“Why is our firm interested in investing in renewable energy and energy efficiency?” asked Patrick Avato, climate business lead at IFC, in Wednesday morning’s POWER-GEN Europe panel on “Investing in existing and new assets: strategic options”.

His answer? “Because climate change is affecting our clients.” He pointed to rising energy prices in a number of countries, the growing cost and increasing scarcity of water for water-intensive power projects, and the growing risk areas of weather and policy. “As a private-sector arm of the World Bank,” he said, “we’re faced with the expectation that 80 per cent of our project financing should come from the private sector.” But why would the private sector invest so much, he asked? Is this actually an opportunity that can generate significant returns?

To answer this question, IFC conducted what Avato said is the first comprehensive study on “climate-smart” business in Europe, the Middle East and North Africa. The study found that the opportunity is “huge”: between now and 2020 it found $640bn in commercially viable investment opportunities, almost half of which are in the energy sector.   

Looking at specific countries, Russia is “not that interested in renewables” and “not an ideal investment climate”, yet IFC found that the size and structure of its economy and the age of its assets make it a big opportunity market. In its far east and Siberia there are off-grid locations with high power prices, and across the country there are aging power plants and infrastructure. Russia’s losses of power and heat due to an aging grid are equal to France’s total annual energy production, Avato said.

In addition to Russia, large swathes of central Asia such as Kazakhstan also feature large aging infrastructure networks, parts of which are not recoverable, but there are still significant opportunities in refurbishments and upgrades of district heating systems.

Other big-opportunity countries include the newest EU Member States and Poland, Romania and Turkey, the country with the fastest-growing energy market in the region. Opportunities for investment in renewable energy projects are strongest in eastern Europe, IFC found, while there are also big opportunities in upgrading existing power plant and transmission/distribution assets.

“We only invest in projects where we expect to make returns,” Avato concluded; “We think this region at this time, with these technologies, is a significant opportunity.”