Overall, the closed projects have not made a significantcontribution to the reduction <strong>of</strong> GHG emissions. This isa consequence <strong>of</strong> the target users’ poverty and low energyconsumption. In India, the avoided carbon emissions wereestimated to be 94,000 tons over the lifetime <strong>of</strong> the photovoltaicsubproject. In China, a rough extrapolation impliestotal CO 2reductions on the order <strong>of</strong> 7,000 tons per year.Evidence on these projects’ poverty reduction impacts isspotty because <strong>of</strong> the lack <strong>of</strong> monitoring. In India, sometraders reported a 50 percent increase in net income byusing solar instead <strong>of</strong> kerosene lighting; income <strong>of</strong> somerural households increased by about 15–30 percent because<strong>of</strong> 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 <strong>of</strong>SHS users claimed that the use <strong>of</strong> a photovoltaic system increasedtheir incomes; 15 percent claimed that the increasewas significant.Project monitoring and evaluation needsto be strengthened, particularly regardingcost data, performance <strong>of</strong> installed systems,poverty impacts, and CO 2savings.Calculation <strong>of</strong> 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(<strong>World</strong> <strong>Bank</strong> 2010). <strong>The</strong>se 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 <strong>of</strong> 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 <strong>of</strong> the impact <strong>of</strong>industrial development on price.• Performance <strong>of</strong> installed photovoltaic systems wasnot always monitored and reported. Monitoring systemsare shut down when the project closes, inhibitingevaluation <strong>of</strong> the program’s sustainability—the crucialquestion <strong>of</strong> 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 <strong>of</strong>2most <strong>of</strong> the projects, actual CO 2savings was not carefullymonitored.<strong>The</strong> 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 <strong>of</strong>fer GHG reductions and other environmentalbenefits. Wind and other renewable energy typically <strong>of</strong>fersignificantly lower returns per dollar on both dimensions.But capacity factors make a large difference in returns. Renewableenergy <strong>of</strong>fers additional benefits <strong>of</strong> 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 <strong>of</strong>fer extremely higheconomic returns to <strong>of</strong>f-grid households because <strong>of</strong> thehouseholds’ large benefits from electricity access. However,the systems have relatively low carbon benefits. <strong>The</strong> economics<strong>of</strong> other kinds <strong>of</strong> <strong>of</strong>f-grid renewables will be similar,because <strong>of</strong> low capacity factors and low usage <strong>of</strong> energy bypoor rural people.Overcoming barriers to adoption and diffusionMiddle-income countries are increasingly willing to paypremium prices for renewable energy because <strong>of</strong> its environmentaland energy security benefits. <strong>World</strong> <strong>Bank</strong> policyadvice and piloting has been helpful in China and Mexicoin catalyzing large-scale installation <strong>of</strong> wind facilities. Thisis a relatively low-cost, potentially high-leverage, but uncertainline <strong>of</strong> intervention that may take years to bearfruit. It is through this kind <strong>of</strong> indirect catalysis, rather thaninvestment in individual power plants, that the WBG canaffect a large enough volume <strong>of</strong> investment to help thesetechnologies make globally relevant advances in cost competitiveness.WBG support has helped develop SHSmanufacturing capacity.<strong>World</strong> <strong>Bank</strong> 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 <strong>of</strong> solar modules.Sustained declines in module cost, together with promotion30 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
Box 2.5On-Grid and Off-Grid Renewable Energy in Sri Lanka<strong>The</strong> <strong>World</strong> <strong>Bank</strong> has helped promote significant growth in renewable energy in Sri Lanka, through two IDA-GEFprojects, beginning in 1997.<strong>The</strong> largest impact was through catalyzing the growth <strong>of</strong> grid-connected, independently operated smallhydropower plants. This was done by facilitating finance. A small power purchase agreement eliminatedtime- consuming, asymmetric negotiations between small companies and the electricity board. A market-basedfeed-in tariff, with a floor, ensured a minimum income. IDA funds were on-lent by private banks for durations <strong>of</strong>7–9 years, as opposed to the usual 4. <strong>The</strong> government assumed the foreign exchange risk (and has borne the cost<strong>of</strong> a devaluation).As a result, 153 MW <strong>of</strong> minihydro have been installed, generating 4.4 percent <strong>of</strong> grid-connected power (2008)and saving a claimed 550,000 tons <strong>of</strong> CO 2per year. Sri Lanka has gained technical manufacturing expertise in theprocess and is now exporting turbines and engineering services.<strong>The</strong> projects also supported the rapid growth <strong>of</strong> solar photovoltaic home systems, from near zero to 125,000systems totaling 5.5 peak MW <strong>of</strong> capacity. Output-based subsidies (as in China’s REDP) and specialized micr<strong>of</strong>inancewere key. Success was more modest for village hydro systems, supported through grants and loans, whichinstalled 1.3 MW serving 4,696 households. And a wind project, designed to demonstration commercial feasibility,performed below expectations and was not replicated. Recently, a new IFC project, PADGO, has begun to promotedecentralized energy, including combined heat and power fueled by biomass.<strong>Challenge</strong>s for further expansion <strong>of</strong> renewable electricity include an inadequate grid; decreasing quality <strong>of</strong>remaining hydropower sites; wind sites that are remote and can support only small turbines; and an increasinglybureaucratic plant licensing process that now requires two years. Demand-side management and energyefficiency have also been less successful than hoped. However, a 30 percent increase in electricity tariffs in 2009(that preserved lifeline tariffs) should increase the attractiveness <strong>of</strong> both renewable energy and energy efficiency.Source: IEG background study.<strong>of</strong> smaller systems (as in the Lighting Africa Project), couldhelp with diffusion.Long loan durations are an important stimulusto project bankability and are featuredin IFC lending and <strong>Bank</strong> on-lending.Long loan tenors are an important stimulus to projectbankability and are a feature <strong>of</strong> IFC direct lending andon-lending by the <strong>World</strong> <strong>Bank</strong>. At current carbon prices,carbon finance has a very modest leverage on the financialviability <strong>of</strong> hydropower, wind, or geothermal projects buta pr<strong>of</strong>ound effect on projects that involve the capture <strong>of</strong>methane.Systems issuesAs renewable energy expands, systems integration issuesbecome critical. <strong>The</strong>re is increasing use <strong>of</strong> strategicenvironmental assessments to aid in optimizing hydropowersites, taking account <strong>of</strong> economics, environmental impacts,transmission needs, and integration <strong>of</strong> intermittent powersources. Spatial planning <strong>of</strong> this kind will become increasinglyimportant to aid in integration <strong>of</strong> wind, biomass, solar,and other site-specific resources, especially as climateadaptation needs are factored in.Learning and feedbackSystematic monitoring <strong>of</strong> output <strong>of</strong> grid-connected renewableenergy can help explain why new types <strong>of</strong> projects areunderperforming, so that design and operations <strong>of</strong> repeaterprojects can be improved.Better monitoring <strong>of</strong> costs and impacts is needed to guidefuture investment portfolios. Actual long-term impacts <strong>of</strong>solar home systems are poorly measured—including howlong they last.Renewable Energy | 31
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Phase II: The Challenge of Low-Carb
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CLIMATE CHANGE AND THE WORLD BANK G
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Table of ContentsAbbreviations . .
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Figures1.1 GHG Emissions by Sector
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AcknowledgmentsThe report was prepa
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Executive SummaryUnabated, climate
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esettlement plans has been ineffect
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Figure 6.1800Economic and Carbon Re
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Specifically, the WBG could:• Pla
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Appendix ARenewable Energy Tables a
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Figure A.4A. Hydro/biomass capacity
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Table C.2Completed Low-Carbon Energ
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TAble C.4Reviewed energy efficiency
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IEG eliminated a few cases of doubl
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Hartshorn, G., P. Ferraro, and B. S
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______. 2007. World Development Ind
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IEG PublicationsAnalyzing the Effec