-- Related Links -- Energy Website Energy Data Experts on Energy: Jamal Saghir

AT A GLANCE:

• Access to modern energy sources and adequate supplies of electricity are at the core of development and poverty reduction strategies.
  
  
• It is estimated that 1.6 billion people in developing countries have no access to electricity. Most live in Africa and South Asia. Without energy, they face very limited or no economic growth; factories and businesses cannot function efficiently; hospitals and schools cannot operate fully or safely; basic services that people in rich countries take for granted cannot be offered.
  
  
• A year of global financial and economic crises, increasingly visible impacts of climate change, and volatile energy prices have broadened the range of challenges facing the globe.
  
  
• Energy poverty and a high dependence on carbon-intensive fuels remain daunting problems for the energy policy agenda.
  
  
• Although stimulus packages allow for new investments in clean energy in developed and developing countries, significantly higher investments over the long term are needed to meet the goal of a sustainable energy future.

The World Bank Group (WBG) is leading efforts to overcome challenges in the energy sector through a wide range of investments, policy advice, capacity building, and technical assistance. During FY 2009, the WBG invested US$8.2 billion in the energy sector, the highest annual amount ever. More than 40 percent of the commitments were in low carbon projects, including new renewable energy, energy efficiency, and hydropower.

Current Challenges in the Energy Sector

Economic Crisis: The past year has seen unprecedented financial and economic upheaval across the world. The crisis led to extreme volatility in financial flows and energy commodity and asset prices. Global oil prices varied tremendously, having a severe impact on the economies and trade balances of oil-consuming as well as oil-producing countries. The economic crisis resulted in a significant reduction in investments and severe limitations on the flow of liquidity across all sectors, including infrastructure and energy. While there are signs of recovery in certain countries, current indications are that the effects of the present turmoil on infrastructure investments will be severe and long-lasting.

Access and Energy Poverty: The number of people without access to energy in Sub-Saharan African countries is projected to rise from 177 million to 190 million in 2030, despite current efforts to reduce this number. Increasing access to improved energy services remains a global challenge for poverty alleviation. Without access to energy services the poor will be deprived of the most basic economic opportunities needed to improve their standards of living. The WBG, therefore, has maintained its support for investments in access to drive towards higher rates of electrification across the world.

Climate Change: Efforts to mitigate the effects of climate change are being planned and negotiated internationally at the highest levels of governments. These efforts have taken center stage in the international political arena, with an emphasis on the relevance of energy as a key element on the climate change agenda. Many stimulus packages around the world have included large components to support clean energy. The conventional wisdom of providing access based largely on fossil fuel fired generation has been overturned with the realization that, in many cases, renewable energy options can provide new access at comparable or slightly higher costs and, at times, with similar characteristics to thermal power.

 WBG Response to Energy Sector Challenges 

The WBG has been at the forefront of the response to the global economic crisis, providing counter-cyclical investments, risk-management, and sector-focused advice to maintain the levels of investment required to mitigate the impact of the crisis on client partners. Through increased investment in renewable energy and energy efficiency, the WBG is helping its clients move toward a low-carbon growth path while simultaneously providing diversification of energy supplies. During the last six years, the WBG has invested about US$11 billion in low carbon investments, US$10 billion of which were in renewable energy and energy efficiency. Excluding large hydro, new renewable energy investments alone contributed US$4.2 billion.

During the past two years, several new initiatives have been launched, including the Infrastructure Recovery and Assets Platform, the World Bank Group Strategic Framework on Development and Climate Change, and the Climate Investment Funds. The WBG began the implementation of these initiatives in FY09, achieving several early successes and reaching some important milestones.

Infrastructure Recovery and Assets (INFRA) — Acknowledging that infrastructure investments and maintenance were the main casualty during and after the Asian financial crisis of the late 1990s and other similar economic downturns, the WBG launched the INFRA platform to prevent similar problems after this recession. This platform spearheaded the organization’s efforts to enhance investments in ongoing projects that are at risk of loss of financing or projects near closure whose financing has fallen through.

Strategic Framework on Development and Climate Change (SFDCC) — During the past fiscal year, the SFDCC has been implemented to help mitigate the risks of climate change. Its aims are to:

• Support adaptation and mitigation in country-led development processes;
• Mobilize additional concessional finance for mitigation and adaptation;
• Facilitate the development of market-based financing mechanisms to minimize the cost of climate change mitigation;
• Leverage private sector resources for mitigation of climate change;
• Support accelerated development and deployment of new clean energy technologies; and
• Provide policy research, knowledge, and capacity building for local stakeholders and policymakers to enable sustainable growth and adaptation to climate impacts.

Climate Investment Funds (CIF) — The Climate Investment Funds comprise two funds, the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF). Donor countries have pledged more than US$6 billion so far.

Clean Technology Fund — The largest of the Climate Investment Funds, the CTF is intended to finance clean energy investments that have the potential to bring about a transformation in the energy choices of emerging and middle-income economies. During the past fiscal year, investment plans for three emerging economies (Egypt, Mexico, and Turkey) were approved and another 11 plans in other countries are under preparation.

These investment plans are prepared in collaboration with client countries, regional development banks, and other stakeholders, and include individual large-scale low-carbon projects that employ innovations in technology. The projects proposed under the CTF vary from wind power generation to improved public transport and power evacuation for new renewable energy projects.

Scaling up Renewable Energy Program (SREP) — The objective of the SREP, a Strategic Climate Fund component, is to pilot programmatic approaches in low-income countries to initiate a change to low carbon energy pathways by exploiting their renewable energy potential to offset fossil-based energy supply. Steps to put the SREP into operation will be taken once a minimum funding level of US$250 million for the program is met.

World Bank Group Support For Energy Investments – Sustainability and Access

During FY07- FY09, energy investments more than doubled from the previous three-year period to almost US$19.4 billion. Investments in renewable energy and energy efficiency (RE/EE) increased 170 percent over the previous three-year period. The projects ranged from new renewable generation for increased access, demand side management energy efficiency, urban transport energy efficiency, and capacity building.

More than 79 percent of the WBG’s commitments to upstream fossil fuels production and thermal generation projects are dedicated to low-carbon-intensity natural gas production and power generation. One notable example of such natural gas projects is the Ain-Sokhna investment in Egypt, which will herald supercritical gas-fired power generation, the first of its kind in Egypt.

The recent Chillers Energy Efficiency investment in India is an example of innovation to bring together finance from carbon finance and the Montreal Protocol for ozone depleting substances to finance more energy efficient chillers (large-scale refrigerating units used in commercial buildings and industrial establishments). This project will provide multiple benefits, by reducing local pollution, reducing the production of ozone-depleting substances regulated by the Montreal Protocol, and reducing carbon dioxide emissions by the reduced use of electricity. This project is now being replicated in other countries.

Table 1: Table 1: WBG Energy Investments by Project Type, (US$ million)

1.  These categories are not mutually exclusive, as some projects are classified as blended low carbon and access.

Note: Some columns and rows may not add up exactly due to rounding.

WBG financing for RE/EE remained at high levels this past fiscal year despite the turmoil in commercial lending for such projects around the world. The share of RE/EE projects in the WBG’s energy lending has continually risen to reach more than 40 percent in FY09, the highest level ever. 

Table 2: World Bank Group Energy investments by institution (US$ million)

 Note: Some columns and rows may not add up exactly due to rounding.

Energy Strategy for the World Bank Group – The Energy Strategy for the WBG is under preparation. This Strategy will provide a framework for the WBG’s support to the energy sector, to balance the twin pillars of increasing access to improved energy sources for all people while minimizing the impact of the energy sector on climate change. Extensive global consultations with relevant stake-holders will support this Strategy.

For more information, please see: www.worldbank.org/energy

Media Contacts:
Roger Morier: (202) 473-5675
Email: rmorier@worldbank.org

Leonardo Mazzei: (202) 473-6282

Email: lmazzei@worldbank.org

Updated September 2009