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close this bookRural Energy and Development: Improving Energy Supply for Two Billion People (WB, 1996, 132 p.)
close this folderChapter seven - The role of the world bank group
View the document(introduction...)
View the documentPolicies and operations since the 1970s
View the documentRural electrification
View the documentThe sustainable in a production and use of wood-fuels
View the documentRenewable energy
View the documentProject innovations and advisory services
View the documentThe way forward: a renewed commitment by the world bank group
View the documentBroadening the scope of energy sector reform
View the documentInvestments
View the documentOpportunities for partnerships

Renewable energy

The Bank's efforts to bring renewables into mainstream financing began in the early 1980s, motivated by the high prices of oil at that time. During 1980-95. the Bank financed approximately thirty renewable energy projects in eighteen countries. including eight projects co-financed with the Global Environment Facility (GFF). By fiscal 1995. total commitments amounted to approximately US$1.3 billion.

Until 1990. however. about 75 percent of the lending was for geothermal energy. which is an economically attractive option for grid supplies in several countries, but does not have a direct bearing on the rural energy problems discussed in this paper (see the annex for a full list of projects during 1980-95). In the 1980s. lending for small-scale applications of new renewable energy technologies suitable for rural supplies was confined to a few pilot projects, which were sometimes components of ongoing energy projects. Aside from a number of activities identified by ESMAP, also of a pilot nature. the collapse of oil prices in 1985/86 led to such ventures being put into abeyance for a period.

Since 1990. interest and investment in renewable energy sources has been on the upswing worldwide As chapter 5 noted. the main reasons were the continued technological developments. concomitant cost reductions, and environmental benefits of renewable energy.

The establishment of the GEF has also proved to be a stimulus. because renewables are emerging as the most promising non-net-carbon-emitting technology for addressing global warming over the long term (Anderson and

Williams 1994; GEF 1996; World Bank 1992). The Bank financed eight renewable energy projects during the pilot phase, and a pipeline of projects in more than twenty countries is currently emerging A good example is the US$280 million India Renewable Energy Project, approved in 1993. It provides credit and investment incentives for the introduction of solar home systems in rural areas, wind farms. and micro-hydro projects. In 1992 India had only SO megawatts (MOO) of wind power plant, and experts anticipated that another 85 MW could be added over a five-year period. Within four years nearly 550 MW had been installed. There is a downside to this achievement. however, which is the dependence of the program on the unusually high level of tax incentives and subsidy; a financially more sustainable policy would reduce the subsidies and tax incentives and look to phasing them out over time, once the program has been established The photovoltaic (PV) component had a slower start. but is beginning to generate considerable interest among public suppliers in both grid and off grid markets

As Bank-financed renewable projects have not yet been completed and audited, it is too soon to provide a post-evaluation. We do, however. know about the performance of renewable energy projects other organizations have financed in developing countries and about the substantial. established programs in the industrial countries. We can sum Up this experience as follows:

· The basic technologies are fully proven, work well. and are no longer experimental.

· The potential for further development and cost reductions is considerable and will be facilitated by further investment and research and development

· The failure of some has generally been for familiar institutional reasons rather than for technological or economic reasons. for example, when projects paid too little attention to establishing follow-up and maintenance services.

· Investments in renewable energy will benefit from improved enabling conditions tot investment in the energy sector as a whole.

· The developing countries are becoming increasingly interested in the wider use of renewable energy. applications are increasing, and a plethora of investment and project preparation activities is under way.

· The projects can meet the investment criteria of the World Bank Group and the GEF.

· The investments in this area are supported by nongovernmental organizations, private industry, and departments of energy and industry in many of the Bank's member countries who are urging Bank involvement and leadership with respect to both policy and project development.

Thus in every respect. renewable energy is a good area for future investment by the Bank.