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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


Supported by a broader dialogue on energy policies, the World Bank Group will be better able to tailor its energy investments more closely to developing countries' needs and concerns. How its investment portfolio develops will vary with the country. but increasing commitments of Bank resources are likely for the following:

· Rural electrification and its alternatives

· New renewable energy forms, guided by the Bank's Solar Initiative and joint programs with ESMAP and ASTAE

· Agro-fotestry, farm forestry, and natural forest management along the lines indicated in the Bank's forestry papers

· More efficient and environmentally improved approaches to the supply and use of biofuels.

An increase in the supply and use of modern cooking fuels in rural areas should also follow, though these would be private investment activities rather than financed by the Bank.

Bank loans and credits have been available for such investments for mole than fifteen years, in the case of electrification for more than twenty years, and well-prepared projects can meet the investment criteria of both the World Bank Group and the GEF. No changes to the Bank's internal policies ale therefore required, though their application. as shortly discussed, often entails innovation in approaches to investments and policies. The policies on electric power and energy efficiency announced in 1992 should make such projects economically more attractive by improving the enabling conditions for investment and the financial positions of energy companies However, a significant allocation of the Bank's resources will be required to build on the policy reforms and finance investment in rural energy and service expansion.

In addition, there must be a willingness to innovate and to entertain new approaches. While the Bank has been able to finance the above kinds of investments for some time experience has shown that institutional as well as technological and economic innovations have frequently paved the way to mole successful investments and policies. Perhaps the best example on the institutional side has been the growing recognition of the importance of local participation in development (discussed in chapter 3), for example. in relation to managing forests and introducing agro-forestry and wood stove programs.


A special problem for much of Sub-Saharan African is the need to expand access to electricity beyond its currently restricted level. In none of Sub-Saharan Africa's lower-middle or low-income countries does access exceed 20 percent, and the average for most countries is less that 10 percent. This compares quite unfavorably to most countries in Asia and Latin America, where several countries have electrification rates above 75 percent, most notably, China and Thailand. By comparison, in Ghana and Kenya the rural electrification rate is around 12 percent, in Tanzania and Uganda it is less than 10 percent, and in many other countries it is barely 5 percent. The reasons for the low rates of electrification involve a combination of poor management by African power distribution companies, a hesitation by companies to get involved in higher-cost distribution, and a practice of charging high connection costs for new electricity consumers. In many countries national uniform tariffs for electricity also discourages electricity companies from getting involved with more expensive rural and pert-urban service. For instance, in Zimbabwe consumers must sometimes pay as much as US$900 for obtaining an electricity connection, which limits the number who can connect to the system. Likewise, in many African countries, the distribution companies adhere to high and expensive standards for electricity provision, which effectively rules out many consumers from being able to afford electricity service. Given that the populations without electricity are growing in Sub-Saharan Africa, the task of developing innovative ways to promote electricity service without providing extensive subsides for poor and rural peo

Equally important, and in a broad sense a development that also implies greater participation. is the movement to liberalize energy markets, encourage private investment, and introduce independent ("arm's length") regulation Although these ale old ideas, it is only recently that they have been finding practical application in developing countries and posing novel problems once we turn to the specifics of policy not least, as noted. with respect to finance. regulation. and the distribution of energy services. On the technological side. an openness to investments in new renewable energy technologies will be crucially important from both an environmental and an economic perspective

In Africa and South Asia in particular, major efforts will also be required for all four types of projects noted earlier (and on the supporting policies). because the pressures on soils and natural resources are especially severe in these regions In addition to the need to put biofuel supply and use on a sustainable footing, Africa has the furthest to go with electrification and the provision of modern. The Sub-Saharan Africa Power Reform Symposium, co-sponsored by the World Bank in Johannesburg in December 1995. made a promising start on addressing the major issues.

Box 7.2 illustrates the challenge decision-makes face in dealing with the power sector and rural electrification in Africa.

The preceding review has also shown that innovations in finance and credit will often be needed to address the high "first-cost" problem in extending modern energy supplies to rural areas They may come in the form of leasing and micro-financing arrangements - for example, for PV sets-or incentives in support of the development of local energy companies that themselves may be willing to finance (on a cost-recovery basis) the initial costs or extend credit

A rising area of investment activity will be the new forms of renewable energy, not only for rural energy supplies, but for grid supplies more generally. as discussed in chapter 5. The GEF, especially, is providing a golden opportunity to the Bank's clients to break new ground in the use of new renewable energy technologies (GEF 1995. 1996) To encourage investment in this area. the Bank's energy staff have launched the Solar Initiative The initiative is being supported externally by the donor community. primarily through ESMAP, ASTAE, and the secondment of staff with technical expertise in the subject to the Bank.

The initiative encourages the Bank's client countries to develop projects and policies in this area. It provides information on project experience, technical advice, and crosssupport and encouragement to the regional operating divisions to prepare such projects and policies for Bank and GEF financing. Also, in association with the International Energy Agency. it 'networks” the efforts of the industrial countries (where most of the technologies have been developed) to those of the developing countries. and in collaboration with the IFC, it encourages private investment in renewable energy (box 7.1).