a review of the world bank’s assistance · 2016. 6. 27. · study series 2004 annual review of...

A Review of the World Bank’sAssistanceA Review of the World Bank’sAssistance

THE WORLD BANK

THE WORLD BANK

New Renewable EnergyNew Renewable Energy

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Study Series2004 Annual Review of Development Effectiveness: The Bank’s Contributions to Poverty ReductionAddressing the Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs Agricultural Extension: The Kenya ExperienceAssisting Russia’s Transition: An Unprecedented ChallengeBangladesh: Progress Through PartnershipBrazil: Forging a Strategic Partnership for Results—An OED Evaluation of World Bank AssistanceBridging Troubled Waters: Assessing the World Bank Water Resources StrategyCapacity Building in Africa: An OED Evaluation of World Bank Support The CIGAR at 31: An Independent Meta-Evaluation of the Consultative Group on International Agricultural ResearchCountry Assistance Evaluation Retrospective: OED Self-Evaluation Debt Relief for the Poorest: An OED Review of the HIPC InitiativeDeveloping Towns and Cities: Lessons from Brazil and the PhilippinesThe Drive to Partnership: Aid Coordination and the World BankEconomies in Transition: An OED Evaluation of World Bank Assistance The Effectiveness of World Bank Support for Community-Based and –Driven Development: An OED EvaluationEvaluating a Decade of World Bank Gender Policy: 1990–99Evaluation of World Bank Assistance to Pacific Member Countries, 1992–2002 Financial Sector Reform: A Review of World Bank AssistanceFinancing the Global Benefits of Forests: The Bank’s GEF Portfolio and the 1991 Forest Strategy and Its ImplementationFiscal Management in Adjustment LendingIDA’s Partnership for Poverty ReductionImproving the Lives of the Poor Through Investment in CitiesIndia: The Dairy RevolutionInformation Infrastructure: The World Bank Group’s ExperienceInvesting in Health: Development Effectiveness in the Health, Nutrition, and Population SectorJordan: Supporting Stable Development in a Challenging RegionLesotho: Development in a Challenging EnvironmentMainstreaming Gender in World Bank Lending: An UpdateMaintaining Momentum to 2015? An Impact Evaluation of Interventions to Improve Maternal and Child Health and Nutrition Outcomes in Bangladesh The Next Ascent: An Evaluation of the Aga Khan Rural Support Program, PakistanNongovernmental Organizations in World Bank–Supported Projects: A ReviewPoland Country Assistance Review: Partnership in a Transition EconomyPoverty Reduction in the 1990s: An Evaluation of Strategy and PerformanceThe Poverty Reduction Strategy Initiative: An Independent Evaluation of the World Bank’s Support Through 2003Power for Development: A Review of the World Bank Group’s Experience with Private Participation in the Electricity SectorPromoting Environmental Sustainability in DevelopmentPutting Social Development to Work for the Poor: An OED Review of World Bank ActivitiesReforming Agriculture: The World Bank Goes to MarketSharing Knowledge: Innovations and Remaining ChallengesSocial Funds: Assessing EffectivenessTunisia: Understanding Successful Socioeconomic Development Uganda: Policy, Participation, PeopleThe World Bank’s Experience with Post-Conflict ReconstructionThe World Bank’s Forest Strategy: Striking the Right BalanceZambia Country Assistance Review: Turning an Economy Around

Evaluation Country Case SeriesBosnia and Herzegovina: Post-Conflict ReconstructionBrazil: Forests in the Balance: Challenges of Conservation with DevelopmentCameroon: Forest Sector Development in a Difficult Political EconomyChina: From Afforestation to Poverty Alleviation and Natural Forest ManagementCosta Rica: Forest Strategy and the Evolution of Land UseEl Salvador: Post-Conflict ReconstructionIndia: Alleviating Poverty through Forest DevelopmentIndonesia: The Challenges of World Bank Involvement in ForestsThe Poverty Reduction Strategy Initiative: Findings from 10 Country Case Studies of World Bank and IMF SupportUganda: Post-Conflict Reconstruction

ProceedingsGlobal Public Policies and Programs: Implications for Financing and EvaluationLessons of Fiscal AdjustmentLesson from Urban TransportEvaluating the Gender Impact of World Bank AssistanceEvaluation and Development: The Institutional Dimension (Transaction Publishers)Evaluation and Poverty ReductionMonitoring & Evaluation Capacity Development in AfricaPublic Sector Performance—The Critical Role of Evaluation

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WORKING FOR A WORLD FREE OF POVERTY

The World Bank Group consists of five institutions—the International Bank for Reconstruction and Development(IBRD), the International Finance Corporation (IFC), the International Development Association (IDA), theMultilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of InvestmentDisputes (ICSID). Its mission is to fight poverty for lasting results and to help people help themselves and their envi-ronment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public andprivate sectors.

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The Independent Evaluation Group (IEG) is an independent, three-part unit within the World Bank Group. IEG-World Bank is charged with evaluating the activities of the IBRD (The World Bank) and IDA, IEG-IFC focuses onassessment of IFC’s work toward private sector development, and IEG-MIGA evaluates the contributions of MIGAguarantee projects and services. IEG reports directly to the Bank’s Board of Directors through the Director-General,Evaluation.

The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of theBank Group’s work, and to provide accountability in the achievement of its objectives. It also improves Bank Groupwork by identifying and disseminating the lessons learned from experience and by framing recommendations drawnfrom evaluation findings.

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New Renewable EnergyA Review of the World Bank’s Assistance

2006The World Bank

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v Acronyms and Abbreviations

vii Acknowledgments

ix Executive Summary

xv Résumé analytique

xxiii Resumen

1 1 Objectives and Evaluation Approach1 Evaluation Approach

3 2 The Bank’s NRE Objectives

7 3 NRE Portfolio Characteristics and Trends

9 4 The Implementation Scorecard and Main Findings on Delivering the NRE Strategy9 NRE Portfolio Performance15 Results in Terms of Poverty Reduction16 To What Extent Were Global Environmental Benefits Achieved?18 Outcomes Related to PSD and Promotion of Good Governance

21 5 Main Lessons Learned and Strategic Implications for the Bank

29 6 Conclusions and Next Steps

31 Annexes33 A: The Bank’s New Renewables Portfolio35 B: NRE Projects Selected for In-Depth Review37 C: Cost Competitiveness of Renewable and Conventional Energy

Technologies41 D: Ratings of Closed NRE Projects43 E: Ratings of Ongoing NRE Projects under Supervision45 F: Project Performance Evaluation49 G: Assessment of the NRE Portfolio’s Contribution to

Poverty Reduction and Good Governance

Contents

55 H: An Evaluation of the Portfolio’s Performance in Achieving Global Environmental Benefits

59 I: Private Sector Development in the Bank’s New and Renewable Energy Projects

69 J: Impact of Analytical and Advisory Assistance

73 Endnotes

77 Bibliography

Figure5 2.1 Forecast Generating Costs for Selected Renewable and Conventional

Electricity Generation: 2004 versus 2015

Tables8 3.1 Preparation Costs for NRE Projects Higher than for Conventional

Power Projects9 4.1 Outcome Ratings for Closed NRE Freestanding Projects and

Components of Blended Projects 11 4.2 Ratings for Ongoing NRE Projects Mostly Satisfactory12 4.3 NRE Projects’ Dissemination Targets 13 4.4 Characteristics of Grid-Connected and Off-Grid NRE Projects17 4.5 Data on Reductions in Greenhouse Gas Emissions from NRE Projects 18 4.6 Energy Efficiency Measures Cost-Effective in Reducing Greenhouse

Gas Emissions

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N E W R E N E WA B L E E N E R G Y: A R E V I E W O F T H E W O R L D B A N K ’ S A S S I S TA N C E

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ACRONYMS AND ABBREVIATIONS

AAA Analytical and advisory assistanceASTAE Asia Sustainable and Alternative Energy ProgramBDS Business development servicesCAS Country Assistance StrategyCO2 Carbon dioxideCRESP China Renewable Energy Scale-Up ProgramEBRS Energy Business Renewal StrategyEIRR Economic internal rate of returnERR Economic rate of returnERT Energy for Rural Transformation Project (Uganda)ESD Energy Services Delivery Project (Sri Lanka)ESMAP Energy Sector Management Assistance ProgrammeGEF Global Environment FacilityGHG Greenhouse gasICR Implementation Completion ReportICT Information and communication technologyIDCOL Infrastructure Development Company LimitedIEG Independent Evaluation GroupkW KilowattskWh Kilowatt hoursM&E Monitoring and evaluationMFI Microfinance institutionsMW MegawattNGO Nongovernmental organizationNOx Nitrogen oxidesNRE New and renewable energyOBA Output-based assistancePDO Project development objectivePRSP Poverty Reduction Strategy PaperPSD Private sector developmentPV Photovoltaic systemRED Renewable Energy Development Project (China)RERED Renewable Energy and Rural Economic Development Project (Sri Lanka)RERM Renewable Energy in the Rural Market Project (Argentina)RET Renewable energy technologyRRD Renewable Resources Development Project (India)SHS Solar home systemSO2 Sulfur dioxideSPPA Small Power Purchase AgreementTA Technical assistanceW Watts

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Acknowledgments

Fernando Manibog (lead evaluation officer) andAshwin Bhouraskar (consultant) prepared thisreport. Trond Augdal and Hakon Nordang(consultants) contributed to the literature andportfolio reviews, respectively. The reportbenefited greatly from the insights of numerous

Bank staff and external respondents who agreedto be interviewed, for which the task team isgrateful. The authors are also grateful for thesupport of the Norwegian Ministry of ForeignAffairs, which funded the consultants whoparticipated in this assessment.

Director-General, Evaluation: Vinod ThomasDirector, Independent Evaluation Group–World Bank: Ajay Chhibber

Manager, Sector, Thematic, and Global Evaluation Division: Alain BarbuTask Manager: Fernando Manibog

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Executive Summary

The purpose of this review by the Independent Evaluation Group (IEG)of the World Bank is to inform the efforts to scale up the Bank’s sup-port for renewable energy by evaluating the performance of the Bank’s

current portfolio and the extent to which strategic objectives were achieved.

At the 2004 Conference on Renewable Energy inBonn, Germany, the Bank announced that itwould increase its lending for renewable energyand energy efficiency by an average of 20 percentper year for the five-year period fiscal 2005–09.This review assesses the Bank’s readiness todeliver on that announcement. This assessmentof “new renewables” is restricted to geothermal;solar; wind; biomass; and small, mini-, and micro-hydro energy sources. It updates and expandsthe renewable energy sections of IEG’s 2003study on private sector development (PSD) forthe electricity sector (IEG-World Bank, IEG-IFC,and IEG-MIGA 2003b).

The Bank’s Renewable Energy Objectives

Strategic frameworkThe Bank’s institutional objectives for new andrenewable energy (NRE) are contained instrategy papers for rural energy (World Bank1993), the environment (World Bank 2001b; IEG2002), and the Energy Business Renewal Strategy(EBRS) (World Bank 2001a). The EBRS providesthe most detailed list of energy development

“pillars” and operational activities relevant toNREs (as well as other energy subsectors).

Thus, following IEG’s objectives-based method-ology, this review is keyed to the EBRSoperational goals for NRE and the followingthree pillars: (i) helping the poor directly, (ii)promoting good governance and PSD, and (iii)helping protect the environment. The fourthpillar of macro-fiscal impacts is also relevant,given the potential of NRE to displace importedfuels; however, renewable energy still accountsfor a small proportion of the energy balances ofthe developing countries where the Bankprovided NRE support.

Cost competitiveness of renewable energy andthe role of the BankA recent technical and economic assessment(Chubu Electric Power Co., Inc. and others 2005)1

indicates that renewable energy technologies(RETs) are the least-cost electrification option formany off-grid, mini-grid, and grid-based applica-tions, on a levelized economic cost basis (see figure2.1 in chapter 2).

RETs would be even more competitive today,given current oil prices of around US$70 perbarrel, compared with the assumption ofUS$38–40 per barrel in the 2005 assessment study.Costs for off-grid systems of around 300 watts (W)(pico-hydro, small wind, and photovoltaic system[PV]–wind hybrids) are projected to be in therange of 15–25 cents per kilowatt hour (kWh), orless than half of the 30–40 cents per kWh forgasoline and diesel generators. Solar PV systemcosts for small power applications (50–300 W) arecomparable to the diesel/gasoline alternatives. Forstand-alone mini-grid systems at the village levelwith loads between 5 and 500 kilowatts (kW),numerous RETs—biomass, biogas, geothermal,wind, and micro-hydro—are potentially the least-cost generation options, compared with conven-tional energy alternatives.

For grid-connected RETs, however, conventionalelectricity-generating technologies—open-cycleand combined-cycle gas turbines and coal- andoil-fired steam turbines—remain the least-costoptions. Although biomass, hydro, and windpower can potentially compete with conventionalpower plants smaller than 50 megawatts (MW),these RETs are simply costlier than larger conven-tional power generating units of 50–300 MW.

Conventional energy technologies, however,have been highly subsidized through direct,indirect, and nontransparent means. Thesemeans include cash transfers to producersand/or consumers, tax exemptions, pricecontrols, trade restrictions, regulatory hurdlesfor RETs, and government failure to correctmarket imperfections. That subsidization skewsthe playing field against renewable energy.Including the cost of environmental externali-ties and a value for energy diversification signifi-cantly increases the economically viable quantityof renewable energy.

The Bank’s role in renewable energy lending isto level the playing field between renewable andconventional energy sources—renewable energycannot compete financially with conventionalenergy because of the distortions cited above.

That in turn requires continuing governmentand donor support. In cofinancing projects withthe Global Environment Facility (GEF), the Bankseeks to remove the market and regulatorybarriers to RETs and achieve global environmen-tal benefits by financing the incremental costs ofrenewable energy investments. The Bank’sCarbon Financing Program also contributes tothe explicit valuation of the positive externalitybenefits of renewable energy.

Evaluation approachThis review draws on Bank as well as IEG evalua-tions, including reviews of ImplementationCompletion Report (ICR) Reviews, ProjectPerformance Assessment Reports, and thematicstudies. The review team also interviewed Bankstaff and conducted a focused literature reviewthat included studies by the Monitoring andEvaluation Unit of GEF, the Energy SectorManagement Assistance Program (ESMAP), andexternal publications. The Bank’s new CarbonFinance Program is outside the scope of thisevaluative review and will be covered in theplanned IEG climate change study.

The review’s methodological approach was toevaluate project outcomes and assess overallNRE portfolio progress based on projectperformance ratings and the extent to which theEBRS pillars of poverty reduction, PSD, andenvironmental protection, as well as theirrespective operational activities specific toNREs, were achieved.

Portfolio performance—main findings

Main characteristics. The NRE portfolio consistsof 65 NRE projects: 56 NRE projects listed in the1990–2004 Progress Report on RenewableEnergy and Energy Efficiency (World Bank2005d), plus nine projects approved in fiscal2005. Of the 65 projects, only 27 (42 percent)have closed; 38 (58 percent) are still active.

The portfolio is relatively young, as 69 percentof the projects were approved after 1997. TheAfrica, East Asia and Pacific, and South Asia

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Regions account for almost 75 percent of thetotal number of NRE projects. The Latin Americaand the Caribbean and Europe and Central AsiaRegions have eight projects each, and theMiddle East and North Africa Region only two. Infiscal 2005, the International Bank for Re-construction and Development/InternationalDevelopment Association, carbon finance, andGEF commitments to NRE amounted to $190million, or 10.5 percent of total lending for theenergy and mining sector, of $1.8 billion (WorldBank 2005a, 2005d).

From the total portfolio of 65 projects, 56 couldbe evaluated, as performance data on 9 projectsthat had just been approved at the time of thisreview were not yet available. Of those 56 projects,46 percent are freestanding; these included thefull spectrum of interventions covering technicalassistance, market development, producer andconsumer financing, commercialization, and after-sales service. The East Asia and Pacific and theSouth Asia Regions had most of the Bank’sfreestanding NRE projects. The other 54 percentof projects involve NRE components of largerpower, rural electrification, and petroleum andwater projects (called “blended” projects in thisreview). Thirty-eight (68 percent) of the projectshave received GEF cofinancing.

Closed projects. The outcomes of the 27 closed,freestanding projects and separate ratings of theNRE components of blended projects show thatmore than half (17) had satisfactory ormoderately satisfactory outcomes, while theremainder had weak results. Freestanding NREprojects were generally satisfactory, exceptthose that involved geothermal energy or thatwere interrupted by economic crises.

Regarding NRE components of blended projects,there appears to be some association betweenthe rating and the component’s size and integra-tion in the larger project. Most NRE componentsperformed satisfactorily or moderately so. YetNRE components that accounted for 15 percentor more of the costs of their respective projects,or that were well integrated in their projects, had

satisfactory outcomes. These were projects inrural electrification or energy sector reform witha sizeable biomass component and those involv-ing a mix of NRE and energy efficiency or solidwaste management.

For small components that were less than 15percent of project costs and that did not have astrong relationship with the overall project goals,the outcome ratings were only moderatelysatisfactory. Ratings for NRE components inenergy sector reform projects that were smalland had little connection to the dominantproject objectives were mixed, with three ratedas unsatisfactory.

Ongoing projects. Compared with the mixedperformance of closed projects, active NREprojects show better progress toward satisfactoryoutcomes. Indeed, a few have already surpassedtheir targets for the physical installation of RETs.

There is also strong evidence that, over time,many lessons learned have helped the design ofongoing projects. The latest project developmentobjective ratings are all satisfactory for NREprojects in the South Asia Region and for themajority of NRE projects in the East Asia andPacific and the Latin America and the CaribbeanRegions as well. But performance is weaker in theAfrica Region, with three projects rated unsatis-factory and one rated moderately unsatisfactory.Components in blended projects tended to havelow ratings in project development objective,implementation progress, or both.

Lessons learned. The lessons from older projectshave led to better designs of more recent NREprojects. This has had an influence on outcomes,as the satisfactory or highly satisfactory freestand-ing projects were also the more recent ones.

One of the key lessons is that integrating NREprovision with supporting inputs from socialservice institutions and small and medium-sizeenterprises has enhanced development out-comes. Another lesson is that reliable creditservices are needed to make NRE systems afford-

E X E C U T I V E S U M M A R Y

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able to rural households. Also, a policy andregulatory framework for NRE that is conduciveto widespread adoption needs to be in place forNRE projects to succeed. Another key lesson isthe importance of building the capacity of keystakeholders to develop the environment for NREcommercialization and ensure service quality.

Finally, a practical lesson for the Bank is tosupport stakeholder and community participa-tion and to demonstrate that this can lead toflexibility on project design and implementa-tion. To promote continuous improvement ofNRE project designs, the scaling up of NRElending should be matched by a wider dissemi-nation and application of these lessons.

Factors of performance. Some factors behindsatisfactory and less-than-satisfactory perform-ance have emerged from IEG’s review of ICRsand Project Performance Assessment Reports.While not present in all satisfactory projects,good performance tends to be associated withstrong government commitment and effectiveBank performance in project design, supervi-sion, and adaptive management. There areadditional factors unique to satisfactory NREprojects:

• Extensive consultations with entrepreneurs,consumers, and nongovernmental organizations

• Effective credit and output-based grant fi-nancing mechanisms that facilitate access toNRE technologies by the poor

• Strong institutional capacity prior to or re-sulting from the project

• Focused attention to addressing the market bar-riers to NRE

• Active interest from local investors andfinanciers.

Poor performance seems to be associated withseveral factors, including inadequate attention topolicy and regulatory issues specific to NRE, poorsupervision of NRE components, weak countrycommitment, a risk-averse private sector, insuffi-cient public and private institutional capacity, andsociopolitical or economic crises.

Main Findings on Implementing the EBRSStrategic Pillars

1. To what extent did the Bank’s NRE interven-tions help the poor directly?

It is not the case that poverty-reduction goalssurfaced only after the 2001 EBRS. The portfolioreview finds that the Bank has been consistentlypursuing poverty reduction as a major objectivein its NRE portfolio; that is part of its broadergoal of improving energy access. In practice, thepoverty-reduction goals were integrated intoproject design through welfare improvements,enhanced livelihoods and incomes, and/orpromotion of rural transformation throughenergy development.

Many recent projects factor these goals intotheir design, but only two closed projectsincluded poverty reduction as an explicitlystated objective. Thus, for a significant one-thirdof the closed projects, it is from the preparatorystudies, the design, and the targeted beneficiar-ies of the NRE projects that an implied poverty-reduction objective can be discerned.

At this stage, however, the poverty-reductionimpact is largely nonevaluable, becausemonitoring and evaluation (M&E) systemshave been absent or weak among closedprojects. Even for recent projects, whereinincreased income is an explicit goal, only a fewhave M&E systems that will be able to identifythe income gains attributable to increasedenergy access. None of the projects providesany data on increased household income. M&Eof gender impacts has been unsatisfactory aswell, with little evidence available to substanti-ate the often-cited claim that women havebenefited.

The Bank—through ESMAP—has recently beendeveloping methods and tools to better assessthe socioeconomic impacts of improved energyaccess. Some of the latest NRE projects (forexample, in Bangladesh and Uganda) are usingthese approaches.

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On balance, it is still unclear to what extent andhow the Bank’s NRE assistance has reducedpoverty. This lack of evidence is a serioushandicap in targeting the Bank’s NRE lending.That handicap needs to be addressed throughthe establishment of stronger M&E systems inongoing and forthcoming projects, particularlythose designed with output-based assistance(OBA) components, which are especiallydemanding of M&E systems.

2. To what extent did the Bank’s NRE projects pro-tect the environment?

Few of the closed NRE projects include mitiga-tion of harmful environmental effects as anexplicit objective. From this portfolio review,there is only partial evidence that NRE projectsare achieving their targeted global environmen-tal benefits. About a third of the closed projectsprovide little or no data, but generally thegreenhouse gas (GHG) emission-reductiontargets have been achieved. Among NREprojects, larger-scale, grid-connected renew-ables have greater potential to reduce GHGsthan small off-grid projects, such as those usingsolar PV technology.

The Bank supports both energy efficiency andNRE, which makes the most strategic sense. Onone hand, a recent GEF evaluation concludedthat although NRE investments can contribute topreventing global climate change, greater GHGemissions reductions have resulted from Bank-GEF energy efficiency than from NRE projects.On the other hand, over the 40- to 80-year timehorizon where the most significant reductions inGHG emissions will be required, both energyefficiency and NRE (along with physical andbiological carbon sequestration) will need to playa role. Energy efficiency alone will not enable thedesired reduction levels to be reached; the large-scale deployment of low-carbon and no-carbonenergy sources will also be a requirement.

The global environmental impacts of NREprojects could be greater if the projectscatalyzed the creation of NRE markets, reduced

market barriers, and focused on maximizinglocal impacts. Data on the local benefits ofBank-GEF NRE projects have been lackingbecause of weak M&E. However, M&E systemsin these projects should focus more on measur-ing the removal of market barriers than juston the levels of GHG reductions. The Bank’scarbon finance operations—which are recentand are outside the scope of this review—haveimplemented rigorous M&E protocols formeasuring and verifying GHG reductions.

3. To what extent did the Bank’s NRE programpromote PSD?

The portfolio data provide strong evidence thatthe Bank has added the most value in NRE projectswhere it has supported PSD, particularly in theareas of establishing a commercialization process,building investor and consumer confidence,strengthening institutional capacity, and mobiliz-ing private financing. However, the Bank paidinadequate attention to creating a nondiscrimina-tory regulatory environment for NRE—despite itsparallel push for broader energy sector reforms—with adverse effects on some NRE schemes.

With ESMAP assistance, recent NRE projectshave now started to address regulatory issues.The Bank has also supported local financialinstitutions and mobilized investments, oftenthrough public-private partnerships. Yet institu-tional weaknesses and lack of readiness, experi-ence, and incentives among local NRE investorsto serve rural markets have been constrainingfactors. As with NREs’ poverty-reduction impact,M&E for the Bank’s PSD work in NRE has beenunsatisfactory. The M&E needs to be improvedto assess the factors behind the success of thedifferent delivery mechanisms, adapt and applythe lessons when scaling up elsewhere, andserve as a decision tool for effectively im-plementing ongoing and future OBA schemes.

Project experience suggests that partnershipsand community involvement are essential,because PSD alone cannot lead to improvedenergy access. An important lesson is that private-

E X E C U T I V E S U M M A R Y

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public partnerships that include nongovernmen-tal organizations, the consumer communities,and extensive stakeholder consultations can playa vital role in promoting NREs and reaching thepoor. Where projects relied solely on the privatesector to increase energy access, achievements inreaching the poor were low.

Conclusions and Next StepsThe Bank’s NRE strategy is relevant to developingcountry energy priorities. The Bank’s NREprogram is well anchored in the larger EBRS pillarsand is properly focused on its goals of reducingpoverty, promoting PSD, and contributing toenvironmental protection. As reconfirmed inrecent forums (including the Bank’s 2006 EnergyWeek), the Bank and the donor community needto help address the dire energy predicament ofdeveloping countries by acting on all fronts, includ-ing petroleum, clean coal, hydropower, biomass,and energy efficiency, as well as renewable energy.

As the Bank seeks to deliver on its commitmentto increase NRE support, it needs to capitalize onits demonstrated strength of creating an invest-ment climate conducive to commercializing NREand promoting PSD. The Bank needs to focus onother strengths as well, such as building public-private partnerships and appropriate risk-mitigation structures. It needs to consider a seriesof operations and suitable lending instrumentsthat will accommodate the long gestation periodsfor NREs, from institutional capacity building andpolicy/regulatory reform all the way to fullcommercialization. And it needs to internalize—in its Regional budgets and work programs—theoperational costs of its successful “brokering” andadvisory role in NREs, rather than continuing todepend on bilateral donor funds.

The Bank’s likely contributions on otherobjectives are more doubtful. Experience in thepast 15 years indicates that the Bank’s impact inhelping the poor directly, or achieving local andglobal environmental benefits through its NREinterventions, has been hard to measurebecause M&E has been weak or absent. But thelittle evidence that has emerged suggests thatthe impact has so far been limited.

Good M&E systems should be established forenergy services intended to help the poor.Renewable energy projects with OBA com-ponents should be the first targets. Rigorousimpact evaluations should be carried out forselected renewable energy projects that areclosing within the next two to three years.

An important first step is for the Bank to includeNRE objectives and work programs in CountryAssistance Strategies—which historically have givenlittle attention to NRE—whenever relevant. TheBank needs to signal the importance of NRE incountry and energy sector strategies. While promot-ing energy sector reforms and architectures, theBank needs to simultaneously address theconstraints that hinder NRE development andcommercialization. The key thrusts of the Bank’sNRE assistance should be economic energy pricing,increased private financing, and effective regulation.

In sum, the Bank should do more of what hasworked, focusing in particular on its catalytic role forPSD in NRE projects, staying flexible and innovativeby applying lessons learned to improve the designof newer projects, and more widely disseminatinggood practices. The Bank should also address areasof past weakness, which include M&E, themainstreaming of NREs in Country AssistanceStrategies, and the internalization of “NRE businessincubation” costs within the Bank’s own budget.

In particular, the NRE portfolio should benefitincreasingly from self- and independent evalua-tions, given the strategic role that the Bank gives toNREs in improving energy access, particularly forthe poor. These assessments should focus morerigorously on outcomes and impacts; differentiatethe lessons more sharply among rural electrifica-tion, grid-connected NREs, and off-grid renewablesas the portfolio of closed NRE projects expands;and have strong feedback loops that would allowflexibility and responsiveness in implementing theobjectives of the Bank’s NRE strategy.

This is a challenging task, given the currentbudget stringency. Yet it is a task that meritsserious Bank management support, given theBank’s global NRE commitments.

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Résumé analytique

Le Groupe indépendant d’évaluation (IEG) a réalisé cette étude pour four-nir des éléments d’information à l’appui de l’effort d’intensification del’aide de la Banque dans le domaine des énergies renouvelables, en éva-

luant les résultats du portefeuille actuel de l’institution et le degré de réali-sation des objectifs stratégiques.

Lors de la Conférence sur les énergies renouve-lables, organisée à Bonn, en Allemagne, en 2004,la Banque a fait savoir qu’elle augmenterait d’envi-ron 20 % par an pendant cinq ans (exercices 05-09), l’aide qu’elle consacre à la promotion desénergies renouvelables et à la maîtrise de l’éner-gie. Nous avons évalué dans quelle mesure laBanque est prête à atteindre l’objectif annoncé.Cette évaluation des sources d’énergie renouve-lable se limite au géothermique, au solaire, àl’éolien, à la biomasse et à la mini et microhydrau-lique. Elle actualise et complète les sections surl’énergie renouvelable de l’étude que l’IEG aréalisée en 2003 sur le développement du secteurprivé à l’appui du secteur de l’électricité (IEG-Banque Mondiale, IEG-Société financière interna-tionale, IEG-Agence multilatérale de garantie desinvestissements 2003b).

Objectifs de la Banque en matièred’énergies renouvelables

Cadre stratégiqueLes objectifs institutionnels de la Banque enmatière d’énergies nouvelles et renouvelables

(ENR) sont énoncés dans les documents straté-giques sur l’énergie rurale (Banque mondiale1993), l’environnement (Banque Mondiale2001b ; IEG 2002), et la Stratégie de refonte desopérations dans le secteur de l’énergie (EBRS)(Banque mondiale 2001a). Cette stratégie fournitla liste la plus complète des « pôles » de mise envaleur des énergies et des activités opération-nelles dans le domaine des ENR (et dans lesautres branches du secteur de l’énergie).

La méthodologie de l’IEG s’organisant autourd’objectifs, la présente étude s’articule sur lesobjectifs opérationnels de l’EBRS en matièred’ENR et sur les trois pôles suivants : i) aidedirecte aux pauvres, ii) promotion de la bonnegouvernance et du développement du secteurprivé, et iii) aide à la protection de l’environne-ment. Le quatrième pôle, les impacts macrobud-gétaires, a également son importance, les ENRpouvant se substituer aux combustibles importés.Il est toutefois à noter que les énergies renouve-lables ne représentent qu’une petite part du bilanénergétique des pays en développement danslesquels la Banque a favorisé le recours aux ENR.

Compétitivité du coût des énergiesrenouvelables et rôle de la BanqueUne récente évaluation technique etéconomique (Chubu Electric Power Co., Inc. etal. 2005)1 montre que, si l’on retient un coûtéconomique normalisé (voir figure 2.1, chapitre2), les technologies exploitant les énergiesrenouvelables ( ou convertisseurs d’énergierenouvelable (CER) ( offrent la formule d’élec-trification la moins coûteuse pour beaucoupd’applications hors réseau, en miniréseau ouraccordées au réseau.

Les CER seraient encore plus compétitifs aujour-d’hui, le prix du baril de pétrole étant d’environ70 dollars, contre les 38-40 dollars retenuscomme hypothèse dans l’évaluation de 2005.Selon les prévisions, le coût des systèmesdécentralisés d’environ 300 watts (W) (picohy-draulique, petit éolien et systèmes hybridesassociant le photovoltaïque et l’éolien) seraitcompris entre 0,15 et 0,25 dollar le kilowatt-heure (kWh), soit moins de deux fois celui desunités alimentées à l’essence ou au gazole (0,30-0,40 dollar). Lorsque la puissance installée estfaible (50-300 W), le coût du photovoltaïque estcomparable à celui des unités au gazole ou àl’essence. Pour les miniréseaux décentralisés oùla puissance appelée est de 5 à 500 kW, denombreux CER ( transformation de la biomasse,biogaz, géothermique, éolien et microhydrau-lique ( sont potentiellement les formules d’élec-trification des villages les moins coûteuses, si onles compare aux sources d’énergie classique.

En revanche, pour les installations raccordéesau réseau, les moyens classiques de productiond’électricité, à savoir les turbines à gaz à cycleouvert et à cycle combiné et les turbines àvapeur alimentées au charbon et au fioul restentles solutions les moins onéreuses. Bien que labiomasse, l’hydraulique et l’éolien puissentrivaliser avec les centrales thermiques classiquesde moins de 50 mégawatts (MW), ils sont toutsimplement moins avantageux dès lors que desinstallations de 50 à 300 MW sont nécessaires.

Les convertisseurs d’énergie classique,cependant, sont largement subventionnés de

façon directe, indirecte et non transparente, pardes transferts monétaires aux producteurs et/ouaux consommateurs, des exonérations d’impôts,des mesures de contrôle des prix, des pratiquescommerciales restrictives, des obstaclesréglementaires aux CER et le fait que l’État necorrige pas les imperfections du marché. Cessubventions faussent le jeu au détriment desénergies renouvelables. Si l’on tient compte ducoût des externalités environnementales et de lavaleur qu’ajoute la diversification énergétique, laquantité économiquement viable d’énergiesrenouvelables s’accroît sensiblement.

Dans ses prêts à l’appui des énergies renouve-lables, la Banque doit avoir pour rôle de placerles sources d’énergie renouvelable et classiquesur un pied d’égalité, car les distorsions citéesplus haut font que les premières ne peuventfinancièrement soutenir la concurrence avec lessecondes. Par voie de conséquence, celasuppose une aide soutenue des pouvoirspublics et des bailleurs de fonds. En cofinançantdes projets avec le Fonds pour l’environnementmondial (FEM), la Banque cherche à lever lesbarrières réglementaires et les obstacles àl’exploitation commerciale des CER, et à amélio-rer l’état environnemental de la planète enfinançant le surcoût des investissements dansles énergies renouvelables. Le programme detransactions sur les crédits de réduction desémissions, que conduit la Banque (programme «crédits carbone »), contribue aussi à mesurerexpressément la valeur des externalités positivesdes énergies renouvelables.

Approche retenueNous nous sommes appuyés sur des évaluationsde la Banque et de l’IEG ainsi que sur desexamens de rapports de fin d’exécution, derapports d’évaluation rétrospective de projets etd’études thématiques. Nous avons égalementrencontré des membres des services de laBanque et examiné de façon sélective des étudesdu Bureau indépendant de l’évaluation du FEM,des rapports du programme d’assistance à lagestion du secteur de l’énergie (ESMAP) et despublications extérieures. Le nouveau pro-gramme « crédits carbone » de la Banque n’entre

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pas dans le champ de la présente évaluation ; ilsera examiné lors de l’étude que l’IEG prévoitde consacrer au changement climatique.

La méthodologie adoptée consistait à évaluer lesrésultats des projets et à mesurer la progressionglobale du portefeuille sur les ENR ens’appuyant sur la notation de la performance desprojets et en déterminant dans quelle mesureles pôles stratégiques de l’EBRS (réduction de lapauvreté, développement du secteur privé,protection de l’environnement) et les opéra-tions en rapport avec les ENR, propres à chacund’entre eux, avaient été mis en pratique.

Gestion du portefeuille — Principaux résultatsde l’étude

Physionomie du portefeuille. Le portefeuille sur lesENR se compose de 65 projets, dont 56énumérés dans le Progress Report on Renew-able Energy and Energy Efficiency (Banquemondiale 2005d), qui couvre la période 1990-2004, et 9 approuvés pendant l’exercice 05. Surces 65 projets, seuls 27 (42 %) sont achevés et 38(58 %) sont en cours.

Le portefeuille est relativement jeune, 69 % desprojets ayant été approuvés après 1997. Près de75 % du nombre total de projets sont concen-trés sur les régions Afrique, Asie de l’Est etPacifique, et Asie du Sud. Les régions Amériquelatine et Caraïbes, et Europe et Asie centrale encomptent huit chacune, la région Moyen-Orientet Afrique du Nord, deux. Pendant l’exercice 05,les engagements consacrés aux ENR par laBanque internationale pour la reconstruction etle développement et l’Association internationalede développement, le programme « créditscarbone » et le FEM se sont élevés à 190 millionsde dollars, soit 10,5 % du volume total des prêtsau secteur de l’énergie et des mines (1,8milliards de dollars) (Banque mondiale 2005a,2005d).

Sur les 65 projets qui composent le portefeuille,56 ont pu être évalués, les chiffres sur la perfor-mance des neuf projets restants, qui venaientjuste d’être approuvés, n’étant pas encore

connus. Quarante-six pour cent de ces 56projets sont des projets à part entière quicouvrent la gamme complète des interventions :assistance technique, développement desmarchés, prêts aux producteurs et aux consom-mateurs, exploitation commerciale et servicesaprès-vente. La plupart d’entre eux sont concen-trés sur les régions Asie de l’Est et Pacifique, etAsie du Sud. Les 54 % restants correspondentaux composantes ENR de plus grands projetsconsacrés à l’électricité, à l’électrification deszones rurales, au pétrole et à l’eau (les projetsdits « mixtes »). Trente-huit des projets (68 %)sont cofinancés par le FEM.

Projets clos. Il ressort des résultats des 27 projetsà part entière aujourd’hui clos et descomposantes ENR des projets mixtes que plusde la moitié de ces opérations (17) sont jugéessatisfaisantes ou marginalement satisfaisantes,les autres obtenant des notes inférieures. Enrègle générale, les projets à part entière sontjugés satisfaisants, à l’exception toutefois deceux qui font intervenir l’énergie géothermiqueou qui ont été interrompus par des criseséconomiques.

S’agissant des composantes ENR des projetsmixtes, il semble qu’il existe un lien entre la noteattribuée et la taille de la composante ou sondegré d’intégration au projet. Les résultats de laplupart de ces composantes ont été jugéssatisfaisants ou marginalement satisfaisants.Cela étant, les composantes ENR qui représen-taient au moins 15 % du coût du projet ou dontle degré d’intégration était important ontobtenu la note « satisfaisant ». Il s’agissait deprojets sur l’électrification rurale ou la réformedu secteur de l’énergie comportant unimportant volet « biomasse » ou de projetscombinant ENR et maîtrise de l’énergie ougestion des déchets solides.

Les composantes qui représentaient moins de15 % des coûts du projet et qui n’étaient pasétroitement liées aux grands objectifs de l’opéra-tion n’ont été jugées que marginalement satisfai-santes. Dans les projets de réforme du secteurde l’énergie, les composantes de taille limitée et

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peu liées aux objectifs majeurs de l’opérationont obtenu des résultats en demi-teinte, insatis-faisants pour trois d’entre elles.

Projets en cours. Comparés aux projets clos, dontle bilan est mitigé, les projets en cours semblents’acheminer vers des résultats satisfaisants.Plusieurs d’entre eux ont même déjà dépasséleurs objectifs de résultats en ce qui concernel’installation physique des CER.

Plusieurs éléments montrent aussi clairementque de nombreux enseignements tirés desprojets clos ont contribué au fil du temps à laconception des opérations en cours. Lesdernières notations de l’objectif de développe-ment sont toutes satisfaisantes pour les projetsde la région Asie de l’Est. Il en est la plupart dutemps de même dans les régions Asie de l’Est etPacifique, et Amérique latine et Caraïbes. Lesrésultats sont toutefois moins bons dans larégion Afrique, où trois projets ont été jugésinsatisfaisants et un marginalement insatisfai-sant. Les résultats des composantes des projetsmixtes ont tendance à être médiocres pourl’objectif de développement, l’état d’avance-ment, voire pour les deux critères.

Enseignements tirés des projets. Les enseigne-ments tirés des anciens projets ont contribué àune meilleure conception des projets actuels.Les résultats s’en ressentent, les projets à partentière jugés satisfaisants ou très satisfaisantsétant justement les plus récents.

Lorsque le recours aux ENR se double d’unsoutien aux apports des prestataires de servicessociaux et des petites et moyennes entreprises,les résultats s’améliorent. C’est là l’un desgrands enseignements tirés des anciens projets.On a également constaté que des services decrédit fiables étaient nécessaires pour mettre lesCER à la portée des ménages ruraux. Pour queles projets réussissent, il faut aussi mettre enplace des politiques publiques et un cadreréglementaire favorisant l’adoption à grandeéchelle des ENR. De même, il est très importantde renforcer la capacité des acteurs clés à créerles conditions nécessaires à l’exploitation

commerciale des ENR et à assurer la qualité desservices.

Enfin, dans la pratique, la Banque doit associerla population locale et les acteurs concernés àson action et montrer que cette participationpeut être gage de souplesse pour la conceptiondu projet et l’exécution des opérations. Pourcontribuer à l’amélioration constante de laconception des projets, l’intensification del’effort de prêt à l’appui des ENR doit s’accom-pagner d’une diffusion et d’une application pluslarges de l’ensemble de ces acquis.

Facteurs influant sur la performance. Notre examendes rapports de fin d’exécution et des rapportsd’évaluation rétrospective des projets met enévidence certains facteurs influant sur la perfor-mance des projets, qu’elle soit satisfaisante ouinférieure à satisfaisante. Bien que ce ne soit passystématiquement le cas, les bons résultatstendent à être liés à une forte motivation despouvoirs publics et à des prestations efficaces dela Banque lors des phases de conception et desupervision des projets, et en matière de gestionévolutive. En outre, les facteurs suivants sontpropres aux projets de mise en valeur des ENR :

• Ampleur de la consultation des entrepreneurs,des consommateurs et des organisations nongouvernementales

• Efficacité des mécanismes de crédit et de fi-nancement sous forme de dons assortis d’uncontrat de résultats pour faciliter l’accès despauvres aux CER

• Solidité des capacités institutionnelles pré-existantes ou résultant du projet

• Adoption de mesures visant à s’attaquer auxobstacles à l’exploitation commerciale des ENR

• Présence d’un intérêt réel des investisseurs etbailleurs de fonds locaux.

Les mauvais résultats semblent être liés àplusieurs facteurs tels que le manque d’atten-tion aux politiques et au cadre réglementairepropres aux ENR, la médiocrité de la supervisiondes composantes ENR, le manque de détermi-nation des pays, l’aversion au risque du secteurprivé, l’insuffisance des capacités institution-

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nelles publiques et privées et les crises sociopo-litiques et économiques.

Mise en pratique des pôles stratégiquesde l’EBRS : Principaux résultats

1. Dans quelle mesure les projets de mise en va-leur des ENR de la Banque ont-ils aidé lespauvres ?

Il serait erroné de dire que les objectifs deréduction de la pauvreté ne sont apparusqu’après l’EBRS de 2001. Il ressort de notreétude du portefeuille sur les ENR que la luttecontre la pauvreté a systématiquement été uneconsidération majeure de la Banque, dans lecadre de son objectif plus large d’améliorationde l’accès à l’électricité. Dans la pratique, lesobjectifs de réduction de la pauvreté étaientintégrés à la conception des projets au moyende mesures en faveur de l’amélioration desconditions de vie, de l’accroissement desmoyens de subsistance et des revenus, et/ou dela promotion de la transformation des zonesrurales par leur électrification.

Bon nombre de projets récents incluaient detelles mesures dans leur conception, mais laréduction de la pauvreté n’était un objectifexplicite que dans deux des projets clos. Pour unbon tiers des projets clos, c’est donc à travers lesétudes préparatoires, la conception desopérations et les bénéficiaires visés que l’onpeut mettre en évidence un objectif implicite deréduction de la pauvreté.

À ce stade, une grande partie de l’impact desopérations sur le recul de la pauvreté ne peuttoutefois être évaluée, compte tenu de l’absenceou de la faiblesse des systèmes de suivi etd’évaluation dans les projets clos. Même pourles projets plus récents, dans lesquels l’accrois-sement des revenus est un objectif explicite, ilest rare qu’il existe un système de suivi etd’évaluation à même de faire ressortir lesaugmentations de revenus résultant d’unmeilleur accès à l’électricité. Aucun des projetsne fournit de données sur l’amélioration durevenu des ménages. Le suivi et l’évaluation des

impacts sur la parité des sexes ne sont pas nonplus satisfaisants, peu d’éléments venant confir-mer le bien-fondé de la thèse répandue selonlaquelle les femmes ont bénéficié de ces projets.

Dans le cadre de son programme ESMAP, laBanque a récemment mis au point des méthodeset des outils pour mieux évaluer l’impact socioé-conomique d’un meilleur accès à l’électricité.Certains des derniers projets (au Bangladesh eten Ouganda, par exemple) utilisent cestechniques.

L’un dans l’autre, il n’est toujours pas possible dedire clairement dans quelle mesure et en quoil’aide de la Banque aux ENR a fait reculer lapauvreté. Du fait de ce manque d’élémentsprobants, il est très difficile d’orienter précisé-ment les opérations de prêts de la Banque àl’appui des ENR. Il faut remédier à cette situationpar l’adoption de systèmes de suivi et d’évalua-tion plus solides dans les projets en cours et àvenir, particulièrement dans ceux qui comportentdes composantes dans lesquelles l’aide estassortie de contrats de résultats, une formule quidépend beaucoup de l’existence de tels systèmes.

2. Dans quelle mesure les projets de mise en va-leur des ENR de la Banque protègent-ils l’en-vironnement ?

Parmi les projets clos, rares sont ceux quicomportent un objectif explicite d’atténuationdes méfaits sur l’environnement. Dans notreévaluation du portefeuille, seuls quelqueséléments montrent que les projets ont les effetspositifs recherchés sur l’environnementmondial. Pratiquement aucune donnée n’existepour près d’un tiers des projets clos, mais lesobjectifs de réduction des émissions de gaz àeffet de serre (GES) ont généralement étéatteints. Les grands projets de mise en valeurd’ENR raccordées au réseau ont plus de chancesde réduire les émissions de GES que les petitesinstallations décentralisées, telles que cellesfaisant appel au photovoltaïque solaire.

La Banque apporte son appui à la maîtrise del’énergie comme aux ENR, ce qui est stratégi-


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quement le plus logique. D’un côté, selon uneétude récente du FEM, les projets Banque-FEMde maîtrise de l’énergie permettent une plusforte réduction des émissions de GES que lesinvestissements dans les ENR, même si cesderniers peuvent aider à prévenir le change-ment climatique au niveau mondial. De l’autre,dans les 40 à 80 prochaines années, pendantlesquelles les réductions les plus importantesdevront intervenir, la maîtrise de l’énergie, maisaussi les ENR, auront un rôle à jouer (parallèle-ment à la fixation biologique et au stockagematériel du carbone). Une meilleure maîtrise del’énergie ne permettra pas à elle seuled’atteindre les niveaux de réduction voulus. Unlarge recours aux énergies peu ou nonpolluantes sera également nécessaire.

Les investissements dans les ENR pourraientavoir un plus grand impact sur le patrimoineenvironnemental de la planète s’ils stimulaientla création de marchés de ces énergies,réduisaient les obstacles à leur exploitationcommerciale et visaient à optimiser les effets auniveau local. Le manque de systèmes de suivi etd’évaluation explique l’absence de données surles effets positifs locaux des projets Banque-FEMdans ce domaine. De tels systèmes devraienttoutefois servir davantage à mesurer le degréd’élimination des obstacles à l’exploitationcommerciale des ENR que le niveau deréduction des émissions de GES. Les opérationsde la Banque sur le marché du carbone, qui ontdémarré récemment et n’entrent pas dans lechamp de notre étude, s’accompagnent deprotocoles de suivi et d’évaluation pour mesureret vérifier rigoureusement ces réductions.

3. Dans quelle mesure le programme de laBanque sur les ENR aide-t-il à promouvoir ledéveloppement du secteur privé ?

Les données du portefeuille sur les ENRmontrent clairement que la valeur ajoutée auxprojets a été la plus grande lorsque la Banque afavorisé le développement du secteur privé,notamment en créant des mécanismes d’exploi-tation commerciale, en suscitant la confiancedes investisseurs et des consommateurs, en

renforçant les capacités institutionnelles, et enmobilisant des financements privés. Bienqu’ayant parallèlement facilité une réforme pluslarge du secteur de l’énergie, la Banque ne s’estpas suffisamment efforcée de créer un cadreréglementaire non discriminatoire pour les ENR,ce qui a été préjudiciable à certains projets dansce domaine.

Avec l’aide du programme ESMAP, les projetsrécents prennent en compte la question ducadre réglementaire. La Banque prête égalementson concours à des institutions financièreslocales et mobilisent des investissements,souvent au moyen de partenariats public-privé.Toutefois, les faiblesses institutionnelles et lemanque de préparation, d’expérience et demotivation des investisseurs locaux sur lesmarchés ruraux sont des facteurs limitatifs. Peu àmême de mesurer l’impact des projets sur laréduction de la pauvreté, les systèmes de suivi etd’évaluation de la promotion du développementdu secteur privé dans les investissements de laBanque sur les ENR ne sont pas non plus satisfai-sants. Il faut améliorer ces systèmes pour évaluerles facteurs à l’origine des bons résultats dedifférents mécanismes d’intervention, adapter etappliquer les enseignements tirés des projetslorsqu’il s’agit de transposer les opérations à plusgrande échelle, et utiliser le suivi et l’évaluationcomme un outil d’aide à la décision pour mettreefficacement en œuvre les actuels et futursprogrammes d’aide assortis de contrats derésultats.

L’expérience montre que les partenariats et laparticipation des populations locales jouent unrôle déterminant, le développement du secteurprivé n’étant pas suffisant pour améliorer l’accèsà l’électricité. Il ne faut pas non plus oublier queles partenariats public-privé faisant intervenirdes organisations non gouvernementales, descercles de consommateurs et une vaste consul-tation des différents acteurs concernés peuventbeaucoup aider à promouvoir les ENR et àatteindre les pauvres. Les projets ne s’appuyantque sur le secteur privé pour accroître l’accès àl’électricité ne sont pas bien parvenus à toucherles pauvres.

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Conclusion et dispositions à prendreLa stratégie de la Banque en matière d’ENR estbien adaptée aux priorités énergétiques des paysen développement. Le programme de la Banquedans ce domaine est solidement ancré auxgrands pôles stratégiques de l’EBRS et s’articulebien sur ses objectifs de réduction de lapauvreté, de promotion du développement dusecteur privé et d’aide à la protection de l’envi-ronnement. Ainsi que l’ont récemmentreconfirmé différentes assemblées (dont laSemaine 2006 de la Banque sur l’énergie), laBanque et la communauté des bailleurs de fondsdoivent aider les pays en développement à sortirde leur situation très difficile au plan énergé-tique en intervenant tous azimuts, c’est-à-diresur les fronts du pétrole, du charbon propre, del’hydraulique, de la biomasse, de la maîtrise del’énergie, et aussi des énergies renouvelables.

Pour accroître son aide aux ENR comme elle s’estengagée à le faire, la Banque doit tirer parti de sacapacité avérée à créer un climat de l’investisse-ment favorable à l’exploitation commerciale deces énergies et à la promotion du développe-ment du secteur privé. La Banque doit égalements’appuyer sur d’autres atouts tels que la mise enplace de partenariats public-privé et desstructures voulues d’atténuation des risques. Elledoit examiner toute une série d’opérations etd’instruments de prêt bien adaptés, qui permet-tront de prendre en compte la longue périodede gestation des projets de mise en valeur desENR, en intervenant aussi bien pour renforcerles capacités et favoriser les réformes despolitiques publiques et du cadre réglementaireque pour promouvoir la pleine exploitationcommerciale de ces énergies. Elle doit aussiinscrire à ses budgets régionaux et programmesde travail le coût opérationnel de ses précieuxservices de « courtage » et de conseil à l’appuides ENR afin de ne plus être tributaire des fondsdes bailleurs d’aide bilatérale.

La contribution possible de la Banque à laréalisation des autres objectifs est plusdouteuse. L’expérience des 15 dernières annéesmontre qu’il est difficile de mesurer l’impact dela Banque sur l’aide directe aux pauvres ou sur

les effets positifs pour l’environnement local oumondial de ses investissements dans les ENR, dufait du manque ou de l’absence de systèmesd’évaluation et de suivi. Les rares éléments donton dispose semblent toutefois indiquer quel’impact reste limité.

De bons systèmes de suivi et d’évaluationdoivent être mis en place pour les servicesénergétiques qui visent à aider les pauvres. Lesprojets de mise en valeur des énergies renouve-lables qui comportent des composantes danslesquelles l’aide est assortie de contrats derésultats doivent être les premiers à en bénéfi-cier. Il faut faire une évaluation rétrospectiverigoureuse de l’impact d’un certain nombre deprojets sélectionnés deux ou trois ans avant leurclôture.

Pour commencer, il est important que la Banqueinclue, dans les cas voulus, des objectifs et desprogrammes de travail pour les ENR dans sesstratégies d’aide aux pays, qui traditionnellementen comportent peu. La Banque doit faire ressortirl’importance des ENR dans ses stratégies-pays etdans sa stratégie sectorielle pour l’énergie. Touten favorisant la réforme du secteur de l’énergie etl’adoption de l’architecture nécessaire, elle doits’attaquer aux obstacles qui entravent la mise envaleur des ENR et leur exploitation commerciale.L’aide de la Banque doit être principalement axéesur la tarification rationnelle de l’énergie,l’accroissement des financements privés et l’effi-cacité du cadre réglementaire.

En un mot, la Banque doit réitérer ce qui adonné de bons résultats, notamment en seconcentrant sur sa capacité à stimuler ledéveloppement du secteur privé dans lesprojets sur les ENR, en appliquant avecsouplesse et créativité les enseignements tirésdes anciens projets pour mieux concevoir lesnouvelles opérations et en diffusant pluslargement les méthodes ayant fait leurs preuves.Elle doit aussi intervenir sur les questions quilaissent à désirer, dont le suivi et l’évaluation, laprise en compte systématique des ENR dans lesstratégies d’aide aux pays et l’inscription à sonpropre budget des « coûts d’incubation » des


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entreprises dans le secteur des énergiesrenouvelables.

Enfin, compte tenu du rôle stratégique que laBanque veut faire jouer aux énergies nouvelleset renouvelables pour améliorer l’accès à l’élec-tricité, surtout au profit des pauvres, leportefeuille sur les ENR doit pouvoir de plus enplus s’appuyer sur des autoévaluations et desétudes indépendantes. Celles-ci doivent ciblerplus rigoureusement les résultats et les impacts; établir une distinction plus fine entre l’électrifi-cation des zones rurales, les ENR raccordées au

réseau et leurs applications hors réseau àmesure que le portefeuille de projets achevéss’accroît ; et mettre en place de solides chaînesde remontée de l’information qui fourniront lasouplesse et la capacité d’adaptation nécessairespour s’efforcer d’atteindre les objectifs de lastratégie de la Banque sur les ENR.

Dans un contexte d’austérité budgétaire, il s’agitlà d’une tâche ardue, qui mérite cependanttoute l’attention de la direction de la Banque,compte tenu des engagements mondiaux quel’institution a pris dans ce domaine.

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Resumen

El objetivo de este evaluación realizado por el Grupo de Evaluación In-dependiente (IEG, por su sigla en inglés) del Banco Mundial es orien-tar los esfuerzos para ampliar el apoyo del Banco a las fuentes de

energía renovables evaluando el desempeño de la cartera actual de proyec-tos del Banco y el nivel de logro de los objetivos estratégicos.

En la Conferencia Internacional sobre EnergíasRenovables celebrada en Bonn (Alemania) en2004, el Banco anunció su intención de aumentarel financiamiento para las fuentes de energíarenovables y la eficiencia energética en una mediadel 20% anual para el quinquenio de 2005–2009.En el presente examen se evalúa si el Banco estáen condiciones de asumir ese compromiso. Estaevaluación de las nuevas energías renovables selimita a las fuentes geotérmica, solar, eólica y debiomasa, así como a las fuentes de energía hidroe-léctrica a escalas pequeña, mini y micro. Seactualizan y amplían las secciones sobre fuentesde energía renovables del estudio realizado por elIEG en 2003 acerca del desarrollo del sectorprivado para el sector de la electricidad (IEG-Banco Mundial, IEG-Corporación FinancieraInternacional, IEG-Organismo Multilateral deGarantía de Inversiones 2003b).

Objetivos del Banco en relación con lasfuentes de energía renovables

Marco estratégicoLos objetivos institucionales del Banco en

relación con las fuentes de energía nuevas yrenovables están plasmados en documentos deestrategia energética para las zonas rurales(Banco Mundial, 1993), estrategia para el medioambiente (Banco Mundial 2001b; IEG 2002) y laEstrategia de renovación del sector de la energía(Banco Mundial 2001a). Esta estrategia constade una lista muy detallada de “pilares” para eldesarrollo energético y las actividades operacio-nales relacionadas con las energías nuevas yrenovables (así como otros subsectores de laenergía).

Por consiguiente, siguiendo la metodología delIEG, basada en objetivos, este evaluación seadecua a los objetivos operacionales de laestrategia de renovación del sector de la energíapara las fuentes de energía nuevas y renovablesy los tres pilares siguientes: i) ayudar directa-mente a los pobres, ii) fomentar una buenagestión y el desarrollo del sector privado, y iii)ayudar a proteger el medio ambiente. El cuartopilar de impactos macrofiscales reviste tambiénimportancia, puesto que las fuentes de energíanuevas y renovables podrían desplazar a los

combustibles importados; sin embargo, esasfuentes siguen representando una partereducida de los balances energéticos de lospaíses en desarrollo donde el Banco ha pro-porcionado apoyo a las energía nuevas yrenovables.

Competitividad de los costos de las fuentes deenergía renovables y papel de BancoUna reciente evaluación técnica y económica(Chubu Electric Power Co., Inc. y cols. 2005)1

indica que la tecnología de energías renovableses la opción de electrificación más económicapara muchas aplicaciones fuera de la red,basadas en ella o que funcionan en minirredes,sobre la base de un régimen de costos económi-cos actualizados y anualizados (véase el cuadro2.1 en el capítulo 2).

La tecnología de energías renovables seríaincluso más competitiva hoy, habida cuenta delos precios actuales del crudo en torno a losUS$70 por barril, en comparación con la hipóte-sis de US$38–40 por barril que se utilizó en laevaluación de 2005. Se prevé que los costos desistemas de unos 300 vatios fuera de la red(microgeneradores hidroeléctricos, sistemaseólicos pequeños e híbridos fotovoltaicos-eólicos) ronden los 15–25 centavos por kilova-tio/hora (kWh), o menos de la mitad de los 30–40centavos por kWh de los generadores degasolina y diésel. Los costos del sistema solarfotovoltaico para las aplicaciones de pocapotencia (50–300 W), son comparables a lasalternativas diésel/gasolina. Por lo que respecta alos sistemas independientes de minirred parapoblaciones pequeñas, con cargas de entre 5 y500 kilovatios (kW), existe abundante tecnologíade energías renovables—concretamente, deenergía de biomasa, biogas, geotérmica, eólica ymicrohidroeléctrica— que constituye la alterna-tiva de generación de energía potencialmentemenos onerosa frente a otras opciones energéti-cas convencionales.

No obstante, con respecto a la tecnología deenergía renovable conectada a la red, la tecnolo-gía convencional de generación de electricidad—es decir, las turbinas de gas de ciclo abierto y

de ciclo combinado y las turbinas de vaporalimentadas con carbón o petróleo— siguesiendo la opción más barata. Aunque la energíade biomasa, hidroeléctrica y eólica puedecompetir, en principio, con las centrales eléctri-cas convencionales de menos de 50 megavatios(MW), esos sistemas son, simplemente, máscaros que las unidades generadoras convencio-nales más grandes, de 50–300 MW.

Sin embargo, la tecnología de energía conven-cional ha recibido muchas subvenciones pormedios directos, indirectos y poco transparen-tes. Estos medios incluyen transferencias deefectivo a los productores, los consumidores oambos, las exenciones fiscales, el control deprecios, las restricciones comerciales, losobstáculos normativos a la tecnología deenergías renovables y la incapacidad de lasautoridades para corregir las deficiencias delmercado. Esas subvenciones inclinan la balanzaen contra de las fuentes de energía renovables.Si se tienen en cuenta el costo de factoresambientales externos y el valor de la diversifica-ción de la energía, la cantidad de energíasrenovables económicamente viables aumentade forma considerable.

El papel del Banco en el financiamiento de lasfuentes de energía renovables consiste enalcanzar un equilibrio entre las fuentes deenergía renovables y las convencionales, porquelas distorsiones que acabamos de mencionarhacen que las energías renovables no resulteneconómicamente competitivas con las fuentesde energía convencional. Ello, a su vez, requiereun respaldo continuo de los gobiernos y de losdonantes. Cuando financia proyectos con elFondo para el Medio Ambiente Mundial(FMAM), el Banco trata de eliminar las barrerascomerciales y normativas a la tecnología deenergías renovables y conseguir beneficiosambientales a nivel mundial financiando loscostos incrementales de las inversiones enfuentes de energía renovables. El programa delBanco para el financiamiento del carbonocontribuye, asimismo, a la valoración explícitade los beneficios positivos de los factoresexternos de las energías renovables.

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Planteamiento de la evaluaciónEste examen documental se basa en evaluacio-nes realizadas tanto por el Banco como por elIEG, incluido el examen de informes finales deejecución, informes de evaluación de los proyec-tos y estudios temáticos. El grupo encargado delexamen se entrevistó, además, con personal delBanco y analizó diversas publicaciones específi-cas, entre otros, estudios realizados por laUnidad de Seguimiento y Evaluación del FMAM,el Programa de asistencia para la gestión delsector de energía (ESMAP) y publicacionesexternas. El nuevo Programa de financiamientodel carbono que ha puesto en marcha el Bancoqueda fuera del ámbito de este examen evalua-tivo y se abordará en el estudio del IEG sobre elcambio climático.

El planteamiento metodológico del examen eraevaluar los resultados de los proyectos y analizarla evolución general de la cartera de proyectossobre energías nuevas y renovables en funciónde las calificaciones de desempeño de losproyectos y de la medida en que se alcanzaronlos pilares de la Estrategia de renovación delsector de la energía, a saber, la reducción de lapobreza, el desarrollo del sector privado y laprotección ambiental, así como sus respectivasactividades operacionales en relación con lasenergías nuevas y renovables.

Desempeño de la cartera: Conclusiones másimportantes

Características principales. La cartera de energíasnuevas y renovables está integrada por 65proyectos: 56 proyectos incluidos en el docu-mento Progress Report on Renewable Energyand Energy Efficiency 1990–2004 (BancoMundial 2005d) y nueve proyectos aprobadosen el ejercicio de 2005. De los 65 proyectos, sólo27 (42%) han concluido; 38 (el 58%) siguen enmarcha.

La cartera es relativamente joven, ya que el 69%de los proyectos se aprobó después de 1997.Las regiones de África, Asia oriental y el Pacífico,y Asia meridional representan casi el 75% delnúmero total de proyectos sobre energías

nuevas y renovables. Las regiones de AméricaLatina y el Caribe y Europa y Asia central acogenocho proyectos cada una, y la región de OrienteMedio y Norte de África sólo dos. En el ejerciciode 2005, los compromisos del Banco Interna-cional de Reconstrucción y Fomento/ Asocia-ción Internacional de Fomento, del programade financiamiento del carbono y del FMAM conrespecto a las energías nuevas y renovablesascendieron a US$190 millones, es decir, el10,5% del financiamiento total para el sector dela energía y la minería, que asciende a US$1.800millones (Banco Mundial 2005a, 2005d).

De la cartera total de 65 proyectos, se pudieronevaluar 56, ya que los datos de desempeñocorrespondientes a nueve proyectos queacababan de aprobarse no estaban aún disponi-bles cuando se realizó el presente examen. Deesos 56 proyectos, 46% son autónomos eincluyen toda la gama de intervenciones, quecubre la asistencia técnica, el desarrollo delmercado, el financiamiento de los productoresy los consumidores, la comercialización y losservicios posventa. Las regiones en que elBanco realizó más proyectos autónomosrelacionados con las energías nuevas y renova-bles fueron Asia oriental y el Pacífico, así comoAsia meridional. El 54% restante son proyectoscon componentes de energías nuevas y renova-bles vinculados con proyectos más grandes deenergía, electrificación rural y de petróleo yagua (denominados proyectos “combinados”en este examen). Treinta y ocho proyectos(68%) han recibido cofinanciamiento delFMAM.

Proyectos terminados. Los resultados de los 27proyectos autónomos terminados y las califica-ciones separadas de los componentes sobreenergías nuevas y renovables de los proyectoscombinados revelan que más de la mitad (17)obtuvieron resultados satisfactorios o modera-damente satisfactorios, mientras que los demásobtuvieron resultados insatisfactorios. Losproyectos autónomos fueron satisfactorios engeneral, salvo aquéllos relacionados con laenergía geotérmica o que se vieron interrumpi-dos por crisis económicas.

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Por lo que atañe a los componentes sobreenergías nuevas y renovables de los proyectoscombinados, hay indicios de la existencia decierta relación entre la calificación y la magnitude la integración del componente en el proyectogeneral. La mayoría de los componentes sobreenergías nuevas y renovables arrojaron resulta-dos positivos o moderadamente positivos. Así ytodo, los que representaban el 15% o más de loscostos de sus proyectos respectivos, o queestaban bien integrados en sus proyectos,tuvieron resultados favorables. Fueron proyec-tos de electrificación rural o reforma del sectorde energía con un componente considerable deenergía de biomasa y proyectos que incluían unacombinación de fuentes de energía nuevas yrenovables y eficiencia energética o gestión delos desechos sólidos.

Para los componentes pequeños que represen-taban menos del 15% de los costos del proyectoy que no incidían de forma determinante en losobjetivos generales del proyecto, las calificacio-nes de desempeño sólo fueron moderadamentesatisfactorias. Las calificaciones de loscomponentes de energías nuevas o renovablesde los proyectos de reforma del sector de laenergía que eran pequeños y guardaban pocarelación con los objetivos principales de losproyectos fueron desiguales, ya que tres seconsideraron insatisfactorios.

Proyectos en curso. En comparación con eldesempeño dispar de los proyectos terminados,los proyectos de energías nuevas y renovablesactivos muestran una evolución más favorablehacia resultados satisfactorios. De hecho, varioshan superado ya las metas de instalación físicade tecnología.

Existen, asimismo, pruebas sólidas de que, a lolargo del tiempo, muchas de las enseñanzas extraí-das han contribuido a diseñar los proyectos encurso. Las calificaciones más recientes relativas alobjetivos de desarrollo de los proyectos son todassatisfactorias para proyectos de energías nuevas yrenovables en la región de Asia meridional, asícomo para la mayoría de los proyectos de lasregiones de Asia oriental y el Pacífico, y América

Latina y el Caribe. Pero el desempeño es peor enla región de África, donde se han calificado tresproyectos de insatisfactorios y uno de moderada-mente insatisfactorio. Los componentes de losproyectos combinados tienden a obtener califica-ciones mediocres con respecto al objetivo dedesarrollo de los proyectos, los avances logradosen la ejecución, o ambos.

Enseñanzas extraídas. Las enseñanzas extraídasde proyectos más antiguos han permitidodiseñar mejor los proyectos de energías nuevasy renovables más recientes, lo cual se hareflejado en los resultados, ya que los proyectosautónomos satisfactorios o muy satisfactoriosson también los más recientes.

Una de las principales enseñanzas es que lacombinación del suministro de energías nuevasy renovables con aportaciones de las institucio-nes de servicios sociales y pequeñas y medianasempresas ha permitido mejorar los resultadosen materia de desarrollo. Otra lección es que senecesitan servicios de crédito fiables para quelos sistemas de energías nuevas y renovablessean asequibles para los hogares rurales.Además, debe instaurarse un marco normativo yreglamentario para esas energías que propicieuna adopción a gran escala de modo que estosproyectos tengan éxito. Otra importanteenseñanza es la utilidad de fortalecer la capaci-dad de los principales interesados para desarro-llar el entorno para la comercialización deenergías nuevas y renovables y garantizar lacalidad del servicio.

Por último, una enseñanza práctica para el Bancoes la necesidad de respaldar la participación de lacomunidad y las partes interesadas y demostrarque se puede favorecer así la flexibilidad en eldiseño y la ejecución de los proyectos. A fin depromover la mejora continua de los diseños deproyectos de energías nuevas y renovables, esnecesario que el aumento del financiamiento deesas energías se acompañe de una mayordivulgación y aplicación de estas enseñanzas.

Factores que influyen en el desempeño. El análisisrealizado por el IEG de los informes finales de

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ejecución y los informes de evaluación de losproyectos ha revelado algunos de los factoresque explican los resultados satisfactorios einsatisfactorios. Aunque no están presentes entodos los proyectos satisfactorios, los buenosresultados tienden a estar vinculados a uncompromiso sólido de las autoridades y unalabor eficaz del Banco en cuanto al diseño, lasupervisión y la gestión adaptable del proyecto.Existen factores adicionales inherentes a losproyectos de energías nuevas y renovables:

• amplias consultas con empresarios, consumi-dores y organizaciones no gubernamentales,

• mecanismos eficaces de crédito y de financia-miento en condiciones concesionarias en fun-ción de los resultados que faciliten el accesode los pobres a tecnologías de energías nue-vas y renovables,

• una capacidad institucional sólida adquiridacon anterioridad o a raíz del proyecto,

• más atención al modo de afrontar las barrerascomerciales a las fuentes de energía nuevas yrenovables,

• un interés activo de los inversionistas y finan-ciadores locales.

Los malos resultados parecen guardarrelación con diversos factores, entre ellos lainsuficiente atención prestada a los aspectosnormativos y reglamentarios inherentes a lasenergías nuevas y renovables, la supervisióndeficiente de los componentes de energíasnuevas y renovables, un compromiso nacionalescaso, un sector privado con aversión al riesgo,una capacidad institucional pública y privadainsuficiente y crisis sociopolíticas o económicas.

Principales conclusiones sobre laejecución de los pilares estratégicos dela Estrategia de renovación del sector dela energía

1. ¿En qué medida favorecieron directamente alos pobres las intervenciones del Banco en ma-teria de energías nuevas y renovables?

Los objetivos de reducción de la pobreza no hanaparecido precisamente después de la estrategia

de renovación de 2001. El examen de la carterarevela que el Banco ha perseguido siempre lareducción de la pobreza como uno de los princi-pales objetivos de su cartera de proyectos deenergías nuevas y renovables, que forma partede su objetivo más amplio de mejorar el accesoa la energía. En la práctica, los objetivos dereducción de la pobreza se han integrado en eldiseño de los proyectos mediante mejoras delbienestar, el aumento de la calidad de vida y losingresos o la promoción de la transformaciónrural a través del desarrollo energético.

Muchos proyectos recientes tienen en cuentaestos objetivos en su diseño, pero sólo dosproyectos terminados incluyeron la reducciónde la pobreza como un objetivo explícito. Asípues, para un nada despreciable tercio de losproyectos concluidos, el objetivo implícito dereducción de la pobreza se desprende de losestudios preparatorios, del diseño de losproyectos y de los beneficiarios seleccionados.

Sin embargo, en este momento, es prácticamenteimposible evaluar el impacto en la reducción dela pobreza porque los proyectos concluidoscarecían de sistemas de seguimiento y evaluacióno éstos eran deficientes. Incluso entre los proyec-tos recientes, en que uno de los objetivos explíci-tos es lograr el aumento de los ingresos, sonpocos los que disponen de sistemas deseguimiento y evaluación que permitan determi-nar las mejoras en el ingreso atribuibles a unmayor acceso a la energía. Ninguno de los proyec-tos ofrece datos sobre el aumento de los ingresosde los hogares. El seguimiento y la evaluación delas repercusiones de género han sido tambiénpoco satisfactorios, pues se disponen de pocaspruebas que corroboren la frecuente afirmaciónde que las mujeres se han beneficiado.

Recientemente, el Banco —a través delESMAP— ha estado desarrollando métodos einstrumentos para evaluar mejor las repercusio-nes socioeconómicas de un mayor acceso a laenergía. Algunos de los proyectos de energíasnuevas y renovables más recientes (por ejemplo,en Bangladesh y Uganda) están usando esosplanteamientos.

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En cualquier caso, sigue sin estar claro en quémedida y de qué modo el apoyo del Banco a lasenergías nuevas y renovables ha reducido lapobreza. La falta de pruebas es un serio inconve-niente a la hora de encauzar su financiamiento aesas fuentes. Esta dificultad debe abordarsemediante el establecimiento de sistemas deseguimiento y evaluación más sólidos en losproyectos actuales y futuros, en especial en losdiseñados con componentes de asistenciabasada en resultados que necesitan particular-mente sistemas de seguimiento y evaluación.

2. ¿En qué medida protegieron los proyectos deenergías nuevas y renovables del Banco elmedio ambiente?

Pocos proyectos de energías nuevas y renova-bles terminados tienen la atenuación de losefectos perjudiciales para el medio ambientecomo objetivo explícito. Este examen de lacartera sólo ha hallado pruebas parciales de queestos proyectos están logrando los beneficiosambientales mundiales previstos. Aproximada-mente el tercio de los proyectos concluidos noproporciona datos o proporciona muy pocos,pero, en general, se han alcanzado las metas dereducción de las emisiones de gases de efectoinvernadero. Entre los proyectos, los relativos alas energías renovables a gran escala y conecta-das a la red tienen más posibilidades de reducirlas emisiones de gases que los proyectospequeños fuera de la red, como los que empleantecnología solar fotovoltaica.

El Banco respalda tanto la eficiencia energéticacomo las fuentes de energía nuevas y renovables,lo cual tiene mucho sentido desde el punto devista estratégico. Por un lado, en una evaluaciónreciente del FMAM se llegó a la conclusión deque, aunque las inversiones en energías nuevas yrenovables pueden contribuir a evitar el cambioclimático, se han obtenido mayores reduccionesde emisiones de gases de efecto invernaderogracias a la eficiencia energética propugnada porel Banco y el FMAM que a los proyectos deenergías nuevas y renovables. Por otro lado, enun horizonte de 40 a 80 años, donde se necesita-rán las reducciones más notables de emisiones

de gases, tanto la eficiencia energética como lasfuentes de energía nuevas y renovables (juntocon el secuestro físico y biológico del carbono)tendrán un papel que desempeñar. La eficienciaenergética por sí sola no permitirá alcanzar losniveles deseados de reducción; será tambiénnecesario un despliegue a gran escala de fuentesde energía que reduzcan o eliminen las emisio-nes de carbono.

Las repercusiones ambientales mundiales de losproyectos de energías nuevas y renovablespodrían ser mayores si éstos catalizasen lacreación de mercados de energías nuevas yrenovables, redujeran las barreras comerciales yse concentraran en maximizar los efectos a nivellocal. No se dispone de datos sobre los benefi-cios locales de los proyectos de energías nuevasy renovables del Banco y el FMAM porque elseguimiento y la evaluación han sido deficientes.Sin embargo, los sistemas de seguimiento yevaluación de estos proyectos deberían cen-trarse más en cuantificar la eliminación de lasbarreras comerciales en lugar de limitarse amedir los niveles de reducción de gases de efectoinvernadero. Las operaciones de financiamientodel Banco en relación con el carbono —que sonrecientes y quedan fuera del ámbito de esteexamen— han aplicado protocolos rigurosos deseguimiento y evaluación para medir y verificarlas reducciones de las emisiones de gases.

3. ¿En qué medida permitió el programa delBanco fomentar el desarrollo del sectorprivado?

Los datos relativos a la cartera apuntanclaramente a que el Banco ha obtenido mejoresresultados con los proyectos de energías nuevasy renovables que han apoyado el desarrollo delsector privado, en especial en relación con elestablecimiento de un proceso de comercializa-ción, el fortalecimiento de la confianza de losinversionistas y los consumidores, el fortaleci-miento de la capacidad institucional y la movili-zación de financiamiento privado. Sin embargo,el Banco no ha prestado suficiente atención a lacreación de un marco normativo no discrimina-torio para las fuentes de energía nuevas y

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renovables —a pesar del impulso que ha dadoparalelamente a reformas más amplias en elsector de la energía— con efectos negativos paraalgunos planes relativos a esas fuentes.

Gracias a la asistencia del ESMAP, algunosproyectos recientes sobre energías nuevas yrenovables han comenzado a abordar ya lascuestiones normativas. El Banco ha apoyado,asimismo, a instituciones financieras locales ymovilizado inversiones, a menudo medianteasociaciones entre el sector público y el privado.Sin embargo, las deficiencias institucionales y lafalta de preparación, experiencia y motivaciónentre los inversionistas locales para atender amercados rurales han sido factores limitadores.Al igual que ocurre con el impacto de lasenergías nuevas y renovables en la reducción dela pobreza, el seguimiento y la evaluación de lalabor de desarrollo del sector privado del Bancoen este ámbito han sido insatisfactorios. Esnecesario mejorar ambas actividades paraanalizar los factores que explican el éxito de losdistintos mecanismos de ejecución, adaptar yaplicar las enseñanzas extraídas cuando seamplíe el alcance de los proyectos en otros sitiosy disponer de instrumentos de decisión paraponer eficazmente en práctica planes presentesy futuros de asistencia basada en resultados.

La experiencia derivada de los proyectossugiere que las asociaciones y la participaciónde la colectividad son fundamentales, porqueel desarrollo del sector privado no basta parapropiciar un mejor acceso a la energía. Unaenseñanza importante es que las asociacionesentre el sector público y el privado con partici-pación de organizaciones no gubernamentalesy comunidades de consumidores, y las ampliasconsultas a los interesados pueden desempe-ñar un papel capital para fomentar las energíasnuevas y renovables y llegar a los pobres.Cuando los proyectos dependían únicamentedel sector privado para aumentar el acceso a laenergía, apenas se lograba llegar a los pobres.

Conclusiones y pasos siguientesLa estrategia sobre energías nuevas y renovablesdel Banco es congruente con las prioridades las

prioridades energéticas de los países en desarro-llo. El programa de fuentes de energía nuevas yrenovables del Banco está sólidamente ancladoen el marco más amplio de los pilares de laEstrategia de renovación del sector de la energíay se centra adecuadamente en sus metas dereducir la pobreza, fomentar el desarrollo delsector privado y contribuir a la protección delmedio ambiente. Como se ha confirmado unavez más en foros recientes (incluida la Semanade la Energía organizada por el Banco en 2006),el Banco y la comunidad de donantes debenabordar la crítica situación energética que vivenlos países en desarrollo interviniendo en todoslos frentes, incluido el petróleo, el carbónlimpio, la energía hidroeléctrica y de biomasa yla eficiencia energética, así como las energíasrenovables.

A fin de cumplir su compromiso de aumentar elapoyo a las fuentes de energía nuevas y renova-bles, el Banco necesita aprovechar su capacidadprobada para crear un clima de inversiónpropicio para la comercialización de fuentes deenergía nuevas y renovables y el fomento deldesarrollo del sector privado. El Banco ha decentrarse también en otros puntos fuertes,como el fortalecimiento de las asociacionesentre el sector público y el privado y estructurasapropiadas de reducción del riesgo. Habrá deconsiderar una serie de operaciones e instru-mentos crediticios adecuados para responder alos largos periodos de gestación de los sistemasde energías nuevas y renovables, desde elfortalecimiento de la capacidad institucional y lareforma normativa y reglamentaria hasta laplena comercialización. Y deberá incorporar —en sus presupuestos y programas de trabajoregionales— los costos operacionales de susatisfactoria “intermediación” y su papel consul-tivo, en lugar de seguir dependiendo de fondosde donantes bilaterales.

Las eventuales contribuciones del Banco a otrosobjetivos son más dudosas. La experiencia de losúltimos 15 años indica que los resultados de losesfuerzos del Banco para ayudar directamente alos pobres o lograr beneficios ambientaleslocales o mundiales a través de sus intervencio-

R E S U M E N

x x i x

nes en materia de energías nuevas y renovableshan sido difíciles de medir porque elseguimiento y la evaluación han sido deficienteso inexistentes; ahora bien, la pocas pruebas deque se dispone indican que, hasta la fecha, elimpacto ha sido limitado.

Habría que establecer buenos sistemas deseguimiento y evaluación de los serviciosenergéticos destinados a asistir a los pobres. Losprimeros objetivos deberían ser los proyectossobre fuentes de energía renovables concomponentes asistencia basada en resultados.Habría que realizar evaluaciones rigurosas delimpacto de algunos de los proyectos sobreenergías renovables que concluirán en lospróximos dos o tres años.

Un primer paso importante es que el Bancoincluya objetivos y programas de trabajo relacio-nados con las energías nuevas y renovables en lasestrategias de asistencia a los países —que históri-camente han prestado poca atención a esasfuentes de energía— siempre que sea pertinente.El Banco necesita señalar la importancia de lafuentes de energía nuevas y renovables en lasestrategias nacionales y del sector de la energía.Cuando fomente las reformas y arquitecturas delsector de la energía, el Banco deberá abordartambién las limitaciones que obstaculizan eldesarrollo y la comercialización de energíasnuevas y renovables. Las principales orientacio-nes de la asistencia del Banco en este ámbitodeberían ser la fijación de precios económicospara la energía, el aumento del financiamientoprivado y una reglamentación eficaz.

En resumen, el Banco debe seguir tomando lasmedidas que han funcionado, centrándose enparticular en su papel catalizador para el

desarrollo del sector privado en proyectos deenergías nuevas y renovables, permaneciendoflexible e innovador aplicando las enseñanzasextraídas para mejorar el diseño de nuevosproyectos, y dando una mayor divulgación a lasbuenas prácticas. El Banco debería, asimismo,abordar ámbitos que en el pasado han sidodeficientes, como el seguimiento y la evalua-ción, la integración de las energías nuevas yrenovables en las estrategias de asistencia a lospaíses y la inclusión de los costos de “incuba-ción de negocios de energías nuevas y renova-bles” en el presupuesto del propio Banco.

En particular, la cartera de proyectos de energíasnuevas y renovables debería beneficiarse cadavez más de evaluaciones tanto internas comoindependientes, dado el papel estratégico queatribuye el Banco a esas fuentes en la mejora delacceso a la energía, especialmente para lospobres. Esas evaluaciones deberían centrarse demanera más rigurosa en los resultados y losimpactos, en diferenciar más radicalmente lasenseñanzas de la electrificación rural, de lasfuentes de energía nuevas y renovables conecta-das a la red y de las energías renovables fuera dela red a medida que se amplía la cartera deproyectos terminados en este campo, así comoen un sistema sólido de intercambio de informa-ción que permitiría tener flexibilidad y capaci-dad de respuesta en la ejecución de los objetivosde la estrategia del Banco sobre energías nuevasy renovables.

Se trata de una tarea difícil habida cuenta delrigor presupuestario actual. Sin embargo, es unatarea que merece un apoyo firme de la adminis-tración del Banco, dados sus compromisosmundiales en materia de fuentes de energíanuevas y renovables.

x x x


1

Objectives and EvaluationApproach

The main objective of this Independent Evaluation Group (IEG) reviewis to assess prospectively how the implementation performance out-comes of the Bank’s new renewable energy (NRE) portfolio could in-

form the strategic goal of expanding the Bank’s NRE support. This assessmentis important in view of the Bank’s 2004 commitment to increase its lendingfor NRE by an annual average of 20 percent during fiscal 2005–09.

11

Whereas IEG has conducted a study related tothe 1998 Fuel for Thought Strategy1 andevaluated the private sector development (PSD)outcomes resulting from the 1993 electricpower lending policy, the Bank’s NRE portfoliohas not been independently evaluated before.Similarly, given IEG’s evaluation of the extractiveindustries (IEG-World Bank, IEG-IFC, IEG-MIGA2003a) and the large number of external studiesand regional self-evaluations of large hydro(more than 10 megawatts [MW]), this assess-ment is restricted to geothermal, solar, wind,biomass, and hydro energy sources of less than10 MW. The review also expands on the NREsections of IEG’s widely disseminated 2003study on PSD in the electric power sector (IEG-World Bank, IEG-IFC, IEG-MIGA 2003b).

Evaluation ApproachThere are three main aspects to this review’sevaluation approach. First, IEG’s evaluationmethodology is objectives based. Thus, theassessment of NRE project outcomes wasconducted vis-à-vis objectives at both the

project and strategic levels. At the project level,the review considered the objectives as stated inproject Staff Appraisal Reports or ProjectAppraisal Documents. At the strategic level, thereview assesses the extent to which the EnergyBusiness Renewal Strategy (EBRS) pillars ofpoverty reduction, PSD, and environmentalprotection, as well as the relevant lines of actionunder each, were achieved.

Second, the NRE portfolio is also highly diverse;that is, the Bank’s Regions focused on distinctrenewable energy technologies2 and demonstratesharply contrasting institutional and governanceframeworks. Consequently, the study focused onderiving findings (rather than thematic lessons)and on assessing the Bank’s performance, with aview to informing the NRE scale-up efforts andpriority business lines in the coming years.

Third, in its strategy for the electric powersector, the Bank’s support is predicated oncountry commitment to improving sectorefficiency through policy reforms and sector

restructuring. Therefore, at the country level,this review also takes into account the energysector reform context wherein the NRE projectswere implemented.

Project ratings usedFor the project-level review, portfolio results arereported for both completed and ongoingoperations.

For completed projects, the rating catgoriesinclude outcome (comprised of relevance tocountry-sector objectives, efficacy, and efficiency);sustainability; institutional development impact;and Bank and borrower performance during theproject design, implementation, and completionstages.

For ongoing projects, the review uses ProjectStatus Report ratings—Achievement of theProject Development Objective (PDO), GlobalEnvironmental Objective, and ImplementationProgress—as one source of data among others,with the caveat these ratings have not beenindependently validated. NRE components in“blended” projects were rated separately.

Documents reviewedThe evaluation draws on several elements: (i) Bankproject documents, particularly ImplementationCompletion Reports (ICRs), supervision reports,and aide-memoires; (ii) IEG products, includingICR Reviews, Project Performance AssessmentReports, and energy-environment thematicstudies; (iii) Bank staff interviews; and (iii) afocused literature review covering the GlobalEnvironment Facility (GEF), the Energy SectorManagement Assistance Program (ESMAP), andexternal studies selected for their data and insightson NRE’s poverty-reduction impacts, evaluativecontent, and applicability to the countries thatreceived Bank NRE support. This review also drawsfrom the recently completed ESMAP self-evaluation (ESMAP 2004b). Specific examples toillustrate ESMAP’s contributions to project designand preparation are provided in the report.

Portfolio reviewedThe NRE portfolio is relatively recent: out of 65

NRE projects in the total portfolio (annex A),3 27are closed;4 the 38 that are ongoing are from thelast seven years. The study reviewed in greaterdepth 12 of these 56 projects, with 5 closed and7 ongoing “full-spectrum” projects that have thegreatest value for deriving evaluative findingswith potentially broad applicability (annex B).By “full spectrum,” the review means thefollowing:

• These projects pursued the full range of ac-tivities, including technical assistance (TA)and studies, market development, PSD, con-sumer and producer financing, commercial-ization, and after-sales service. Most wereapproved recently and are in the East Asiaand Pacific and the South Asia Regions, plusa few in the Africa and the Latin America andthe Caribbean Regions. Nearly all the activitiesfocus on electricity access; a few focus onhousehold energy. Outside this subset, theNRE components consist mainly of studiesor pilot activities.

• The projects are major lending vehicles withsignificant Bank and GEF financing, or theyare rural electrification projects that have in-cluded a large NRE component.

Given the constraints of this review (mainly thesmall number of closed and full-spectrum NREprojects that were reviewed) and the still-expanding and mostly young NRE portfolio, itwas premature to draw generalized, evidence-based findings and lessons that distinguishamong rural electrification, grid-connected NRE,and off-grid NRE interventions, which do havedifferent objectives, characteristics, andexpected outcomes, as noted in the report (seechapter 4). This level of disaggregation shouldbe possible as more NRE projects close andfurther self- and independent evaluations arecarried out in the coming years.

The Bank’s relatively recent carbon financeoperations were also outside the scope of thisreview, as few if any lessons can be derived fromthe still mostly active portfolio. The CarbonFinance Program, however, will be part of theIEG’s climate change study planned for fiscal 2008.

2


3

The Bank’s NRE Objectives

Energy is a vital input to economic growth and human well-being. Therapid growth in consumption and global economic dependence onoil, natural gas, and electric power has deepened the geopolitical im-

portance of these commercial energy resources.

Meanwhile, traditional fuels such as firewood,agricultural residues, and animal wastes continueto be the only energy resources used by almostone-third of the world’s population to meet theircooking, heating, and other basic needs. Amongthese consumers are the world’s poorest people,for whom commercial energy (particularly grid-based electricity) is unaffordable or is noteconomical to deliver. About 1.6 billion peopleare without electricity access today. Renewableenergy from solar and wind resources was initiallypromoted as a way to reach these isolatedconsumers, but renewable energy technologies(RETs) have been harnessed recently to feed intoelectricity grids or provide off-grid, decentralizedpower supply solutions at the village level.

For people in developing countries, the mostcritical energy issue is lack of access to eithercommercial or traditional energy sources. TheMillennium Development Goals for reducingpoverty, hunger, and disease and for expandingeducation and achieving gender equality will notbe met without accessible, affordable, andreliable energy services (UN 2005). Thecommercial energy subsector (petroleum

products and electricity) has traditionallyattracted large investment resources fromprivate, bilateral, and multilateral financiers.Traditional fuels, while extremely important tolarge segments of the world’s population, havereceived much less support. For newrenewables, the 1990s witnessed growth in thepromotion of NRE technologies to meet ruralenergy needs and mitigate greenhouse gas(GHG) emissions and thus achieve both localand global environmental benefits.

Through its advice and project lending in allthree areas—commercial, traditional, andrenewable energy—the Bank has respondedstrategically and operationally to the dire andchallenging energy predicament of its clientcountries. The energy sector accounted forabout 8 percent of total International Bank forReconstruction and Development/InternationalDevelopment Association commitments of$22.3 billion in fiscal 2005. In the past five years,NRE lending has grown rapidly, from $20 millionin fiscal 2001 to $190 million in fiscal 2005. In thelatter year, NRE lending accounted for 10percent of total Bank energy lending. More than

22

half of the Bank’s NRE projects have beencofinanced with grants from GEF.

The Bank’s strategic framework for NREincludes (i) two institutional papers in 1993 onenergy efficiency and rural energy (World Bank1993), where the Bank’s commitment to NREwas first stated,1 and (ii) three formal strate-gies—the Electric Power Lending Policy (1993),Fuel for Thought (World Bank 1998), and theEBRS (World Bank 2001a). The Bank’s mostrecent action was to announce at the May 2004Conference on Renewable Energy in Bonn,Germany, that it planned to increase lending forrenewable energy and energy efficiency by 20percent per year for the 5-year period fiscal2005–09.

The EBRS articulates the Bank’s objectives andplanned actions to support NRE. The three EBRSpillars (out of four) for which specific NRE linesof action have been identified are as follows: (i)help the poor directly, (ii) promote governanceand PSD, and (iii) protect the environment.(Although NREs have the potential to displaceimported petroleum, their macrofiscal impact—the fourth EBRS pillar—is limited, because NREsare presently a small contributor to the overallenergy supply of the Bank’s country clients.)Specific activities were established under eachof these objectives:

• To help the poor directly, the Bank sought tofacilitate access to modern fuels and electric-ity, including NRE; ensure that energy subsidieswere targeted toward and reached the poor;and create energy service enterprises run by thepoor, such as rural energy services provisionbased on NRE.

• To promote good governance and PSD, theBank aimed to create objective, transparent,and nondiscriminatory regulatory mechanismsthat level the playing field between NRE andconventional energy. The Bank also sought tostrengthen local financial institutions to providelong-term financing for NRE businesses.

• To protect the environment, the Bank, oftenin partnership with GEF, sought to remove

market and regulatory barriers to NRE as wellas achieve global environmental benefits byfinancing the incremental costs of renewableenergy investments.

The Bank aims to play a crucial role in leveling theplaying field between renewable and conventionalenergy sources. Although RETs largely remainfinancially noncompetitive with conventionalenergy sources for electricity generation, arecent Bank assessment (Chubu Electric PowerCo., Inc. and others 2005) indicates that RETs arethe least-cost electrification option for many off-grid, mini-grid, and grid-based applications, asshown in annex C and figure 2.1—on a levelizedeconomic cost basis, and assuming the availabil-ity of the renewable energy resource.2 Theassessment characterizes current (2004) andfuture (2015) commercial prospects for RETs andfossil fuel-fired electricity generation technolo-gies in these applications and compares levelizedgeneration costs using a consistent economicmethodology differentiated according to deploy-ment conditions and plant size ranges.3

For off-grid (or stand-alone) systems, pico-hydro (300-watt [W]–1-kilowatt [kW]), smallwind (300 W), and photovoltaic system(PV)–wind hybrid (300 W) technologies areprojected to be in the range of 15–25 cents perkWh, or less than half of the 30–40 cents perkWh for gasoline and diesel generators. SolarPV system costs for small power applications(50–300 W) are comparable to these conven-tional energy alternatives. For mini-gridsystems at the village or district levels notconnected to the grid and with loads between5 and 500 kW, numerous RETs—biomass,biogas, geothermal, wind, and micro-hydro—are potentially the least-cost generationoptions, compared with diesel gasoline alterna-tives. Biogas digesters and biomass gasifiers areespecially promising given their high capacityfactors and the flexibility of matching their sizeto the mini-grid load.

For grid-connected RETs, however, conventionalelectricity-generation technologies—open-cycle

4


T H E B A N K ’ S N R E O B J E C T I V E S

5

Figure 2.1: Forecast Generating Costs for Selected Renewable and Conventional Electricity Generation: 2004 versus 2015 (cents/kWh)

20042015

20042015

20042015

20042015

20042015

20042015

20042015

20042015

20042015

20042015

20042015

20042015

2004201520042015

20042015

0 5 10 15 20 25

50 10 15 20 25 30 35 40 45 50 55 60

100 20 30 40 50 60 70 80 90

Off grid

Grid connected (5–50 MW)

Mini grid

Solar PV 50 W (CF = 20%)

Wind 300 W(CF = 30%)

Pico hydro 300 W(CF = 30%)

Diesel/gasoline generator 300 W (CF = 30%)

Solar PV 25 KW(CF = 20%)

Wind 100 KW(CF =3 0%)

Biomass gasifier 100 KW(CF = 80%)

Micro hydro 100 KW(CF = 30%)

Diesel generator 100 KW(CF = 80%)

Wind 10 MW (CF = 30%)

Solar thermal without storage 30 MW(CF = 20%)

Solar thermal with storage 30 MW(CF = 54%)

Mini hydro 5 MW(CF = 45%)

Diesel generator (base)5 MW (CF = 80%)

Diesel generator (peak)5 MW (CF = 10%)

Source: Chubu Electric Power Co. Inc. and others 2005.

Note: Cents/kWh, based on crude oil prices of US$38/bbl (blue barrel) base case in 2004 and US$63/bbl high case in 2015.

and combine-cycle gas turbines and coal- and oil-fired steam turbines—remain the least-costoptions. For these conventional sources, site-specific considerations such as the load profile,demand growth, and interfuel cost differentialsdetermine which specific conventional technol-ogy is the lowest cost. For power plant sizes lessthan 50 MW, geothermal, biomass, hydro, andwind power are potentially as economical asconventional power plants, but these RETs simplycannot compete with larger conventional power-generating units of 50–300 MW.

Conventional energy technologies, however,have been highly subsidized through direct,indirect, and nontransparent means, such ascash transfers to producers and/or consumers,tax exemptions, price controls, trade restric-tions, regulatory hurdles for RETs, and govern-ment failure to correct market imperfections.This has all skewed the playing field againstrenewable energy. For example, in 2004, for theUnited States and Europe combined, govern-ment support for renewable energy was roughlyUS$10 billion.

In contrast, total global energy subsidies forfossil fuels are reported to be between $150 and$250 billion per year. Some studies show thatwith environmental externalities considered,the economic costs of RETs—particularly wind,mini-hydro, and biomass electric for off-grid andpotentially mini-grid applications—are lower

than those for conventional power generationand, on a levelized basis, are the least economi-cal cost option for such applications.

Inclusion of the cost of environmental andglobal externalities increases significantly theeconomically viable quantity of renewableenergy. If, in addition, a value for energy diversi-fication is added, the economically viablequantity of renewable energy increases evenmore. The Bank has conducted studies todetermine this economically viable optimumquantity of renewable energy in China, Croatia,Mexico, and South Africa in the context of RETprojects.

The Bank’s role in renewable energy lending isto level the playing field between renewable andconventional energy sources, because thedistortions cited above make renewable energyfinancially uncompetitive with conventionalenergy sources in both developing anddeveloped countries. These distortionstherefore continue to require government anddonor support. The Bank, often with cofinanc-ing from GEF, seems to remove the market andregulatory barriers to RETs and achieve globalenvironmental benefits by financing theincremental costs of renewable energy invest-ments. The Bank’s Carbon Financing Program isalso contributing to the explicit valuation of thepositive externality benefits of renewableenergy.

6


7

NRE Portfolio Characteristics and Trends

Since 1990, the Bank has financed 65 NRE projects or projects with NREcomponents,1 of which 56 could be evaluated for this review. Performancedata on nine projects that had just been approved at the time of the re-

view were not yet available from the Bank’s data systems.

This chapter on portfolio characteristics is basedon the overall 65 projects, while the next chapteron performance evaluation is based only on the56 projects with available performance data. Ofthe 65 total projects, 27 have closed (42 percent)and 38 are still ongoing (58 percent).2 Moreover,26 are freestanding (12 closed and 14 ongoing),and 39 are “blended” (15 closed and 24ongoing); that is, the NRE activities arecomponents of larger power, petroleum, orrural development projects. Most of the NREprojects were approved after 1997, and 28 (43percent) received Board approval in fiscal 2002or later. Thus, the Bank’s NRE portfolio isrelatively young.

NRE projects are unevenly distributed across theBank’s Regions.3 The Africa Region has had thehighest number of NRE projects, mainly asrelatively small components. Although the EastAsia and Pacific and the South Asia Regions havefewer projects, they have most of the Bank’smain freestanding ones in solar PV and hydro.The Latin America and the Caribbean and theEurope and Central Asia Regions haveimplemented few projects since 1990, and only

one project was approved in the Middle East andNorth Africa Region.

The Africa and the South Asia Regions have beenimplementing NRE projects since the 1980s andhave increased their lending pace over time. Theother Regions, however, became active only inthe mid-1990s. In Latin America and theCaribbean, most projects were approved after1999. In all the Regions, it was not until after themid-1990s that freestanding NRE projects beganto be implemented.

After starting mainly with solar PVs, the Bank nowsupports a wide range of RETs. Initially, solar PVswere promoted in all Regions, except Europe andCentral Asia. The Africa Region had a strongbiomass focus and all the freestanding fuel woodprojects. Geothermal projects were implementedin the 1990s in the East Asia and Pacific andrecently in the Europe and Central Asia Region. Inthe East Asia and Pacific Region, a shift away fromgeothermal to solar PV and small and mini-hydroprojects has taken place. In the South Asia Region,small, mini-, and village hydropower have beenamong the primary RETs. In addition, most of the

33

projects supported TA (90 percent), studies (70percent), and pilot activities (60 percent). In manycases, the NRE component consisted of just theseactivities. This is particularly true of the closedprojects in the Africa Region.

The NRE portfolio had a strong rural focus. About 55percent of the Bank’s NRE portfolio targetedrural areas. Bank projects sought to reach areaswhere NRE technologies (such as small hydro)could be connected to the grid, as well as havingoff-grid small-/mini-hydro and PV applications.Rural households, public service centers such asschools and clinics, and, more recently, smallbusinesses have been the intended recipients.Rural electrification in particular has been anarea where the Bank promoted NRE. Twelveprojects have featured grid-connected RETs, butthese have also been used to provide electricityin areas that the power grid cannot access forphysical or cost-effectiveness reasons.

More than half the NRE portfolio was cofinancedby GEF. GEF cofinanced more than 38 projects (68percent), with the objective of removing marketbarriers to NRE commercialization (GEF 1996).

GEF funds the incremental or additional costsassociated with transforming a conventionalenergy project with national benefits into an NREproject with global environmental benefits. GEFgrants reduce market barriers by covering thedifference or “increment” between an option that

was less costly and polluted more and a morecostly, more environmentally friendly option.

The average costs of preparing NRE projects, whichwere historically higher than conventional energyprojects, have decreased in recent projects.Although, as table 3.1 illustrates, preparationcosts were higher for the initial NRE projects,follow-up projects have cost much less—7–12times less in three countries that have been fociof the Bank’s NRE assistance (India, Indonesia,and Sri Lanka). Nonetheless, the “stigma” ofhigh processing costs still seem to affect NREprojects at the conceptualization stage and maybe a factor in the relatively weak emphasis onNRE in programming country assistance (asdiscussed later in the report). The supervisionof NRE projects may also require more resourcesand intensity to ensure that project implementa-tion proceeds successfully.

The Bank’s broader energy sector reform work in the1990s largely orphaned NRE, despite the clear needto integrate regulatory, pricing, and planningissues specific to NRE in the Bank’s country-sector dialogue (see chapter 5). In addition tocosts, this has also contributed to marginalizingNRE when mapping out country and sectorassistance. As a result, the earlier NRE projectswere seen as “boutique” operations thatpioneering Bank staff made possible onlythrough arduous championing and mobilizationof external funds.

8


Electric power NRE

Preparation cost

Average (US$ thousands) 393 461

Median value (percent of total commitment) 0.3% 0.4%

Range (US$ thousands) 63–1900 77–1,215

Project size

Average (US$ millions) 161 95

Range (US$ millions) 5–485 11–224

Sample size 80 10

Source: Cabraal 2004.

Table 3.1: Preparation Costs for NRE Projects Higher than for Conventional Power Projects

9

The ImplementationScorecard and Main Findings on Delivering the NRE Strategy

Ratings of closed projects are mixed. Based on a review of the 27 closedprojects in the Bank’s NRE portfolio, the number of closed, free-standing projects and NRE components in blended projects that per-

formed well was slightly higher than the number of those for which performancewas weak, as table 4.1 shows.

NRE Portfolio PerformanceAmong the freestanding NRE projects, the onesin Chad, Mauritius, Tunisia, and India hadmoderately satisfactory or satisfactory out-comes. The Senegal and Sri Lanka projectsearned high satisfactory outcomes (the SriLanka project received the IEG Best PracticeAward for 2005).

All three freestanding geothermal projects,however, had unsatisfactory outcomes. Theoutcomes of NRE components that are blendedwith larger projects in Burundi, the Philippines,Rwanda, and Uganda were unsatisfactory ormoderately so. This would suggest thatfreestanding projects have generally performedbetter than projects where NREs are only acomponent. This requires further field study,however, as some local factors may be involved.Out of the total 65 NRE projects in this review,

44

Overall scorecard: Satisfactory performance, but a high level of

unsatisfactory outcomes

Rating No. Projects

Highly satisfactory 2 2 freestanding (Sri Lanka, Senegal)

Satisfactory 8 3 freestanding, 5 components

Moderately satisfactory 7 1 household wood fuel,

6 components

Moderately unsatisfactory 3 2 freestanding, 1 geothermal

component

Unsatisfactory 6 1 freestanding, 2 geothermal,

3 components

Not rated/not available 1 1 freestanding

Total 27

Source: Implementation Completion Report Reviews and Project Performance Assessment Reports.

Table 4.1: Outcome Ratings for Closed NRE Freestanding Projects and Components of BlendedProjects

38 are still ongoing. The detailed ratings forclosed NRE projects are in annex D.

As table 4.1 illustrates, freestanding projectswere generally rated as satisfactory, unless theyinvolved geothermal energy or were interruptedby an economic crisis in the country. Theprojects rated satisfactory or highly satisfactorywere also the more recent of the freestandingprojects, which may be associated with thestrong lesson learning between older and newerprojects that is discussed in chapter 5.

Regarding NRE components of blendedprojects, each of which were separately rated forthis assessment (see annex E), there appears tobe some association between the outcomerating and the component’s size and integrationin the larger project. NRE components thatconstituted a significant share of their respectiveprojects (15 percent or higher) or that were wellintegrated in the larger projects despite theirsmall size had satisfactory outcomes. Thesewere projects in rural electrification and energysector reform with a sizeable biomasscomponent and those involving a mix of NREand energy efficiency. However, for componentsthat were small (generally less than 15 percent)and that did not have a strong relationship withthe other aims of the larger projects, theoutcome ratings were only moderatelysatisfactory.

In terms of regional performance, the South AsiaRegion’s projects were either satisfactory ormoderately so. In the Africa Region, the experi-ence is mixed, with satisfactory and unsatisfac-tory projects and components.

The performance of projects in the East Asia andPacific Region is similarly quite mixed. Biomassprojects or components have all shown satisfac-tory or moderately satisfactory ratings (exceptone project in Mali). NRE components in irriga-tion or rural electrification projects have allshown either satisfactory or moderately satisfac-tory ratings as well. NRE components in energysector reform projects that were small and hadlittle connection to the dominant objectives of

their projects were quite mixed, with three ratedas unsatisfactory.

Results to date of ongoing projects are mostlysatisfactory, a few far surpass their targets, andlessons learned have led to better project design.The portfolio review and interviews of Bank staffshow that the design of ongoing NRE projectsbenefited from applying the lessons from closedand active projects (a full discussion of thelessons learned is in chapter 5).

The review also found that the supervisionratings for ongoing projects are predominantlysatisfactory or moderately satisfactory; that is,less than one-fourth of the projects are rated asmoderately unsatisfactory or unsatisfactory, asshown in table 4.2. This compares favorably withthe Bank-wide figure of 79 percent of projectsreceiving moderately satisfactory or higherratings for development outcome.1

It is worth noting that the implementationprogress rating in the first few years is not apredictor of whether the projects will havesatisfactory final outcomes, because new NREprojects take time to build momentum asinstitutional capacities are built (for example, inthe India Renewable Resources Development[RRD] Project, Sri Lanka Energy ServicesDelivery [ESD] Project, Argentina RenewableEnergy in the Rural Market [RERM] Project, andChina Renewable Energy Development [RED]Project). The detailed ratings for ongoing NREprojects are presented in annex E.

In terms of achieving PDOs, the latest PDOratings are all satisfactory for NRE projects in theSouth Asia Region, and the majority of East Asiaand Pacific and Latin America and the CaribbeanRegion projects as well. In the Africa Region,PDO ratings are mixed but mainly poor, withthree projects rated unsatisfactory and oneproject moderately unsatisfactory. Blendedprojects tend to have low ratings in PDO,implementation progress, or both.

Some NRE projects are making significant achieve-ments in disseminating NRE technologies, while

1 0


others are making only minor progress, if any. Astable 4.3 shows, the major ongoing and recentlyclosed NRE projects present a contrastingpicture in terms of performance. The evidencethat the Bangladesh project will far surpass itsoriginal target has led to the establishment of aneven higher goal for solar home system (SHS)connections. The China RED project has alreadygone beyond its target for PV systems, and theSri Lanka Renewable Energy for Rural EconomicDevelopment (RERED) Project is on track tomeet its installation goals. As a result of the firstIndia RRD project, the NRE share of total genera-tion grew from 0.4 percent in 1995 to 3.4percent by 2001, for which the RRD project wasa significant contributor. Similarly, in Sri Lanka,NRE grew from zero percent prior to the ESDproject to 124 MW either commissioned orunder construction by September 2005(compared with total generation capacity ofabout 2,000 MW). China has more than 30,000MW of small hydro and plans to increase NREshare of total generation to 15 percent by 2020.

In contrast, the Argentina, India Second RuralElectrification, Nicaragua, and Uganda projectshave been lagging behind in meeting their PVsystem sales or small-hydro developmentobjectives. The first two projects have chroni-cally lagged behind to the point that their

closing dates were extended. This unevenperformance has implications for their ultimatepoverty-reduction impact.

Grid-connected projects are not necessarily easierto implement than off-grid NRE projects. NREprojects that supply power to the grid aresometimes assumed to be relatively easier todesign and implement than off-grid projects.However, this is not necessarily the case, partic-ularly when the overall energy sector regulatoryframework and tariff structure are taken intoaccount (see chapter 5).

Grid-connected RETs exhibit different character-istics than off-grid technologies (see table 4.4),which need to be taken carefully into accountduring project design and supervision to yieldsuccessful outcomes. A review of the latestsupervision reports for six NRE projects (twoclosed and four ongoing) in Sri Lanka, India,China, and Uganda show that both grid and off-grid components had satisfactory ratings(moderately satisfactory in Uganda) forimplementation progress and PDOs.2

Delivering off-grid NRE services has been achallenging course for the Bank, given that therequirements, costs, and benefits of thoseservices are quite different from those of

T H E I M P L E M E N TAT I O N S C O R E C A R D A N D M A I N F I N D I N G S

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No. of projects Highly Moderately Moderately (N = 27) satisfactory Satisfactory satisfactory unsatisfactory Unsatisfactory

Project development objective 21b 11 6 1 3

Implementation progress 22c 9 8 4 1

Global environment objective 16d 1e 6 6 2 1

Source: Implementation Status Reports.

a. Based on the latest Implementation Status Report for each project. Four projects closed between June 2004, when the initial portfolio evaluation was conducted, and the end of June

2005, bringing the active portfolio from 33 to 29.

b. A PDO was not applicable for two GEF-only projects in Mexico (methane gas capture and rural electrification for agriculture), not available for two GEF medium-size projects (Hungary

Rehabilitation and Expansion of Small Hydro and Uruguay Landfill Methane Recovery Demonstration Project), and not provided for three projects (Philippines Rural Power; Vietnam Sys-

tem Efficiency Improvement, Equitization, and Renewables; and India Second Rural Electrification).

c. An implementation progress rating was not applicable or not available for the GEF medium-size projects in Hungary and Uruguay and was not provided for four projects (Philippines

Rural Power; Vietnam System Efficiency Improvement, Equitization, and Renewables; India Second Rural Electrification; and Mexico Methane Gas Capture).

d. For eight projects, including the GEF medium-sized projects in Hungary and Uruguay, a global environmental objective was not applicable. The supervision documents for three proj-

ects did not provide a rating for the achievement of this objective.

e. GEF only: Mexico Methane Gas Capture.

Table 4.2: Ratings for Ongoing NRE Projectsa Mostly Satisfactory

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Country (and fiscal year approved) RET Target (in PAD) Achieved Closing date

Argentina (1999) Solar PV for households 65,000 households 1,900 householdsa Original: 9/30/2005Solar PV for public 1,100 public Revised: Revised: 12/31/2006institutions institutions 30,000Small wind off-grid 3,500 house-holds/ householdssystems for households institutionsand institutions

Bangladesh (2002) Solar PV 64,000 households 53,000 householdsb 6/30/2008(revised to 200,000)(Baseline = 250)

Bolivia (2003) Solar PV 15,000 systems 0c 12/31/2007China RED (1999) Wind 2,618 GWh 685 GWh/year electricity 6/30/2007

generated from (baseline = 526)

Solar PV 10 MWp 7.8 MWpd

353,000 units 356,000 unitsd

India Second Rural Small hydro 200 MW 69.4 MWe Original: 3/31/2006Electrification (2000) Revised: 3/31/2007Lao PDR (1998) Solar PV and micro-hydro 4,600 households 6,097 households Closed 12/2004Nicaragua (2003) Mini- and micro hydro-based 2 MW total installed capacity 0f 12/31/2008

independent gridsSolar PV 100 kW of installed PV 7.6f

capacity—all types of usersSolar PV or mini-grid 7,000 new connections 104f

Sri Lanka RERED Grid-connected small-hydro, Additional 85 MW installed An additional 85 MW 6/30/2008(2002) wind, and biomass capacity (baseline = 31 MW) operating or under

constructiond

Solar PV and village hydro Electricity access to an An additional 83,773 SHSs; additional 100,000 households 4,594 households served and 1,000 SMEs and public by village hydrod

institutions (baseline = 22,685 households)

Uganda (2002) Hydro 15-MW capacity installed or 14 MW under 8/31/2006under installation constructiong

Solar PV 320,000 cumulative Wp sales 19,000 Wp installedg

of PV systems to households/institutions

Source: Implementation Status Reports and Project Appraisal Documents.

Note: PAD = Project Appraisal Document, SME = small and medium-size enterprises, GWh = gigawatt hour, MWp = peak megawatt, Wp = peak watt, SHSs = solar home systems.

Notes below indicate Implementation Status Report dates.

a. November 9, 2005.

b. December 5, 2005.

c. November 21, 2005.

d. December 31, 2005.

e. January 24, 2006.

f. February 7, 2006.

g. December 21, 2005.

Table 4.3: NRE Projects’ Dissemination Targets

providing grid-connected NRE. Despite apossible impression that the implementationof grid-based NRE poses less difficulty, itshould be noted that creating policy andregulatory environments that support grid-connected renewables has remained a signifi-cant challenge.

The importance of a conducive environmentat the national level can be seen from theexperience of some of the ongoing projects. Afactor that has adversely affected the IndiaSecond Renewable Energy Project is theregulatory uncertainty that private developers

face as a result of legislative changes at thestate level. There has been a request from bothprivate and public stakeholders for assistanceto determine prices for power from re-newables, and the Bank has offered its help.However, not all the borrower agencies havebeen cooperative.

In Uganda, grid-connected and bagasse-basedenergy generation has taken longer to imple-ment than expected largely because of the timerequired to negotiate a power purchaseagreement. But with the approval of agreements,investment has been increasing significantly.


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Criteria Grid-connected Off-grid

Cost to financing institution Moderate Substantial–high

(Sri Lanka ESD mH: US$ 963.5/kW; (Sri Lanka ESD PV:11/Wp; vH: $2,060/kW;

India RRD SH: $990/kW, wind: $1,150/kW) India RRD PV: $4.8-$14.2/Wp)

Regulatory requirement Substantial–high Low–moderate

(predictable, supportive environment, (“light-handed” regulation, tariff

such as sector reform, tariff rationalization, determination for low-income areas)

and small power purchase agreement)

Social requirement (community Low High

and NGO participation)

Institutional requirements Substantial High

for financing (public-private partnerships, commercial (public agencies, private banks,

banks, medium-large firms) village cooperatives, microfinance institutions)

Capital needs High Substantial

(large up-front investments, (grants for system affordability,

long repayment periods) working capital for private firms)

Pace and magnitude of Substantial–high Moderate

increased energy provision (faster pace, wider coverage) (slower pace, less coverage)

Service reliability Substantial Moderate–substantial

(higher energy levels, more (low energy levels,

hours of availability) limited hours of availability)

Economic rate of returna High Low–high

(Sri Lanka ESD mH: 26%b (Sri Lanka ESD vH: 61%, PV: 42.6%b

India RRD SH: 28–33%)c India RRD PV: 14–108%)

Source: Implementation Completion Reports, Project Appraisal Documents, and Project Performance Assessment Reports.

Note: NGO = nongovernmental organization, mH = mini-hydro, SH = small hydro, vH = village hydro, Wp = peak watt.

a. Includes environmental benefits, such as GEF support for off-grid renewable technologies, and consumer surplus, unless otherwise noted.

b. The calculation is for avoided cost only.

c. Does not include global environmental benefits or consumer surplus.

Table 4.4: Characteristics of Grid-Connected and Off-Grid NRE Projects

In Sri Lanka’s case, a small power purchaseagreement (SPPA) was developed during thefirst project, Energy Services Delivery, and hadnotable positive impact on mini-hydro invest-ments for the grid. But while the follow-upRERED project has been proceeding well, thelack of explicit policy support for renewables inthe country places the sustained growth of thesubsector in question.

Some supportive policy decisions have beenmade for NRE, often in response to lobbying bysector groups. However, these are likely to havelimited impact, as they have not been given anyfinancial support and have gone unimple-mented. These decisions, moreover, have beenmade without taking into account a broadervision and policy for the sector.

As the portfolio grows in size and more NREprojects close, the differences in objectives,outcomes, and impacts between rural electrifi-cation, off-grid NRE, and grid-connected NREinterventions should be closely evaluated. Ruralelectrification interventions focus more onpoverty reduction and broad improvement ofthe quality of life of consumers. Grid-connectedNRE projects, in contrast, have a strongerpotential for reducing GHG emissions andcontributing to energy security. Off-grid NREsremain a subset of rural electrification and havetheir own specific challenges, such as theeffectiveness, efficiency, transparency, andtargeting of subsidies, and better integrationwith the larger rural electrification program.

Larger-scale, grid-connected NRE projects,however, are concerned more with the overallenabling environment (policy, regulations,pricing, and financing), because, given anadequate tariff regime as well as transparent andpredictable regulations, many NREs can becompetitive without subsidies. Therefore, futureassistance strategies may differ, depending on thetype of NRE intervention. That makes it importantto continuously derive findings and lessons fromthe NRE portfolio, with a view to adapting theBank’s NRE assistance strategy to be more respon-sive to country client needs.

Economic rates of return (ERRs) for closed NREprojects vary considerably but are generallyfavorable. In the India RRD Project (1992), ratesof return for small hydro and solar PV systemswere 28 to 33, and 14 to 108 percent, respec-tively. The ERR for wind energy was 14 percent3

(these figures include the GEF cofinancing forwind and solar PV).

In the Sri Lanka ESD Project (1997), ERRs forvillage hydro and solar PV were 61 and 42.6percent, respectively, while for wind energy theERR was only 3.9 percent (these figures includethe GEF cofinancing for all three technologiesand consumer surplus for village hydro and PV).Annex F provides additional details on ERRs forthe projects in India, Sri Lanka, and two othercountries.

An important observation is that ERRs at projectcompletion tended to be higher than appraisalestimates, suggesting that costs were lower or thatbenefits were higher than estimated at appraisal.If the benefits to consumers were higher, furtherstudy is merited, and the importance of strength-ening monitoring and evaluation (M&E) in NREprojects is further underscored.

The GEF funds for off-grid projects wereprovided for barrier removal and offered on thebasis of performance. In the economic analysesof these projects, the GEF funds were used as aproxy to value the global externality. With GEFsupport, NRE electricity-generation schemescan provide substantial economic returns,especially when consumer surplus benefits areincluded, as they are in the figures for solar PVand for small hydro in Sri Lanka. However, fullcommercialization of NRE has not yet beenachieved, and the rates of return would be signif-icantly lower in some cases in the absence offinancial incentives or subsidies.

It is important to note that subsidies for conven-tional energy-based electricity, such as lifelinerates, are a generally accepted practice. Theabsence of a level playing field between NRE andconventional energy remains a contentiousissue in the Bank’s energy practice, as the

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interviews and literature review for this assess-ment have found.

Some potential factors of performance have emergedin selected NRE projects. Satisfactory NREoutcome ratings tend to be associated withseveral elements: strong government commit-ment; effective Bank performance, includingadaptability based on high-quality supervision;extensive consultation and participation withentrepreneurs, consumers, and nongovernmen-tal organizations (NGOs); effective credit andoutput-based (GEF) grant-financing mechanismsfor the private sector; efficient credit arrange-ments for grid NRE financing and consumeraccess to off-grid NREs; strong capacity beforethe project or as a result of its activities; focusedattention to addressing the market barriers torenewables; and strong interest from localinvestors and financiers. Recent freestanding(NRE only) and rural electrification (grid and off-grid) projects, which aimed at commercializationthrough the private sector, exhibit these factorsand performed well.

In contrast, neglect and lack of commitment ledto unsatisfactory performance. Projects thathave performed poorly tend to be associatedwith inadequate attention to ensuring aconducive policy and regulatory environmentfor NRE, weak country or implementing agencycommitment, a private sector that is hesitant totake risks, weak Bank performance, insufficientcapacity of public and/or private institutions,and sociopolitical or economic crises in thecountry.

Poor supervision may also be part of thereason small NRE components in conventionalenergy or water sector reform projects did notachieve their objectives, as unsatisfactoryoutcomes for the components tended to occurat the same time as unsatisfactory ratings forBank performance. However, if the Bank is toscale up NRE components in nonenergysectors (for example, education and health)where NRE solutions can provide importantenergy services, other factors may be involvedthat need closer study.

Results in Terms of Poverty ReductionThe poverty-reduction impacts of the Bank’sNRE projects are largely nonevaluable, mainlybecause of weak or absent M&E. Partialevidence, however, suggests highly mixedpoverty-reduction outcomes. This is becausesome ongoing and closed projects haveexceeded their installation targets, while othershave only made minor progress, if any. Thereview also found that the poorest of the poorhave been unable to benefit because the costs ofenergy delivery remain prohibitive for them. Seeannex G for the detailed review.

Although the EBRS strategy anchors the Bank’ssupport for NRE partly on poverty reduction,only one closed NRE project included povertyreduction as a stated objective. This said, bypursuing the improvement of energy access,poverty reduction was a major implied objectivein NRE assistance through welfare improve-ments, enhanced livelihoods and incomes,and/or promotion of rural transformation.

As shown in table 4.3 on the pace of RET instal-lations in ongoing and closed projects, thepoverty-reduction outcomes of the Bank’s NREinterventions are highly mixed, based on thedegree to which installation targets have beenachieved. For example, through NRE powerprovision, the Argentina, Nicaragua, andUganda projects have sought to reduce povertyby implementing quality-of-life improvements,fostering small businesses, and spurring ruraltransformation, respectively. But their povertyimpacts have been small because of the minorprogress being made to date in NREinstallation.

Weak M&E for poverty-reduction outcomes inthe Argentina and Nicaragua projects will makeit difficult to assess whether these projects havecontributed to reducing poverty. Targets forsmall hydro in the Sri Lanka and India NREprojects were exceeded, but solar home systemsin five projects fell short of their targets by signif-icant amounts.

The poverty-reduction impact of NREs, however,


1 5

has multiple dimensions and needs to beassessed beyond the level of household incomes.This need underlines the importance ofadequate M&E. The activities of NRE entrepre-neurs, service providers, and investors can havesignificant poverty-alleviation outcomes.

For example, the China RED Project supports 34companies that are selling 120,000 PV systemswith a gross value of about $24 million annually.These companies have set up about 12 ruralretail outlets each and employ 60–90 staff each.In addition, more than 100 companies aresupplying goods and services to these 34companies.

In Sri Lanka, 13 solar PV companies, throughmore than 100 rural outlets, are selling 24,000solar PV systems, with $10 million equivalent ingross revenues annually. Moreover, 35 privatehydro development companies have invested inabout 115 MW of private generation (with grossrevenues of about $15 million/year), and 10financial institutions are lending for NRE.

India now has a robust and growing renewableenergy manufacturing, design, and engineeringoperation and maintenance capability comparedwith the conditions in 1993 (details are insection 4.5 of the ICR). Similar experiences areemerging from the Latin America and theCaribbean and the Africa Regions.

Compared with decentralized power systemsbased on NRE, wood fuel supply projects weremore likely to have reached households at allincome levels because they involved wholecommunities in forest management and thewood fuel trade. It should be noted, however,that evaluating the impacts at the householdlevel for these electricity-supply projects isdifficult, because M&E systems in the projectshave been absent or weak. None of theprojects, for example, provides data onhousehold income. Although increasedincome is a goal for recent projects, only a fewhave M&E systems that will be able to identifythe income gains attributable to increasedenergy access.

In recent years, the Bank, through ESMAP, hasbeen developing methods and tools to betterassess the socioeconomic impacts of improvedenergy access. The methodology developed byESMAP is not technology specific; it is outcomebased. Where applicable, ESMAP used theconsumer surplus methodology, thus enabling itto capture the impact of technological change.Although these approaches are being employedin some of the latest NRE projects, such as thosein Bangladesh and Uganda, they are quiterecent, so it is still unclear if the Bank’sassistance to improve access through renewableenergy has reduced poverty to any significantdegree. This is a major analytical gap. Address-ing this data vacuum is critical in mapping outand targeting the Bank’s expanded NRE lending.

To What Extent Were GlobalEnvironmental Benefits Achieved?

The global environmental benefits of most Bank NREprojects have generally met expectations, but M&Eis weak or absent in many cases. Together withGEF financing, the Bank pursued the EBRSobjective of protecting the environment byremoving market barriers to renewables. Astable 4.5 shows (see also annex H), out of fiveclosed projects, three met or nearly met theirappraisal targets and one exceeded its estimatedreductions.

One project in Indonesia, which fell far short ofits target, was severely affected by an economiccrisis in the country, as is the ongoing project inArgentina. Because of weak M&E, data on theprojects’ environmental impacts are limited:about a third of the closed projects provide littleor no data. Overall, the limited evidence fromNRE project documents shows that targets forthe reduction of GHG emissions were largelynot met. However, although many GEF projectshave not implemented well-structured M&Eprotocols, reductions in GHG emissions havebecome a less-important measure over time inthe GEF framework. Rather, what counts are thereductions of market barriers, which is whatthe M&E systems in GEF projects should try tomeasure.

1 6


Regarding the Bank’s carbon finance operations,the Bank pioneered the design and implemen-tation of rigorous M&E protocols to measureand verify GHG emissions. The Carbon FinanceProgram, which is relatively new, is outside thescope of this review and will be covered in theplanned IEG climate change study (fiscal 2008).

Addressing both energy efficiency and renewablesmakes sense. According to a recent evaluation ofthe GEF Climate Change Program (GEF 2004),the direct contribution renewables have madeand will be able to make to global climate changeprevention is not substantial. PV systems, whichfeature heavily in the Bank’s off-grid electricityprovision and rural electrification projects, havea low impact on GHGs.

In the NRE subsector, the systems that have hadthe largest effect in reducing carbon emissionsand that have the potential to make the largestcontribution in the future are grid-connectedones. The global environmental impact of NREprojects is likely to be greatest when projects

catalyze the creation of NRE markets and reducemarket barriers—or, at the local level, if theyfocus more on addressing beneficiaries’environment-related concerns. There can bewin-win solutions that address both local andglobal environmental issues; for example, cleanfuels for urban transport could significantlyreduce urban air pollution and the negativehealth impacts on the poor.

However, preliminary evidence gathered by theGEF study suggests that increased energyefficiency may be more effective in reducingGHG emissions. Table 4.6 shows the greatercost-effectiveness GEF has achieved in energyefficiency projects compared with those inrenewable energy for preventing climatechange. Energy efficiency projects have beenfound to yield greater net economic benefitsthan NRE projects.

The study concludes that more emissionreductions have resulted, and will result, fromBank-GEF energy efficiency projects than from


1 7

Project Targeted reduction Actual reduction

Argentina (closing 2006) 25,000 310

Bangladesh (closing 2008) 257,664 (over 15-year life, by replacing Not reported

kerosene, through grid & off-grid)

Bolivia (closing 2007) 14,000 0

China RED (closing 2007) Targets (MT) Baselines (MT) Not estimated at midterm

CO2: 38.6 CO2: 11.1

SO2: 4.41 SO2: 1.57

NOx: 0.119 NOx: 0.035

TSP: 0.213 TSP: 0.076

Indonesia SHS (closed) 1.3 million (over 15 years) 9,000 (over 15 years)

India RRD PV component (closed) 116,000 (over 10 years) 94,000 (over project lifetime)

Lithuania Geothermal Demo (closed) 52,000 46,000

Nicaragua (closing 2008) 10,000 Not reported

Sri Lanka ESD (closed) 140,000 (excluding reductions from mini-hydro) 514,000 (total including hydro)

Sri Lanka RERED (closing 2008) 1,250,000 900,000

Tunisia Solar Water Heating (closed) 18,000 25,000

Source: Implementation Completion Reports for closed projects and latest available Implementation Status Report for ongoing projects.

Note: CO2 = carbon dioxide, SO2 = sulfur dioxide, NOx = nitrogen oxides, MT = metric tons, TSP = total suspended particulates.

Table 4.5: Data on Reductions in Greenhouse Gas Emissions from NRE Projects (metric tons)

NRE projects (GEF 2004). It is anticipated thatongoing energy efficiency projects will betterreduce GHGs than those in any other energysubsector, accounting for two-thirds of the totallifetime reductions of 1.7 billion tons of CO2.

4 Incontrast, the renewable energy subsector, whichcontains a larger number of projects than energyefficiency, will produce only a quarter of theoverall GHG impact (GEF 2004).

The foregoing findings, however, have been thesubject of much debate and should not necessar-ily suggest that the Bank should focus on energyefficiency instead of NRE. In weighing energyefficiency versus NRE, it is important to considertimescale. Over the 40- to 80-year time horizonwhere the most significant reductions in GHGemissions will be required, both energyefficiency and NRE (along with physical andbiological carbon sequestration) will need to playa role. Energy efficiency alone will not enable thedesired reduction levels to be reached; the large-scale deployment of low-carbon and no-carbonenergy sources will also be a requirement.

Moreover, although there are cost-effectivenessdifferentials as cited in the GEF report, both GEFenergy efficiency and GEF renewable energyinterventions are highly cost-effective by anymeasure under the Kyoto Protocol. Finally,unlike the Bank’s Carbon Finance Program, theGEF’s role is to remove market barriers in orderto leverage considerably more NRE investmentsbeyond a particular project. For example, underthe follow-up to the China RED Project, thegovernment is planning a village electrificationprogram to provide off-grid PV services toinhabitants of 20,000 villages. According to thegovernment, this will require up to 200 MW ofPV, or 20 times the capacity to be installed underthe earlier project.

Outcomes Related to PSD and Promotionof Good GovernanceThe Bank’s effectiveness in facilitating PSD in itsNRE portfolio has been substantial, and particu-larly high in recent projects. (See annex I for theevaluation of the portfolio’s PSD performance.)

Bank-financed projects have helped removemarket barriers and establish processes for NREcommercialization in several ways. They haveconsistently promoted PSD through a flexibleapproach of supporting various NRE technolo-gies and business models for their delivery. Theyhave developed NRE policies, involved diversestakeholders, and strengthened local financialinstitutions to provide long-term financing forrural energy businesses. The business modelshave been sales based and have involvedconsumer credit (dealer or end-user credit;lease or hire-purchase schemes) and fee-for-service approaches, with the credit modelperforming better than service fees for solar PVs.The NRE policies developed have includedthose for standards and certification, as well asthe standardization of SPPAs to reduce investorrisk and boost their confidence.

The Bank has also supported local financialinstitutions and mobilized investments, oftenthrough public-private partnerships. In SriLanka, the Bank was especially successful inpromoting the role of local commercial anddevelopment banks in financing privatedevelopers. As a result, subsidy-free NREcommercialization has begun to appear.

For promoting biofuels and greater efficiency oftraditional wood fuel use, the Bank has helpeddevelop the private sector, involving firms in thecreation of ethanol-based gel fuel and improvedcookstoves and bringing wood fuel markets

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Cluster GEF, US$ per ton CO2 GEF, US$ per ton carbon

Energy efficiency 0.21 0.77

Renewable energy 0.63 2.29

Source: GEF 2004.

Table 4.6: Energy Efficiency Measures Cost-Effective in Reducing Greenhouse GasEmissions

under improved regulation and governance.This has benefited rural communities that act asprivate entities in supplying wood fuel.

In the design of successful NRE projects, theBank has employed complementary interven-tions to help commercialize NRE technologies,as follows:

• Promoting private competition• Encouraging cost-effectiveness through

economies of scale• Mobilizing financial resources through public-

private partnerships• Providing output-based aid (OBA) for gradual

phase-out• Verifying and improving the technical per-

formance of NRE systems to ensure qualitystandards in the market and boost consumerconfidence

• Demonstrating the commercial viability andutility of NRE

• Using sales models for the delivery of renew-able energy technology

• Involving the beneficiary communities.

Most of the electricity-oriented NRE projectshave used several of these interventions ascomponents that complement one another.

OBA,5 financed through GEF grants, was used inselected projects as a mechanism to ensure thatRET installation and service met disseminationvolumes and quality standards. Some projects

have explicitly sought to boost consumersupport and demand for renewables by improv-ing the technical performance of RETs.

OBA appears to have helped increase consumerconfidence in the private provision of NRE,although concrete evidence is limited becauseof the lack of M&E for private sector activities.Some progress is being made in a few NREprojects, such as the M&E reports by the IndianRenewable Energy Development Agency andthe NGO Dian Desa in Indonesia, as well assurveys done in Sri Lanka.

However, M&E remains a major gap that needsto be addressed if the Bank is to build on its PSDsuccesses, as OBA approaches are particularlyM&E-intensive—especially so in the highlydecentralized NRE projects. Worth noting is theinnovative approach of the Bolivia NRE project,wherein the private sector operators will becollecting social and economic data annuallyfrom the consumer households during theirrequired technical visits.

The Bank’s effectiveness was modest with respectto the EBRS goal of promoting good governanceand creating regulatory environments conduciveto NRE (as discussed immediately below). Morerecent projects, however, and ESMAP assistancehave started to address the issue. In some cases,institutional weaknesses have been constrainingfactors. Public partners have been weak, andprivate investors lacked experience and readiness.


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2 1

Main Lessons Learned andStrategic Implications forthe Bank

The Bank’s NRE interventions are anchored in the larger EBRS pillars andare well focused on its goal of reducing poverty, promoting PSD, con-tributing to global environmental protection, and improving macro-fiscal

balances.

The Bank’s NRE strategy is relevant to developingcountry energy priorities. As reconfirmed duringthe Bank’s 2006 Energy Week, the Bank and thedonor community need to help address the direenergy predicament of developing countries byacting on all fronts, including petroleum, cleancoal, hydropower, biomass, energy efficiency,and renewable energy. The 2006 Energy Weekalso highlighted the need to diversify supply andhow NRE is a part of the supply diversificationstrategy that leads to least-cost supply.1

Although the NRE strategy continues to berelevant, there are important implications withrespect to its implementation, based on thelessons learned from older NRE projects (whichhave had a mixed performance) as well as morerecent projects (which to date have mostly beenperforming satisfactorily). These lessons, whatis working and what is not, and their strategicimplications are discussed below.

Lessons learned in older projects have led to betterNRE project designs; the scaling up of NRE lendingshould be matched by broader lesson learning toensure continuous design improvement. As the

Bank scales up its NRE involvement, it isimportant to ask whether the newer projectshave benefited from applying the lessons ofearlier projects.

The interviews and portfolio review showed thatimportant lessons of experience emerged fromearlier, major projects—notably the India RRDProject (fiscal 1993–2002), the Indonesia SHSProject (fiscal 1997–2001), and the Sri Lanka ESDProject (fiscal 1997–2003)—and that more recentprojects drew on them to develop improveddesigns. The five main lessons learned over thespan of the NRE portfolio are described below.

• Lesson One: To enhance development out-comes, NRE provision needs to be accompa-nied by supporting inputs and services fromsocial service institutions and small andmedium enterprises.

Drawn initially from the experience of the SriLanka ESD project, this lesson has continued toinfluence the design of several later NREprojects, in Argentina, Bangladesh, Bolivia,Nicaragua, Sri Lanka (for the follow-on RERED

55

project), and Uganda. These projects havesought to support business, microfinance,social, and information and communication(ICT) services alongside NRE provision.

At a broader level, this learning is reflected in theevolution of the Bank’s approach from primarilysupporting welfare enhancement by disseminat-ing NRE systems to households to also promotingwider-scale social development by making NREavailable to clinics and schools; income generationthrough a connection with productive uses; andthe supply of other services, such as ICT orbusiness development, to encourage broader ruraltransformation and larger-scale poverty reduction.Internal and external research on the possiblecontributions of NREs to poverty reduction alsoinformed this shift in the Bank’s design approach.

• Lesson Two: Reliable credit services are neededto make NRE systems affordable to ruralhouseholds.

This lesson has also significantly shaped thedesign of the Bank’s NRE projects. In the SriLanka and Indonesia projects, PV dealers haddifficulty providing credit services, and largefinancial institutions in the case of mini-hydroschemes are averse to supporting such schemes.As an adaptation, the Bank gave NGOs withstrong capacity to provide microcredit servicesan important role in NRE dissemination.

This lesson significantly shaped the design of theBangladesh project and the Sri Lanka REREDprojects, which included microfinance NGOsfrom the start. Part of the value of partnering withsuch NGOs was found in the lower financialincentive these organizations required to serveremote, low-income areas compared with privatefirms. This lesson was also learned in theArgentina project, where large concessionaireswere reluctant to serve poor areas but coopera-tives and public agencies offered to do so. As aresult, a later project in Bolivia was designed tosupport different kinds of contractual arrange-ments, including those with local cooperativesand NGOs for off-grid areas, where the marketattractiveness may be low.

• Lesson Three: A policy and regulatory frame-work conducive to NRE needs to be in placefor widescale adoption to be successful.

This lesson was present in the ICRs of all theearlier projects in India, Sri Lanka, and Indone-sia. In the Sri Lanka ESD project, the successful,standardized SPPA was developed based onsimilar work that the Bank supported earlier inIndonesia under the second NRE project. Inlater projects in Argentina, Bolivia, andNicaragua and the China Renewable EnergyScale-Up Program (CRESP), policies and regula-tions supportive of NRE had been establishedprior to the project.

In Latin American countries, ESMAP assistancehelped create appropriate and coherentframeworks for tariff setting, quality of service,technical standards, and delivery serviceobligations. It also helped improve regulatoryenforcement and supervision before theprojects became effective. The CRESP is per-haps the most successful example of thisapproach, as it includes a mandated marketshare for renewable energy, for which the Bankinvested considerable time during projectpreparation.

• Lesson Four: Building the capacity of key stake-holders is an important factor in developing theenvironment for NRE commercialization andensuring service quality.

The designs of the more recent NRE projectshave incorporated strengthening the capacityof stakeholders (private dealers, publicagencies, and financial institutions) to fosterNRE commercialization and enhance servicequality. In the Indonesia SHS project, institu-tional capabilities were developed to technicallycertify and establish national componentsstandards for SHS. In the Sri Lanka ESD project,capacity development for the private sector,government agencies, and NGOs wasundertaken, first on a piecemeal basis but lateron a scaled-up basis. This provided knowledgeon the RETs and for risk analysis, implementa-tion, and monitoring.

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Based on these successes, a number of laterprojects have pursued broad-scale capacitydevelopment. The Uganda Energy for RuralTransformation Project, for example, hasprovided training for public agencies, NGOs,business development, and social serviceagencies to coordinate other inputs, and for themonitoring of development impacts. Capacitydevelopment in the China RED Project hastargeted the technical, policy, and institutionalissues related to wind energy; it has also soughtto improve the abilities of solar PV companies inmarketing, sales and service network develop-ment, after-sales service, financial management,and system testing and certification.

• Lesson Five: To promote project ownershipand rapid market development, the Bankshould support stakeholder and communityparticipation and demonstrate that this canlead to flexibility in project design andimplementation.

Another feature of recent projects is the Bank’swider consultation with stakeholders, whichhas led to support for community participationand an associated flexibility in project designand implementation. One of the major reasonsfor the success of the Sri Lanka ESD project wasthat management was adaptive, enabling it totry new approaches to resolve the difficulties itencountered. For example, faced with low salesof SHSs and a lack of credit for rural house-holds, the project expanded the role ofmicrocredit institutions in servicing rural areas.

This flexible approach can be seen in theBangladesh and follow-up Sri Lanka projects.According to the design of the former, one ofthe implementing agencies will solicit requestsfor proposals from consumers, communities,and companies on how to respond to marketconditions and develop ideas for this purpose.The off-grid market development program willbe prepared in consultation with representativesof microcredit institutions, consumers, otheragencies, and stakeholder communities andinclude support for activities such as publicinformation campaigns, capacity development

of SHS dealers, and creation of new mechanismsfor consumer financing.

Similarly, in the design of the Sri Lanka REREDproject, stakeholders have been given a strongvoice on the use of TA funds so that innovationsfor a sustainable renewable energy market maydevelop. Moreover, a community participationapproach was used to give households a strongsay in decisions regarding the choice of NREsystems, financing, tariffs, system maintenance,and other issues.

An important lesson of this evaluation is thatPSD alone cannot lead to improved energyaccess. Public-private partnerships that in-tegrally involve NGOs and the consumercommunities are essential for promoting NREand reaching the poor.

Growing evidence points to the private sector’seffectiveness in delivering rural energyservices—but only through public-privatepartnerships that include community organiza-tions and consumer groups. Household energyprojects, in particular, have sought to engagerural communities as private actors in the supplyof wood fuels to urban consumers. However, theprivate sector working alone cannot directlyimprove energy access for the poor. Whereprojects relied solely on the private sector toincrease energy access, achievements inreaching rural communities were poor. In the SriLanka ESD Project (1997), for example, involve-ment of a key NGO became necessary for PVsystem consumers to receive financing, whichprivate solar companies were unable to provide.

The Bank’s “brokering” and advice helped promoteNRE and led to improved project design. In 1992, theBank and donor partners established the AsiaSustainable and Alternative Energy Program(ASTAE) to support mainly the identification andpreparation of NRE projects, and to a lesser extenttheir implementation and evaluation. By theperiod 1998–2000, ASTAE had succeeded in facili-tating the inclusion of alternative energy in theAsia Region’s energy lending program, reaching12 percent of power lending during that period.

M A I N L E S S O N S L E A R N E D A N D S T R AT E G I C I M P L I C AT I O N S F O R T H E B A N K

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In 2002, ASTAE’s goals were refocused toward theachievement of the Millennium DevelopmentGoals, and in 2004–2006, its business plan wasreoriented away from inputs (dollar lending)toward outputs. Examples of outputs include anincrease in the number of households with accessto energy, installation of NRE-generating capacity,avoidance of conventional electricity-generatingcapacity, establishment of energy servicecompanies, and reduction of CO2 emissions.

ASTAE’s 2005 Annual Report (World Bank2005b) provides information on the positiveresults to date, which include the enactment ofthe Chinese Renewable Energy Law and theestablishment of the first three energy servicecompanies in China. ASTAE’s experience inChina is having an important demonstrationeffect in other countries. ASTAE has alsopioneered the funding of three resident staff inChina, Indonesia, and Vietnam and the prepara-tion and launching (jointly with ESMAP) of sixnational programs2 under the Global VillageEnergy Partnership.

Effective analytical and advisory assistance(AAA)—a large amount of it under the donor-funded ESMAP—has also been an importantfactor of performance in successful Bank NREprojects. Almost all NRE projects had AAAassociated with their preparation and appraisal.This assistance ranges from market assess-ments to the development of standardizedSPPAs or workshops for stakeholders andpractitioners.

The direct, positive impact of AAA on NREpromotion is substantial, and country benefici-aries have been diverse, based on the literaturereview and a small survey. Many examples ofESMAP’s AAA for NRE projects were providedearlier in this report.

But the Bank needs to internalize AAA and brokeringcosts. Many challenges remain in ensuring thatthe Bank’s AAA keeps pace with new issues asthe NRE portfolio is scaled up. A complex AAAagenda lies ahead for NRE.

Because AAA is an important tool of qualityassurance, the Bank should internalize its costs,particularly those that directly affect projectdesign and implementation and are thereforepart of the Bank’s own work. This step would bein contrast to depending mainly on bilateraldonor grants and trust funds, which areintended to benefit the country clients and notsubstitute for the Bank’s internal budget. Theseexternal funding sources include the consor-tium of ASTAE and ESMAP, project preparationfunds from the GEF or Japan’s Policy and HumanResources Development Fund, and variousbilateral donor trust funds. This heavy relianceon external funding has created disconnects andtime lags between meeting the country clients’needs quickly and fulfilling the procedural andfiduciary requirements of mobilizing externalfunds.

ASTAE’s role of “NRE business incubator” hasnow matured through the increasing number ofBank-GEF projects, and these activities could bemainstreamed into the Bank’s own budget aspart of its core business. In addition, ASTAE’sfunding could instead increasingly focus on (a)improving M&E, particularly in NRE projects withOBA components; (b) conducting two or threerigorous impact evaluations, possibly for theclosed China, India, and Sri Lanka projects; and(c) strengthening local capacity in these areas.

The Bank should also strengthen M&E considerably,including carrying out rigorous impact evalua-tions for selected projects, because of thecontinuing debate surrounding the benefits ofNRE provision.

On one hand, it is widely accepted in theinternational community that the provision ofmodern energy is an intrinsic requirement ofdevelopment. Hence, the allocation of re-sources should really not be framed as a choicebetween energy or other (social) sectors; energyis a complementary input to investments inthose sectors. However, research also showsthat the impacts from electricity investments, interms of the number of people brought out of

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poverty, are less than those from investments ineducation, road infrastructure, agriculturalresearch and development, and telecommunica-tions (Fan, Hazell, and Thorat 1999; Fan, Zhang,and Zhang 2002).

The literature survey carried out for this reviewshows that the research is inconclusive onwhether NRE investments achieve povertyreduction. While electricity access has, overall,led to quality-of-life improvements and hasmade some, but not major, contributions toincomes, in some cases it has had no effect. Inothers it has had an adverse one on the poorest(Cook and others 2004). In many areas of thedeveloping world, the poverty impact ofrenewables has been minimal.

According to literature on NRE in rural China,some of which was produced as inputs intoBank project preparation, household PV systemuse in remote areas of China has had little, if any,impact on poverty (van der Linden and others2003). These systems—or rather the electricitythey produce—are desired by rural householdsbecause they end the sense of social exclusionin a country that is more than 90 percent electri-fied (IDS 2003). The electricity from PV systemsdoes provide some intangible gains, such as theability to gain information from TV and in somecases to study at night (though one author hasreported that the quality of lighting is too poorto allow this [van der Linden and others 2003]).These gains may in turn bring livelihoodimprovements in the distant future.

The Bank’s NRE program needs to be betterintegrated with the Bank’s work on energy sectorreforms. Integration of NRE with larger sectorreforms—particularly on transparent andpredictable regulation, as well as economicpricing of alternative petroleum fuels—has beenneglected by the Bank. Early in the EBRSimplementation, the Bank paid inadequateattention to creating a nondiscriminatory regula-tory environment for NRE—despite its parallelpush for energy sector reforms in general. Thiscaused adverse effects on some NRE schemes,

as was experienced by private small hydrodevelopers in India (IEG 2003a).

Even today, the key regulatory and pricingingredients for successful NRE promotion havedeteriorated in some states in India; forexample, legislative changes and regulatoryuncertainty have adversely affected the secondNRE project. With ESMAP assistance, NREprojects have now started to address regulatoryissues. Institutional weaknesses and lack ofreadiness, experience, and incentives amonglocal NRE investors to serve rural markets havealso been constraining factors.

Regulatory improvements conducive to NREcommercialization have been the orphans ofenergy reforms. This works against the Bank’sown NRE goals, because privatization andcompetition in power markets tend to weakeninterest in serving rural markets, lead to a prefer-ence for petroleum-based fuels, and shortentime horizons for fuel choices. The Bank focusedon the reform of large utilities and paid insuffi-cient attention to the critical issue of reformingregulatory and policy environments for NRE,particularly during the early to mid-1990s.

The Bank did this to create objective, transpar-ent, and nondiscriminatory regulatory mech-anisms aimed at creating an energy market inwhich renewable energy could be competitive.But renewable energy competes—and isstunted—in markets with distorted prices forconventional energy sources, often throughgovernment subsidization of petroleumproducts. Additionally, where privatization andunbundling of the energy sector has notoccurred or is incomplete, the true costs of grid-based rural electrification remain hiddenbecause of implicit cross subsidies. Thus, thepotential cost-effectiveness of off-grid NREsystems is hard to demonstrate without broaderenergy sector reforms that integrate renewableenergy promotion.

Neglecting NRE in the design and implementa-tion of energy reforms can have important


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negative consequences that are difficult toreverse. This can be seen in the second IndiaNRE project, which has sought to commercializesmall hydro.

When the first project was approved in 1992, theprevailing regulations and tariff guidelines wereadequate to support grid-connected NRE.However, after the Electricity Act was promul-gated in 2003 and regulatory authority wasmoved to the state level, uncertainties startedaffecting the second NRE project, which hadbegun in 2001.

For the second project, the impact of the regula-tory uncertainties stemming from the inconsis-tencies between national and state-levelframeworks, the reform backsliding in somestates, and the absence of a clear policyframework and future plans for NREs was notsufficiently addressed. Consequently, smallhydro development was adversely affected, ascontinuing government policy shifts and unevenstate adoption of national legislation deterredprivate actors from investing in NRE systems.This Bank inaction is partly due to the sharpdivision between the “sector reform team” andthe “renewables team” in the Bank’s energypractice, and the weak coordination betweenthem.

The Bank did not begin to pay more attention topromoting policy and regulatory environmentsthat are conducive for its NRE projects untilabout 2000. Since then, the Bank has had severalsuccesses in helping resolve regulatory andpolicy uncertainties. In the Sri Lanka ESDproject, a standardized SPPA was developedunder the project (based on similar work thatthe Bank supported in Indonesia under thesecond NRE project) and employed with theparticipating firms to resolve a tariff determina-tion issue between the Ceylon Electricity Boardand developers. As a result of the agreement,there was significant growth in the number ofmini hydro investments.

In recent years, ESMAP—through its advisoryand analytical assistance—has helped establish

the regulatory frameworks for rural electrifica-tion, as is evident in Argentina, Bolivia, andNicaragua. This assistance has helped put inplace appropriate and coherent regulatoryframeworks regarding off-grid electrification. Itcovers tariff setting, quality of service, deliveryservice obligations, technical standards, andother matters. The assistance has also helpedregulatory agencies to enforce and supervise off-grid rural energy policies and develop detailedregulations in the context of national energylegislation. These are being incorporated intothe design and implementation of rural electrifi-cation projects in these countries.

An additional feature of this ESMAP assistance isthat it has involved and promoted the exchangeof information and experience among policy-makers of different countries.

Focusing on getting the regulatory andincentives framework right has proven moreuseful for getting project results than trying toget governments to enunciate a nationalrenewable energy policy. This portfolio reviewfound that the performance of an NRE project isnot sensitive to whether the government hasestablished a policy promoting renewables ornot. For example, although policy support forrenewables existed in India when the satisfac-tory RRD Project (1992) was approved, noexplicit government support for NRE existed inSri Lanka when the highly satisfactory ESDProject (1997) was implemented. Adequatelyaddressing the regulatory and market barriers toprivate sector involvement is a factor of goodperformance, as is country commitment (what agovernment does), but a formal NRE policy(what a government says) is not.

NRE has only recently been mainstreamed in theBank’s Country Assistance Strategies (CASs) andoperations. The Bank’s support for NRE has beenhindered by its limited mainstreaming in CASs.Based on a review of 24 CASs since 1995 for 8countries where major NRE projects evaluatedin this report were implemented (Argentina,Bangladesh, China, India, Indonesia, Nicaragua,Sri Lanka, and Uganda), only 10 mention NRE

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development as a goal—and four of those werefor India.

Despite comprehensive and innovative NREprojects implemented recently in Nicaragua, SriLanka, and Uganda, there was no mention ofNRE in the CASs for these countries. However,the situation has improved in recent years, witha much larger number of CASs and PovertyReduction Strategy Papers (PSRPs) in fiscal 2005making a substantive reference to renewableenergy.

The fiscal 2005 Renewable Energy and EnergyEfficiency Progress Report (World Bank 2005d)indicates that 60 percent of CAS and PSRPsissued in fiscal 2004, and 74 percent of thoseissued in fiscal 2005, have specific references torenewable energy and energy efficiency. Thismomentum needs to be maintained, as it is clearthat the Bank’s ability to deliver on its globalNRE commitments is predicated on supportfrom the Bank’s country units through clearstrategic and budgetary signals to Bank staff.

The crisis in traditional biomass fuels remains themain energy issue for the world’s poor. The heavyglobal dependence on traditional wood fuels isprojected to grow; hence, biomass productionon a renewable basis remains the top priority inmeeting the energy needs of the poor.

This is most evident in Sub-Saharan Africa,which is dependent on traditional fuels for morethan 60 percent of its energy supplies. In 2000,about half of the population in developingcountries relied on traditional biomass forcooking and heating. Global evidence showsthat poor people allocate most of their energyexpenditure on cooking fuels. In 2003, it wasestimated that 2.6 billion people will continue torely on biomass despite efforts to substituteother fuels for it.

According to the Bank’s Energy and WaterDepartment, the Bank has done significant workon rural forestry, which is classified undercommunity/ rural forestry projects rather than asenergy projects. Community forestry projects

reportedly increased from 19 in the 1980–1990period to 72 in the 1990–2005 period. It wouldbe important to assess whether this biomasswork meets the energy-poverty goals that theBank is pursuing. The Energy Sector Boardneeds to monitor and take stock of these activi-ties to facilitate the integration of biomass energywithin the NRE portfolio.

Overall, the Bank’s support has led to increasedcountry commitment to NRE, but strategic issues andchallenges remain. Country commitment to NREhas grown where NRE projects have beenimplemented, often with GEF cofinancing.Borrower countries such as Sri Lanka and India,in which full-scale NRE projects were im-plemented, have engaged in follow-up projects,demonstrating their growing interest in NRE. Inthese and a growing number of countries, thegovernments have played more of a market-enabling than a market-making role.

Many developing countries, however, still seethe energy sector as having a narrow purposeand still do not consider energy a priority.Energy is generally given inadequate importance(and NRE even less so) in national developmentframeworks and is viewed only within thecontext of large-scale infrastructure projects.The issue of energy access is usually absent fromthose frameworks.

Furthermore, development strategies tend tofocus only on electricity and ignore rural energyneeds. A United Nations Development Pro-gramme study of 80 Millennium DevelopmentGoal country reports found that only 5 percentdiscussed plans to expand new and renewableenergy. In those few reports, the discussion wasonly in the context of the goal of environmentalsustainability, not poverty alleviation. Only 5percent discuss the link between energy, poverty,and rural development. In contrast, many morereports—25 percent—discuss energy efficiencyfor environmental sustainability (UNDP 2005).

Several strategic questions arise for the Bank asit tries to meet its commitment to scale up itsNRE lending.


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• Will certain regions and countries be priorities,and if so, which ones and under what criteria?

• If spreading out NRE assistance would nolonger be possible under the new GEF Re-source Allocation Framework, would the Bank’sNRE work still be consistent with its poverty-reduction goal, as GEF resources move towarda much smaller number of (likely large) ben-eficiary countries than before?

• Will the selected NRE projects support the fullspectrum of NRE commercialization and servicedelivery, or will investments be distributed

among a much larger number of projects tofund mainly TA and market-development as-sistance, even though this may significantlydefer the energy service delivery that is re-quired to achieve consumer/investor confi-dence and market expansion?

• If the strategy to increase support for NRE is tobe largely country driven, how will the Bank en-sure that a 20 percent increase will result eachyear, when the main focus of many borrowingcountries continues to be on conventionalfuels?

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Conclusions and Next Steps

The Bank’s NRE strategy is relevant to developing country energy priorities.Its NRE interventions are anchored in the EBRS pillars—reducingpoverty, promoting PSD, contributing to global environmental protec-

tion, and improving macro-fiscal balances.

As reconfirmed during the Bank’s 2006 EnergyWeek, the Bank and the donor community needto address the dire energy predicament ofdeveloping countries on all fronts. This includespetroleum, clean coal, hydropower, biomass,energy efficiency, and renewable energy, whichshould be pursued, because it can be financiallyviable and sustainable if barriers are removed.With respect to renewable energy specifically,the much improved design and performance ofrecent NRE projects augurs well for the Bank’sreadiness to deliver on its Bonn commitmentsto increase its NRE support.

As the Bank scales up its NRE assistance,however, it would do well to focus on itsdemonstrated strengths in creating an invest-ment climate conducive to commercializing NREand promoting PSD through public-privatepartnerships and appropriate risk-mitigationstructures. The Bank has a satisfactory scorecardin consistently promoting PSD, and it has beenflexible in its approaches. Its stakeholders andthe NRE technologies it supported also havebeen highly diverse.

The Bank helped remove market barriers bydeveloping NRE policies (including on standardsand certification) and various business modelsfor NRE technology delivery (with sales modelsinvolving consumer credit performing betterthan fee-for-service ones). The Bank has playeda key role in leveling the playing field betweenNRE and conventional energy technologies, andsubsidy-free NRE commercialization has startedto materialize.

Therefore, the Bank should focus on itsstrengths in building public-private partner-ships. It should consider a series of operationsand appropriate lending instruments toaccommodate the long gestation periods forNREs, from institutional capacity building andpolicy/regulatory reform all the way to fullcommercialization. It should internalize—in itsregional budgets and work programs—theoperational costs of its successful “brokering”and advisory role for NREs.

The Bank’s performance on other EBRSobjectives has been weaker: experience in the

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past 15 years indicates that the Bank’s impact inhelping the poor directly or achieving globalenvironmental benefits through NRE promotionhas been hard to measure because M&E hasbeen notoriously weak or absent. But the littleevidence that has emerged suggests that thisimpact is limited.

Good monitoring and impact evaluationsystems should be established for energyservices intended to help the poor. Renewableenergy projects with output-based aid com-ponents should be the first targets. Rigorousimpact evaluations should be carried out forselected renewable energy projects that areclosing within the next two to three years.

An important first step would be for the Bank toinclude NRE objectives and work programs inCASs, which historically have given littleattention to NRE. Bank management needs toclearly signal the relevance of NRE in countryand energy sector strategies. As the Bankpursues its energy sector reform agenda, itneeds to simultaneously address issues thathinder NRE development and commercializa-tion. The key thrusts of the Bank’s NREassistance should be economic energy pricing,increased private financing, and effectiveregulation.

Moving forward, the Bank could do more of whatworks, which includes its strong lesson-learning,“brokering,” and advisory record that haspositively influenced recent NRE project design.As the Bank scales up its NRE assistance, it needsto foster innovation and flexibility by also dissem-inate more widely the lessons learned, with aview to achieving continuous improvement inthe design and implementation of newer NREprojects. The Renewable Energy Toolkit releasedin 2006 is a step in that direction.

Wider dissemination of good NRE practices alsopresents (vis-à-vis other NRE financiers) a globalleadership opportunity for the Bank, whichdistinguishes itself as being the largest financierof NRE (World Bank 2005c). For example, the

Inter-American Development Bank, the AsianDevelopment Bank, and the African Develop-ment Bank lend much less for NREs, about 1–2percent of their total lending for the energysector.

But the Bank also needs to do a better job ofintegrating its NRE program within its own workon energy sector reforms and architectures. Toachieve this, the Bank’s country units need tostrengthen their support for the mainstreamingof NRE in the Bank’s CASs and operations (a goalthat the new ESMAP Renewable EnergyThematic Group could pursue further); assigndue importance to traditional biomass fuels inaddressing the needs of the world’s poor; andintegrate biomass projects better within the NREportfolio.

Moreover, Bank management needs to givepriority and resources to address the seriouslack of M&E in its NRE projects, especiallybecause the Bank is promoting OBA approachesthat do require intensive monitoring of perform-ance data. The Bank needs to internalize thecosts of NRE “business incubation” as part of itscore business. To this end, the Bank and thedonors may also consider reorienting ASTAE’swork program toward a stronger focus oncapacity building to integrate M&E systems inNRE projects and rigorous impact evaluationsfor the NRE projects series in India, Sri Lanka,and China.

The NRE portfolio should benefit increasinglyfrom self- and independent evaluations, giventhe strategic role that the Bank gives to NREs inimproving energy access, particularly for thepoor, as well as its joint global commitmentswith other donors. These assessments shouldfocus rigorously on outcomes and impacts(while differentiating more sharply among ruralelectrification, grid-connected NREs, and off-grid renewables as the portfolio of closedprojects expands) and have strong feedbackloops that would allow flexibility and respon-siveness in implementing the objectives of theNRE strategy.

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ANNEXES

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ANNEX A: THE BANK’S NEW RENEWABLES PORTFOLIO

IBRD/IDA GEF Approved (project or NRE co-

Region/ (fiscal Energy component, financingcountry year) Project type US$ millions) (US$ millions)

South Asia Region

Afghanistan 2005 Emergency National Solidarity—Supplemental Renewable 5.6

Bangladesh 2002 Rural Electrification and Renewable Energy Development SPV, H 17.19 8.20

India 1993 Renewable Resources Development/Alternate Energy W, SPV 190.00 26.00

India 2000 Second Renewable Energy H 110.00

India 2001 Rajasthan Power Sector Restructuring Renewable 1.80

India 2002 Uttar Pradesh Water Sector Restructuring H 1.49

Nepal 1993 Sunsari Morang Headworks H 5.60

Nepal 1997 Irrigation Sector H 0.79

Nepal 2003 Power Development H 22.68

Sri Lanka 1992 Second Power Distribution and Transmission H 1.50

Sri Lanka 1997 Energy Services Delivery W, SPV 23.23 5.90

Sri Lanka 2002 Renewable Energy for Rural Economic Development W, SPV, H, BM 74.25 8.00

Middle East and North Africa Region

Tunisia 1995 Solar Water Heating ST 4.00

Yemen, Rep. of 2005 Rural Electrification and Renewable Energy RE 0.55

Latin America and the Caribbean Region

Argentina 1999 Renewable Energy in Rural Markets SPV, W 26.70 10.00

Bolivia 2003 Decentralized Infrastructure for Rural Transformation SPV 6.80

Ecuador 2002 Power and Communications Sector Modernization and Rural Services Renewable 2.84

Honduras 1992 Energy Sector BM, W, Solar, H 3.54

Mexico 2000 Renewable Energy for Agricultural Productivity W 8.90

Mexico 2001 Methane Gas Capture and Use and Landfill BM/BG 6.27

Nicaragua 2003 Off-grid Rural Electrification SPV, H 8.88 4.02

Uruguay 2000 Landfill Methane Recovery Demonstration BM/BG 0.98

East Asia and Pacific Region

Cambodia 2004 Rural Electrification and Transmission ST, H 3.20 5.75

China 1999 Renewable Energy Development W, SPV 100.00 35.00

China 2004 Fourth Inland Waterways H 13.65

China 2005 Renewable Energy Scale-Up Program Wind, BM 87.0 40.22

Indonesia 1995 Second Rural Electrification GT, H 19.40

Indonesia 1997 Renewable Energy Small Power BM, H 63.74 4.00(Continues on the following page.)


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IBRD/IDA GEF Approved (Project or NRE co-

Region/ (fiscal Energy component, financingcountry year) Project type $US millions) ($US millions)

Indonesia 1997 Solar Home Systems SPV 20.00 24.00Lao, PDR 1998 Southern Provinces Rural Electrification SPV 1.04 0.74Philippines 1990 Energy Sector GT 50.70Philippines 1994 Leyte Luzon Geothermal GT 213.38 30.00Philippines 1994 Leyte Cebu Geothermal GT 56.97Philippines 2004 Rural Power SPV, H 5.00 9.00Vietnam 2002 System Efficiency Improvement, Equitization and Renewables H 13.50 4.50

Europe and Central Asia RegionCroatia 2005 Renewable Energy Resources RE 5.5Latvia 1998 Solid Waste Management BM/BG 3.74 5.12Lithuania 1996 Klaipeda Geothermal GT 6.90Macedonia, FYR 2000 Mini-Hydropower H 0.75Moldova 2005 Renewable Energy from Agricultural Waste BM 0.68Poland 2000 Podhale Geothermal District Heating and Environment GT 5.40Turkey 2004 Renewable Energy H 50.51Hungary 2003 Small Hydro H 0.42

Africa RegionBenin 2005 Energy Service Delivery APL BM 5.70Burundi 1991 Energy Sector Rehabilitation BM/BG, H 1.60Cape Verde 1999 Energy/Water Sector Reform W, SPV 1.23 4.70Chad 1998 Household Energy BM 0.85Ethiopia 1998 Energy II BM, H 4.00Ethiopia 2003 Energy Access SPV, BM, H 21.71 4.93Guinea 2003 Decentralized Rural Electrification SPV, H 3.50Kenya 2005 Energy Sector Recovery Geothermal 31.50Kenya 1997 Energy Sector Reform GT 20.00Madagascar 1996 Energy Sector Development BM / BG, H 7.82Madagascar 2004 Environment Program III BM 4.00Mali 1995 Household Energy Renewable 2.50Mali 2004 Household Energy and Universal Rural Access W, SPV, BM/BG, H 17.83 3.50Mauritius 1992 Sugar Energy Development/Sugar Bio-Energy Technology BM/BG, H 15.00 3.30Mozambique 2003 Energy Reform and Access SPV, H 1.82 2.09Niger 1988 EnergyRwanda 1993 Energy Sector Rehabilitation SPV, ST, H 2.60Rwanda 2005 Urgent Electricity Rehabilitation SIL H 4.70Senegal 2005 Rural Electric Service BM 4.10Senegal 1998 Sustainable and Participatory Energy Management BM 5.20 4.70Uganda 2000 Power III Supplemental H 16.50Uganda 2002 Energy for Rural Transformation SPV, H 3.90 12.10

Total commitments 1,375.44 301.46Source: World Bank Group Progress Reports.Note: The table is fully consistent with the World Bank Group Progress Reports on Renewable Energy and Energy Efficiency for 1990–2004 and fiscal 2005 (World Bank 2005d), exceptfor seven projects: South Africa Concentrating Solar Power for Africa; Honduras Energy Sector Adjustment (Ref 2); Mexico Solar Thermal Integrated Cycle Project; Brazil Itaparica Sup-plemental; Egypt Integrated Solar Thermal; Guinea Rural Energy; and China Passive Solar Rural Health Clinics. Information was either not available for these projects, or they are still atthe proposal stage. BG = biogas; BM = biomass; GEF = Global Environment Facility; GT = geothermal; H = hydro; ST = solar thermal; SPV = solar PV; W = wind.

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The study reviewed 65 new and renewable energy(NRE) projects, of which 27 are closed and 38 areongoing. The complete list of closed projects,along with their Independent Evaluation Group(IEG) ratings, are presented in annex C. In termsof in-depth evaluation (including IEG ProjectPerformance Assessment Reports in some cases),

the report focused especially on those closed andongoing NRE projects, as listed below, that aremost indicative of the Bank’s performance, giventhe project’s size, level of financial commitment,innovativeness, range of objectives, scope ofcomponents and activities, country significance,and importance given to renewable energy.

ANNEX B: NRE PROJECTS SELECTED FOR IN-DEPTH REVIEW

Bank approval GEF IBRD/IDA Region/ (fiscal year)/ ($US ($US country Project NRE type closing millions) millions)

South Asia Region

India Renewable Resources Development/ Alternate

Energy (GEF) W, SPV, H 1993/2001 26.00 190.00

India Second Renewable Energya H 2000/Ongoing N.A. 110.00

Sri Lanka Energy Services Delivery W, SPV, H 1997/2002 5.90 23.23

Sri Lanka Renewable Energy for Rural Economic Development W, SPV, H 2002/Ongoing 8.00 74.25

Bangladesh Rural Electrification and Renewable Energy Developmenta SPV, H 2002/Ongoing 8.20 17.19

Latin America and the Caribbean Region

Argentina Renewable Energy in the Rural Market SPV, W 1999/Ongoing 10.00 26.70

Nicaragua Off-grid Rural Electrificationa SPV, H 2003/Ongoing 4.02 8.88

East Asia and Pacific Region

Indonesia Solar Home Systems SPV 1997/2001 24.30 20.00

China Renewable Energy Development W, SPV 1999/Ongoing 35.00 100.00

Africa Region

Uganda Energy for Rural Transformationa SPV 2002/Ongoing 12.10 3.90

Mali Household Energy BM 1995/2000 2.50 N.A.

Senegal Sustainable and Participatory Energy Management BM 1998/2004 4.70 5.20

Source: Project Appraisal Documents and World Bank Operations Portal.

Note: BM = biomass; H = hydro; SPV = solar PV; W = wind.

a. Projects with large NRE components. The rest are freestanding projects.

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The Bank aims to play a crucial role in leveling theplaying field between renewable and conventionalenergy sources. The economics of renewableenergy are driven mainly by the operational costsof using alternative fuels, such as kerosene ordiesel in the decentralized power applications thatare the subject of this review.

Capital cost differentials between NREs andfossil fuels play a relatively small role, as over thepast two decades the costs of NRE technologieshave been decreasing, but those of conventionalenergy technologies have decreased as well, asillustrated by major advances in wind turbinesand combined gas cycle technology. While solar,wind, and hydro resources are free in nature,petroleum is a global commodity; hence, whatreally drives comparative NRE versus conven-tional energy economics are international crudeoil and petroleum product prices, whose ratesof increase could offset decreases in costs result-ing from technological progress. For large-scaleelectricity generation, fuel price may constitute46–87 percent of the total levelized economiccost of electricity (Chubu Electric Power Co.,Inc. and others 2005).

In economic terms, what used to be thehypothetical upper bound of $50–$70 per barrelof crude oil in many studies on renewableenergy economics has now become a dailyreality, making NREs economically competitive,at least in principle. This upper bound is evenunderestimated, because global petroleum useentails negative environmental externalities andshould command an “energy security premium”that is not captured in world prices. In financialterms, however, most developing countriescontinue to domestically adopt “social pricing”

of petroleum products (thus resulting inmassive drains in their fiscal resources), whichcancel out any margin of competitiveness thatNREs might have had.

Consequently, with the exception of a fewtechnologies, renewable energy in bothdeveloping and developed countries remainsfinancially uncompetitive with conventionalenergy sources and therefore continues torequire government and donor support (REN21Renewable Energy Policy Network 2005). Yet astable C.1 below shows, for off-grid applications,a range of renewable energy technologies(RETs) are economically competitive with gaso-line generators. For mini-grid applications,micro hydro and biomass gasifiers are lower-costoptions, compared with diesel generation, andwind power is marginally competitive. For grid-connected applications less than 50 megawatts(MW), wind, mini-hydro, and geothermal(where available) are lower-cost options thandiesel for peaking load and can be competitivewith diesel for base load. Above 50 MW and upto 300 MW, coal-fired generation remains theleast-cost option, but wind power is not farbehind. Off-grid, solar photovoltaics (PV) can becompetitive with gasoline generators but areuncompetitive in grid-connected applications.

In table C.1, costs are not inclusive of subsidiesand other policy incentives, or of all environ-mental externalities. Cost figures are based onassumptions regarding capacity, capacity factor,and life span specific for each technology, andthey include capital plus operating costs,expressed on a levelized basis, using a 10percent real discount rate over the economic lifeof the plant, in constant 2004 US$. Assessments

ANNEX C: COST COMPETITIVENESS OF RENEWABLE AND CONVENTIONAL ENERGY TECHNOLOGIES


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2004 2015 Rating (watts) US¢/kWh US¢/kWh

Off gridSolar PV 50–300 40–75 35–65Wind 300 22–39 20–34PV-wind hybrid 300 24–37 21–31Pico hydro 300 11–19 10–18Pico hydro 1,000 10–16 9–15Gasoline generator 300 49–79 47–77Mini gridSolar PV 25 44–58 37–47Wind 100 14–23 12–19PV-wind hybrid 100 16–24 14–20Geothermal (binary) 200 13–16 13–16Biomass gasifier 100 8–10 7–9Biogas 60 6–7 5–7Micro hydro 100 9–13 9–13Diesel generator 100 15–25 15–25Micro turbines 150 27–33 27–33Fuel cells 200 23–29 21–26Central generation (<50 MW)Solar PV 5 37–49 29–40Wind 10 5–9 4–7Solar thermal (no storage) 30 15–21 13–18Solar thermal (w/storage) 30 11–15 10–12Geothermal (binary) 20 6–8 6–8Biomass (gasifier) 20 7–8 6–8Landfill gas 5 5–7 5–6Mini-hydro 5 5–8 5–8Diesel, base load 5 7–12 7–12Diesel, peaking 5 14–20 14–20Fuel cells 5 11–16 9–14Central generation (50–300 MW)Biomass (steam) 50 6–7 6–7Geothermal (flash) 50 4–5 4–5Wind 100 4–8 3–6Large hydro 100 4–7 4–7Hydro (pumped storage), peaking 150 29–39 28–39Oil/gas combined cycle (1100 C class) 150 9–15 9–14Oil/gas combined cycle (1300 C class) 300 4–7 3–7Coal steam 300 3–5 3–5Coal IGCC 300 4–6 3–5Coal AFB 300 3–4 3–4Oil steam 300 5–10 5–10

Source: Chubu Electric Power Co., Inc. and others 2005.

Note: kWh = kilowatt hour.

Table C.1: Renewable and Conventional Energy Costs

are based on the approach and formulas in theElectric Power Research Institute’s RenewableEnergy Technical Assessment Guide (EPRI2004). Average fuel prices for 2004 and 2015,based on World Bank forecasts, are assumed tobe, respectively, $38/bbl and $31/bbl for oil;$54/ton and $34/ton for coal; and $4.9/MMBTUand $4.0/MMBTU for natural gas.

To simplify estimations, all capital and operatingcosts were calculated on the basis of one powerplant’s construction in India. Adjustments weremade for labor costs, the largest variableaccounting for costs between locations. Capitaland operating cost calculations assume allgenerating equipment is designed under WorldBank environmental guidelines and thereforeinclude costs for typical environmental impacts,from normal operations and standard emissionscontrol measures.

Yet not all environmental and social externalitiesare included. Costs in 2015 are calculated byconsidering future price decreases due to bothtechnological innovation and mass production.Key uncertainties including fuel costs, futuretechnology cost and performance, and resourcerisks are addressed using a probabilistic approach.In the case of solar PV, wind, and PV-wind hybridsin a mini-grid area or off-grid configuration, totalcosts include battery or backup generator costs tosmooth stochastic variations in the availableresource and provide a reliable output.

Conventional energy technologies, though,have been highly subsidized through a variety ofdirect as well as indirect and nontransparentmeans, such as cash transfers to producersand/or consumers, tax exemptions, pricecontrols, trade restrictions, regulatory hurdlesfor NREs, and government failure to correctmarket imperfections. These subsidies skew theplaying field against renewable energy.

An estimate of energy sector subsidies in theEuropean Union in 2001 was calculated at

Euros 29 billion (EEA 2004). Subsidy levels forrenewable energy even in the European Union,where renewable energy has received strongsupport, are low in comparison with otherforms of energy. For the United States andEurope combined, government support forrenewable energy in 2004 was roughly US$10billion. In contrast, total global energysubsidies for fossil fuels are reported to be inthe range of US$150–$250 billion per year(REN21 Renewable Energy Policy Network2005). To help level this playing field, GlobalEnvironment Facility (GEF) financing presentin many Bank NRE projects seeks to remove themarket and regulatory barriers to NRE as wellas achieve global environmental benefits byfinancing the incremental costs of renewableenergy investments.

Deriving the true costs of renewable andconventional energy technologies is challengingbecause of the difficulties encountered indetermining the environmental externalities,values for energy security, and the subsidiesinvolved. However, some studies show that,considering environmental costs and assessingmore rigorous technology and capital andgeneration costs, the economic costs of RETs—particularly wind, hydropower, geothermal, andbiomass-electric for grid applications—are lowerthan those for conventional generation. On alevelized basis, RETs are the least-cost option forsuch applications.

Several RETs are potentially the least-cost optionfor mini-grid applications as well (Chubu ElectricPower Co., Inc. and others 2005). For remoteareas, conventional versus NRE cost compar-isons may serve little purpose, because off-gridtechnologies constitute the only option and arefar more economical than grid extension tothese areas. Table C.2 illustrates that forEuropean Union member countries, renewableenergy can in fact be more competitive thanfossil fuels when environmental and socialexternalities are taken into account.

A N N E X C : C O S T C O M P E T I T I V E N E S S O F R E N E WA B L E A N D C O N V E N T I O N A L E N E R G Y T E C H N O L O G I E S

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Country Coal and lignite Peat Oil Gas Nuclear Biomass Hydro Wind

Austria 1–3 2–3 0.1

Belgium 4–15 1–2 0.5

Germany 3–6 5–8 1–2 0.2 3 0.05

Denmark 4–7 2–3 1 0.1

Finland 2–4 2–5 1

France 7–10 8–11 2–4 0.3 1 1

Greece 5–8 3–5 1 0–0.8 1 0.25

Ireland 6–8 3–4

Italy 3–6 2–3 0.3

Netherlands 3–4 1–2 0.7 0.5

Norway 1–2 0.2 0.2 0–0.25

Portugal 4–7 1–2 1–2 0.03

Spain 5–8 1–2 3–5a 0.2

Sweden 2–4 0.3 0–0.7

United Kingdom 4–7 3–5 1–2 0.25 1 0.15

Source: Martinot 2005.

Note: Subtotal of quantifiable externalities (such as global warming, public health, occupational health, material damage).

a. Biomass cofired with lignites.

Table C.2: External Cost Figures for Electricity Production in Selected European Countries for Existing Technologies (Euro cents per kWh)

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ANNEX D: RATINGS OF CLOSED NRE PROJECTS

Institutional development Bank Borrower

Project Outcomea Sustainability impact performance performance

Blended

Burundi Energy Sector Rehabilitation U (U) UN N U U

Niger Energy Project MS (S) L SU S S

Kenya Energy Sector Reform and Power Development S (U) L SU S U

Rwanda Energy Sector Rehabilitation MU (MS) NE M U S

Uganda Power III Supplemental MU (S) UN N U U

Indonesia 2nd Rural Electrification S (MS) UN M S S

Lao PDR Southern Provinces Rural Electrification S (S) L SU S U

Philippines Energy Sector S (U) UNC M U U

Honduras Energy Sector Adjustment Loan MS (MS) UNC M S U

Latvia Solid Waste Management & Landfill Gas Recovery S (S) L SU S S

Macedonia Mini-Hydropowerb S (S) NA NA NA NA

Poland Podhale Geothermal District Heating & Environment MU (MU) L M U U

Nepal Sunsari Morang Headworks S (MS) UNC SU S S

Nepal Irrigation Sector MS (MS) UN M S S

Sri Lanka 2nd Power Distribution and Transmission MS (MS) L M S U

Freestanding

Chad Household Energy MS NE H U S

Mali Household Energy MU NE SU U S

Mauritius Sugar Energy Development S L SU U S

Senegal Sustainable and Participatory Energy Management HS HL SU S S

Indonesia Solar Home Systems U L SU HS S

Indonesia Renewable Energy Small Power NR NR NR NR NR

Philippines Leyte Cebu Geothermal U UN N S S

Philippines Leyte Luzon Geothermal U UN M U U

Lithuania Klaipeda Geothermal Demonstration MU NE SU S S

Tunisia Solar Water Heating S NE SU S S

India Renewable Resources Development S L M S S

Sri Lanka Energy Services Delivery HS L H HS HS

Source: Implementation Completion Report Reviews and Project Performance Assessment Reports.

Note: HS = highly satisfactory; S = satisfactory; MS = moderately satisfactory; MU = moderately/marginally satisfactory; U = unsatisfactory; L = likely; UN = unlikely; H = high; SU = sub-

stantial; M = modest; N = negligible; UNC = uncertain; NA = not available; NE = nonevaluable; NR = not rated.

a. Closed projects as of end of fiscal 2005. For blended projects, the outcome rating in parentheses is of the NRE component.

b. Ratings for certain criteria not available (GEF medium-size grant project).

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ANNEX E: RATINGS OF ONGOING NRE PROJECTS UNDER SUPERVISION

Freestanding Achievement Implementation Global env. or of PDO progress objective

Country and project blended Previous Latest Previous Latest Previous LatestCape Verde Energy and Water Sector Reform

and Development B U U U U U UEthiopia Energy Access/Renewable Energy B U U S S NP SEthiopia Energy II B U U S S NA NAGuinea Decentralized Rural Electrification B MU MS S MS MU MUMadagascar Energy Sector B MU MU MU MU NA NAMadagascar Environment III B S MS MS MS S SMali Household Energy and Universal Access FS S MS S MS S MSMozambique Energy Reform and Access B S MS S MS S MSUganda Energy for Rural Transformation B MS MS MS MS MS MSCambodia Rural Electrification and Transmission B S S S MS S MSChina Fourth Inland Waterways B S S S S NA NAChina Renewable Energy Development FS S S S S S SPhilippines Rural Power B MS NP S NP S NPVietnam System Efficiency Improvement, Equitization

and Renewables B S NP S NP S NPHungary Rehab. and Expansion of Small Hydro (GEF med.-

size project) FS NAV NAV NA NA NA NATurkey Renewable Energy FS S S S MS NA NAArgentina Renewable Energy in the Rural Market FS MS MS MU MU MS MSBolivia Decentralized Infrastructure for Rural Transformation B S S MS S NA NAEcuador Power and Communications Sector Modernization

and Rural Services B S S MS MS MS MSMexico Methane Gas Capture and Use at a Landfill (GEF only) FS NA NA HS NP HS HSMexico Renewable Energy for Agriculture (GEF only) FS NA NA S S S SNicaragua Off-Grid Rural Electrification FS MS MU MS MU MS MUUruguay Landfill Methane Recovery Demonstration Project

(GEF med.-size project) FS NAV NAV NA NA NA NABangladesh Rural Electrification and Renewable Energy

Development B S S S S S SIndia Rajasthan Power Sector Restructuring B S S S S NA NAIndia Second Renewable Energy FS S NP NP NP S NPIndia Uttar Pradesh Water Sector Restructuring B S S MU MU NA NANepal Power Development B S S U MU NA NASri Lanka Renewable Energy for Rural Economic

Development FS S S S S S S

Source: Latest Implementation Status Reports for projects.

Note: Updated active NRE project ratings, February 2006.

PDO = project development objective; B = blended; FS = freestanding; S = satisfactory, MS = moderately satisfactory, MU = moderately unsatisfactory, U = unsatisfactory, NA = not ap-

plicable, NAV = not available, NP = not provided.

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Closed Projects

The outcomes of closed projects have been mixed.Based on the IEG ratings from ImplementationCompletion Report (ICR) Reviews and ProjectPerformance Assessment Reports, the scorecardfor closed projects reflects both weak and goodperformance, as shown in annex C. Among thefree-standing projects, the ones in Chad,Mauritius, Tunisia, India, and Sri Lanka hadmoderately satisfactory or satisfactory outcomes(highly satisfactory in the case of Sri Lanka).However, all three freestanding geothermalprojects in the Philippines and Lithuania hadunsatisfactory outcomes.1

The outcomes of the NRE components in energyprojects in Burundi and the Philippines wereunsatisfactory.2 In only three projects were theNRE components satisfactory, while six of themwere moderately satisfactory. The Niger EnergyProject (1988), of which the NRE component wasfor wood fuels and was 16 percent of the project, isone of them: wood energy markets in the countryare still functioning, according to IEG’s projectevaluation (IEG 2005).

It is important to note that in two of thecountries for which the NRE component wasunsatisfactory or moderately unsatisfactory—Burundi and Rwanda—civil conflict disruptedthe projects and was the main reason for theirinability to meet their objectives. Four othershave been adversely affected or canceledbecause of conflict and/or economic crises:NRE projects in Argentina, Bolivia, andIndonesia (two projects).3 Four of these sixcanceled projects are closed and constitute

one-quarter of the subset of projects that arethe focus of this study. That makes lessonlearning a challenge.

Freestanding projects performed better than projectswhere NRE is only a component. The closed portfo-lio is marked by solid achievements. Excludinggeothermal projects, freestanding NRE projectsperformed well, better than blended projects(table F.1). The outcomes for the projects inIndia and Mauritius were satisfactory, and thatfor Sri Lanka was highly satisfactory. While notperforming as well, the projects for householdenergy (sustainable wood fuel management)achieved moderately satisfactory outcomes (theoutcome of Mali’s household energy project,though, was moderately unsatisfactory).

The potential also existed for even better overallperformance. The two projects in Indonesiareceived either a poor rating or were not ratedat all because projects were canceled after theEast Asia financial crisis. Project documentsindicate, however, that the conditions forsuccess existed for both projects.

The efficiency of closed, “full-spectrum” NREprojects has been generally substantial. An analysisof the efficiency of four closed NRE projectsfound that the recalculated economic internalrates of return (EIRR) at project completionwere higher than those estimated at appraisalfor almost all RETs. Hydro and solarcomponents—the most common across theprojects—met or exceeded their target EIRRs.The exceptions were wind and geothermalenergy, although wind energy holds consider-able potential (World Bank 2004a).

ANNEX F: PROJECT PERFORMANCE EVALUATION

Table F.2 provides the EIRR figures for theseclosed projects (a more detailed analysis is inannex C). The EIRR calculations include the GEFgrants intended to remove market barriers toNRE by financing the incremental costs incurredin shifting from conventional to renewableenergy sources. Calculations done for the Indiaand Sri Lanka projects show that, without GEFassistance, project completion EIRRs would stillbe marginally higher than appraisal estimates.As GEF subsidies are phased out, it is importantto monitor the economic performance andcommercialization prospects (without sub-sidies) of several Bank-GEF projects that willclose in the next few years.

Factors of Performance

Good performance requires significant resourcesand maturation periods. Based on the experienceof closed projects with satisfactory outcomeratings from IEG’s ICR Reviews, key factors thattend to be associated with good performancewere identified. Although these factors are notpresent in all projects, those projects that haveperformed well generally have strong govern-ment commitment; effective Bank performance;extensive consultation and participation with

entrepreneurs, consumers, and nongovernmen-tal organization (NGO); effective credit andoutput-based (GEF) grant-financing mechanismsfor the private sector; efficient credit arrange-ments that facilitated access to RETs by the poor;strong capacity prior to the project or as a resultof its activities; focused attention to addressingthe market barriers to renewables; and stronginterest from local investors and financiers.Recent freestanding (NRE only) and rural electri-fication (grid and off-grid) projects that aimed atcommercialization through the private sectorexhibit these factors and performed well. Theimportance of the factors of performancediscussed above for a selected group of success-ful projects is presented in table F.3.

A focus on getting the regulatory and incentivesframework right has proven more useful to maximizingproject results than trying to get governments toenunciate a national renewable energy policy. Anexamination of the successful projects in table F.3shows that the performance of an NRE project isnot sensitive to whether the government hasestablished a policy promoting renewables or not.For example, while policy support for renewablesexisted in India when the satisfactory RenewableResources Development Project (1992) was


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Overall ratingsInstitutional development Bank Borrower

Projects Outcome Sustainability impact performance performance

Freestanding (12) Mixed: Mixed: Substantial or high Mixed: Satisfactory

6 moderately to 5 likely (except 3) 7 satisfactory or (except 1)

highly satisfactory (1 highly likely) highly

5 moderately unsatisfactory 6 unlikely or satisfactory

or unsatisfactory nonevaluable 4 unsatisfactory

With NRE components (15) Mixed: Unlikely Modest Mixed: Mixed:

11 satisfactory or or uncertain (except 5 9 satisfactory 6 satisfactory

moderately satisfactory (except 4) substantial, 5 unsatisfactory 8 unsatisfactory

4 unsatisfactory or 2 negligible)

moderately

unsatisfactory

Note: The Indonesia Renewable Energy Small Power Project (1997), which was canceled, was not rated.

Table F.1: Overall Ratings for Closed Freestanding Projects and Projects with NRE Components

A N N E X F : P R O J E C T P E R F O R M A N C E E VA L U AT I O N

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Country/project Appraisal Actual

Sri Lanka Energy Services Delivery

Grid-connected mini-hydro 18 26

Off-grid village hydro 12 18

Solar home systems 12 42.6

Wind farm 14 3.9

India Renewable Resources Development

Small hydro (dam-toe)a 13–65 28

Small hydro (canal and run of river)a 12–29 33

Wind farm 12 14

Solar PV lanterns 33

Solar PV home systems 108

Solar PV power packs 14–14.6 21

Solar PV village power 19

Solar PV water pumping 43

Tunisia Solar Water Heating

Solar 34 42

Philippines Leyte-Luzon Geothermal

Geothermal 10.5 7.5

Source: Implementation Completion Reports.

a. EIRR figures are without GEF grant.

Table F.2: Economic Internal Rates of Return for Selected NRE Projects (percentages, with GEFgrants for incremental costs)

Solid institutional

Good Bank Efficient and/or Attention performance: credit technical to

project Involve- mechanisms capacity addressing Strong design, AAA, ment of enabling at entry regulatory Solid

IEG country supervision, all Effective the poor or as a and private outcome commit- and stake- GEF grants access result of market sector

Closed projects rating ment adaptability holders and OBA to RETs project barriers interest

Sri Lanka ESD Highly satisfactory � � � � � � � �

India RRD Satisfactory � � � �

Mauritius Satisfactory � � � �

Senegal Highly satisfactory � � � � � � �

Note: A checkmark indicates that the factor was evident in the project. The absence of a checkmark indicates that the factor was not relevant to the project and/or there was little re-

porting provided on it in the ICR or supervision documents. AAA = analytical and advisory assistance; OBA = output-based assistance.

Table F.3: Factors of Performance in Successful NRE Projects

approved, no explicit government support forNRE existed in Sri Lanka when the highly satisfac-tory Energy Services Delivery Project (1997) wasimplemented. As table F.3 shows, adequatelyaddressing the regulatory and market barriers toprivate sector involvement and NRE scale-up is afactor of good performance, as is country commit-ment (what a government does). A formal NREpolicy (what a government says) is not.

Neglect and lack of commitment easily lead to badperformance. Projects that received unsatisfac-tory outcome ratings tend to be associated withinadequate attention to ensuring a conducivepolicy and regulatory environment for NRE.

These ratings are also associated with poorsupervision of NRE components in a largerconventional energy or water sector project,weak country or implementing agency commit-ment, a private sector hesitant to take risks,weak Bank performance, insufficient capacity ofpublic and/or private institutions, and sociopo-litical or economic crises in the country.

The influence of these factors in unsuccessfulprojects is shown in table F.4. Small NREcomponents in conventional energy or watersector reform projects generally did not achievetheir objectives, mainly because of poorsupervision.


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Poor Weak Insufficient supervision country or institutional

Socio- Inadequate of NRE imple- capacity political attention components menting Risk- Weak (despite

or to policy and in a agency averse Bank capacity- IEG outcome economic regulatory larger commit- private perform- building

Closed projects rating crisis framework project ment sector ance activities)

Philippines Leyte

Luzon Geothermal Unsatisfactory � � �

Mali Household Energy Moderately unsatisfactory � � �

Burundi Energy

Sector Rehabilitation Unsatisfactory � � � � �

Rwanda Energy

Sector Rehabilitation Moderately unsatisfactory � � � � �

Table F.4: Factors of Performance in Unsuccessful NRE Projects

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Poverty reduction is a major objective of NREprojects that was mostly implied but not stated.Reducing poverty by increasing energy accessfor the rural poor has been an importantobjective of the NRE projects that the Bank haspursued from the early 1990s to the present, andpoverty reduction is often an implicit objectivein the design and target beneficiaries of theBank’s NRE projects. Thus, a key question iswhether the Bank’s financial assistance andadvice contributed to achieving this objective.

Although this has been at least an impliedobjective in NRE projects judging from thecomponents and activities, the portfolio reviewfound that of the Bank’s 27 closed NREprojects,1 only two—the Mali Household EnergyProject (1995) and the Senegal Sustainable andParticipatory Energy Management (1997)—explicitly stated a poverty reduction objective.In seven other projects, livelihood improvementwas an implied goal.2

The Bank sought to reduce poverty through threeapproaches: improving welfare, enhancing in-comes, and initiating rural transformation. Thewelfare improvement approach generallyreflected in the Bank’s NRE projects in the1990s3 sought to increase the welfare of therural poor through household lighting, whichwould provide more time for study and choresand improve comfort and safety. The ArgentinaRenewable Energy in the Rural Market (RERM)Project (1999) is an example of this approach;it seeks to make electricity accessible todispersed households for lighting and smallappliances, as well as to schools and publichealth clinics in poor, rural areas. Beyondimmediate benefits, it is expected that the

increased hours of lighting will generatelonger-term positive impacts on livelihood,education, and social development.

A more recent approach is to focus on increas-ing incomes of the poor through electricityprovision, such as the Sri Lanka RenewableEnergy for Rural Economic Development(RERED) Project (2002). This project seeks toincrease nonfarm incomes by targeting electric-ity supply to household-based enterprises andsmall and medium-size enterprises. The SenegalSustainable and Participatory Energy Manage-ment Project (1997) also sought to generaterevenue for villages by having them participatein the trade of sustainably managed wood fuels.

Cross-sectoral rural transformation has beenthe third and latest Bank approach to linkenergy access and poverty reduction. By provid-ing electricity and information and communica-tion technology (ICT) links to rural enterprises(considered as catalysts for rural sector transfor-mation) and to public service institutions, theBank is striving to generate broad-basedeconomic growth, which will in turn reducepoverty levels. The Uganda Energy for RuralTransformation Project (2001) is the bestexample of this approach. It aims to induceindirect and long-term effects from economicgrowth, such as increased employment, incomegeneration, and improved health care andeducation; these effects will increase the ruralstandard of living.

The three approaches have not been applied inthe portfolio exclusive of each other. While insome projects only welfare improvement orincome enhancement has been pursued, in

ANNEX G: ASSESSMENT OF THE NRE PORTFOLIO’S CONTRIBUTION TO POVERTY REDUCTION AND GOOD GOVERNANCE

others two or even all three of the approachesare reflected.

In tackling poverty through NRE provision, the Bank’srecent areas of emphasis are to improve livelihoodsand incomes and establish a sustainable process forthe full commercialization of renewables. Improv-ing livelihoods and incomes as key goals ofrenewable energy provision is evident in manyof the most recent ongoing projects, such as inthe Bolivia Decentralized Infrastructure forRural Transformation Project (2003) andBangladesh Rural Electrification and RenewableEnergy Development Project (2002).

As in the Uganda project, the goal of the Boliviaproject is to promote the growth of the rural andmicro-enterprise sector through electricity andICT provision, thus expanding employment andincome-earning opportunities. Electricity accessfor rural schools and clinics is also intended toimprove primary education and preventivehealth services. Availability or electricity for poorhouseholds will increase safety and time forstudy and chores.

In an effort to raise levels of social developmentand economic growth in rural areas, theBangladesh project seeks to support rural initia-tives for the productive use of electricity, such asin agriculture, to increase income and improvethe delivery of health and education services.Increased access of households to reliablesupplies of electricity would enable more directgains; greater convenience, safety, and ability tooperate small appliances; and indoor air qualityimprovement from the elimination of kerosenesmoke.

The Bank has also sought to establish a multistake-holder commercialization process for NRE technolo-gies. The Bank has done this by removing thebarriers to viable and sustainable renewablesmarkets, building the confidence of investorsand consumers, strengthening institutionalcapacity, and mobilizing private financing. As aresult of this process, an environment is likely toemerge that will enable the development of NREin the Bank’s borrower countries beyond the

levels achieved at the end of its projects—in itselfa measure of sustainability. This increaseddissemination through a well-functioning marketcould improve livelihoods on a larger scale.

Of the Bank’s physical targets for renewable energyinstallations, some have been surpassed, whileothers are making minimal progress. Except forhydro in Sri Lanka and India, where targets wereexceeded, physical targets for RET installationshave not been met (see table 4.3). Each of thefive closed projects involving the installation ofsolar home systems (SHS), which were mainlyintended for poor households, fell short ofachieving their dissemination targets, in somecases by a significant amount. Even in a projectwith a highly satisfactory IEG rating, the SriLanka Energy Services Delivery (ESD) Project(1997), the SHS component did not do as wellas the grid/off-grid hydro ones because,although the project surpassed its target for SHSinstallation, the target had been reviseddownward from its original figure.

Monitoring and evaluation (M&E) systems in NREprojects have been mostly absent or weak, despitethe goal of poverty reduction consistently stated inCountry Assistance Strategies (CASs) of countrieswith NRE projects. As a result, there are no activeperformance indicators, so evaluating thesubsidy-targeting and poverty-reduction im-pacts of improved access is difficult. Forexample, the Mali Household Energy Project(1995) intended to improve the living standardsof residents in 250 villages by employing them assuppliers in the firewood trade. The project alsoplanned to provide benefits for low-incomeurban wood fuel consumers in five towns bysupplying them with cost-saving, improvedcharcoal stoves. However, no monitoring indica-tors or systems were established to assess theincome effects on the villagers and urbanhouseholds. That makes an evaluation of theproject’s impact impossible at this stage.

The Senegal Sustainable and ParticipatoryEnergy Management Project (1997) was animprovement over the Mali project in terms ofdetermining the economic benefits of the


5 0

project on the villages, but it had importantweaknesses. The project was designed togenerate revenue for low-income rural villagesby involving them in both the sustainable supplyof wood fuel to towns and various agricultureand other natural resource-based activities.

But based on supervision documents, intracking the income the villages received, theproject made no distinction between incomefrom the wood fuel component and incomefrom non-energy-related activities. How muchthe wood fuel component contributed topoverty reduction is therefore difficult tomeasure.

Furthermore, although the project intends tobenefit low-income urban households byproviding improved cookstoves, there was noindication that the cookstove component wasbeing monitored, and no information is availableon whether the component benefited users.Capacity building for monitoring and evaluation(M&E) design was provided in the project, andan M&E plan was developed on schedule. But itis not clear in light of the above what the plan’spurpose was and what indicators weremonitored.

The lack of effective M&E systems to determinepoverty impacts is also found among theprojects that have sought to improve electricityaccess. In the Argentina RERM Project (1999),performance indicators that were developed atstart to assess welfare improvements includedhours of lighting, study, and socializing and theextent of population migration. Yet no annualtarget levels that could serve as benchmarkswere developed for these indicators.

The project’s implementation design also didnot include steps for monitoring these indica-tors or evaluating the impact of electricity accesson poor households. Only the number ofhouseholds and public centers connected to arenewable energy system were to be counted.Although the steps to develop a completemonitoring system were eventually taken, thesecame rather late. Four years after the project’s

initiation and one year before its expectedclosing, the Bank and the borrower decided thata monitoring system would be designed andimplemented to understand the socioeconomicimpacts of the different NRE technologies.

In terms of lack or absence of M&E, an exceptionis the Sri Lanka ESD Project (1997). Based ondetailed interviews with beneficiaries, theproject conducted an evaluation of the socialand economic impacts of electricity accessthrough solar home systems and off-grid villagehydro schemes. The evaluation found thefollowing improvements in the quality of life ofcustomers:

• Women could do household work at night.• Children could study longer hours, and it was

felt their educational performance hadimproved.

• Entertainment hours were extended, and fam-ily interaction was enhanced.

• A feeling of safety was increased.• Health conditions improved with the elimina-

tion of kerosene lamp fumes.

The survey, however, showed little evidence thatelectricity access from the NRE systemsincreased economic or income-generatingactivities apart from the seasonal employmenteach village hydro scheme provides to 30–60people in construction (IEG 2004).

Though gender impact has been a focus in the socialdevelopment goals of many renewable energyprojects,4 there is little evidence to support the claimthat women have benefited. The lack of properM&E of the impact on women is significant,given the finding of some studies that womenoften lose when a wood fuel market isestablished (IEG 2003b). The Mali HouseholdEnergy Project claims to have benefited womenin both urban and rural areas substantially. Inurban areas, women allegedly gained because ofthe cleaner indoor environment and reductionin energy expenditures that improved stovesallowed. Rural women supposedly benefitedfrom the creation of wood fuel markets andimproved charcoaling techniques because they

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tend to be major actors in the wood fuel chain.Yet no monitoring was done to determinewhether the project actually benefited urbanand rural women.

Increasing the income of women through theirinvolvement in wood fuel management andmarketing and other income-generating activitieswas a specific aim of the Senegal Sustainable andParticipatory Energy Management Project (1997);training for women in these activities was includedin the project. However, it did not delineate howthe welfare impacts on women were to bedetermined. While the project claimed to haveachieved “gender development,” it has providedno data to support this claim. The Argentina RERMProject, as the one in Senegal, identified womenas well as children as groups that would benefitparticularly from the project, but it too has nottracked their welfare for most of the project.

Increased income is a goal of nearly all of the recentfreestanding projects (2001–present).5 But thus far,supervision records do not provide data onincreased household incomes. Only a few projectshave M&E systems to determine the contribu-tion of improved energy access to incomes. Thegoal of the Sri Lanka RERED Project (2002) is toincrease incomes of the rural poor by providingelectricity for nonfarm-productive activities. Yetin the Project Appraisal Document, there is nodescription of an M&E plan or of the data-collection methods that would be used.

The project’s M&E system is not sufficientlydeveloped to assess the project’s specific contri-bution to poverty alleviation. It does not capturethe various income effects or distinguishbetween the income gains that are or are notattributable to energy access. For householdincome, the only performance indicator ismeasurable increases in incomes of householdsthat gain access to electricity.

The Nicaragua Off-Grid Rural ElectrificationProject (2003) also illustrates the absence ofrigorous M&E found among many of the recentNRE projects. The project’s main developmentobjective is to generate welfare improvements

and enhanced income in rural areas throughelectricity provision. It seeks to do this bysupporting the delivery of services by microfi-nance (MFI) services for connection to electric-ity systems and of business developmentservices (BDS) to rural enterprises. But no keyperformance indicators exist under the projectfor poverty reduction or welfare improvement.The project indicators consist only of thoseregarding the implementation of MFI servicesand BDS, such as the number of householdsusing MFI services to access electricity and theuse of BDS by rural enterprises. The projectincludes the development of a participatoryM&E system to assess the project’s ultimateresults. But a year after approval, it was stillunclear what the M&E plan consists of and howthe impact on the poor is to be evaluated.

Although late, the Bank has been developingapproaches and tools recently to better assess thesocioeconomic impacts of improved energy access.The Energy Sector Management AssistanceProgramme (ESMAP), for example, is pioneeringnew methods and instruments. In 2002, ESMAPpublished Rural Electrification and Develop-ment in the Philippines: Measuring the Socialand Economic Benefits, a study that offers apractical approach to qualitatively and quantita-tively assessing the effects of electricity accesson education, health, comfort and protection,productivity, and other areas and discusses itsapplication in the Philippines. The study, whichincludes a measurement of the effects ofelectricity access in monetary terms, also offersevidence that rural electrification has a positiveimpact on the poor and thus is an importantelement for development.

ESMAP also recently released Guidelines forDesigning Energy Modules in Multi-TopicHousehold Surveys (2004) to help the Bankintegrate energy modules into its LivingStandard Measurement Studies and othermultitopic household surveys. The guidelineswere developed under the reasoning that withenergy modules, surveys will be able to providemore extensive and reliable data on householdenergy use. These data would enable not only


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better policy making for poverty-targeted ruralenergy provision, but together with otherhousehold information, the surveys provideM&E of the impacts of improved energy accesson living standards.

Some of the latest NRE projects are using these newmethods and tools to help the developmentcommunity better understand the impacts of energyaccess. The Uganda Energy for Rural Transfor-mation (ERT) Project (2001) will be the firstproject to use a variety of approaches andadvanced analytical tools to rigorously quantifythe various indirect impacts of electricityprovision on the different dimensions of ruralpoverty and growth.

The M&E program will do several things:

• Document services in energy, water, health,education, and roads, and economic and socialwelfare, in a sample of communities beforeproject implementation to obtain baselineinformation.

• Track welfare in these communities, includ-ing its distribution within the household andwith respect to gender, to identify the changesthat project implementation has brought.

• Distinguish between the impacts on connectedand unconnected entities.

• Compare project with nonproject communitiesto distinguish the impacts from other society-wide changes.

As most of the impacts on poverty will beindirect, the M&E plan’s goal is to identify theseeffects and help draw lessons to maximize theproject’s contributions in subsequent phases.The program builds on ESMAP’s monitoringwork and was designed with reference toUganda’s poverty survey systems.

The Bangladesh Rural Electrification andRenewable Energy Development Project (2002)is another recent project that gives M&E moreemphasis. The project includes several socioe-conomic development objectives—enhancededucation; improved quality of life from greatersafety, comfort, and convenience; women’s

empowerment through improved education forgirls and better access to information; incomebenefits from the reduced cost of electricityfrom NRE; enhanced rural productivity anddevelopment opportunities, and povertyreduction—and for each of these a specific setof indicators to assess whether the objectiveshave been achieved.

By providing technical assistance to the M&Ecell of the public Rural Electrification Board, theproject also seeks to establish an institutionalsystem for measuring and documenting theimpacts of electricity provision and buildingborrower capacity for M&E. As with the Ugandaproject, this one in Bangladesh aims to collectbaseline data, resurvey households on a regularbasis after electrification, and use the results toassess the performance of the rural electrifica-tion program in terms of socioeconomicoutcomes.

The recent initiatives to improve monitoring methodsand instruments are too recent to be evaluated. Onbalance, it is still unclear whether the Bank’sassistance to improve access through NRE hassignificantly contributed to poverty reduction. It hasbeen often accepted that NRE supplying gridand off-grid energy has reduced poverty andbrought about overall improvements in welfareand had positive economic impacts at thenational level. Yet the lack of evidence onwhether the Bank’s NRE portfolio has made asignificant contribution to poverty reduction is amajor analytical gap. This is consistent withIEG’s finding that there is little hard evidence todate on the poverty-reducing impact ofcommunity development projects (IEG 2005),which include many NRE projects.

The Bank’s credibility is at stake when it adopts“helping the poor directly” as an institutionalmandate in its energy assistance withoutknowing whether such an impact is beingachieved. Addressing this information gap isespecially critical for mapping the Bank’sexpanded lending for NRE. The Bank’s lack ofleadership in promoting good M&E systemsworks against its catalytic role for poverty-

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targeted NRE development in the long run. Thatis because the Bank loses the opportunity tobuild critical monitoring capacity in its clientcountries, which is essential for measuring

baselines and setting indicators for futureprojects. It is hoped that the Bank’s M&E workin its Uganda and Bangladesh NRE projects willlead the way.


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Together with GEF financing, the Bank pursued theEnergy Business Renewal Strategy (EBRS) objectiveof protecting the environment by removing marketbarriers to renewables. The environmentalobjectives of the EBRS are twofold: protect theenvironment by removing the market andregulatory barriers to renewables and achieveglobal environmental benefits.

The Bank and the GEF have sought to achievethe first objective by catalyzing impacts beyonddirect, project-related ones and by using differ-ent strategies. These strategies have includedusing business models appropriate to the localcontext and making financing available throughvarious mechanisms. This annex focuses on theeffectiveness of the Bank-GEF in generatingenvironmental benefits by examining closedNRE projects, which are the only ones withinformation on final impacts.

Out of the total of 27 closed projects (as of June2005), the GEF cofinanced 13. However, a totalof 17 projects included mitigating harmfulenvironmental effects or the provision of anenvironmentally clean form of energy as aproject development objective. The 10 that didnot were conventional energy or irrigationprojects in which NRE constituted only acomponent, although two geothermal energyprojects in the Philippines were among them. Ofthe ongoing projects, 20 are GEF cofinanced.

The Bank has sought to make energy use moreenvironmentally sustainable in two ways: (i) byreducing the emissions of CO2 and othergreenhouse gases (GHGs) through the substitu-tion of NRE for conventional ones and (ii) byestablishing management plans for the sustain-

able extraction of wood fuel energy forhousehold use to conserve forests. (Threeprojects in the closed portfolio—in Chad, Mali,and Niger—and one ongoing project in Senegalfocused on the sustainable supply of wood fuelenergy for household cooking and forestconservation.)

Excluding wood fuel projects, the Bank’s NREportfolio has been centered on electricity orheat provision through the use of solar, wind,hydro, biomass, and geothermal resources. Sixprojects involved renewables-based heating.Three were implemented in the Philippines andone in Lithuania. Tunisia was the recipient of onesolar water heating project.

In terms of achieving global environmental benefitsthrough NRE projects, the Bank’s effectiveness wasgenerally satisfactory. Projects that aimed toreduce GHG emissions generally met theirtargets, and wood fuel projects achieved theirenvironmental objectives and had positive localimpacts. Based on an assessment of the fiveclosed projects that sought to reduce GHGemissions and for which some data are available,three projects met or nearly met their appraisaltargets, and one project, in Tunisia, exceededthem. The one project that failed to achieve theexpected reductions and fell far short of doing so(in Indonesia) was severely impacted by theAsian economic crisis of the 1990s (see table 4.5).

The Sri Lanka ESD Project reduced GHGemissions by a total of 514,000 tons. Althoughthis is greater than the appraisal figure of 140,000tons, it did not include the targeted reductionfrom mini-hydro projects. The Indonesia SHSProject sought to mitigate GHG emissions by

ANNEX H: AN EVALUATION OF THE PORTFOLIO’S PERFORMANCE IN ACHIEVING GLOBAL ENVIRONMENTAL BENEFITS

replacing household kerosene and diesel usewith PV systems. Due partly to the economiccrisis the country experienced, the number ofSHSs installed was far below the level targeted atappraisal. As a result, though the goal was toreduce fossil fuel use by about 546,000 kiloliters,only about 3,700 kiloliters were conserved.

For the India Renewable Resources Develop-ment (RRD) Project, the carbon emissionsavoided were estimated at about 5.4 million, 1.1million, and 94,000 tons over the lifetime of thesubprojects for small hydro, wind, and PV,respectively. The emission reductions achievedfor solar PV were below predictions (appraisaldocuments did not present emission-reductiontarget figures for each of the RETs separately, butprovided a figure for wind and PV combined).

The Lithuania Geothermal Project also failed toreach the level of carbon reduction set atappraisal. However, the project surpassed itstargets for reducing SO2 and NOx. Table H.1helps explain the gap between targeted andactual reductions in GHG emissions, in that thephysical installations of RETs achieved in severalkey projects also fell below their targets. Only

the Tunisia project had unqualified success, as itsurpassed its targets for carbon reductions.

The four projects for sustainable wood fuelmanagement and forest conservation, unlikethose that sought to reduce GHG emissions,were successful overall in meeting their environ-mental objectives.

Evidence on the environmental performance of theportfolio is partial. Owing to poor M&E systems inthe projects, more than a third have either insuffi-cient or no information on the achievement of theirenvironmental objectives. Fifteen of the 27 closedprojects examined included a component forRET installation or improvement.1 However,nine of these either failed to provide informa-tion on their environmental impacts or did nothave clear targets for GHG or wood fuel usereductions, or both. In most cases, neithertargets nor specific impacts were provided.2

The evidence thus far indicates that the qualityof environmental impact monitoring acrossthe portfolio was quite uneven and thatadequate M&E is required to know the fullextent of the environmental benefits from NREprojects.


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Project Environmental goals Achievements

Chad Household Energy • Bring 300,000 ha of forest under sustainable • 500,000 ha brought under sustainable community

wood fuel management. management.

Niger Energy • Promote a more effective management of natural forest • Conserved the forest resource base, developed

cover and firewood conservation. rural wood fuel markets, and established a

sustainable supply of wood to urban areas.

Mali Household Energy • Reduce wood fuel consumption by 330,000 tons/year. • Wood fuel consumption decreased by 400,000

• Cover 720,000 ha of forest with sustainable tons/year.

management. • Only 320,000 ha brought under sustainable

management.

Senegal Sustainable and • Annual sustainable wood fuel production • Sustainable wood fuel production of 400,000

Participatory Energy of 300,000 tons/year. tons/year.

Management Project • Reduce wood fuel-related deforestation by • Wood fuel-related deforestation reduced by

20,000 ha/year. 29,000 ha/year.

• Reduce CO2 emissions by 500,000 tons. • CO2 emissions reduced by 1.2 million tons.

Note: ha = hectares.

Table H.1: Global Environmental Goals and Achievements of Wood Fuel Management Projects

According to the GEF Climate Change ProgramStudy (GEF 2004), the contribution re-newables have made and will be able to maketo global climate change prevention is notsubstantial. For the Bank to expect the directimpacts of its NRE projects to play a major rolein reducing GHG emissions is unrealistic.Photovoltaic systems, which feature heavily inthe Bank’s off-grid electricity provision andrural electrification projects, have a low impacton GHGs. In the renewables subsector, thesystems that have had the largest effect oncarbon emissions and the potential to make

the largest contribution in the future are grid-connected ones.

The global and local impacts of NRE can be greaterin the long term if projects catalyze the creation ofsound markets for NRE, as the environmentalbenefits will come not so much from the numberof systems that projects install, but indirectly andin the future from the instruments they create.Considering this, it is important to recognize thatthe Bank has achieved its greatest emissionreductions from its GEF-cofinanced investmentsin energy efficiency (GEF 2004).

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The Bank’s effectiveness in pursuing the EBRSobjective of promoting private sector development(PSD) was substantial overall and high in recentprojects. In practice, the Bank focused oncommercializing NRE technologies; involveddiverse public, private, and civil societystakeholders; and was flexible in its approach tostrengthening local financial institutions toprovide long-term financing for rural energybusinesses. Most of the electricity-oriented NREprojects used complementary interventions tocommercialize NRE technologies as follows:

• Promoting private competition• Encouraging cost-effectiveness through

economies of scale• Mobilizing financial resources through public-

private partnerships• Providing output-based aid for gradual phase-

out• Verifying and improving the technical per-

formance of NRE systems to ensure qualitystandards in the market and to boost con-sumer confidence

• Demonstrating the commercial viability andutility of NRE

• Using sales models for RET delivery• Involving the beneficiary communities.

Most of the electricity-oriented projects haveused several of these interventions ascomponents that complement one another.

Encouraging private competition has been a charac-teristic of the NRE portfolio in general. Amongclosed projects, it was most evident in theIndonesia SHS Project, the Sri Lanka ESDProject, and the Sri Lanka RERED Project. It was

also a key strategy in a number of active projectsin Argentina, China, and Uganda.1

The Argentina project, for example, has requiredthat private concessionaires compete for theexclusive rights to serve an entire province withSHS, off-grid mini-hydro, and small wind units.The project’s goal has been to involve a smallnumber of large and capable private actors,given that a conducive regulatory environmentlargely exists from prior energy sectorunbundling and privatization at the federal level.

Together with fostering competition, the Bank alsolaid the groundwork for promoting economies ofscale to achieve greater cost-effectiveness in NREprovision. The Argentina project is a goodexample of this approach. By providingexclusive rights over a province to a few privateconcessionaires with the necessary organiza-tional and financial resources, the project hasexpected them to achieve reductions inequipment, transaction, and operation costs.The project also promoted scale economies toease public sector administration and regula-tion, cover a large and dispersed populationeffectively, serve consumers over a long period,and enable good private sector investmentreturns with minimal subsidies. Other projectsusing economies of scale to serve a largepopulation and meet institutional and produc-tive needs are the Uganda Energy and RuralTransformation Project and the Sri LankaRERED Project.

The Bank supported the creation of public-privatepartnerships to mobilize financing for RETs. In India,where the Bank has made some of the largest

ANNEX I: PRIVATE SECTOR DEVELOPMENT IN THE BANK’S NEW AND RENEWABLE ENERGY PROJECTS

investments for renewable energy, a public-private partnership was created to mobilizefinancing for RETs. The India RRD Project soughtto strengthen the capacity of a specialized publicinstitution, the Indian Renewable EnergyDevelopment Agency, to finance privatedevelopers of wind energy, solar PV, and smallhydro. This strengthening aimed to supportNRE commercialization.

The follow-up Second Renewable Energy Projecthas continued this strategy of strengthening theagency to promote private investments in smallhydro (IEG 2003a). These partnerships are alsoevident in the Sri Lanka ESD Project, discussedin several places elsewhere in the report.

Output-based assistance (OBA), financed throughGEF grants, was used to ensure that RET installationand service met dissemination volumes and qualitystandards. This review focused on the Bank’scontribution to creating an investment climateconducive to NRE commercialization and themechanisms to bring this about, instead of onthe rationale for subsidies, which have been thesubject of much previous analysis.

GEF subsidies are being phased out in Bank/GEF-cofinanced projects such as those in Indiaand Sri Lanka. In these projects, the GEF granthas been provided after independent verifica-tion, audits, and performance monitoring. Thespecific arrangements, however, have variedacross projects. In the Indonesia SHS Project, arelatively early one in the portfolio, SHS dealersreceived a small grant for each unit sold andinstalled. Modifying the use of OBA, laterprojects were designed for the phase-out ofsubsidies to place the private actors on anindependent footing and encourage thedevelopment of a fully commercialized NREmarket.

The Sri Lanka ESD Project, for instance, includeda one-time grant to developers to reduce theircapital and planning costs for off-grid RETs (IEG2004). To limit private sector dependence, theArgentina RERM Project provides concessionaires

with a limited time subsidy, channeled throughthe consumer and used to pay the tariffs, after theconcessionaires have financed the costs ofequipment and installation on their own.

OBA appears to have played a role in increasingconsumer confidence in the private provision of NRE,although evidence is limited because of the lackof M&E on private sector activities. Someprojects have explicitly sought to boostconsumer support and demand for renewablesby improving the technical performance of RETs.In the China Renewable Energy DevelopmentProject, support has been provided to improveSHSs. As well, the technology standards theproject has set have already had the effect ofincreasing consumer and investor attraction forthese systems and have raised competition andreduced prices. Improving the technologystandards of SHSs was also an importantcomponent of the Indonesia SHS project.

While pursuing the installation of RETs, the Bankhas also sought to demonstrate the commercialviability and long-run economic potential of NREtechnologies through pilots. For example, in theSri Lanka ESD Project, a pilot grid-connectedwind energy component was implemented.

To encourage private investment and minimizenotions of risk, developers have also beenprovided with market information on re-newables. At the same time, RET demonstrationsand promotional campaigns have beenconducted for rural consumers, as was done inthe Argentina project for wind energy, to educaterural residents on the benefits of NRE technolo-gies and thus increase demand for them.

To deliver RETs to consumers through the privatesector, Bank projects have used different sales models.Projects have employed PV sales models usingeither cash sales or various forms of credit, such asdealer credit, end-user credit, and lease or hire-purchase schemes. Examples are Indonesia SHS,China Renewable Energy Development (RED),India RRD, Sri Lanka ESD, and Uganda Energy forRural Transformation (ERT). In the Indonesia SHS


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project, dealer credit was used—privateenterprises sold SHSs and extended credit to ruralconsumers through hire-purchase schemes. ThePV dealers accessed credit on normal commercialterms from participating local commercial banks,which refinanced their loans from the Bank.

A smaller number of projects have exploredconcessional, fee-for-service models, but thesehave been less successful than sales models.Regulated concessions, using fee for service,have been part of the Argentina RERM Projectand Cape Verde Energy and Water Sector Reformand Development Project (1999). Although thelikelihood of reaching more poor is greater withthis model, the approach has been problematicin Argentina, and very few PV systems have beeninstalled there.

In China, a fee-for-service model was consideredunworkable and was rejected early in the projectdesign, partly because no appropriate authorityexisted in the electric power or agricultural/ruralsector to regulate concessions. The Sri LankaESD Project demonstrated the failure of a fee-for-service model in that country. It was foundthat monthly collection expenses under thescheme were too high. Experience with fee-for-service models is still insufficient to point to realsuccesses (GEF 2004).

The Bank involved rural communities in householdenergy projects aimed at commercializing woodfuels. All of the household energy projectssought to engage rural communities as privatesector actors in the supply of wood fuels tourban consumers: the Niger Energy Project(1988), Mali Household Energy Project (1995),the Senegal Sustainable and ParticipatoryEnergy Management Project (1997), and theChad Household Energy Project (1998).

These projects were designed so that the systemof regulated wood fuel markets and village-based, sustainable forest management benefitsthe communities and thus provides them withthe incentive to participate. Electricity-centeredprojects have sought to engage communities as

well, such as the Sri Lanka ESD Project andBangladesh Rural Electrification and RenewableEnergy Development Project.

The private sector has been involved in the develop-ment of renewable fuels, and private firms haveparticipated in efforts to create improvedcookstoves. The Bank, in partnership with a firmin Zimbabwe, developed a low-cost, biomass-based ethanol gel fuel as an alternative topetroleum-based products and has conductedconsumer tests and market assessments inEthiopia, Malawi, Mozambique, Senegal, andZimbabwe. For more efficient use of wood fuelsand to shift use to conventional household fuels,such as liquefied petroleum gas, the Bank hasinvolved private firms in the Niger EnergyProject (1988), Mali Household Energy Project,Senegal Sustainable and Participatory EnergyManagement Project, and Chad HouseholdEnergy Project for the development and dissem-ination of improved cookstoves and interfuelsubstitution.

The Bank’s effectiveness was modest with respect tothe EBRS goal of good governance and creation ofregulatory environments conducive to NRE. Morerecent projects and ESMAP assistance havestarted to address the issue. Regulatoryimprovements conducive to NRE commercial-ization have been the orphans of energyreforms, and this works against the Bank’s ownNRE goals. That is true because privatization andcompetition in power markets tend to weakeninterest in serving rural markets, lead to a prefer-ence for petroleum-based fuels, and shortentime horizons for fuel choices.

The Bank focused on the reform of large utilitiesand gave inadequate attention to the criticalissue of reforming regulatory and policyenvironments for NRE, particularly during theearly to mid-1990s, to create objective, transpar-ent, and nondiscriminatory regulatorymechanisms aimed at leveling the playing fieldfor renewable energy. Renewable energycompetes—and is stunted—in markets with dis-torted prices for conventional energy sources,

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often through government subsidization ofpetroleum products.

Additionally, where privatization and un-bundling of the energy sector have not occurredor are incomplete, the true costs of grid-basedrural electrification remain hidden because theimplicit cross-subsidies in the electricity subsec-tor are not transparent. Thus, the fact that off-grid NRE systems can be more cost-effectivedoes not emerge. Leveling the playing field forrenewables within the broader energy sectortherefore becomes important for renewableenergy promotion.

Neglecting NRE while energy sector reforms arebeing designed and implemented can have importantnegative consequences that are slow and hard toreverse. This can be seen in the India RRDProject, which, while seeking to commercializesmall hydro, did not address the regulatoryuncertainties. The project could not do sobecause of inconsistencies between nationaland state-level frameworks, reform backslidingin some of the states, and the absence of a clearpolicy framework and future plans for renewableenergy. Consequently, the small hydro develop-ment was adversely affected (IEG 2003a).

When the India Second Renewable EnergyProject was designed, the Bank was slow to learnthe lesson from the RRD Project and did notpursue a nondiscriminatory regulatory environ-ment for NRE. As a result, the continuinggovernment policy shifts and uneven stateadoption of national legislation deterred privateactors from investing in renewables.

Only in the late 1990s did the Bank begin toemphasize the promotion of policy and regulatoryenvironments that are conducive for its NRE projects.The design of the Argentina RERM Project, forexample, took into account the opportunitiesprovided by the country’s advanced privatiza-tion in the energy sector and had a sound regula-tory framework. In the Uganda ERT Project, theBank took this one step further. In its first phase,before major private sector investments weresolicited, the project aimed to develop and

strengthen certain aspects of the regulatory andpolicy framework for RETs. The plannedframework is innovative in that the goal is to varytariffs by region according to consumers’ abilityto pay and to be higher for less-viable areas.Furthermore, smaller grid projects will comeunder lighter regulation.

The Bank has had some early successes in resolvingregulatory and policy uncertainties. In the SriLanka ESD project, a standardized Small PowerPurchase Agreement (SPPA) was developedunder the project and employed to resolve atariff determination issue between the CeylonElectricity Board and developers. As a result ofthe agreement, there was significant growth inthe number of both mini-hydro and wind powerdevelopers (IEG 2004).

Prior to the SPPA, purchasing energy from smallpower producers often required lengthybureaucratic processes and involved high costs,which ultimately made these arrangementsunviable. The SPPA was a standardized, legallybinding agreement between the national utility,the Ceylon Electricity Board and small energyproducers (<10 MW). It involved a non-negotiable, formula-based tariff structure, basedon avoided cost for the Energy Board, the lackof which had impeded small grid-connectedpower development. The SPPA eliminatedmarket uncertainty and created transparency.Furthermore, the SPPA included transmission,distribution, and performance obligations, thushelping normalize the participation of smallpower producers in the electricity sector.

The contribution of the SPPA to the project wasseen directly in the significant growth it broughtin both mini-hydro and wind power developers.The experience of the project illustrates that evenwhen renewable energy by small power produc-ers is profitable and long-term financing isavailable, an SPPA and a predictable purchase rateare essential elements of a successful renewableenergy development program (Ferrey 2004).

The Bank’s analytical and advisory assistance(AAA) in the Mauritius Sugar Energy Develop-


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ment Project (1992) helped establish a policyframework for private sector involvement thereas well, in bagasse-based power generation. Theproject supported the policy of private powergeneration based on bagasse as a substitute forimported fuels.

There was a strong general consensus amongboth private and public evaluation respondentsthat, although the Bank’s contribution solely infinancing terms was small and its involvementby completion minimal, its advisory and “honestbroker” role was critical in facilitating the launchand implementation of the country’s BagasseEnergy Development Program. The Bank’snonfinancial AAA during supervision missionsrelated to PSD—as well as the economic andsector work on the theory and best practices forenergy pricing based on the avoided-costprinciple—were often cited by stakeholders asspecific examples of the value the Bank added.

In recent years, ESMAP—through its AAA—hashelped establish the regulatory frameworks forrural electrification, as has been evident inArgentina, Bolivia, and Nicaragua.2 This AAA hashelped establish appropriate and coherentregulatory frameworks regarding off-grid electri-fication; it covers tariff setting, quality of service,delivery service obligations, technical standards,and other matters. The project also assistsregulatory agencies enforce and supervise off-grid rural energy policies and develop detailedregulations in the context of national energylegislation.

The results of the project are being incorporatedinto the design and implementation of the ruralelectrification projects in these countries. Anadditional feature of this ESMAP assistance isthat it has involved and promoted the exchangeof information and experience among policymakers in these countries.

The Bank’s effectiveness was substantial in pursuingthe EBRS goal of supporting local financial institu-tions for RET commercialization and establishingmarkets for renewables. The Bank successfullypromoted the role of local commercial and

development banks in financing privatedevelopers, as was evident in the Sri Lanka ESDProject. As a result, private sector involvementgrew significantly, and a strong NRE industry inthe country now exists. In 2004, there were 11mini-hydro developers, 9 accredited solarcompanies, and 20 active village hydro develop-ers. A large number of consultants and trainershave also emerged.

Through using innovative financing mech-anisms, the project illustrated that the risksinvolved in NRE are manageable and was able tomake the local financial institutions moreresponsive to the market. Another outcome wasthe growth in the number of financial institu-tions interested in lending for NRE. In thefollow-up project, a higher number of participat-ing credit institutions are involved, and severalthat are not involved are financing renewableenergy subprojects as well. Finally, the ESDproject also engaged and strengthened amicrofinance NGO to make SHSs more afford-able to rural consumers (IEG 2004).

The India RRD Project helped change the publicsector dominance in NRE financing to onecharacterized by PSD and more private develop-ers. As a result, competition has improved andadditional multilateral and bilateral support forcommercializing NRE was mobilized (IEG2003a).

But in some cases, institutional weaknesses havebeen constraining factors. Public partners havebeen weak, and private investors lacked experi-ence and readiness. Following the India RRDProject, the Indian Renewable Energy Develop-ment Agency still lacked financial strength andinstitutional capacity to promote NRE commer-cialization on a sustainable, cost-recovery basis.It continued to accumulate nonperformingassets and have higher financial risks, limitedcapital availability (because it is not a financiallycompetitive institution), and noncompetitiveterms and processes. The agency also lacked themanagement and operational principles andpractices to meet clients’ needs and simultane-ously mitigate risks. The agency had not been


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fully effective in facilitating NRE developmentand had only partial support of the variousstakeholders (IEG 2003a). These weaknessesaffected its performance at the start-up of theIndia Second Renewable Energy Project.

Argentina’s economic crisis had a significantadverse impact on the RERM Project. But thelack of success in transferring rural electricityprovision to the private sector has also been duein large part to an insufficient number ofqualified firms bidding for concessions.Moreover, the performance of provincial bodiesin regulating the NRE systems has been unsatis-factory. This is despite the country’s priorexperience with privatization at the nationallevel, the privatization of provincial markets, andtraining provided in the project on regulation.(An insufficient number of qualified firms and aninability to transfer energy provision to theprivate sector were seen as substantial risks atthe onset of the project.)

The Uganda ERT Project (2001) sought toensure that the public and private entitiesinvolved have the necessary capacity toundertake their respective roles before substan-tial investments are made in subprojects.Business development services will be madeavailable to private sector firms, while technicalassistance will be provided to public regulatoryagencies.

However, major delays in these activities haveunfortunately delayed the establishment of aprocess to commercialize NRE. Some of thesedelays have been in (i) preparing the proposedrenewable energy development framework,which has contributed to uncertainty over theregulatory environment, particularly tariffsetting; (ii) establishing a renewable energydatabase for the private sector; (iii) havingcapacity-building activities for the public sectoron the regulatory framework; and (iv) establish-ing the financing institution (that is, theRenewable Energy Fund).

As a result, private sector investments to meetthe project’s Phase One initial targets have been

low. The risks that the private sector willconsider—that (i) Phase One incentives are notsignificant, (ii) the Renewable Energy Fund willnot function effectively, and (iii) the new regula-tory framework will not work properly—remainas substantial as they were at project initiation.

Growing evidence points to the private sector’seffectiveness in delivering rural energy services—but only through public-private partnerships thatinclude community organizations and consumergroups. The private sector working alone cannotdirectly improve energy access for the poor. Inthe Sri Lanka ESD Project, solar companies wereto receive financing to provide credit toconsumers. Yet they were unwilling or unable tooffer this service, so market development forSHS was initially slow. Adapting to the situation,the project at the midterm review designed andimplemented a microfinance model with a keyNGO3 to expand the reach of the SHScomponent in low-income, rural areas bymaking the units more affordable. Meetings thatthe project held with the full range of stakehold-ers also helped develop an arrangement for theNGO to assist in financing a few small electricitycooperative societies to build, own, and operatevillage hydro projects (IEG 2004).

The India RRD Project (1992) relied solely onthe private sector to increase energy access tothe rural poor. But it was unclear at the outsethow to work with which private investors.Although the Indian Renewable EnergyDevelopment Agency accredited a number ofrural credit organizations, its credit policytended to favor larger enterprises and assistedsmaller-scale entrepreneurs only to a limitedextent, despite these entrepreneurs being bettersuited to serve the rural poor. Also, the agency’scomplex procedures and requirements discour-aged small to medium-size start-up companies,which could have played an important role inthe introduction of SHS.

The Bank exacerbated this bias by preferring tofinance consumers directly instead of providingdirect working capital loans to public or privatedevelopers. As a result, the project did not


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adequately facilitate energy access, particularlythrough SHSs, for the rural poor (IEG 2003a).

The Argentina RERM Project has not been ableto involve the private sector in providing energyservices to the rural poor to the degreeexpected, largely because the provincial regula-tory authorities and concessionaires have haddifficulty reaching participation agreements forserving the dispersed market. Concessionaireshave been reluctant to serve rural areas becauseof the uncertainties that a freeze instituted ontariffs for the concentrated electricity marketraises for their contracts.

The result is that two years before projectclosure, fewer than half the concessioncontracts targeted for serving dispersed marketswith NRE systems were in effect. This has led todoubts that provinces with important dispersedmarkets will be served through the project. Ithas also led to a substantial risk that the transferof rural electricity service to the private sectorwill not be accomplished.

While private concessionaires have lacked theincentive to serve dispersed, rural areas, cooper-atives and public distribution utilities haveshown interest, even during the economic crisis,in serving the rural market. On the borrower’ssuggestion, the project was amended to allowthese institutions to apply as concessionaires forthe installation and maintenance of NREsystems. Moreover, the Ministry of Educationoffered additional financing to support PV instal-lation in rural schools. The Bank showed flexibil-ity and supported the participation of these newinstitutions. This outlook has the potential toimprove the project’s level of achievement inreaching poor, rural areas.

Learning on the part of the Bank that NGOs canplay vital roles in private sector-led renewableenergy provision also appears to be reflected inthe Bangladesh Renewable Energy and RuralEconomic Development and Uganda ERT proj-ects. To promote the use of SHSs in rural areas,the Rural Electrification Board and theInfrastructure Development Company Limited

(IDCOL) have been serving as the twoimplementing agencies. While the ElectrificationBoard provides SHSs on a fee-for-service basis,IDCOL’s role has been as a financial intermedi-ary to make longer-term refinancing and grantsavailable to NGOs, MFIs, and SHS suppliers, sothat these entities can provide financing toconsumers for SHS purchases.

In mid-2004, there were nine participatingorganizations, and they have installed roughly19,700 systems—nearly twice the numbertargeted for this year at appraisal. Furthermore,the collection of consumer installments by theorganizations has been quite good. What havemade this component successful are the qualitymanagement of IDCOL and, most likely, the longexperience of many NGOs and MFIs inBangladesh with micro-lending to the rural poor.

In Uganda, village banks were given a revolvingfund, which they use to lend to consumers atreduced rates with flexible repayment sched-ules. This mechanism was developed after it wasdiscovered that dealer and consumer credit thatdevelopment banks offered reached only thewealthiest households.

The Household Energy Projects in Niger (1988),Mali (1995), Senegal (1997), and Chad (1998)demonstrate that where low-income ruralcommunities constitute the private sector, in thecase of these projects in the wood fuel trade,PSD was most successful. The significant level ofcommunity engagement can be attributed to theincentives the projects offered to the villages ofgaining economic benefits.

The final outcome of full NRE commercialization withno subsidies has not yet materialized. But if theBank’s desired interim outcome is to mainstream andscale up a process in that direction, the scorecard issatisfactory overall, particularly in recent years.

Market penetration of NRE technologies hasbeen more successful in projects that combineelements of policy, finance, and businessdevelopment, such as the Sri Lanka ESD Project.In general, however, the creation of a sustain-


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able market for NRE faces a number of obstacles,especially where NRE (in cases where it is theeconomically least-cost option) remainsfinancially more expensive and less accessiblethan conventional energy sources.

Nevertheless, increased use of NRE is emergingin countries with more developed renewableenergy policy environments and financingcapacities. Although major target groups, suchas the very poor, still cannot afford PVs (orconventional grid electricity unless very lowlifeline tariffs and household connectionsubsidies are offered), some PV-orientedprojects have been successful in niche markets,such as clinics, schools, and high-value applica-tions, and where households have disposableincome. Grid-connected renewable energysystems might be viable where adequate policyand regulatory support is available.

The recent China RED Project has been quitesuccessful in helping establish a process for NREcommercialization. This project has led to theemergence of a sustainable market for SHSs inthe western region. OBA has been helping PVcompanies meet working capital needs andfinance consumers. Moreover, in some cases, PVcompanies have invested in strengthening theirfinancial management and human resources anddeveloping products and distribution networks.

A key component of the project is support fortechnology improvements and standards beingset to increase performance and reduce costs.These improvements have had a direct positiveimpact on market development: new productshave been developed, greater competition hasemerged, and prices have decreased. Most marketparticipants recognize the project’s standards asbeing a key factor in the market’s development.

Twenty-five companies are now competing (upfrom 16 at project commencement), andadditional companies, mostly small andmedium-size enterprises, are in the process ofqualifying. In terms of physical targets, 410,000SHSs have been sold (compared to 363,000 atappraisal). But more importantly, the main

financial, institutional, price, and technologicalbarriers to large-scale commercialization havebeen removed.

Building on the RED project’s pilot wind energycomponent, the preparatory work for theproposed China Renewable Energy Scale-UpProgram is being implemented to facilitate windenergy scale-up. The project also provided muchof the information for the drafting of theRenewable Energy Law, which would require thata certain amount of China’s energy be supplied byrenewables. This case illustrates a new attentionon the Bank’s part to ensuring an environmentconducive to renewable energy.4

Regulatory uncertainties in India and theuneven nature of the frameworks across thestates have kept NRE commercialization fromreaching its full potential. However, in somestates real achievements have been made. Thesecan be attributed to the stakeholder consulta-tion and negotiations processes that the first twoprojects (the RRD Project and the SecondRenewable Energy Project) set in motion. Oneissue was tariffs: there was discord betweentariffs set at the national level and thoseproposed by the states, and lower state levelsprovided a disincentive to NRE developers. InTamil Nadu and Karnataka states, however, thestate electricity boards and private developershave reached a mutually acceptable agreementon tariffs. It will enable electricity supply fromrenewables despite this tariff level being lowerthan the national figure.5

M&E of PSD outcomes in renewable energy projectsneeds to be improved soon and significantly, particu-larly for projects with OBA components that linkfinancial incentives to delivery of specific perform-ance indicators. The Bank’s renewable energyprojects even up to the late 1990s have beensomewhat experimental. As the Project AppraisalDocument of the Argentina RERM Project states,“…as more international experience in… differ-ent delivery mechanisms is obtained, it is antici-pated that not one but several deliverymechanisms will be found effective, dependingon the particular country context.”


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However, it is too early for any conclusions to bemade on the success or failure of differentcommercialization approaches because M&E ofthe impact of Bank interventions has beeninadequate overall. For example, in the IndiaRRD Project, M&E within the implementing andfinancing body was weak, but the Bank did notmake the necessary effort to strengthen theinstitution’s capacity (IEG 2003a). Similarly,although capacity building in M&E of the privatesector was one of the activities in the ArgentinaRERM Project, there is little evidence from theproject documents on whether the M&E that wasconducted provided information on the successof the concessionaire approach that was used.

Another example is the Indonesia SHS Project.Although the Bank claims that a lesson from theproject is to scale down performance-basedgrants to facilitate the transition of companies tocommercial operations, there is insufficientinformation available from project documentsregarding the effect of the OBA on private

operations to make this conclusion. EffectiveM&E of projects with OBA components isespecially critical, given the rapid increase inperformance-based operations and theimportance of enabling comparisons acrossprojects to sift through what works and whatdoes not in OBA schemes.

M&E of NRE commercialization and PSD inproject- and country-specific contexts areessential for learning what type of private actorsto involve, determining and revising subsidylevels and OBA mechanisms, and mitigatinginvestor risk in the renewable energy subsector.The results would also provide signals toinvestors whether transparency and predictabil-ity in the regulatory framework for renewablesare being achieved. M&E systems will need to bestrengthened if the Bank is to (i) learn from thesuccesses and shortcomings of its NREapproaches in diverse contexts and (ii) derivefrom these lessons the basis for scaling up itssupport for NRE.


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The relevance and efficacy of the Bank’s new andrenewable energy AAA is high. Effective AAA hasbeen a key factor of performance in successful NREprojects. Almost all NRE projects had AAA associ-ated with their preparation and appraisal. AAA isdefined broadly to include NRE-related studies,technical assistance, training, workshops, pilotactivities, and study tours.

In some cases, formal economic and sector workalso addressed NRE issues. Throughout the NREportfolio, it was evident that AAA played animportant role in supporting both projectdesign and implementation by addressing awide range of issues, including the following(among others):

• Pre-investment assessments, market assess-ment surveys, feasibility studies

• Selection and strengthening of the project im-plementing agency

• Technical design of project components• Development of standardized SPPAs• Design of financial intermediation mechanisms• Analysis of economic pricing and tariff-setting

options• Implementation action plans, road maps for

scaling up• Technical standards• Practitioners’ workshops (for example, quality

processes and control)• Analysis of regulatory requirements for NRE

commercialization• Monitoring and evaluation methodologies and

associated country case studies.

The direct, positive impact of AAA on NRE promotionis substantial, and country beneficiaries have beendiverse. This conclusion is based on the litera-

ture review and a small survey. A number ofBank-GEF projects have contributed directly tothe development of renewable energy policiesby drafting or revising national renewableenergy strategies and action plans: in Indonesia(1997), China (1999), India (1992), Sri Lanka(1997), Uganda (2001), and Argentina (1999).However, very few of the projects explicitlyfocused on power sector reform.

Another area where Bank-GEF AAA and projectshave been successful is in establishing standards,codes, testing, and certification related to PVsystems. China has adopted a national standardand testing procedures for SHSs, which the Bankproject helped to develop. The standard hasplayed an important part in improving the qualityand reliability of PV systems to the benefit of themarket and consumers. Other projects (forexample, Argentina) also aim to developstandards. In Indonesia, the project helpeddevelop a domestic testing and certificationlaboratory that has obtained internationalaccreditation for PV component testing.

Examples of AAA for specific projects are shownin table J.1. In several documented cases, the AAAinterventions were instrumental in resolvingserious project implementation issues. The SriLanka and Mauritius cases illustrate problems thatwere resolved through AAA at the critical junctureof the midterm review.

In addition to the NRE community of practicewithin the Bank, target audiences have includedgovernment officials, private companiesinterested in NRE investments, commercialbanks and MFIs, the academic and researchcommunity, NGOs, and energy consumers.

ANNEX J: IMPACT OF ANALYTICAL AND ADVISORY ASSISTANCE

Cost efficiency has not been established. Althoughrelevant and effective, the cost-efficiency of NRE-related AAA has not been studied to date in amethodologically rigorous manner that com-pares alternative AAA delivery systems for thesame stream of knowledge- or capacity-buildingbenefits. The available data consist of absolutecost figures for each AAA intervention, which,

without permitting any comparability, only pointsto a very wide range of costs for an equally highlydiverse set of AAA outcomes.

Many challenges remain in ensuring that the Bank’sAAA keeps pace with new issues as the NRE portfo-lio is scaled up. As a key tool of quality assurance,the Bank should internalize the costs of AAA


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Project AAA/economic and sector work activities

Sri Lanka Energy Services Delivery • Development of an SPPA that resolved the tariff issues between developers and the

Ceylon Electricity Board and was a key factor in mini-hydro growth

• Prefeasibility studies for the project’s mini and micro-hydro components to prepare a

pipeline of subprojects

• Wind prefeasibility study

• Survey of residential and commercial energy-consumption patterns

• A 250-system pilot project implemented for the solar PV component

• Technical specifications developed for the solar and micro-hydro components

India Renewable Resources Development • A review of the government program on nonconventional energy sources and follow-up

preinvestment studies. The review’s conclusions that power generation from grid-connected

mini-hydro and windfarm systems, and from solar PV, offer commercialization

opportunities served as the rationale for the project.

• A study on independent power producers helped bring about an important shift in the

government’s approach to renewable energy development.

• Technical studies for the various components

Mauritius Sugar Energy Development • Research on sugar bioenergy and the policy framework requirements, and an energy

sector review

• Bank facilitation of public-private consultations and eventual partnerships

Argentina Renewable Energy for the Rural Market • Helped countries establish appropriate and coherent regulatory frameworks for tariff

Bolivia Decentralized Infrastructure for setting, quality of service, delivery service obligations, and technical standards in

Rural Transformation off-grid electrification

Nicaragua Off-Grid Rural Electrification • Assisted regulatory agencies with enforcement and supervision of off-grid rural energy

(under the ESMAP project Regulatory Issues of policies and with developing detailed regulations in the context of national energy

Off-Grid Energy Services Delivery as Part of legislation

National Rural Electrification Strategies) • Results of AAA project have been incorporated into the design and implementation of the

Bank’s rural electrification projects.

• Promoted the exchange of information and experience among policy makers in these

countries

Uganda Energy for Rural Transformation • Conducted a rural electrification strategy study (assessing demand and supply of electricity

in rural and peri-urban areas), which served as a basis for the project

• The Uganda project plans to develop detailed regulations under the Electricity Act.

China Renewable Energy Scale-Up Program • The program includes the development of a mandated market share for renewable energy.

(proposed)

Table J.1: Examples of Analytical and Advisory Assistance/Economic and Sector Work in NREProjects

instead of depending mainly on bilateral donorgrants and trust funds. A complex AAA agendalies ahead for NRE, as the scaling up of theBank’s NRE portfolio has resulted in the needfor AAA to address new and more multifacetedissues. This statement is based on interviews anda small survey.

Three issues (among others) have immediaterelevance to developing countries, but little orno analysis has been done to date for them:

• What is the economic and security rationale tomove away from the centralized utility model(large power stations supplying the traditionalresidential, commercial, and industrial sectors)toward the distributed utility concept (a con-trol center dispatching power supplies fromdistributed sources, including conventionaland decentralized renewable energy options)?

• In planning energy mixes, what are the trade-offs in adopting a portfolio approach, that is,adding the fixed costs of renewable energy tech-nologies to a fossil fuel–based generating mix?

• What is the scope for innovations in powerpurchase agreements and tariff regimes that

would attract commercial private investorfinancing?

The Bank has depended in large part on externalfunding to cover AAA costs. Funding sources,although varied, have come mainly fromexternal donors. The Bank’s NRE-related AAAhas been funded by donor consortium ofESMAP; project preparation funds from GEF orthe Policy and Human Resources DevelopmentFund from the government of Japan; variousbilateral donor trust funds; and, to a limitedextent, project financing. This has createddisconnects and time lags between meeting thecountry clients’ needs quickly and fulfilling theprocedural and fiduciary requirements ofmobilizing external funds, which are intendedto benefit the country clients and not substitutefor the Bank’s internal budget.

To maintain its comparative advantage in theglobal knowledge market, the Bank shouldinternalize the costs of AAA, particularly thosethat directly affect project design and implemen-tation and are therefore part of the Bank’s ownwork.

A N N E X J : I M PA C T O F A N A LY T I C A L A N D A D V I S O R Y A S S I S TA N C E

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Executive Summary1. The World Bank’s Energy and Water Depart-

ment commissioned this study.

Résumé analytique1. Étude réalisée à la demande du Département

énergie et eau de la Banque mondiale.

Resumen1. Este estudio fue realizado por encargo del

Departamento de Energía y Agua del BancoMundial.

Chapter 11. This 1997/98 study by the Operations Evalu-

ation Department (now the Independent Eval-uation Group) evaluated the application of theenvironmental guidelines in the energy port-folio at the time when the Fuel for Thoughtpaper (that is, the energy-environment strat-egy) was being finalized (World Bank 1998).

2. Generally speaking, the Africa Region focusedon biomass energy, the South Asia Region onsmall and mini hydro, and the Latin Americaand the Caribbean Region on wind energy.

3. A total of 65 projects are listed in the Bank fis-cal 2004 and 2005 reports on renewable en-ergy and energy efficiency, but the Bank’sproject databases do not yet provide infor-mation on nine projects that were approvedin fiscal 2005. Hence, the study focused on 56projects that have performance data avail-able, although information was still insuffi-cient for about a third of these.

4. As of June 2005.

Chapter 21. The Bank’s involvement in NRE dates back

even earlier, to 1980, with the establishmentof the Renewable Energy Unit in the then-centralized Energy Department. However, for-mal institutional strategies started only in 1993.

2. The analysis was conducted on an economicbasis, excluding transfer payments such astaxes, duties, interest payments (includinginterest during construction), and subsidies.Physical contingencies are included, but pricecontingencies are not. The cost comparisonswere done in real 2004 U.S. dollars.

3. The cost ranges shown are the result of sensi-tivity analyses that were applied to the variousleveled generating cost components using aMonte Carlo approach. The generating cost isthe sum of the capital, operating, and fuelcosts, leveled over the economic life of theplant, using a 10 percent real discount ratethat is assumed to be the opportunity cost ofcapital.

Chapter 31. This is in line with the portfolio identified in

the Energy and Mining Sector Board’s De-cember 2005 report (World Bank 2005e), aswell as the immediately preceding report cov-ering 1990–2004.

2. The figures are (closed + ongoing): Africa,22 (9 + 13); East Asia and Pacific, 13 (7 + 6);South Asia, 12 (6 + 6); Latin America and theCaribbean, 8 (1 + 7); Europe and Central Asia,8 (4 + 4); Middle East and North Africa, 2(1+1).

3. In descending order, the number (and per-centage share) of NRE projects in each re-gion are: Africa, 22 (34 percent); East Asiaand Pacific, 13 (20 percent); South Asia, 12 (19percent); Latin America and the Caribbean, 8

ENDNOTES

(12 percent); Europe and Central Asia, 8 (12percent); and Middle East and North Africa,2 (3 percent).

Chapter 41. Based on the Annual Review of Portfolio Per-

formance for fiscal 2005, prepared by theQuality Assurance Group. The 79 percent fig-ure is without any weighting by disburse-ments. With weighting, 83 percent of projectswere rated satisfactory or higher.

2. India Second Renewable Energy Project, aidemèmoire, supervision mission, October 18–26,2005; Uganda Energy for Rural Transforma-tion Project, aide mèmoire, supervision mis-sion, May 23–27, 2005; Sri Lanka RenewableEnergy for Rural Economic Development Pro-ject, aide mèmoire, supervision mission, Sep-tember 5–16, 2005.

3. The figures for small hydro and wind are av-erages based on a sample of projects.

4. According to the GEF Climate Change Study,half of the emission reductions of the energyefficiency cluster will be contributed by theBank-supported China Efficient IndustrialBoilers Project alone. Four other Bank-financed energy-efficiency projects in China,together with seven mostly energy-efficiencyprojects in China supported by other imple-menting agencies, will account for about 75percent of the energy efficiency subsector’sfuture reductions.

5. OBA consists of using explicit performance-based subsidies to support the delivery ofservices to complement or replace user fees.It involves third parties, typically private firms,but in some cases NGOs, delivering servicesunder contracts that tie disbursements of pub-lic funding to services or outputs actually de-livered.

Chapter 51. Notably, the work on risk-adjusted valuations

of energy undertaken by Shimon Awerbuchand others (Awerbuch 2006).

2. Laos, Cambodia, Indonesia, Mongolia, Philip-pines, and Vietnam.

Annex F1. This includes the Philippines Leyte Luzon Ge-

othermal Project (1994), Philippines LeyteCebu Geothermal Project (1994), and Lithua-nia Klaipeda Geothermal Project (1996).

2. These projects were Uganda Power III Sup-plemental Project (2000), Philippines EnergySector Project (1990), Rwanda Energy SectorRehabilitation Project (1993), and BurundiEnergy Sector Rehabilitation Project (1991).

3. These were Indonesia Renewable EnergySmall Power Project (1997), Indonesia SolarHome Systems Project (1997), Argentina Re-newable Energy in the Rural Market Project(1999), and Bolivia Decentralized Infrastruc-ture for Rural Transformation Project (2003).

Annex G1. As of June 2005.2. In its evaluations, IEG views a project’s ob-

jectives as encompassing both the project de-velopment objectives (PDOs) stated in projectdocuments as well as key associated outcometargets. This means that whenever the PDOsstated in project documents are so broadand/or generally worded as to preclude anymeaningful evaluation, intended project ob-jectives are inferred by the evaluator fromkey associated outcome targets (and/or proj-ect design features as relevant).

3. Some recent projects, such as the NicaraguaOff-grid Rural Electrification Project (2003), arealso characterized by this strategy.

4. According to the Project Assessment Docu-ments of nine NRE projects—Mali (House-hold Energy and Household Energy andUniversal Access), Ethiopia (Energy Access),Argentina, Senegal, Nicaragua, Uganda,Bangladesh, Sri Lanka (RERED), and Bolivia—the delivery benefits in terms of quality oflife or income to women is an important goal.

5. Increasing the incomes of RET users is a goalof the following projects approved in or afterfiscal 2001, according to their Project Assess-ment Documents: Sri Lanka RERED;Bangladesh, Nicaragua, Uganda, and MaliHousehold Energy and Universal Access; Bo-


7 4

livia and Ethiopia Energy Access. These con-stitute most of the freestanding projects in thefiscal 2001 to present period, except for TurkeyRenewable Energy (fiscal 2004) and HungarySmall Hydro (fiscal 2003), as well as someblended projects, in which the NRE componentis significant.

Annex H1. Rwanda Energy Sector Rehabilitation, Kenya

Energy Sector Reform and Power Develop-ment, Honduras Energy Sector AdjustmentLoan, and Sri Lanka Second Power Distributiondid not involve renewable energy installation.Though the Indonesia Renewable Energy SmallPower Project did involve installation, it was ter-minated after a year because of the economiccrisis the country experienced.

2. These projects were Indonesia Second RuralElectrification, India RRD, Mauritius Sugar Energy

Development, Philippines Leyte Cebu Geo-thermal and Energy Sector, Burundi Energy Sec-tor Rehabilitation, Nepal Irrigation Sector andSunsari Morang Headworks, and Niger Energy.

Annex I1. Argentina Renewable Energy in the Rural Mar-

ket; Uganda Energy for Rural Transformation;China Renewable Energy Development.

2. The ESMAP project is entitled Regulatory Is-sues of Off-Grid Energy Services Delivery asPart of National Rural Electrification Strategies.

3. Sarvodaya Economic Enterprise DevelopmentServices.

4. Communication with Richard Spencer, TaskManager, China Renewable Energy Develop-ment, February 25, 2005.

5. Communication with Antonie de Wilde, AsiaSustainable and Alternative Energy ProgramCoordinator, February 24, 2005.

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———. 2004a. Renewable Energy for Develop-ment. Washington, DC.

———. 2004b. Sustaining Forests: A Develop-ment Strategy. Washington, DC.

———. 2004c. Sustainable Energy: Less Poverty,More Profits. Washington, DC.


7 8

———. 2003. Annual Report. Washington, DC.———. 2001a. Energy Business Renewal Strat-

egy. Washington, DC.———. 2001b. Making Sustainable Commit-

ments: An Environmental Strategy for theWorld Bank. Washington, DC.

———. 2001c. The World Bank Group’s EnergyProgram—Poverty Reduction, Sustainabil-ity and Selectivity. Washington, DC.

———. 1998. Fuel for Thought: An Environ-mental Strategy for the Energy Sector. Wash-ington, DC.

———. 1996. Rural Energy and DevelopmentPaper: Improving Energy Supplies for TwoBillion People. Washington, DC.

———. 1993. Energy Efficiency and Conserva-tion in the Developing World. The WorldBank’s Role. Washington, DC.

B I B L I O G R A P H Y

7 9

Study Series2004 Annual Review of Development Effectiveness: The Bank’s Contributions to Poverty ReductionAddressing the Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs Agricultural Extension: The Kenya ExperienceAssisting Russia’s Transition: An Unprecedented ChallengeBangladesh: Progress Through PartnershipBrazil: Forging a Strategic Partnership for Results—An OED Evaluation of World Bank AssistanceBridging Troubled Waters: Assessing the World Bank Water Resources StrategyCapacity Building in Africa: An OED Evaluation of World Bank Support The CIGAR at 31: An Independent Meta-Evaluation of the Consultative Group on International Agricultural ResearchCountry Assistance Evaluation Retrospective: OED Self-Evaluation Debt Relief for the Poorest: An OED Review of the HIPC InitiativeDeveloping Towns and Cities: Lessons from Brazil and the PhilippinesThe Drive to Partnership: Aid Coordination and the World BankEconomies in Transition: An OED Evaluation of World Bank Assistance The Effectiveness of World Bank Support for Community-Based and –Driven Development: An OED EvaluationEvaluating a Decade of World Bank Gender Policy: 1990–99Evaluation of World Bank Assistance to Pacific Member Countries, 1992–2002 Financial Sector Reform: A Review of World Bank AssistanceFinancing the Global Benefits of Forests: The Bank’s GEF Portfolio and the 1991 Forest Strategy and Its ImplementationFiscal Management in Adjustment LendingIDA’s Partnership for Poverty ReductionImproving the Lives of the Poor Through Investment in CitiesIndia: The Dairy RevolutionInformation Infrastructure: The World Bank Group’s ExperienceInvesting in Health: Development Effectiveness in the Health, Nutrition, and Population SectorJordan: Supporting Stable Development in a Challenging RegionLesotho: Development in a Challenging EnvironmentMainstreaming Gender in World Bank Lending: An UpdateMaintaining Momentum to 2015? An Impact Evaluation of Interventions to Improve Maternal and Child Health and Nutrition Outcomes in Bangladesh The Next Ascent: An Evaluation of the Aga Khan Rural Support Program, PakistanNongovernmental Organizations in World Bank–Supported Projects: A ReviewPoland Country Assistance Review: Partnership in a Transition EconomyPoverty Reduction in the 1990s: An Evaluation of Strategy and PerformanceThe Poverty Reduction Strategy Initiative: An Independent Evaluation of the World Bank’s Support Through 2003Power for Development: A Review of the World Bank Group’s Experience with Private Participation in the Electricity SectorPromoting Environmental Sustainability in DevelopmentPutting Social Development to Work for the Poor: An OED Review of World Bank ActivitiesReforming Agriculture: The World Bank Goes to MarketSharing Knowledge: Innovations and Remaining ChallengesSocial Funds: Assessing EffectivenessTunisia: Understanding Successful Socioeconomic Development Uganda: Policy, Participation, PeopleThe World Bank’s Experience with Post-Conflict ReconstructionThe World Bank’s Forest Strategy: Striking the Right BalanceZambia Country Assistance Review: Turning an Economy Around

Evaluation Country Case SeriesBosnia and Herzegovina: Post-Conflict ReconstructionBrazil: Forests in the Balance: Challenges of Conservation with DevelopmentCameroon: Forest Sector Development in a Difficult Political EconomyChina: From Afforestation to Poverty Alleviation and Natural Forest ManagementCosta Rica: Forest Strategy and the Evolution of Land UseEl Salvador: Post-Conflict ReconstructionIndia: Alleviating Poverty through Forest DevelopmentIndonesia: The Challenges of World Bank Involvement in ForestsThe Poverty Reduction Strategy Initiative: Findings from 10 Country Case Studies of World Bank and IMF SupportUganda: Post-Conflict Reconstruction

ProceedingsGlobal Public Policies and Programs: Implications for Financing and EvaluationLessons of Fiscal AdjustmentLesson from Urban TransportEvaluating the Gender Impact of World Bank AssistanceEvaluation and Development: The Institutional Dimension (Transaction Publishers)Evaluation and Poverty ReductionMonitoring & Evaluation Capacity Development in AfricaPublic Sector Performance—The Critical Role of Evaluation

IEG PUBLICATIONS

All IEG evaluations are available, in whole or in part, in languages other than English. For our multilingual selection, please visithttp://www.worldbank.org/ieg

WORKING FOR A WORLD FREE OF POVERTY

The World Bank Group consists of five institutions—the International Bank for Reconstruction and Development(IBRD), the International Finance Corporation (IFC), the International Development Association (IDA), theMultilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of InvestmentDisputes (ICSID). Its mission is to fight poverty for lasting results and to help people help themselves and their envi-ronment by providing resources, sharing knowledge, building capacity, and forging partnerships in the public andprivate sectors.

THE WORLD BANK GROUP

ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION

The Independent Evaluation Group (IEG) is an independent, three-part unit within the World Bank Group. IEG-World Bank is charged with evaluating the activities of the IBRD (The World Bank) and IDA, IEG-IFC focuses onassessment of IFC’s work toward private sector development, and IEG-MIGA evaluates the contributions of MIGAguarantee projects and services. IEG reports directly to the Bank’s Board of Directors through the Director-General,Evaluation.

The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of theBank Group’s work, and to provide accountability in the achievement of its objectives. It also improves Bank Groupwork by identifying and disseminating the lessons learned from experience and by framing recommendations drawnfrom evaluation findings.

THE INDEPENDENT EVALUATION GROUP

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A Review of the World Bank’sAssistanceA Review of the World Bank’sAssistance

THE WORLD BANK

THE WORLD BANK

New Renewable EnergyNew Renewable Energy

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