Jamal Saghir Director Energy, Transport and Water The World Bank The World Bank Group February 2010...

World Bank Group Towards a New Energy Strategy

Jamal SaghirDirector

Energy, Transport and WaterThe World Bank

The World Bank Group

February 2010

The World Bank Group

About This Consultative Meeting The World Bank Group is preparing a

new energy strategy and seeking input on its approach to the Bank Group’s assistance for energy development.

As a basis for discussion, the Energy Strategy Approach Paper, available online, outlines the proposed approach.

Input from consultation meetings and from people who comment via the Web site will be documented and used as an input to the team as it formulates the strategy.

SEEKING YOUR INPUT

World Bank Group Energy Strategy Consultations

How your feedback will be reported, used

SEEKING YOUR INPUT


•We will prepare a summary of the comments received today and post it on the web within 10 days of this meeting.

•We will then share a summary and accept additional written comments.

•By the end of July, we will prepare a summary of all of the feedback received during the consultation process with a response by the World Bank Group on how it is being considered.

Timeline for Development of Strategy

Oct Feb-Jun

Jul-Sept

Nov–Dec

Energy Strategy

Approach Paper

available on-line

First RoundConsultations• web-based•face-to-face

Feb or March

Drafting of Strategy

Second Round

Consultations•Web-based

Board of Executive Directors

TOWARDS A NEW ENERGY STRATEGY


Structure of the Presentation Context and challenges World Bank’s role in the

energy sector Lessons learned Objectives Proposed areas of

engagement

SEEKING YOUR INPUT


The world still has 1.5 billion people without access to electricity.

Nearly 2.5 billion continue to use traditional biomass fuels for cooking and heating.

Electricity shortages in many developing countries are growing in frequency and intensity, limiting economic development and poverty reduction efforts.

Energy Access and Energy Poverty

CHALLENGES


Without modern energy, factories and businesses – large and small – cannot function efficiently; hospitals and schools cannot operate fully or safely; basic services that people in rich countries take for granted cannot be offered.

According to the UN Millennium Project, there is a close relationship between energy and achievement of MDGs:

“Modern energy services help reduce poverty (MDG 1) and can play a critical role in improving educational opportunities for children, empowering women and promoting gender equality (MDG 2 and 3).

The availability of adequate clean energy is important in reducing child mortality (MDG 4).

Reducing the carrying of heavy loads of fuel wood improves maternal health (MDG 5). Inefficient combustion of fuel wood exacerbates respiratory illnesses and other diseases (MDG 6).

Fuel substitution and improved stove efficiencies would help alleviate the environmental damage of biomass use (MDG 7). Finally, widespread substitution of modern energy for traditional biomass can be a rallying point for global partnerships (MDG 8).”

Energy Access and Energy Poverty (cont.)


CHALLENGES

Africa has exceptionally low energy access… In Sub-Saharan Africa, the number of people without

access to electricity is projected to rise from 590 m. in 2008 to 700 m. in 2030.

Installed generation capacity extremely low At 39 MW per million population, about 1/10 levels in

other low-income regions Total in Sub-Saharan Africa: 70GW (30 GW, if S. Africa

is excluded) 112 GW in France, 120 GW in Germany 120 GW

Cost of electricity shortages in Sub-Saharan Africa is estimated at more than 2% of GDP

More than 30 countries face outages and load shedding In half of SSA, demand for power grew at ~4.5% in

2001–05, but generation capacity grew at only 1.2% Shocks such as volatile oil prices and conflict are also

contributing to the power crisis

Causes of Africa’s Power Supply Crisis


Main Cause or TriggerNatural Causes (Droughts)Oil Price ShockSystem Disrupted by ConflictHigh Growth, Low

Investment/Structural Issues

CHALLENGES

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Africa’s power sector faces large financing gap…

Africa power infrastructure has huge refurbishment and expansion needs 7GW of new generation capacity

needed each year 44.3GW out of 70GW needs to be

refurbished Distribution network needs to

expand to reach 6 million more people each year

Global economic crisis could reduce total power spending needs by at least 20%

Existing spending is just over a quarter of what is actually required Only $4.6 billion is for meeting long-

term investment needs China is a major financier Private sector finance is growing but

not sufficient to meet needs

0

5

10

15

20

25

30

35

40

45

Investment Requirement Current Investments

Annual Financing Gap of $30.9 billion

$ Billion


CHALLENGES

In a ‘business-as-usual’ scenario, energy -related carbon dioxide emissions will almost double by 2050

Meeting the energy needs of developing countries and arresting climate change will require global action and cooperation.

Energy-saving policies and energy with low lifecycle GHG emissions will be important for meeting future energy needs sustainably.

Climate Change


CHALLENGES

Managing Uncertainties The oil price fluctuations during

2004-08 demonstrated the importance of diversifying the energy portfolio, pursuing measures to conserve energy and improve energy efficiency, and being better prepared for high energy price volatility and possible future shocks.

The global financial crisis has also increased uncertainty in investments, while reducing available resources for development assistance and investment flows.


CHALLENGES

2004 – Bonn RE Conference (commitment of 20% annual increase between 2005 and 2009)

2005 – Clean Energy Investment Framework (CEIF) developed at G8’s request

Strategic Framework for Development and Climate Change (SFDCC) – 2008

2009 – Investment exceeds Bonn promise by over three times

New Energy Sector Strategy - 2011

Key InstrumentsProject Investments Development Policy LendingFinancial Intermediation Technical Assistance

(Climate Investment Funds)

Energy Sector Milestones

WORLD BANK GROUP’S ROLE IN ENERGY


Working in a Wide Range of Areas



World Bank Group Lending for Renewable Energy and Energy Efficiency, 1990-2009, including new renewable energy, energy efficiency, and hydropower greater than 10 megawatts

Increasing Lending for Renewable Energy and Energy Efficiency



An efficient, reliable, and low-cost energy sector is critical for equitable economic development

Sound operational and financial performance is essential

Improved capacity and governance are needed for better sector performance and ability to address climate change

For the very poor, the most important determinant of access to and use of modern energy is their cash income

Observations and Lessons Learned



Money alone will not bring changeGovernments must be market enablersPrivate sector engagement is necessary Increased coordination imperative to avoid duplication of

programsFinancial and economic viability is critically importantCapital investments must be linked with committing resources

and capacity building to ensure sustainability Innovation in technology, business model, and financing is

necessaryGood intentions alone are not sufficient

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Key Lessons Learned on Renewable Energy



Energy Access in Mali

PROGRAM CASE STUDY 1

Only 7% of Mali’s rural population has access to electricity.

WB Rural Access Project started in 2003 with support of GEF and Mali government ($44.4 m)

2350 solar home systems were installed in 40 communities

636 public institutions were powered by solar PV, including 40 schools and 48 health centers


Solar energy provides access to remote rural communities far away from the grid.

PROGRAM CASE STUDY 4

The World Bank is scaling up support for large-scale solar thermal and PV systems in a number of countries.

In Egypt and Morocco, WB is supporting demonstration projects on integrated solar combined cycle power generation (ISCC) technology.

WB is mainstreaming PV deployment for off-grid rural electrification (e.g. Carbon Finance project in Bangladesh deploying more than one million solar home systems)

Large-scale Solar Power


WB is developing a large-scale program in the Middle East and North Africa region for concentrating solar power technology using CTF and other instruments.

Improve access and reliability of energy supply

Facilitate shift to more environmentally sustainable energy sector development

The challenge is to balance the twin objectives of greater access and sustainability…

PROPOSED APPROACH


Policy and institutional reforms (market reforms aiming at improving the operational and financial performance of the sector, improving transparency, separating the roles of regulation and policy making, public and private roles, bringing accountability and introducing competition through restructuring utilities and markets, regulation)

Cross-border energy trade

Increased investment in hydropower projects, renewable energy, and energy efficiency

Transmission and distribution

Thermal generation in accordance with the criteria outlined in SFDCC

Development projects in extractive industries

Across All CountriesPROPOSED APPROACH


Expand supply capacity, enhance reliability, and increase access. Access to reliable modern energy services will remain the top priority.

Cross-border trade particularly important for small countries.

Hydropower with focus on integrated water resources management.

Low-Income, Fragile, Post-Conflict, and Middle-Income Countries with Low Access

PROPOSED AREAS OF ENGAGEMENT


Continue focus on areas with low access in middle-income countries

Improve affordability by increasing supply efficiency and passing efficiency gains to consumers

Explore all options: off-grid, cooperatives, pro-poor financing methods, affordable lifeline rates

Help build capacity to access financing to make low-carbon alternatives affordable, including working with local private sector

Low-Income, Fragile, Post-Conflict, and Middle-Income Countries with Low Access (cont.)



Help address local and emerging global challenges and increase support to innovation and transformation

Support commercial-scale renewable energy, supply-and demand-side energy efficiency, and emerging clean technologies and related infrastructure facilities

Help leverage climate finance, private sector financing, and other financing opportunities

Middle-Income Countries



Clean Technology Fund (CTF) ~ $5.2 b

Strategic Climate Fund ~ $1 b

— Scaling up RE in Low Income Countries

Jointly run by MDBs to provide grants and concessional financing to developing countries to address urgent CC challenges

Jointly run by MDBs to provide grants and concessional financing to developing countries to address urgent CC challenges

Carbon Finance Carbon Finance

10 Carbon Funds ~ $2.2 b (200 projects)

Carbon Partnership Facility (CPF)

SREP — Access Issues

FINANCIAL INSTRUMENTS

Climate Investment Funds


In partnership – with governments, bilateral and multilateral donors, private sector, civil society, and communities

Scaling Up - On average, leverage from WBG financed projects is 1:4 (each dollar mobilizes about $4 from other financiers)

Programmatic approach – combining investment, policy advice and technical assistance for maximum impact and coordination with other donors (e.g., Rwanda SWAP)

How We Work

PROPOSED APPROACH


In support of the poorest – our guidance supports pro-poor policies, including subsidies with high-targeting efficiency.

With the best technology for the job – the WBG’s projects are technology-neutral.

New clean technologies – provide technical assistance and policy/regulatory advice to facilitate their deployment. Mobilize financing (GEF, CF, CIFs).

How We Work (cont.)

PROPOSED APPROACH


1. Where do you think the help of the World Bank Group in the energy sector in developing countries is most needed?

2. Does the proposed approach adequately address the needs of the poor and marginalized? If not, how could it be strengthened?

3. Does the proposed approach strike the right balance between meeting the needs and priorities of low-income countries and those of middle-income countries?

Questions for Your Consideration

SEEKING YOUR INPUT


4. Where there are trade-offs between meeting the local energy needs of individual countries and reducing global greenhouse gas emissions, what principles should the World Bank Group follow in resolving the trade-offs?

5. What should be the role of the World Bank Group in promoting new technology and/or helping to transfer existing technologies to new markets, and how much weight should the Bank Group give to each?

6. What other suggestions or comments do you have?

Questions for Your Consideration (continued)

SEEKING YOUR INPUT


Visit the World Bank’s websiteto share your views,

stay updated, and get more information.

http://www.worldbank.org/energyconsultations

SEEKING YOUR INPUT


Thank you for participating.

Jamal Saghir Director Energy, Transport and Water The World Bank The World Bank Group February 2010...

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