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There are many drivers of climate change, but few would disagree that energy infrastructure built according to “business-as-usual” standards is a major one. Meeting the lofty goals set at the 2015 Paris Climate Accords requires powering our homes, businesses, and government agencies with a cleaner mix of energy that includes more renewable sources. It also requires promoting standards that encourage energy efficiency—for example, for appliances or building codes—as a low-cost and high-impact way to reduce greenhouse gas (GHG) emissions.
The Global Infrastructure Facility (GIF) is playing a positive role by preparing bankable, climate-smart projects that help countries build low-carbon energy infrastructure and encourage greater energy-efficiency measures. The GIF both drives and leverages private sector investments in climate-smart projects by promoting good governance and standardization in project preparation and has a sizeable portfolio of climate-smart projects in the pipeline.
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Solar power is experiencing a surge in popularity across the globe. It prevents carbon emissions, helps diversify the power generation mix, reduces dependence on fossil fuels, and can increase off-grid energy access.
With falling costs of solar photovoltaic (PV) technology, advancing storage technology, and grid integration, prices for solar PV electricity have been falling rapidly around the world and solar is now in many countries price competitive with traditional energy sources and has become particularly attractive for developing countries.
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Critically constrained public resources on the one hand, and huge existing infrastructure needs for basic services on the other, make private participation in emerging markets and developing economies (EMDEs) not just critical, but in fact, imperative. Crowding in private finance is essential to spur economic development and meet the twin goals of shared prosperity and elimination of extreme poverty, as well as to achieve the Sustainable Development Goals.
The Private Participation in Infrastructure (PPI) Database, with data spanning over almost 27 years, has become a powerful tool and measure for gauging the level of private investment in infrastructure in EMDEs.
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Infrastructure is a key driver for growth, employment, and better quality of life in emerging markets and developing economies (EMDEs). But this comes at a cost. Approximately 70% of global greenhouse gas emissions come from infrastructure construction and operations such as power plants, buildings, and transport. The Overseas Development Institute estimates that over 720 million people could be pushed back into extreme poverty by 2050 as a result of climate impacts, while the World Health Organization projects that the number of deaths attributable to the harmful effects of emissions from key infrastructure industries will rise from the current 150,000 per year to 250,000 by 2030.
Does this mean we need to build less infrastructure? No. But part of the solution lies in low-carbon infrastructure.
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A few years ago, I participated in a meeting to discuss best practices in Public-Private Partnership (PPP) regulation. There was no shortage of examples. In fact, PPP practitioners were eager to share their experiences from countries around the world, but we did not have a systematic way to make all that information accessible to policy makers. Moreover, at the time, I kept thinking that there were many more good examples beyond those we were sharing at the meeting.
The lack of systematic data on the quality of PPP regulation was a serious issue. What we needed was a comprehensive, systematic way to go beyond individual examples. How could we collect available information, organize it in a rigorous and systematic way, and make it all accessible to policy makers?
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One September afternoon, my boss, Pankaj Gupta, popped his head into my office. He had some ideas about how the novel use of guarantees might help solve a type of problem we had not faced before. The Energy and Extractives Global Practice had received a request from Ukraine. The problem was the country was heading into the 2014/15 winter with a large gas shortfall.
These were not easy times for Ukraine, which was in the throes of armed conflict on its Eastern border. With an economy in turmoil, the credit rating agency, Standard & Poor's, had dropped Ukraine's credit rating two notches in the last year. The rating now languished at CCC, or very speculative and non-investment grade. This made finance, the life-blood of service delivery, difficult to access and expensive.
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The potential economic benefit from the cooperative use of the Nile’s water is estimated to be worth well over $11 billion—from irrigation and hydropower generation alone. But being able to harness those benefits is a far reach; the Nile Basin—a vital source of drinking water, irrigation, hydropower and transport—has a growing need for infrastructure investments to attain the full potential of this resource. Many of these infrastructure investments need to be coordinated between the basin’s 11 countries to ensure they are creating mutual benefits and are not causing harm to neighboring countries.
The Nile Equatorial Lakes Subsidiary Action Program - Coordination Unit (NELSAP-CU), one of the Nile Basin Initiative’s two investment programs, plays a prominent role in the region’s development. NELSAP supports poverty alleviation, economic growth, and the reversal of environmental degradation in the sub-region through cooperative development and water management. Between 2005 and 2015, we mobilized $90 million of cumulative finance for pre-investment programs (e.g. the Lake Edward and Albert Fisheries Project) and $930 million for investment projects (e.g. the Regional Rusumo Falls Hydroelectric Project).
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As the backbone of development, infrastructure provides vital support for the twin goals of poverty reduction and shared prosperity. Considering the different needs, roles, and responsibilities of men and women in infrastructure design makes the achievement of these goals more sustainable.
Women and men face constraints both as beneficiaries and producers of infrastructure services. For example, there can be inequitable access to roads, financing for electricity connections, or clean water. There are also inequities in the infrastructure business value chain: Do utilities have a balance of women and men on technical and leadership teams? Is there diversity on boards, with regulators or policy makers? Are women-owned firms in supply chains?
Between 2004 and 2017, some 30 African countries have adopted laws regarding Public-Private Partnerships (PPP). If we were to add to this list the countries that have implemented PPP policies, and those who are in the midst of drafting PPP laws, the tally would rise, leaving us with less than just 10 African countries that are entirely without a PPP framework.
What this tells us is that the calls by international financial institutions have been heard by decision-makers in Africa:
But how does reality measure up to the theory? How many projects, based on PPP law, have actually reached financial close? Given the time required to prepare a PPP, it is maybe too early to see PPP laws translated into concrete PPP projects, especially as more than 20 countries have in fact adopted their laws only in the last five years.
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Sector reform is a familiar concept for anyone working in the energy sector, particularly in developing countries. Typically, reforms involve measures such as building an institutional framework that allows for an independent regulator, improving the operational efficiency of utilities (for example, by unbundling vertically-integrated utilities), creating an environment for private sector participation, and last but not least, introducing tariffs that reflect costs. All these measures are designed with one goal in mind: to put the sector on a sustainable path and improve the quality of service for end-users.
While acknowledging the many benefits that sector reforms can bring, one issue we continue to face is the poor financial state of key power utilities. In other words, a lack of creditworthiness. Often, their lack of financial creditworthiness is the most critical obstacle to implementing investment programs. This makes utilities even more dependent on continuous government subsidies.