Déjà vu on “bankable pipelines”: why project preparation needs a comeback

Peter Storey and Peter du Pont, PFAN

We have just returned from another energising trip to attend Singapore International Energy Week (SIEW) and the Asia Clean Energy Summit (ACES).  SIEW and ACES give plenty of attention to Singapore’s own energy strategy, but they have also become one of the region’s sharpest forums on the energy transition: strategic, commercial and grounded in business reality. However, having worked in the sector and been involved with the Private Financing Advisory Network (PFAN) for more than 15 years, it was also a week of déjà vu.

In session after session, we heard the same complaint: “The money is there, but there aren’t enough bankable clean energy projects.” Ahead of COP31, our social media feeds keep asking the same question: “Where are the projects?” We heard exactly this in 2006 when we set up PFAN to address precisely this problem. Nearly twenty years later, it is extraordinary that we are still having the same conversation. The difference is that we now have two decades of experience demonstrating what it takes to build a bankable pipeline, and a considerable body of expertise and infrastructure that we should be using.

The complaint is real. And it is not wrong. There has never been a shortage of ideas, concepts and plans on paper. What is scarce is a reliable pipeline of investor-ready climate and clean energy projects, and the pipeline does not appear on its own. Building one takes a dedicated platform with real resources to originate, screen and prepare projects until they are ready for investment. These platforms do much more than provide technical assistance. They develop markets, build local developer capacity, aggregate smaller opportunities, structure transactions and connect businesses with appropriate sources of capital. In doing so, they perform a critical intermediary function between the availability of finance and its actual deployment.

We have solved this problem before. Such platforms exist, and they work. PFAN was launched in 2006 by the Climate Technology Initiative (CTI), an IEA implementing agreement, together with the UNFCCC’s Expert Group on Technology Transfer. USAID and METI funded much of PFAN’s early development and activities in its first decade. Then in 2017, PFAN entered a new phase as a global programme hosted by UNIDO in partnership with the Renewable Energy and Energy Efficiency Partnership (REEEP) and other funders came to the table, including Australia, Japan, Norway and Sweden. The ambition was to scale up PFAN’s reach and operations threefold — an ambition we successfully delivered, significantly expanding its global network, project pipeline and investment impact.

And PFAN was not alone. GET.invest, New Energy Nexus, REEEP, EEP, Asia Pacific PPF and SEFA have all demonstrated the value of dedicated project preparation capacity.

What we have forgotten. The problem is that we have lost our institutional memory. Throughout the 2010s, the development community invested heavily in project preparation and built platforms and facilities that delivered results. Then came COVID-19, the war in Ukraine, rising defence spending and squeezed aid budgets, and project preparation quietly fell off the agenda. In its place is an assumption that the sheer volume of capital will close the gap. Public and private climate finance has indeed grown substantially. But capital alone does not create investable projects.

The cost goes well beyond a weak project pipeline. Without dedicated origination and preparation, backed by targeted technical assistance, money sits idle or is wasted. At best, deployment is slow and flows to the usual suspects: well-resourced developers with strong balance sheets. The small and mid-sized companies that drive much of the transition in emerging markets are left behind. Funds end up trying to prepare projects themselves, while governments and donors spend money setting up new facilities instead of building on existing expertise and networks. Ultimately, we get less impact from the climate finance we already have.

The common fix is to attach technical assistance budgets to funds and financing facilities. That sounds sensible, but it often overloads them. Fund managers already have their hands full raising, structuring and deploying capital. Asking them to run project preparation as well, while balancing and reporting on the competing objectives of multiple donors, stretches even the most experienced teams.

Project preparation is a discipline in its own right. It requires specialist technical, financial and commercial skills and experience, local networks, established systems and delivery infrastructure, and it needs sustained resources to work with developers over time. It should be closely aligned with the capital it serves and informed by investor requirements, but kept at arm’s length, not least to avoid conflicts of interest. Fund managers are primarily tasked with raising, structuring, deploying and managing capital. Project preparation has different operational requirements, incentives and time horizons. Combining these functions without adequate resources or clear accountability risks compromising both.

The irony is hard to miss. The development community is lamenting the lack of bankable projects just as capital is most abundant, and just after it let its project preparation capacity lapse.

Build on what works. The answer is not to reinvent the wheel. Existing platforms need refreshing, with updated systems, new technology and closer alignment with today’s capital, but they have a track record. Since 2006, PFAN has supported more than 1,400 companies and helped nearly 300 of them raise financing, mobilising a total of USD 3.6 billion in investment. The cost of setting up and deploying PFAN and its network of more than 250 advisors worldwide over the past 20 years has been around USD 50 million. That is more than USD 70 of investment for every dollar of public support.

Why walk away from that? Why would we walk away from that accumulated institutional capital, only to spend public money recreating similar capabilities elsewhere?

This is not an argument against creating something new where a genuine gap exists. It is an argument for exercising due diligence before doing so. When public resources are highly constrained, the starting point should be to identify what already exists, what it can deliver and how it can be strengthened. The priority should be to make this ecosystem work better, not add another layer.

PFAN is ready. PFAN has stayed resilient, which shows the value its network delivers to members and clients. Over the past 18 months, we have adapted PFAN’s proposition to respond to the changing needs of the climate finance market. In addition to supporting individual businesses and project developers, we have extended our services to support fund and facility managers with customised services, improving portfolio performance and originating and preparing assets to order. We are already working with several funds and initiatives. We have redesigned our services and systems to serve the climate finance community across commercial, concessional and blended finance.

We are ready to help solve the pipeline challenge and to put our experience, methods and networks to work once again. But this requires a shift in approach. Before establishing yet another new facility, governments, donors and climate finance institutions should engage with existing PPFs, understand what capabilities are already in place and explore how to sustain, strengthen and better connect them to sources of finance.

The climate finance community must first accept a simple premise: bankable projects don’t just happen. They must be built, and building them takes sustained investment.

Peter Storey is CEO of PPL, an independent arranger and advisor for financing. He is Founder and Global Coordinator of PFAN. Peter du Pont is Co-CEO of Asia Clean Energy Partners, a mission-driven advisory firm based in Southeast Asia.  He is a co-founder of PFAN in Asia, and a Board member of New Energy Nexus, a global non-profit that supports clean energy entrepreneurs through funds, accelerators and networks in the US, Asia, and Africa.