Why renewable projects need finance, grids and long-term buyers

A signed renewable-energy agreement is only a set of commitments; getting power onto the grid also depends on construction, connections and coordination among the parties, says Mark Bowman of the European Bank for Reconstruction and Development (EBRD). There is no single obstacle that applies to every project.

Daniel Calderon says emerging markets need more well-capitalized developers with the engineering, environmental and financing skills to prepare projects properly. His firm has found projects that sat for a decade or more with inadequate road design or other development work. He thinks more disciplined developers could create more opportunities in markets that are less competitive than Europe.

Halil Demirdağ says the obstacles vary: some places need a grid built, while others need a connection to an existing network or clearer planning authority. In Türkiye, he says, giving the energy ministry some planning authority improved visibility for investors who otherwise faced demands from many different bodies.

Demirdağ says Türkiye has entrepreneurs and a solar supply chain, including cells, modules, transformers, steel structures and cables. What it still needs, in his view, is finance and government support to connect projects quickly. He also argues that public resistance to new grid infrastructure can slow progress.

Antha Williams asks how REACT, the partnership between Türkiye's energy ministry and EBRD, can turn renewable targets into investment. Bowman says the platform brings government, development banks and other partners around one country-led plan, addressing finance alongside grid connections and regulation.

Türkiye's target is 175 gigawatts of wind and solar by 2040, roughly three times the current level, Bowman says. He estimates that reaching it will require around $300 billion. The ministry sets direction; EBRD and partners including the World Bank and IFC help prepare projects and give private investors a visible pipeline.

Bowman says similar country-led platforms exist in Egypt, North Macedonia, Kazakhstan and Uzbekistan, although each is shaped by its market. The common idea is that government ownership and a comprehensive plan allow development banks and private investors to coordinate behind an ambitious policy agenda.

Asked about Turkish solar's biggest challenge, Demirdağ answers: money. He says 36–38% of the country's electricity was generated from imported coal and gas in the previous year, a dependence he traces back decades. Cheaper wind, solar and storage offer a way to change that, in his view.

Demirdağ says storage can balance the system and should be considered alongside wind and solar. He argues that clean electricity is now the cheapest choice even before accounting for climate or environmental benefits. His industry association has changed its name to reflect both solar and storage, he says.

Demirdağ says his company operates in more than ten countries and sees the energy transition advancing across them. Williams turns to Calderon and a 500-megawatt Egyptian wind project backed by debt from European development lenders, asking what made its financing possible.

Calderon says construction has begun on two 250-megawatt wind farms in Egypt, with an investment of more than $620 million. Roughly $430 million is debt from EBRD, the European Investment Bank and DEG, while Alcazar and its fund investors provide around $200 million in equity.

The first requirement for raising project finance, Calderon says, is a project that makes economic sense. He puts the cost of gas-fired electricity in Egypt at 13–14 cents per kilowatt-hour and says the wind project will supply power at about three cents under a 25-year fixed-price contract. He estimates annual savings of $150 million for the government.

The project had spent 15 years in development, Calderon says, and needed roads, environmental and other preparatory work done properly before lenders could participate. Even then, he says, the financing did not initially add up when the developers wanted to use European equipment.

Calderon credits a European Commission guarantee facility for helping the lenders support the project and European equipment. He says long-term power contracts are central to making projects financeable: in Egypt his firm also worked on another investment with a 25-year price, and in the western Balkans a US technology company agreed to buy power from four wind farms, supporting over €500 million in financing.

Williams asks where a development bank can have the greatest effect, since public institutions cannot fill the entire investment gap themselves. Bowman says EBRD's role includes proving projects are commercially viable and creating markets in which private investors can eventually take over.

For every euro EBRD invests, Bowman says it directly mobilizes about two euros in private finance on average; that figure excludes wider changes to the market. The bank can take risks others cannot price or will not accept, using tools such as guarantees, local-currency lending and taking the first loss if a project fails.

Bowman says concessional finance—funding offered on more favorable terms than the market—is scarce and should be used carefully, only when needed to make a project or market transformation happen. The goal is not just to fund individual projects but to create conditions in which others will invest.

Williams cites plans for roughly $200 billion in Turkish renewable and grid investment by 2035 and asks what financiers misunderstand. Demirdağ says Turkish banks have grown and, in his view, can support around $10 billion a year. He also says changes to central-bank rules have made it easier for banks to provide green loans.

Demirdağ says authorities have also moved to offer some projects directly to investors, with contracts supported by the government system. He says Turkish electricity-market participants have been paid and puts the electricity pool at about $35 billion. He sees renewable investment as aligned with reducing imports of coal, gas and oil.

Demirdağ estimates Türkiye spends $60 billion to $100 billion a year importing energy. He expects the planned investment to be found domestically or by investors and banks, but says international finance could speed it up. His argument is that climate and financing should both cross borders.

As an example of a financing barrier, Demirdağ points to export-credit banks that offer cheap loans only if borrowers buy equipment from their country. Longer, cheaper financing can lower the cost of electricity for the public and accelerate the transition, he argues; he says Turkish projects have 20-year government contracts.

Asked what he would tell investors worried about emerging-market risk, Calderon acknowledges that investors have lost money in those markets. He says Alcazar has targeted roughly $5 billion in project enterprise value across its funds and experienced a loss ratio below 1%, which he attributes to identifying and managing the main sources of loss.

Calderon identifies currency as one risk: in some markets, including Türkiye, projects can earn revenue in dollars or euros. Construction risk is another. His firm uses contractors that promise delay payments if plants are late; he says such payments have in some cases increased returns on delayed projects.

The third risk is political, including a government taking a plant. Calderon says all of the firm's projects so far have political-risk insurance. He reports net returns above 20% and says insurance costs about 1% of returns, arguing that currency terms, contractor guarantees and insurance can make project risk more manageable.

Calderon says the challenge is getting investors to examine individual projects rather than treating all emerging markets alike. He says every investor who has come through his firm's due diligence has invested, and argues that a growing number of developers are working in a disciplined way.