41815 Catalyzing Private Investment for a Low-Carbon Economy World Bank Group Progress on Renewable Energy and Energy Efficiency in Fiscal 2007 THE WORLD BANK Catalyzing Private Investment for a Low-Carbon Economy World Bank Group Progress on Renewable Energy and Energy Efficiency in Fiscal 2007 November 2007 THE WORLD BANK Copyright © 2007 The International Bank for Reconstruction and Development / The World Bank Group 1818 H Street, NW Washington, D.C. 20433, USA All rights reserved First printing: November 2007 Manufactured in the United States of America This document is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed herein do not necessarily reflect the views of the Board of Executive Directors of the World Bank Group or the governments they represent. ii Contents Acronyms and Abbreviations vii Units of Measure vi Foreword ix Acknowledgments x Executive Summary xi Leveraging World Bank Group Resources xi World Bank Group Financial Support for Renewable Energy and Energy Efficiency xii Technical Assistance xiv Introduction 1 Selling Solar: Lessons from a Decade of IFC and World Bank Experience 5 World Bank Group Solar Photovoltaics Projects 5 Key Lessons of Experience from Solar PV Projects 8 Future Support for Photovoltaics 11 Case One: Stimulating Solar Technology Improvement in China 12 Case Two: Lighting Africa: Catalyzing Markets for Modern Lighting 14 Expanding Energy Efficiency Interventions 17 Opportunities and Benefits of Energy Efficiency 17 Barriers to Energy Efficiency Investments 18 World Bank Group Energy Efficiency Investments 19 Private Sector Finance for Energy Efficiency 19 Energy Efficiency Action Plan 20 Case Three: Promoting Energy Efficiency Investments through 22 Financial Intermediation in China Building a Sustainable Hydropower Partnership 25 An Abundant Resource 25 The Multiple Benefits of Hydropower 25 The World Bank Group’s Hydropower Investments 26 Managing the Risks of Hydropower Projects 27 Engaging the Private Sector 28 The World Bank Group’s Hydropower Strategy 30 Case Four: Sri Lanka—Private Sector Leadership in Small Hydropower 32 Case Five: Bujagali Hydropower: Financing and Risk Mitigation 34 Toward a Low-Carbon Economy: Renewable Energy and Energy Efficiency Portfolio Review 37 Financial Commitments 37 Technical Assistance and Sector Studies 40 iii The Way Forward 45 Case Six: ESMAP Helps Create a Framework for Renewable Energy and 46 Energy Efficiency in Morocco Annex 1: Institutional Support for Renewable Energy and Energy Efficiency 47 Roles of the Institutions 47 Definitions 48 Different Reporting Styles 49 Annex 2: Annual Renewable Energy and Energy Efficiency Portfolio Review 51 Annex 3: FY07 Renewable Energy and Energy Efficiency Projects 55 List of Boxes Box 1: Applying WBG Instruments for Renewable Energy and Energy Efficiency Scale-Up 2 Box 2: Sustainable Solar Market Packages 8 Box 3: Moving Up the Value Chain—Moser Baer in India 9 Box 4: The Price of Poor Lighting 14 Box 5: IFC Financial Intermediation in Energy Efficiency 21 Box 6: Identification of New Energy Efficiency Opportunities through 21 the IFC’s Investment Tracking System Box 7: Cornerstones of Progress 33 Box 8: Wind Umbrella Project, Mexico 41 Box 9: Improving Residential Energy Efficiency in Serbia 42 Box 10: Shanghai: Developing a Green Electricity Scheme 42 List of Tables Table 1: World Bank Group Commitments for Renewable Energy and xiii Energy Efficiency in FY07 Table 2: World Bank Group Solar PV Initiatives 6 Table 3: Energy Efficiency Opportunities in Important Consuming Sectors 18 Table 4: Nam Theun 2 Project Risk Allocation 31 Table 5: World Bank Group Commitments for Renewable Energy and Energy Efficiency, FY07 37 Table 6: Measuring Progress in New Renewable Energy and Energy Efficiency Lending 38 against the Bonn Commitment Table 7: Number of Projects by Region, FY07 40 List of Figures Figure 1: World Bank Group Commitments for Renewable Energy and xiii Energy Efficiency, FY90–07 Figure 2: Share of World Bank Group Commitments for Renewable Energy and xiv Energy Efficiency Relative to Total Energy Commitments, FY90–07 Figure 3: Reductions in Greenhouse Gas Emissions by Consuming Sector through 2050 18 Figure 4: Hydropower Potential and Production by Region 25 iv Figure 5: World Bank Group Annual Hydropower Financial Commitments 26 Figure 6: Regional Distribution of World Bank Group Hydropower Projects 27 Figure 7: Sri Lanka Small Hydropower Growth 32 Figure 8: World Bank Group Renewable Energy and Energy Efficiency Commitments, 38 FY90–07 Figure 9: Share of Renewable Energy and Energy Efficiency Relative 39 to the World Bank Group’s Total Energy Commitment Figure 10: World Bank Group Renewable Energy and Energy Efficiency Commitments 39 by Region, FY07 Figure 11: World Map with Distribution of Renewable Energy and Energy Efficiency Projects 41 Figure 12: Sectoral Commitments by Region, FY07 43 Figure 13: Number of AAA Products with Renewable Energy and Energy Efficiency Focus, 45 FY00–07  Acronyms and Abbreviations AAA Analytical and advisory IBRD International Bank for activity Reconstruction and AFR Africa Region Development ASTAE Asia Alternative Energy IDA International Development Program Association BEL Bujagali Energy Ltd. IEA International Energy Agency BOOT Build-Own-Operate-Transfer IFC International Finance CEIF Clean Energy Investment Corporation Framework IPO Initial public offering CEPALCO Cagayan Electric Power and IPP Independent power producer Light Company IREDA India Renewable Energy CFB-IBRD The World Bank’s Carbon Development Agency Finance Business IRIN Integrated Regional CFU Carbon Finance Unit Information Networks CG Competitive Grant (Facility) (IRIN), U.N. Office for CHEEF China Energy Efficiency the Coordination of Financing Project Humanitarian Affairs CNG Compressed natural gas IUCN World Conservation Union CRESP China Renewable Energy LCR Latin America and Caribbean Scale-Up Program Region DVD Digital video disc LED Light-emitting diode EAP East Asia and Pacific Region LLC Limited liability corporation ECA Europe and Central Asia MBIL Moser Baer India Ltd. Region MIGA Multilateral Investment EE Energy efficiency Guarantee Agency EEfSD Energy Efficiency Action Plan MNA Middle East and North Africa for Sustainable Development Region EETG Energy Efficiency Thematic NGO Nongovernmental Group organization EIA Environmental Impact NOZ-PV Netherlands Research Assessment Program PV ESCO Energy service company OECD Organisation for Economic ESMAP Energy Sector Management Co-operation and Assistance Program Development FI Financial institution PNOC-EDC Philippines National FINESSE Financing Energy Services for Oil Company’s Energy Small-Scale Energy Users Development Corporation FYR Former Yugoslav Republic PV Photovoltaic(s) GDP Gross domestic product PVMTI Photovoltaic Market GEF Global Environment Facility Transformation Initiative vii QR Quick Response (Facility) UNEP United Nations Environment RE Renewable energy Programme REDP Renewable Energy UNF United Nations Foundation Development Project (China) VCD Video compact disc RETG Renewable Energy Thematic WBG World Bank Group Group Y Yuan (currency of China) SAR South Asia Region SDG Solar Development Group Units of Measure SHP Small hydropower GWh Gigawatt-hour SHS Solar home system km Kilometer SME Small and medium enterprise kWp Kilowatt-peak SSMP Sustainable Solar Market MW Megawatt Package Wp Watts-peak UETCL Uganda Electricity Transmission Company Limited viii Foreword Renewable energy and energy efficiency are at the nexus of the goals of the World Bank Group’s energy work: poverty alleviation, energy security, and climate change mitigation. Oil and gas price rises, the instability of energy markets, the major impacts of climate change that the Intergovern- mental Panel on Climate Change and Sir Nicholas Stern’s reports convincingly articulated, and the need to meet the Millennium Development Goals by 2015 have given even greater urgency to enhanced support for clean energy. To overcome these challenges and do so in a sustainable manner, the World Bank Group has com- mitted more than US$11 billion since 1990 for renewable energy and energy efficiency with commit- ments in fiscal 2007 rising to US$1.4 billion, or 40 percent of total energy sector lending. Every dollar of our funds has leveraged about two dollars of investment from the private sector, governments, and others. The progress we have achieved establishes the base of experience for implementing the Clean Energy Investment Framework (CEIF). The CEIF was launched in 2006 to give greater impe- tus to addressing the challenge of energy access for growth and the causes and impacts of climate change. Renewable energy and energy efficiency will also be central to the World Bank Group’s Climate Change Strategy that will be issued shortly. Achieving the goals of the CEIF and the Climate Change Strategy demands actions on a number of fronts—policy, governance, capacity, and investment. The investment challenge remains paramount, and more so for renewable energy and energy efficiency, which are more capital intensive than other forms of energy. The World Bank Group, although one of the largest multilateral lenders for energy, is only one player in the field, and cannot possibly meet the investment needs alone. Our total fi- nancial commitment for the energy sector in the 2007 financial year was US$3.6 billion. Although we continue to grow our energy investments in absolute terms, we increasingly see our role as a catalyst in working with the private sector and others to leverage our resources. This is a vital mission if we are to help our partner countries in their transition to a low-carbon economy. The poor are, after all, the most vulnerable and the least able to adapt to the devastating impacts of climate change. Previous renewable energy and energy efficiency progress reports focused on how the World Bank Group was meeting the commitment it made in June 2004 in Bonn, Germany, to increase our support for new renewable energy and energy efficiency by 20 percent per year; and defining the impact our support has had in improving lives. This report focuses on the efforts we are making to work in partnership with the private sector in order to leverage our resources. Accordingly, we are pleased that this report is jointly prepared by the International Finance Corporation and the World Bank. Rachel Kyte, Director Jamal Saghir, Director International Finance Corporation Chair, Energy and Mining Sector Board The World Bank ix Acknowledgments The report was prepared jointly by the Environment and Social Development Department of the International Finance Corporation (IFC), and the Energy, Transport and Water Department in the World Bank’s Sustainable Development Vice Presidency. The work was led by Alan Miller (IFC) and Anil Cabraal (World Bank). Other principal contributors were Patrick Avato, Malcolm Cosgrove-Davies, Daryl Fields, Enno Heijndermans, Jeremy Levin, Natalie Magradze, Jessica Morey, Ashok Sarkar, Sunil de Silva, Rus- sell Sturm, and Chris Walsh. Aldo Baietti, Francis Gagnon, Lucie Giraud, Debora Oliveira and Geoff Revell provided written contributions, background materials, or other support. Photos are credited to: Africa Energy Unit (World Bank), Paul Baringanire, Anil Cabraal, Curt Car- nemark, the Comisión Federal de Electricidad, (Mexico), Ousmane Dione, Daryl Fields, Evan Mills, Zhang Minji, Yevgeny Pashin, D. Riffet / Médiathèque EDF, Lasse Ringius, Gennadiy Ratushenko, Trevor Samson, Dominic Sansoni, Adriana Valencia, and the World Bank Photo Library. The portfolio analysis was conducted by Patrick Avato (World Bank) and Cecilia Lim (IFC), with support from Elif Kiratli. Production coordination was provided by Eileen Fredriksen. Rebecca Kary provided editing support, and Bob Reinecke was responsible for the typesetting. The report was prepared under the overall guidance of Rachel Kyte and Jamal Saghir, and is issued under the auspices of the Energy and Mining Sector Board. Cover: Jepirachi wind power project, Colombia (Adriana Valencia) Please address questions or comments to Alan Miller (amiller2@ifc.org) or Anil Cabraal (acabraal@ worldbank.org).  Executive Summary Evidence is mounting that developing countries will be disproportionately affected by the ad- We are working with our Board to signifi- verse impacts of climate change, putting at risk cantly step up our assistance to the inter- hard-earned development gains. Sir Nicholas national efforts to address climate change…. Our main objective will be to help countries Stern’s 2006 economic review of climate change “mainstream” adaptation and mitigation ac- estimated that “business as usual” emissions tions within their growth strategies, including plans for energy development, agriculture, of greenhouse gases might lead to damages and land use. between 5 and 20 percent of gross domestic product (GDP) over the next 200 years. The poor —Robert B. Zoellick, President, World Bank are the most vulnerable and least able to adapt. Group.1 At the same time, increasing energy supply and services are critical for economic growth for all developing countries. A consensus is growing that moderating and managing climate change try to country and from one sector to another. is central to every aspect of poverty reduction, This report draws out such lessons from our economic growth, and development. experiences in solar photovoltaics (PV), energy Leveraging World Bank Group Resources The response of markets and the private sector will be critical for successfully in- creasing energy access and mitigating and adapting to climate change. The continu- ing focus of WBG efforts will be to support the engagement of the private sector and other partners in this effort, through diverse measures, in- cluding investment support, barrier removal, and com - petitive markets as sources of investment and solutions. The role of governments remains important for establishing the required policy and regula- tory environment and other 1 “Catalyzing the Future: An Inclusive and Sustainable efforts at barrier removal. The many lessons Globalization,” Annual Meeting Board of Governors of the learned are being applied regionally, from coun- World Bank Group, Washington, D.C., October 22, 2007. xi efficiency, and hydropower. Among them are risk guarantees; currency, commodity, and inter- the following: est rate risk management; and carbon finance; as well as capacity building and policy, legal, and • Improve the policy and regulatory environ- regulatory support. ment to reduce energy price distortions, mitigate regulatory risks, streamline ap - World Bank Group Financial Support for proval processes, and increase transparency Renewable Energy and Energy Efficiency in decision making. • Adhere strictly to good environmental and In fiscal 2007 (July 1, social management principles and ensure 2006, to June 30, 2007), World Bank Group funding for renewable energy—compris- that all parties—from consumers and af- total WBG financial com- ing wind, solar, biomass, geo- fected communities, to energy suppliers and mitments for renewable thermal, and hydropower— financiers—benefit. Embed sustainability energy, including hydro- and energy efficiency projects rose by two-thirds in fiscal principles in executing agencies. power of all sizes, and 2007 to US$1.43 billion. • Although economic viability may be com- energy efficiency rose to pelling, financial viability, as well as market US$1.4 billion (Table 1). and consumer confidence, are sine qua non This represents a 67 per- for project success and scale-up. Pay heed cent scale-up in financing for renewable energy 2 to quality and meet consumer expectations and energy efficiency from US$860 million in fis- in service and value. cal 2006. The GEF has been an important partner, • Increase access to pre-investment and invest- contributing US$128 million in co-financing for ment financing, and introduce risk manage- World Bank projects. The World Bank’s Carbon ment and credit enhancement instruments. Finance Unit has been an important contribu- Benefit from new instruments, such as those tor—its impact is even greater, since every dollar offered by the carbon markets. of carbon financing is estimated to leverage five • Introduce business models better suited to to six dollars in investment funds. In fiscal 2007, renewable energy and energy efficiency, the WBG supported 63 renewable energy and including distributed generation. Be adapt- energy efficiency projects in 32 countries with able and take advantage of innate capacities more than half the financing going to Africa. within each country. Commitments for new renewable energy and • Build capacity and increase knowledge energy efficiency were US$683 million, and among the domestic financial sector, indus- US$751 million was committed for hydropower try, utilities, engineering, policy makers, and projects greater than 10 MW per facility. As consumers. Support South–South knowl- shown in Figure 1, the cumulative WBG financial edge exchanges. commitments to renewable energy and energy • Facilitate access to improved technologies efficiency from fiscal 1990 to fiscal 2007 exceeded and strengthen the capacity to plan, design, US$11 billion, with a nearly steady increase in construct, and integrate such technologies commitments from 2002. into the energy supply sectors. The World Bank (IBRD and IDA), in partner- The WBG brings to bear a wide range of financial ship with GEF, committed US$821 million for and nonfinancial instruments to support the development of renewable energy and energy efficiency. Among them are conventional lend- 2 New renewable energy comprises energy from solar, wind, biomass, and geothermal energy, as well as hydropower ing instruments; equity and quasi-equity; partial facilities with capacities up to 10 MW per facility. xii Table 1: World Bank Group Commitments for Renewable Energy and Energy Efficiency in FY07 Source of funds New renewable energy Hydro > 10MW Energy efficiency Total World Bank (IBRD/IDA) 70 430 49 549 GEF (World Bank) 121 0 7 128 World Bank (Carbon Finance) 68 66 10 144 IFC (own funds) 154 140 156 450 IFC (Carbon Finance) 7 0 0 7 MIGA 0 115 40 155 Total 421 751 262 1,433 Note: Some columns may not add up exactly because of rounding. Source: WBG databases. renewable energy and energy efficiency proj- came from com - ects and activities. MIGA committed US$155 mercial investors. In fiscal 2007 the share of renewable energy and energy million in guarantees for clean energy–related Thus, every dollar efficiency financing reached investments, with significant expected leverage of IFC lending was 40 percent of total energy in additional private sector financing. The IFC associated with commitments. made 25 investments totaling US$450 million in US$2 of private energy efficiency and renewable energy, such sector investment. as biomass cogeneration systems, hydropower, wind, geothermal, solar PV manufacturing. The There has been a steady rise in the share of total value of the renewable energy and energy financing the WBG committed for low carbon efficiency investments supported by the IFC ex- renewable energy and energy efficiency since ceeded US$1.1 billion, of which US$763 million 1990 (Figure 2). In 1990–94 the share was about 13 percent of total energy sector commitments. The share of renewable energy and energy effi- Figure 1: World Bank Group Commitments for Renewable ciency financing rose to 25 percent of total energy Energy and Energy E ciency, FY90–07 1,600 14,000 commitments in the three years, fiscal 2005–07, Energy e ciency and 40 percent in FY 07. 1,400 New renewable energy 12,000 Hydro > 10 MW 1,200 Cumulative commitment At the Bonn International Conference on Re- 10,000 newable Energies in June 2004, the WBG made Annual US$ millions Cumulative US$ millions 1,000 8,000 a commitment to accelerate its support for new 800 renewable energy and energy efficiency.The 6,000 WBG committed to increasing our financial com- 600 mitments for new renewable energy and energy 4,000 400 efficiency at a growth rate of 20 percent per year 2,000 between fiscal 2005 and 2009, compared with a 200 baseline commitment of US$209 million (equal to the average of the previous three years). The 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 WBG has exceeded its Bonn commitment by al- most 100 percent. From fiscal 2005 to fiscal 2007, Source: WBG databases. xiii Figure 2: Share of World Bank Group Commitments for Renewable Investment Climate Assessment for Renewable Energy and Energy E ciency Relative to Total Energy Commit- Energy in India supported by the WBG. It is ex- 0.5 amining barriers and barrier removal options re- 40% lated to the development of economically viable 0.4 renewable energy, encompassing policy, regula- Total WBG Energy Commitments tory, financing, and entrepreneurial constraints. Share of RE+EE Relative to 0.3 25% The outcome of the study will be guidance to 21% 0.2 policy makers and regulators for establishing 18% 13% a framework to support faster development of 0.1 renewable energy by reducing transactions costs and risks to private investors. 0 1990–1994 1995–1999 2000–2004 2005–2007 2007 Previous renewable energy and energy efficiency Fiscal Year progress reports focused on the progress the Source: WBG databases. WBG was making in meeting its Bonn commit- ments and the impact the projects were having in improving the lives of people in developing we committed US$1.8 billion for new renewable countries. This report again details progress on energy and energy efficiency compared with the clean energy, but in addition focuses more spe- Bonn commitment goal of US$913 million for cifically on the efforts we are making to work in the same period. partnership with the private sector to leverage our resources, since the WBG, despite being one Technical Assistance of the largest multilateral development bank lenders for energy, can meet only a small part Increasing adoption of clean energy options is of the investment needed. Consequently, as the supported by a variety of economic sector work WBG continues to grow our energy investments and technical assistance. We are supporting the in absolute terms, we increasingly see our role as preparation of low-carbon energy strategies in a catalyst in working with our client countries and advanced developing countries. Work began in the private sector to leverage our resources. fiscal 2007 on four Low-Carbon Country Growth Case Studies (Brazil, China, India, Mexico), and South Africa beginning in FY08. Other activi- ties performed in the past year include studies, reports, and policy notes on renewable energy policy in Colombia and Morocco, energy security in Uruguay, and rural electrification in Mexico, Peru, and Timor-Leste. Energy efficiency also received considerable attention, for example, building energy efficiency in China and energy efficiency policy formulation in Morocco. The Energy Sector Management Assistance Pro- gram (ESMAP) and the Asia Alternative Energy Program (ASTAE) have been major resources for this work. Of special note is the ESMAP-funded xiv Introduction Presently, renewable energy’s contribution to of private capital. From the point of view of global primary energy is only 13 percent of the private investors, mobilizing private capital total, with traditional biomass and large hydro- for renewable energy and energy efficiency in power contributing the largest share. The share of developing countries will require obtaining new renewable energy is tiny at about 0.5 percent risk-adjusted returns from such investments of global primary energy use.3 Energy efficiency comparable with returns from more traditional opportunities are hardly tapped. Nevertheless, energy alternatives. with high oil prices, energy supply uncertainties, and climate change concerns, there is a greater Renewable energy and energy efficiency scale- appreciation of the role that renewable energy up demands concerted action on a number and energy efficiency can play in increasing sup- of fronts—policy, legal, regulatory, technical, ply and moderating demand, and in helping to financial, and risk mitigation. The three WBG move toward a low-carbon economy. agencies—the World Bank, IFC, and MIGA— bring to bear their individual strengths to offer There is also recognition that multilateral finan- a menu of services to their member countries. cial resources and government resources are A few examples illustrate this unique capability inadequate to meet the investment needs. There- (Box 1). fore, the large amounts of financing needed for transitioning to a low-carbon economy will only 3 International Energy Agency, “Renewables in Global En- be available through the efficient mobilization ergy Supply,” Paris, January 2007.  Box 1: Applying WBG Instruments for Renewable Energy and Energy Efficiency Scale-Up Meeting a national renewable energy goal in China. China committed itself to raising its share of renew- able energy to 15 percent of total electricity generation by 2020 as a substitute for coal-fired power generation and for uplifting regions where economic development lags. To support this commitment, the Government of China promulgated its landmark Renewable Energy Law. The World Bank supported this effort first with technical assistance and then with IBRD and GEF financing, and approved the Renewable Energy Scale-Up Project. Financing for the first phase is US$174 million from IBRD and US$40 million from GEF. In parallel, an IFC loan of up to US$22 million to Zhongda Sanchuan, a local hydropower development company based in Zhejiang, supports three run-of-river hydropower stations along the White Water River in Yunnan Province. The World Bank Carbon Finance Unit is purchasing carbon offsets from a 100 MW wind farm in Huitingxile, Inner Mongolia. Building markets for renewable energy in South Africa. The Renewable Energy Market Transformation Project supported by the Bank will help establish policy and regulatory frameworks and build insti- tutional capacity for renewable energy development. The US$17 million is funded by a US$6 million grant from GEF, US$2.3 million contribution from the South African government, and US$9 million leveraged from the private sector. The project’s four-year objective is to assist the government meet its target of supplying 4 percent of electricity with renewable energy by 2013. Leveraging private finance for energy efficiency by IFC. Over more than a decade, IFC has developed and refined a highly successful approach to leveraging commercial lending for energy efficiency in- vestments through training and risk mitigation instruments provided to local financial institutions in emerging markets. The IFC model started in Hungary with a US$5 million grant from the GEF that was expanded with additional GEF support to cover several countries in Central Europe, and subsequently was adapted to projects in China, Russia, and a new facility in development in the Philippines. Creating the foundation for a global wind industry in India. The WBG support for new renewable en- ergy began in 1994 when the Government of India set policy targets and offered financial incentives to stimulate new renewable energy development. These have had the desired effect of producing a large and vibrant market for wind energy and small hydropower, among others. Today India is the third largest wind market globally. It has a strong domestic wind turbine manufacturing industry that is expanding internationally. In 2007 the IFC made a corporate loan of up to US$33 million to MSPL Limited, one of India’s largest iron ore manufacturers to help them construct two new wind farms in Maharashtra State to increase their installed capacity from 111 MW to about 150 MW. This financing also illustrates the growing global trend toward investment in wind and other renewable energy projects by industrial companies from outside the energy sector—a trend that India set in the early 1990s. Geothermal industry privatization in the Philippines. The IFC made a US$50 million equity investment in the Philippines National Oil Company’s Energy Development Corporation (PNOC-EDC) as part of the state-owned enterprise’s initial public offering (IPO) on the Philippines Stock Exchange. The investment supported the Philippine government’s goal of privatizing energy sector assets and expanding the geothermal energy sector. It is expected that with the success of the IPO and competitive selection of a new private sector majority shareholder, PNOC-EDC can both expand its development of local renewable energy projects and become a global player in the development of geothermal resources. This project used a new instrument that was developed jointly by the World Bank and IFC—Subnational Finance—to support well-run subnational entities, such as local governments and public economic enterprises, in their financing programs without the need for national government guarantees. Carbon finance for leveraging investments. The World Bank was a pioneer in establishing the carbon market beginning with the Prototype Carbon Fund. Today, the World Bank manages ten carbon funds and facilities which are public-private partnerships bringing together ten governments and 65 private sector firms from industrialized countries. They have entrusted the World Bank to manage more than US$2billion in funds for the purchase of carbon emissions reductions in developing and transition economies.  Given the scale of investments needed to in- ticularly if new technology is involved. Smaller, crease or improve access to energy in developing widely dispersed opportunities (such as im- countries, there is an urgency to move beyond provements in the energy efficiency of buildings) traditional investment vehicles to leverage pri- are also typically difficult to finance because of vate investment. The WBG is employing its full relatively high transaction costs. There is also range of financial and nonfinancial instruments a higher risk perception because of the lack of to overcome the hurdles to private investment awareness and experience among investors and in developing countries. Among them are proj- financiers. An integrated approach combining ect risks, subsidies for fossil fuels, unfavorable country support, technological support, and utility regulatory policies, and other factors that creative financing is therefore most likely to be increase the perceived risks. The result of these effective. barriers is reduced availability and higher costs for financing, particularly when dealing with This report examines how the WBG has sup- new technologies or those not widely used in a ported renewable energy and energy efficiency particular region. Even when financial markets to respond to calls for urgent action on clean are well developed within a country, financing energy, improve energy security, and increase large infrastructure projects may be difficult access to energy for development. The WBG’s without some additional support—again par- renewable energy and energy efficiency progress  in fiscal 2007, including our response to the com- established the basis for an enduring partner- mitment made in Bonn, Germany, in June 2004, ship to support the dual goals of development is described in Chapter 5.4 and climate protection. Looking forward, the emphasis on renewable energy and energy The previous report focused on the development efficiency development within the WBG will outcomes and the positive changes that can be continue as we operationalize the Clean Energy made in peoples’ lives through the effective Investment Framework (CEIF).5 The World Bank use of renewable energy and energy efficiency Group launched the CEIF in 2006 to address cli- technologies. The fiscal 2004 and fiscal 2005 mate change not only as a risk to development, reports informed the readers of the specifics of but also as an opportunity for Bank clients to each WBG institution’s support for renewable accelerate their economic transformation and energy and energy efficiency. take advantage of new technologies. Renewable energy and energy efficiency will contribute This report highlights the role of the WBG in le- significantly to this enhanced strategy. veraging and mobilizing private investment for renewable energy and energy efficiency. It draws lessons from projects that the WBG supports and discusses how a range of financial instruments at our disposal is used to leverage private capital. 4 In June 2004, at the Bonn International Conference on To this end, the report discusses three areas of Renewable Energies, the World Bank Group committed applications—hydropower, energy efficiency, to scaling up its renewable energy and energy efficiency and solar PV. Case studies throughout the report financial assistance by an average of 20 percent per year over five years (FY05–09) and to reporting on its annual illustrate different models used to partner with performance in supporting renewable energy and energy the private sector to support renewable energy efficiency (the “Bonn target”). and energy efficiency development. 5 World Bank Sustainable Development Network, “Clean Energy for Development Investment Framework: Progress Report on the World Bank Group Action Plan.” Report to The private sector response has been positive, the Development Committee, World Bank, Washington, and the outcomes encouraging. The results have D.C., September 27, 2007.  Selling Solar: Lessons from a Decade of IFC and World Bank Experience Together the World Bank and the IFC constitute a major financier of PV in developing countries with projects valued at more than US$600 mil- lion that serve about 1.3 million households and other facilities in about 30 countries in Africa, Asia, and Latin America (see Table 2). They range from support for the installation of 400,000 PV systems in China, and financing solar light- ing for teachers in remote areas of Papua New Guinea, to the provision of lighting and basic electricity services for rural Ethiopians to a grid- connected 1 MW PV system in the Philippines that demonstrates the value of conjunctive use of PV and hydropower. The chapter highlights lessons emerging from WBG experiences in sup- porting PV for development. World Bank Group Solar Photovoltaics Projects With its mandate to further economic develop- ment through the private sector, the IFC had its first involvement with investing in PV markets in 1989 when it made a US$3 million investment for development. The high priority accorded to (debt and equity) in Shenzhen YK Solar PV En- rural electrification, the large numbers of unelec- ergy Co., Ltd., a solar PV manufacturer in China. trified households, and the availability of financ- Although the investment, made using regular ing through public programs also appeared to IFC funds, did not meet its original expectations, be potentially well suited to introducing PV for it established an important precedent for invest- off-grid electrification on a large scale. World ing in solar PV businesses in frontier markets by Bank experience is encouraging, with about not only demonstrating confidence in viability of 0.65 million installations completed out of its the PV technology, but also by focusing on com- 1.2 million portfolio in 23 countries. mercializing the deployment of this technology in the developing world. To date, the IFC has managed five GEF-funded solar PV initiatives: IFC/GEF Small and Me- In the mid-1990s, the World Bank began support- dium Scale Enterprise Program (SME Program), ing PV systems (or solar home systems, SHSs), Photovoltaic Market Transformation Initiative as a least-cost alternative to grid extension for (PVMTI), Solar Development Group (SDG), Re- governments to deliver on promises of energy newable Energy and Energy Efficiency Fund, and  Table 2: World Bank Group Solar PV Initiatives Target number Solar PV Total cost Country Project of systems capacity (kWp) (US$ million) Argentina Renewable Energy in the Rural Market 30,000 2,843 36.0 Bangladesh Rural Electrification & Renewable 198,000 9,900 91.4 Energy Development Bolivia Decentralized Energy, ICT for Rural Transformation 60,000 2,600 38.6 Burkina Faso Energy Access Project 2,100 100 2.0 Cambodia Rural Electrification and Transmission 10,000 400 4.0 Cape Verde Energy and Water Project 4,500 129 2.5 China Renewable Energy Development 400,000 10,000 144.9 Ethiopia Energy Access 6,300 407 5.4 India Renewable Resources Development 45,000 2,500 24.0 Indonesia Solar Home Systems 8,500 425 3.8 Lao PDR Southern Provinces Rural Electrification, and 13,000 460 4.3 Rural Electrification Projects Mali Household Energy and Universal Access Project 10,000 350 3.5 Mexico Renewable Energy for Agriculture, and Rural Electrification (FY08) 8,345 1,767 27.6 Mongolia Renewable Energy and Rural Access 50,000 520 5.2 Mozambique Energy Reform and Access, and PV for Schools and Health Clinics 9,800 1,096 13.5 Nicaragua Off-grid Electrification for Rural Development 6,000 215 3.0 Pacific Islands Regional Sustainable Energy Finance 21,000 630 16.5 Papua New Guinea Teachers Solar Lighting 2,500 100 2.2 Philippines Rural Power and IFC 1 MW grid-tied project 135,000 10,000 120.0 Sri Lanka Energy Services Delivery, Renewable Energy for 180,000 7,200 62.3 Rural Economic Development (RERED), and RERED Additional Financing Tanzania Energy Development and Access (FY08) 11,800 800 20.0 Uganda Energy for Rural Transformation 8,300 600 18.8 Zambia Increased Access to Energy (FY08) 8,300 415 11.0 Multiple countries IFC-financed financing facilities 100,000+ 8146 25.3 Totals 1.33 61.62 US$686 million MW million * Includes projects of the SME Program in Bangladesh, Dominican Republic, Honduras, Tunisia, and Vietnam, and PVMTI in India, Kenya, and Morocco. Source: Anil Cabraal, 21st European Solar Photovoltaics and Solar Energy Conference, Dresden, Germany, September 2006 (with data updated, November 2, 2007).  the grid-tied solar power plant of the Cagayan There were also a number of unanticipated Electric Power and Light Company (CEPALCO). developments, including a failed prediction Case studies on these PV financing initiatives, as that the price of solar PV panels would decline well as examples of some of the projects that these markedly, a decrease in the supply of smaller initiatives supported, are available in an IFC pub- modules, and several economic shocks that lication, “Selling Solar: More than a Decade of the disrupted markets. Hindsight shows that the IFC’s experience” (available on-line at http:// initial beliefs of many market players about a www.ifc.org/ifcext/enviro.nsf/Attachments- large scale, fully commercial solar PV off-grid ByTitle/p_SellingSolar/$FILE/SellingSolar.pdf). market were overly optimistic even though such Although these programs have been responsible off-grid PV markets are slowly emerging, most for the installation of more than 80,000 SHSs, notably in Kenya. Much more is now known they have been less successful from a financial about the type of financing required to support standpoint, because they have not resulted in solar PV market growth and what it takes to significant market transformation or a sizeable develop a successful solar PV company and number of financially sustainable businesses. market. Perhaps one of the most important les- sons is that supporting the solar PV market is far In some of the initiatives the main challenge more complex than first envisioned, particularly was not in the technology per se, but rather in because of the level of market segmentation that accurately judging market reality and trends is rooted in income level, lifestyle, and various and the major risks that PV entrepreneurs face. regional and geographical differences.  Key Lessons of Experience home systems are being installed monthly. • The Off-Grid Rural Electrification Project Lesson 1: Project designs must remain flexible in Nicaragua brings electricity services to and adaptable to address issues of affordabil- households, public centers, and productive ity, risks and other market constraints. uses by facilitating access to microfinancing and strengthening the institutional capacity Affordability varies among market segments to implement a national rural electrification (such as relative income levels or market ap- strategy. plications), and it remains a challenge for PV • Papua New Guinea Teachers Solar Lighting companies to sell to the niche market segments Project where financing for solar lighting even where PV is the least-cost energy alterna- systems for teachers posted in remote areas tive for the consumer. High first costs, lack of is provided through the Teachers Savings financing, limited awareness are among the and Loan Society. constraints faced. Project designs must therefore • The Sustainable Solar Market approach first be able to quickly adapt to market conditions so introduced in the Philippines under the that responsive solutions are created to address World Bank and GEF-assisted Rural Power barriers. Four such examples are projects sup- Project and now being considered in Tanza- ported by the World Bank and GEF: nia and Zambia (see Box 2). • Bangladesh Renewable Energy for Rural In these and other solar projects, it was impera- Electrification project where 8,000 solar tive during implementation to adapt to chang- ing market needs, such as by extending the eligibility of PV system sizes to smaller, more affordable systems, such as solar lanterns, or by Box 2: Sustainable Solar Market introducing loan guarantee facilities or capacity Packages building support to entrepreneurs and microfi- nance institutions. The Sustainable Solar Market Package (SSMP) is a contracting mechanism that provides for the supply and installation of PV sys- Lesson 2: PV must be considered as one of sev- tems along with a maintenance and repair eral options for rural electricity provision. contracts (five years with option to extend) to schools, clinics, and other community fa- cilities in a defined rural area, bundled with All consumers prefer access to unlimited sup- requirements and incentives for commercial plies of electricity at low prices. As grid-based sales to households, businesses, and other nongovernmental customers in the same rural electrification is often a highly valued area. By bundling institutional, community, political tool, significant government resources and household applications in a particular are employed in grid extension, even when it area, the SSMP approach addresses some of the important affordability and sustainability is a drain on government budgets and where issues of the past PV projects: standardiza- economic justification is weak. As a result of tion, reduced transactions costs, and larger these subsidies the cost of grid electricity to the business volume, and reduced risks. In the Philippines, 7 SSMP contracts to benefit 76 end user is significantly less than alternative villages are under implementation with more options. SSMP packages under preparation to benefit 572 villages. In Tanzania and in Zambia, un- der World Bank projects that will be approved However, there is now an increasing apprecia- in FY08, about 10 SSMP packages are planned tion by governments and rural electrification au- to be implemented in each country. thorities that PV is an economic least cost option  for rural electricity provision, especially where are less than they could obtain in other ventures. the alternatives are small generators, batteries Nevertheless, China is an exception, where PV or kerosene lighting. With oil prices exceeding dealers depend primarily on private equity to US$90 per barrel, and kerosene subsidies becom- finance their businesses. As experiences from ing untenable, PV’s attractiveness is increasing. China, India, the Philippines, and several other The Philippines, for example, has a formal rural countries show, there are profitable opportuni- electrification planning process that demarcates ties for entrepreneurs in developing countries villages where grid extension is not viable. to supply PV modules to developed-country markets that are highly subsidized.6 Where solar PV is least cost, market and will- ingness to pay studies must be conducted to Lesson 4: Good government relations and sup- confirm that consumers will indeed demand port are strong success factors these systems before PV financing programs are established. Subsidies to buy down first Although there are examples of companies costs, access to financing through rural banks or able to establish successful PV rural electricity microfinance organizations may be necessary to ventures without government support, those enhance affordability. companies fortunate enough to operate with such support (or with some form of subsidy or Lesson 3: Private equity is not the most appro- market aggregation support) tended to be more priate financial mechanism for investing in PV successful than companies operating without businesses in developing countries. explicit government support. Given the value of mobilizing private enterprises to extend PV An important lesson for the IFC was that, while electricity services as an economic alternative private equity and venture capital firms are to grid extension, public-private partnerships heavily involved in the manufacturing of PV for for risk sharing or to buy down the first cost of developed country markets (Box 3), the risks and PV systems can be effective. Such commercial economics of PV in the developing world mean retail market opportunities do exist in develop- that the returns that such investors typically seek ing countries, as experiences in China, India, Kenya, and Sri Lanka, among others, have demonstrated. Box 3: Moving Up the Value Lesson 5: Quality must not be compromised Chain—Moser Baer in India Moser Baer India Ltd. (MBIL) is the third-larg- The most expensive form of electricity is a power est manufacturer of recordable optical storage supply that is not working. Quality of systems media products (CDs and DVDs) in the world. and ability to obtain spare parts and repair ser- MBIL is also an existing IFC client. Currently, MBIL is undertaking a two-year diversification vices must be an integral part of any PV electric- program that involves setting up an export- ity program. The World Bank was a pioneer in oriented solar PV cell and module manufactur- introducing quality requirements enforcement ing facility with an installed annual production capacity of 80 MW in Greater Noida, India. beginning with a project in Indonesia. All World The IFC has recently approved a US$22.5 million long-term loan to the company to sup- port a total investment of US$92 million. The project has the potential to avoid 80,000 tons 6 See the report, “Renewable Energy Network for the 21st of CO2 emissions annually and will contribute Century,” on power generation policies at http://gsr.ren21. to the creation of about 600 new jobs. net/index.php?title=Power_Generation_Promotion_Poli- cies.  Bank–funded proj- On the supply side, financing is needed to ects now rigorous- increase manufacturing capacity, supply new ly enforce quality materials that bypass the global bottlenecks requirements. In caused by the limited supply of silicon and both Indonesia newer and higher efficiency solar PV materials and China, the and end-user devices (such as lighting with project specifica - LEDs). Demand for larger utility-scale PV may tions eventually also emerge, especially for reducing peak elec- were adopted as tricity demands. The IFC is well positioned to national standards. provide its own funding on commercial terms, In China, additional support was provided for without reliance on donor subsidies, to support technology improvement (Case One) and they such ventures through its Infrastructure Depart- have introduced a “Golden Sun” quality mark ment, as well as solar PV module manufacturing to help consumers identify quality-certified companies through its Global Manufacturing products. Department. Lesson 6: Access to financing is essential Demand for PV for rural electricity will grow. World Bank financing for solar PV will be pri- Solar PV is capital intensive—both for manufac- marily provided as part of rural electrification turers of key components, such as PV modules, programs, where PV is considered a least cost and for consumers who purchase PV products. supply option. Financing, often through microfi- Therefore financing and financing vehicles that nancing institutions, will be coupled with efforts reach the target consumer are essential. to remove policy and price distortions. Addi- 10 tional support will be provided to strengthen not a question of “if,” but ”when,” the goal of the capacity of governments, the private sector, a self-sustaining solar PV market in developing nongovernmental organizations (NGOs), and countries will be reached. We also recognize financial intermediaries. that PV is but one rural electricity option and therefore should be offered as one option on a IFC support for PV for rural electricity will menu of options to meet rural electricity service continue. Instead of solar PV–focused initia- goals. Moreover, we recognize that electricity tives, such as the SDG and PVMTI, the IFC will is merely an intermediate product and that it is employ financial vehicles open to a wider range the services rendered by electricity that matters of clean energy opportunities, such as the Envi- for operating motors, lighting, refrigeration, ronmental Business Finance Program and the communications, and so forth. To this end, Sustainable Energy Facility. Important features the World Bank and IFC have embarked on a are a more streamlined approval process and joint project, Lighting Africa (Case Two). It will emphasis on debt instruments over equity, with catalyze local and international lighting-related convertibility features to take advantage of any companies into offering the unelectrified popu- potential upside. lation greater access to modern and affordable off-grid lighting products while displacing Future Support for Photovoltaics fuel-based lighting products, such as kerosene lamps or candles, for which developing-country Having extensively evaluated not just its own consumers spend about US$40 billion annually. experience, but also the experience of several PV technology is expected to be a principal important players in the solar PV business, the source of power for such off-grid lighting ap- WBG remains cautiously optimistic that it is plications. 11 Case One Stimulating Solar Technology Improvement in China The CG and QR facilities received about 200 propos- als seeking US$3.3 million. These funds leveraged US$8.3 million from the proponents. The supported projects have had direct impact on the market by rapidly introducing into the Chinese and inter- national markets high-quality and innovative PV China, along with the World Bank and GEF, products. Results from two of the beneficiaries are launched the China Renewable Energy Develop- outlined below. ment Project (REDP) in December 2001. Since then, the Photovoltaic Market Development and Technol- ogy Improvement Components of this project have achieved impressive results. By June 2007 it had supported the installation of 374,000 PV systems with a total PV module capacity of about 9 MW, benefiting more than 2 million people in the north- western provinces. More than 30 companies have established dealerships throughout these provinc- es, which provide PV components and systems that meet the project’s quality standards. The Technology Improvement Component offered Chinese PV companies assistance in research, development, demonstration, and innovation. It has helped improve the quality of PV components and systems through a number of means including cost-shared research and development, national standards setting and enforcement, strengthening testing and quality monitoring. The REDP introduced two innovations: a Competi- tive Grant (CG) Facility and a Quick Response (QR) Facility that specifically addressed the problem of low-quality PV components and systems found in the Chinese market before the REDP. The design of these facilities was based on the successful Nether- lands Research Program PV (NOZ-PV) from 1997 to 2001. 12 Beijing Sunpu developed a new Solar Home The companies surveyed have also reported that System “plug and play” unit built of durable plastic. they invested about US$75 million equivalent in The plastic casing gives the PV system an attrac- 2004 and 2005 in their companies and manufactur- tive appearance and provides room for including ing facilities to produce these new and improved a radio, VCD or DVD player, and speakers. Two technologies. casing sizes have been developed—one for small systems (10–30 Wp) and one for larger systems (30–60 Wp). The total project cost was Y 572,000 The Grant from REDP can be regarded as the (US$77,000), with a CG Facility grant of Y 150,000 fire in snowing winter. Our company sold the (US$20,000). PV integrated system with a metal case in the domestic market. The shape of the metal case Ningbo Solar Electric Power Company devel- was often distorted because of the pressure it was under during transportation. And it oped a new silver paste for its PV cell production always led to a refund. process using CG funding. The increased perfor- mance permitted the company to increase the Under the support of TI component of REDP, rating of their large PV modules from 160 to 170 our company developed a plastic case for the Wp at a lower unit cost. The total project cost was PV integrated system. It solved the problem mentioned above, won the satisfaction of Y 844,000 (US$114,000), and the CG Facility grant the dealer and user, and doubled our sales. was Y 250,000 (US$34,000), which amounted to 30 At the same time, we improved the outward percent of the project cost. appearance and the coherence of the system. The improved system also sold abroad, for The technology improvement approach has been example, in Southeast Asia. replicated under the World Bank/GEF–assisted So, we will say thanks to the Project Man- China Renewable Energy Scale-Up Program (CRESP) agement Office of the REDP, wish REDP will where a CG Facility is used to facilitate technol- continue in China. ogy transfer of wind turbine technology to China, improve the technology of biomass energy equip- —Mr. Mingshan Xiao, Chief Marketing Officer, ment manufactured in China, and demonstrate Sanpu innovative renewable energy technologies. 13 Case Two Lighting Africa: Catalyzing Markets for Modern Lighting For the poorest of the poor, lighting is often the most expensive item in their energy budget, typi- cally accounting for 10–15 percent of total house- hold income. The “energy poor” in Africa spend about US$17 billion a year on fuel-based lighting sources (Box 4). Beyond household use, commercial use of fuel- based lighting can have even more acute economic impacts. Fishermen on Lake Victoria in Kenya, for ex- ample, often spend half their income for the kero- sene they use to fish at night. Yet, while consuming a large share of scarce income, fuel-based lighting provides little in return. Box 4: The Price of Poor Lighting Fuel-based lamps, such as kerosene lamps, are costly, inefficient, and provide poor lighting. The As a result of surging kerosene prices, schools smoke they emit is directly linked to health issues in rural Senegal are running out of light. The associated with inhalation and eye damage. The schools are not connected to the electricity flames from kerosene lamps are responsible for grid, and they rely solely on fuel lamps. With thousands of severe burns among children annually the oil price shock in 2006, fuel for lighting became too expensive to buy. In Thiancone and untold numbers of devastating house fires. Bogual, a town in northeastern Senegal, some 690 km from the capital, Dakar, students Lighting Africa aims to catalyze by the year 2030 must squeeze in the few houses equipped access to modern, non fossil, safe and low cost with solar energy to read after dark. Accord- ing to the headmaster of the local school, 100 lighting to 250 million people in Sub-Saharan Africa percent of the students finished elementary who rely on fuel-based (typically kerosene-fueled) education in 2005, but in 2006 when the lighting systems due to a lack of access to reliable school could no longer pay for fuel, just 60 electricity. percent got their elementary certificate. Lighting Africa is supported by significant contribu- Source: Integrated Regional Information Net- works (IRIN), U.N. Office for the Coordination tions from the GEF, European Commission, ESMAP, of Humanitarian Affairs, October 23, 2007. PPIAF, Norwegian Ministry of Foreign Affairs, Re- newable Energy and Energy Efficiency Partnership and Good Energies Inc. In Lighting Africa, the Bank Group seeks to unleash ing technology, including light-emitting diodes the potential represented by newly emergent light- (LEDs), whose ability to deliver high-quality light 14 with very low levels of electricity input offers an • Facilitating consumer access to a range of alternative to fuel-based lighting using a variety of affordable, reliable, and high-quality light- renewable sources of electricity where the electric ing products and services—for example, by grid is unavailable. Because of the energy efficiency providing consumer education services and and low power requirements of these lights, self- consumer finance, and by executing a product generated packaged lighting systems that include quality assurance program. a solar cell or mechanical hand crank, for example, can be priced at an affordable level—and marketed • Improving market conditions for the scale- on self-sustaining commercial terms. Thus, Light- up of modern lighting products by reducing ing Africa is not a give-away program, but rather existing technical, financial, policy, information, undertakes a number of market-catalyzing actions and institutional barriers. This includes the to do what the industry cannot efficiently do itself in development of methods for obtaining CDM aggregating market demand, capturing market in- credits for distributed lighting. formation, catalyzing consumer and supplier financ- ing, and ensuring product quality in the market. • Mobilizing the international communi- ty—governments, private sector, international The initiative will facilitate the transition to modern organizations and NGOs—to aggressively lighting services in the following ways: promote the use of modern lighting services for the poor in Africa. • Catalyzing the private sector, including strengthening ties between the interna- See http://www.lightingafrica.org for more informa- tional lighting industry and local suppliers and tion. service providers to profitably manufacture, market, and distribute significantly lower cost products. Night market shoe seller in Dar es Salaam (Tanzania), with handmade kerosene tin lamp (left), and 1-watt LED (right) 15 Expanding Energy Efficiency Interventions It is possible to improve energy efficiency in many The use of energy in buildings, industries, and ways. The production, distribution, and use of transports can be reduced by 33 percent by 2050 energy all offer opportunities. Buildings can be in- according to the International Energy Agency.7 sulated better, industries can upgrade equipment, and inefficient power plants can be rehabilitated The lighting sector in developing countries has or replaced with more efficient ones. These op- enormous potential for energy savings and im- portunities can be captured in every sector of the proved quality. The demand for electric lighting economy, but despite cost savings, this does not is increasing twice as fast in developing countries happen readily because of a variety of barriers. It (3.6 percent) as in industrial countries (1.8 per- can be that the companies are not informed about cent). Developing countries are using more and the possibilities, that they lack the money and more electricity, including for lighting. Whereas cannot obtain financing, that the laws in place are lighting is on the order of 5–15 percent of energy not favorable, that the projects are too small, or use for households in industrial countries, in the that the technology is not available or proven in developing world it is typically much greater. a particular location. The solutions need to be as Remarkably, poor households without access to diverse as the problems, and they need to include electricity can pay as much for kerosene used in modifying laws, improving technologies, setting lanterns as their wealthier counterparts pay for the right prices, and opening markets. The World Bank Group has projects in each of these areas with the goal of transforming energy markets and 7 IEA, “Energy Technology Perspectives,” Paris, 2006. bringing other sources of investment to cap- ture energy efficiency opportunities. Opportunities and Benefits of Energy Efficiency Every country and every sector of the economy have the potential for energy savings (see Table 3). The production of energy can be more efficient by improv- ing power plants and transmission systems. 17 Table 3: Energy Efficiency Opportunities in Important Consuming Sectors Sector Energy efficiency improvement opportunities Buildings Integrated building design, better insulation, advanced windows, energy-efficient lighting, space conditioning, water heating, and refrigeration technologies. Industry Industrial processes, cogeneration, waste heat recovery, preheating, and efficient drives (motor, pump, compressors). Cities and District heating systems, combined heat and power, efficient street lighting, efficient water municipalities supply, pumping, and sewage removal systems. Agriculture Efficient irrigation pumping and efficient water use, such as drip irrigation. Power supply New thermal power plants: Combined cycle, supercritical boilers, integrated gasification combined cycle (IGCC), and other advanced combustion technologies. Existing generation facilities: Refurbishment and repowering (including hydropower), improved operation and maintenance practices, and better resource utilization (higher plant load factors and availability). Reduced transmission and distribution losses: High-voltage lines, better-insulated conductors, capacitors, efficient and low-loss transformers, and improved metering systems and instrumentation. Transport Efficient gasoline and diesel engines, urban mass transport systems, modal shifts to inter- and intracity rail and water transport, improved fleet usage, and compressed natural gas (CNG) vehicles. Households Lighting, appliance efficiency, and improved cook stoves. much higher-quality electric lighting. The quality the financial decisions that drive larger project and efficiency of lighting technologies adopted in designs, a focus on energy efficiency is rarely the next twenty years will have significant impli- the primary rationale of an investment decision. cations for the environment and development. More often, an industrial operator seeks to mod- ernize or expand its operations, or a commercial Energy efficiency reduces the demand for funds building operator seeks more reliable space in developing countries by deferring the need conditioning equipment or more attractive and for new power plants and fuel whose cost is rising. It also reduces costs of operation and Figure 3: Reductions in Greenhouse Gas Emissions by maintenance, and can improve productivity. Consuming Sector through 2050 Companies increase their financial performance and countries become more competitive thanks Energy E ciency: US$447 Million to an efficient private sector. Less energy use also End-use e ciency Coal to gas provides public benefits by reducing pollution Power and improving work conditions from better light generation Nuclear Fossil fuel and indoor air quality. When it comes to climate generation change, energy efficiency is the largest, least e ciency expensive, and fastest way to reduce its effects CCS over the next decades (see Figure 3). Hydropower Barriers to Energy Efficiency Investments Bio fuels in Biomass transport CCS in fuel Other renewables Although the economics of energy efficiency Fuel mix in building transformation CCS in industry sand industry measures are compelling and often underlie Source:IEA,“EnergyTechnologyPerspectives,”Paris,2006. 18 functional lighting, and the associated energy efficiency cost savings provides the fi- nancial return necessary for the project to go ahead. While projects with strong energy efficiency compo - nents are appealing finan- cially, cost-saving measures are rarely recognized as creditworthy by banks, and even less frequently viewed as a target business for lend- ing. Since debt financing is usually critical for energy efficiency investment, this lack of recognition is a seri- ous constraint. Financial institutions traditionally have not organized Private Sector Finance for Energy Efficiency products and marketing efforts to capture en- ergy efficiency opportunities—a major missing Convincing private banks to invest in energy force for investment. The lack of a systematic efficiency is a key feature of the World Bank business focus on the energy efficiency market Group approach as it allows leveraging its own opportunity has transcended global financial resources. The World Bank offers technical as- markets—from the larger international financial sistance and financial intermediary loans for this institutions to local commercial banks and leas- purpose. For example, ing companies. • The World Bank brought together domestic World Bank Group Energy Efficiency banks in Brazil, China, and India to share Investments experiences, create partnerships, and ex- plore opportunities for energy efficiency Since 1990, the World Bank Group has invested investment.8 This project highlighted the nearly $3.1 billion in energy efficiency in about importance of a dialogue between banks and 120 projects in 40 countries. There are projects technology suppliers. One such exchange in all regions with a significant concentration in led to new lending programs for energy ef- Europe, Central Asia, East Asia and Pacific. A ficiency in several Indian banks. Major Chi- few sectors have received a larger share of the nese banks created a concept for an energy investments, in particular industries, district heating, and electric power. In the past much 8 The project is funded by the Energy Sector Management of the energy efficiency investment was for im- Assistance Programme (ESMAP) and the United Nations proving district heating systems. This fiscal year Foundation (UNF).and is implemented with the United Na- saw the beginning of several projects to provide tions Environment Programme (UNEP). A World Bank book expected for the end of 2007 will synthesize the practical modern and efficient lighting technologies for knowledge from the project, together with additional knowl- grid-connected and off-grid consumers. edge from efforts in different countries on this topic. 19 helped offer advice on setting up energy efficiency service companies, training, and outreach. The IFC’s strategy to mobilize en- ergy efficiency investments makes the most of its position as a lender for private sector projects in devel- oping countries. First, it targets op- portunities emerging from its own investment business, and second, it explores the corporation’s network of more than 400 commercial finan- cial institution clients (see Box 5). Energy Efficiency Action Plan After years of effort to catalyze substantial energy efficiency invest- ment in client countries, the WBG began evaluating its own business in order to understand best how to more systematically and strategical- ly support client countries in energy efficiency. The World Bank launched an Energy Efficiency Action Plan for Sustainable Development (EEfSD) in 2007 to guide actions in client countries on multiple fronts. The Action Plan comprises four tracks: efficiency financing project (see Case Study 1. Integrating energy efficiency within eco- Three). In Brazil, banks developed a loan nomic and sector work. guarantee for energy service companies. 2. Mainstreaming energy efficiency in in- • In the Second Renewable Energy Project vestment operations by systematically with the India Renewable Energy Develop- integrating energy efficiency operations ment Agency (IREDA), energy efficiency within the core energy practice by replicat- investments were supported through an ing the “business-as-usual” and proven IDA credit of US$17 million that leveraged energy sector project designs and instru- an additional US$58 million from IREDA’s ments. own resources, loans from other commercial 3. Improving the internal operational, learn- sources, and developer’s equity and saved an ing, and analytic capacity to provide broad- equivalent of 86 MW of generation capacity based analytical and operational support, at an investment cost of under US$900/kW. including developing new finance instru- Five million dollars in cofinancing from GEF ments or adapting existing ones. 20 Box 5: IFC Financial Intermediation in Energy Efficiency The size of investments in energy efficiency is often smaller than the amount the IFC and World Bank find most efficient, despite the potential for high returns and development impact. These projects, however, are a perfect fit for many financial institutions in developing countries, such as commercial banks and leasing companies. In 1997 the IFC began to work with some of the 400 financial institutions among its clients. Although energy efficiency is not a specific business for most of them, they all have loans for sustainable energy projects in their portfolio. The IFC works with the institutions to align energy efficiency investments with their business strategy. This may include, for example, lending to small and medium enterprises (SMEs), marketing new products to existing clients, or using a bank’s position as a holder of accounts for municipal governments. The IFC then works with their management to develop financial products, train the bank staff to market the new product, and develop credit procedures for what might be a new class of borrowers in their pipeline. This includes how to assess risk and value in investments for energy efficiency. The IFC will choose to use financial tools or advisory services depending on the needs of each client. This includes enabling long-term financing in local currency or sharing the risk with the financial in- stitution while it builds experience. In each case, IFC support is a short-term boost to build capacity and enthusiasm for a growing investment business. Results to date are impressive. The IFC has supported more than 20 financial institutions, leading to an estimated more than US$120 million in energy efficiency lending and a much larger pipeline of expected future investment. 4. Monitoring, evaluation, and outreach in rela- of a process to determine whether such efforts tion to developmental outcomes and results. could be expanded. This new tracking system will be extended to the World Bank to identify In 2004, IFC started to identify clean energy new energy efficiency investment opportunities components within its own investments as part (Box 6). Box 6: Identification of New Energy Efficiency Opportunities through the IFC’s Investment Tracking System Starting in fiscal 2005, by developing and refining an investment tracking system that identifies the energy efficiency and renewable energy components embedded in its core investment business, the IFC has developed a full understanding of where energy efficiency opportunities emerge across the industry sectors in its portfolio. The exercise has identified a broad range of energy efficiency invest- ments across the power generation and distribution business, municipal water system investments, and throughout the general manufacturing, chemicals, agribusiness, and mining businesses. In the process, the IFC identified close to US$2 billion in energy efficiency and renewable energy investment resident in 25 projects in its portfolio of fiscal 2007 new investment commitments. These investments are typically a small part of a much larger loan, and most often take place without any deliberate promotion or incentives from IFC, but driven by the production efficiency gains inherent to energy efficiency applications. Based on this profile, the IFC has identified a portfolio of energy efficiency investment opportunities it is seeking to replicate and expand by systematically identifying similar opportunities in the market and working with project sponsors as part of the IFC’s appraisal process. The IFC seeks to leverage its financial appraisal and review procedures to promote greater energy efficiency investment and offering more value to its clients and greater overall development impact. 21 Case Three Promoting Energy Efficiency Investments through Financial Intermediation in China The National Development and Reform Commis- conservation experts because of the potential for sion of China launched the “1000 Large Industrial significant savings. Enterprises Energy Conservation Action Plan” in April 2006, targeting the top 1,008 largest industrial The estimated energy conservation investments energy consumers. Together, these account for needed to achieve the 20 percent energy efficien- approximately 30 percent of China’s total primary cy target of the National Development and Reform energy consumption. The conservation oppor- Commission surpass US$50 billion—most of tunity in these industries is often referred to as a them in the industrial sectors. The World Bank-GEF “goldmine” of energy savings by Chinese energy funded First and Second China Energy Conserva- 22 tion Projects in the 1990s successfully introduced develop and sustain energy conservation lending an energy performance contracting mechanism business lines. through energy management companies to sup- port small commercially viable energy conserva- This integrated IBRD/GEF funded project is de- tion projects. The proposed China Energy Efficiency signed to help remove the principal barriers imped- Financing (CHEEF) project, prepared by the World ing investments in medium-size and large industrial Bank in fiscal 2007, is an important follow-up. The energy conservation projects. The GEF grant-fi- CHEEF project complements and reinforces several nanced technical assistance activities will address ongoing World Bank/IFC energy efficiency projects the knowledge, institutional, and capacity gaps through a focus on the medium-size and large of the banking sector, mitigate the risk concerns industrial energy conservation investment market. of enterprises, and strengthen the governmental The proposed CHEEF project will provide (a) a Bank supervision of industrial energy conservation. The loan of US$200 million to support energy conser- efforts of the energy conservation financial inter- vation investments in target industries through mediary lending program are expected to dem- the selected participating financial institutions; onstrate the financial viability of medium-size and and (b) a GEF technical assistance grant of US$13.5 large industrial energy conservation investments, million to strengthen the government capability and provide direct support to the government’s to enforce related laws, regulations, and standards; energy conservation priorities during the 11th Five- and (c) assist the private financial institutions to Year Plan period. 23 Building a Sustainable Hydropower Partnership Hydropower is the largest global source of af- fordable renewable energy, yet in the develop- ing world less than a quarter of the potential of this abundant resource has been tapped. When developed appropriately, with attention to social and environmental risks, hydropower projects can provide multiple economic and environmen- tal benefits to the world’s poor. For these reasons, after a decade of declining lending, the WBG is re-engaging in hydropower as a way to contrib- ute to its mission: to eradicate poverty and help build sustainable development. However, the financing requirements of many large projects exceed the funds available from public sources, like the WBG, and thus the private sector plays a An Abundant Resource critical role in hydropower development. To en- sure the financial, environmental and social suc- Hydropower potential of varying sizes and cess of these projects, the World Bank is working configurations (pico, micro, mini, run-of- in partnership with national governments, civil river, through to dams and storage reservoirs) society organizations, and the private sector to amounts to roughly 7 billion GWh per year in support and plan quality hydropower projects developing countries9. Yet, only 23 percent of the in developing countries. energy potential has been developed, compared with 72 percent in OECD countries (see Figure 4). And, in terms of water management, per capita Figure 4: Hydropower Potential and Production by Region water storage in Africa amounts to less than one 2300000 fiftieth of that in North America or Australia. Economically feasible hydropower potential 1800000 (GWh/year) The Multiple Benefits of Hydropower Production by hydro plants in 1300000 2004/05 (or average) (GWh/year) Appropriate multipurpose hydropower devel- 800000 opment, as part of a menu of options, can bring significant benefits in terms of access to electric- 300000 ity, diversified energy options, managing water –200000 scarcity (and over-abundance), and support- EAP EAP ECA LAC MENA SA SSA Hi OECD w/o w/ Non- 9 The international community considers hydropower of all China China OECD sizes and configurations to be renewable, as acknowledged at the World Summit on Sustainable Development in Johan- Source: World Atlas and Industry Guide (2006 edition), a publication of The International nesburg, South Africa, and the International Renewable Journal on Hydropower and Dams. Aqua~Media International, Sutton, Surrey, U.K. Energies Conference in Bonn, Germany. 25 ing water-dependent activities. Hydropower Figure 5: World Bank Group Annual Hydropower contributes to the energy security agenda Financial Commitments 1200 as a low-carbon source of electricity drawn from an indigenous natural resource that 1000 reduces susceptibility to the oil price shocks that developing countries have experienced 800 in the last five years. It also provides unique, US$ Millions complementary services to an energy system 600 that mixes thermal and renewable sources, adding reserve capacity to back up intermittent 400 sources, such as wind and solar. Beyond energy, 200 hydropower storage projects—when designed and operated sustainably—can help manage 0 the drought and flood stresses of naturally 1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 *FY08 volatile hydrology and the allocation of this Source: World Bank Group data, Washington, D.C., 2007. is Q1 increasingly scarce resource across multiple users, thereby contributing to water security. Finally, hydropower also offers the opportunity have been approved in the last three years, to build transboundary cooperation through amounting to US$1.6 billion in commitments regional initiatives in both water management (to support a total of US$4.9 billion in project and the development of power pools, with investments and 6,224 MW; see Figure 5). Major benefits beyond the river.10 projects have recently been approved in Africa (Democratic Republic of Congo, Senegal, Sierra Financial benefits of low carbon generation are Leone, and Uganda) and Asia (India and People’s being exploited in hydropower projects. Between Democratic Republic of Laos), with several re- 2005 and 2007, carbon credit was extended to 15 habilitation projects in Eastern Europe (Georgia, WBG projects valuing US$110 million. Increas- Macedonia, and Ukraine). New projects are under ingly, the carbon market is accessed by larger discussion in Brazil, Ethiopia, Georgia, Guinea, projects in both the private and public sectors. India, Rwanda/Nile Equatorial Lakes, Tajikistan, For example, the 59 MW Felou project in Senegal and Vietnam, along with carbon finance projects recently accessed US$3.1 million through the in Madagascar and Sri Lanka (Figure 6). signature of an Emissions Reduction Purchase Agreement with the World Bank Spanish Carbon Regionally, the hydropower story varies con- Fund, and the larger 412 MW plant in India is siderably: exploring carbon financing of US$15 million. • In India, the focus is on addressing an elec- The World Bank Group’s tricity gap that is compromising growth and Hydropower Investments on realigning the balance among renewable and nonrenewable energy resources. The The WBG is re-engaging in hydropower for both Rampur project benefiting from a combina- energy and water security. After a decade of de- tion of IBRD financing and carbon finance clining lending, the Bank now supports a range of projects, from small run-of-river and rehabilita- 10 C. Sadoff and D. Grey (2003), “Beyond the River: The Ben- tion to large multiyear storage and multipurpose efits of Cooperation on International Rivers,” in Water Science investments. Thirty-five hydropower projects & Technology, Vol. 47, No. 6, pp. 91–96, IWA Publishing. 26 Figure 6: Regional Distribution of World Bank Group ing demand for energy in multiple countries, Hydropower Projects such as the Nam Theun 2 project in Laos that serves Laos, Thailand, and Vietnam. South Asia Region Africa Region 15% 23% Managing the Risks of Hydropower Projects Middle East and North Africa Region Along with the potential development benefits 2% East Asia and Paci c Region of hydropower, the WBG also recognizes that Latin America 21% hydropower, like many natural resource proj- and Caribbean Region ects, poses risks, particularly when it involves 24% Europe and Central regulation of rivers or resettlement of local Asia Region 15% communities. Hence, hydropower must be developed cautiously in the context of broader Source: World Bank Group data, Washington, D.C., 2007. development goals, including (a) responsible Note: The number of projects counts separate WBG engagements, which in some cases support a single hydropower. environmental management, (b) poverty alle- viation and social development, (c) integrated water and energy management, and (d) institu- will add 412 MW into the Northern India tional development. Electricity Grid. • In Africa, hydropower needs to be addressed There has been exceptional development in the from a water management perspective, giv- past decade in understanding how to address en the challenges of multiple demands for what used to be overwhelming environmental water and the predominance of international and social risks. The contraction of Bank lending rivers. On the Niger River, for example, the in the 1990s was in part a response to concerns Bank is aiding nine countries in developing about the environmental and social impacts of a river basin organization that will enhance dams, and the balance between benefits and regional coordination, development, and costs of development. The World Commission sustainability of water resources along the on Dams, in which the World Bank partici- third longest river in Africa. The regional pated, produced a useful reference document context is also an important driver from the that identifies important issues and outlined energy side as well. A recently approved important strategic priorities for dams. The project in the Democratic Republic of Congo WBG also actively participated in the United will rehabilitate two Inga plants for a total Nations’ follow-up to the Commission: the Dams increase of 600 MW in supply to the South- and Development Program.11 Its final report, ern Africa Power Pool. Coupled with invest- “Dams and Development: Relevant Practices ments in transmission and distribution, this for Improved Decision-Making,” provides a additional energy will increase the reliability positive and constructive compendium for ad- of electricity supply in the region. dressing environmental and social concerns. • In Eastern Europe , the WBG is assisting These endeavors complement the industry’s countries in rehabilitating and upgrading own efforts to raise awareness and improve facilities to feed into an emerging regional practices through the International Hydropower power pool. Association’s Sustainability Protocol.12 • In East Asia, challenges and opportunities are arising in the effort to ensure that projects al- 11 http://www.unep.org/dams. leviate poverty in host countries while feed- 12 http://www.hydropower.org. 27 WBG projects are themselves subject to the “most large projects exceed funds available from gov- sophisticated set of policies, operational proce- ernments and public sources. Private participa- dures, and guidelines among the international tion can also bring additional skills in financial donor community,”13 which has prompted in- management, procurement, and project man- novative approaches to sustainability. The Nam agement. However, the financial crises of the Theun 2 project, for example, includes a conser- second half of the 1990s, coupled with reduced vation offset to protect a regionally significant lending from multilateral development banks biodiversity area. Nearly 10 times the inundation for hydropower, greatly cooled the prospects area in the Nakai Nam Theun watershed, the for private sector participation. Today, the lack offset is supported by long-term financing (US$1 of strong regulatory and enabling environments million per year for 30 years) and an innovative set against intense scrutiny of larger projects institutional and capacity building arrangement. raises considerable risk for private capital. The In the Nile Basin, the proposed Rosumo Falls inherent complexities of large hydropower (such multipurpose project undertook a comprehen- as large upfront costs, long project development sive strategic environmental assessment to com- time, and environmental and social impacts) pare various options from a “triple bottom line” further compromise investment. perspective.14 With this ongoing experience, the Bank continues to synthesize lessons learned and The WBG is addressing the challenge and op- refine “best practices” to improve the outcomes portunity for private sector participation by (a) of hydropower projects. taking a programmatic approach to institutional Engaging the Private Sector 13 World Commission on Dams, Dams and Development: A New Framework for Decision-Making. Earthscan, 2000. The private sector plays a critical role in hydro- 14 Triple bottom line refers to the three values in sustainable power. The financing requirements of many development: economic, environmental, and social. 28 and regulatory development (as in the recently by the private sector. The WBG has been success- approved Development Program Loan to the ful in supporting the entry of the private sector state of Himachal Pradesh in India) and (b) act- for small and medium hydropower projects as ing as financial intermediary, providing targeted exemplified by projects in several countries: financial support, convening multiple parties, and accessing a range of financial instruments • The World Bank Carbon Finance Unit began and models. purchasing carbon offsets from La Esperan- za, a run-of-river private hydropower proj- Given the hiatus in new project development ect located in the waters of Intibucá River, for hydropower, knowledge and experience in Honduras, in 2007. The project developer is attracting private participation in these projects also developing forestry and land protection is lacking. A recent study of financing water in- programs around the river basin, cleaning frastructure explored project financing models, the garbage from the lake area, and gener- instruments, and project structures (for example, ating local direct and indirect jobs. Further, BOOT and government).15 The extent of private La Esperanza electrifies the local village. sector involvement and appropriate structure for More recently, La Esperanza has funded a public-private partnership will depend on site- tree planting program in the surrounding and country-specific circumstances. It will also community with more than 30,000 trees that depend on the type of project. Many small and were donated by La Esperanza. medium run-of-river projects that have limited financial risk, low environmental consequences, C. Head, The Financing of Water Infrastructure: A Review of 15 and no resettlement complications are bankable Case Studies. World Bank, Washington, D.C., 2006. 29 • In India, the World Bank supported two a more complex mix of public and private struc- financial intermediation projects over the tures in order to balance public and private last 15 years that has resulted in 79 small benefits and a range of risks. The Nam Theun hydropower projects with 276 MW in total 2 project’s complex private-public partnership capacity. The projects helped launch several involved more than 30 parties, with explicit small hydropower project developers, some allocation of risks across Nam Theun Power of whom are also investing in other coun- Company equity holders, project sponsors, and tries. The success of the schemes funded by private participants, as well as the Government the World Bank and IREDA has also raised of Laos and the WBG (see Table 4). interest from commercial banks, leading to the gradual emergence of a competitive com- Generally, risks are allocated to the party best mercial market for funding such schemes. able to manage it at the least cost to the overall Consequently, total small hydropower project. Risk instruments, such as guarantees, capacity in the country stands at more than have had a significant role in recent Bank proj- 2,000 MW as of 2007. ects. Three projects—Bujagali (see Case Five), • The IFC is financing Hidromaule S.A. in Bambuna in Sierra Leone, and Nam Theun Chile, a hydropower generation company 2—took advantage of risk guarantees from IDA owned by an Italian-Chilean consortium. or MIGA, or both, as in the case of Nam Theun The company’s initial project, Lircay, is a 2. MIGA guarantees against political risks, such 20 MW run-of-river hydropower project as war, civil disturbance, expropriation, and for- located along the Lircay River in the VII eign exchange inconvertibility, and the insurance Region of Chile, approximately 30 km to requires no host country backing. IDA partial the northeast of the city of Talca. The Lir- risk guarantees cover commercial bank debt. cay hydropower project takes advantage During the past three years, the value of risk of water rights owned by the Canal Maule guarantees for WBG hydropower was valued Association, a long-established irrigation at US$518 million. group formed mainly by small and medium agriculturists and with approximately 2,200 The World Bank Group’s shareholders. Hydropower Strategy • In Sri Lanka, an indigenous renewable ener- gy industry was born in 1997 that today has Looking forward, the WBG will continue to invested more than US$130 million in more build a pipeline of sustainable projects that add than 100 MW of small hydropower plants value to water management and mixed energy (Case Four). This industry emerged thanks portfolios. The portfolio, a combination of lend- to policy, legal, regulatory, and financial sup- ing, technical assistance, and analytical advisory port from the World Bank to establish a small services will continue to be characterized by power purchase framework and to invest diversity, with projects ranging from small local in renewable energy. This achievement also plants and rehabilitation of existing facilities led the IFC to set up a facility in Sri Lanka to pumped storage and multipurpose transna- to create more standardized financial terms tional projects. The contribution of hydropower for distributed generation to expand and to the renewable energy portfolio will build on extend this small power model. the following: At the other end of the spectrum, large storage • Region-specific lending strategies, taking projects with multipurpose operations demand into consideration country programs and 30 Table 4: Nam Theun 2 Project Risk Allocation NTPC Equity Holders, Project Sponsors Phase Risks/Obligation and Private participants(a) Lao PDR (b) IDA PRG Pre-Construction Project design • • • Pre-construction works Financing Construction Cost overruns Construction delays • • Operation Operations and maintenance • • • Tariffs • Transmission • Hydrological “B-period” tariffs Concession Team Thai Baht devaluation • • • • • • Lao political force majeure • • • Changes in Lao PDR law • • Natural force majeure(c) • Lao—expropriation • Thailand political force majeure Thailand —expropriation (a) Including EGAT as an off-taker; Engineering, Procurement and Construction (EPC) contractors; project lenders and GOL, as shareholder in NTPC. (b) Excludes risks taken by GOL as an NTPC shareholder. (c) Natural force majeure: acts of God, earthquakes, fires, typhons, etc. Source: World Bank, “IDA Guarantee Paves Renewed Interest in Private Hydropower—the Nam Theun 2 Project,” Project Finance and Guarantees Group, Washington, D.C., June 2005, p. 5. capacities, sector needs, and constraints, and partnerships, funding for regional projects, Bank value added. and transaction costs of Bank lending. • Attention to environmental and social man- • Continued emphasis on capacity building agement and cross-cutting issues, such as to enhance regulatory environments and revenue management and benefit sharing embed sustainability principles in execut- across all stakeholders, retaining water flows ing agencies. to sustain the environment, and climate change. • Alignment of financial instruments to hy- dropower needs, addressing public-private 31 Case Four Sri Lanka—Private Sector Leadership in Small Hydropower Sri Lanka’s small hydropower (SHP) industry has cal prowess has evolved over the years and enabled received international acclaim in recent years. them to resourcefully counter ever-increasing input Ten years since the first grid-connected, privately costs. Consequently, local expertise is now sought owned small hydropower project was commis- after internationally, and three Sri Lankan engineer- sioned by Premasiri Sumanasekera in Dick Oya, the industry has grown into a 109 MW success story (Figure 7). Domestic private sector investment in the industry of about US$130 million has contrib- uted 4 percent of the nation’s gross generation. Between 2005 and 2006 the only new generation that was added was from these private small hydro- power generators. In a world pressured by escalat- ing oil prices, the Government of Sri Lanka is now committed to build on the SHP industry’s achieve- ment and reduce the burden on the consumer by prioritizing the development of indigenous, economical sources of energy. The National Energy Policy and Strategy has set a target of meeting 10 percent of the total demand from new renewable energy sources by 2015. An effective framework has evolved over a decade to attract private sector investment for the devel- Figure 7: Sri Lanka Small Hydropower Growth opment of small-scale, run-of-river hydropower Renewable Power Expansion under SPPA projects in Sri Lanka. This framework rests on six 200 important cornerstones, which together provide a SPPA Signed powerful incentive and support structure that tilts 150 Commissioned the scale toward continued investor confidence, Cumulative MW which in turn overcomes numerous obstacles in the 109.4 MW 100 (June 30, 2007) process (see Box 7). The SHP industry is now endowed with a skilled 50 pool of local engineers and engineering firms. Lo- cal engineers have ingeniously adapted imported 0 technology and know-how to suit indigenous 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 conditions. As a result of their efforts, the cost of (mid- development in Sri Lanka is 20–30 percent less than year) internationally accepted benchmarks. Their techni- Source: DFCC Consulting (Pvt) Ltd. 32 ing firms are already designing, constructing, and the nation’s infrastructure, and policy makers are investing in small hydropower projects in Africa. encouraged to steer the country toward sustain- able development by balancing economic prog- Indigenous, new renewable energy generation ress with the conservation of the environment and is having a significant positive impact on the empowerment of rural communities. The quality economy, society, and environment of Sri Lanka. of life of villagers in the vicinity of SHP plants has The country’s energy security is improved be- improved in large part because of better road ac- cause of the diversification of the energy mix, local cess, bigger bridges and, in some areas, access to private sector investment is mobilized to develop grid electricity. The provision of basic infrastructure facilities undoubtedly translates into enhanced income-generation opportunities for these com- munities. The country as a whole also benefits from a significant foreign exchange savings of about Box 7: Cornerstones of Progress US$30 million generated by the 346 GWh that these SHPs supplied to the national grid in 2006 1. A straightforward application process to (assuming 60 percent of generation displaced reserve a site for development based on a Letter of Intent issued on a first-come, oil-based power at US$80/barrel of oil). Sustainable first-served basis. development has thus become a reality as tangible 2. A 15-year standardized, non-negotiable economic gains are derived, while the environment power purchase agreement with the util- profits from the reduction of polluting emissions ity ensures that this Must Run facility is operated and maintained in a manner equivalent to 221,000 metric tons of carbon every consistent with Prudent Utility Practices. year. 3. A power purchase tariff with a guaranteed floor price based on the avoided cost of marginal generation of utility-owned ther- mal power plants. 4. Tax and import duty concessions that are available to other energy and nonenergy investments meeting Board of Invest- ments criteria. 5. Medium- to long-term project financing through the World Bank–funded Energy Services Delivery Project and thereafter the Renewable Energy for Rural Economic Development Project (additional financ- ing of US$40 million was injected into the RERED project in FY07 by the World Bank). 6. Strong domestic entrepreneurial capacity and local technical expertise. 33 Case Five Bujagali Hydropower: Financing and Risk Mitigation An ongoing electricity crisis is a major impediment transparent selection process for the project spon- to foreign investment in Uganda. It has placed a sor and required the sponsor to follow a transparent significant strain on economic growth and has process for selection of the engineering, procure- contributed to a decline in GDP growth down to 5 ment, and construction contractor. The government percent in 2006 from 6 percent in previous years. has also engendered public support through a well- orchestrated communications campaign. In addi- The 250 MW run-of-river Bujagali Hydropower tion, the government retained highly qualified legal Project is a major component of the Ugandan services for support throughout the transaction, government’s least-cost energy sector expansion which provided confidence to all participants that strategy that will supply enough power to meet the Uganda’s interests were adequately represented. country’s needs once it is commissioned in 2011. The associated transmission line is being financed To lay the groundwork for such substantial invest- by the African Development Bank. ments in the sector, the government had previously undertaken a comprehensive power sector reform The estimated US$870 million project is structured program, including unbundling of the power util- on an IPP basis. The project company, Bujagali ity, promotion of private sector participation, and Energy Ltd. (BEL), will sell power to Uganda Electric- creation of a sound legal and regulatory frame- ity Transmission Company Ltd. (UETCL, Uganda’s work. The robust sector framework created by the national transmission company) under a 30-year government has allowed electricity prices to remain Power Purchase Agreement. The WBG’s support at or near cost-reflective levels. The bankability of of this project has been pivotal in mobilizing the financing package needed for what is the largest single private investment in Uganda—and among the largest in East Africa. Major Challenges and Lessons Learned The Bujagali project faced the normal challenges of engineering, environmental, and social issues, as well as financing, involved in any large hydropower project. However, the project’s large size with re- spect to the economy and the sector, as well as the country environment, called for both innovation and dedication to see the transaction through. The Ugandan government’s commitment to devel- oping Bujagali has played a defining role in meeting these challenges. The government undertook a 34 projects such as Bujagali depend heavily on the operation within the IDA/IFC/MIGA WBG team in general confidence that a committed government close collaboration with key project stakehold- can establish through reform actions, as well as ers in the government, the project sponsor, and sustained support of the donor community. other members of the lending consortium. • Strong package of accompanying support The challenges faced by the project required to the energy sector: In parallel to the Bujagali focused and carefully crafted strategies for WBG preparation, IDA supported the power sector engagement. The main features of this experience reform process with technical assistance and can be summarized as follows: with financial support to the privatization of the distribution company (which also received MIGA • Leveraging effect: An innovative combination support). IDA also provided a power sector de- of a US$115 million IDA partial risk guarantee, velopment loan supporting the sector’s finances US$130 million in IFC loans, and US$115 mil- and 50 MW of additional temporary thermal lion of MIGA guarantee for equity investment generation capacity to help mitigate the short- resulted in the mobilization of nearly US$870 term power shortage. million of project financing for this project. • Signaling effect: The substantial participation • Rigorous analysis and effective external of the WBG in the Bujagali Project has signaled to communication: The WBG team pursued rigor- its clients, financing partners, and to the private ous analysis and external communication with sector its willingness and capacity to re-engage the wider public, business, and investment com- in the development of a public-private partner- munity to ensure compliance with policies. ship in support of “transformative” energy and • Efficient collaboration within the WBG infrastructure projects in Africa, especially the team: The success of this project hinged on co- largely untapped hydroelectric potential. 35 Toward a Low-Carbon Economy: Renewable Energy and Energy Efficiency Portfolio Review A number of factors are influencing the trend in million for new renewable energy, US$751 mil- World Bank Group support for renewable energy lion for hydropower greater than 10 MW, and and energy efficiency. The steadily rising support US$262 million for energy efficiency (Table 5). for such energy options are due to the WBG’s increased commitment towards such energy op- Thus, with combined commitments of US$683 tions coupled with external factors such as high oil for new renewable energy and energy efficiency, prices, commercial maturation of the technologies, the WBG outperformed its Bonn Commitment greater awareness, and climate change concerns. by a wide margin, as in previous years. Cumu- latively, between fiscal 2005 and fiscal 2007, the Financial Commitments WBG has exceeded its Bonn Commitment target by almost 100 percent—committing US$1,812 Renewable energy and energy efficiency proj- million against the cumulative target of US$913 ects continue to perform strongly in the WBG million over the same timeframe (Table 6). energy portfolio and are increasingly being mainstreamed in the WBG’s energy lending. In Since 1990, the WBG has committed about fiscal 2007 a total of US$1,433 million supported US$11.4 billion toward renewable energy and en- 63 renewable energy and energy efficiency proj- ergy efficiency (see Figure 8). Details are provid- ects in 32 countries. This represents a 67 percent ed in Annexes 1, 2, and 3. Of this amount, US$3.1 scale-up in commitments from fiscal 2006. The billion each were for new renewable energy and WBG’s support can be broken down into US$421 energy efficiency. Another US$5.2 billion went Table 5: World Bank Group Commitments for Renewable Energy and Energy Efficiency, FY07 (millions of U.S. dollars) Source of funds New renewable energy Hydro greater than 10 MW Energy efficiency Total World Bank (IBRD/IDA) 70 430 49 549 GEF (World Bank) 121 0 7 128 World Bank (Carbon Finance) 68 66 10 144 IFC (own funds) 154 140 156 450 IFC (Carbon Finance) 7 0 0 7 MIGA 0 115 40 155 Total 421 751 262 1,433 Note: Some columns may not add up exactly because of rounding. Source: WBG databases, 2007. 37 Table 6: Measuring Progress in New Renewable Energy and Energy Efficiency Lending against the Bonn Commitment (millions of U.S. dollars) New RE and EE FY02–04 Total commit­ments FY02 FY03 FY04 average FY05 FY06 FY07 FY05–07 Actual 204 178 245 209* 461 668 683 1,812 Bonn commit­ment target n.a. n.a. n.a. n.a. 251 301 361 913 n.a. Not applicable. * The baseline of US$209 million was set as the average annual lending commitment for new renewable energy (RE) and energy efficiency (EE) made by the IBRD and IDA, the World Bank’s Carbon Finance Business (CFB-IBRD), and the GEF (IBRD and IDA) in fiscal 2002, 2003, and 2004. The baseline comprises exclusively of new RE and EE. Note: This includes the additional US$168 million in IFC fiscal 2005 commitments that were not reported in the fiscal 2005 RE and EE progress report (World Bank Group Progress on Renewable Energy and Energy Efficiency: Fiscal Year 2005, December 2005). Commitment amounts for two IFC projects included in last year’s RE and EE progress report have also been revised (Dominican Republic Basic Energy was US$12 million and is now US$6.34 million, and India Allain Duhangan Hydropower was US$49 million and is now US$47 million). The additional IFC fiscal 05 commitments were principally EE and RE investment com- ponents of IFC projects in agriculture, industry, transport, and other nonenergy sectors. to hydropower projects with capacities greater Commitments for large hydropower projects than 10 MW per facility. During the same period, increased substantially over previous years, the share of total WBG energy lending devoted most prominently in Sub-Saharan Africa. The to renewable energy and energy efficiency has continent’s vast underexploited hydropower been steadily increasing. The average share of resources offer large potential for further ex- renewable energy and energy efficiency of total pansions as a low-carbon solution to increasing energy commitments has doubled since 1990–94 energy access. The WBG has renewed its efforts to 25 percent in 2005–07 and reached 40 percent to support countries’ benefit from this resource in fiscal 2007 (Figure 9).16 while at the same time continuing to maintain and refine its stringent and comprehensive envi- 16 IBRD-IDA energy sector investments include oil, gas, Figure 8: World Bank Group Commitments for Renewable Energy and coal (including coal mine closing or rehabilitation; and Energy E ciency, FY90–07 transmission and distribution of oil, gas, and electricity; 1,600 14,000 power generation and associated environmental controls and Energy e ciency plant rehabilitation; district heating and plant rehabilitation; 1,400 New renewable energy renewable energy; and energy efficiency and conservation). Hydro > 10 MW 12,000 IFC investments in the energy sector include investments Cumulative commitment 1,200 from the IFC’s own account; MIGA investments refer to 10,000 Annual US$ millions Cumulative US$ millions gross liability exposure. IFC and MIGA investments in en- 1,000 ergy sector consist of investments in the power sector, oil, 8,000 gas, and coal mining, as well as electricity and gas services. 800 Previous IFC assessments referenced only “stand-alone” 6,000 projects whose sole focus was energy efficiency or renew- 600 able energy, thus missing the full scope of investment in 4,000 sustainable energy undertaken as a component of larger 400 investments in various sectors. Subsequently, the IFC has identified additional renewable energy and energy effi- 200 2,000 ciency investments in commitments IFC had made in other sectors, such as agriculture, water supply, industry and in 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 corporate loans to financial intermediaries. For more details, see Choices Matter: 2005 Sustainability Report at www.ifc. org/SustainabilityReport. Source: WBG databases. 38 Figure 9: Share of World Bank Group Commitments for Renewable efficiency commitments (Figure 10). The major- Energy and Energy E ciency Relative to Total Energy Commitments, ity of these commitments were devoted to large FY90–07 0.5 hydropower projects, followed by investments in energy efficiency improvements. Eleven 40% 0.4 projects were developed in South Asia, which ac- counted for US$183 million in funding devoted Total WBG Energy Commitments Share of RE+EE Relative to 0.3 mostly to new renewable energy. Also in East 25% 21% Asia and Pacific, Latin America and Caribbean, 0.2 18% and Middle East North Africa regions, WBG 13% activities were focused mainly on new renew- 0.1 able energy. In contrast, activities in Europe and Central Asia were focused predominantly on 0 1990–1994 1995–1999 2000–2004 2005–2007 2007 energy efficiency improvements, which attracted US$97 million in commitments. Fiscal Year Source: WBG databases. A total of 32 projects with new renewable energy ronmental and social safeguard policies. The Bu- projects or components of projects were ap- jagali Hydropower Project in Uganda (see Case proved in fiscal 2007. For example, solar thermal Five) and the Regional and Domestic Power power generation received two large commit- Markets Development Project in the Democratic ments from GEF in Mexico and Morocco, with a Republic of Congo accounted for the majority of combined value of US$93.6 million. Geothermal large hydropower commitments last year. power generation received about US$72 million in commitments with projects in Kenya, Philip- With US$549 million of combined commitments, pines, and Europe and Central Asia. Wind power the IBRD and IDA provided the largest funding was supported with almost US$70 million (see for renewable energy and energy efficiency of Box 8)—mostly through Carbon Finance and all the WBG institutions. These commitments the IFC—and biomass energy received US$51 focused predominantly on large hydropower million in commitments. In addition, several projects, which received US$430 million in fund- projects supported a portfolio of different new ing, followed by US$70 million for new renewable energy and US$49 million for energy efficiency. In Figure 10: World Bank Group Renewable Energy and Energy addition, the GEF has been an important partner E ciency Commitments by Region, FY07 800 by contributing US$128 million in co-financing for World Bank projects. IFC committed a total 700 New RE Hydro > 10 MW of US$450 million, with US$154 million going to 600 EE Annual US$ millions new renewable energy, US$156 million to energy 500 efficiency, and US$140 million to large hydropow- er projects. World Bank Carbon Finance activities 400 contributed an additional US$144 million and 300 MIGA contributed US$155 million. 200 Sub-Saharan Africa received US$735 million in 100 renewable energy and energy efficiency com- 0 mitments for 12 projects, which accounted for AFR EAP ECA LCR MNA SAR 51 percent of total renewable energy and energy Source: WBG databases. 39 renewable energy technologies. Such projects Technical Assistance and Sector Studies include a US$40 million IDA commitment to Sri Lanka supporting small hydropower, solar In addition to operational activities, the WBG home systems, and bioenergy, and a US$9.5 engages in a variety of economic sector work million GEF project in the Pacific Islands sup- and technical assistance focused on renewable porting solar PV, picohydro, and biodiesel energy and energy efficiency. This work is an technologies. integral part of the WBG activities, which is val- ued as an important source of information and See Table 7 and Figure 11 for breakdown of the advice for policy makers and other stakeholders. number of projects by region and sector. Figure In addition, these activities are an important 12 shows the funds committed for new renew- component in the preparation of future lending able energy, energy efficiency, and hydropower activities. As shown in Figure 13, Analytical and greater than 10 MW, by region. Advisory Activities in renewable energy and energy efficiency have sharply risen in fiscal Energy efficiency improvements were supported 2007, with 21 activities completed. Activities per- in 21 projects worldwide. On the electricity sup- formed in the past year include studies, reports, ply side, for example, these include a US$39.6 and policy notes on renewable energy policy million MIGA guarantee on investments into im- in Colombia and Morocco, energy security in proving energy efficiency in power transmission Uruguay and rural electrification in Mexico, and distribution in Uganda. Similarly, a US$9 Peru, and Timor-Leste. Energy efficiency also million carbon finance project in the Nigerian city received considerable attention, for example, of Aba focused on improving efficiency through building energy efficiency in China and energy the development of a gas-fired cogeneration efficiency policy formulation in Morocco. These plant and reduction of transmission and distribu- figures show increasing interest in activities re- tion losses through upgraded transmission lines. lated to renewable energy and energy efficiency On the demand side, examples include a US$27 on the part of client countries and pave the way million IBRD commitment to a residential energy for strong operational and lending activities in efficiency project in Serbia (see Box 9). the coming years. Table 7: Number of Projects by Region, FY07 Region Energy efficiency Hydro > 10 MW New renewable energy Total AFR 5 3 4 12 EAP 3 3 8 14 ECA 5.5 1 2.5 9 LCR 4 1 9 14 MNA 0.5 1 1.5 3 SAR 3 1 7 11 Grand total 21 10 32 63 Note: Projects that contain both a new RE and an EE component have been divided and counted as 0.5 to avoid double count- ing. These projects include LCR’s Bertin Ltd., FYR Macedonia Sustainable Energy, Peru BBVA Banco Continental, and Morocco’s Energy Sector Development Policy Loan. Source: WBG databases. 40 Energy Sector Management ports both regional activities that provide better Assistance Program service to individual developing countries, and cutting-edge research and global projects. The Energy Sector Management Assis- tance Program (ES- MAP), is a multidonor trust-funded global tech- Box 8: Wind Umbrella Project, nical assistance program that has reached its 25th Mexico anniversary. This program provides policy advice This Carbon Finance project aims at promot- on sustainable energy development to govern- ing investments in wind energy to reduce ments of developing countries and economies in greenhouse gas emissions, to contribute to transition. ESMAP promotes the role of energy the further development of the international carbon market in Mexico through the supply in poverty reduction and economic growth in an of Emissions Reductions under the Clean De- environmentally responsible manner to achieve velopment Mechanism and to improve energy the Millennium Development Goals. security. The project is the first large-scale investment in wind energy in the country and is expected to reduce about 4 million tCO2e ESMAP helps build consensus on energy poli- over a 20-year operating period and produce cies, develops innovative energy solutions, and an equivalent amount of emissions reduc- tions for sale. At the same time, the project facilitates the leveraging of incremental financ- is expected to facilitate the development of ing among both public and private development other wind projects in Mexico through its partners. ESMAP offers support to the WBG in demonstration effect and by building capacity, knowledge, and experience in the develop- four thematic areas, Energy Security and Energy ment, operation, and maintenance of wind Efficiency, Renewable Energy, Energy Poverty, energy generation facilities. and Market Efficiency and Governance. It sup- Figure 11: World Map with Distribution of Renewable Energy and Energy Efficiency Projects 41 analysis of different existing green electricity Box 9: Improving Residential schemes worldwide, and Considering Trade Poli- Energy Efficiency in Serbia cies for Liquid Biofuels, an international analysis of the interaction between national biofuels poli- The principal aim of the project is to provide cies, agricultural policies, and trade policies and additional financing to expand an existing their effect on international markets of biofuels demand-side energy efficiency project in the Republic of Serbia that aims at reducing the and other agricultural products. Moreover, Risk rate of electricity use in buildings. Especially Assessment Methods for Power Utility Planning for heating, electricity consumption in the analyzes the methods currently used for plan- Serbian residential sector is very large, which leads to high heating costs, unsustainable ning power generation technology portfolios. It electricity demand, and avoidable greenhouse concludes that most current planning methods gas emissions. To alleviate these problems, the project aims at improving energy ef- are inadequate for comparing fuel-intensive ficiency in three social care buildings, eight thermal generation technologies with free-fuel schools, and six hospitals that were left out of capital intensive renewables, such as hydro, the original project because of a cost overrun. Moreover, it expands the scope of the original wind, and geothermal because of difficulties project to include the rehabilitation of the heat in handling fuel price risk systematically. ES- supply system of the Nis Clinical Center, other MAP and the World Bank are now working on demand-side efficiency improvements at the University of Kragujevac, 20 schools, 7 social incorporating these lessons into new activities care buildings (such as orphanages), and 11 and developing more appropriate planning hospitals across Serbia. methods. ESMAP supports collaboration across the energy Box 10: Shanghai: Developing a sector and shares ideas, good practices, and Green Electricity Scheme project experiences across regions. ESMAP has established an Energy Efficiency Thematic Group Upon the request of the City of Shanghai, (EETG) and a Renewable Energy Thematic Group China, in 2003, the World Bank—supported (RETG) within the World Bank. In July 2007, the by grants from ESMAP and ASTAE—launched a project to help the city in designing and in- EETG sponsored a joint roundtable in Tokyo with troducing a practical green electricity scheme. the World Bank and the Government of Japan on The scheme allows consumers to purchase, on market opportunities and best practices in the a voluntary basis, part or all of their electric- ity from renewable energy resources, such as area of energy efficiency policies and investments. wind and solar, thereby contributing to making The RETG held its first meeting in June 2007, fo- the city’s electricity portfolio more sustainable and reducing local air pollution. At its launch cusing discussions on “deep green” RE scenarios in 2005, the project enlisted 14 large electric- and the global wind power outlook. ity-consuming companies to commit to buying a total of 6.54 GWh of renewable electricity branded as “Jade Electricity” annually. With this In 2006, ESMAP’s energy efficiency portfolio critical mass of demand ensured, the scheme comprised 23 projects for a total commitment was subsequently able to attract additional cus- of US$3.8 million while renewable energy tomers, including businesses of varying sizes and households. It is believed that the success comprised 15 projects and US$2.2 million of of this project can be replicated in other cities commitments. in developing countries. A more detailed de- scription of the scheme and the lessons derived from it can be found in the report Shanghai: In fiscal 2007, ESMAP supported a variety of Developing a Green Electricity Scheme (ESMAP studies, including Shanghai: Developing a Green technical paper 105/06). Electricity Scheme (see Box 10), a survey and 42 Figure 12: Sectoral Commitments by Region, FY07 Energy E ciency: US$262 Million AFR US$79 million EAP US$24 million As in FY06, the ECA region continued to ECA receive the highest energy e ciency US$97 million commitments in FY07—US$97 million. AFR performed similarly well with US$79 LCR million. The majority of projects improved US$24 million energy e ciency in the power transmis- sion and distribution sector, followed by MNA US$16 million industry and demand-side approaches in the residential and commercial sectors. SAR US$21 million Renewable Energy—Hydropower> 10 MW: 751 Million Large hydropower projects were AFR supported with US$751 million in FY07. US$636 million The majority of these projects, valued at US$636 million, were in AFR. Both EAP IBRD/IDA and IFC only classify projects as US$26 million large hydropower if the installed capacity ECA at a single facility exceeds 10 MW. US$7 million Pumped storage, run-of-river hydropower, and hydropower projects with dams are LCR included here as well, as long as the US$10 million capacity exceeds 10 MW. Hydropower rehabilitation projects, which do not result MNA in a greater increase of capacity installed US$40 million (that is, MW), are classi ed as energy e ciency projects. SAR US$32 million Renewable Energy—New Renewables: US$421 Million AFR US$20 million EAP US$93 million SAR made the largest contribution to the new renewable energy portfolio, ECA accounting for US$131 in commitments. US$12 million LCR and EAP followed with commitments of US$100 million and US$93 million, LCR respectively. Solar thermal, geothermal, US$100 million wind, and biomass power projects received the bulk of these commitments. MNA US$65 million SAR US$131 million 41 43 Asia Alternative Energy Program • Scale up impact of renewable energy and energy efficiency through programmatic approaches. The Asia Alternative Energy To make a measurable impact on reducing Program (ASTAE) grew out of greenhouse gas emissions and providing the Financing Energy Services increased access to modern energy, more and for Small-Scale Energy Users larger projects are required. This will require (FINESSE) project initiated by a shift from working on stand-alone projects ESMAP and bilateral donors in to working strategically on multiple projects 1989. Following a joint request on a programmatic basis. The projects will from Asian borrowers and donor partners, the not be ends in themselves, as in the past, Bank acted to implement the FINESSE recom- but will be seen as vehicles to build capacity mendations by creating ASTAE in January 1992. and provide the momentum for policy and The original objective of ASTAE—to mainstream institutional change and the creation of an energy efficiency and renewable energy in World enabling environment for scale-up. Bank operations—was achieved. The initial target • Strengthen the enabling environment. Large- of a 10 percent share of renewable energy and scale renewable energy and energy effi- energy efficiency lending in the Asia energy sector ciency development requires that countries was surpassed during FY97–00. With the support establish an institutional, policy, financial of ASTAE, more than US$1 billion of renewable and regulatory framework that helps at- energy and energy efficiency projects or project tract capital from international financial components were developed, including about institutions, export credit agencies and, most US$500 million in World Bank loans and GEF importantly, the domestic and international grants. The projects supported by ASTAE and ap- private sector. ASTAE will use its cross-coun- proved between FY93 and FY02 provided access try experiences to share best practices. to 660,000 households, installed 570 MW of renew- • Develop project pipeline. ASTAE will continue able electricity-generating capacity, and avoided to support new project development us- 720 MW of conventional electricity-generating ing the programmatic approach. The new capacity as a result of efficiency improvements. projects will include both grid-connected and off-grid renewable energy applications, Since then, ASTAE has embarked on a more as well as market-based energy efficiency ambitious strategy to scale up renewable en- projects. ASTAE will continue its work in ergy and energy efficiency to make a direct and meeting energy needs in the agriculture, immediate impact on the World Bank’s overall health, rural, and urban sectors. mission of poverty alleviation and growing em- phasis on environmental protection in the two The ASTAE work is supported by the World regions—South Asia, and East Asia and Pacific. Bank, Government of the Netherlands, Canadian ASTAE’s work plan focuses on the following International Development Agency, United Na- key components: tions Development Programme, and U.K. De- partment for International Development. Other • Support successful implementation. ASTAE will sponsors have included the U.S. Department of continue to provide support for the projects Energy, U.S. Agency for International Develop- currently under implementation. In the past, ment, Government of Finland, Government of ASTAE assistance has been extremely valu- the Swiss Confederation, European Community, able in helping to redesign projects to adapt U.S. Export Council for Renewable Energy (US/ to shifting conditions. ECRE), German Federal Ministry for Economic 44 Figure 13: Number of AAA Products with Renewable Energy and of climate change has led to calls from govern- Energy E ciency Focus, FY00–07 ments, the private sector, and the public for the 25 WBG to adopt a more comprehensive approach Technical Assistance beyond the CEIF. This approach would address Economic and sector 20 work climate change not only as a risk to development, but also as an opportunity for Bank clients to 15 accelerate their economic transformation and take advantage of new technologies. The WBG 10 would expand its role in supporting meaningful, country-specific, and country-driven climate ac- tions, focusing on the highest development and 5 climate impacts. Broadening the WBG strategy would mean including the following elements: 0 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 (a) a comprehensive approach to climate change, Source: WBG databases. extending beyond clean energy and addressing sectors such as transport, agriculture, forests, Cooperation, and the Royal Danish Ministry of and urban development; (b) a stepped-up pro- Foreign Affairs. gram in policy research and knowledge sharing; (c) an enhanced role in the acceleration of new The Way Forward technology; and (d) an increased engagement in climate risk management.17 Renewable energy Broad consensus is now emerging that the and energy efficiency will contribute signifi- world needs to address the dual challenges of cantly to this enhanced strategy. increasing energy supply and services that are critical for economic growth for all developing countries and moderating and managing climate 17 World Bank Sustainable Development Network, “Clean Energy for Development Investment Framework: Progress change. The World Bank Group launched the Report on the World Bank Group Action Plan.” Report to the CEIF in 2006 to address these challenges. The Development Committee, World Bank, Washington, D.C., growing recognition of the enormous challenge September 27, 2007, p. 5. 45 Case Six Creating a Framework for Renewable Energy and Energy Efficiency in Morocco Morocco is 95 percent dependent on imported This process helped the government prepare a fossil fuels. This has focused the attention of the comprehensive legal framework for energy man- government on the need to ensure energy supply agement. The framework eventually took the form security and absorb energy price shocks. Morocco of a single law on energy efficiency and renewable is well endowed with renewable energy resources, energy that will be used to prepare additional nec- and has a substantial potential for energy efficiency essary regulations to promote investments. The law improvements. Since 2005 the government has sets up goals, such as 1,000 MW of additional wind- been actively engaged in an energy sector dialogue electricity generation capacity by 2012, mandatory with the World Bank in order to prepare an energy energy efficiency audits, and the preparation of im- sector development policy loan. ESMAP, the trust- proved sectoral energy efficiency standards. The law funded World Bank Energy Sector Management also establishes an energy management agency. Assistance Program, provided support to this dia- The agency will be charged with promoting energy logue. ESMAP is now catalyzing activities for energy efficiency and supporting small renewable energy efficiency and renewable energy in Morocco by technologies for households and businesses. giving assistance to formulate policies and regula- tions. The projects have provided a legal framework The law also launches two special funds. One fund for energy efficiency and renewable energy in will pool donor financing to support private sector Morocco, including special financing mechanisms. investment in large wind and power generation ca- They have also created a new energy management pacity. Another fund will support energy efficiency agency focused on the following: investments. In 2007 ESMAP supports additional work to prepare the business plans and to design • Increasing the role of renewable energy in the organization of the new energy management Morocco with the objective of generating 20 agency and the funds. percent of electricity from domestic renewable energy sources by 2015. • Promoting more efficient utilization of energy in industry and public buildings and for residential use. • Reducing greenhouse gas emissions by 10 per- cent by 2015. In 2006, ESMAP-supported projects focused on building consensus among stakeholders on goals and measures that will promote wind electricity and energy efficiency. These projects supported working groups within the government that were able to draw on lessons learned from previous ef- forts in Morocco and best practices from elsewhere. 46 Annex 1: Institutional Support for Renewable Energy and Energy Efficiency This annex describes the various WBG institutions financing to the world’s 80 poorest countries (home and units and the role that each plays in contribut- to 2.5 billion people). IDA’s interest-free credits and ing to renewable energy and energy efficiency. It also grants are vital because these countries have little or provides definitions of renewable energy and energy no capacity to borrow on market terms (http://www. efficiency. Last, it discusses the methodology used to worldbank.org/ida). compute the data in this report. The IFC Roles of the Institutions The IFC’s (International Finance Corporation’s) The World Bank Group mandate is to further economic development through the private sector. Working with business partners, In this report, the WBG refers to four closely associ- it invests in private enterprises in developing coun- ated World Bank institutions that directly support tries and provides long-term loans, guarantees, and renewable energy and energy efficiency activities.18 risk management and advisory services to its clients The four institutions are the IBRD, IDA, the IFC, and (http://www.ifc.org). MIGA. There are six operational regions under the IBRD and IDA. The report disaggregates the com- MIGA mitments made by these regions and institutions. In addition, the WBG is an implementing agency for the MIGA (Multilateral Investment Guarantee Agency) GEF. This report provides information on WBG-ad- provides political risk insurance against noncommer- ministered GEF projects. The WBG’s Carbon Finance cial risks to eligible foreign investors and commercial Business (CFB-IBRD) is reported separately because banks for qualified investments in developing mem- it is a unique business line that purchases emissions ber countries (http://www.miga.org). reductions and does not directly invest in projects. Carbon Finance The IBRD Both the IBRD and the IFC have Carbon Finance Units The IBRD (International Bank for Reconstruction (CFUs) that leverage public and private investment and Development) aims to reduce poverty in mid- for projects that generate greenhouse gas emission dle-income and creditworthy poorer countries by reductions. This helps to grow the market by extend- promoting sustainable development through loans ing carbon finance to both developing and transition and guarantees and, in the nonlending area, AAAs economies. The funds are provided by private compa- (http://www.worldbank.org/ibrd). nies and governments seeking to purchase emission IDA 18 There is also a fifth institution that is a part of the World Contributions to IDA (International Development As- Bank Group: the International Centre for Settlement of Investment Disputes (ICSID). Because this institution does sociation) enable the World Bank to provide approxi- not directly support any RE or EE activities, for this annual mately US$6–9 billion a year in highly concessional report, World Bank Group precludes ICSID. 47 reductions to learn how to originate transactions in energy and energy efficiency investments (http:// this complex emerging market. The Carbon Finance www.thegef.org). Business (CFB-IBRD) is divided into separate business lines—the IBRD CFU ( ) and the IFC CFU (http:// Definitions www.ifc.org/carbonfinance). Following are the definitions used for reporting on ESMAP the WBG’s activities. Commitment amounts used in the report were prorated to include only those project ESMAP (Energy Sector Management Assistance components that clearly fall into one of the following Program) is a global technical assistance program categories. and knowledge partnership sponsored by a group of donors, including Canada, Denmark, Finland, New Renewable Energy Germany, the Netherlands, Norway, Sweden, the United Kingdom, the United Nations Foundation, the Projects that had at least one of the following were United Nations Development Programme, and the considered projects with a new renewable energy World Bank. ESMAP is managed by the World Bank component: solar energy for heat and power, wind (http://www.worldbank.org/esmap). energy for mechanical and electrical power gen- eration, geothermal and biomass energy for power ASTAE generation and heat, and hydropower of 10 MW or less per installation. In 1992, the World Bank and donor partners estab- lished ASTAE (Asia Alternative Energy Program) to Energy Efficiency support the transition to environmentally sustainable energy use in developing countries in Asia. ASTAE Energy efficiency comprises end-use thermal and supports upstream economic and sector work, much electricity efficiency activities (for example, industry, like ESMAP, and it also provides assistance in renew- transport, buildings, and appliances), power sector able energy and energy efficiency project identifica- rehabilitation, loss reduction in transmission and tion, preparation, and supervision (http://www. distribution, and improvements in the efficiency of worldbank.org/astae/). district heating systems. Hydropower rehabilitation projects, which do not result in increased capac- The GEF ity (MW), are also classified as energy efficiency. However, this report does not include loss reduction The Global Environment Facility (GEF), established due to rehabilitation of transmission or distribution in 1991, helps developing countries fund projects networks if the share of transmission and distribution and programs that protect the global environment. investments cannot be clearly disaggregated from GEF grants support projects related to biodiversity, other objectives, such as network expansion and load climate change, international waters, land deg- increase. Neither does it include Development Policy radation, the ozone layer, and persistent organic Loan commitments unless the share attributable to pollutants. efficiency can be clearly determined. GEF is an independent financial organization that Hydropower Greater Than 10 MW provides grants to developing countries for projects that benefit the global environment and promote The World Bank considers hydropower, regardless sustainable livelihoods in local communities. The GEF of scale, to be renewable energy. However, for re- is the WBG’s largest partner in the area of renewable porting purposes, hydropower projects in which the 48 installed capacity at a single facility exceeds 10 MW the cumulative total for the WBG. Only those proj- are reported separately. Pumped storage, run-of-river ect components that could clearly be attributed to hydropower, and hydropower projects with dams are a renewable energy and energy efficiency category included here if the capacity exceeds 10 MW. were counted. The WBG supports projects that may be cross-sectoral The IFC in nature. For example, renewable energy and energy efficiency components may be embedded within an The report shows IFC (International Finance Cor- agricultural, health, or power project. In such blended poration) net investments from its own account for projects, sometimes it is not easy to specify precisely renewable energy and energy efficiency investment. what the size of each sectoral component is. In this Previous IFC assessments referred only to stand- report, as far as possible, great care has been taken to alone projects whose sole focus was energy efficiency show only the commitment amount associated with or renewable energy, thus missing the full scope of new renewables, energy efficiency, or hydropower investment in sustainable energy undertaken as a greater than10 MW. For example, in a particular component of larger investments in various sectors. project, the total commitment made by the IBRD and The IFC has since revised its methodology so that IDA may be US$100 million. This project may have it now identifies renewable energy and energy ef- three different sectoral components: agro-industry, 50 ficiency investments in commitments it has made percent; health, 30 percent; and new renewables, 20 in other sectors, such as agriculture, water supply, percent. In such a case, only US$20 million has been industry, and transport, and in corporate loans to included as the project’s contribution to renewable financial intermediaries. The new methodology as- energy. sesses the percentage of IFC investment in proportion to the full project cost and applies that proportion to Different Reporting Styles the full renewable energy or energy efficiency project value. This methodology has been used to update The various World Bank institutions have differing the IFC’s fiscal 2005 renewable energy and energy styles of reporting their data because of their differ- efficiency commitment amounts. For more details, ent kinds of business. For example, MIGA provides see “Choices Matter: 2005 Sustainability Report” at guarantees to projects against various kinds of risks, www.ifc.org/SustainabilityReport. whereas the IBRD and IDA provide project finance and guarantees. Emissions reductions purchases by MIGA carbon finance are a revenue stream. The IFC provides both equity and loan financing, as well as guarantees. MIGA (Multilateral Investment Guarantee Agency) For the purposes of this report and to arrive at an normally reports the maximum liability of its guar- estimate of the WBG’s total commitments toward antee and the foreign direct investment that the renewable energy and energy efficiency, we have guarantee leveraged. For the purposes of arriving added commitments made by each WBG institution. at a cumulative total for the WBG, this report added The following distinctions should be kept in mind together only the MIGA maximum liability. when reading this report. Carbon Finance IBRD and IDA For purposes of this report, to compare carbon asset For IBRD- and IDA-assisted projects, commitment purchases and regular project financing, this report amounts toward renewable energy, energy efficiency, considered signed Emission Reductions Purchase or both for each project have been used to estimate Agreements to be the appropriate measure and added 49 those amounts to arrive at the total commitment—that The GEF is, the Carbon Finance Business’ (CFB-IBRD’s) equiva- lent of Board approval for World Bank loans. For approved GEF (Global Environment Facility) projects, this report uses the commitment amounts for each project. 50 Annex 2: Annual Renewable Energy and Energy Efficiency Portfolio Review Annual Table 1: WBG Renewable Energy and Energy Efficiency Commitments (US$ millions) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total New Renewables 53 2 56 227 300 59 47 336 15 239 444 26 169 105 192 218 221 421 3,129 Energy Efficiency 0 265 54 10 59 148 380 56 356 26 295 193 67 168 67 243 447 262 3,094 Hydropower (>10 MW) 0 150 161 938 186 317 819 15 461 0 320 0 181 237 81 447 192 751 5,253 Grand total 53 417 271 1,174 545 524 1,245 407 832 264 1,059 219 416 510 339 908 860 1,433 11,476 Annual Table 2: WBG Renewable Energy and Energy Efficiency Commitments (US$ millions) by Institution or Unit 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total GEF 0 0 3 36 56 35 10 78 28 56 111 14 37 70 83 100 48 128 892 GEF-IFC/TF 0 0 0 0 0 0 37 33 30 5 0 19 0 14 8 20 0 165 IBRD Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 2 8 10 48 23 14 144 249 IBRD/IDA 53 392 196 1,113 303 452 1,108 146 534 137 691 197 340 290 194 445 370 549 7,508 IFC 0 25 72 26 186 7 36 135 206 15 1 6 13 135 0 221 393 450 1,925 IFC Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 21 13 7 34 MIGA 0 0 0 0 0 30 35 15 65 26 252 0 0 5 0 91 2 155 675 Special Financing 0 0 0 0 0 0 20 0 0 0 0 0 0 0 0 0 0 0 20 Total commitment 53 417 271 1,174 545 524 1,245 407 832 264 1,059 219 416 510 339 908 860 1,433 11,476 Annual Table 3: WBG New Renewables Commitments (US$ millions) by Institution or Unit 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total GEF 0 0 3 26 30 10 7 39 6 56 66 9 36 16 62 47 47 121 580 GEF-IFC/TF 0 0 0 0 0 0 30 30 0 14 0 0 0 0 14 1 0 0 89 IBRD Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 2 4 10 19 4 8 68 115 IBRD/IDA 53 2 20 201 270 19 8 132 10 128 127 9 128 64 97 139 136 70 1,610 IFC 0 0 33 0 0 0 0 135 0 15 0 6 1 15 0 18 17 154 393 IFC Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 13 7 23 MIGA 0 0 0 0 0 30 2 0 0 26 252 0 0 0 0 0 0 0 311 Total commitment 53 2 56 227 300 59 47 336 15 239 444 26 169 105 192 218 221 421 3,129 Annual Table 4: WBG Energy Efficiency Commitments (US$ millions) by Institution or Unit 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total GEF 0 0 10 26 25 3 39 22 1 45 5 1 54 22 53 1 7 312 GEF-IFC/TF 0 0 0 0 0 7 3 0 16 5 0 19 0 0 7 20 0 76 IBRD Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 0 0 13 4 0 10 28 IBRD/IDA 265 54 0 33 123 350 14 328 9 244 188 35 34 32 23 115 49 1,897 (continuous from previous section) IFC 0 0 0 0 0 0 0 6 1 12 75 0 156 309 156 715 IFC Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 MIGA 0 0 0 0 0 0 0 0 0 0 0 0 5 0 0 1.8 39.6 7 Special Financing 0 0 0 0 0 20 0 0 0 0 0 0 0 0 0 0 0 20 Total commitment 265 54 10 59 148 380 56 356 26 295 193 67 168 67 243 447 262 3,094 Annual Table 5: WBG Hydropower (> 10 MW) Commitments (US$ millions) by Institution or Unit 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total IBRD Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 4 0 15 15 6 66 106 IBRD/IDA 125 122 912 0 310 750 0 196 0 320 0 177 192 66 283 119 430 4,001 IFC 25 39 26 186 7 36 0 200 0 0 0 0 45 0 47 67 140 817 IFC Carbon Finance 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 0 11 MIGA 0 0 0 0 0 33 15 65 0 0 0 0 0 0 91 0 115 203 Total commitment 150 161 938 186 317 819 15 461 — 320 — 181 237 81 447 192 751 5,253 Annual Table 6: WBG Renewable Energy and Energy Efficiency Commitments (US$ millions) by Region 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total AFR 0 127 73 203 0 3 12 30 201 7 124 0 78 32 46 101 126 735 1,898 EAP 51 0 121 410 310 367 400 145 123 139 513 8 124 177 47 368 232 143 3,676 ECA 0 290 0 0 33 140 381 14 238 15 68 186 75 139 147 260 313 117 2,416 LCR 2 75 340 199 10 2 41 186 79 219 6 30 78 30 92 141 133 1,664 MNA 0 0 0 0 2 4 0 0 0 0 0 0 0 0 40 9 11 121 188 OTH 0 0 0 0 0 0 32 148 0 25 0 12 1 0 13 0 1 0 232 SAR 0 0 2 222 0 0 419 29 85 0 135 7 108 85 15 77 35 183 1,402 Grand total 53 417 271 1,174 545 524 1,245 407 832 264 1,059 219 416 510 339 908 860 1,433 11,476 Annual Table 7: WBG New Renewables Commitments (US$ millions) by Region 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total AFR 0 2 18 3 0 3 8 30 5 6 124 0 16 32 46 46 19 20 377 EAP 51 0 0 0 300 49 0 112 2 139 0 3 18 0 37 129 103 93 1,035 ECA 0 0 0 0 0 0 7 0 9 6 6 2 0 0 56 10 11 12 119 LCR 2 0 37 2 0 3 2 20 0 78 204 6 26 35 0 15 56 100 586 (continuous from previous section) MNA 0 0 0 0 0 4 0 0 0 0 0 0 0 0 40 1 5 65 115 OTH 0 0 0 0 0 0 30 145 0 10 0 12 1 0 13 0 0 0 212 SAR 0 0 2 222 0 0 0 29 0 0 110 2 108 38 0 17 27 131 685 Grand total 53 2 56 227 300 59 47 336 15 239 444 26 169 105 192 218 221 421 3,129 Annual Table 8: WBG Energy Efficiency Commitments (US$ millions) by Region 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total AFR 0 0 0 0 0 4 0 1 1 0 0 0 0 0 4 30 79 40 EAP 0 54 10 10 8 0 33 121 0 193 5 1 32 11 77 72 24 648 ECA 265 0 0 33 140 374 14 229 9 62 183 65 131 41 79 292 97 2,015 LCR 0 0 0 14 0 0 6 0 1 15 0 0 6 15 61 38 24 180 MNA 0 0 0 2 0 0 0 0 0 0 0 0 0 0 9 6 16 17 OTH 0 0 0 0 0 2 3 0 15 0 0 0 0 0 0 1 0 20 SAR 0 0 0 0 0 0 0 6 0 25 5 1 0 0 13 8 21 79 Grand total 265 54 10 59 148 380 56 356 26 295 193 67 168 67 243 447 262 3,094 Annual Table 9: WBG Hydropower (> 10 MW) Commitments (US$ millions) by Region 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Grand total AFR 125 55 200 0 0 0 0 196 0 0 0 62 0 0 51 77 636 1,402 EAP 0 67 400 0 310 400 0 0 0 320 0 105 145 0 163 57 26 1,993 ECA 25 0 0 0 0 0 0 0 0 0 0 10 8 51 170 11 7 282 LCR 0 39 338 186 7 0 15 186 0 0 0 4 37 15 16 47 10 898 MNA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40 40 SAR 0 0 0 0 0 419 0 79 0 0 0 0 47 15 47 0 32 638 Grand total 150 161 938 186 317 819 15 461 - 320 - 181 237 81 447 192 751 5,253 Annex 3: FY07 Renewable Energy and Energy Efficiency Projects (millions of U.S. dollars) No. Country Project name Energy type Financing RE or EE sources component financing Africa Region 1 Congo/Africa Regional & Domestic Power Market Development Project Hydro > 10 MW IDA 272.97 2 Ghana Urban Transport Project EE (urban transport) GEF 7.00 3 Kenya Olkaria II Geothermal Expansion Project Geothermal Carbon Finance 8.70 4 Madagascar Power/Water Sector Recovery and Restructuring Project Small hydro IDA 3.00 5 Nigeria Aba Cogeneration Project EE (Cogeneration) Carbon Finance 9.00 6 Senegal Felou Hydro Project Hydro > 10 MW Carbon Finance 3.11 7 Senegal Vicat-SOCOCIM EE IFC 17.53 8 South Africa Renewable Energy Market Transformation Project Biomass, solar, small-scale GEF 6.00 hydro 9 Uganda Private Power Generation (Bujagali) Project Hydro > 10 MW MIGA 115.00 IFC 130.00 IDA Guarantees 115.00 10 Uganda Power Sector Development Project EE IDA 6.00 11 Uganda Umeme Limited (Globeleq ConCo) EE (Transmission & MIGA 39.60 Distribution) 12 Uganda West Nile Electrification Project Solar PV and other new Carbon Finance 2.55 renewables East Asia and Pacific Region 13 China Bank of Beijing (CHUEE) EE IFC 18.00 14 China CDCF Hubei Guangrun Hydropower Project Hydro > 10 MW Carbon Finance 4.61 15 China Huitengxile Wind Farm Wind Carbon Finance 15.20 16 China Tianjin Shuangko Waste energy Carbon Finance 1.16 17 China Tinarui Cement EE IFC 1.97 18 China Yunnan Hydropower Project Hydro > 10 MW Carbon Finance 19.25 19 Lao PDR GMS Power Trade Project Hydro > 10 MW IDA 2.10 20 Mongolia Renewable Energy for Rural Access Project Solar PV, wind GEF 3.50 21 Mongolia Renewable Energy for Rural Access Project Solar Home Systems, wind, IDA 3.15 renewable-diesel hybrid system 22 Pacific Islands Sustainable Energy Finance Project Solar PV, pico-hydro and GEF 9.48 bio-diesel 23 Philippines MWC III EE IFC 4.39 24 Philippines Northern Negros Geothermal Power Project Geothermal Carbon Finance 9.36 25 Philippines PNOC-EDC Geothermal IFC 49.30 26 Timor-Leste Energy Services Delivery Project RE, including wind IDA 1.63 (continuous from previous section) Europe and Central Asia Region 27 Europe and GeoFund 1 Geothermal GEF 4.53 Central Asia 28 Bosnia EKI EE IFC 0.77 29 Macedonia, Sustainable Energy Project New renewables, including GEF 5.00 Former Yugoslav solar, hydro, biomass, EE Republic 30 Poland Puck Wind Farm Project Wind Carbon Finance 2.44 31 Russian MDM Bank EE IFC 50.00 Federation 32 Serbia Energy Efficiency Additional Financing Project EE IBRD 27.16 33 Serbia Pro-Credit Serbia EE IFC 19.10 34 Ukraine Hydropower Rehabilitation – Proto Carbon Finance Project Hydro > 10 MW Carbon Finance 7.15 35 Ukraine Sandora II EE IFC 0.40 Latin America & Caribbean Region 36 Brazil Bauducco EE IFC 1.08 37 Brazil Bertin LTD EE IFC 1.62 Cattle waste fat bio-diesel IFC 1.62 38 Brazil Lages Cogen Facility Biomass Cogeneration Carbon Finance 7.50 39 Brazil Vale do Parana Bagasse Cogeneration IFC 5.95 40 Chile Hidromaule 20 MW IFC 9.70 41 Colombia Furatena Energy Efficiency Project EE Carbon Finance 0.66 42 Mexico CFE Wind Farm Project Wind Carbon Finance 1.22 43 Mexico Hybrid Solar Thermal Integrated Cycle Project Solar Thermal GEF 49.35 44 Mexico Umbrella Waste Management Project Waste energy Carbon Finance 1.56 45 Mexico Wind Umbrella Project Wind Carbon Finance 16.73 46 Nicaragua Nicaragua Sugar Bagasse cogeneration IFC 3.25 47 Peru BBVA Continental New renewable energy IFC 8.40 credit-line to bank EE IFC 19.60 48 Peru Laredo Expansion EE IFC 0.84 49 Uruguay Orion Pulp and paper biomass IFC 4.20 cogeneration Middle East and North Africa Region 50 Iraq Dokan & Derbankdikhan Emergency Hydropower Project Hydro > 10 MW IDA 40.00 51 Morocco Integrated Solar Combined Cycle Power Project Solar Thermal GEF 43.20 52 Morocco Energy Sector Development Policy Loan Solar, wind IBRD 22.00 EE IBRD 16.00 56 (continuous from previous section) South Asia Region 53 India Allain Duhangan Hydro Project Hydro > 10 MW Carbon Finance 31.73 54 India Balrampur II Biomass cogeneration IFC 10.40 55 India BHSL Biomass cogeneration + IFC 15.30 ethanol 56 India CCIL II EE IFC 3.91 57 India CF IHDC Small hydro IFC-Carbon 7.40 58 India Electrotherm EE IFC 2.60 59 India Moser Baer Photovoltaic Ltd. (MBPV) Export-oriented solar PV IFC 22.50 manufacturing plant investment with 80 MW p.a. production capacity 60 India MSPL Two wind projects of 37 MW IFC 33.00 61 India West Coast Paper EE IFC 14.60 62 Nepal Nepal Village Micro Hydro Carbon Offset Project Micro-hydro Carbon Finance 1.96 63 Sri Lanka Technical Assistance to the Ministry of Public Works Small hydro, solar home systems, bio-energy IDA 40.00 Notes: RE stands for renewable energy, and EE stands for energy efficiency. In the absence of a precise methodology, the IFC assesses the percentage of IFC investment in proportion to the full project cost and applies that proportion to the full RE/EE project value. For more details, see “Choices Matter: 2005 Sustainability Report” at www.ifc.org/SustainabilityRe- port/. Fuel cells are categorized as RE by IFC regardless of whether the energy resource used to generating the hydrogen has been a fossil fuel or renewable energy resource. For the World Bank and for this report, fuel cells are only filed as renewable energy of the energy resource used to generating hydrogen is a renewable energy resource. Hydropower rehabilitation projects, which do not result in greater output, are classified as EE by the WBG. 57 This publication is printed on recycled paper. November 2007. The World Bank Group 1818 H Street, NW Washington, DC 20433 www.worldbank.org www.ifc.org www.miga.org THE WORLD BANK