ESMAP's Knowledge Exchange Forum investigates how results-based financing could work for energy projects to ensure that every dollar raised has an impact.
As international agencies seek financing to achieve the goals of the Sustainable Energy for All Initiative—providing universal access to electricity, doubling the share of renewable energy in the global energy mix, and doubling the improvement in energy efficiency—practitioners want to ensure that every dollar raised has the maximum possible impact.
Results-based approaches, in which financing is provided upon achievement of specified outputs, or targeted performance against specified macro-level indicators, are cited by many as the best way to go.
Although results-based approaches have been widely—and successfully—adopted in several sectors, especially health services, their deployment in the energy field has been limited. For many experts, that needs to change. Results-based approaches are essential, they say, if the push to bring electricity and clean fuels by 2030 to the world’s 1.3 billion people currently without access is to succeed.
“The Sustainable Energy for All Initiative has raised expectations for real progress on access, and on scaling-up renewable energy and clean household fuels. We’re convinced that results and performance-based approaches can help us meet these expectations.” ||Rohit Khanna, Manager, ESMAP
With this in mind, the Energy Sector Management Assistance Program (ESMAP) is devoting the first day of its annual Knowledge Exchange Forum in Washington May 7-9 to review, through a series of expert panels, the experience of results-based and performance-based approaches in other sectors, namely health, roads, ICTs, and water and sanitation, to assess how they might be applied to achieve key energy goals.
“With widespread fiscal austerity and tighter international assistance budgets, the need to deliver clear results for financing is critical,” said Rohit Khanna, the manager of ESMAP. “The Sustainable Energy for All Initiative has raised expectations for real progress on access, and on scaling-up renewable energy and clean household fuels. We’re convinced that results and performance-based approaches can help us meet these expectations.”
Many multilateral institutions and bilateral donor agencies are already adopting results-based approaches to support energy sector development.
For example, the Scaling-up Renewable Energy Program (SREP), part of the Climate Investment Funds, is encouraging results-based financing; the Global Partnership on Output-Based Aid (GPOBA) is considering a broader range of RBF approaches; and the Energy+ partnership is proposing to use a performance-based incentive for progress against a range of energy indicators. ESMAP has embarked on a two-year work program that aims to assess how these approaches can be used to improve outcomes and scale up financing for expanding energy access and renewable energy deployments.