The Global Sustainable Energy Challenge: A World Bank view and response Charles M. Feinstein Director Energy & Extractives Global Practice World Bank September.

The Global Sustainable Energy Challenge:A World Bank view and response

Charles M. FeinsteinDirector

Energy & Extractives Global Practice

World Bank

September 24, 2015

ENERGY TRILEMMA

Energy Security: The need for secure energy supplies to fuel economic development

Energy Equity: The increasing call for energy equity so as to provide basic energy services (electricity access, clean cooking) for the unserved billions

Environmental Sustainability: The enormous challenge posed by climate change and the quest for environmental sustainability

Driving force of the international expansion of markets for clean energy

Source: World Energy Council, World Energy Trilemma 2013

ENERGY CHALLENGE – ENERGY DEFICIT

1.2 billion people live without any electricity

2.8 billion cook with health-damaging solid fuels

1 billion are under-electrified

Another 1 billion are connected to the grid but have only intermittent service

ECONOMIC IMPACT OF ENERGY SHORTFALL

Economic Cost of Power Outages as Share of GDP, 2005

ENERGY PRODUCTION AND CLIMATE CHANGE

Energy production remains the primary driver of GHG emissions

35%

24% 21% 14% 6.4%

Energy Sector

Agriculture, forests and

other land uses

Industry Transport

AR5 WGIII SPM2010 GHG emissions

IPCC AR5 Synthesis Report

WB Response to Challenges

Approach and WB Services

SUSTAINABLE ENERGY FOR ALL (SE4ALL)

The Sustainable Energy for All (SE4ALL) initiative is a multi-stakeholder partnership between governments, the private sector, and civil society, co-chaired by UN Secretary General and President of the World Bank.

By 2030 it aims to:

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Sustainable Energy Department

Achieve universal access to energy, including energy and modern cooking fuels

Double the rate of improvement in energy efficiency from 1.3% to 2.6% per annum

Double the renewable energy share of power produced and consumed from 18% to 36%

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WBG FINANCING TOOLS, INSTRUMENTS AND SERVICES

Investment Project Financing (IPF)

Development Policy Financing (DPF)

Program-for-Results (P4R)

Technical Assistance (TA)

Economic and Sector Work (ESW)

Risk Guarantee

Advisory Services

Financing instruments:

Knowledge services:

WBG Energy commitments – InstitutionsUS$m

IFC; 1,603

MIGA; 466

World Bank; 6,829

FY’14 Commitments (US$m)

2010 2011 2012 2013 2014 -

2,000

4,000

6,000

8,000

10,000

12,000

IFC

2010 2011 2012 2013 2014 -

2,000

4,000

6,000

8,000

10,000

12,000

MIGA

2010 2011 2012 2013 2014 -

2,000 4,000 6,000 8,000

10,000 12,000

World Bank

WBG Energy Lending: FY14 by sector

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.

Ga

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ge

ne

ratio

n

Co

al a

nd

Oil

fire

d g

e..

. -

500

1,000

1,500

2,000

2,500 2,316 2,235

1,567 1,274

751 741

404 158

FY 2014 lending by sector ($m)

MIGA IFC WB

IDA-IBRD portfolio

Darker the green, higher the lendingBubbles denote lending (in $ millions)

Portfolio as of October, 2014

SE4ALL PARTNERSHIP FOR ENERGY EQUITY INVESTMENT

The Sustainable Energy for All (SE4ALL) initiative is a multi-stakeholder partnership between governments, the private sector, and civil society. By 2030 it aims to:

Universal energy access (electricity

and modern cooking fuels)

Renewable energy share from 18% to

36%

Double the rate of improvement in energy efficiency

from 1.3% to 2.6%

Current Annual$US bn

Required Annual$US bn

Scale-Up Gap

Energy Access 9 45 500%

Energy Efficiency 225 393 (615 WEO-450) 175%

Renewable Energy

244 320 (442 WEO-450) 131%

SE4All Total 478 758 – 1,102 158%

MOBILIZING PRIVATE CAPITAL TO ADDRESS CHALLENGE

$4BIBRD/IDA

Guarantee Commitmen

ts

$31.2 B

Total Infrastructure Financing

$12.6B

Private Financi

ng

*All guarantee operations, 1990-2015

Demonstrated Success in Innovative Structures Transforming Convening Power of WBG into Bankable Projects Optimizing the Use of the Bank’s “AAA” Balance Sheet to Leverage

Private Capital

56 Guarantee Operations have been approved to date spanning 45 countries

ENABLERS OF SUSTAINABLE ENERGY

Proper PlanningEnabling policy,

laws and regulation

Utility Performance

Resource Mapping

Fair procurement

practicesElectricity tariffs

Capacity to Integrate

Renewables

Network Connection and

pricingCarbon pricing

Assessing a country’s readiness for clean energy investment

WB Response to Challenges

Tackling Energy Trilemma: Energy Equity

ENERGY EQUITY: SCALING UP GRID EXPANSION…

Footer Information16

o Many countries have the population density that supports successful grid upgrade

o WB has helped countries in different stages of grid expansion to scale up (eg Vietnam, Rwanda)

1976 1985 1994 1996 1998 2000 2002 2004 2006 2008 2010 20130

20

40

60

80

100

Household electrification rate%

Vietnam- last mile grid electrification Rwanda- using geo-spatial tools to reduce the costs and increase pace of grid electrification

… AND PROVIDING MORE OFF-GRID ELECTRICITY

o Increasing menu of options makes off-grid electricity more attractive, available and affordable – for poor and better-off households

o Overlapping technologies and business models to choose from

o Possibility to satisfy varied income levels and geographic/demographic conditions

o Makes it easier to climb the energy ladder

o Expanding fasto Allows customers to

afford higher service level

o Scalable business model

o Most investment ready

PAYGRent to own… (lanterns/SHS)

PAYG fee for service

(kits/SHS)

Village micro-grids

Larger grid-quality mini-grids

Device sales (mostly lanterns)

Grid

WB Response to Challenges

Tackling Energy Trilemma: Clean Energy as key part of diversified energy mix for energy security

RE PORTFOLIO AND FINANCING LEVERAGE (FY10-15)

Biogas1%

Biomass1%

Geo-thermal

10%Solar CSP14%

Solar Lighting0.03%

Solar PV6%

Solar Thermal0.10%

Wind onshore

2%

Hydro54%

Unspeci-fied RE

6%

RE TA, Capactiy

Building & Project Mgmt1%

Hydro TA, Capactiy

Building & Project Mgmt5%

USD 8 Bn

$8BIBRD/IDA Financing

$18 BTotal

Renewable Energy

Financing

$10BCo-financing

• Renewable Energy Mapping Program

• System Strengthening for integration of Variable Renewable Energy

• Scaling up solar electricity (focus on Africa)

• Lighting Africa & Lighting Asia

• Global Geothermal Plan: Phase II

• Leveraging private sector

• Scale up of policy and regulatory work

EE PORTFOLIO AND FINANCING LEVERAGE (FY10-15)

$3.5 BIBRD/IDA Financing

$7 BTotal

Renewable Energy

Financing

$3.5 BCo-financing

Electricity Trans-mission and Dis-tribution;

29%

Heat Genera-tion and Supply;

29%Residen-

tial Energy Efficiency;

10%

Com-mercial Energy

Effi-ciency; 0.1%

Industrial Energy Ef-

ficiency; 21%

Public Sector

Energy Ef-ficiency;

2%

Urban Energy

Efficiency; 7%

Other (General, Policy and Manage-ment); 2%

USD 3.52Bn

• Integrating Demand Side Management in utility operations

• Integrating energy efficiency in Health, Education and Urban investment

• Energy Efficient Cities

• Water and irrigation utility energy efficiency

• Scale up of policy and regulatory work

WB Response to Challenges

Tackling Energy Trilemma: Climate Change & Sustainability

WB GLOBAL INITIATIVES:

• Climate Finance• WB mission is integral to tackling climate

- eliminating extreme poverty and boosting shared prosperity

• Climate Investments:

• more than $28 billion by WB and other MDBs

• $3.8 billion from others (CIF, Montreal Protocol, GEF, and carbon markets)

• Public funding is not enough. The finance required is trillions, not billions

• Delivery: 188 climate change-related investments in 59 countries by WBG.

• WB services• Issuance of green bonds• Supporting low-carbon and climate-resilient infrastructure in emerging markets.

FRAMEWORK TO GUIDE WBG FINANCE

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GHG EMISSIONSLOW HIGH

COST

HIGH LOW

1. Strong case for support(e.g. energy efficiency, hydro, geothermal, solar/wind in high-cost environments)

2. Support in rare circumstances if a) Meets critical energy needsb) No lower-cost alternatives

available in time or to scalec) No alternative finance.Coal Screening Criteria still apply

3. Support under certain conditionsa) Concessional finance available

to cover cost differential b) Strong country ownership

5. No case for support

4. Support possible if strategic potential for technological innovation and global demonstration effects

Low carbon generation* lending averages over 94% (for last 4 years) of total WBG generation lending

FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14

Renew-able Energy (Hydro) genera-tion

357.925 1840.537 1255.877 676.59178581 2315.82

Renew-able Energy (Non-Hydro) genera-tion

1782.172168 738.320976 1880.9277 911.89246 1273.58

Gas fired genera-tion

606 161.93 563.98 879.844 403.8

Oil fired genera-tion

103.27 28.738 284.545 274.7 158.39

Coal fired genera-tion

3037.5 0 0 0 0

% of Low carbon genera-tion lending

0.466478534274956

0.989623495049681

0.928601892084361

0.89985520549429

0.961848352077156

50000%

150000%

250000%

350000%

450000%

550000%

650000%

WBG Generation lending (all categories)

Co

mm

itm

en

ts (

perc

en

tag

e)

Low carbon

Other

*Low Carbon Generation constitutes Renewable Energy (hydro and non-hydro) generation and Gas fired generation

WBG INVESTMENTS ANALYZED W-W/O CARBON VALUE

Social Values of Carbon recommended for the WBG in US$ per 1 metric tonne of CO2 equivalent (in real 2014 US$)

2015 2020 2030 2040 2050

Low 15 20 30 40 50

Base 30 35 50 65 80

High 50 60 90 120 150

Investment Projects calculate ex-ante GHG footprint. Projects undertake economic analysis with and without the social value of carbon and present these estimates for Management and Board consideration. High and low paths are offered for use in sensitivity analysis

Thank you