Urgent action required for a robust renewable energy sector

This week at COP28 in the UAE, participants will consider the global stocktake released by UN Climate Change. It’s a sobering read and a stark reminder that meeting our climate change targets requires accelerated action. The International Renewable Energy Agency, Global Renewables Alliance and COP have set the ambitious goal of tripling renewable power by 2030, reinforced by the pledge signed by 118 countries at COP28 for a threefold increase of installed renewable energy capacity.

Yet experience from the extractive sector shows that we don’t only need to agree on accelerated targets but also focus on how they are achieved. Without integrating transparency and accountability into renewable sector development, we cannot hope to achieve a renewable energy sector that will work in the public interest, continue to attract investment, maintain stakeholder rights, and reduce energy poverty. That’s why the EITI, together with a group of companies, think tanks and civil society organisations, today issued a call to action for advancing transparency and accountability in the renewable energy sector.

At risk

The speed and scale needed to reach net zero goals make the renewable sector prone to numerous corruption and integrity risks. According to recent research undertaken by the EITI, these fall broadly into three categories.

Institutional and regulatory gaps

First, the absence of clear rules and regulatory frameworks may lead to shortcuts in licensing, auction and contracting processes. In Bulgaria, excessive costs were incurred in a corruption-prone roll out of renewable energy projects resulting in a loss of public confidence in the energy transition. Experience from the extractive sector shows that a lack of transparency on regulatory processes can open channels for political influence and corruption. Subsidy programmes may be introduced with clear policy goals, but are at risk of misuse where eligibility criteria or disbursement rules are unclear.

A lack of transparency on regulatory processes can open channels for political influence and corruption.

There is a resounding case for contract transparency in the extractive sector and this applies to the renewable energy sector, too. In Brazil, the disclosure of company ownership structures has strengthened competition in the country’s wind power auction market, but elsewhere practice is lagging. Civil society is calling for clear positions in support of contract transparency and disclosure of project-level financial flows, in line with existing standards for the extractive industries, and extending to power purchasing agreements. Renewable energy firms are also seeing the value in seeking transparency of corporate ownership within investments, another safeguard that is increasingly a norm in the extractive sector.

Inadequate community engagement

Second, community safeguards for renewable sector projects may be at risk, due to inadequate community engagement, land acquisition processes vulnerable to abuse, and opaque community consultation processes. We need transparent, meaningful consultation processes. Perfunctory engagement that does not capture a diverse range of views and fails to ensure adequate representation of vulnerable groups,  ultimately puts projects at risk, as was the case with proposed renewable energy sector developments by Enel in Colombia.

We need transparent, meaningful consultation processes.

While communities hosting renewable sector projects hope to have a say in how project revenues are used, they also have high expectations around how such projects will meet their energy needs. Clear processes for decision-making and for information sharing will help secure lasting license to operate for renewable energy companies.

Implementation and operational risks

Finally, a lack of transparency may also jeopardise the speed and quality of project implementation in the renewable sector. Where politically connected companies are favoured in the allocation of projects, these may fail due to the lack of technical expertise or financial backing. Political influence may also be felt in supply chains, where the procurement of goods and service can be subject to conflicts of interest, nepotism and cronyism across a range of governance contexts.   

A one-off opportunity

The renewable sector offers the prospect of sustainable job creation and investment. A surge in investment in renewable energy technologies, such as solar, wind and hydropower, can create a wealth of employment opportunities in manufacturing, installation and maintenance of renewable energy infrastructure. It can reduce energy poverty, especially in cases where decentralised models for energy generation can be adopted.

We need transparency and accountability across eight areas of renewable sector development.

To deliver these benefits, we need transparency and accountability across eight areas of renewable sector development. The stakeholders shaping this bold call to action have identified policy and legal frameworks, contracts and licenses, community engagement, community impacts and benefits, company ownership, taxes and subsidies, anti-corruption safeguards, and supply chains as key areas where transparency is needed to ensure that the sector develops in a way that meets the needs of present and future generations.

Forging collaborative approaches

This call to action is a first step in promoting multi-stakeholder dialogue on governance of the renewable energy sector. It advocates for governments to integrate transparency into the management of their renewable energy sectors, companies to prioritise disclosure and good governance, and civil society actors to leverage disclosures to push for better project outcomes.

Without integrating transparency and accountability into renewable sector development, we cannot hope to achieve a renewable energy sector that will work in the public interest.

A space for dialogue across those stakeholders will be important. Multi-stakeholder platforms in the extractive sector have led to positive impacts, and organisations such as the EITI can share learnings to build a more resilient renewable sector. As large energy companies transition to grow their renewable sector business, their participation may also provide a mechanism for such lessons to be transferred.

Stakeholders who signed the call to action will convene early in 2024 to identify how they can work together in concrete ways to raise awareness of risks, support the application of good practices and raise standards across the sector. Such collaborative approaches are essential to realise the ambitious goals that we collectively need to fulfil. We hope that discussions at COP28 reinforce these messages and encourage more to join the conversation.