How Is USAID Attracting Global Clean Energy Financing?

What has United States Agency for International Development (USAID) done to support efforts to scale up clean energy? What are the impacts of these clean energy projects? What is USAID’s strategy to attract funding from the private sector? In this interview, Jeffrey Haeni, energy division chief of the Bureau for Economic Growth, Education and Environment at USAID, shared his insights on global clean energy development.

USAID sponsored this solar installation in Afghanistan
  USAID sponsored this solar installation in Afghanistan.

CEFF: What technologies will USAID fund to address climate change challenges? Are there any priorities?

Jeffrey Haeni: For clean energy development, we take a technology-neutral approach. Much of our work supports improving the enabling environment for a variety of clean energy technologies and investments. We support the technologies that are most appropriate for the countries.

Generally speaking, wind and solar projects are most cost-effective for many of the countries where we work. For some countries, geothermal and hydro technologies may make sense. Our main mission is to accelerate the scaling of both renewable energy and energy efficiency worldwide. To achieve that, we need to support the most cost-effective technologies given the need of the country and the resources available.

CEFF: Where do the funds for renewable-energy development come from within USAID?

Jeffrey Haeni: USAID is 100 percent publicly funded and all of our funding comes from taxpayers and is approved by the United States Congress.  Two presidential initiatives support clean energy development at USAID – the Global Climate Change initiative (GCC) and Power Africa. Several other USAID missions [in] Jordan, Afghanistan, Pakistan and Haiti also support energy programs.  

CEFF: What are the criteria for selecting the regions to work with or in?

Jeffrey Haeni: USAID has a diverse set of countries where we support energy projects. For the GCC program, we work with countries that are currently large emitters and countries that can potentially become large emitters in the future. 

We also include countries that are leaders and representatives of a class of countries who are facing climate challenges. Furthermore, we work with regional players that have strong demonstration effects in terms of deploying clean energy at scale and reducing carbon emissions.

Power Africa is focused on all of sub-Saharan Africa. Other energy investments are made based on a range of strategic priorities or opportunities, to alleviate a proven constraint to economic growth, or in support of a reconstruction program in a post-disaster or post-conflict setting. 

CEFF: What metrics are used for measuring the impact of the support within USAID? Are the metrics publicly available?

Jeffrey Haeni: We use a combination of standardized and customized metrics. Standardized metrics include things such as megawatts of clean energy developed, tons of CO2 reduced, dollars leveraged, and institutions supported. We also develop customized indicators for specific projects to measure outcomes and impact. A full list of our Global Climate Change program indicators can be found on the Climate Links website.   

Measuring and understanding the impact of projects is a high priority. We conduct project evaluations to document lessons learned. They help us to improve our practices. 

We try to make the evaluation results publicly available. Some specific elements of the evaluation, such as information related to financial performance or specific business operations, may not be public.  

CEFF: Are there any issues that are sensitive to USAID and other stakeholders such as host countries and investors?

Jeffrey Haeni: We operate in a variety of environments with a wide range of political complexities. At times, USAID will encounter sensitive issues with host countries – such as removing fossil fuel subsidies or revising tariffs. Most of the time, we try to make information on our projects public and we try to share our lessons learned with other practitioners in the field.

CEFF: Who are the main stakeholders of USAID and what are their concerns?

Jeffrey Haeni: We have a lot of flexibility to work with key stakeholders in the clean energy field. This includes high-level engagement with ministries, regulatory commissions, and other government entities. We also engage with utilities, private developers, and private financial institutions. We engage with the broad range of stakeholders required for clean energy development.  Domestically, stakeholders include the Department of State and others in the inter-agency, Capitol Hill, the private sector, implementing partners, and the public.

CEFF: Will return on investment (ROI) be a major metric in USAID's decision-making process? What are the expectations from investors (public vs. private)?

Jeffrey Haeni: USAID does not invest directly in clean energy companies with a return expectation. A majority of our work is to deliver technical support through a wide range of implementing partners.

Typically, we outline the scope of activities in collaboration with a host country. After the scope is defined and agreed, we will work with our implementing partners to implement the activities and achieve the desired results. Very often those objectives will include increasing investment from the private sector, which is critical for meeting our clean energy goals. To attract private funding, ROI is going to be one consideration from the private investor’s perspective.

There are other challenges as well in attracting the private sector to invest in developing countries. For instance, regulatory and legal uncertainty is a major impediment keeping private players from investing in the developing world.

The financial viability of energy-sector power purchasers in another key challenge. USAID supports work to improve the financial viability of utilities so that developers can have more confidence. We also provide instruments to help reduce the risk of lending to clean energy projects, such as a 50-percent loan guarantee. In sum, USAID takes a holistic approach to attracting private investment into clean energy projects with ROI being one important variable.

CEFF: Will USAID's funding be administered publicly or privately?

Jeffrey Haeni: All of USAID’s funds are public. However, public funding will comprise a small portion of the investment required to achieve the global clean energy and energy access objectives. Thus, partnering with the private sector and supporting projects that increase private financial flows is a top priority for USAID in the clean energy sector.  

Significant sums of private international investment are flowing into clean energy development, particularly into advanced emerging economies such as Mexico, India, and South Africa. Additionally, we are trying to stimulate private domestic investment particularly for some of the smaller clean energy projects.

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