Jamal SaghirDirectorEnergy, Transport and Water The World Bank Stockholm23 February 2010The World Bank Group

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

Nearly 2.5 billion continue to use traditional biomass fuels for cooking and heating. Electricity shortages in many developing countries are growing in frequency and intensity, limiting economic development and poverty reduction efforts.Energy Access and Energy PovertyCHALLENGESWithout modern energy, factories and businesses large and small cannot function efficiently; hospitals and schools cannot operate fully or safely; basic services that people in rich countries take for granted cannot be offered.

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

According to the UN Millennium Project, there is a close relationship between energy and achievement of MDGs:Modern energy services help reduce poverty (MDG 1) and can play a critical role in improving educational opportunities for children, empowering women and promoting gender equality (MDG 2 and 3). The availability of adequate clean energy is important in reducing child mortality (MDG 4). Reducing the carrying of heavy loads of fuel wood improves maternal health (MDG 5). Inefficient combustion of fuel wood exacerbates respiratory illnesses and other diseases (MDG 6). Fuel substitution and improved stove efficiencies would help alleviate the environmental damage of biomass use (MDG 7). Finally, widespread substitution of modern energy for traditional biomass can be a rallying point for global partnerships (MDG 8). Energy Access and Energy Poverty (cont.)CHALLENGES

Africa has exceptionally low energy accessIn Sub-Saharan Africa, the number of people without access to electricity is projected to rise from 590 m. in 2008 to 700 m. in 2030.Installed generation capacity extremely low At 39 MW per million population, about 1/10 levels in other low-income regionsTotal in Sub-Saharan Africa: 70GW (30 GW, if South Africa is excluded almost equivalent to Sweden 33 GW)112 GW in France, 120 GW in Germany 120 GWCost of electricity shortages in Sub-Saharan Africa is estimated at more than 2% of GDPMore than 30 countries face outages and load sheddingIn half of SSA, demand for power grew at ~4.5% in 200105, but generation capacity grew at only 1.2% Shocks such as volatile oil prices and conflict are also contributing to the power crisisCauses of Africas Power Supply Crisis CHALLENGES

*Africas power sector faces large financing gap

Africa power infrastructure has huge refurbishment and expansion needs7GW of new generation capacity needed each year44.3GW out of 70GW needs to be refurbishedDistribution network needs to expand to reach 6 million more people each yearGlobal economic crisis could reduce total power spending needs by at least 20%Existing spending is just over a quarter of what is actually required Only $4.6 billion is for meeting long-term investment needsChina is a major financierPrivate sector finance is growing but not sufficient to meet needs

Annual Financing Gap of $30.9 billion$ BillionCHALLENGES

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In a business-as-usual scenario, energy -related carbon dioxide emissions will almost double by 2050 Meeting the energy needs of developing countries and arresting climate change will require global action and cooperation. Energy-saving policies and energy with low lifecycle GHG emissions will be important for meeting future energy needs sustainably. Climate ChangeCHALLENGES

Managing UncertaintiesThe oil price fluctuations during 2004-08 demonstrated the importance of diversifying the energy portfolio, pursuing measures to conserve energy and improve energy efficiency, and being better prepared for high energy price volatility and possible future shocks. The global financial crisis has also increased uncertainty in investments, while reducing available resources for development assistance and investment flows.CHALLENGES

2004 Bonn RE Conference (commitment of 20% annual increase between 2005 and 2009)2005 Clean Energy Investment Framework (CEIF) developed at G8s requestStrategic Framework for Development and Climate Change (SFDCC) 2008 2009 Investment exceeds Bonn promise by over three timesNew Energy Sector Strategy - 2011Key InstrumentsProject Investments Development Policy LendingFinancial Intermediation Technical Assistance(Climate Investment Funds)Energy Sector MilestonesWORLD BANK GROUPS ROLE IN ENERGY

Working in a Wide Range of AreasWORLD BANK GROUPS ROLE IN ENERGYIDAIDA

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1.963.463.360.361.36

0.611.465.180.940.66

5.334.710.620.310.65

IDA

IDA

IBRD

IFC

MIGA

Other sources

US$ billion

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ItemIDAIBRDIFCMIGAOther sources

Renewables and energy efficiency1.963.463.360.361.36

Upstream oil, gas, and coal, and new thermal generation0.611.465.180.940.66

Reforms, regulation, and power transmission and distribution5.334.710.620.310.65

40% energy lending was for RE/EE in FY09 -- a 24% increase from FY08Nearly $4.5 billion invested in programs directly dealing with energy accessBonn commitment of 20% annual increase exceeded two-foldWORLD BANK GROUPS ROLE IN ENERGYWORLD BANK GROUPS ROLE IN ENERGYSectoral Distribution (FY2004-09)

World Bank Group Lending for Renewable Energy and Energy Efficiency, 1990-2009, including new renewable energy, energy efficiency, and hydropower greater than 10 megawattsIncreasing Lending for Renewable Energy and Energy EfficiencyWORLD BANK GROUPS ROLE IN ENERGY

WORLD BANK GROUPS ROLE IN ENERGYRE/EE Project Distribution (FY2004-09)

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

Sound operational and financial performance is essential Improved capacity and governance are needed for better sector performance and ability to address climate change For the very poor, the most important determinant of access to and use of modern energy is their cash income Observations and Lessons LearnedWORLD BANK GROUPS ROLE IN ENERGY

Money alone will not bring changeGovernments must be market enablersPrivate sector engagement is necessaryIncreased coordination imperative to avoid duplication of programsFinancial and economic viability is critically importantCapital investments must be linked with committing resources and capacity building to ensure sustainabilityInnovation in technology, business model, and financing is necessaryGood intentions alone are not sufficientKey Lessons Learned on Renewable EnergyWORLD BANK GROUPS ROLE IN ENERGY

Energy Access in Mali PROGRAM CASE STUDY 1 Only 7% of Malis rural population has access to electricity. WB Rural Access Project started in 2003 with support of GEF and Mali government ($44.4 m)2350 solar home systems were installed in 40 communities636 public institutions were powered by solar PV, including 40 schools and 48 health centers

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

WB-IFC joint initiative to mobilize the private sector to develop and disseminate modern lighting solutions using LED and other technologiesProgram target is to facilitate sales of 500,000 off-grid lighting products by 2012, serving more than 2.5 million people Technical assistance and seed funding is made available to entrepreneurs to develop low-cost, high-quality lighting products Lighting AfricaPROGRAM CASE STUDY 2 Lighting Africas vision is to build a commercial platform for the lighting sector that can serve 250 million people in Sub-Saharan Africa by 2030.

Rural Electrification and Renewable Energy Development (RERED) program launched in 1997 with WB supportMore than 350,000 solar home systems installed since 2002, with a monthly installation rate of 15,000 systemsInnovative financing schemes involving micro-credit institutionsStrict quality control of technical standards for the equipmentStreamlined follow-up maintenanceFocus on consumer awarenessRural Electrification in BangladeshPROGRAM CASE STUDY 3

RERED second phase aims to install 1 million home systems by 2012 and promote biogas and PV water pumping.

PROGRAM CASE STUDY 4 The World Bank is scaling up support for large-scale solar thermal and PV systems in a number of countries.In Egypt and Morocco, WB is supporting demonstration projects on integrated solar combined cycle power generation (ISCC) technology.WB is mainstreaming PV deployment for off-grid rural electrification (e.g. Carbon Finance project in Bangladesh deploying more than one million solar home systems)Large-scale Solar PowerWB is developing a large-scale program in the Middle East and North Africa region for concentrating solar power technology using CTF and other instruments.

SFDCC (2008) provides the overall guidance and support for WBGs operational response to climate change challenges and promoting clean energy (RE/EE) investmentsWBG has adopted a pro-active approach in assisting countries toward a low carbon growth path.WBG has undertaken to increase the share of low carbon energy projects to 50% of its total energy portfolio (FY09-11)WBG is also scaling-up assistance on adaptation. WBG has committed to increase RE/EE lending by 30% annually from a baseline of $600m

TOWARDS A NEW ENERGY STRATEGYStrategic Framework on Development and Climate Change (SFDCC)

Timeline for Development of StrategyOctFeb-JunJul-SeptNovDecEnergy StrategyApproach Paperavailable on-lineFirst RoundConsultations web-basedface-to-faceFeb or MarchDrafting of StrategySecond RoundConsultationsWeb-basedBoard of Executive DirectorsTOWARDS A NEW ENERGY STRATEGY

Improve access and reliability of energy supply Facilitate shift to more environmentally sustainable energy sector developmentThe challenge is to balance the twin objectives of greater access and sustainabilityPROPOSED APPROACH

Policy and institutional reforms (market reforms aiming at improving the operational and financial performance of the sector, improving transparency, separating the roles of regulation and policy making, public and private roles, bringing accountability and introducing competition through restructuring utilities and markets, regulation)Cross-border energy trade Increased investment in hydropower projects, renewable energy, and energy efficiencyTransmission and distributionThermal generation in accordance with the criteria outlined in SFDCCDevelopment projects in extractive industriesAcross All CountriesPROPOSED APPROACH

Expand supply capacity, enhance reliability, and increase access. Access to reliable modern energy services will remain the top priority. Cross-border trade particularly important for small countries.Hydropower with focus on integrated water resources management.

Low-Income, Fragile, Post-Conflict, and Middle-Income Countries with Low AccessPROPOSED AREAS OF ENGAGEMENT

Continue focus on areas with low access in middle-income countriesImprove affordability by increasing supply efficiency and passing efficiency gains to consumersExplore all options: off-grid, cooperatives, pro-poor financing methods, affordable lifeline ratesHelp build capacity to access financing to make low-carbon alternatives affordable, including working with local private sectorLow-Income, Fragile, Post-Conflict, and Middle-Income Countries with Low Access (cont.)PROPOSED AREAS OF ENGAGEMENT

Help address local and emerging global challenges and increase support to innovation and transformationSupport commercial-scale renewable energy, supply-and demand-side energy efficiency, and emerging clean technologies and related infrastructure facilitiesHelp leverage climate finance, private sector financing, and other financing opportunitiesMiddle-Income CountriesPROPOSED AREAS OF ENGAGEMENT

Clean Technology Fund (CTF) ~ $5.2 bStrategic Climate Fund ~ $1 b Scaling up RE in Low Income CountriesJointly run by MDBs to provide grants and concessional financing to developing countries to address urgent CC challenges Carbon Finance 10 Carbon Funds ~ $2.2 b (200 projects)Carbon Partnership Facility (CPF) SREP Access IssuesFINANCIAL INSTRUMENTSClimate Investment Funds

MexicoTurkeyEgyptEnergy Efficiency - Replacing inefficient lighting and appliances; expectedemissions reductions of 4 million tons of CO2 per yearUrban Transport - 20 bus rapid transit corridors with low-carbon buses Renewable Energy Proposed CTF $500 million leverages $6.2 billionRenewable Energy - Implementing "intelligent" grid management and control systems to support large-scale integration of wind power Renewable Energy and Energy Efficiency - Promoting private sector development through credit lines to local development banks Proposed CTF $250 million leverages 2.1 billion

Wind Power - From

Special fund to demonstrate low carbon pathways in the energy sector by creating new economic opportunities and increasing energy access through the use of renewable energyFinancing for new renewable energy technologies (solar, wind, bioenergy, geothermal, and small hydro of up to 10 MW)Complementary technical assistance (planning and pre-investment, policy development, legal and regulatory reform, business development and capacity building)Current envelope of $300 million expected to finance few demonstration pilotsEligibility limited to IDA-only countries (and similar regional development bank equivalents)

FINANCIAL INSTRUMENTSScaling up Renewable Energy Program (SREP)

In partnership with governments, bilateral, UN System, and multilateral donors, private sector, civil society, and communitiesScaling Up - On average, leverage from WBG financed projects is 1:4 (each dollar mobilizes about $4 from other financiers)Programmatic approach combining investment, policy advice and technical assistance for maximum impact and coordination with other donors (e.g., Rwanda SWAP)How We WorkPROPOSED APPROACH

In support of the poorest our guidance supports pro-poor policies, including subsidies with high-targeting efficiency.With the best technology for the job the WBGs projects are technology-neutral. New clean technologies provide technical assistance and policy/regulatory advice to facilitate their deployment. Mobilize financing (GEF, CF, CIFs).

How We Work (cont.)PROPOSED APPROACH

Where is the help of WBG in the energy sector in developing countries most needed?Does the proposed approach adequately address the needs of the poor and marginalized? If not, how could it be strengthened?Does the proposed approach strike the right balance between meeting the needs and priorities of low-income countries and those of middle-income countries?Where there are trade-offs between meeting the local energy needs of individual countries and reducing global greenhouse gas emissions, what principles should the World Bank Group follow in resolving the trade-offs?What should be the role of the World Bank Group in promoting new technology and/or helping to transfer existing technologies to new markets, and how much weight should the Bank Group give to each?What other suggestions or comments do you have?

Questions for Energy StrategyCONCLUSION

Visit the World Banks websiteto share your views,stay updated, and get more information.

http://www.worldbank.org/energyconsultationsSEEKING YOUR INPUTThank you for participating.

*On a per capita basis, power generation capacity in Africa is about one tenth of the levels found in other low-income regions.*On a per capita basis, power generation capacity in Africa is about one tenth of the levels found in other low-income regions.****ESMAP Note:

In response to these challenges, ESMAP has launched the Country Energy Sector Vulnerability Assessments Program, with three components:

Power sector vulnerability assessments to help countries assess the impact of the global financial crisis on priority investments and to identify measures to mitigate them and close any financing gaps assessments completed for Indonesia, Philippines and Vietnam; underway in 16 other countries.Oil price volatility assessments to help countries assess the effects of oil price increases, examine policy instruments to mitigate them and also put in place energy diversification strategies to reduce vulnerability assessments underway for countries in Central America.Climate vulnerability assessments to help countries assess the vulnerability of their energy infrastructure to climate variability pilot assessment completed for Albania and underway for Uzbekistan. [later on this afternoon, Jane will present video on Albania pilot]

*ESMAP Note:

SIDA contributions to ESMAP supported non-lending TA activities that contributed towards achievement of the above milestones, including, preparation of the Africa Energy Access Scale-up component of the CEIF. [later on this afternoon, Tjaarda will give an implementation update on AFREAS]

*General Note:

Highlight IDAs investments noting that the high level of support for building capacity in the sector in IDA countries has a strong link to competiveness. ***General Note:

(Map is from Beyond Bonn: World Bank Group Progress on Renewable Energy and Energy Efficiency in Fiscal 2005-2009)

New renewable energy commitments were for projects in biomass, small hydropower (less than 10 MW per facility), solar (PV) home systems, and wind power projects.****ESMAP Note:

ESMAP co-funding to Lighting Africa between 2007-2009 was derived from its SIDA contribution.

**ESMAP Note:

Under ESMAPs Renewable Energy Market Transformation Initiative (REMTI), funding has been provided (to the MNA Energy Team) to conduct a comprehensive assessment of regulatory, technical, economic and institutional aspects of the proposed MNA regional CSP initiative. This assessment underpins the MNA Regional CSP Investment Plan that has been submitted to the CTF.

*ESMAP Note:

To help the WBG meet the new commitment to increase RE/EE lending by 30% annually, going forward, ESMAP has launched two initiatives:

ESMAPs Renewable Energy Market Transformation Initiative (REMTI), which is supporting the preparation of country-specific Renewable Energy Market Transformation Strategies, each of which will help inform the identification, preparation and appraisal of a new pipeline of multi-year programmatic lending operations (SWAps and/or DPLs on RE).ESMAPs Energy Efficient Cities Initiative (EECI), which is supporting the Banks Urban practice to integrate energy efficiency measures into a new pipeline of programmatic lending operations (SWAPLs) targeting cities in MICs and LDCs, in line with the Banks Urban Strategy.

Consultation one. This first phase of the consultation process, (February 2010 June 2010), consists of face-to-face meetings, videoconferences and Web-based consultations. Comments, session summaries of public consultation meetings, and participant lists will be made available in English and, to the extent possible, in the language of the consultation meetings. Through the consultation Web site, stakeholders will have an opportunity to submit suggestions and comments electronically.

After the closing of the first round consultations, the World Bank Group will :- share a consultation summary and make it available on the consultations Web site.. Such a summary will include Management response to the feedback. Summaries from individual consultation meetings will be made available on the website shortly after each consultative meeting..will review the comments and suggestions gathered during the consultation process and consolidate a draft Energy Strategy..

Consultation two. A revised draft Energy Strategy will be posted on the consultation Web site for a two-month electronic comment period, along with a document outlining how the issues raised during the first phase of consultations were addressed in the drafting of the strategy paper.

All comments and recommendations collected will be used to inform the drafting of the final Energy Strategy, which will be presented to the World Bank Group Board of Executive Directors for approval in January 2011.

*Help developing countries achieve the twin objectives of

Improving access and reliability of energy supply; Facilitating the shift to a more environmentally sustainable energy development path.

To achieve the twin objectives, the Paper proposes two strategic supporting pillars considered essential for a reliable, efficient and sustainable energy sector.Improving the operational and financial performance of the energy sector;

Strengthening governance of the energy sector to improve the contribution of energy to equitable economic development.

*******ESMAP Note:

ESMAPs G+5 Pilot on Low Carbon Growth Country Studies included Mexico; the outcome was instrumental in identifying key components of Mexicos CTF Investment Plan already approved.ESMAP funded a capacity building activity Turkey: Electricity Market TA which underpins the smart-grid component of the recently approved Turkey CTF Investment Plan.ESMAPs REMTI supported the Egypt: Commercial Wind Farm Development Framework which underpins the wind power component of the Egypt CTF Investment Plan.ESMAPs REMTI is supporting the development of comprehensive (i) Country RE Market Transformation Strategies in Philippines; and (ii) CSP Technology Deployment Roadmap for MNA Region. Both activities underpin preparation of CTF Investment Plans that have recently been submitted for review.

ESMAP Note:

ESMAPs REMTI is supporting the development of RE Technology Roadmaps for Central America (geothermal, small hydro) and East Africa (geothermal) which may inform the preparation of SREP Investment Plans, once country/regional eligibility has been determined.ESMAP-AFREA activities include provision for recipient-executed TA grants for Sub-Sahara Africa countries that may dovetail with SREP Investment Plans, once country/regional eligibility for SREP among Sub-Sahara Africa countries has been determined.

*****