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

Sellers and microfinanciers find it costly to service thesepopulations.Against these barriers the WBG has deployed a number ofinstruments:• Most projects employed subsidies. These subsidieswere to buyers or renters, dealers or manufacturers, orwinning concessionaires under a fee–for-service model.Subsidies were often 10–20 percent of cost, but rangedup to 60 percent. They aimed at making the systemsmore affordable and at expanding overall productionand thus pushing the entire industry down the learningcurve, resulting in sustained cost reductions. In Boliviaand China, dealer/manufacturer subsidies were contingenton meeting quality standards.• Consumer credits addressed the financing barrier andwere provided through three primary mechanisms:dealer extended credit, credit through local banks, andcredit through microfinance institutions.• Investor financing (beyond subsidies) was provided insome projects.• Technical assistance and support for standards and certificationaddressed the quality barrier.WBG-supported projects deployedsubsidies and consumer credit.Project outcomesActive promotion of SHS now dates back two decades, toa time when solar modules (the main component of SHS)were much more expensive than they are now. Reviewslooking over the first decade of that experience pointed tothe persistence of price and credit as barriers (Martinot,Ramankutty, and Frank 2000; GEF 2004a; GEF 2004b).Disappointment in these outcomes has led the GEF—themain financier of these projects—to deemphasize them.An IFC self-assessment (IFC 2007) was pessimistic also,concluding that without some level of subsidies, solarphotovoltaic power in developing countries is often tooexpensive for the average rural consumer; that “the rural,off-grid, solar photovoltaic industry in emerging markets isa low-margin, high-risk business”; and that IFC has “beenunable to significantly transform markets and create sustainablebusiness as originally anticipated.”However, emerging evidence from evolving World Bankexperience paints a more positive picture—though stillwith the qualifications that SHS appears to be a small nichemarket rather than a rural panacea and is largely still dependenton subsidies.All projects in the evaluation portfolio had the developmentobjectives of (i) increasing access to electricity in rural areasin an environmentally sustainable manner and (ii) facilitatinggreater participation by the private sector in advancingthe commercialization of photovoltaic technology. In addition,4 of the 12 projects specifically spelled out the goal offostering economic growth or improving the delivery of socialservices such as health and education through the provisionof electricity services. The global environmental objectiveof the solar photovoltaic projects was to remove barriersto the adoption of emissions-reducing energy technologies.Outcomes for four of the five evaluatedprojects with large SHS components wererated satisfactory.Table 2.8 reports the rated outcomes of the five completedprojects in the evaluation sample with large SHS components.With the exception of Indonesia—where the 1997macroeconomic crisis crippled consumer demand—all theprojects performed well against targets. But good measuresof SHS longevity are lacking. 13Table 2.8 Rated Outcomes of Completed Projects with Large SHS ComponentsProject Number of installed SHS Total capacity of installed SHS (MWp)Targets Actual Targets ActualChina Renewable Energy Development Project 350,000 400,000 11 10India Renewable Resources DevelopmentProjectNA 2.5 – 3 2.145IndonesiaSHSs200,000 (appraisal)70,000 (revised)8,054 NASri LankaEnergy Services Delivery30,000 (appraisal)15,000 (revised)21,000 NASri Lanka Renewable Energy for Rural economicDevelopment (RERED)87,000 by 2009 (appraisal)155,000 by 2011 (revised)105,398 (as ofJune 30, 2009)4.622Sources: Implementation and Completion Reports and Sri Lanka RERED Statistics and Reports (http://www.energyservices.lk/statistics/index.htm).Note: MWp = peak megawatts; SHS = solar home systems.28 | Climate Change and the World Bank Group