Funding energy access for the poor: Can the Bank meet the Challenge?
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Article summary
The World Bank’s reporting shows that if the current rate of progress persists, the SEforAll and WBG Energy 2030 objectives will not be met. This session takes a closer look at the WBG’s approach to determine if more could be done by the WBG to improve progress towards these goals.
Wednesday, 11 October
Organized by: The Swedish Society for Nature Conservation with Oxfam, Sierra Club and Bank Information Center
Panellists:
- Susan Ulbaek (Nordic Executive Director, World Bank) (Moderator)
- Anna Östergren (Senior Policy Adviser, Climate, Swedish Society for Nature Conservation)
- Kiri Hanks (Food & Climate Justice Campaigner, Oxfam America)
- Neha Mathew (Campaign Representative, Sierra Club)
- Muhammad Tanzimuddin Khan (Dhaka University)
- Malcolm Cosgrove-Davies (Lead Energy Specialist, World Bank)
Anna Östergren
The Bank’s Energy Directions (ED) Paper states its energy practice will contribute to the achievement of the three 2030 goals under the UN Sustainable Energy for All initiative (SEforAll):
- Achieving universal access to modern energy services;
- Double the historic global rate of improvement of energy efficiency;
- Double the share of renewable energy in the global energy mix.
Paper created new critical tools:
- Global Tracking Framework (GTF) tracks SEforAll goals at country level; however, the Bank does not report its annual progress on SEforAll goals.
- Regulatory Indicators for Sustainable Energy (RISE): assesses the legal environment for investment in energy access (EA) and renewable energy.
But, according to the Bank’s own data, SE4All targets are not being met, across the board. There is not enough annual funding for energy access, increase in electricity connections, or increase in renewables.
- There is a lack of Bank internal SE4All targets: no funding targets (in FY2016, only $1.5 bn, or 13 percent of WBG’s energy budget, went to improving energy access).
- No EA targets: approximately 156 million people annually need to gain access to reach universal access by 2030. Between FY2000 and 2014, WBG provided 13.2 million connections (less than one million annually).
There is no Bank guidance in the ED paper on prioritising energy access, phasing out fossil fuel finance, or enabling policy:
- ED paper does not provide guidance on prioritising energy access to the poor ahead of energy exports.
- IEA’s Africa Energy Outlook (2014) warns that if energy finance in Sub-Saharan Africa tcontinues to focus on exporting fossil fuels instead of meeting domestic energy needs, EA goals will not get financing that they require.
- ED paper does not recognise that Bank’s continuation of support for fossil fuels with undermine SEforAll goal of doubling the share of renewables in the energy mix. The Bank’s annual fossil fuel investments continue to equal or be larger than renewables.
- Inadequate requirements for policy support SeeforAll in Development Policy Finance (DPF) and technical assistance (TA), or in approach to Public-Private Partnerships (PPPs).
Recommendations: the Bank needs to adopt targets aimed at accelerating progress on SEforAll:
- Funding target: the Bank should direct 50% of its annual energy sector budget (at least $5.75 billion) to EA.
- The Bank should set an EA target of reaching 15 million annually.
- EA investment should be prioritised ahead of financing energy exports.
Kiri Hanks, SEforAll – Lessons from Bangladesh
We’re part of an effort to look at how MDBs can support Bangladesh’s Nationally Determined Contribution (NDC). Oxfam is hosting a stakeholder roundtable later this year that we would invite the World Bank to attend.
Bangladesh has set quite ambitious goals on energy access (EA), setting a goal of universal access by 2021. Clean energy goals include:
- 100% renewable energy (RE) by 2050
- Membership in the India-led International Solar Alliance
- 10% RE by 2021
- Signed up to prioritise IDA funding for NDC implementation
What is the World Bank’s role? WBG looking to scale up RE and sustainable investment
- Climate action plan 2016;
- Country Strategy Papers mainstreaming RE and climate smart investment
Mixed story so far in Bangladesh:
- Installation of solar irrigation for farmers, small grids for businesses being considered
- Missed opportunities: clean cooking (only 10% access)
- WBG funding for coal through financial intermediaries (FIs) – Rampal coal plant. Need to tackle this issue as 50% of IFC funding volume now goes through FIs. Oxfam has shown that investments in coal yield much bigger costs, in terms of WBG’s own figures that take into account the cost of carbon pollution.
Muhammad Tanzimuddin Khan (Dhaka University) – Additional short comments on the Masterplan for Sustainable Energy in Bangladesh
Most of proposed projects in the policy are harmful – they are conventional projects that do not address the issue of EA, as they connect do grid rather than connecting to those who do not currently have access.
The plan largely overlooks RE, and includes unrealistic costs on solar that are much higher than the current market rate.
The plan was not based on any real consultation. The masses of people support the shift to renewables. It was prepared by a Japanese consultant under a grant from Japan.
Political will? Masses approve of the shift to renewables, but politicians want big projects so that they can siphon money off.
Neha Mathew (Campaign Representative, Sierra Club)
WBG and other MDBs have committed to provide access to 1.1 billion people by 2030. A Sierra Club report in October 2014 found four MDBs, including WBG, were failing to make progress on this goal quickly enough. A recently updated scorecard of the 2014 report again gives all four Banks a grade of F.
The ranking is based on the International Energy Agency’s Energy for All Case, which suggests that in order to achieve universal energy access by 2030, new investments will need to be balanced between grid extension, mini-grids and off-grid energy (36 percent, 40 percent and 24 percent, respectively). No Bank came close to achieving this mix; in the case of the World Bank, across FY12 and FY14 its energy spend was just 2% off-grid and mini-grid renewables, and 8.2% on other access funding – with the remainder of its energy portfolio being dedicated to non-access spending.
The World Bank did double its energy access portfolio from FY2012-2014, but overall its share of off-grid renewables fell. While its overall access lending increased, due to growth in the size of the energy portfolio, it is not in line of IEA Energy for All Case.
Recommendations for get SEforAll target back on track:
- 50% of Bank’s energy portfolio should be devoted to access
- Increase off-grid and mini-grid energy proportions of portfolios
- WBG, along with other MDBs, need to set a clear definition of what constitutes EA, and clearly and transparently report on energy access at the project level
- Bank should work with clients to ensure more resources flow towards distributive energy solutions
Malcolm Cosgrove-Davies (Lead Energy Specialist, World Bank)
Access to electricity – global overview: 1 billion people without access, including 62.5% in Sub-Saharan Africa; and 20% in South Asia; 20 countries within these regions account for 80% of global access deficit. Rate of increasing access to electricity falls way short of the pace to meet 2030 SEforAll objective. SD9 includes reliable energy for all; this includes not only those without access, but those that are underserved. This is also an important dimension of the EA challenge in Sub-Saharan Africa.
Energy production remains dominated by fossil fuels (66% of global energy production; 80% in Africa). EA – how to do it? We need both grid and off-grid investment as part of the mix.
- Grid has been the traditional approach – as is favoured by policy-makers
- Mini-grids: small clusters of connected users – these actually have a long history dating back to the first electrification
- Off-grid is evolving fast, and increasing storage capacity is leading to higher productive use.
Problems:
- Unserved: low ability to pay, remote, or both – making it difficult to employ market-based interventions
- Underserved: poor service is blind, every connected customer suffers; wealthy better able to cope; tied to broader systemic sector issues.
Solutions:
- Fixing grids is difficult; needs education of governments and reforms of the sector. We also need special provisions for the poor, and to scale up investments.
- Expand market for off-grid: workable delivery models; create enabling environments, extend to the rural poor. However, if you look at Kenya, is one of biggest emerging markets, new investment has primarily been in urban areas.
- Crowd in key stakeholders: financiers, private sector; donors.
- Increased focus on access: people reached and investment off-grid
Q&A
Philippines CSO: What about the IFC’s role in funding new coal plants, through FIs, as part of the country’s sector plan?
Malcolm: Bank is only one of the parties, governments will decide what they want to do, with or without the Bank’s advice.
Jon Sward, BWP: Is the Bank working in coordination with other MDBs, to ensure that they are pulling in the same direction on RE in client countries. For example, is the Bank coordinating with the African Development Bank on its New Energy Deal for Africa EA initiative? Also, what about de-risking – how is the Bank working to ensure this for EA projects.
Malcolm: De-risking of renewables – a very important point. Both on the side of off-grid and otherwise, and this is something we are working on. Coordination of donors – can’t speak to AfDB programme, but at regional and country level, we have donor coordination on EA and other issues.
Kiri Hanks: will Bank attend Bangladesh NDC roundtable that Oxfam is hosting later this year.
Malcolm: It’s not my decision, but I would think so – there is no reason why we would not want to do that.
Muhammad Tanzimuddin Khan: electrification is not enough; inequalities have to be taken into account. There are already areas that have access, where the poor are bypassed.
Malcolm: I agree, we could dump a bunch of solar lanterns out there (in rural areas with no electrification) and everyone would have Tier 1 access, but that’s not enough to support productive use.
Susan Ulbaek: SE4All goals are in the Bank’s energy action plan. Clearly we have more work to do in this area. In terms of emissions reporting, we need to decide how big an effort that will be. However, if you look at the new energy generation IDA is funding, 85% of it is going to renewables.
