A wind turbine farm in Tunisia
- Renewable energy a growing share of World Bank lending
- World Bank endorses UN sustainable energy goals
- Policy incentives, financing are key to expanding access and clean energy
November 7, 2011 - The World Bank Group’s renewable energy portfolio increased from a total of $3.1 billion between fiscal years 2008-09 to $4.9 billion in 2010-11. Given the simultaneous expansion of the overall energy portfolio during the same period, the renewable energy proportion rose from 20% to 23%.
The absolute dollar figures will decline in coming years as the Bank Group’s overall portfolio contracts after the extraordinary level of fiscal crisis lending in 2009 and 2010. But even amid year-to-year fluctuations, continued adoption of pro-growth, pro-poor and climate-resilient policies by countries will likely reinforce their interest in renewable energy financing from the Bank Group.
This is aligned with growing evidence that countries investing in renewable energy and energy efficiency will emerge as winners. Their investments can help expand access to energy and, in the case of manufacturing of renewable energy technologies, also create jobs that lay the foundation for sustained prosperity.
The use of renewable energy sources like hydropower, geothermal and solar panels, as well as programs such as Lighting Africa, all promise to bring affordable electricity to light homes and businesses and charge cell phones for hundreds of millions. || S. Vijay Iyer, Director, Sustainable Energy Department, The World Bank
Expanding access—while a critical goal in those countries where it is low—is not the only force driving investments in renewable energy. Ethiopia, for example, is developing its vast hydro potential to meet booming demand from its own cities and industries, and to export hydroelectricity to neighboring Kenya.
In doing so, it aims to join middle-income countries making a strategic choice for renewable energy. A studyby the UN Environment Programme, Bloomberg and the Frankfurt School, reports that developing countries, led by China, Brazil and India, attracted financial new investment in renewable energy totaling $72 billion in 2010, outpacing developed countries in which new financial investment in renewables was just over $70 billion. Africa had the largest percentage increase in renewable energy investment among the developing regions, excluding the big three economies, reaching $3.6 billion, a 380%-increase over the $750 million invested in 2009.
“In the low-income countries, where access rates are below 30%, or even 10% in some cases, expanding access has to be our priority,” said S. Vijay Iyer, Director of the Bank’s Sustainable Energy Department. “That is reflected in our investments in electrification programs and power systems. The use of renewable energy sources like hydropower, geothermal and solar panels, as well as programs such as Lighting Africa, all promise to bring affordable electricity to light homes and businesses and charge cell phones for hundreds of millions.”
In middle-income countries, the Bank approved major projects in 2011 that meet twin goals of expanding access and reinforcing countries efforts to achieve a sustainable energy path. The Bank approved $175 million for Indonesia’s Geothermal Clean Energy Investment Project to help meet growingenergy needs in a clean and climate-friendly way. It will enable Pertamina Geothermal Energy to boost power generation capacity by up to 150 megawatts in three geothermal fields. Absent this investment, an equivalent capacity of coal-based power generation would be required.
In India, theBank approved a $648 million loan to THDC India Ltd. to support construction of the Vishnugad Pipalkoti Hydroelectric plant, expected to generate 1,665 million kilowatt-hours of electricity a year and meet peak demand from households and industries. The 444-megawatt project will also help reduce India’s greenhouse gas emissions by 1.6 million tons each year.
The Bank is supporting another large-scale renewable energy project in Kenya. A $330-million International Development Association (IDA) credit was approved in 2010 to expand geothermal power production at the country’s Olkaria plant by 280 megawatts. It’s part of a $1.4 billion package supported by the Kenyan government and multiple partners to expand electricity access, connecting 1.5 million people and businesses to the electricity grid by 2015.
As delegations prepare for climate talks at the 17th Conference of the Parties to the UN Framework Convention on Climate Change in Durban November 29 – December 9, UN Secretary-General Ban Ki-moon has set a high level of ambition on renewable energy. He recently called on governments, private sector and civil society to achieve to double the proportion of renewable energy in their energy mix by 2030, while also delivering universal access to energy, and improving energy efficiency.
These goals reflect the urgency of the crisis, which demands such ambition, Sri Mulyani Indrawati, World Bank Managing Director, told an energy conference in Oslo in October. “Look at the scale of energy poverty—1.4 billion people who still live in darkness after sunset, and three billion who burn wood, dung or coal to heat their homes or cook their meals,” she said. “We need ambitious goals like these...on behalf of the World Bank, I welcome and share this level of ambition.”
How to build this synergy between expanding access and increasing the proportion of renewable energy in the power mix? It depends on a mutually-reinforcing circle of policy incentives and financing to encourage new clean energy technologies and systems, along with energy efficiency measures that help make the new technologies effective and affordable.
A good example of how the Bank has worked in partnership with a country to expand accessand do it sustainably is Vietnam. In 1993, only 14% of Vietnam’s rural population had access to electricity. Today that proportion has shot up to 95%. A third of the power comes from hydro, 40% from natural gas, and just 19% from coal—a proportion in decline. Although annual carbon emissions have grown from 0.4 to 1.3 kg per capita, this is not due to household electricity, which accounts for just 20% of power usage. The World Bank supported this sustained rural electrification drive with technical assistance and zero-interest IDA credits.
More information:
- World Bank Energy website
- Energy Issue Brief
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