucial when you look at energy,” Yumkella said. “We are going to need more innovations in risk management. There is a lot of unpredictability in energy markets,” he added, noting the collapse in oil prices last year that saw Brent, the international crude marker, fall from a high of about $115 a barrel in June last year to $45 this past June — a record six year low.
He said the governments should improve legal and economic framework to encourage investment including “partial guarantee schemes”.
Yumkella also said “in some cases” governments will need to offer subsidies, although acknowledging that governments could not be expected to take in losses from the private sector, adding that subsides could be offered on a basis of “around five years”.
