El Salvador aims to make its energy sector carbon-neutral by 2050. To further this objective and meet national targets and SDGs the country and its Directorate of Energy, Hydrocarbons and Mining, seek to reduce energy demand and emissions from productive activities.
However, specific barriers and risks to commercial investment remain due to the novelty, scale, and lifespan of innovative renewable and green energy projects. New technologies as well as advanced smart meters and distributed generation, storage, and energy efficiency are nascent in El Salvador and require scaled-up deployment to support the country to achieve its net-zero targets.
These technologies have different risk profiles and financing needs that require specific products to support them, notably risk-mitigation mechanisms designed to help mobilise investment. Publicly funded financial instruments are crucial to overcoming the initial phase barriers that new technologies face until they become commercially self-sustainable.
To address this, the World Bank is providing technical assistance to the El Salvador’s Directorate of Energy, Hydrocarbons and Mining (Dirección General de Hidrocarburos y Minas – or DGHEM) to support the design of a dedicated Energy Transition Fund (ETF) that would foster investments in cleaner energy solutions and at the same time facilitate the creation of new markets and local green jobs.
The World Bank contracted BASE to support this endeavour and provide technical assistance on risk mitigation to ensure the fund can attract the greatest amount of private funding and thus achieve maximum leverage.
The Fund aims to finance multiple areas of sustainable energy, such as energy efficiency, renewable energies, sustainable transportation, and circular economy projects. Initially, the focus will be on the public sector, to effectively decarbonise operations and assets in areas like public buildings and transportation.
The ETF is envisioned as a self-sustaining revolving fund: repayments of lent capital, along with interest, will be re-employed to finance new projects. The savings generated through the adoption of sustainable energy solutions will serve as a key source of revenue to repay the financing.
BASE’s primary objective is to design and conceptualise the ETF tailored to El Salvador’s legal, regulatory, and energy sector framework. The consultancy will provide strategic recommendations on the governance structure, financial instruments and operational models of the ETF, ensuring its alignment with El Salvador’s needs and maximising its scalable impact across sectors and industries, while leveraging private sector investment.
The consultancy will deliver a comprehensive Energy Transition Fund design aligned with El Salvador’s legal and regulatory framework. It will identify key public and private sector financing needs, and develop a detailed implementation roadmap.
By unlocking investments in green technologies, it will help create markets, generate local jobs, and support El Salvador’s transition to a sustainable, carbon-neutral economy.
