Panel Paper: Leveraging Private Investment to Increase the Deployment of Renewable Energy in Developing Countries: Evidence from Uganda

Thursday, November 8, 2018
Jackson - Mezz Level (Marriott Wardman Park)

*Names in bold indicate Presenter

Benedict Probst1, Lotte Westermann2, Laura Diaz Anadon1 and Andreas Kontoleon3, (1)Cambridge University, (2)Kreditanstalt fuer Wiederaufbau, (3)University of Cambridge

Effectively mitigating climate change entails a quick upscaling and redirection of electricity infrastructure investment. Given that the bulk of emissions increases until 2050 will come from low- and middle-income countries, finding cost-effective ways to mitigate climate change while meeting development targets is essential. However, recent research has shown some of the limitations of broad financing mechanisms, such as the Clean Development Mechanism. The limitations of CDM, combined with those of existing carbon markets, have resulted in a growing interest in improving the design of specific investment support, such as modifications of targeted feed-in-tariffs (FITs) that may be more cost effective when compared to traditional deployment subsidies or broad financing mechanisms in the short-run. We evaluate the design and outcomes of the GETFIT (Global Energy Transfer Feed-in Tariffs) investment support scheme in Uganda, which has attracted ~ 500 million USD in private sector investment for 17 small-scale renewable energy projects (solar, hydro, bagasse) in only three years. The programme, supported by the German government along with other donors, has as its main aims to catalyse private sector investment into renewable energy in developing and emerging economies through the improvement of the existing regulatory frameworks and, more importantly, a results-based subsidy that ‘tops-up’ local feed-in tariffs. Applying quasi-experimental program evaluation methods on detailed project-level data, as well as insights from interviews with developers, investors and government agencies, we estimate the abatement cost of the programme and local economic effects. We compare the outcomes to other mitigation efforts (e.g., CDM) and draw wider policy lessons for possible international financing schemes under the Post-Kyoto climate architecture. Our findings suggest that, when compared to other financing mechanisms, the FIT top-up program led to cost-effective emissions abatement and substantial local economic effects. However, we also found that these programs could further integrate incentives to support generation expansion planning to avoid supply outstripping demand, posing substantial financial problems to the parastatal utility company UETCL, which is obliged to purchase the generated power.