Scaling up funding for clean energy projects in developing and emerging countries via PPPs: costs, benefits, challenges and some cases

Abstract

Clean energy investments such as geothermal and hydropower projects tend to be large capital intensive and with long repayment periods. These projects can be challenging, especially in developing and emerging countries in transition that are often characterized by a changing and unpredictable political and business environment. Public private partnerships (PPPs) can enable pooling of public, private and donor funds for clean energy investments. A well-designed PPP can be a venue for scaling up funding for clean energy investment internationally. However, little point exists in forming PPPs if, for example, the private sector partner receives most or all the benefits, or if the government keeps changing the rules of the game resulting in a non-viable project. The focus of this article is on PPPs, potential benefits and challenges for host governments and various partners, including the private sector investors, bilateral donors, multilateral institutions such as international financial institutions (IFIs). The objective of this article is to review some theoretical research done on PPP, potential benefits as well as some challenges using this model in developing and emerging countries and finally, present some cases that demonstrate how various partners have cooperated under the PPP model. In addition to reviewing relevant theoretical literature the methodology used in the article is the case study method. The cases also show innovative use of the funding and risk mitigation instruments offered by international financial institutions in partnerships with other market players, such as host governments, private sector, bilateral development institutions, export credit agencies, where sharing the risks and the rewards in a fair and sustainable manner is the key to success. Keywords: hydro-and geothermal energy projects, public private partnerships, international and national financial institutions.Švarios energijos investicijoms daryti, pavyzdžiui, geoterminiams ir hidroenergijos projektams, būdingos didelės kapitalo investicijos, kurių grąžinimo laikotarpiai yra ilgi. Šie projektai gali būti sudėtingi, ypač besivystančiose ir pereinamojo laikotarpio besiformuojančiose šalyse, kurioms dažnai būdinga besikeičianti ir nenuspėjama politinė bei verslo aplinkos. Viešojo ir privataus sektoriaus partnerystės gali padėti sutelkti viešųjų, privačių ir finansavimo fondų lėšas švarios energijos investicijoms. Tinkamai suorganizuota viešojo ir privataus sektoriaus partnerystė gali būti panaudota švariai energijai finansuoti tarptautiniu mastu. Kita vertus, yra mažai bendrų interesų, formuojant viešojo ir privataus sektoriaus partnerystę, pavyzdžiui, jeigu privataus sektoriaus partneris gauna didžiausią arba visą naudą arba jeigu vyriausybė nuolatos keičia bendradarbiavimo taisykles, dėl kurių projektas tampa neveiksmingas. Šiame straipsnyje pagrindinis dėmesys skiriamas viešojo ir privataus sektoriaus partnerystėms, priimančių šalių vyriausybių ir įvairių partnerių, įskaitant privataus sektoriaus investuotojus, dvišalius invest...

Clean energy, climate change and the global cross border investment regime

“…The need is to step up local and global efforts. This article is also relevant for large hydropower projects built in a challenging business and investment environment 4 to show how the international community can help make such investments available with the appropriate lending and risk mitigation instruments. This requires the cooperation, coordination and commitment of many different players, including host governments, the international community via international financial institutions, bilateral agencies and donors as well as the private sector.…”

“…It is a test for developing and emerging market countries but also for international financial institutions (IFIs) to assist those countries make the transition. So far IFIs, including the World Bank and the regional development banks have been slow to respond (see for example Hilmarsson, 2017). Those institutions can for example offer loans, guarantees and provide equity to support clean energy projects but they do not provide a comprehensive solution for the problem.…”

“…The authors would like to express his appreciation to the editor and the anonymous reviewers for their feedback and suggestions to improve the article. 2 See Intergovernmental Panel on Climate Change, Fifth Assessment Report, see https://www.ipcc.ch/ report/ar5/index.shtml 3 Externality can be defined as a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices, see for example: http://www.oxforddictionaries.com/definition/english/externality 4 For evaluation of different business and investment environments see World Bank, 2017. 5 The Price of Oil and the Price of Carbon, see http://blog-imfdirect.imf.org/2015/12/02/theprice-of-oil-and-the-price-of-carbon/ 6 Also known as COP 21.…”