High Voltage at the UN

As the annual demand for energy increases due to expanding economies and growing populations, the UN is leading the charge to pull 1.5 billion people out of poverty by providing them access to electricity by 2030. Will it work?

Eager energy suppliers who sense a new global market trend are lining up fast at the UN entrance gates, but only to learn that the rules of the game are also changing.  Government subsidies for renewable projects including the lucrative feed-in-tariffs are drying up.  New solutions are in order including the unthinkable, namely, Public-Private Partnerships or PPP’s, where diplomats and CEO’s collaborate as legally bound partners.

PPP’s are popular with large infrastructure projects such as major highways or public transportation systems.  In exchange for access to capital and management expertise from the private sector. governments use PPP’s to shield private investors from unduly investment risks.  It is no surprise then that a group of CEO’s of utility companies, energy equipment suppliers, UN dignitaries and the World Bank recently convened at the UN to share their experiences and best practices using PPP’s to finance electricity producing projects.  Some examples of the ‘best practices’ given, demonstrated a wide variety of objectives.

For example, AEP’s (American Electric Power) renewable energy sustainability project for the Galapagos Islands located off the coast of Ecuador, focused on structuring partnerships that eventually transfer ownership to the government.  Kansai Electric from Japan traded land and permits with Tuvalu’s local government for a PV Power Plant to be operated by trained local workers.  Kansai Electric’s main objective was to transfer sufficient technology to encourage local production of their solar panels.  The Mexican government’s CFE managed to push construction risk on to the private sector by luring them with guaranteed purchase agreements to be financed using long term loans backed by 20-year PPA’s (Power Purchase Agreements).  Finally Brazil’s Belo Monte’s mega-hydro project, which recently received approval for construction, is leaning on its government to soothe local tensions from indigenous tribes who are at risk of losing their lands.

It was agreed that diplomats and CEO’s view the PPP value proposition very differently.  While diplomats seek reduction of poverty for billions, CEO’s focus on shareholder value.  Their differences are closely monitored by the World Bank whose mission is to attract the right kind of investors for projects that will render the best long term capacity-building results for generating electricity.  On paper and at their first meeting held at the UN on June 2, 2011, the UN’s PPP made an impression among a room full of key players from both sides.  Even if partnerships do not emerge right away, one can be certain that the ground work for a high voltage future at the UN was cast.

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