Exploring innovative energy infrastructure financing in Ghana: benefits, challenges and strategies

Abstract

Purpose – Inefficiencies in the power sector resulting from underinvesting and underselling reduce the ability of governments to adequately finance energy projects. The purpose of this paper is to explore mechanisms of energy financing, benefits and challenges associated with innovative financing of energy infrastructure as well as strategies to improve innovative financing of energy infrastructure. Design/methodology/approach – Questionnaires were used to elicit responses from respondents. Seventy-eight responses were retrieved. Mean score ranking, Kruskal–Wallis test and discriminant validity were the analysis conducted. Findings – Partial credit guarantee; partial risk guarantee; credit enhancement; and loan guarantees were the significant mechanisms. Production efficiency; reduce pressure on public budgets; access to management expertise; and self-sustainability of infrastructure facilities were the significant benefits. Lack of transparency and adequate data for risk assessment; high up-front cost; heterogeneity, complexity, and presence of a large number of parties; and lack of a clear benchmark for measuring investment performance were the severest challenges. Complete transparency and accountability; political stability and public view on private provision of energy infrastructure services; and macroeconomic environment were the significant strategies. Practical implications – This study is beneficial to energy sector as the current government of Ghana hints on willingness to involve private sector in management of the power sector. Originality/value – The novelty of this study is that it is a pioneering study in Ghana on innovative financing of energy infrastructure.