Renewable energy (RE) is central to achieving the Sustainable Development Goals (SDGs) and responding to the urgency of climate change. According to the United Nations, the availability of affordable and clean energy (SDG 7) is an explicit and interdependent goal “crucial for achieving almost all [16 other] SDGs,” such as eradicating poverty, improving health and education, supplying clean water, industrialization, and combating climate change. These are further emphasized through SDG 13 on climate action (UN 2018). The Paris Agreement on climate change, which became effective in 2016, places even greater prominence on scaling up RE as a key solution to limiting global temperature rise to no more than 2°C by 2100 and to “make best efforts to limit warming to 1.5°C” (World Bank, IFC, and MIGA 2016).

RE has experienced a dynamic expansion over the years through the development of multiple technologies and has the potential to scale up further in the future. The major RE technologies—hydropower, solar power, wind power, geothermal power, and biopower—produce over a quarter of the world’s electricity (figure 1.1). Hydropower, which has been the dominant technology by scale, makes up the highest proportion in the global RE mix, with a 62 percent share in 2017 (or 16.4 percent of total global electricity production). Around 2000, wind power began to expand at a globally significant scale, followed by a major scale-up of solar photovoltaics (PV) starting around 2008. Together, wind and solar PV made up 7.5 percent of global electricity produced in 2017. For the same year, biopower and geothermal—two long-standing technologies—produced less than 3 percent of global electricity. RE markets experienced a major transformation during the period assessed, with multiple technologies now showing a significant global impact (box 1.1). Future expansions of RE will need to navigate this anticipated continued market volatility.

Figure 1.1. Renewable Energy Share of Global Power Generation, 2017

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Figure 1.1. Renewable Energy Share of Global Power Generation, 2017

Source: REN21 2018.

Note: CSP = concentrated solar power; PV = photovoltaic.

A very large scale-up in RE is required to achieve global energy and environment goals, which needs to be set in motion immediately and sustained for several decades. Despite the expansion of RE, electricity produced from fossil fuels makes up nearly three-quarters of the global generation mix, since these technologies have also continued to grow. Therefore, the expansion of RE will need to accelerate and be sustained so that the growth of fossil-based technologies can be reduced without locking in a less sustainable pathway to meeting energy demand. Several studies propose different pathways to achieving such goals, but all options involve an unprecedented scale-up in RE.1 One such analysis by the International Energy Agency used in a 2019 report by the Intergovernmental Panel on Climate Change estimates that the RE share in the global energy mix will need to more than double by 2030 (consistent with the SDGs) and further accelerate to almost quadruple by 2040—a program of action commonly referred to as the clean energy transition (table 1.1). The 2019 Intergovernmental Panel on Climate Change report calls for “rapid and far-reaching” transitions in the energy sector (among others) to limit global warming to 1.5°C. It is estimated that such an expansion will double the present global level of investments in RE, from $300 billion to $600 billion (IEA 2017, 2019; IRENA 2017).

Source: Based on International Energy Agency forecasts for its Sustainable Development Scenario.

Note: 2030 represents a target consistent with meeting the Sustainable Development Goals. CSP = concentrated solar power; GW = gigawatt; PV = photovoltaic; TWh = terawatt-hour.

The World Bank Group has mainstreamed its support to RE and is committed to the SDGs and the climate goals in the Paris Agreement. The institution has a long history of financing hydropower, but its support for other RE technologies was initially modest and mostly for increasing electricity access, particularly in rural areas not served by the power grid. However, in 2004, the president of the Bank Group made a commitment at the Renewable Energy Conference in Bonn, Germany (the Bonn Commitment) to increase its lending for RE by 20 percent over five years (figure 1.2). This commitment coincided with the global expansion in wind and predated the boom in solar power that followed. After the Bonn Commitment, there was a notable uptick in the Bank Group’s financial support to RE covering all major technologies, averaging about $2 billion per year. The scale-up in funding extended to the greater involvement of the private sector, including through the International Finance Corporation and the Multilateral Investment Guarantee Agency—two institutions within the Bank Group. Although the Bank Group’s financing for RE is dwarfed by the $300 billion in annual global flows into the sector, the institution’s significant international role in supporting reforms, convening partners and mobilizing financing, and disseminating global experiences is a unique position of influence. It also explains the Bank Group’s interest in evaluating its performance in support of RE so that it is optimally geared to help client countries successfully navigate the clean energy transition.

Figure 1.2. World Bank Group Commitment to Renewable Energy, 2000–17

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Figure 1.2. World Bank Group Commitment to Renewable Energy, 2000–17

Source: World Bank Group 2018.

Note: The renewable energy portfolio evaluated includes 18 additional projects that had been approved previously and were evaluated in 2000 or later. IFC = International Finance Corporation; MIGA = Multilateral Investment Guarantee Agency.a. Total commitment amounts do not include issuances of MIGA guarantees.