Developing countries face immense challenges and a triple penalty in their air clean energy transition.
Without access to more affordable sources of capital, they often paid more for electricity, often cannot access clean energy projects and can remain locked into fossil fuel projects.
According to World Bank analysis, these countries end up paying 15-30% more for clean energy than it costs in higher income countries. The result is that these countries are locked out of the clean energy projects, locked into more expensive fossil fuels, and burning coal and gas rather than making long-term investments in clean energy.
To overcome this challenge, the World Bank has recently released a report called Scaling Up to Phase Down which shares the Bank’s approach to the energy transition.
In a nutshell, the approach is summarized in a six-step virtuous cycle that starts with government leadership that leads to a supportive regulatory environment along with increasingly capable institutions. These fundamentals are what will attract private capital that is waiting on the sidelines to prepare and invest in bankable projects at the lowest cost through competition and transparency, and most importantly, bring results that include more affordable electricity, cleaner air and new jobs.
Step 01 : Government commitment toward clean energy transition is a key
Step 02 : Supportive regulations and policy environment are crucial to attract private sectors and investors
Step 03 : Robust institutions and utilities are important to send a strong signal about risk mitigation to international financiers
Step 04 : Bankable energy projects should be monitored through a pipeline
Step 05 : Transparent competitive processes should be put in place to identify markets that can deliver such projects.
Step 06 : Positive feedback on previous results will increase consumer interest and attract more private capital.
Finally, it is worth noting that it is not just a theory, as the report is the result of previous experiences from the World Bank, which has successfully kick-started the energy transition in some countries.