MAXIMIZING FINANCE FOR DEVELOPMENT STORIES WEST BANK AND GAZA Securing Energy for Growth and Development Power demand in West Bank is fast outpacing supply and Gaza is already experiencing severe shortage with electricity supply of less Highlights of World than 6 hours per day, affecting homes, hospitals, schools, and busi- Bank Group Support nesses. The Palestinian Authority is working with the World Bank Group and its international partners on an ambitious energy reform The World Bank Trust Fund for Gaza and the West Bank (TFGWB) provided agenda. Early results are visible through the demonstrative solar en- a $4 million grant and the multidonor ergy transactions, which are transforming the sector and increasing Partnership for Infrastructure Devel- private participation in competitively priced clean energy projects. opment trust fund (PID-MDTF) ap- proved $7 million for an electricity sec- Development Challenge tor performance improvement project in West Bank and Gaza relies heavily on Israeli imports to meet its electricity needs, 2017. amounting to 99 percent of total supply in West Bank and 64 percent in Gaza, as of 2015. With demand for power forecasted to grow 3.5 percent annually until IFC is providing an $8 million loan for a 2030, the Palestinian Authority needs investments of $3 billion to $4 billion to rooftop solar project and is acting as the meet energy security goals. Approximately 10 percent could be provided through lead transaction advisor to attract private sector investment in other solar photo- direct public sector and donor support; remaining needs must be met through voltaic plants. private financing. The financial sustainability of the electricity sector, particular- ly the creditworthiness of the single-buyer public agency, is a key constrain to MIGA is providing $7 million in polit- private participation. ical risk insurance to the rooftop solar project through its West Bank and Gaza The MFD Approach Investment Guarantee Trust Fund and The World Bank Group’s assistance strategy for the West Bank and Gaza’s energy its Conflict Affected and Fragile Econ- sector aims to enable the private sector to flourish and create jobs. It is working omies Facility. with development partners to introduce reforms at energy institutions to enhance financial discipline. At the same time, the different institutions of the World Bank Group are providing complementary transaction advisory, risk insurance, financ- ing and co-investment grants to structure demonstrative transactions that will facilitate private sector solutions and financing for the sector. Setting up the regulatory and institutional One of the World Bank Group’s first demonstrative solar framework energy transactions in West Bank and Gaza is the Pales- tine Real Estate Investment Co (PRICO)’s rooftop solar The Palestinian Authority is collaborating with the World energy facility. IFC helped structure the investment and Bank and its international partners through an electricity financed it through an $8 million loan, of which $4 million sector performance improvement project. With $4 million is supported by the IFC-Canada Climate Change Program. from the TFGWB and $7 million from PID-MDTF, the TFGWB provided a $1.8 million grant, and MIGA’s critical project is helping key energy public institutions to improve support to PRICO de-risked the transaction through a $7 the efficiency of the electricity distribution system and pilot million political risk guarantee. The project will create a new new business models for solar energy in Gaza. The project solar market in West Bank and Gaza and provide up to 80 supports sector reform, capacity development, and revenue percent of the electricity needs of the Gaza Industrial Estate, strengthening interventions across the value chain. It ad- keeping factories running and creating almost 800 jobs, dresses priority needs of the regulator, the single buyer and according to the World Bank’s estimates. The estate is con- distribution companies for financial sustainability, which is nected to the grid and has entered a net metering agreement crucial for effective private sector engagement. with Gaza Electricity Distribution Company (GEDCO). The 2017 Securing Energy for Development report defined Given the growing energy needs of the West Bank and Gaza, a roadmap for implementing reforms and policy measures power imports and traditional gas power plants will remain to strengthen the electricity sector and make it attractive for an important part of the energy mix. IFC has been man- private investment. The study identifies the actions required dated to arrange the financing of a proposed 450-megawatt for expanding, diversifying, and stabilizing power supply to power plant in Jenin, the first in West Bank. The World West Bank and Gaza. The report was funded by the World Bank Group is implementing a multipronged approach that Bank Group, the Norwegian government, and the Energy will accelerate the pace of reforms, design appropriate risk Sector Management Assistance Program. The study leverag- allocation, and mobilize private investment through proac- es the convening power of the Bank Group to consolidate tive outreach locally and internationally. inputs from donor partners, local energy sector stakeholders, and the Palestinian Authority, particularly its Ministry of Finance. Making a difference The Palestinian Authority and international communi- Facilitating private sector investments to ty’s commitment to energy security are raising legitimate create new solar markets expectations, particularly in Gaza, that a more stable energy supply situation is possible. The ongoing reforms Solar energy remains largely untapped for West Bank and are strengthening the electricity sector’s financial resilience Gaza and is increasingly attractive as costs have dropped by while building confidence of private investors in gas and 80 percent over the past 5 years, driven by innovation. The solar projects. The first private sector projects in solar energy World Bank Group and development community’s support are already catalyzing other investments in the solar market of ongoing sector reforms are yielding early results, generat- and more are expected to follow with other investors and ing strong private sector interest, particularly in solar energy. international financial institutions. Seizing this opportunity, Through IFC, the World Bank Group is providing advisory the World Bank Group is collaborating with the Palestinian support to help the Palestinian government launch its first authority and donor partners to assess opportunities for wave of public-private partnerships in solar energy with creating a competitive market for solar and independent PETL, the transmission company, acting as the single buyer. power producers (IPPs) and developing the Private Sector Enhancement Facility to support viable projects. 03/2018 WHAT IS MFD? Achieving the Sustainable Development Goals to end extreme poverty by 2030 will require about $4.5 trillion annually, far more than multilateral development banks or donors can provide by themselves. To face this challenge, the World Bank Group adopted the MFD approach, which entails working with governments to crowd in the private sector while optimizing the use of scarce public resources. This approach is guided by the Hamburg Principles adopted by the G20 in 2017 and builds on the substantial experience across the institution. www.ifc.org www.worldbank.org www.miga.org