Grants

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Overview

Grants can be provided for demonstrations, pilot projects, to develop the market or to buy down the cost of the technology. Grants for finance have often been used to develop “revolving funds” for renewable energy finance. Unfortunately their long term success rate has been low.

Grants often originate from private foundations, but can also be provided by international development organizations like the World Bank (WB), the ADB, the GEF, U.N agencies, bilateral funding organizations and governments.

GRANTS
Advantages		Disadvantages
Relatively simple to implement. The money received is not expected to be paid back. Experimental and unproven technologies can be used with lowered financial risk to implementers. Don't require ongoing administration.		Usually a complicated process must be followed to access grant funding that may take years to complete. If grants are made in return for equity, then the public sector is involved in the control of projects, which may lead to poorer perfomance and the crowding out of private financing. There often is a loss of flexibility in purchasing, administration, project location and system designs since donor agencies place many requirements on the implementation process. Low levels of leverage as it directly replaces possible private financing. A large administrative cost to meet donor requirements is common. No return on capital that could have been used to finance further projects. High risk in terms of avhieving objectives as they don't create incentives for delivery.
Source:Wade, H. (2005). Financing Mechanisms for Renewable Energy Development in the Pacific Islands.

Further Information

• Hydropower - Grants & Subsidies
  

References