The Inter-American Development Bank (IDB) expects to direct as much as 80% of its loans for private sector energy projects over the next three years to renewable sources of energy including wind, geothermal, biomass, solar and hydroelectric capacity, IDB president Luis Alberto Moreno told a panel in Mexico.

Only 30% of IDB energy loans are currently being directed towards renewable projects.

Energy demand in Latin America and the Caribbean is expected to increase 50% by 2030, requiring estimated investments of about US$1.5tn, he said. In the next decade alone, the region will require a 26% increase in its installed capacity, according to the International Energy Agency.

Better regulations and falling equipment costs are boosting demand for private sector investments in renewable energy in Latin America and the Caribbean, particularly in wind power projects.

“Several countries in the region want to diversify their energy matrix and have changed their regulatory framework to attract more investment in clean energy,” said Hans Schulz, who heads IDB’s structured and corporate finance department. “Investment in the region is on the rise.”

Demand is increasing for multilateral financing because institutions like IDB can offer loans with maturities of up to 15 years, while a typical commercial bank would offer a loan with a maturity of no more than five years, Schulz said.

“Without long-term financing, these renewable energy projects cannot become a reality,” Schulz said. “As a result, multilateral support has been essential for many green energy projects to happen.”

Wind energy has become an important source of demand for IDB loans because new materials and turbine designs have slashed generation costs, making wind capacity an attractive alternative for both governments and companies in several Latin America and Caribbean countries.

IDB has financed US$3tn worth of renewable energy projects over the last decade, Moreno said. The bank approved US$1.2bn in financing for private sector projects last year, of which a third of the total was used to finance renewable energy and energy efficiency projects in the region.

Moreno and Schulz made their remarks at the opening session of IDB’s 51st annual meeting in Cancún, Mexico.

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