Development assistance to clean energy has reached the poorest to a marginal degree

13 With respect to the OAG’s recommendation to consider how technological advances in renewable energy could be better utilised, the Minister replies that the past ten years of technological development and sharp price drops have made solar, wind and biomass energy more competitive. This will make it possible to expand the breadth of the focus on clean energy. At the same time, the Minister notes that hydropower is an area where Norwegian aid is well placed to contribute. Many of the partner countries also have signiicant hydropower resources they would like to exploit, and have there- fore requested Norwegian aid in this area. The Minister points out that other donor countries have more experience and expertise within solar and wind power than Norway can ofer. The Ministry of Foreign Afairs endorses the OAG’s recommendation to strengthen eforts to improve energy access in rural areas with small-scale renewable solutions. The Ministry agrees that there is a need to supplement grid extension with other initiatives to reach the poorest population, including households where conditions are not conducive to grid expansion or establishment of isolated grids. At the same time, the Ministry points out several challenges that prevent increased use of decentralised solutions, such as lack of access to inancing and weak framework conditions for commercial operators. The Minister emphasises that to reduce poverty, it is important that access to electric- ity creates businesses and jobs. This happens over time and also depends on the devel- opment of other infrastructure and general framework conditions. The Ministry will look more at the possibilities of how increased access to energy, for example through the Norwegian support for grid expansion, can contribute to increased economic development. The Minister points out that it has been diicult for Norfund to ind mature projects and investors who are willing to invest in countries that are characterised by generally weak governance and poor framework conditions. The Minister points out that the authorities in the partner countries have gradually gained greater understanding of the importance of creating better investment climates and predictable framework condi- tions. The poorest countries have, in the Ministry’s opinion, become somewhat more attractive for investments in clean energy. In recent years, Norfund has bolstered its clean energy eforts in poor countries, including the creation of a project development facility and the reorganisation of SN Power. Furthermore, the Minister notes that eforts are under way to ind suitable mechanisms where grant funds can be combined with investment funds to realise projects that would otherwise not have been under- taken. To the OAG’s recommendation to consider alternative measures that can trigger private investment in clean energy, the Minister replies that a process is under way to identify multilateral and other international inancing instruments that can contribute to more private investments in clean energy in developing countries. Based on lessons learned from a pilot project for innovative inancing mechanisms in Uganda, it will be considered whether similar models can be used in other partner countries in Africa and Asia. The Minister stresses that Norfund will continue to be an important devel- opment policy instrument for investments in renewable energy and the geographical shift towards investment in the least developed countries and Sub-Saharan Africa will continue. Regarding capacity building, the Ministry of Foreign Afairs recognises that not all goals have been reached. The Ministry also has experience from several other projects where weaknesses in the planning of capacity building projects have created problems 14 in the implementation and progress. According to the Ministry, this may be due to the need to devote more resources to obtaining thorough knowledge of partner institu- tions, but also that assessments made of the institution’s ability to absorb and put into practice the capacity strengthening that has been ofered have been too optimistic. The Minister underlines that more thorough preparation and better dialogue with partner country governments and relevant institutions will be required to ensure that the projects are adapted to the realities of the individual institution and thereby contribute to realistic results. The Ministry of Foreign Afairs will carefully review how we can ensure that capacity building takes into account the recipient organisation’s organisational challenges, capacity and expertise, as the OAG recommends. Competitive tendering of contracts and capacity building and institutional cooperation programmes will be considered. The Minister points out that there will be a need to promote greater continuity by retaining employees with training in the recipient organisation, and the Ministry will take a closer look at resource and skills needs when planning capacity building projects. The goal will be to ensure a comprehensive assessment of institutional needs and preconditions, systematic assessment of relevant policy instruments and initia- tives, and the establishment of better framework conditions for measuring results. The Minister agrees with the OAG that support for development in poor countries requires a comprehensive and coordinated use of instruments so that aid is more targeted. The Ministry agrees that there is a need for more coordinated management of clean energy eforts, and the Minister refers in this context to the fact that a common budget item – chapter item 166.74 – was introduced in 2013 for clean energy initiatives. This has provided a better overview of budgetary development and made it easier to steer the funds to where they produce the best results. The Ministry aims to improve management tools through the budget and activity plan processes. Eforts to develop clear and operational goals, performance indicators and good measurement systems will be a key priority in the future. The Minister maintains that the OAG’s review of energy aid will be an important contribution to this process. Responsibility for implementing development policy has been delegated to the embas- sies in the individual partner countries. The Minister justiies this with that decisions about cooperation should be taken in close consultation with the recipient. Regarding the OAG’s recommendation to ensure that the embassies conduct and improve analyses as a basis for aid, the Minister agrees that thorough analyses are a prerequisite for the priorities that are set and the decisions that are made within the energy initiative. The Ministry will examine how the quality of the embassies’ plan- ning can be improved to exploit Norway’s comparative advantages. The Ministry of Foreign Afairs has recently obtained input from embassies with large energy portfolios on how energy initiatives should be prioritised and improved. The Minister views this as important for the strategic actions that will be taken to ensure a decision-making platform that ensures that the use of policy instruments best its the conditions in partner countries, as recommended by the OAG. The Minister relates that the Ministry will review the number of countries and multilateral investments in clean energy with the aim of greater concentration. This can improve performance and achievement.