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April 26, 2021
Episode #1 Mohamed Rali Badissy: Power-Sector Transparency & Energy Access
By Katie Auth, Rose Mutiso, Mohamed Rali Badissy

Mohamed explains why transparency is an overlooked issue in addressing energy poverty, why he thinks decarbonization will increase public demands for more energy transparency, and the one crucial thing about energy poverty nobody’s talking about.

Mohamed Rali Badissy is an Assistant Professor of Law at Penn State Dickinson Law, where his research focuses on the interplay between energy regulation and private investment. He previously served as the Senior Attorney for Energy and Finance with the Commercial Law Development Program (CLDP) of the U.S. Department of Commerce, advising governments in emerging markets on commercial law reforms intended to catalyze private investment to increase energy access. Over the past two decades, Mohamed has led energy sector reforms in dozens of markets in partnership with host governments, multilateral institutions, civil society organizations and industry leaders, and continues to serve as an advisor to both public institutions and private developers. He is the principal editor for a series of open-source guidebooks for governments titled Understanding Power Project ProcurementUnderstanding Power Project Financing, and Understanding Power Purchase Agreements. Mohamed previously practiced with the public international law group at Latham & Watkins LLP in New York and Dubai and served as a law clerk with the U.S. District Court of New Jersey (Newark).


Show Notes


Transcript

START (HIGH ENERGY PLANET)

 

[MUSIC]

 

KATIE:  I’m Katie Auth in Washington…

 

ROSE:  …and I’m Rose Mutiso in London, and this is High Energy Planet, the podcast from the Energy for Growth hub about new ideas to solve global energy poverty.

 

KATIE:  On today’s show the regulatory underbelly of energy development.  We’ll talk with Mohamed Badissy, professor at Penn State Dickinson Law School, and formerly of the U.S. Department of Commerce, about how power purchase agreements shape energy investment and access in developing markets worldwide.

 

ROSE:  We’ll ask Mohamed why we need transparency in these agreements, which countries are getting it right, how regulation and legal reform in emerging countries impact global (inaudible), and the one crucial energy-poverty issue that no one’s talking about.

 

KATIE:  Then later Rose and I air our current obsessions about energy and development.

 

ROSE:  Katie, get ready to hear me out on electric trains in Africa.

 

KATIE:  I’m ready, Rose.  All that coming up on this episode of High Energy Planet.

 

[MUSIC]

 

ROSE:  Mohamed Badissy, welcome to High Energy Planet.  So great to have you.

 

MOHAMED:  Oh, it’s an absolute pleasure.  Excited to be here, thank you.

 

ROSE:  So your work focuses on how regulation and commercial law can help or hinder private investment into the energy sector in developing markets.  So that probably doesn’t sound like the most galvanizing specialty to somebody not familiar with the central role of procurement, contract law, and how power gets delivered across the world.  So if you’re introducing somebody to what you study and work on how would you explain it so that they can understand why it’s really important, and perhaps even why it’s overlooked, and yet a really important angle into the problem of providing affordable and abundant energy in these geographies.

 

MOHAMED:  It’s a fair question, I’ve got to say.  I try to justify it to myself all the time why I’ve committed my life’s work to this field.  But the story’s quite clear for me.  I come from a family of engineers.  I come from a family of problem-solvers.  My family’s originally from Morocco and sort of – we have a great tradition of being an innovative group of people.  And when I was growing up I did my absolute best to be good at math, and sciences, and be an engineer like the rest of my (family), but I was terrible at it.  I just – it was not meant for me.  But being a problem-solver, and being somebody who has an appreciation for how innovation, and technology, and design, and implementation makes a difference in the world, I started to learn, you know, in my legal career that there’s a consequence to regulation, there’s a consequence to law, there’s a cost to the way that business is done.  And so to the extent that there are brilliant people around the world trying to think of the next great battery, the next great solar panel, you know, how to install things as cheap as possible and deliver the most efficient power, I’ve learned to acknowledge and sort of treasure in my career that smart lawyers–who are (inaudible) putting out smart regulations, better contracts, lowering the cost of doing business–are actually contributing to that very same problem-solving exercise, that to the extent that you can make it both easier to build a power plant but easier to contract for a power plant, easier to buy power and deliver it, and easier to sort of quantify and sort of establish the market for that power.  We’re all working towards a market which at the end of the day makes it as cheap as possible for an electron to go from a power plant to somebody’s iPhone.

 

ROSE:  That’s really cool, Mohamed.  You know, as an engineer I absolutely love it when lawyers insist on taking the credit [LAUGHTER] in technical fields.  You know, I’m here for it.

 

MOHAMED:  [LAUGHTER] Well, if it wasn’t for us, I mean, who would sue you at the end of the day, right?  There’s no accountability.

 

ROSE:  [LAUGHTER] Okay.

 

KATIE:  That’s awesome.  So Mohamed, one particular aspect of that giant field of regulatory energy work that I know you’re particularly interested in and fired up about is the legal issues around power-purchase contracts.  What are the major concerns that you’re looking at here?

 

MOHAMED:  So when it comes to power contracts the simplest way to explain, you know, the concerns of those like myself and others who are observing, you know, the huge growth that’s happening in the power industry, is that more and more the building, delivery, and payment for power is playing an important role in our society, which is to say that not only is energy access essential for the quality of modern life, but even as we move into, you know, a carbon-conscious world the kind of energy that we’re generating, you know, the carbon footprint of our energy system plays – you know, 30%, 40%, sometimes 50% of our carbon production comes directly or indirectly from energy production.  Well, what the problem is there is that because folks are so focused on the physical impact of energy systems, we don’t think about the policy impact of those systems.  And as more and more money flows into the energy sector, as more and more money is invested in an entire new generation of energy projects, we’re not being as careful as we should be in asking where the money’s coming from, how it’s flowing to, you know, who’s getting payments on the side, and are these investments working?  Are they efficient?  Are they actually producing, you know, the outcomes they’re meant to produce?  And the simplest way to put that is we honestly in most energy markets of the world don’t know who’s paying for the power, who’s building the power projects, you know, what it says in the contract.  I mean, these are fundamental rights.  We sort of think of energy access as a fundamental right.  And yet all of the contracts behind that energy delivery, all of the structure of the energy system, the transactions that are happening there, are happening, you know, behind closed doors.  And we learned many times in history how dangerous that can be.  You know, with the explosion of oil and gas investments, you know, the ’70s and ’80s we saw money flowing all around the world, ending up in the pockets of the wrong people, entire regimes being propped up through “petrodollars,” as we used to call them.  We’ve learned those lessons from, you know, blood diamonds.  Over the years we’ve learned that resources–and energy is a resource–although they themselves are valuable because they’re getting to be delivered, you know, they’re (inaudible) used in society, the way they’re generated, and the way they’re sort of developed matters as well.  And so I’m concerned that we’re all getting the warm fuzzy feeling of a green-energy future and solar panels on every rooftop, but we’re not thinking about what that actually means dollars for dollars of who owns what and what the liabilities are at the end of the day.  And that’s my big concern is that as this economy grows – this energy economy grows, we’re not growing it in a healthy, transparent, and accountable manner at the end of the day.

 

KATIE:  When you talk about, you know, the fact that we’ve learned that lesson in the extractives industry, and we’ve worked really hard to increase transparency around, you know, other parts of the industry, why have we just overlooked electricity?

 

MOHAMED:  So the difference is this, is that electricity in markets–and this is – I’ll put on my law-professor hat here for a second–electricity traditionally has been a regulative marketplace, which means that we already set up somebody to watch the market.  We already had – you know, most countries have an electricity regulator, they have a utility regulator, there’s a trusted system whereby we the people who have voted for our government, the government is appointed a regulatory agency, we’ve sort of governed that system through a regulatory body.  And so for the longest time we’ve trusted that regulatory system to be enough, to be enough of a check, to be enough of an information clearing house and a force for good to make sure that, you know, folks aren’t doing nefarious things or moving money around and sort of abusing the system.  The difference now is that there is a huge boom of electricity development in unregulated or poorly-regulated markets.  If we think about emerging markets–sub-Saharan Africa, Central Asia, you know, Central America, things of that sort–those are some of the most energy-poor regions of the world where there’s the highest demand, which for an investor is highly attractive.  But they also have some of the lowest governing standards in the world.  And so whereas the bargain is in developing markets, we trust the electricity regulator to manage the electricity projects.  If you don’t have a trusted electricity regulator, if you don’t have that ability to have deep insight, and analysis, and observation of the market through a sophisticated, you know, regulatory body, then you’re inviting in all of this investment–again, to meet the demand–but you don’t have that trusted system in place.  And so the only way to solve that sort of trust deficit in some of these markets is to insist on total transparency in the transactions themselves, and the contracts themselves, so that the public and anybody else who wants to observe the market can actually see what’s going on.  And so it’s that lack of oversight and capacity in some of these markets that demands another way – another way of building trust into these systems and sort of mandates that transparency at the end of the day.

 

ROSE:  So Mohamed, just picking up on that thread, you know, I’ve heard you say “transparency” several times, and it seems like on the whole a good thing that most people (inaudible) want to get behind.  And so, like, who – in these unregulated kind of emerging markets, who typically doesn’t want transparency around these actions, and why don’t they want it?  Or what is the roadblock keeping us from achieving this kind of – what seems to be a universally-agreed-upon good?

 

MOHAMED:  So this is where it’s important to sort of be frank and honest about the politics standing behind, you know, the legal issues that I’m trying to highlight.  Transparency at its very core is a bargain–it’s a sacrifice of the individual for a greater good.  Which is to say that I – you know, the person signing this contract, I the investor, I the government who’s signing the other half of the contract, am willing to shine a light on something that is very personal to me, and is something that I’ve created – you know, a liability that I have, for the benefit of informing the public, and informing the marketplace about what’s going on in, again, this critically-important sector, this, you know, critically-important project.  And so that bargain only works in a market where, A, the individuals who are being asked to sacrifice that sort of anonymity see the greater value, and that the market recognizes that value, that there’s sort of a value in that exchange.  And let’s just be blunt right now: in most markets–especially, again, in emerging economies–there’s very little upside to transparency for governments.  Because the only thing that’s being asked of them at the moment is, “Is the power on?  Do the lights work?”  And where those electrons are coming from, and really how much do they cost to develop, and what the long-term obligations are, are not a primary concern.  Because to the extent that any amount of transparency would sort of limit investment of the marketplace, that it would delay the deployment of projects, that’s all downside risk.  That’s all electrons not delivered, that’s people angry, that’s voters angry, that’s you maybe losing the next election.  And so the nearsightedness in most of these markets, it really is a deterrent to that sort of grand-bargain transparency.  And I think what we’re trying to do, and sort of learning from the lessons that Katie mentioned in (that) one sector and the money sector, is that doesn’t have to be a mutually-exclusive exercise.  You don’t have to sacrifice the long-term health and sustainability and trust of a marketplace just to encourage rapid development in the near-term through investments.  And I think that wisdom that we’re trying to extract from, you know, these (power) industries is that you can be aggressive about delivering power to your people today, and also building a market for tomorrow that’ll sustain that investment and grow, and actually encourage even more innovation in the long-term.  That’s sort of the – we’re trying to adjust the sort of risk matrix for a lot of these governments to realize that they don’t have to sacrifice one for the other.

 

KATIE:  I love that thought about kind of adjusting the risk framework and changing the way that governments think about this.  And clearly governments aren’t the only actors with their own interests here.  But I am curious, you know, given those obstacles what do you think are the most powerful mechanisms or tools that we have–whether they are from donors, or financiers, or civil society–to kind of push for this transparency?

 

MOHAMED:  It’s a good question.  I mean, some of those tools are policy-based and some of them are economic.  Let me just start with the economic ones because I think they’re the most straightforward.  What we know from sort of concrete, you know, analysis in other markets, and sort of empirical evidence, and just anecdotal evidence, is transparency makes things cheaper.  Let’s just be very straightforward, that if you’re able to put in place sort of that bargain I mentioned, whereby the actors in the marketplace, both the buyers and sellers, are comfortable disclosing information and informing the market, the market becomes smarter, people know more about what it takes to get a deal done, deals get done faster – they get done more quickly, and that results in cheaper power.  To put it in concrete terms, it lowers the transaction costs in a marketplace.  So – and we’ve seen this in deregulated markets in the U.S., and deregulation has its sort of, like, its controversies, but we know economically – economically that deregulation and transparency that make more informed markets, make costs go down.  And to the extent that energy access and cost of energy is a major component of energy access, that’s important at the end of the day.  So that’s sort of the economic tool is the ability to drive down costs in the marketplace.  The policy side is that there is increasingly a challenge in some of these markets of differentiating between, let’s say, good actors and bad actors.  That we have found that as the push for green energy in particular and the push for energy access, you know, grows and grows in some of these markets.  And let’s just be clear, you have riots every summer in Iraq because people don’t have energy for air conditioning.  You have riots every summer in parts of – you know, sub-Saharan Africa’s lack of energy access.  You have people dying sometimes because – you know, medical facilities that can’t stay on the…  There are angry people in the public who are sort of voicing a rage about the lack of energy access.  And one of the things that transparency can deliver is that it actually indicates in the near term action that may not be coming for a few years.  Which is to say that to the extent that governments put in place sort of transparent disclosure of activity in the marketplace, the public then knows what’s happening.  They know the project’s under development.  They know the investments that are to be, the things that are being built.  Whereas without that transparency, without that sort of layer of information, the public is always assuming that the government’s not doing its job, or the market isn’t working, and that tomorrow will be like today.  And so there’s a certain, I would say, sort of hope and long-term credibility that comes in a transparent market, where by disclosing that activity and the nature of that activity you disclose the inertia that’s being built in the marketplace, which will eventually deliver those services that are heavily-demanded in these populations.  So it’s both costs and, again, trust at the end of the day, that the governments can actually generate and produce from this commitment to transparency.

 

ROSE:  All right, so let’s name some names.  Which countries are bright spots on these issues, and which ones have a long way to go?  And do you see any markets taking promising steps in the right direction?

 

MOHAMED:  There is definitely some progress being made.  I think if you look around the world…  I mentioned South Africa–I think it’s a great example whereby they did a multi-round procurement process for renewable energy, were able to use the same contract every round, were able to build a lot of trust in the marketplace.  And lo and behold, every single round the cost of energy went down.  You see things like energy (auctions) in everywhere from Senegal, to Egypt, and, you know, even in the Middle East.  The recent, you know, round of auctions that – the reverse auctions that were happening in places like Vietnam, there are more structured approaches to inviting investment into the marketplace in quite a few countries around the world.  And they’re delivering results.  They’re delivering billions and billions of dollars of investment.  I think where I’m hesitant to label any one country as a prime example just yet, is we haven’t seen a commitment both to procurement transparency and contracting transparency in a lot of these markets…  (Inaudible) say that – I think there’s a strong culture around the world where governments are willing to engage in transparent procurement practices.  But the moment that procurement’s finished and somebody’s been awarded the contract, all the things that happen afterwards–the negotiations, and the financings, and all of that–aren’t necessarily in the public domain.  But there are some place – you know, Brazil is well-known for this.  Mexico actually has increased, you know, its transparency, although they’ve had a few setbacks recently.  The Philippines is actually one of the most transparent energy markets in Southeast Asia, both in the transmission projects and generation projects.  So we have seen some governments that have already committed to procurement transparency, translate that into transparency through the entire value chain.  And I think that the second thing I would point out is that there are individual companies that have become real cheerleaders and sort of advocates for transparency.  And ironically, you know, some of the most transparent companies are those that are forced to be transparent because they publicly list it.  And so to the extent that – we have sort of this new generation of majors.  You know, we used to have the oil majors–the Exxons, and BPs, and Shells of the world–and now we have the NLs and, you know, here – you know, we have Next Era in the U.S. and these new major energy companies.  Even the – some of the oil companies are becoming major energy companies.  To the extent that those are publicly-listed companies and they have an accountability there, and they have sort of an obligation to disclose some of their major commitments, we’re starting to see that translate into the marketplace as well, sort of the culture-of-securities transparency.  And that kind of transparency (is) becoming a major force in the energy marketplace.

 

[MUSIC]

 

KATIE:  Coming up, we ask Mohamed how he got involved in energy contract transparency, what’s the one thing about energy poverty nobody’s talking about, and why he walks while taking video calls.

 

[MUSIC]

 

KATIE:  So I’m so glad you brough up kind of this growing culture of transparency in the private sector because I’m going to take us in a slightly different direction.  So you mentioned the rage that is, you know, present among populations because they lack access to electricity.  And we see that, you know, all around the developing world.  But there’s also increasingly rage and public demands for decarbonization and an aggressive action on climate change.  And sometimes those two things line up–you mentioned the South African renewable energy auctions–but sometimes there are, you know, potentially trade-offs or, you know, tough decisions that need to be made around what generation to procure and when in order to achieve both of those goals.  And I’m wondering whether you think, you know, this type of regulatory transparency can play a role in elucidating that or deconflicting those things, kind of giving people a sense of how those two factors play out.  And I mentioned the private sector because you are seeing this push among investors, at the very least, for transparency around climate investments and carbon emissions.  And I kind of see that as part of a similar picture.

 

MOHAMED:  It’s a great question, Katie.  And really what it is, is that there’s a wisdom implicit in what you’re asking that I don’t think, you know, many of our partners in some of these governments have just yet.  Which is to say that there’s an assumption that if I simply announce a solar project being built I’ve satisfied a carbon target, right?  I’ve sort of – I’ve decarbonized just by the very basic fact that I’m investing in solar power, or wind, or, you know, offshore wave energy these days, whatever exotic sources you want to toss into the mix.  And I think the lesson learned historically is that the public only becomes smarter and smarter about these issues as they go along.  Which is to say that whereas they want to see an announcement of solar power today, they’re then going to ask tomorrow about what kind of solar power.  How viable is that option?  What impact does solar have on the soil underneath?  How sustainable is the debt obligation behind that solar project?  Does it mean we’re sacrificing, you know, our capital future, our tax base just for the sake of, you know, greening, you know, our power?  The labor standards, even the water usage of some of these solar projects is becoming more scrutinized in some markets.  So I think the best way to answer your point is that, yes, there is sort of a sheen, there is a natural upside to announcing investments in green energy.  But unless you are able to convince the public that the nature of those investments is green, but also the structure of those investments is green, you actually can’t convince the public over time.  They’re going to start asking questions about the details of projects.  That unless you’ve disclosed those contracts, unless you’ve made clear and you put into the public domain an explanation of not just “these are panels,” but where they’re going, how they’re being built, how they’re being maintained, and the financial obligations connected to them, you’re going to have problems down the road.  As the public becomes smarter and scrutinizes these transactions more carefully, you actually lose some of that trust you built at the outset as the – you know, over time.  And we’re seeing that here in the U.S.  I mean, maybe just, you know, compare some of the markets in the world that have seen the biggest booms in investment–you know, Europe, the U.S., and elsewhere–especially for solar, are now having huge pushback on solar projects.  Because people are realizing that solar itself, as positive as it is on a general carbon alternative to, say, you know, thermal fuels, has different grades of efficiency, has different impacts on the surrounding area, on the soil, on the ecosystems.  And so people don’t just want solar projects, they want good solar projects, sustainable solar projects, productive solar projects.  And so we’re getting to the point now in the U.S. where we’re not just asking is solar being built, but where is it being built, how is it impacting things like farmland, how is impacting bees, how is it impacting, you know, energy markets, things of that sort – sort of the equity issues in some of these markets in rural and urban areas.  So it’s a long-winded way to say that while there may be a near-term focus on decarbonization and meeting sort of, you know, targets that you’ve set in sort of climate accords, we know that over time these projects will be scrutinized despite their green nature.  And the only way to ahead of time anticipate and sort of diffuse that risk is to inform the public from the outset about not just the fact that it’s a solar project, but all the details of that solar project, to build that trust and to sort of deflect any of the concerns that are going to come up down the road.

 

ROSE:  How did you first get interested in regulation and legal issues as regards power-purchasing?  So we know that you ran a radio station in college, among other things.  You know, connect the dots for us–how did you go from being a cool college kid to this?  And, you know, what was the lightbulb that went off for you?

 

MOHAMED:  Well, you know, it’s funny, I’m going to trace it back to that point I made earlier about coming from a family of engineers.  I’ve always been somebody who likes to dissect.  In college we built a radio station, but of course I wanted to be the one to literally build it – to physically build it and also to use it afterwards.  In that same spirit, you know, early on in my legal career I was a litigator.  I started off in my career as an arbitration attorney doing litigation, you know, in court or in tribunals.  I always ask myself, wait a second, why are we even here?  How did this problem happen in the first place?  Why did those contracts fall apart, or this deal fall apart, or, you know, this controversy take place?  And that leads you to sort of a meta-level analysis where you ask yourself about the system, and about the nature of the transaction.  And I kept having my head in the clouds and annoying my partners at the time when they wanted me just to get the work done.  And so I realized quite quickly that the same curiosity that, you know, as a kid let me take apart our telephone, or to build the radio station, or to sort of always ask about why something is the way it is, led me to regulatory work.  Because the luxury of being a regulator, and the luxury of thinking about regulation, is you get to anticipate problems before they happen.  The smartest regulations are those that put in place both a trusted system for dealing with day-to-day observation and oversight, and make sure the market works.  But also they program in some (defusing) – they program in some deconflicting information where they say, “Well, if a problem comes up here’s how we deal with it.  Here’s how we make sure that small problems don’t become large problems.  Or to the extent a large problem happens here’s how we share the burdens of the entire system so it doesn’t fall apart.”  And so it was that desire to always ask about how can we do this better that led me to regulatory work, and continues to be what drives me today.  I think more than ever, as I mentioned before, doing things better is more important – more consequential because of this ambition we have, you know, in today’s energy transition.

 

KATIE:  So I just absolutely love the image of little Mohamed taking apart a telephone [LAUGHTER].  And I’m sure your parents were thrilled with that, by the way.

 

MOHAMED:  I was very lucky to have patient parents, I have to say.

 

KATIE:  So you and I share something, which is that we once worked for the U.S. government and now are outside.  What have you found that you can and can’t do being on the inside versus the outside, and how are you approaching these issues differently now as a result?

 

MOHAMED:  It’s a good question, and I think it’s something that I don’t know that I actually have a full answer to.  I haven’t been out of government long enough to fully appreciate just how much new power I have, which is to say how much freedom I have in this role.  And I would answer the question this way:  I think when you’re, you know, a government official, when you’re part of the team, you’re exactly that–you’re part of a team.  You have a personality, you have your conviction, you have your own sort of thought process, but you’re delivering on a mission that’s established from higher up the chain, right?  Policies are set, missions are set, and you’re really executing or helping to craft the implementation, you know, of a higher-level policy.  As much as you are perhaps at a policy level thinking big-picture, you still are constrained by the political philosophy and the political outcomes that have been defined by the leadership.  And I think the luxury that I have now is I’m allowed to question that authority.  And I don’t mean it in, like, you know, is it corrupt or is it sort of ill-willed, but more important, “Could we do it better?” is really the question that I think I’m allowed to ask now that I’ve enjoyed with this academic freedom.  Is that I can look at the very important work, Katie, that you and I both did about, you know, increasing energy access to sub-Saharan Africa and delivering the investment that actually built the plants that delivered the electrons – I mean, they’re very concrete outputs that I think were some of the hallmarks of some of that work.  And I get to say, well, could it still have been better?  I mean, the electricity was delivered.  Again, that is fundamentally important.  But are there lessons from that, are there sort of targeted interventions that we could put in place that the next time would (inaudible) that much cheaper, or that much faster, or that much broader of an impact?  And so those big-picture thoughts I think have consumed me since I left government, and they’re – it’s the reason that I’m still interested in this work.  You can leave government and be exasperated and exhausted with that work, and ever want to look at a policy every again, and just sort of stick your head in the ground.  Or you can take that fire that leads to government work in the first place, that sort of fire in your belly that makes you want to make a difference, and kick it up a notch.  And I think that’s what I’m trying to do.  I’m trying to be even more ambitious in my sort of thinking and my design of some of these regulatory solutions than I was in government because I’m allowed to get outside the box now.

 

KATIE:  Yes, more fire.  I love it.

 

MOHAMED:  [LAUGHTER] Exactly.

 

KATIE:  So, you know, I think all the stuff we’ve talked about–transparency around PPAs, and driving down the cost of renewables in emerging markets–the development impact of all of those things is pretty clear.  And, you know, a lot of our work, the three of us, has focused on the development impact of energy access and clean energy.  But you worked at the Department of Commerce, and these are also issues that bring in – on the U.S. government side they bring in the State Department, they bring in, you know, other agencies that you don’t necessarily associate just with development.  What is the U.S. governments’ interest in these issues beyond development?  Does it touch on other economic or national security priorities?

 

MOHAMED:  It does.  And I think, you know, the fact that you mentioned the different government departments sort of explains that story.  The U.S. government and many governments–I want to give credit to our own government–have become smart at understanding the interconnected nature of energy markets.  For example, we know that at the Commerce Department, which is dedicated to expanding U.S. commerce, more and more U.S. companies are exporting energy products.  They’re exporting their services, their panels, you know, even the capital from U.S. banks and U.S. investors going into projects abroad.  So our economy is more connected to energy economies abroad.  We know that at a diplomacy level, the State Department, that to the extent that there’s a lack of energy access, that destabilizes governments.  To the extent that there’s a significant amount of energy access it promotes economic development and builds a sustainable future for some of our allies and sort of critical regions around the world.  Even something like the Department of Agriculture knows that energy access is necessary to sustainable agriculture for irrigation pumps and things of those sort.  So to the extent that they’re worried about food security, and they’re worried about some of the long-term security in that sector, they know that energy is a core component.  We know that labor is important, that to the extent that you have dirty energy sources and folks working in those conditions, you’re building in place health conditions–that is to say, you know, inhalation of, you know, particulate matter, etc.–that are going to produce long-term, you know, health impacts that, again, spill across borders.  Because to the extent that there’s destabilization you may have things like, you know, refugees or mass migration.  So to really tie that all together I think every part of the U.S. government has begun to appreciate the interconnected nature of energy markets and security, and to program that logic into the way that approaches its core mission.  And I have to say, it’s just a matter of timing.  I mean, it was never intentional, but I think you and I were both lucky to be in government at a time when that awakening was happening and that appreciation was growing.  And it’s only become further engrained, you know, since then I think at the end of the day.

 

ROSE:  So to what extent would the U.S. government’s interests be characterized as less about the development mission and more about promoting U.S. private sector interests?  And what about the legal framework helps that goal?

 

MOHAMED:  Well, there is an access issue there and there’s a sustainability issue.  Let me describe them separately.  If you think about the fact that in many markets around the world energy projects represent the largest single form of private investment, that means that when energy investment comes in it defines a market.  And if one of the things we know in the U.S., you know, that open markets are in our joint best interests, and, you know, basic theories behind globalization and free trade, we know that open-energy investment is open investment generally, that sort of free-energy investment is free trade.  Which is to say that by targeting some of our interventions and our promotion of access to markets around energy investment we’re creating the long-term sustainability, you know, that we always wanted in those markets in the first place.  But then at a policy level I think, you know, where it goes just beyond the social value of energy, there’s an appreciation that independence, which is to say that democratic independence, the ability of people to govern themselves, and the freedom that comes along with that, and how freedom actually connects at a philosophical level…  That, you know, individuals who have shared freedom have shared respect for that freedom, and therefore a shared interest in promoting, you know, free and open future, which is sort of the core of U.S. diplomacy; it has been, you know, for over a century.  The lack of energy is a lack of independence.  And so at a fundamental policy level we know that we can’t truly expect to build allies of, you know, free and open democratic states if that core part of their independence, their energy independence, can’t be addressed at some point.  So I think we’ve learned to recognize–as we talked about at riots before and things of that sort–how energy issues trigger fundamental challenges to governance.  They trigger fundamental challenges to the sustainability of governments.  And to the extent that we’re promoting good governance, we have to promote it with some of those components in mind, knowing that that’s an essential component to a sustainable government, sustainable governance, at the end of the day.

 

KATIE:  So here’s a big question.  What’s one thing about energy that nobody is talking about that you think everybody should be talking about?

 

MOHAMED:  That there’s not actually poor people who are experiencing energy poverty.  I think the most destructive and subversive narrative in energy poverty is that it’s somebody sitting in a hut in the middle of nowhere in sub-Saharan Africa or, you know, central Mongolia, a thing of that sort.  I think there’s an imagined narrative in the minds, and I think it’s unfortunate it’s re-enforced sometimes by even Hollywood narratives and others, that we know what poverty looks like in these markets, and what impoverished people look like.  And the reality is, is that energy poverty is so sort of pervasive that it even hits basic entrepreneurs trying to run their shoe repair shop in downtown Lagos, right?  That the reality of energy poverty is that even one hour of missing energy, you know, production during the day means you have to shut down your factory, or shut down your school, or whatever it may be.  It is such a pernicious–if I can use that word–problem in these markets, that even though we think of somebody who has no lightbulbs working, the fact that you can’t operate a basic piece of machinery during part of the day means you’ve lost economic output.  You have actually sacrificed the ability to continue to do your job and be a productive part of an economy just because the lights weren’t on, or the electrons weren’t flowing.  And so I don’t think we have an appreciation for just how absolutely massive the consequences of energy poverty are, and who is experiencing that poverty at the end of the day.  That it is not just folks who are off the grid; it is folks who are on the grid but the lights still don’t work.  And those sometimes are the most I think tragic consequences of the lack of energy security at the end of the day.

 

ROSE:  And Mohamed, just chiming in here, I – perhaps safe to say that also the folks in Texas briefly experienced energy poverty.

 

MOHAMED:  And you know what?  It’s a hard lesson but it’s a reminder of just how – you know, energy as a fundamental right means it’s a fundamental right for everyone.  We have all built our lives around an energy-rich lifestyle, right, from your iPhone to your respirator, or whatever it may be.  And you’re right–I think we’ve seen it (here in the U.S.); we’re seeing it – you know, the rolling blackouts that we’ve seen in California.  I live in a rural part of Pennsylvania; we don’t have the most stable energy access, I’ll be honest.  The lights go out – every single device in our house has a backup battery.  We’ve had to adjust and invest, if you will, in energy security in our own household.  And so I think you’re right, nobody is spared.  And nobody is spared from that lack of access.  It may be more common in some parts of the world, but it is consequential – as consequential for everyone at the end of the day.

 

KATIE:  So building on that kind of what’s one position that you have about energy poverty or energy access that you think a lot of people would disagree with?

 

MOHAMED:  The experience that I’ve had in recent years is that one of the most lagging parts of sort of the energy security solution or attempts to address energy security, is how smart the money is.  I think we have run the numbers and we know the consequences of lack of energy access.  We know from a development perspective, an economic perspective, from a gender-equity perspective, even as I mentioned, democratic governance, we know the consequences across the scale of the lack of energy access.  And yet we still manage investments in energy like they’re a profit-making exercise.  Most of the funds that flow from development banks, like, you know, from the World Bank, are – you know, even the U.S. government, even, you know, private lenders, there is still a strict adherence to a market methodology for the financing of energy projects that I find to be absolutely frustrating.  Which is to say that if I know that by investing a dollar in an energy project I’m generating five dollars of economic activity–and that’s a pretty fair ratio in most markets around the world–why should I be that worried about investing that dollar?  There is such a focused sort of narrow risk perception on negotiating a particular project and its narrow risk that it sacrifices the ability to scale up in the marketplace.  And I think sometimes that if we were simply able to adjust the way we sort of analyze risk of energy projects to a macro scale, which is to say, “Look, let’s just set aside a whole bunch of money on the sidelines,” to say, “Build as many projects as you want, finance them, get the money flowing, get the electrons flowing,” and if one or two projects goes bad we’re going to socially-ensure – we’re going to sort of have a risk pool here on the sideline to help those projects.  But to treat every single project like it’s its own negotiation and its own sort of risk analysis is holding the market back.  And the best example there is, if you think about getting a mortgage in the United States, okay, you know, mortgages are a bank taking the risk that you’re going to pay a loan over time.  But it’s a low risk because if things go bad they can just take the house, right?  That’s the basic bargain of a mortgage.  The bank doesn’t come and look under your floorboards.  They don’t sit and ask, “What do you plan to do with this house?”  They don’t, like, you know, like, knock the walls, you know, closely for termites.  They trust you as the buyer to have done that work.  If you’re (wanting) to borrow all this money to buy a house, we’re sort of going to trust you as a buyer that you’ve done your inspection, that you’ve done your diligence.  The bank doesn’t come in and do an extra layer of, you know, investigation.  And yet that’s still what happens in the power sector.  As common as power projects are, as standard as solar panels are, as (sort of), you know, the ability to approach these projects in a standardized way, every single transaction still comes under intense scrutiny from lenders.  And it’s holding the marketplace bank…  I would love to see a future where there is just a pool of structured funds, you tick a bunch of boxes like a mortgage, you satisfy these conditions, and then the money shows up and you build a power project.  And that way we build thousands of them from, you know, ten megawatts to a thousand megawatts of scale.  It’s the only way I see us actually reaching the targets of deployed energy that we’re setting, you know, both for climate and for basic human rights purposes.

 

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ROSE:  Okay Mohamed, now it’s time to play Rant or Rave.  So we say a word or term, and you go on a short rant or rave about it.  Ready?

 

MOHAMED:  [LAUGHTER] Okay.

 

ROSE:  Okay, let’s go.  Rant or rave: walking while taking video calls?

 

MOHAMED:  Absolutely essential, otherwise I would never leave the house.

 

KATIE:  Rant or rave: regulations for solar development in Pennsylvania?

 

MOHAMED:  Raving because they’re getting better, but a rant because I can’t believe here in the U.S. we’re still so backwards in some of the way we approach these things.

 

ROSE:  Rant or rave: Carlisle, Pennsylvania, where you live?

 

MOHAMED:  Oh, absolutely awesome.  I’ve got to say it’s the biggest small town in America.

 

KATIE:  Pirate radio in Los Angeles?

 

MOHAMED:  We need more of it, and frankly I feel like I have so much more to say now.  I wish I had my show back.

 

KATIE:  Another one: Africa’s regional power (polls)?

 

MOHAMED:  Oh, the future – the absolute future.  Africa’s greatest strength is the trust amongst its people.  It will outshine the world in its interconnectedness in the future.

 

ROSE:  Solar auctions?

 

MOHAMED:  (Inaudible) straw man.  A deal’s a deal, I don’t care if it’s auctioned or not.

 

KATIE:  And lastly, owning dogs and cats at the same time?

 

MOHAMED:  Oh yeah, three kids, two cats, one dog.  I can’t tell them apart sometimes because you don’t where the hair is coming from in our couch.  But, yeah, I’ve got to say, you know, the COVID lock-in, we’ve been very lucky to have such a rich and dynamic household at the end of the day.

 

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KATIE:  Mohamed, thanks so much for being with us on High Energy Planet.  Coming up, Rose and I on our current energy and development obsessions.

 

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KATIE:  Now it’s time for Amped Up: one thing each of us can’t stop thinking about right now in the energy and development space.  And this week, Rose, you’re amped up about electric trains in Africa?  What’s going on with that?

 

ROSE:  Yeah, Katie.  I love trains, massive fan, and incidentally trains are a super-hot infrastructure class in Africa right now.  Every country is trying to upgrade their kind of dilapidated infrastructure, get new single-gauge railway lines up.  Of course the Chinese are bankrolling this in a big way and there’s controversy around indebtedness, and you name it.  But for me, aside from all of that exciting stuff for better or worse, I’ve been really following closely the electrification angle.  And so there are super-high aspirations for electrifying this new rail infrastructure that’s coming up.  So, you know, Ethiopian Djibouti is a classic example.  It’s the first kind of fully-electric cross-border railway on the continent.  And I think more controversially, Kenya was – we started off with plans for an electric railway and ended up with a diesel one.  So, you know, good old switcheroo there.  [LAUGHTER] But, you know, all over the place, like, you know, Tanzania is planning to electrify their new (SGR) railway.  I think Senegal’s got plans.  Everybody’s kind of getting in on this.  And here at the Hub, as you know, we talk a lot about demand stimulation and how our ailing utilities need new sources of demand.  And so obviously this could be a big source of demand.  But – and then, like, electric trains are cleaner and more efficient.  There are many possible pluses.  But then, you know, you’ve traveled a lot in Africa, and you know that the electricity is way less (un)reliable, and can we really support this kind of infrastructure?  So lots of stuff being debated about what is possible, what is realistic, is this too ambitious, is this not ambitious enough, where the money flows.  But as somebody who is super-obsessed with both trains and power-sector issues in Africa, I’ll be following this closely.  In any case, this is an interesting thing.  And, you know, I think people don’t often think Africa when they think cool electric trains, and this is a new topic.  You are on tap this week with a problem in the non-profit space that has been going around for a while.  So this is kind of the issue of problematic imagery or what is better known as “poverty porn.”  So why and where is this an issue in the energy access space?

 

KATIE:  Yeah, so you’re totally right, Rose.  This is definitely not in any way a new issue, but I’ve been seeing a lot of it lately.  Basically this is a problem where the international development industry frequently uses images of people in emerging economies to raise awareness to celebrate successful programs, even to sell products.  And the problem is that way too many of those images tap into really damaging stereotypes of victimhood and the romanticization of poverty.  And for me this is galling anywhere, but particularly galling in the energy access space where donors and practitioners love to talk about how their work is empowering people.  But it’s not empowering when your public imagery hinges on this narrative of people being passive, grateful recipients of basic electricity.  And unfortunately I think it’s become kind of so engrained now in these institutions, even for those that like to think of themselves as super-progressive on this stuff, that it’s second nature.  There’s not often a lot of thought getting put into why some images might be problematic.  And ultimately it perpetuates, you know, the worst aspects of international development.  And almost everyone is guilty of it, from the big multilaterals to solar home system companies operating in Africa.  So we all need to do better.

 

ROSE:  I couldn’t agree more, Katie, and if I could just say that the energy-access power-sector people are equally guilty of stretching the empowerment and power metaphor too far in ways that just make this dignity problem even worse, so – until they agree with you.

 

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ROSE:  If you have an energy or development obsession for Amped Up, good or bad, tweet it to us at @Energyforgrowth and we’ll include it in an upcoming episode.  All right folks, that’s it for today’s show.  High Energy Planet is a production of the Energy for Growth Hub, an energy solutions (connector) matching policymakers with evidence-based pathways to a high-energy future for everyone.  Find out more at www.energyforgrowth.org and tweet your questions and thoughts to us at @EnergyforGrowth.

 

KATIE:  If you liked today’s episode be sure to rate and rank the podcast and tell a friend about us.  Bob Lalasz is our executive producer.  (Gray Johnson) is our senior producer.  Join us next time for more High Energy Planet.

 

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[0:41:19]

 

END (HIGH ENERGY PLANET)

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