This policy tool could reshape US energy investments abroad
Learn all about ‘Energy Security Pacts’
Last month, the House Foreign Affairs Committee unanimously (!) voted to advance the bipartisan DOMINANCE Act, sponsored by Representatives Young Kim (R-CA) and Ami Bera (D-CA).
One of its core features is a concept called ‘Energy Security Pacts,’ based on an idea first proposed by the Hub. It would enable the United States to co-invest with key allies in strategic energy projects that improve energy security, reliability, and cost. More reliable power is necessary to expand industries that also benefit the United States, including mining and minerals processing.
Next, the full House of Representatives will consider the bill.
In the Senate, Chris Coons (D-DE) and Pete Ricketts (R-NE) introduced a bill with a similar provision in April. That bill, known as the Energy Security Pacts Act, will go next to the Senate Foreign Relations Committee.
So, what exactly are Energy Security Pacts? How could they work in different partner countries? We’ve rounded up insights from our team on how this policy tool would work and what it could look like in three different countries: Honduras, Zambia, and the Philippines.
What is an Energy Security Pact?
The Big Picture
Energy Security Pacts are bilateral investment packages by the US government, alongside private partners, in the energy system of a strategic priority country. They’re a streamlined way to advance partner country and US interests through global energy investments.
These pacts would also boost US interagency coordination around these investment projects; lack of coordination currently prevents US investments from reaching their full potential.
These Pacts would follow a five-step process:
Choose a strategically important partner country with energy security needs that impact areas of US interest, willingness to advance key reforms, and resources to invest alongside the US.
Conduct a joint US-Partner Country analysis on the primary constraints to energy security, drawing on MCC’s constraints-to-growth analysis.
Negotiate and agree to an Energy Security Pact of joint investments in key energy security solutions supported by tools and resources from agencies like the State Department, Millennium Challenge Corporation, US International Development Finance Corporation, and the Department of Energy.
Implement investments by relevant US agencies, overseen by the State Department and agency political leadership.
Report results to the White House and Congress.
Go Deeper:
This report (8 page version for the motivated, 1 page version for the time-pressed) by Katie Auth, Casey Dunning Davis, and Todd Moss provides a comprehensive overview.
Casey wrote about why interagency coordination matters and the Energy Security Pacts Act in the Senate.
And Katie wrote about the DOMINANCE Act in her Substack, Aid Interrupted.
Three Examples: Honduras, Zambia, and the Philippines
To play out what these ESPs could look like in practice, we chose three countries dealing with different energy challenges. We break down why the US and each country would benefit from a partnership, and detail what role each US government agency would play in bringing the ESP to life.
Honduras
The United States seeks to develop Central American energy markets that can support industrial development, near-shore manufacturing, and expand trade ties with the US.
With the second-highest unemployment rate in Central America, 60% of its population living below the poverty line, and one of the Western Hemisphere’s lowest industrial electricity access rankings, Honduras needs reliable and affordable electricity to boost domestic economic growth.
An Energy Security Pact would help the US meet its strategic objectives in the region while delivering affordable and reliable electricity to Honduras.
Read more about how an Energy Security Pact would work in Honduras.
Zambia
The US wants to help countries scale up production of key minerals, and diversify the processing of those materials outside China.
Zambia, Africa’s second-largest copper producer, depends on continuous, affordable power to run mines, smelters, and processing facilities. But in recent years, chronic power shortages have been an ongoing problem.
A Zambia Energy Security Pact would coordinate key US agencies to:
Diversify power generation and fortify the grid against drought;
Secure reliable electricity for copper mining and processing;
Create a more bankable, investment-ready power market that attracts private capital.
Read more about how an Energy Security Pact would work in Zambia.
The Philippines
Across Southeast Asia, the US wants to help allies strengthen their economic competitiveness and reduce reliance on China.
In the Philippines, energy vulnerabilities threaten the country’s security and economy. An aging and fragmented electricity grid, partially controlled by China’s State Grid Corporation, discourages private investment and creates operational and security risks. The Philippines also imports over half its energy supply, exposing it to price shocks and disruptions. And high electricity prices constrain key industries that could help secure mineral supply chains.
A Philippines Energy Security Pact would secure the Philippines’ energy system through coordinated investments that expand US export opportunities, increase grid resilience, and strengthen market governance. The Pact would also limit Chinese leverage.
Read more about how an Energy Security Pact would work in the Philippines.