The Inter-American Development Bank (IADB) is ramping up its lending for green private sector projects in Latin America and the Caribbean.
The IADB’s capital increase agreement was announced at its annual meeting in Uruguay on Friday and calls for 25% of its lending portfolio to support climate change and environmentally-friendly initiatives, including renewable energy.
The increase agreement reflects the rise in demand from its 26 borrowing members, IDB says in a statement.
Last year, the IDB approved US$736mn in financing for private sector environmentally-friendly projects, compared with the US$663mn invested between 2000 and 2010. For 2012, the IDB expects to approve more than US$700mn in financing for private sector renewable energy projects, particularly wind, solar and hydropower plants.
The push for renewable forms of energy comes as Latin America and the Caribbean face strong pressure to meet demand.
According to the International Energy Agency, energy demand in the region is expected to increase by 50% by 2030 because of increased private transport and land use changes, requiring estimated global investments of up to US$1.5trn.
The first agreement to be signed under IADB’s increased budget plan is with Japan International Cooperation Agency (JICA).
The banks will provide up to US$600mn for renewable energy and energy efficiency projects in Central America and the Caribbean over the next five years.
The financing will benefit IDB member countries that are already eligible for JICA financing: Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Guyana, Honduras, Jamaica, Nicaragua, Panama and Suriname.
Under the agreement, the IDB and JICA have created two different co-financing schemes: joint-co-financing, in which the IDB will match the financing provided by JICA in each project; and parallel co-financing, in which each organisation will separately finance specific components of an eligible project.
JICA will provide US$300mn in concessional financing for the facility, which could potentially mobilise another US$300mn from the IDB’s own resources if all projects are financed under the joint co-financing scheme.
“We are considering potential projects in the areas of hydroelectric power plant rehabilitation, photovoltaic power generation, and installation of energy saving facilities and equipment,’’ says Toshitaka Takeuchi, energy specialist and technical contact for the agreement at the IDB’s energy division.
“In addition we will explore financing opportunities for geothermal power generation considering its significant potential in the region.”