Poverty Reduction Blog Tag: Energy
Posted on September 29, 2014 by Tom Haslett, Program Officer
Earlier today, MCC hosted a panel with leaders from Malawi’s key power sector institutions to discuss efforts underway to reform their organizations and the sector to help increase access to reliable electricity for Malawians. This event, part of a U.S. Trade and Development Agency reverse trade mission, comes at an interesting time. President Obama’s Power Africa initiative—a presidential initiative to triple the number of people with access to power in Sub-Saharan Africa—has turned a spotlight on the challenges of bringing electricity to growing economies throughout the continent.
The challenges Malawi faces in developing its power sector are representative of the issues Power Africa is designed to tackle. Only about 8 percent of Malawians are connected to the electricity network. The country has just 351 megawatts of generation capacity, and demand is expected to grow far beyond this level in the next several years.
The challenge is clear. Yet the government and the electricity utility, the Electricity Supply Corporation of Malawi (ESCOM), do not have the resources required to invest in generation to give Malawi’s economy the power it needs to grow. Bringing in private investment is a priority, and the country’s power sector institutions are adapting to improve the conditions for this to occur. MCC’s five-year, $350.7 million compact with Malawi—the agency’s first program focused exclusively on the power sector—is designed to help the country overcome these challenges.
Several factors currently limit the prospects for private investment. Any privately funded generation projects must sell electricity to ESCOM to reach consumers. This is because the utility owns all transmission and distribution infrastructure in the country. To date, no deals have been concluded, despite a number of ongoing negotiations. In the past, the utility was not viewed as a creditworthy partner for independent power producers because of concerns about its financial and operational health. However, recent improvements, in part supported by MCC, may help allay these concerns.
Additionally, the Malawian regulatory environment is still in its formative stages, creating uncertainty about key issues like access to the electricity grid and tariffs that independent power producers could receive. Finally, the government and ESCOM lack the experience and an established framework to structure complex power purchase agreements that maximize benefits for the Malawian public while ensuing value for money and minimizing potential risks and liabilities.
Malawi’s MCC compact is addressing these constraints head on. It recognizes the fundamental role that strong sector institutions and an appropriate governing framework must play to attract investment into any growing power sector. Our support includes a comprehensive set of technical assistance services to strengthen ESCOM’s finances and operations.
The compact also includes capacity building for the country’s energy regulator so it can play an effective role delivering reliable electricity service while deepening the confidence of investors and companies considering entering the market. The compact is also providing high-level advisory services to the Ministry of Natural Resources, Energy and Mining and supporting the development of a roadmap for restructuring the power market to ensure that roles are clarified as the sector matures.
Collectively, these reforms intend to create a more suitable environment for private sector investment in new electricity generation in Malawi. And the compact’s investments will also strengthen the transmission and distribution infrastructure to facilitate the delivery to customers of any new sources of electricity.
During the panel discussion at MCC today, the CEO of ESCOM, the acting CEO of the energy regulator and the Principal Secretary for Energy described their organizations’ experiences through the compact as well as their own efforts to drive change. Each of them emphasized the need to change the status quo to spur development in Malawi. For example, the Principal Secretary noted that mining is a potential growth avenue but the national grid can’t supply the power they need with the gap currently filled with expensive diesel fuel generators.
The CEO of ESCOM noted that this demand, combined with the ongoing reforms, will attract investors who need to know someone will buy the power they produce. And the CEO of the regulator highlighted the fact that his agency has developed a template for power purchase agreements that they hope to put to use for investors interested in the opportunities the country presents.
Throughout the discussion, one message was clear: Malawi is ready for growth in a power sector that is now open for business—and, with the changes afoot, the future is bright.
Posted on July 10, 2014 by Tom Haslett, Program Officer
Earlier this year, the Principal Secretary of Malawi’s Ministry of Energy convened the first semi-annual review of the country’s five-year, $350.7 million MCC compact. These reviews will be held every six months and provide key stakeholders with an opportunity to assess progress against the agenda for reform in Malawi’s power sector. The compact establishes an ambitious program to revitalize the country’s power sector through investments in critical infrastructure, hydropower plant efficiency and sector institutions.
The centerpiece of the review is a set of indicators focused on the performance of ESCOM, the country’s electricity utility, in areas like asset maintenance, bill collection and efficient provision of electricity. ESCOM’s financial plan establishes targets for these indicators, which are then compared against actual performance at the semi-annual review. This gives stakeholders in attendance and the Malawian public in general a window into what’s going on at ESCOM and with broader power sector reforms aimed at attracting new investment in electricity generation.
Why is this important? ESCOM is the main electricity provider for Malawian households and companies, and its operations are a matter of intense public interest. However, ESCOM’s recent performance has not been strong, and many Malawians lack confidence in the utility’s ability to improve. This was displayed recently as stakeholders spoke out against an increase in tariffs proposed by ESCOM; people asked why they should pay more for unreliable service and encouraged the company to increase efficiency, not raise rates. And in April 2014, the energy regulator approved a tariff increase below the level ESCOM identified as necessary to cover costs while highlighting the need for performance improvements.
ESCOM’s efforts to improve its service have given rise to a chicken-and-egg problem: The company believes a higher, cost-reflective tariff is necessary to improve service. But the public will have trouble accepting significantly higher tariffs until ESCOM’s operations improve.
This is where the semi-annual review can establish a path forward by providing a forum where objective data helps paint a picture of ESCOM’s performance and define corrective actions.
At the same time, emerging issues in the power sector can be jointly reviewed by power sector institutions and representatives of the private sector and civil society.
The review is also a perfect tool for the MCC model. The sustainability of our work in Malawi is based on strengthening ESCOM’s ability to recover costs, invest in service provision and be a viable partner for investors. We’re supporting these goals by introducing a modern management information system and helping build capacity in areas like financial management, procurement and billing efficiency.
The compact also targets policy reforms that can incentivize private investment in new power generation. The semi-annual reviews will allow us to understand if the compact is meeting its goals and provide learning opportunities. In addition, by bringing together stakeholders from across Malawian society, these forums will ensure the public consultations that helped develop the compact continue to inform its implementation.
This first semi-annual review gave concerned stakeholders a chance to better understand current power sector reform goals, progress to date against those goals and how the compact is supporting their achievement. A report that includes data on all key performance indicators discussed in the review will be publicly available soon. And three sub-committees with members drawn from the semi-annual review participants will meet on July 17 to review priority corrective actions to progress against the reform agenda and approve implementation procedures and timelines to address these issues. As our work continues over the coming months months, we’ll look forward to the next review—another opportunity to shed light on how MCC is helping to reform Malawi’s power sector.
Posted on April 7, 2014 by Tamara Heimur, Liberia country team
Each MCC compact is designed to create economic growth. Since the private sector is a key driver for sustainable growth, MCC’s Finance, Investment and Trade team works with partner country colleagues to ensure that companies have input throughout the compact development process.
This work includes consultations with American, Liberian and international businesses to learn firsthand about the challenges they face when considering investment in our partner countries. We then work with our partner countries to design compact grants that address these challenges.
MCC, the Government of Liberia and The Corporate Council on Africa (CCA) recently hosted a roundtable meeting in Washington, DC for companies that are active in Liberia or are interested in investing.
At the roundtable, the Government of Liberia (GoL) and MCC presented the Liberia Constraints Analysis, a report outlining the primary constraints to economic growth and investment in Liberia.
Every MCC partner country develops a constraints analysis, which takes an evidence-based approach to identifying the primary factors that limit investment. The analysis clarifies priorities among a country’s many development needs and identifies potential areas of focus for an MCC compact. The Liberia Constraints Analysis identified the lack of roads and electricity as the primary constraints to growth.
After the presentation of the constraints analysis, the Liberian government delegation presented some initial concepts for potential projects in the roads and energy sectors. We invited feedback and questions from attendees, which helped start a conversation that will help the GoL to refine the proposed projects.
This event is part of a series of conversations that MCC and the GoL have hosted since Liberia qualified for MCC assistance in December 2012. In mid-2013, the GoL organized roundtables with businesses in Liberia to learn what is constraining the growth of local companies, and in late 2012, MCC, the GoL and CCA hosted another event for companies in Washington, DC to provide feedback on the proposed compact projects. We expect to continue the dialogue with companies through more events, webinars, email updates, and other forums as the GoL continues its compact development process.
This type of private sector engagement is an important component of the MCC model. Together with our partners in the GoL, we are ensuring the private sector and other stakeholders provide input every step of the way.
We invite additional input and feedback from private sector firms; please contact the following individuals for more information:
Government of Liberia:
- Monie Captan, National Coordinator, National Millennium Challenge Compact Development, firstname.lastname@example.org.
- Philip Pleiwon, Private Sector Lead, National Millennium Challenge Compact Development, email@example.com.
Millennium Challenge Corporation:
- Evan Freund, Country Team Lead for Liberia, firstname.lastname@example.org.
- Tamara Heimur, Private Sector Lead for Liberia, email@example.com.
Posted on October 2, 2012 by Patrick Fine, Vice President, Department of Compact Operations
Two weeks ago, MCC was delighted to host a delegation from the Government of Indonesia (GOI) for the signing of a Project Implementation Agreement (PIA), the document that sets out the operational details for implementing MCC’s compact with Indonesia. The compact focuses on investments in renewable energy and sustainable natural resource use, maternal and child nutrition, and public procurement modernization.
The Indonesian delegation was led by Pak Lukita Tuwo, who is the Vice Minister of the Planning Ministry and GOI’s principal representative for the MCC compact. Pak Lukita was accompanied by members of his staff, including Ibu Emmy, the head of the Ministry’s legal bureau, and Pak Kennedy, its director for bilateral foreign funding.
We were also pleased to be joined by Pak Dino Djalal, Indonesia’s Ambassador to the United States, and Ambassador Djani, who is the head of North American and European Affairs at the Ministry of Foreign Affairs. Ambassador Djani was in Washington for the semi-annual meeting of the U.S.-Indonesia Comprehensive Partnership, where Secretary of State Clinton and Foreign Minister Natalegawa announced the signing of the PIA.
The signing, which took place in MCC’s Washington office, was marked by a sense of celebration and anticipation: MCC and GOI expect the compact to enter into force within the next few months. The PIA sets out the terms for the new Millennium Challenge Account – Indonesia (MCA-I), the first institution of its kind in the country and one that we hope will provide a path-breaking model for other development projects in Indonesia.
We’re also seeing other signs of progress as we move toward entry into force: the first meeting of the MCA-I Board of Trustees, the approval of the first disbursement request for funds, and the signing of five major contracts. I’m proud of what the MCC and GOI teams are doing to move this exciting program forward. Expectations are high, especially among the Indonesian people in the provinces, where many of the compact activities will be implemented.
While much hard work and many challenges lie ahead, we’re already seeing the power of partnership and are confident that the compact will not only improve lives of Indonesians, but strengthen the ties between our two nations.
Posted on August 20, 2012 by B. Tsolmon and L. Gerelmaa, Millennium Challenge Account-Mongolia
Severe winter air pollution in Ulaanbaatar, the capital of Mongolia, has become a major concern for the city’s 1.3 million residents, which is nearly half the country’s total population. A majority of Ulaanbaatar’s air pollution comes from districts populated with gers, traditional Mongolian houses where lower-income households live.
Women head many of these ger households. They rely on burning raw coal in inefficient stoves to heat the poorly insulated gers—a primary source of the city's air pollution, which fuels environmental and health risks and causes economic impacts. To address this concern, a facility was established within the scope of the compact's Energy and Environment Project to fund financial incentives and technical assistance for adopting cleaner, more efficient technologies for use in heating the gers.
The project’s particular and positive impact on gender issues recently gained international attention with the July 2012 visit of Melanne Verveer, U.S. Ambassador-at-Large for Global Women’s Issues, as part of a women’s empowerment conference held in Mongolia.
Ambassador Verveer paid a visit to Norovkhand and her family in the Bayanzurkh district outside Ulaanbaatar. Norovkhand obtained a subsidized energy efficient stove through MCA-Mongolia, the local entity managing compact implementation. Norovkhand, a single mother of three and a grandmother of one, shared her experiences on how much coal she has saved in using her new stove, compared with the traditional stove she used previously.
Most importantly, the energy-efficient stove, she said, simplifies routine housework since it requires less fueling, generates less ash and is easy to clean.
“It is very affordable and accessible especially for female-headed households like us, given the subsidies provided by the project,” she said.
Norovkhand’s family is also among potential beneficiaries of the hashaa (yard) plot privatization and registration activity under the compact’s Property Rights Project. With their land formally registered, Norovkhand’s family and many others will have an opportunity to access bank credit, enabling them to make more productive use of their plots.
MCA-Mongolia is tracking the longer-term impacts of increased asset ownership through its monitoring and evaluation work, which also includes a complementary qualitative survey on how increasing asset ownership among women impacts household dynamics.
To track the difference the compact is making for Mongolians at both household and national levels, a number of gender-responsive actions are underway across the program to ensure that women and men benefit equitably from the compact, which is key for sustainable development and economic growth of benefit for all.
Posted on March 30, 2012 by Daniel Yohannes , Chief Executive Officer
Today’s release of MCC’s 2011 Annual Report, appropriately titled Gateway to Opportunity, captures the milestones of the past year and articulates clear priorities moving forward. In the report, you can read about the significant strides we have made in delivering results, forging partnerships with countries and civil society, and championing policy reforms to create opportunities for sustainable economic growth in some of the world’s poorest countries. This foundation allows us now to expand our work not just to help poor countries rise out of poverty and break the cycle of aid dependency but also to create stable trading and investment partners for the United States, which means more jobs here at home.
By incentivizing the right policy conditions and generating an enabling environment for growth, MCC builds a Gateway to Opportunity for American businesses interested in exporting to or doing business in these next generation emerging markets as they climb out of poverty. Because of this, MCC’s mission is key to Secretary of State Clinton’s 21st century economic statecraft and President Obama’s efforts to put in place an American economy that is “built to last.” MCC is pushing the envelope on development effectiveness and sustainability through our commitment to transparency, accountability, results, policy reform, and country-driven solutions.
MCC’s approach has not gone unnoticed. A November 2011 Fortune Magazine article concludes that MCC “certainly gives the taxpayer real bang for the buck.” A recent MarketWatch commentary by Thomas Kostigen arguing for a robust MCC budget sums up the impact best: “MCC deserves its fair share so the U.S. can gain its fair share in the emerging markets. The global impact of these investments comes back to us all in the form of food, jobs, more open markets for trade, and doing good and right by others. It’s a boomerang effect.”
We agree, and we’re committed to showcasing even more investment and procurement opportunities for U.S. businesses in the months ahead to ensure the full “boomerang effect” of positive impact for the world’s poor as well as American businesses and workers.
Posted on February 29, 2012 by Jason Bauer, Director, Private Sector Development
Two weeks ago, Ghana successfully completed its five-year MCC compact, a $547 million program designed to improve the agriculture and transportation sectors. Over one million Ghanaians will benefit from the compact. In early 2011, the MCC Board of Directors selected Ghana as eligible to develop a new compact. As part of this compact development process, the Government of Ghana has initiated broad-based consultations with representatives from civil society and the private sector.
On January 24, 2012, MCC partnered with the Initiative for Global Development and the Corporate Council on Africa to host a forum for business firms – some already active in West Africa, some newcomers to opportunities in the region. The forum’s program was designed to help MCC and the Government of Ghana identify opportunities, obstacles, and solutions to private sector participation in Ghana’s power sector. More than 60 participants representing more than 20 companies across the power value chain participated in the day-long session.
Government of Ghana officials, including from the Ministry of Energy, spoke in an open forum about the types of private sector participation Ghana is most interested in attracting. A number of potential investors shared their views, both in group settings and individual meetings, about Ghana’s constraints to foreign investment. Participants also recommended concrete actions the Government of Ghana could take within the proposed new compact to alleviate those constraints.
This event is just one example of MCC’s efforts to enhance engagement with the private sector during program development. Feedback from attendees was encouraging; one noted that it was the first time his company, a U.S.-based energy firm, had engaged with a donor and partner government during the process of defining a proposed grant program.
Once the Government of Ghana completes the concept paper for its proposed second-generation compact, the MCC Board of Directors will review project proposals and vote on compact approval. We look forward to further engaging the private sector to incorporate its innovation, capacity building, capital and expertise to the MCC compact development process.
Posted on January 25, 2011 by Courtney Engelke , Director, and Burak Inanc, Deputy Resident Country Director Mongolia
Wintertime air pollution in Ulaanbaatar, Mongolia is among the worst in the world. In Ulaanbaatar, the coldest capital city in the world, coal-fired heating and cooking stoves in traditional “ger” (or circular felt) dwellings emit a toxic brew of pollution. While Mongolia is becoming an increasingly attractive investment and tourist destination, businesspeople and tourists generally steer clear of the capital city during winter months, in part because of the pervasive air pollution. Unfortunately, the over 600,000 residents living in Ulaanbaatar’s “ger districts” don’t have that option.
MCA-Mongolia’s Energy and Environment Project (EEP) aims to reduce air pollution by providing financial incentives to encourage residents to become more energy efficient and use lower-emission heating devices and stoves. In December, the EEP launched an Affordable Energy Efficiency Home Design Contest to spur innovation in modern housing.
The EEP also hosted an International Energy Efficiency Exhibition to introduce energy-efficient products to consumers. This exhibition, the second held since the project’s inception, included nearly 50 domestic and international suppliers from the United States, Korea, and Turkey, among other nations. The event also served to increase the pipeline of innovative and appropriate products that are being considered for financial support by the EEP.
The EEP Project Director, the Ministry of Mineral Resources and Energy, and the City Government’s Air Quality Office opened the exhibition with impassioned remarks about the importance of clean energy to the health and well-being of city residents. A group of popular Mongolian rock singers then performed an original “clean air” song, penned for the occasion, to fervent applause. Suppliers enthusiastically exhibited energy-efficient home products, energy-efficient building materials, ger home insulation, electric heaters, liquefied petroleum gas heaters, pellet heaters, and air filtration systems to consumers who were eager to listen and learn. Compelling photos documenting the impact of air pollution from a student competition were on display, and awards were announced for the photos and a related essay contest.
Perhaps most inspiring, however, was the strength of the public and private-sector collaboration to find affordable solutions to this serious public health problem. The wide variety of products and ideas on display was encouraging—the prospects for sustainable market-based solutions appear to be growing by the day.
The Energy and Environment Project has added some of the products showcased in the exhibition to its analytical pipeline, and some of the producers have now organized to advocate for energy efficiency. At the same time, MCC is working hard to support MCA-Mongolia in its efforts—and we can’t seem to stop humming that Mongolian “clean air” song.
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