Barriers and Risks to Renewable Energy Financing - Revision history

Gabriela Gemio at 10:01, 16 March 2017

2017-03-16T10:01:52Z

Gabriela Gemio at 10:01, 16 March 2017

2017-03-16T10:01:04Z

Gabriela Gemio at 09:59, 16 March 2017

2017-03-16T09:59:42Z

Gabriela Gemio at 09:59, 16 March 2017

2017-03-16T09:59:40Z

Gabriela Gemio: /* Further Information */

2017-03-16T09:58:35Z

Further Information

Henry Webel at 15:10, 5 November 2015

2015-11-05T15:10:51Z

Show changes

Wiki Gardener at 12:21, 13 October 2014

2014-10-13T12:21:52Z

Show changes

Fungai Cecilia Sandamu at 13:44, 25 August 2013

2013-08-25T13:44:52Z

Fungai Cecilia Sandamu at 12:21, 25 August 2013

2013-08-25T12:21:28Z

Fungai Cecilia Sandamu at 12:00, 25 August 2013

2013-08-25T12:00:48Z

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 *<div>[https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/SREP_financing_instruments_sk_clean2_FINAL_FOR_PRINTING.pdf Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]</div>
-*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div>
+*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div></div></div>
-*[[Risks in Energy Access Projects|Risks in Energy Access Projects]]''' - This article includes an example of activities to be carried out during a project’s preparation to reduce the occurrence of risks or their influence at any point in a project’s life. It also contains an extensive list of risks (technological, institutional, geo-political, financial/economic, social and environmental) and suggestions on how to minimize, mitigate or control these risks during the life cycle of a project. In addition there is a brief explanation of risk management and how to prioritize risks. The last section leads to experiences applying de-risking approaches for rural electrification and further reading. &nbsp;
+*[[Risks in Energy Access Projects|Risks in Energy Access Projects]]'''- '''This article includes an example of activities to be carried out during a project’s preparation to reduce the occurrence of risks or their influence at any point in a project’s life. It also contains an extensive list of risks (technological, institutional, geo-political, financial/economic, social and environmental) and suggestions on how to minimize, mitigate or control these risks during the life cycle of a project. In addition there is a brief explanation of risk management and how to prioritize risks. The last section leads to experiences applying de-risking approaches for rural electrification and further reading. &nbsp;
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 *<div>[https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/SREP_financing_instruments_sk_clean2_FINAL_FOR_PRINTING.pdf Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]</div>
 *<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div>
-**'''[[Risks_in_Energy_Access_Projects|Risks in Energy Access Projects]]''' - This article includes an example of activities to be carried out during a project’s preparation to reduce the occurrence of risks or their influence at any point in a project’s life. It also contains an extensive list of risks (technological, institutional, geo-political, financial/economic, social and environmental) and suggestions on how to minimize, mitigate or control these risks during the life cycle of a project. In addition there is a brief explanation of risk management and how to prioritize risks. The last section leads to experiences applying de-risking approaches for rural electrification and further reading. &nbsp;
+*[[Risks in Energy Access Projects|Risks in Energy Access Projects]]''' - This article includes an example of activities to be carried out during a project’s preparation to reduce the occurrence of risks or their influence at any point in a project’s life. It also contains an extensive list of risks (technological, institutional, geo-political, financial/economic, social and environmental) and suggestions on how to minimize, mitigate or control these risks during the life cycle of a project. In addition there is a brief explanation of risk management and how to prioritize risks. The last section leads to experiences applying de-risking approaches for rural electrification and further reading. &nbsp;
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← Older revision		Revision as of 09:59, 16 March 2017
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		+	[[Category:Financing_and_Funding]]

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 [http://www.plugintheworld.com/mobisol/product/ Mobisol]&nbsp;tries to close the financing gap by getting loans&nbsp;and financing as a big company and then collect the money from costumers on long term in small rates by [https://en.wikipedia.org/wiki/M-Pesa M-PESA].<ref name="Mobisol">Mobisol explanation: http://www.plugintheworld.com/mobisol/product/ , visited 2015/11/05</ref><br/>
 = Further Information<br/> =
 *<div>[https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/SREP_financing_instruments_sk_clean2_FINAL_FOR_PRINTING.pdf Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]</div>
-*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div><br/></div><br/></div>
+*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div>
 = References =
 <references /><br/>

@@ Line 561: / Line 561: @@
 [http://www.plugintheworld.com/mobisol/product/ Mobisol]&nbsp;tries to close the financing gap by getting loans&nbsp;and financing as a big company and then collect the money from costumers on long term in small rates by [https://en.wikipedia.org/wiki/M-Pesa M-PESA].<ref name="Mobisol">Mobisol explanation: http://www.plugintheworld.com/mobisol/product/ , visited 2015/11/05</ref><br/>
 = Further Information<br/> =
 *<div>[https://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/SREP_financing_instruments_sk_clean2_FINAL_FOR_PRINTING.pdf Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]</div>
-*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><br/></div>
+*<div><div>[[Portal:Financing and Funding|Financing and Funding Portal on energypedia]]</div><div><br/></div><br/></div>
 = References =

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 == Lack of Long-Term Financing ==
-RE technologies tend to have high up-front costs and low ongoing operating costs, making access to long term funding for such projects a necessity. Without long-term financing, investment decisions are biased toward conventional technologies that can be [[File:RET Cashflow Profile.PNG|frame|right|150px|Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds|alt=Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]]financially viable with shorter-term loans. In many developing countries long-term financing is difficult and sometimes impossible to get. This is in part due to regulatory or other restrictions on long-term bank lending. A lack of experience with RE technologies also means that potential financiers may feel unable to assess the risks involved, and there may also be a lack of matching funding sources.
+RE technologies tend to have high up-front costs and low [[File:RET Cashflow Profile.PNG|thumb|right|400px|Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds|alt=Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]] ongoing operating costs, making access to long term funding for such projects a necessity. Without long-term financing, investment decisions are biased toward conventional technologies that can befinancially viable with shorter-term loans. In many developing countries long-term financing is difficult and sometimes impossible to get. This is in part due to regulatory or other restrictions on long-term bank lending. A lack of experience with RE technologies also means that potential financiers may feel unable to assess the risks involved, and there may also be a lack of matching funding sources.
 Long-term financing also depends on investors who are looking for long-term assets to match the profile of their liabilities such as pension funds. In developing countries, such funds either don’t exist or limit investment activities largely to the purchase of government debt owing to its low risk<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>.
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 == High costs of resource assessments ==
 Resource uncertainties are a problem for all technologies but in differing ways. For geothermal projects, the greatest risk comes at the time of resource appraisal when expensive drilling of exploratory wells is needed.
 <br/>
-== High exposure to regulatory risks  ==
+== High exposure to regulatory risks ==
 While all energy projects face regulatory risk, RET projects are particularly vulnerable to changes in the regulatory framework. Their lack of cost competitiveness means that these projects are generally dependent on a supportive regulatory framework to proceed—including commitments to pay premium prices, priority access to electricity grids including support for the necessary infrastructure investments, and guarantees of purchases of their output. Severe problems for project viability can arise where the regulatory framework changes.
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 == High financial cost relative to other technologies ==
 <div>
 The high costs of RETs relative to conventional generation technologies are a key risk to their success. These higher costs are exacerbated by the high cost of funds in many underdeveloped financial markets (for example, borrowing costs as high as 16–18 percent have been quoted for Nepal and among other SREP pilot countries, lending rates of 16.5 percent and 15.1 percent have been reported by the International Monetary Fund [IMF] for Ethiopia and Honduras). The high up-front capital costs of many RETs compared to conventional technologies further worsen their commercial position and make costs a concern.
 For grid-connected projects, the high cost of RETs can be overcome, at least in part, through priority rights to dispatch and/or must-take obligations on off-takers. This means that these projects are effectively removed from having to compete for dispatch with other lower-cost conventional technologies. The higher costs imposed on off-takers of purchases from RET projects are generally recovered from electricity customers as a whole—either through the monopoly power of the off-taker or, where the electricity market is competitive, through some form of levy or universal charge.
 But if costs are too high relative to alternatives, affordability concerns may mean that such priority treatment is not given. There may <span style="line-height: 1.5em; font-size: 0.85em;">also be concerns whether RET projects that are more expensive than conventional alternatives will have commitments to pay them honored, whether governments will continue to make the necessary funds available to cover the obligations of publicly owned off-takers, or whether attempts will be made to renegotiate these commitments on the grounds of affordability.</span>
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 == Uncertainties over resource adequacy ==
 Without high-quality assessments of renewable energy (RE) resources, the risks of RE projects are greatly magnified, and private financing will be correspondingly harder to obtain. Resource assessments for wind, hydro, and biomass in particular need to be available on a site-specific basis (that is, general assessments such as wind atlases are not sufficient for project financing) and for an extended period (at least one year of reliable and auditable data, for example). Even then, the risk remains that output—and therefore cash flows—will be less than expected, whether due to lack of rain or wind.
 For solar projects, the problems are somewhat different. There are extensive databases available on solar resources worldwide; whether conditions are adequate for PV technology can be estimated with a fair level of certainty. The situation is rather different for the use of concentrating solar power (CSP), which is only suitable in a limited number of locations and where careful investigation of resources continues to be required. But CSP remains a much more immature technology, and therefore may not be suitable for most LICs or at least for the transformative purposes envisaged by this paper.
 Geothermal projects face a particular risk in that the assessment of resources involves the drilling of expensive exploratory test wells, which may not succeed in finding adequate resources. The costs of these wells are high and the combination of this high cost and risk of failure may deter exploration of geothermal resources in the first place. As a result, while many countries claim that they have significant geothermal recourses, very little potential has been developed so far. Even where an exploration program is successfully completed, there are continued risks of resource adequacy from the failure of production drilling wells and the degradation of the geothermal reservoir over time.
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-== Uncertainties over Carbon Financing  ==
+== Uncertainties over Carbon Financing ==
 The sale of Certified Emissions Reductions (CERs) through the Clean Development Mechanism (CDM) is a widely recognized source of revenue for RET projects in LICs, and one that can help reduce their costs relative to conventional technologies (in effect acting as a form of subsidy). But unless some way can be found to mobilize this potential revenue source up front, it is unlikely to help at the time of project development and implementation.
 There are significant uncertainties over the timing and amounts of revenues from the sale of CERs. The process for registration of projects is long and the outcome uncertain, particularly if a new methodology is involved. Prices can also be volatile. The main benchmark price is that set under the EU Emissions Trading Scheme (ETS), which collapsed to almost zero during 2008. Finally, there is the uncertainty over the CDM post-2012 created by the lack of a replacement for the Kyoto Protocol, which forms the basis for the mechanism.
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 = Financing Barriers =
-== a) Lack of Long-Term Financing ==
+== Lack of Long-Term Financing ==
 RE technologies tend to have high up-front costs and low ongoing operating costs, making access to long term funding for such projects a necessity. Without long-term financing, investment decisions are biased toward conventional technologies that can be [[File:RET Cashflow Profile.PNG|frame|right|150px|Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds|alt=Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]]financially viable with shorter-term loans. In many developing countries long-term financing is difficult and sometimes impossible to get. This is in part due to regulatory or other restrictions on long-term bank lending. A lack of experience with RE technologies also means that potential financiers may feel unable to assess the risks involved, and there may also be a lack of matching funding sources.
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-== <span style="font-size: 18.88888931274414px; line-height: 23.33333396911621px;">b) Lack of Project Financing</span> ==
+== <span style="font-size: 18.88888931274414px; line-height: 23.33333396911621px;">Lack of Project Financing</span> ==
 RE technology projects also seek to access funds on a project finance basis. With project finance the security for the loan comes from future project cashflows and little/no up-front collateral is required. There is still however, the need for a share of the project to be funded from equity. This type of funding allows RE technology projects to spread their costs over the project lifetime, funding the high-upf ront cost fro the positive cahsflows generated during operations. The alternative to this would be to rely heavily on equity funding, payments to which can be delayed until the later years of the project <ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref>.
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-== c) High and Uncertain Project Development Costs ==
+== High and Uncertain Project Development Costs ==
 RE technologies projects are quite vulnerable to changes in the regulatory framework. Due to their lack of cost competitiveness, these projects are dependent on a supportive regulatory framework to proceed—including commitments to pay premium prices, priority access to electricity grids including support for the necessary infrastructure investments and guarantees of purchases of their output. Severe problems for project viability can arise where the regulatory framework changes<ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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-== d) Lack of Equity Finance ==
+== Lack of Equity Finance ==
 While large numbers of renewable energy technologies (RETs) project developers exist, there are only limited numbers of large-scale project sponsors, particularly among those operating in low-income countries, with the ability and willingness to fund RET projects on a corporate finance basis. RET projects are generally smaller than conventional generation projects and this is reflected in the size of developers. The high risks of investment in many LICs, whether inside or outside the energy sector, will also tend to deter many larger energy companies based in more developed economies leading to a lack of equity<ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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-== e) Small Scale of Projects ==
+== Small Scale of Projects ==
 The small scale of many RET projects creates significant problems in obtaining private financing. Economies of scale in due diligence are significant, and many larger financial institutions will be unwilling to consider small projects. Typical due diligence costs for larger projects can be in the range of $0.5 million to $1 million. International commercial banks are generally not interested in projects below $10 million, while projects up to $20 million will find it difficult to obtain interest.4 But lower limits may apply for domestic and regional banks operating in smaller economies, particularly where these lack the resources themselves to make large-scale loans<ref name="Scaling-up Renewable Energy in Developing Countries: Finance and investment perspectives, K Hamilton (April 2010). Chatham House: Energy, Environment & Resource Governance Program Paper 02/10. (http://www.chathamhouse.org.uk/research/eedp/papers/view/-/id/874/).">Scaling-up Renewable Energy in Developing Countries: Finance and investment perspectives, K Hamilton (April 2010). Chatham House: Energy, Environment & Resource Governance Program Paper 02/10. (http://www.chathamhouse.org.uk/research/eedp/papers/view/-/id/874/).</ref>.
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 = Risks of Renewable Energy Projects =
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@@ Line 460: / Line 460: @@
 == a) Lack of Long-Term Financing ==
-RE technologies tend to have high up-front costs and low ongoing operating costs, making access to long term funding for such projects a necessity. Without long-term financing, investment decisions are biased toward conventional technologies that can be [[File:RET Cashflow Profile.PNG|frame|right|250px|Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds|alt=Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]]financially viable with shorter-term loans. In many developing countries long-term financing is difficult and sometimes impossible to get. This is in part due to regulatory or other restrictions on long-term bank lending. A lack of experience with RE technologies also means that potential financiers may feel unable to assess the risks involved, and there may also be a lack of matching funding sources.
+RE technologies tend to have high up-front costs and low ongoing operating costs, making access to long term funding for such projects a necessity. Without long-term financing, investment decisions are biased toward conventional technologies that can be [[File:RET Cashflow Profile.PNG|frame|right|150px|Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds|alt=Source: The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds]]financially viable with shorter-term loans. In many developing countries long-term financing is difficult and sometimes impossible to get. This is in part due to regulatory or other restrictions on long-term bank lending. A lack of experience with RE technologies also means that potential financiers may feel unable to assess the risks involved, and there may also be a lack of matching funding sources.
 Long-term financing also depends on investors who are looking for long-term assets to match the profile of their liabilities such as pension funds. In developing countries, such funds either don’t exist or limit investment activities largely to the purchase of government debt owing to its low risk<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>.
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 == <span style="font-size: 18.88888931274414px; line-height: 23.33333396911621px;">b) Lack of Project Financing</span> ==
 RE technology projects also seek to access funds on a project finance basis. With project finance the security for the loan comes from future project cashflows and little/no up-front collateral is required. There is still however, the need for a share of the project to be funded from equity. This type of funding allows RE technology projects to spread their costs over the project lifetime, funding the high-upf ront cost fro the positive cahsflows generated during operations. The alternative to this would be to rely heavily on equity funding, payments to which can be delayed until the later years of the project <ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref>.
 RE technologies are more exposed to the limited availability of project financing than most conventional technologies as the share of capital costs in their total cost is much greater<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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 == c) High and Uncertain Project Development Costs ==
-Renewable energy technologies (RET) projects are particularly vulnerable to changes in the regulatory framework. Their lack of cost competitiveness means that these projects are generally dependent on a supportive regulatory framework to proceed—including commitments to pay premium prices, priority access to electricity grids including support for the necessary infrastructure investments and guarantees of purchases of their output. Severe problems for project viability can arise where the regulatory framework changes<ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
+RE technologies projects are quite vulnerable to changes in the regulatory framework. Due to their lack of cost competitiveness, these projects are dependent on a supportive regulatory framework to proceed—including commitments to pay premium prices, priority access to electricity grids including support for the necessary infrastructure investments and guarantees of purchases of their output. Severe problems for project viability can arise where the regulatory framework changes<ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
-<br/>
+Furthermore, such projects are often located in enevironmentally and socially sensitive areas. For example with larger solar and wind projects, land use requirements can be very significant. All theses factors make it necessary for RE project sponsors to have access to significant amounts of funds to cover the costs of project development prior to reaching financial close. Generally such funds come from their own resources orf rom sources of risk capital. In developieng countries the small size of potential RE technology project sponsors means that this route of funding is limited. Generally there is little availabilty of risk capital in developing countries financial markets <ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>.
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 == d) Lack of Equity Finance ==
-Linked to both the need for long-term project financing and limited access to preinvestment financing is the challenge posed by the lack of equity finance available for many if not most RET projects. While large numbers of
+While large numbers of renewable energy technologies (RETs) project developers exist, there are only limited numbers of large-scale project sponsors, particularly among those operating in low-income countries, with the ability and willingness to fund RET projects on a corporate finance basis. RET projects are generally smaller than conventional generation projects and this is reflected in the size of developers. The high risks of investment in many LICs, whether inside or outside the energy sector, will also tend to deter many larger energy companies based in more developed economies leading to a lack of equity<ref name="Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm">Renewable Energy Financial Instrument Tool (REFINe). Available at: http://www-esd.worldbank.org/refine/index.cfm</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
-Risk capital is considered to be funds that are seeking high returns and are willing to assume high levels of risk to achieve these. RET project developers exist, there are only limited numbers of large-scale project sponsors, particularly among those operating in LICs, with the ability and willingness to fund RET projects on a corporate finance basis. RET projects are generally smaller than conventional generation projects, and this is reflected in the size of developers. The high risks of investment in many LICs, whether inside or outside the energy sector, will also tend to deter many larger energy companies based in more developed economies.
+This lack of equity capital means that project sponsors are often unable to cover the costs of development activities without external assistance. But, as highlighted above, access to risk capital of the type required is limited in LICs. The lack of equity capital also increases the dependence on project financing, as sponsors are unable to provide collateral for loans or to put up large amounts of equity. As a result, loans have to be secured against future cash flows, given the absence of alternatives<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
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 == e) Small Scale of Projects ==
-The small scale of many RET projects creates significant problems in obtaining private financing. Economies of scale in due diligence are significant, and many larger financial institutions will be unwilling to consider small projects. Typical due diligence costs for larger projects can be in the range of $0.5 million to $1 million. International commercial banks are generally not interested in projects below $10 million, while projects up to $20 million will find it difficult to obtain interest.4 But lower limits may apply for domestic and regional banks operating in smaller economies, particularly where these lack the resources themselves to make large-scale loans.
+The small scale of many RET projects creates significant problems in obtaining private financing. Economies of scale in due diligence are significant, and many larger financial institutions will be unwilling to consider small projects. Typical due diligence costs for larger projects can be in the range of $0.5 million to $1 million. International commercial banks are generally not interested in projects below $10 million, while projects up to $20 million will find it difficult to obtain interest.4 But lower limits may apply for domestic and regional banks operating in smaller economies, particularly where these lack the resources themselves to make large-scale loans<ref name="Scaling-up Renewable Energy in Developing Countries: Finance and investment perspectives, K Hamilton (April 2010). Chatham House: Energy, Environment & Resource Governance Program Paper 02/10. (http://www.chathamhouse.org.uk/research/eedp/papers/view/-/id/874/).">Scaling-up Renewable Energy in Developing Countries: Finance and investment perspectives, K Hamilton (April 2010). Chatham House: Energy, Environment & Resource Governance Program Paper 02/10. (http://www.chathamhouse.org.uk/research/eedp/papers/view/-/id/874/).</ref>.
 While household, micro, and mini systems are obviously far below these limits, even larger grid-connected RET projects are generally smaller than their conventional counterparts. As a result, they often struggle to attract funding from larger financiers. These very small systems also face the problem of lack of local demand in rural areas, leading to underutilized assets and worsening financial returns and attractiveness to financiers<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds.</ref>.
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