Figure 5.1CommercialdemoSpectrum <strong>of</strong> Technology SupportScale-upCSP Fuel cells Photovoltaic BoilersSource: IEG.Note: CSP = concentrated solar power.Diffusioneffectiveness; and diffusion and scale-up, to reduce localcosts toward the global minimum and to help stimulatesupply and demand.WBG support for technology transfercan help reduce local costs towards globallevels.To bring concrete experience to these sometimes abstractdebates, we review here some <strong>of</strong> the largest and most prominentexamples <strong>of</strong> WBG support for energy technology promotionand transfer, across the spectrum from upstreamto downstream. <strong>The</strong>se are roughly depicted along an upstream-downstreamspectrum in figure 5.1.However, this evaluation uses the term “technology” to referany kind <strong>of</strong> know-how or innovation that can advancedevelopment and GHG mitigation. For instance, ESCOs,chain-<strong>of</strong>-custody tracing <strong>of</strong> beef, and BRTSs all qualify astechnologies.<strong>The</strong> concentrating solar power experienceIn 1997, the GEF approved the first <strong>of</strong> four <strong>World</strong> <strong>Bank</strong>executedprojects designed to accelerate the diffusion <strong>of</strong>concentrated solar power (CSP). CSP, which uses focusedsunlight to drive a steam turbine or heat engine, is attractiveto the developing world. It can take advantage <strong>of</strong>high levels <strong>of</strong> insolation in arid and semi-arid areas suchas northern Africa, the Middle East, western India, southernAfrica, and northeastern Brazil. It is steadier than windpower, providing power throughout the day and even intothe night, using molten salt to store heat. And it is basedon relatively low-tech components—mirrors and pipes—potentially within the manufacturing capabilities <strong>of</strong> manydeveloping countries.An effort to accelerate concentrated solarpower technology bogged down.Yet this effort to accelerate technology bogged down. After13 years, 2 <strong>of</strong> the projects are finally under construction,1 is out for bid, and the last was cancelled. What are thelessons <strong>of</strong> that 13-year experience for WBG technologypolicy?In 1996, the GEF’s Scientific and Technical AdvisoryPanel identified CSP as a promising target for technologypromotion under the GEF’s new Operational Program 7(OP7). At the time, although a subsidized CSP plant hadbeen operating in the United States since the 1980s, nonew plant had been constructed anywhere since 1991; thetechnology’s high cost was unsupportable, especially aselectricity deregulation progressed. Support for CSP wasin line with the goal <strong>of</strong> OP7, that “through learning andeconomies <strong>of</strong> scale, the levelized energy costs (<strong>of</strong> renewabletechnologies) will decline to commercially competitivelevels” (GEF 2003).In April 1997, the GEF approved a grant <strong>of</strong> $47 million toIndia for a CSP project and subsequently approved requestsfor projects in Egypt, Mexico, and Morocco. <strong>The</strong> projectswent to the <strong>Bank</strong> for development and execution. <strong>The</strong> Indiaproject was dropped; the others proceeded slowly.A fundamental source <strong>of</strong> project delay was a mismatchbetween project goals and design. <strong>The</strong> projects’ intent wasto drive the technology down the learning curve. However,the total planned capacity <strong>of</strong> 120 MW was only afraction <strong>of</strong> the amount needed to yield real cost reductions.Moreover, a learning goal would have been moreefficiently served by clustering the plants in the samecountry or region. This would have allowed manufacturersand developers to more easily assemble the necessaryskills and build manufacturing for components in largequantity locally—activities that can help drive costs downmore quickly.Project delays were in part due to mismatchbetween project goals and design.From the host countries’ viewpoint, these plants were anunproven and potentially unreliable source <strong>of</strong> power. Toaddress host countries’ concerns about power reliability,the plants were designed as hybrids, incorporating muchlarger gas-fired generators. This greatly complicated projectdesign and procurement. In India, it proved economicallyinfeasible to build a gas pipeline to the project, which wasdropped.Bidding the hybrids was problematic. An integrated approachto project contracting carried the risk that therewould be little competition or that contractors would be unwillingto guarantee performance <strong>of</strong> the novel system. <strong>The</strong>alternative approach—separate contracts for gas, solar, andfor systems integration—is complex to manage and couldlead to disputes in the case <strong>of</strong> poor performance. Both approacheshave now been employed. A retrospective on thisexperience, when complete, could provide useful guidancefor future WBG work on integrated systems—for instance,in potential work on carbon capture and storage.66 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
A second issue, inherent to any advanced technologyproject, has to do with cost uncertainty and paucity <strong>of</strong> suppliers.When a technology is new, there will be few experiencedsuppliers, and cost information will be uncertain andclosely held by those few. In the case <strong>of</strong> the GEF-<strong>Bank</strong> CSPprojects, initial cost estimates were grossly underestimated.Actual bids came in well above the estimates, but the GEFgrant amounts were already fixed. Hence the size <strong>of</strong> the CSPplants had to be scaled back, a process that incurred renegotiationand delay. In addition, procurement staff had towrestle with the problem <strong>of</strong> few qualified bidders. Althoughprocurement rules exist for this circumstance, its relativenovelty led to a cautious and protracted process.A further obstacle was the <strong>Bank</strong>’s initial insistence thatthe CSP plants be operated by private sector independentpower producers (IPPs). <strong>The</strong>re was great enthusiasm forIPPs in the <strong>Bank</strong> at the time, but they were not present inthe CSP host countries even for traditional power plants.<strong>The</strong> IPP requirement thus complicated a technologicalinnovation by overlaying an institutional one. Moreover,the IPP approach held no attractions for the state utilities,whose cooperation was essential.During the long gestation period <strong>of</strong> the three survivingprojects, much changed at GEF and in the power industryat large. Disenchanted with OP7, the GEF eliminatedit. Meanwhile, CSP experienced a renaissance, driven by aSpanish policy <strong>of</strong> generous feed-in tariffs and renewed interestin the United States. (<strong>The</strong> GEF projects, according tosome industry observers, may have helped maintain interestin CSP in the meantime.) Costs appear to have declined,and several different technologies became available.Buoyed by these changes and the advent <strong>of</strong> the CleanTechnology Fund, and subjected to vigorous external criticismfor prioritizing coal over CSP, the WBG is planninga $750 million investment in a $5.6 billion, 900-MW set<strong>of</strong> CSP projects in Algeria, Egypt, Morocco, Jordan, andTunisia. A project is also planned for South Africa. Unlikethe modest original investment, these new projects wouldpotentially increase cumulative global capacity by a significantproportion and would be geographically concentrated.So there is a greater potential for advancing the globallearning curve. <strong>The</strong> imminent completion <strong>of</strong> the CSP projectsin Morocco and Egypt may help inspire interest in andsupport for the wider new venture.China Efficient Industrial Boiler ProjectIn the early 1990s, GEF-funded <strong>World</strong> <strong>Bank</strong>-Chinese analysis(NEPA and others 1994) found that industrial boilersconsumed 350 million tons <strong>of</strong> coal annually (more thanthe power sector) and accounted for 30 percent <strong>of</strong> China’senergy-related CO 2emissions. <strong>The</strong> boilers were also responsiblefor a large proportion <strong>of</strong> health-damaging urbanair pollution and crop-damaging acid rain. <strong>The</strong> report suggestedthat better boiler designs could yield 10–20 percentefficiency gains.Consequently, a 1997 GEF-funded, <strong>Bank</strong>-executed projectsought to spur Chinese capacity to build efficient industrialboilers, complementing government efficiency policies. <strong>The</strong>project’s objectives were to reduce GHG emissions and localair pollution through the development and deployment<strong>of</strong> “affordable, energy-efficient and cleaner” boilers throughdesign and policy reform. Most <strong>of</strong> the $32 million grant wasspent on acquiring technology (IPRs) for new or upgradedboiler designs and auxiliary equipment (such as grates) andtransferring the technology to domestic manufacturers.Procurement was protracted and difficultbecause few companies were interested inselling the technology.Two problems were encountered during implementation.Both related to the project’s strategy <strong>of</strong> picking winners, thatis, precisely specifying the boiler types to be transferred.First, procurement was protracted and difficult. A combination<strong>of</strong> small contracts, tightly specified technologies, anda two-step (technical/financial) bidding process, togetherwith concerns about IPR security, deterred participation byforeign technology suppliers. Only one package had multiplebidders, and two had none. <strong>The</strong>n, “once contracts wereawarded, contract negotiations proved difficult in somecases, due to difficulties in meeting commercial terms andperformance criteria using Chinese coals. Coupled withmisunderstandings concerning Chinese and internationalcontracting procedures, all <strong>of</strong> these factors contributed todelays in finalizing technology transfer contracts” (<strong>World</strong><strong>Bank</strong> 2004). This process delayed implementation by atleast two years. Meanwhile, evolving environmental regulationsbanned the deployment <strong>of</strong> some <strong>of</strong> the smaller boilersselected for the project.<strong>The</strong> project concluded in 2004. A follow-up survey commissionedfor this evaluation found that the beneficiarycompanies produced a total <strong>of</strong> 7,414 tons per hour <strong>of</strong> newboilers in 2009, accounting for 3.3 percent <strong>of</strong> the nationalmarket against an anticipated 35 percent.A 1997 project transferred technologylicenses for efficient industrial boilers toChinese manufacturers.Firms had divergent experiences. Two companies werehighly successful in producing and marketing the newboilers. <strong>The</strong>se well-run companies invested in their own researchand development, improving the designs and keepingcosts nearly competitive with the older, less-efficientSpecial Topics | 67
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CLIMATE CHANGE AND THE WORLD BANK G
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Figures1.1 GHG Emissions by Sector
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Executive SummaryUnabated, climate
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IEG PublicationsAnalyzing the Effec