World Bank Group | Brief May 2012

At a glance

+ Over 1.3 billion people are without electricity. Even those who have power often face poor service quality, and frequent blackouts. Over 2.5 billion people depend on biomass or coal for cooking and heating; indoor air pollution causes the premature deaths of 1.9 million a year, most of them women and children. These are both results and causes of poverty, and solving them is essential to ending it.

+ A global temperature rise above 2°C would have catastrophic social and environmental impacts. A shift to renewable energy and enhanced energy efficiency is the most effective way to power the future while reducing greenhouse gas emissions.

+ Fossil fuels, often subsidized, still account for 81 percent of global primary energy consumption, which rose by 5 percent in 2010, pushing CO2 emissions to a new high. In parallel, population, technological, and economic growth are expected to drive up overall energy demand by a third from now to 2030, with 90 percent of the new demand—and consumption—in developing and emerging countries.

The challengeWithout access to electricity, life itself is often under threat and its quality diminished. Lack of electricity means no access to light at night, no refrigeration, and only limited means of communication. It imposes early closing on businesses, reducing commercial activity. It stifles productivity in manufacturing and processing of food and raw materials. In Sub-Saharan Africa, home to 840 million people, more than two-thirds—580 million—have no electricity.

Investment in access to electricity is needed to sustain economic growth and human development. Across Sub-Saharan Africa and South Asia, poor energy sector governance, lack of planning, financing constraints, and fuel supply problems result in chronic outages that hold back economic growth. Pakistan and

Bangladesh lose up to 2 percent of GDP due to power shortages; in Sub-Saharan Africa, the figure may be as high as 2.1 percent. Electricity is needed to power health clinics, schools, and community centers; it can reduce child and maternal mortality, and increase school attendance and performance, raising literacy and incomes.

The world relies heavily on high-priced and volatile fossil fuels with burgeoning CO2 emissions. Currently, the power sector contributes over 60 percent of greenhouse gas (GHG) emissions. Coal-fired power plants account for 41 percent of global power generation, and 43 percent of global carbon dioxide emissions. A “business as usual” scenario would double energy-related CO2 emissions by 2050, raising the average global temperature by 5°C by 2100—deep in the danger zone.

The future we wantThe Sustainable Energy for All Initiative sets three energy development goals to be achieved by 2030:

+ Universal access to modern energy services

+ A doubling of the rate of energy efficiency improvement

+ A doubling of the share of renewable energy in the global energy mix.

There is no contradiction between access and clean energy. Climate change requires a shift to cleaner energy. The International Energy Agency (IEA) concludes that the world is in danger of locking itself into an unsustainable future unless major changes are made by the energy sector to limit the global temperature increase to 2°C above the preindustrial level.

How do we get there?Achieving universal access will require annual investments of $48 billion a year to 2030, a fivefold increase over current levels. These investments will need to come from private and public

Sustainable Energy for All

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World Bank Group | Brief May 2012

of 4.5 million tons CO2e/year by 2020. Since 2007, IFC has invested about $4.2 billion in developing countries, leveraging an estimated additional $21 billion in private investment.

In addition to its lending, knowledge sharing, and advisory services, it manages global programs and regional initiatives with track records of delivering results, including

+ Energy Sector Management Assistance Program (ESMAP), a proven channel for analytical energy studies, policy advice and planning tools, capacity-building services, and technical assistance on energy access, renewable energy, and energy efficiency;

+ Lighting Africa, which is on track to reach 70 million people by 2020. A similar program—Lighting India—has just been launched; and

+ Global Gas Flaring Reduction Partnership, a public-private partnership among 20 countries and 10 major oil companies that is expanding its membership and exploring how flared gas can best be tapped to meet domestic energy needs.

The Bank Group is also working with the UN Foundation and ESMAP on the Global Alliance for Clean Cookstoves, to deliver 100 million advanced stoves by 2020. The IFC provides technical assistance to companies to develop viable business models for enhanced energy access through energy devices, mini-utilities and grid-connected renewables. The Global Partnership for Output-Based Aid has funded energy projects reaching 4.5 million people. A new $60 million Cleantech Innovation Facility is targeting small, innovative start-ups that offer products or services that mitigate carbon emissions. The Public-Private Infrastructure Advisory Facility provides technical assistance to facilitate private investment in renewable energy projects. Finally, the Bank Group is mobilizing its analytical capacity to work with the UN, IEA, and other international organizations to measure baseline energy indicators, and report on progress on energy access, renewable energy expansion, and energy efficiency improvements.

References and suggested readingsChestney, Nina. “Global Warming Close to Becoming Irreversible,” Scientific American, March 26, 2012. Available online at http://www.scientificamerican.com/article.cfm?id=global-warming-close-to-becoming-ir.

Foster, V. and C. Briceno-Garmendia. 2010. “Africa’s Infrastructure: A Time for Transformation.” Washington, DC: World Bank.

International Energy Agency. 2010. Power Generation from Coal. Available online at http://www.iea.org/ciab/papers/power_generation_from_coal.pdf.

International Energy Agency. 2011. World Energy Outlook 2011. Paris, France: IEA.

World Bank. “Africa Energy Strategy.” Africa Energy Unit, Mimeo. Washington, DC: World Bank.

World Bank. “East Asia and Pacific Energy Strategy.” East Asia and Pacific Infrastructure Unit, Mimeo. Washington, DC: World Bank.

World Bank. “South Asia Energy Strategy.” South Asia Energy Unit, Mimeo. Washington, DC: World Bank.

World Bank. 2009. “Energy Strategy Approach Paper,” Sustainable Development Network. Washington, DC: World Bank.

World Bank. 2010. World Development Report: Development and Climate Change. Washington, DC: World Bank.

sources, and cover a wide range of areas, including resource mapping, increased generation capacity, expanded transmission and distribution, improved energy efficiency on both supply and demand sides, and policy reform and targeted subsidies.

About 70 percent of those without access live in about a dozen countries in Africa and Asia. With this in mind, efforts need to focus on these countries, mobilizing finance, knowledge, and policy resources where they will have the largest impact. This includes, for example, hydropower in Africa, along with development of regional power pools, geothermal energy in East Africa’s Rift Valley, and off-grid electricity systems in Bangladesh, among others.

Over 75 percent of the financing for the Sustainable Energy for All goals will have to come from the private sector. Private capital investment needs to be mobilized with new financial instruments, incentives, and measures to reduce risk. New technologies, policies, and regulations must provide incentives that deliver a reasonable return to investors and power producers but are efficient enough to deliver reliable energy services to consumers at affordable prices.

The energy poor spend an estimated $37 billion a year on kerosene; alternative lighting options offer major opportunities for the private sector. Manufacturers, distributors, and service providers are offering improved options, from mini-grids and solar home systems for electricity to solar lanterns for lighting and improved stoves for cooking.

To scale up further, market-based approaches need concessional financing and technical assistance to help replicate energy-access business models. Many early-stage companies providing energy-access solutions need assistance to become “bankable,” including start-up grants, concessional financing, or loan guarantees that allow them to borrow from commercial banks. Support is needed for mapping of renewable energy resources, to obtain data on the size and nature of markets, and to support consumer awareness programs and develop technology standards.

Policy support and risk mitigation instruments can help to spur private sector investment in larger renewable energy and energy efficiency projects. Governments need support to develop pro-renewable policy incentives, such as Feed-in Tariffs, Standard-Offers, Renewable Portfolio Standards, and Electricity Auctions, as well as regulatory improvements integrated with smart-grid and smart-meter technologies that reduce electricity losses, increase energy efficiency, and enable load management. The World Bank Group is responding at many levels. Its financing for energy development is expected to reach $6–8 billion in 2013. Since 2007, about three-quarters of the Bank Group’s $41 billion energy lending has been to develop low-carbon energy sources, policy reform, and transmission and distribution, with only one-quarter in fossil fuels. The Bank Group also manages—with other international financial institutions—the Climate Investment Funds, now totaling $7 billion, and which are leveraging up to eight times that amount from other sources. The International Finance Corporation (IFC) aims to have 20 percent of its long-term investments in climate-friendly businesses within three years, to mobilize private sector investment to achieve a GHG reduction