Renewable energy ambitions hinge on bankable projects, investor confidence: IFC

Sri Lanka’s ability to attract private investment into renewable energy will depend less on its generation potential than on its capacity to deliver bankable projects, credible contracts and predictable procurement, International Finance Corporation (IFC) Regional Infrastructure Industry Manager for Bangladesh, Sri Lanka and Nepal Edore Onomakpome said.

Addressing the Sri Lanka Economic and Investment Summit 2026, Onomakpome said the country was starting from a position of strength, with near-universal electricity access, a substantial hydropower base, relatively low network losses and renewables accounting for more than half of annual electricity generation.

However, she cautioned that these advantages alone would not be sufficient to attract investment at scale, particularly as Sri Lanka seeks to integrate more wind and solar power while maintaining reliable and affordable electricity supplies.

“The success metric is not the number of entities being created, but whether each entity can plan, contract, recover costs and actually finance its investments,” she said, emphasising the need to translate electricity-sector reforms into commercially credible institutions and projects that investors and lenders can finance.

The challenge, she said, was to move beyond adding generating capacity towards building an entire ecosystem capable of integrating variable renewable energy, modernising transmission and distribution networks, expanding storage and reducing the overall cost of electricity supply.

Comparing Sri Lanka with other Asian markets, Onomakpome said the country performed reasonably well on electricity access, hydropower and network efficiency, but lagged in the depth of procurement, financing structures and the pipeline of projects ready for investment.

“Vietnam offered lessons in scaling up renewable energy and coordinating transmission planning with generation growth,” she said. The Philippines demonstrated the value of transparent competition, bankable contracts and a deeper private-sector generation ecosystem, while Thailand provided examples of predictable procurement, established counterparties and stronger domestic financing.

She said Sri Lanka should selectively adapt these approaches rather than attempt to replicate any one market.

The priority was to combine the country’s renewable energy base and relatively compact electricity system with clearer regulation and more dependable project execution to compete for international capital.

“It’s not a case of one size fits all,” she said, noting that lessons from regional markets needed to be tailored to Sri Lanka’s own circumstances.

Onomakpome identified currency mismatches as a structural obstacle to renewable energy investment, particularly when projects earn revenue in rupees but borrow in US dollars.

The limited availability of long-tenor rupee financing and the size of the domestic banking pool also constrain funding options. Meanwhile, investors can compare opportunities in Sri Lanka with those in larger neighbouring markets, including India.

Regulatory uncertainty, contractual risks and concerns over the financial strength of electricity purchasers can affect the predictability of project cash flows, influencing both borrowing costs and the returns required by equity investors.

She also highlighted a less visible, but critical constraint which is inadequate project preparation before opportunities are offered to the market.

Land availability, environmental and social compliance, permits, grid interconnection and procurement arrangements need to be addressed in advance if projects are to meet the standards expected by lenders and investors.

“We tender projects and then we struggle with actually having these projects financed,” she said, pointing to the gap between launching procurement and ensuring projects can reach financial close.

The implication is that announcing tenders or identifying renewable energy capacity is not enough. Projects must be sufficiently developed, contractually sound and financially structured before investors are approached.

Onomakpome said Sri Lanka had made progress in changing the legal framework and unbundling the electricity sector into separate entities. However, the effectiveness of those reforms would ultimately depend on how the new institutions performed.

She identified four linked priorities: building commercially credible institutions, ensuring transparent and competitive procurement, strengthening grids and storage to accommodate variable renewable energy, and evolving market arrangements through mechanisms such as wheeling, open access and stronger corporate demand.

Over time, interconnection and green electricity products could also expand opportunities beyond the domestic market, she said.

The World Bank Group had approved a program combining green investment, institutional strengthening and a payment-risk guarantee, she noted. The next test would be implementation, including credible contracts, appropriate tariffs, clear rules on curtailment and funded investment plans.

Onomakpome outlined a range of financing and risk-mitigation tools available through the World Bank Group, including project-preparation and advisory support, long-term financing, mobilisation of other lenders, local-currency and blended-finance solutions, political-risk insurance and guarantees.

Payment guarantees can support defined public-sector payment obligations, while political-risk insurance can cover specified non-commercial risks. Local-currency and blended-finance solutions may help address funding gaps where conventional financing is insufficient.

However, she cautioned that such instruments should not be used to compensate for weaknesses in the underlying market.

The priority should be to identify a small number of strategically important transactions, prepare them to standards investors and lenders can trust, and apply risk protection where the market cannot efficiently absorb the exposure, while preserving commercial discipline.

“If we do that, the energy transition can move from security to competitiveness and possibly over time exports,” she said.