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Energy EfficiencyThe first phase in this evaluation series (IEG 2009) assessed projects related todemand-side efficiency policy and to energy pricing. It highlighted the importanceof removing poorly targeted energy subsidies as a win-win policy that can promoteenergy efficiency, poverty reduction, fiscal balance, and GHG reductions.Since then, the Bank has codirected a G20 study to examinepolicies to reduce energy subsidies (IEA and others 2010).The previous evaluation also urged increased attention forthe intersection between efficiency investments and pricingreform. Such attention is now evident in the VietnamPower Sector Development Policy Operation (2010).Energy Efficiency in the First PhaseEvaluationDistrict heating was one area of World Bank activity reviewedin the Phase I report. Concentrated mostly inEastern Europe, this has been a large area of energy efficiencyemphasis. Over the period 1991–2008, there were41 projects with $2.1 billion in commitments. Of the 25closed projects, about three-quarters had outcomes thatIEG rated moderately satisfactory or better. To a largeextent these were “engineering” projects focusing on supply-sideefficiency improvements. However, some includedpolicy elements such as tariff reform. Some ongoingChinese projects are combining supply-side interventionswith promotion of far-reaching reforms that provide consumerswith the means and incentive to reduce excessiveenergy use.In its review, IEG found 34 projects initiated over 1996–2007 that had policy content that related (under a broaddefinition) to end-user efficiency. These included nine thatsupported the creation of appliance or building standards.Although the projects were successful in supporting adoptionof codes, there was been less attention over this periodto sustained support for implementation and enforcement,and very little monitoring and evaluation of impacts. Therewere about a dozen projects that supported demand-sidemanagement, usually through a utility.Complementing the earlier volume, this chapter reviewsseveral energy efficiency business lines that are large involume or have potential for scale-up: transmission anddistribution (T&D) loss reduction, financial intermediaries,direct IFC investments in industrial energy efficiency,and promotion of efficient light bulbs (table 3.1 puts this inthe context of all low-carbon investments from 2003–08).Using Financial Intermediaries to OvercomeBarriers to Energy Efficiency InvestmentsIn China, Eastern Europe, and Russia, a history of commandeconomies and low energy prices had fosteredindustries and housing that were wasteful of energy. Startingin the 1990s, the World Bank and IFC moved in parallelto equip financial intermediaries to promote energyefficiency in these regions. These efforts were mostly supportedby GEF and had GHG reduction as a goal. This sectionreviews 11 such projects (table C.4, which includesall but two of the energy efficiency financial intermediaryprojects initiated by 2005). 1Diagnosis of barriersThe projects had similar diagnoses of energy efficiencybarriers:• Banks do not understand energy efficiency financing. Inthis view, banks either did not understand that the savingsflow from energy efficiency improvements couldback a loan or did not know how to appraise that flowor the exaggerated the risk of these loans.• End users—factory or housing owners—do not understandtheir energy efficiency savings potential or howto realize it.Although the World Bank and IFC hadsimilar diagnoses of barriers to energyefficiency, they arrived at differentprescriptions.34 | Climate Change and the World Bank Group
Table 3.1 Energy Efficiency Interventions by Type in the Low-Carbon Investment Portfolio 2003–08(with overlap)Type of energy efficiencyComponent cost(millions)Percent oflow carbonNumber ofcomponentsDistrict heating and combined heat and power $573 7.2 25End user energy efficiency, government and municipal $484 6.1 22End user efficiency: industrial energy efficiency $1,128 14.1 47End user energy efficiency residential and commercial $572 7.2 40End user efficiency: multiple or unspecified user types $370 4.6 19Supply side efficiency: thermal power rehabilitation $656 8.2 15Supply side efficiency: Reduced transmission, distribution or system losses $916 11.5 37Supply side efficiency: other or unspecified $340 4.3 12Energy efficiency in transport $23 0.3 2Energy efficiency multiple, unspecified, or unknown $449 5.6 24Source: World Bank.Note: Individual components may appear in multiple categories, so column totals are not meaningful.IFC and the World Bank arrived at different prescriptions.Both hoped for a transformative impact (see table 3.2). IFCfocused on the presumed risk aversion and inexperience ofcommercial banks and therefore prescribed a combinationof technical assistance and loan guarantees. Technical assistancewould train banks to appraise and structure energyefficiency loans and to fill a pipeline of future projects.GEF-subsidized loan guarantees would act like trainingwheels. Once the banks realized that risks were low, theguarantees could be removed. Success of the participatingbanks would spark emulation, and energy efficiency lendingwould spread.In China, the World Bank prescribed energy servicecompanies (ESCOs) to overcome these barriers. ESCOswould provide both finance and technical know-how totheir clients (box 3.1). Because ESCOs were unknownin China and therefore highly risky, the Energy ConservationProject used GEF funds to help capitalize threecompanies to test and popularize the idea, which wasexpected to provoke spontaneous replication. Later, theBank used GEF- supported loan guarantees to back ESCOfinancing, again with the presumption that this would bea temporary measure to overcome banks’ unfamiliaritywith energy efficiency finance. In Romania and Bulgaria,the Bank used GEF grants to set up dedicated, revolvingenergy efficiency funds as an alternative to banks anda complement to ESCOs, which had already arrived inEurope.Table 3.2IFC and World Bank Approaches to Energy Efficiency FinancialIntermediation in China and Eastern EuropeIFCWorld BankChina GuaranteesTechnical assistance for banksESCO demonstrationTechnical assistance for ESCOsGuarantees for ESCOsEastern EuropeGuaranteesTechnical assistance for banksOn-lending (Russia)Dedicated energy fundsTechnical assistance for fundsSource: IEG.Note: ESCO = energy service company.Energy Efficiency | 35
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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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of some technologies, such as landf
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Scale up high-impact investmentsEne
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Page 61 and 62: Table 2.6Hydropower Investments by
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Table 6.1Summary of Sectoral Findin
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Table 6.1Sector Intervention Direct
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Appendix ARenewable Energy Tables a
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Table A.4Grid-Based Biomass/Biogass
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Table A.5 (continued)Negative examp
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Figure A.4A. Hydro/biomass capacity
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Appendix bWorld Bank Experience wit
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Table C.2Completed Low-Carbon Energ
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TAble C.4Reviewed energy efficiency
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the new capacity. Transmission syst
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Table E.2Climate obligationsCoal Pl
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Table F.2GHG objectiveModeNumber of
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IEG eliminated a few cases of doubl
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Table H.1Project andlocationBioener
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Appendix ICarbon and Economic Retur
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Appendix JRecent WBG Developments i
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y providing value to standing fores
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never had an explicit corporate str
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overnight. The Bank can provide ass
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Chapter 51. From the chief economis
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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
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