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

measurement of achieved economic returns is lacking, undercuttingthe Lending Pilot’s ambition to use program results toconvince other clients to invest in cleaner production.The Cleaner Production Lending Facilityfunded small loans with a median projectedrate of return of 36 percent, but most hadCO 2savings of just a few thousand tonsper year.An early lesson from the audits was the necessity of costsharing.Initially, clients were only required to cover 10 percentof the cost but committed to reimburse the grant ifaudit recommendations were implemented. This created anincentive not to disclose implementation plans and not toborrow from IFC. After full cost sharing was implemented,the three sponsored audits successfully identified costsavingmeasures with one- to four-year paybacks.The audit costs were small relative to the client’s projectedreturns. But the audit costs were relatively large compared toIFC’s potential returns from lending. Hence, IFC-fundedaudits are not likely to be sustainable for small-scale projectsin the absence of concessional funding, though theaudits themselves are potentially cost-effective.Transmission and DistributionElectricity T&D projects provide a potentially cheaper alternativeto construction of new generation in countrieswith high technical losses. They also offer major potentialfor reducing carbon emissions. Such projects can increasesupply security and reduce outages and can be important forimproving access. They can reduce carbon emissions by—• Connecting renewable power to the grid• Reducing technical losses (dissipation of electricity aswaste heat)© Moodboard/Corbis.• Reducing the illegal or unpaid consumption known asnontechnical losses (emissions are reduced if consumers,confronted with a bill for electricity, reduce theirconsumption).Reducing lossesLosses vary widely across regions and countries becauseof utility performance. A survey of 12 African utilitiesfound total loss rates ranging from 6 to 35.3 percent(Pinto 2010). In these utilities, transmission losses rangedfrom 3 to 6.6 percent, distribution losses ranged from2.4 to 20.5 percent, and nontechnical losses ranged from3.6 to 17.5 percent.Technical losses in transmission anddistribution remain high in many regions.Technical losses can be reduced through direct investmentin hardware and network management and by increasingthe institutional capacity of utilities to plan, finance, andmaintain their networks. Opportunities for very large economicreturns from T&D projects exist largely becausemany power utilities have lacked the capacity, funds, andincentives to undertake optimal network management. Unlessperformance of utilities is improved, there is a risk thatT&D projects may not yield their expected economic andemission reduction benefits.Nontechnical losses are usually caused by a combinationof faulty or inadequate metering, collusion between utilityemployees and power consumers, and theft. Nontechnicalloss reduction entails collecting money from customerswho were previously receiving power at no cost, provokingopposition from entrenched interest groups.Advanced metering infrastructure technology allowsmeters to be read remotely (using mobile phone networks),which reduces much of the scope for collusion and theft.Significant reductions in the price of advanced meteringinfrastructure components has made their widespreadadoption economically feasible (Antmann 2009). Preliminaryevidence from Brazil, the Dominican Republic, andHonduras demonstrates their effectiveness in reducingnontechnical losses.Advanced metering infrastructuretechnology has demonstrated effectivenessin reducing nontechnical losses.Nontechnical losses are often ascribed to poor people, buta significant portion of those losses comes from majorusers, and targeting these users is often key to reducinglosses. For example, a loss-reduction effort in North Delhisuccessfully reduced total losses from 53 percent in 2002 to40 | Climate Change and the World Bank Group