Establishing dedicated investment funds for grid infrastructure can play a catalytic role in unlocking capital for T&D projects CASE STUDY 3 IDB Invest’s green transmission line standard15 IDB Invest, part of the Inter-American Development Bank (IDB), has proposed a Green Transmission Line Standard to identify electricity transmission projects that can be deemed “green” based on their contribution to the decarbonization of countries’ energy matrices. A practical example is Uruguay’s Green Transmission Line project, which involves the construction and operation of high-voltage lines connecting renewable energy sources to demand centres.14 This project’s green certification has enabled access to specialized financing, lowering the cost of capital and attracting international investors focused on sustainable infrastructure.environment; lack of interest from private investors; insufficient readiness of projects; lack of more effective de-risking mechanisms; and the cost of capital that jeopardizes the provision of affordable services to the end user. While the region presents a relatively high risk profile for infrastructure investments, tools such as guarantees, credit enhancements and currency hedging mechanisms are often insufficient or hard to access. Their absence erodes investor confidence and constrains the flow of long-term capital into the sector. Uncertainty around macroeconomic conditions and inconsistent policy signals further exacerbate the investment challenge. Frequent shifts in regulation and limited predictability of returns make it difficult for investors to assess risk over the life cycle of grid assets, weakening the investment case. As a result of these overlapping constraints, the cost of capital in LAC remains significantly higher than in other regions. This cost premium places considerable pressure on project economics and limits the financial viability of grid infrastructure investments – especially those requiring long-term, large-scale capital commitments. Solutions The working group has identified a number of financial strategies to help address the root causes of investment constraints in the LAC grid sector. These include mechanisms to lower the region’s elevated cost of capital, expand access to competitive funding, enhance the availability of risk- mitigation instruments and build investor confidence in the face of economic and regulatory uncertainty. Grid-dedicated investment funds Establishing dedicated investment funds for grid infrastructure can play a catalytic role in unlocking capital for T&D projects – particularly in markets facing high financing costs and elevated risk profiles. Led by public or private financial institutions, such funds can provide targeted financing to priority segments of the supply chain, helping to de-risk investments, shorten procurement timelines and accelerate project execution. The working group could support the development of actionable recommendations for fund design, governance structures and strategies for capital mobilization – ensuring alignment with regional investment needs and transition goals. Green transmission line standards Developing standards to classify electricity transmission projects as “green” can help unlock climate-aligned capital for grid infrastructure. By aligning project eligibility with national decarbonization strategies, these standards strengthen the investment case, reduce perceived policy risk and enable access to green and concessional financing. To ensure credibility and scalability, such mechanisms should be supported by shared taxonomies and verification criteria that clearly define what qualifies as sustainable grid infrastructure. Improving investment flows into grid infrastructure requires first developing, and then preparing, a robust pipeline of bankable projects. A critical enabler is investing in the pre-investment phase, including technical design, environmental assessments, regulatory compliance and financial structuring. These early-stage efforts are essential to reduce uncertainty, de-risk proposals and lay the foundation for viable investment opportunities.Once projects are developed to a basic level of maturity, dedicated platforms and support mechanisms can help bring them to bankability by aligning proposals with national priorities, standardizing documentation and facilitating early- stage dialogue with financiers. These tools lower transaction costs, improve project visibility and build investor confidence – ultimately accelerating the mobilization of both public and private capital.Developing and preparing bankable grid projects Advancing Latin America’s Power System Transformation 10

Advancing Latin America%27s Power System Transformation 2025