Leveraging private investment to expand renewable power generation: Evidence on financial additionality and productivity gains from Uganda

Effectively mitigating climate change entails a quick upscaling and redirection of electricity infrastructure investment towards clean power. Given that the bulk greenhouse gas emissions increases until 2050 will come from low- middle-income countries, finding cost-effective ways to mitigate while meeting development targets is essential. However, recent research has shown some limitations broad financing mechanisms, such as Clean Development Mechanism (CDM) existing carbon markets. This resulted in growing interest designing novel support schemes, modifications feed-in tariffs (FiTs) may be more cost effective better targeted particular outcomes when compared traditional deployment subsidies or mechanisms. We evaluate design one schemes: GET FiT (Global Energy Transfer Feed-in Tariff) scheme Uganda, which attracted ~ 453 million USD private sector for 17 small-scale renewable energy projects (solar, hydro, bagasse) only three years. Using financial modelling on detailed project-level data, we find most were additional would therefore not have been built without subsidy. In addition, using firm-level panel show power outages hamper manufacturing performance Uganda. absence reliable outage-data entire Ugandan territory, use nightlight variations proxy changes outages. declined substantially since introduction FiT. Yet, our analysis also demonstrates programmes incentivise generation developing countries funded internationally domestically should liaise closely with grid authorities ensure supply does outstrip demand.