Dr Alvaro Calzadilla, Associate Professor at UCL’s Bartlett School Environment, Energy & Resources
Large energy infrastructure can imply special financing arrangements between governments in developing economies and investors or lenders. These arrangements can lead to economy-wide and sector-specific impacts which need to be considered in the project economic evaluation. By considering the case of the Bui Dam in Ghana, we use a macroeconomic approach to determine how the economic performance of critical energy infrastructure manifests during the construction, financing and operation phases. The analysis uses an integrated modeling framework that combines a Computable General Equilibrium (CGE) model of Ghana with a water balance model of the Lower Volta River Basin.
The results highlight the importance of including indirect and induced effects, in addition to the direct effects from project operation, as they influence the scale and temporal evolution of the economic impacts. The collateral from the infrastructure loan agreement, consisting of cocoa exports to China, nearly doubles the project’s positive GDP impact and has a significant multiplier effect over urban and rural household income compared to a standard commercial loan.
We finish with a discussion of how the proposed investment-oriented modelling framework can contribute to ex-ante strategic assessments of proposed energy infrastructure in developing countries.