delivering sustainable energy services for poverty reduction and economic growth
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Delivering Sustainable Energy Services for Poverty Reduction and Economic Growth. RT6-Sustainability: Living in One World Dominique Lallement, Manager Energy Sector Management Assistance Program, World Bank WEC, Buenos Aires, October 24, 2001. Outline of Presentation. - PowerPoint PPT PresentationTRANSCRIPT
Delivering Sustainable Energy Services for Poverty Reduction
and Economic Growth
RT6-Sustainability: Living in One World
Dominique Lallement, Manager
Energy Sector Management Assistance Program, World Bank
WEC, Buenos Aires, October 24, 2001
Outline of Presentation
• Background: the linkages on Poverty and Sustainable Energy?
• The changed environment for sustainable energy-services
• The new Energy Business Strategy of the World Bank Group
Energy Rich –Energy Poor? Major Disparities & Inequities: is this sutainable?
Red 3 - 33% Green 33 - 66% Blue >66%
Energy rich-Energy Poor? Limited correlation between access to modern energy services and natural endowment of primary energy resources
Income and other disparities• Between rich and poor, e.g.: In Africa: less than 10% access to Electricity Ivory Coast: 71% richest, 11% poorest Ghana: 43% richest, 7% poorest Vietnam: 76% richest, 27% poorest
• Between urban and rural Areas Ghana: 4% rural, 62% urban Vietnam: 38% rural, 88% urban• Between large and small enterprises
The poor spend 1/3 of their cash income on energy
THE WORLD BANK GROUP
10
100
1,000
10,000
Co
mm
erci
al E
ner
gy/
Cap
ita
Human Development Index (HDI)
Energy Consumed per Capita
Best-Fit Trendline
Energy is important for growth and energy-based innovation is central
to productivity growth
Energy is important for growth and energy-based innovation is central
to productivity growth
Energy is Key to Human Development: safer health services,
Higher quality education,Access to information
Energy is Key to Human Development: safer health services,
Higher quality education,Access to information
En
erg
y/C
apit
a
Per Capita Income
And yet we know that Energy is key for Growth and for Human Development
Unreliable electricity supply
Firms need to buy back-up generators
Small enterprises cannot afford
cost
Ethiopia
Low growth & low labor demand
Rural India
No access to modern fuels
Women spend an hour per day
gathering firewood
Low labor participation
rate
Rural Bangladesh Urban Rural Africa
No access to modern fuels
High indoor air pollution
High rate of child mortality
No access to electricity
Less time to study
Low educational
achievement & labor particip.
Reduced access to
info/education
EducationHealthEnterprise
Productivity/Income Gen.
Energy is therefore key for Poverty Eradication: many dimensions
Human Productivity
Emissions
Lead &Particulates
Ingestion
High rate ofRespiratoryIllnesses &Lower IQs
Indoor Air Pollution
• India: 500,000 annual deaths, mainly among children under 5 and women, or 8 % of all deaths in this group
• World: 2 million excess deaths per year, or 5 % of the global burden of disease
• A leading cause of death and illness: larger than tuberculosis, AIDS, or malaria (WHO, 1996)
The poor are more susceptible to air pollution: Lessons from Bangladesh
• Death of infirm people• PM10 Particles Aggravate Health Problems such as
Asthma, Bronchitis and contribute to premature Mortality and Hospital Admissions
• PM2.5 Particles contribute mainly to premature Mortality and Hospital Admissions
Excess deaths/years due to air pollution • ~6,000 in Dhaka City (approx.)
Health maintenance cost due to air pollution • ~ US$12. Per capita per year (approx.)• WHO has documented the decrease in children’s IQ
due to lead ingestion
International Development Goals
• Poverty reduction - reduce by at least 1/2 by 2015• Education - universal primary education by 2015• Environment - national sustainable strategy by 2005• Infant and child mortality - 2/3 1990 level by 2015• Maternal mortality - reduce by 3/4 by 2015• Reproductive health - access for all of appropriate age
NLT 2015• HIV/AIDS - reduce by 25% globally before 2010• Water - halve people without safe water by 2015• Gender - eliminate disparity in education by 2005• Upgrading slums - improve lives of 100 million by 2020• Building digital bridges - maximize access to new IT• More transparent and accountable governance
LOOKING AHEAD• Growth in demand: over next 20 years, will come
mostly from developing countries• At current rate of ‘connections’ another 450 million
energy poor will be added• To meet minimum needs (WEC: 500kWh/year/person),
100 million people should be connected a year for the next 20 years as compared to 40 million over past 20 years.
• Today Energy Poor are in rural and peri-urban areas. However, increasing shift towards megalopoles: in 2020, 70% of world population will live in cities of more than 1 million; 60% will be below poverty line.
THE WORLD BANK GROUP
THE FACTORS of CHANGE
The energy service evolutionConsumptive Uses (Light, Radio, TV)
Socially Productive &Community Uses:Health, Education,Water,Transport
Economically Productive Uses (Handicrafts,ICT, Industries)
TraditionalBiomassUtilization
Not a Single Technology
Many Technological Options:Many Technological Options: mini-grids and Hybrid Systemsmini-grids and Hybrid Systems
Grid extension & Grid Interface
Opportunities….Cost reductions: e.g. for Renewable energy, but also for micropower
Cost of Electricity
1980 1984 1988 1992 1996 20000
20
40
60
80
BiomassGeothermal
WindSolar Thermal
Photovoltaic
L
ife-c
ycle
¢/k
Wh
in 1
994
¢
It’s also about hydrocarbon products
A changing institutional landscape
From:
To:Decentralized, Customer-oriented Service Business in New Market Niches
Monolithic Provider of “Public Service” underSocial & Environment Constraints
Emergence of New Business Models
• From integrated monopolies and few independent power producers to a multiplicity of service providers
• Divisibilities in Supply of Services• IPPs, large or small• Competition among providers• Many types of concessions• Local manufacturing opportunities and other
income generating activities for the energy industry
…and new clients and partnerships
Customers
Central Government
Regional Governments
Municipal Governments
Trade Associations/NGOs
Financial Intermediaries
Local Communities
New Financing Options: Subsidies?
Because welfare gains in terms of:
– benefits of modern energy services
– reduction of cash expenditures on energy
are often much higher than long-term costsFamilies that have electricity have 6 times
the light at lower cost than keroseneCheaper for urban poor to cook with LPG
than wood or charcoal, and cleaner too
The Poor are Willing to Pay
• The poorest spend 1/3 of their disposable cash income for poor quality energy services
• The poor purchase lighting services at 35-45c/kwhr
• Who are the non-payers?
The Poor are part of the Solution: Energy services can provide sustainable income.
Bangladesh: Women in Renewable Energy Innovative pilot
develops & tests community/NGO/ private sector delivery model
10,000 household potential in project area alone
modern energy + employment for local women
Lessons Learned to Date• Traditional grid or network extensions have failed to
deliver sustainable energy services to the poor• Decentralized, modular services with investment from
private sector work,w/ or w/o government incentives• Complex interactive issues are involved, must not be
technology driven• Policy, regulatory, institutional, and financing issues
must be addressed• Fuel substitution with major health and environmental
benefits still too limited• Programs were the poor have participated in design,
management and result monitoring are more sustainable• Energy must work in tandem with other sectors
WHAT DOES THE WORLD BANK GROUP PROPOSE TO DO?
Efficient Markets
Local Communities
Governments
Service Enterprises
Various Institutions
Financing Mechanisms
Biomass
Off -Grid Renewables
Electricity and Gas
Sustainable Energy Services: production and Use
The Global Challenge of delivering sustainable energy services to the poor
Energy Quality
Hydrocarbon Products (Kerosene)
Time
The WBG Energy BusinessRenewal Strategy Framework
Direct Poverty Alleviation
Governance /Private Sector Development
Macro/Fiscal
Stabilization
Environmental & Social
Sustainability
Energy forPoverty Reduction& Econ. Growth
The World Bank Group
Examples
Cote d’Ivoire: The Azito Power Project
Chad - Cameroon - Petroleum Development and Pipeline
Public Sector Management
Regulation and Competition
Social Protection /Participation
Environmental Protection
Credit Risk Mitigation
Finance
Private Transactions
Risk Management
Political Risk Mitigation
Local Communities
PrivateSector
Bilateral & OthermultilateralPrograms
Energy
Direct Poverty Alleviation
Governance/ Private Sector Development
Macro/Fiscal
Stabilization
Environmental Sustainability
Knowledge transaction Capacity BuildingFinancial IntermediationWork with our clients & Partners to:
1. Help the poor directly by – facilitating access to modern fuels and electricity – reducing the cost and improving the quality of energy supplied to low-
income households– ensuring that energy subsidies are targeted at and reach the poor– promoting energy efficient/less polluting end-use technologies for
traditional fuels– creating energy service enterprises run by the poor– supporting energy needed for social services (education, communication,
health…)
Direct Poverty Alleviation
Governance/ Private Sector Development
Macro/Fiscal
Stabilization
Environmental Sustainability
Knowledge transaction Capacity BuildingFinancial IntermediationWork with our clients & Partners to:
Energy
2. Improve macro/fiscal balances by
– rationalizing energy taxes– Fostering private investments to replace public ones – managing risks associated with contingent public liabilities– Helping close loss-making energy entreprises (e.g.coal mines and
oil refineries) and financing restructuring costs that fall on government budgets
– enhancing effective payment by all energy users to eliminate operating subsidies to state-owned enterprises
– improving procurement and marketing of imported and exported energy products
Knowledge transaction Capacity BuildingFinancial IntermediationWork with our clients & Partners to:
Direct Poverty Alleviation
Governance/ Private Sector Development
Environmental Sustainability Energy Macro/
Fiscal Stabilization
3. Promote Good Governance and PSP by
– creating objective, transparent, non-discriminatory legal frameworks and regulatory mechanisms
– introducing and expanding competition and cross-border trade– divesting assets to strategic investors and regulatory markets in
a socially responsible and corruption-free way– catalyzing private investments by liberalizing entry to energy
markets– strengthening the voice of consumers and communities– strengthening local financial institutions to provide long-term
financing for rural energy business
Direct Poverty Alleviation
Governance/ Private Sector Development
Environmental Sustainability
Knowledge transaction Capacity BuildingFinancial IntermediationWork with our clients & Partners to:
Energy
Macro/Fiscal
Stabilization
4. Protect the Environment by – promoting clean transport fuels & switching from coal to gas– facilitating environmentally sustainable extraction, production,
processing, transport and distribution of oil, gas & coal– strengthening environmental management capacity in the energy sector– removing market and regulatory barriers to renewables and energy
efficiency investments for power and also biomass (e.g. improved cooking stoves for the poor)
– reducing gas flaring and facilitating carbon trading and joint investments to reduce GHG emissions
World Bank Group Instruments
• Use of complementarity between institutions: World Bank/IDA, IFC and MIGA
• Advisory Services• Lending Instruments: programmatic lending (rural energy funds, subsidies)• Equity participation, entreprise development• Guarantees• New Initiatives: The Business Partnership for
Development, The Prototype Carbon Fund (2000), The Solar Development Group, the Village Power Partnership
The Village Power Partnership:Powering People, Productivity,and Poverty Reduction: Expected Outcomes
• 30 countries with national-scale RE-based rural development programs
• 300 million people previously unserved with access to modern energy services
• Over 50,000 new community systems installed (schools, hospitals, clinics)
• Documented improvements in productivity, income, environment, and quality of life
• Trained, operational local entrepreneurial base
But…it’s not just about solar home systems!