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

Overall, the closed projects have not made a significantcontribution to the reduction of GHG emissions. This isa consequence of the target users’ poverty and low energyconsumption. In India, the avoided carbon emissions wereestimated to be 94,000 tons over the lifetime of the photovoltaicsubproject. In China, a rough extrapolation impliestotal CO 2reductions on the order of 7,000 tons per year.Evidence on these projects’ poverty reduction impacts isspotty because of the lack of monitoring. In India, sometraders reported a 50 percent increase in net income byusing solar instead of kerosene lighting; income of somerural households increased by about 15–30 percent becauseof increased home industry output. SHSs alsoallowed longer study hours for children under better lightingconditions. In China, a 2007 end-user survey covering1,203 households in 6 villages reported that 95 percent ofSHS users claimed that the use of a photovoltaic system increasedtheir incomes; 15 percent claimed that the increasewas significant.Project monitoring and evaluation needsto be strengthened, particularly regardingcost data, performance of installed systems,poverty impacts, and CO 2savings.Calculation of ERRs depends on technical assumptionsabout consumers’ benefit from lighting and may not becomparable between projects. In Bolivia, Indonesia, thePhilippines, and Sri Lanka, ERRs for the consumers’ investmentin SHS were calculated in the 27–47 percent range.For China, IEG estimated a phenomenal 115 percent ERR(World Bank 2010). These very high numbers are consistentwith studies that show huge gains to rural electrification(IEG 2008) and could be higher in areas where grid connectionis possible. However, the ERRs do not include thedynamic gains of industry technical progress and cost reductionsfor future consumers.Overall, projects monitoring and evaluation needs to befurther strengthened:• Disaggregated cost data, such as assembly cost, installationcost, and financing cost were usually not monitoredand reported, preventing assessment of the impact ofindustrial development on price.• Performance of installed photovoltaic systems wasnot always monitored and reported. Monitoring systemsare shut down when the project closes, inhibitingevaluation of the program’s sustainability—the crucialquestion of whether consumers continue to purchasesystems after the subsidy ends.• Baseline and comparison group data are lacking, so it isdifficult to assess impacts on poverty.• Although reducing CO emissions is a critical goal of2most of the projects, actual CO 2savings was not carefullymonitored.The Way Forward for Renewable EnergyEconomic and GHG returns to renewable energyinvestmentHydropower projects with high capacity factors and lowcosts per KW can be cost competitive with fossil fuel plantsand also offer GHG reductions and other environmentalbenefits. Wind and other renewable energy typically offersignificantly lower returns per dollar on both dimensions.But capacity factors make a large difference in returns. Renewableenergy offers additional benefits of energy security(for fuel importing countries) and a possible basis for stimulatingdomestic manufacturing. But low-capacity-factor,high-cost renewable energy may not be advantageous forlow-income countries.SHSs can have extremely high economicreturns, but they have relatively low carbonbenefits.SHSs supply power at high cost yet offer extremely higheconomic returns to off-grid households because of thehouseholds’ large benefits from electricity access. However,the systems have relatively low carbon benefits. The economicsof other kinds of off-grid renewables will be similar,because of low capacity factors and low usage of energy bypoor rural people.Overcoming barriers to adoption and diffusionMiddle-income countries are increasingly willing to paypremium prices for renewable energy because of its environmentaland energy security benefits. World Bank policyadvice and piloting has been helpful in China and Mexicoin catalyzing large-scale installation of wind facilities. Thisis a relatively low-cost, potentially high-leverage, but uncertainline of intervention that may take years to bearfruit. It is through this kind of indirect catalysis, rather thaninvestment in individual power plants, that the WBG canaffect a large enough volume of investment to help thesetechnologies make globally relevant advances in cost competitiveness.WBG support has helped develop SHSmanufacturing capacity.World Bank support has helped develop manufacturing capacityfor SHSs and reduce local prices in China, Sri Lanka,and Uganda. Markets are still reliant on subsidies, however,and are limited by the still-high prices of solar modules.Sustained declines in module cost, together with promotion30 | Climate Change and the World Bank Group