IEEE Power & Energy Magazine - January/February 2021 - 78

In addition to generation, IFC has invested in 32 distribution
companies, which serve close to 60 million customers,
and also in six transmission companies.
deployed and replace the stranded asset. The system would
benefit from a significantly lower cost of the provided service but would have to repay the replaced asset at the nondepreciated value. The option value should be sufficient to
cover the nonamortized value of the loan and equity so the
financing risk is duly mitigated. Though proper balancing
of the risk borne by developers and consumers is required,
these potential innovative market design options should not
be ignored if rapid decarbonization and low-cost supplies
are the main objectives.

A View From the International
Finance Corporation Investing in
Renewable Merchant Projects With
Decreasing Marginal Costs
The International Finance Corporation (IFC) has financed
close to 55,000 MW of private power plants around the
world. Nearly 10,000 MW of these investments are in hydroelectric generation, 5,000 MW are in solar PVs, 5,000 MW
are in wind, 1,500 MW are in geothermal power, and
350 MW are in concentrated solar power. IFC has also
financed several gas-fired power projects, including four

6 Billion
3%

27%

Other Fossil
Fuel Generation
Gas
Generation

large liquid natural gas-to-power projects and two floatingstorage regasification unit terminals.
Presently, IFC manages a US$6 billion power generation
portfolio (see Figure 3). Since 2007, IFC's power generation business has grown rapidly by fivefold, with renewables representing 75% of this growth. In addition to generation, IFC has invested in 32 distribution companies,
which serve close to 60 million customers, and also in six
transmission companies.
In most of its transactions, IFC has followed on the
reform steps of its sister organization, the World Bank. In
the 1990s, IFC successfully invested in the first independent
power producer models in several countries and regions,
including Mexico (1,700 MW), Pakistan (1,500 MW), the
Philippines (1,500 MW), and Sub-Saharan Africa (1,000 MW).
In the early 2000s, as the World Bank introduced unbundling and competitive, deregulated wholesale markets, IFC
started building a portfolio of 9,400 MW of fully or partially
merchant power plants in more than 10 countries around the
world (see Table 1).
As Table 1 shows, IFC has a long track record of investing in merchant projects, financing many first-of-itskind projects across multiple countries. With 9,400 MW
financed on a merchant basis, IFC is a leader in investing in
merchant projects in developing countries that bet on transparent price signals in deregulated markets. The results of
these merchant investments have been largely successful.
The next sections comment on the lessons learned from
some of these investments and how IFC's appetite for merchant investments is changing with an ever-larger penetration of zero-marginal-cost renewables.

Large Penetration of Renewables
and Zero Marginal Cost

70%

Renewable
Generation

1.2 Billion
20%
41%
39%
2007

2020

figure 3. IFC's power generation portfolio by subsector for
fiscal years 2007-2020, showing the percentage of generation
portfolio share. (Source: IFC, www.ifc.org/infrastructure.)
78

ieee power & energy magazine

In 2013, IFC was among the first to invest in large utilityscale solar PVs in Chile. When IFC made its initial investment, there was only a small, 2-MW solar plant. Today,
there are more than 2,200 MW of solar generation in Chile.
IFC invested in the first 300 MW. Three of the four projects were merchant, and one had a PPA. Similarly, in Turkey, IFC was the first bank to take merchant risk on
4,000 MW of power generation, with RE projects accounting for half. The other half, invested in, are among the most
efficient combined-cycle gas turbines in Europe and are
totally flexible since they are not contracted. These plants
play an important role in firming up the intermittency of a
larger penetration of renewables.
january/february 2021

http://www.ifc.org/infrastructure

IEEE Power & Energy Magazine - January/February 2021

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - January/February 2021