How to insure long-term activities in short-term funding? A Guarantee Mechanism in Humanitarian Energy Contracts

Humanitarian agencies are recognizing the need to shift their dependence on fossil fuels and transition to more sustainable approaches to generating and consuming electricity. However, systemic barriers are preventing them from doing so, which results in the continued purchase of diesel generators as their primary source of power even in locations that are favorable for solar solutions.

Recognizing this, a series of workshops were convened under the Global Platform for Action on Sustainable Energy in Displacement Settings (GPA) which is the global hub to achieve SDG 7 in displacement settings, led by humanitarian and development actors. The goal was to identify modern and viable alternative business models,  where the humanitarian partner could outsource the electricity supply to private partners. This can lead to decarbonization of the operations, reduced energy costs and creating employment and other livelihood opportunities. Two priority topics were identified by the workshop participants in order to facilitate the large-scale uptake of these alternative delivery models:

• A conducive legal framework, in line with relevant UN procurement and finance rules and
• A de-risking mechanism that would provide an insurance for the commercial entity’s, as well as for the humanitarian partner in case the contract needs to be terminated early.

Both products/concepts have been developed and the legal framework can be downloaded from Energypedia here and the concept for the guarantee mechanism here.