A taxpayer-funded agency called the U.S. International Development Finance Corporation (DFC) is committing up to $2 billion to address energy scarcity across the world, according to a new Memorandum of Understanding (MoU) announced on Monday morning.
The DFC, launched in December 2019 as an investment vehicle for American soft power to counter China’s massive Belt and Road Initiative (BRI), will partner with The Rockefeller Foundation to expand access to electricity in developing countries. The renewable energy initiative aligns with the incoming Biden administration’s clear priority of addressing climate change.
“This is not a Republican or Democratic thing — it's an American thing,” DFC CEO Adam Boehler, a Trump administration appointee, told Yahoo Finance. “The support that we received from Congress, and I want to call out people like Senator [Chris Coons (D-DE)] and Senator [Sheldon Whitehouse (D-RI)] and others like Senator Lindsey Graham [R-SC], that have been really supportive of this, not only DFC throughout, but things like renewable energy.”
The new initiative will be an important project for the DFC, which has invested a total of roughly $8 billion facilitating privately-financed projects across the world while China has spent hundreds of billions of dollars on its so-called New Silk Road over seven years.
Rockefeller Foundation President Raj Shah, former head of the United States Agency for International Development (USAID) during the Obama administration, explained that The Rockefeller Foundation will provide up to $50 million to de-risk DFC’s investments in addition to expertise.
“The reality is people who live in that condition simply don't have the chance to grow their economies, create jobs, and increase their living standards because they don't have access to real electricity,” Shah told Yahoo Finance. “And instead of building coal plants and connecting transmission lines to those plants, we can now just provide distributed, renewable energy together. … we have a whole pipeline of renewable energy projects around the world that we will now be able to execute on.”
‘Get this market to the point where it's commercially viable’
The DFC campaign will focus on distributed renewable energy, which includes a variety of renewable energy sources (wind, solar, and more) that will be produced at local mini-grids or off-grid sources rather than at a centralized power plant.
There is precedent for this approach: Some rural areas in Nigeria that enjoy solar electricity 24 hours a day from mini-grids and some areas of India have attempted to address widespread electricity scarcity with the implementation of mini-grids.
“It's been a real struggle for these smaller mini-grids and microgrids to prove their commercial viability,” DFC Chief Development Officer Andrew Herscowitz told Yahoo Finance, adding that the new initiative aims to “get this market to the point where it's commercially viable.”
The public-private aspect can be tricky: In Indonesia, a private effort to build a solar mini-grid to power in one village was put on hold because the government gave the country’s state-owned power distributor preference. The village still doesn’t have stable electricity.
Shah noted that effective public-private partnerships will be crucial to addressing climate change and energy scarcity generally, adding that there is “urgency to this work” given that “most of the places where we intend to invest this capital are places that are suffering deeply from COVID-19.”
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Aarthi is a writer for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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