The Challenge of Low-Carbon Development - World Bank Internet ...

oilers. They also launched effective marketing campaigns.In contrast, the other six companies abandoned or deemphasizedthe new boilers, for a variety of reasons. They wereless able to keep costs down, and customers were not willingto pay a 20 percent premium for the new boilers, beingdistrustful of the promised three-year payback. As noted,the markets were increasingly restricted by environmentalrules. And finally, some companies found more lucrativemarkets, such as waste heat recovery, in a rapidly changingmarket.Two successful technology recipientsimproved the designs and reduced costs;six others abandoned or deemphasized theboilers.At appraisal, the project’s intention was that “[t]echnologiesthat are proven to be technically and commerciallysuccessful will be disseminated to other boiler producersin China” (World Bank 1996), a key avenue of technologydiffusion. However, an IEG survey found that none of themanufacturers deliberately licensed or retransferred theirtechnologies to other firms, fearing competition. The mostsuccessful firm reported the existence of unauthorized copiesof their designs, so some informal diffusion may haveoccurred, but the quantity and efficiency of the copies arenot known.Data are lacking on the performance of the auxiliary equipmentmanufacturers. However, one of the grate manufacturershas been successful, because the new grates are notmuch more expensive than traditional ones but offer significantfuel savings.None of the manufacturers licensed orretransferred their technologies to otherfirms, limiting the overall impact.Meanwhile, the government has imposed new mandatorystandards for boilers, effective 2010, that are somewhat lessstringent than the boiler project’s design standards.Renewable Energy Development ProjectThe Chinese REDP (1999–2008) provides an interestingcounterpoint to the Efficient Boiler Project. Another largetechnology transfer project, REDP emphasized support fordomestic research and development and manufacturingcompetence rather than licensing of foreign IPRs. With $40million from an IBRD loan and a GEF grant, the projectfocused primarily on establishing a sustainable market forrural solar home systems (SHS). It aimed to do so by overcomingbarriers to commercialization: inexperience of localmanufacturers, poor quality products, and high marketprices.REDP spurred manufacturer capabilitiesthrough quality-contingent outputsubsidies.REDP used a combination of technical assistance, incentives,and subsidies to boost the capabilities of the smallscaleSHS manufacturers. SHS manufacture is a relativelylow-tech assembly business carried out in small workshops.A nascent industry already existed, including spin-offs of aformer government research institute in Xining. But manufacturingcosts were high and SHS reliability low.REDP offered a $1.50/Wp subsidy for manufacturing, contingenton meeting quality standards including componentquality. To help companies meet those standards, it providedpartial funding for company proposals to improve financialmanagement, quality control, and marketing practices,and to adapt and develop technologies. The technologiesinvolved were modest but crucial. For instance, some companiesdeveloped improved charge controllers—the apparatusthat prevents batteries from being overcharged andis thus essential for SHS life and performance. These wereadapted to operating conditions typical of the high plateauswhere customers lived.The project resulted in lower costs forlarger systems, growth of firms in size andcompetence, and improved technology.The combination of financing, incentives, and technicalassistance was effective.• SHS costs declined for larger systems. The project improvedfirms’ quality control, reducing wastage; mayhave contributed to greater scale economies at the firmlevel; and reduced mark-ups as competition increased.• Firms grew. Employment in monitored companies morethan doubled over 2002–07, and sales increased 363percent.• Firms became more competent, and quality improved. Allbut two of the 17 participating firms received ISO 9001certification. Seventy-four component suppliers wereREDP certified.• Technology improved. The technology improvement programsupported 197 proposals, with an average grant of$17,500. The project reported that among 81 auditedprojects, 95 percent achieved their objectives.As in the case of the Efficient Boiler Project, projectsupportedtechnologies became proprietary and were notshared among companies. This might spur technologicalcompetition but may sacrifice opportunities for industrywideadvancement. The REDP model is now being appliedto the more expensive and technologically sophisticated68 | Climate Change and the World Bank Group