Role of the world bank and other donors
5.23 Potential support for household PV programs from
multilateral development organizations such as the World Bank, the United
Nations, regional development banks, the GEF, bilateral aid and development
agencies, and philanthropic organizations, should be integrated into broad rural
energy or rural development plans. Donor efforts are most effective when
coordinated with governments, local organizations, other donors, and private
sector stakeholders. The donor community can facilitate PV electrification
programs, provide technical assistance, and help fund both pilot and large-scale
projects. Donor roles include:
· Promoting
policy dialogue. Donors can encourage governments to adopt policies and
practices that will be most beneficial to rural electrification programs,
implementing regulatory reforms, least-cost planning and effective financial
mechanisms, and improved fiscal policies.
· Providing investment
financing. Donor funds are often essential for implementation of
household PV programs due to the high up-front investment costs of these
programs and the limited availability of long-term capital in many developing
countries. However, local financial institutions need to participate in projects
in order to ensure the commitment of stakeholders.
· Technology
transfer. Donor agencies can help disseminate information on
technological innovation, best practices, training, and demonstration projects.
Effective donor support can improve project and program design, evaluation
procedures, technical designs, standards and specifications, quality assurance,
manufacturing methods, installation practices, and operation and maintenance of
new technologies.
5.24 The World Bank and other multilateral lending institutions
can encourage client countries to recognize PV and other renewable energy
options as sustainable rural energy alternatives, complementary to grid
extension. While assisting rural development and rural electrification project
preparation, World Bank staff should explicitly consider renewable energy
technologies and suggest their application where they best match the demand.
World Bank/GEF support is particularly critical for up-front infrastructure
investments to support the start-up of large-scale household PV programs in
rural areas. Two innovative World Bank/GEF-supported operations are presently
under preparation in Indonesia and Sri Lanka (see Boxes 5-3 and 5-4). Both rely
heavily on implementation of PV household electrification programs through the
private sector.
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Box 5-3
World Bank/GEF-Assisted Indonesia Solar
Home Systems Project
In a project that is presently under preparation, the World Bank
and the Global Environment Facility (GEF) are planning to assist the Government
of Indonesia in providing electricity services using solar home systems to about
200,000 households in West Java, South Sulawesi and Lampung provinces. The
households targeted are in areas where the electric utility (PLN) grid service
is not expected for at least three years or where it is uneconomic for PLN to
provide such service. The estimated cost of the project is $72.0 million with
$26.0 million from the users and suppliers, a $24.0 million grant from the GEF,
$20.0 million from the International Bank for Reconstruction and Development
(IBRD), and the balance from the Government of Indonesia. GEF cofinancing is
based on the potential for the PV systems to displace kerosene and other fossil
fuels that produce global warming gases. The project is designed to overcome the
principal constraints to solar home system market development: (a) the high
initial cost and the limited availability for term financing; (b) lack of
information at the household level; and (c) undeveloped supply and service
networks.
The project will finance only certified products that meet
specified standards. Each 50Wp or larger system must power at least three
fluorescent lights (each providing more than 200 lumens of light), and a black
and white 14-inch TV for four hours or more per day, on a day with average solar
radiation.
The project will use a commercial approach where dealers sell
solar home systems directly to rural customers. It is expected that at least
eight dealers will participate in this project. The project will offer loans
through commercial banks to dealers for up to five years at market interest
rates. Dealers will provide installment payment programs to solar home systems
customers. The commercial banks will apply for their standard loan appraisal
procedures to decide whether to make loans to the dealers. The Government of
Indonesia refinances the commercial bank loans using on-lending arrangements for
an IBRD credit. While each dealer will set the payment terms, typically, a
customer will make a down payment of about Rp. 200,000 and an installment
payment of about Rp. 20,000/month for 42 to 48 months. Each dealer will receive
a GEF grant of approximately $90-$125 for each unit sold. This grant helps
increase the penetration of sales within the market areas allowing dealers to
make the initial investments required to create a sustainable commercial SHS
market. In addition, the GEF grant will fund market development activities
including promotion, business development, quality assurance, and technical
support. |
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Box 5-4
World Bank/GEF-Assisted Sri Lanka Energy
Services Delivery Project
The Sri Lanka Energy Services Delivery (ESD) Project is expected
to support the installation of approximately 30,000 solar home systems over a
five-year implementation period. Financing for these installations would be
available to private sector and NGO developers through an ESD Credit Line
established under the Project. In addition to the PV systems, the ESD Credit
Line is expected to support development of approximately 20 village micro-hydro
systems and related distribution network and 20 mini-hydro plants (connected to
the central electricity grid). An estimated $12 million will be requested for
the PV subprojects. Half of this funding would come as commercial credit,
supported by World Bank (IDA) funds. Project developers would provide $3 million
in equity, and the GEF would provide $3 million in grant cofinancing. The
Project is designed to remove the principal obstacles to widespread
dissemination of renewable energy technologies. With respect to solar home
systems, these obstacles are: (i) a lack of access to term financing; (ii)
unfamiliarity of consumers, private sector developers, and the financial
community with the technology; and (iii) an underdeveloped sales and
distribution infrastructure. GEF grant support under the Climate Change
Operational Program will help overcome these obstacles to commercialization of
this climate-friendly technology. Once the necessary infrastructure is in place,
and a competitive market prevails, solar home system costs will drop, allowing
continued sales after the ESD Project is completed.
The ESD Credit Line will provide commercial financing through
participating credit institutions for subprojects which meet standard appraisal
criteria. All systems sold must conform with equipment standards developed for
the Project. It is expected that NGO and private sector developers will utilize
the ESD Credit Line to provide term financing to their solar home system
customers. During the Project period, developers will receive a GEF grant of $90
to $100 for each 30- to 50-W solar home system sold. To be approved, business
plans submitted by project developers in support of their ESD credit application
must show financial viability and continued solar home system sales well beyond
the Project period. GEF grant funds will also support business development and
technical support. |
