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Most global warming was caused by developed countries, but combatting it is now the work of both developing and developed countries.  This fundamental inequality, and how to resolve it, is at the core of the United Nations Framework Convention on Climate Change (UNFCCC).  And of every climate change agreement since then, including of course the Paris Agreement of 2015 and the Marrakech Agreement of 2016.

In those various agreements, developed countries agreed to provide substantial – and subsidized – financing for climate change mitigation projects in developing countries which decide to be pioneers and champions of climate change mitigation, whether in renewable energy, transport, or other sectors.  In that context, the Climate Investment Funds (CIFs), including their climate change mitigation components, the Clean Technology Fund (CTF) and the Scaling Up Renewable Energy Program (SREP), were launched in 2008.  The CIFs were a precursor to the much larger Green Climate Fund (GCF) launched in 2015.  To date the GCF has more than US$10 billion in contributions.  It provides grants and highly-subsidized loans for public and private sector projects.  And both the public and private sectors need to become much more familiar with how it works and how to access it.

One of the key investment principles behind such financing is that each dollar should have maximum effect.  This means that projects should be transformational, i.e. not business as usual, and should have such a clear demonstration effect that the projects can be expected to be replicated elsewhere.  There is a well-known phenomenon in the development of a technology in which the technology has not yet crossed the “Valley of Death”.  In other words, the demand for that technology is low because its costs are high, and its costs are high because its demand is low – demand, and hence production, is not yet high enough to create economies of scale in the manufacturing of the technology.

Renewable energy technologies have faced the Valley of Death, and demand for some of them has been sufficiently stimulated by policy incentives (e.g. high feed-in tariffs and investment subsidies).  Examples of this are solar photovoltaics (PV) and wind power, which were transformational for the energy sector.  Subsidized financing, and other policy instruments, have taken PV and wind to the scale at which they no longer need substantial policy support.  They have crossed the Valley of Death and are going far beyond the other side.

However, the revolutionary transformation in the energy sector still to be completed is the one which provides continuous clean energy reliably 24 hours a day, 7 days a week, all year round.  That’s how fossil fuel-fired electricity generation can be fully replaced.  PV works only when the sun is shining, and wind power when the wind is blowing, even if they are now low-cost options when they are available.  They therefore need to be complemented by clean technologies which can store energy to use when the sun and wind can’t provide it directly.

One such option for storage is to generate heat from the sun, store the heat, and use it to generate electricity.  That is what solar thermal – or concentrated solar power (CSP) – does very effectively.  CSP can provide clean electricity 24/7/365, using thermal storage (e.g. storing heat in a salt solution).  Its costs are falling as its use scales up, but – at only 5000MW of CSP currently in operation globally – it’s not yet safely on the far side of the Valley of Death.  Policy incentives are still needed to scale up demand, and achieve those full economies of scale in manufacturing of the equipment.

One region of the world where CSP is particularly productive is the large, dry, cloudless and sunny deserts of the Middle East and North Africa (MENA).  Therefore, that’s the region where any global subsidies can achieve a particularly substantial scale up of the use of CSP technology.  For that reason, the CTF adopted a US$5.6 billion CSP Investment Plan for MENA in 2009, which resulted in the successful 500MW Noor CSP plants in Morocco (a 10 percent increase in the global capacity of CSP).

The CTF subsidized funds catalyzed a package of other concessional and non-concessional financing from public and private sources, and led to a weighted average cost of capital (WACC) of only about 4 percent for those projects.  A WACC as low as 4 percent would have been impossible to achieve otherwise, and the scale up of CSP in sunny MENA would therefore have been much slower to happen without the CTF.  CSP would have stayed on the wrong side of the Valley of Death for longer.

Recent CSP prices in Dubai, Australia and Chile, and China’s large scale-up of CSP, suggest that grid competitiveness for CSP is not too far away, but there is still some distance to cover.  Fortunately, the availability of concessional financing for climate change mitigation in MENA is still substantial.  There are some funds remaining in the CTF and SREP, and even larger funds in the GCF, which has been barely tapped for MENA so far, and not at all for energy storage or CSP.

The GCF is the story waiting to happen for CSP and energy storage in MENA. For example, Jordan, Egypt, Tunisia, Morocco, Algeria, Libya or Lebanon could propose CSP projects to the GCF, and benefit from comparable WACCs to those which enabled the Noor CSP plants.  There are plenty of GCF-accredited financial institutions active in MENA that could support such projects: for example, AFD, KfW, FMO, JICA, EBRD, AfDB, the World Bank, and IFC. Which will be the first one to bring low WACCs from the GCF to MENA to enhance the regional and global scale-up of CSP?  Maybe governments, utilities, and the private sector just need to ask….