How catalytic capital unlocked a $777 million renewable energy market in Ecuador

In 2024, Ecuador was gripped by a crippling, four-month-long energy crisis with rolling 14-hour blackouts. The outages upended people’s lives, paralyzed the health and education sectors and sent the economy into a tailspin. The crisis was caused by a historic drought which hobbled the hydroelectric plants that supply more than 70 percent of the country’s electricity.

Ecuador’s government recognized the need to mitigate catastrophic energy systems failures long before the crisis hit. Officials had already begun awarding contracts to several private major renewable energy developers. However, financing and implementation faced delays due to the lingering risk that utilities – the buyers of the electricity –  might not meet their financial obligations. To clear the way for far greater investment and execute existing projects, the state first had to address this so-called ‘off-taker payment risk’.

The problem: potential is not enough

Like many emerging economies, Ecuador faces surging electricity demand driven by population growth, economic expansion and the accelerating electrification of everyday appliances. The country has abundant potential to meet this need with affordable, reliable clean electricity by deploying solutions ranging from distributed rooftop solar to large-scale renewable power plants.

But potential alone does not mobilize capital. Private developers require predictable revenues, enforceable contracts with utilities and credible payment mechanisms. Without these conditions, they will not risk the substantial capital needed to build new energy infrastructure. Alternatively, they will submit inflated tariff bids as a hedge against potential future losses. In Ecuador, the primary roadblock stymieing the market was the absence of a credible mechanism to cover public utilities’ commercial revenue risks. Consequently, the financing and implementation of projects – some of which had been awarded as far back as 2020 – stalled.

The solution: a liquidity guarantee

This is where strategic partnership bridged the gap. To overcome this structural roadblock, Global Energy Alliance for People and Planet allocated $750,000 from the IDB-managed Low Carbon Energy Trust Fund for People and Planet, enabling the IDB to conduct complex feasibility and legal studies. These IDB-led assessments were the prerequisite for a first-of-its-kind liquidity guarantee for projects able to provide clean energy for two million people.

Building on this groundwork, the Inter-American Development Bank (IDB) approved a $59.2 million partial credit guarantee for non-conventional renewable energy projects. The IDB guarantee covers up to six months of unpaid invoices. If a public utility delays payment, power generators can draw from this buffer to ensure continuous operations. The state acts as a counter-guarantor, remaining legally obligated to reimburse the IDB if the facility is drawn down.

This mechanism now serves as a credible, professionally managed liquidity backstop that drastically reduces investment risk in Ecuador’s renewable energy market.

The dividend: power for two million people

Global Energy Alliance’s early work helped transform a promising project pipeline into an active, investable market. The IDB guarantee was originally designed to de-risk 12 projects representing 800MW of new renewable energy capacity and $1.2 billion in investments.

To date, the mechanism has successfully unlocked 595MW and helped secure commitments of $777 million in private investments. Most of the projects are still in the preconstruction phase and it will take several years for the new capacity to come online, yet the impact of the intervention is already clear: every philanthropic dollar has helped mobilize more than $1,000 in renewable energy investments.

These strategic, small-scale interventions paved the way for systemic change in the energy sector. By reducing payment risks for developers, the guarantee has lowered the risk premium of Ecuador’s renewable energy sector, opened it up to private capital and set the stage for a more stable grid and clean energy for millions.