BW1J7M Report 1999 23870 February 2001 r r X- MEEMM=11- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ., 4-w vs_.''-'- : 11 ' ,. t VI t ^N r-- FAThcieImre- ct,t; .,t, IteoG eIiiI 1@1ik TABLE OF CONTENTS Mission Statement 2 ESMAP in 1999 4 Donors and Members of the Cousulatative Group, Technical Advisory Group and ESMAP Team S Serving the Energy Poor 6 ESMAP Challenges into the 21st Century 7 The Trends 7 ESMAP and the Energy Poor 8 ESMAP 1999-2001 Business Plan 8 ESMAP Products and Services 10 ESMAP Operations 12 Portfolio Overview 13 Portfolio Trends and Management 14 Project Implementation 20 Governance and Management 24 Consultative Group 25 Technical Advisory Group 26 Management, Staffing and Procedures L 27 Financial Review 30 Funding 31 Contribution Received 31 New Donors 31 Funding Categories 31 Core and Thematic Funding 32 Project Funding 32 Expenditures 33 Funding New Projects 34 Cash Balance 34 List of Abbreviations and Acronyms 35 Annex 1 Final Communique, ESMAP Consultative Group Meeting, Washington, DC, April 12-13, 1999 37 Annex 2 Summary Proceedings, Interim Meeting - The Hague, November 15-16, 1999 41 Annex 3 Activities Completed, Launched and Ongoing in 1999 47 Activities Completed in 1999 47 Activities Launched in 1999 49 Activities Ongoing in 1999 52 Annex 4 Reports on Projects Published in 1999 59 Box 1 Poland: Energy Sector Regulation and Tariffs 15 Box 2 Energy Efficiency Operational Exchange Network 17 Box 3 Uganda: Rural Electrification Strategy Study Box 4 Vietnanm: Environmental and Safety Issues in Gas Development 20 Box 5 Improving Energy Efficiency Through Electricity Demand Management in Ghana, Kenya & Tanzania 21 Box 6 Renewable Energy Strategy and Institutional Strengthening Study in the Arab Republic of Egypt 22 Figure 1 Thematic Distribution of Portfolio 1998-1999 by number of projects 16 Figure 2 Thematic Distribution of Portfolio 1998-1999 in US $ 16 Figure 3 Regional Distribution of Portfolio 1998-1999 by number of projects 16 Figure 4 Regional Distribution of Portfolio 1998-1999 in US $ 16 Figure S Average Project Size 17 Figure 6 ESMAP Themes 17 Figure 7 Value of ESMAP Portfolio 17 Figure 8 Projects in Portfolio 20 Figure 9 ESMAP Receipts 1997-1999 31 Table 1 Thematic Distribution of Ongoing Projects by Region (Number of Projects) 13 Table 2 Thematic Distribution of Ongoing Projects By Region (US Dollar Value) 13 Table 3 Evolution of ESMAP Portfolio (Number of Projects) 14 Table 4 Project Disbursements by Theme as a Measure of Implementation 20 Table S Project Disbursement by Region as a Measure of Implementation 20 Table 6 ESMAP Receipts, 1997-1999 32 Table 7 Core and Thematic Funding - Donor Contributions, 1997-1999 33 Table 8 Receipts by Type of Funding in 1999 33 Table 9 ESMAP Expenses, 1997 - 1999 (thousands US$) 33 PHOTO CREDITS Pages 3,12; World Bank Pages 4,20; Eleodoro Mayorga-Alba Pages 6, 25, 26-27, 30; Henri Bretaudeau Page 7; Masami Kojima Pages 8-9, 14, 24, Richard Spencer Mission Statement -~~ ESMAP focuses on the role of energy in economic development with the objective of contributing to poverty alleviation and economic progress, improving living con- ditions, and pr-eserving the environment in developing and transition economies. The Energy Sector Management Assistance Programme (ESMAP) is a global technical assistance program sponsored by the World Bank and the United Nations Development Programme (UNDP) with financial participation from public and private donors. ESMAP provides policy advice and other technical assistance to help governments, public institutions and private businesses. It focuses on three priority areas; the development of energy markets, the promotion of environmentally sustainable energy production and uses, and the increased access to reliable, efficient and affordable energy services by un-served or under-served populations with a focus on the poorest. Since it was established in 1983, ESMAP has supported more than 500 projects, in more than 100 countries. ESMAP concentrates on issues not yet mainstreamed in the operations of bilateral or multi- lateral development institutions. It aims at designing innovative approaches to address energy issues. ESMAP is a participatory and partnership program which involves local and international institutions and busi- nesses in project formulation and implementation. ESMAP's results--through studies, pilot projects and training--enrich the world's knowledge base for addressing energy issues to the benefit of development and transition economies. 3 ESMAP in 1999 e - 4,l ;'` Donors and Members of the Consultative Group, Technical Advisory Group and ESMAP Team CONSULTATIVE GROUP BELGIUM THE NETHERLANDS General Administration for Development Cooperation Ministry of Economic Affairs Ministry of Foreign Affairs CANADA Canadian International Development Agency UNITED KINGDOM Department for International Development DENMARK Ministry of Foreign Affairs THE WORLD BANK (co-sponsor) ENERGIENED, The Netherlands UNITED NATIONS DEVELOPMENT PROGRAMME (co-sponsor) ENRON INTERNATIONAL FINLAND Ministry of Foreign Affairs TECHNICAL ADVISORY GROUP FRANCE Andrew Barnett Ministry of Foreign Affairs Alfredo Mirkin Jan Moen GERMANY Youba Sokona Bundesministerium fur Wirtschaftliche Zusammenarbeit und Entwicklung ITALY Ministry of Foreign Affairs ESMAP MANAGEMENT & ADMINISTRATIVE TEAM NORWAY Royal Ministry of Foreign Affairs Dominique Lallement, ESMAP Manager Henri Bretaudeau CHAIRMAN OF THE CONSULTATIVE GROUP Brenda Manuel' Richard D. Stern Jacqueline Ajala Joanne Fleming AT-LARGE MEMBERS OF THE CONSULTATIVE GROUP Josefina Regino-Suarez Rufino Bomasang Kazim Saeed Ketane Sithole Kristin McGrath' Jose Goldemberg* Kyung Hee Plusquellec- Edward D. Ayensu Maureen Cuffley Nancy Pinto- POLSKIE GORNICTWO NAFTOWE I GAZONICTWO S.A. (PGNiG) Nyra Guice REPRESENTATIVES FROM SPONSORING ORGANIZATIONS SIEMENS CORPORATION Thomas B. Johansson (UNDP) Suresh Hurry (UNDP) SWEDEN James Bond (The World Bank) Swedish International Development Cooperation Agency SWITZERLAND Department for International Economic Cooperation Resigned in 1999 Until October 1999 Until November 1999 Until July 1999 Serving the Energy Poor r ' pw_4 ESMAP Challenges into the 21 st Century The poor say it themselves: Energy means time saved, from drawing water, transporting biomass fuels, or While economic growth and wealth accumula- crops and foods. Energy means increased productivity in tion continued at a steady pace in industrialized agriculture or small businesses, from sowing to food pro- economies in 1999, the gap in economic and social wel- cessing, small-scale manufacturing. Energy means light- fare between industrialized and developing countries ing, and therefore access to education and additional continued to increase. Developing and transition income: use of night time for supplemental income earn- economies particularly hard hit by the 1997/98 financial ing activities. Energy means access to telecommunica- crises made substantial progress in their recovery. The tions, to radio and information, to labor markets, and for impact on poverty of these international shocks has not the better off, to leisure. As well documented through the lessened. Little or minimum progress was made overall in meeting the energy needs of the developing countries, and least of all, in meeting the needs of the poorest seg- ments of their populations. L The Trends ., The figure of 2 billion people without access to [P- modern energy continues to be quoted in most fora on _. energy issues in developing and transition economies, unfortunately unchanged for the past 5-10 years. a - Meanwhile, population growth has continued, at a pace surpassing the rate at which modern energy services are expanding. This suggest that, in reality, the global figure . of the unserved population may exceed the 2 billion mark. In Africa alone, it is estimated that the proportion of people connected to grid electricity has been halved in ten years, from 10 to 5 percent of the population. Globally, because of a decrease in East Asia, the - Middle East and North Africa, the number of poor has -- remained about constant during the past 10 years. At the W end of 1999, about 24% of the population of the devel- oping world-1.2 billion people-lived on less than one experience in industrialized economies, the availability of dollar a day and 2.8 billion lived on less than 2 dollars a new sources of energy and technologies has been key day. Inequality among regions and countries has both to their economic development and to the progress increased sharply over the last 40 years, with poverty shift- in social welfare. As recognized by Josef Stiglitz, Nobel ing towards South Asia and Sub-Saharan Africa (40% of Laureate, "without energy, there is no way out of poverty." the population in South Asia and 46% in Sub-Saharan Africa live in absolute poverty). The distribution of The body of knowledge generated through income within nations and across individuals is also shift- ESMAP and others field work programs confirms and ing. The current trend in rapid urbanization is also asso- underlines that the poor continue to largely rely on bio- ciated with an increase in the number of urban poor. It is mass energy for one of their most basic needs, that is estimated that the absolute number of poor is increasing cooking. But it also highlights the enormous sacrifices faster in urban than in rural areas. Projections indicate the poor make to access energy, or the premium that the that by year 2035, half the world's poor will be in urban poor are ready to pay for more modern energy, spending areas. For the next decade the majority of the poor will as much as 20% of their cash income for lighting, water still be rural, but urban poverty will be growing fast. sterilization, more efficient cooking, light motorization for productive activities, and for transport. One should not forget also that, that as documented by the World * Ensuring the environmental sustainability of energy Energy Council (WEC), the lack of access to modern services will continue to be key for the poor to access energy means relying more on human energy, in particu- energy services. Over the long-term, the energy poor lar that of women whose about 50% of productive life is are the most affected by the negative impact of certain transport: transport of water, wood or charcoal, crops and environmental damages resulting from the use of pre- food, both in rural and urban areas. vailing energy resources and services. Premature death and increased morbidity from indoor pollution result- Against this backdrop, how will the needs of the ing from biomass or kerosene use is now well-docu- energy poor be met as we enter the 21st Century? mented for Africa and the Indian subcontinent. So are the reductions in children's IQ from air pollution due ESMAP and the Energy Poor to lead in gasoline or poor quality lubricants in two stroke engines in congested peri-urban areas of many The year 1999 confirmed that the challenge of developing regions. To these local pollution issues are meeting the needs of the energy poor-be they countries, communities, households, or individuals- remains, and should remain at the core of ESMAP's mission. It also con- firmed that in many ways, the times have never been better for a global mobilization of expertise, financial, physical and - -.7 - political resources to meet this challenge. At no other time - in the history of the past 50 years, have public and private rT partners and civil society realized the need and been so will- ing to work together. This willingness has become endoge- _ nous to ESMAP. At the end of 1999 ESMAP partnerships included 13 public donors and three private ones. It also included formal or inforrnal cooperation agreements with *� the electricity industry (The E7 Network of Expertise for the Global Environment) and the largest association of energy professionals (WEC). Several new partnerships were in development. - The year 1999 was also the opportunity to fully test the continued relevance of the ESMAP Strategy adopted in 1998. * Facilitating access by identifying solutions to deliver energy services to the poor has to remain at the center of ESMAP's operational work. But for ESMAP to have an impact on a significant scale, it had to move away added global pollution ones. Abuses of biomass from carrying out a collection of scattered micro-activ- resources damage the environment. Distortions in ities and focus on activities generating or amplifying a energy markets also have a pernicious effect by pre- critical mass of knowledge and offering a greater venting affordable penetration of LPG, kerosene, or potential for replicability. renewable energy thus worsening the life of the poor * Assisting in making the energy markets work better already over-relying on biomass for primary energy, and continues to be one of the most effective ways to adding to green house gas emissions. enhance opportunities for the energy poor, both at the macro and at the micro level. More transparent and ESMAP 1999-2001 Business Plan efficient markets are indispensable to increase the availability of energy services, to lower the cost of ener- Taking the view that ESMAP can achieve its gy services and to expand the availability of diversified objectives only through a medium-to-long term commit- sources of sustainable energy. ment to its work program, the ESMAP team prepared, a three-year business plan which was endorsed by the transition economies, and to monitor the impact of Consultative Group (CG) during its 1999 annual meet- energy-environment policies; ing. The Business Plan confirmed that the overarching * policy reform in the power sector, including to liberal- goal of the program is to increase the availability of ener- ize markets for non-conventional energy, and for the gy services for poverty alleviation and social development. oil and gas subsectors; It puts the emphasis on integrating the work on market * energy-environment activities; development with the work on energy access, and * social impact analyses, in particular to assess the social addressing environmental issues in order to ensure an impact of energy market transformations and of energy- increase in the availability of energy services and their environment policies, and also to address the specific sustainability. To achieve its goal, ESMAP will continue to gender issues related to the delivery of energy services. capitalize on its comparative advantage of being a unique * knowledge dissemination activites, including ESMAP's global partnership program. It can access a world-wide vocation to be a transactor of knowledge on its donors' pool of energy experts and therefore enhance knowledge programs. * Innovative, pilot/venture fund type of activities. X _| Expanding on the number and types of partner- }~ ... , - ships will be key to the ability of ESMAP to achieve the objectives of its mission. In 1999, ESMAP has already strengthened its partnership with other trust-funded pro- *..e -; gram managed by the World Bank, in particular ASTAE, - , - ;' . ] rf * - Ff, Z _AFRREI and RTPES, whereby ESMAP finances policy- - . , t 6 l related up-stream activities when these programs are con- , t i centrating on project preparation/investment feasibility ~E~; -.--. -. .... - -S work. It has also initiated a partnership with the World < - - , ;-, S t ~{ S Energy Council in order to capitalize on their infrastruc- ., ,'~ 8 i . iture for knowledge dissemination activities. New partner- ,.Z. .6 ;t N S ships are under discussion with several energy institutes r ' wi; S =J. ~ ' ~-'1 as well as with new potential donors. 2 -. ~- _... ,, _ *,L .~., ~ -As we look ahead into the 21st century, we know we should not tolerate that the gap between the energy poor and the energy-rich countries and people continues to widen. The measure of success for the program will be, therefore, the extent to which it has contributed not only to stop the widening of the gap, but to narrow it. generation and dissemination throughout the develop- ing and transition economies. It can also mobilize public and private partners from developing, transition, and industrialized economies. The business plan also reflects that the demand for support from ESMAP is rising in the following areas: * on-time technical assistance, in particular for testing new institutional and financing delivery mechanisms enhancing access to modern energy services for un- served or under-served areas and populations; * capacity building, to increase the analytical, policy for- mulation and negotiation capabilities needed to attract private sector capital and services in developing and 9 ESMAP Products and Services Knowledge Generation and Dissemination * Conferences, roundtables . Publications * Training, workshops and seminars Technical Assistance * Specific studies * Advisory services . Pilot projects ~> W A U~~~~~~~~~~~~~~~~ A"* | =- *57~~~~~~~~~~~~~~~~~~AA 'A~~~~~~ * AAA ~~AA ~ *A~ A ?&' - , * 1--' 10 region, Africa experienced some contraction in both the number and value of activities over the 1998-1999 period. This is indicative of the difficulties experienced to date in 0 identifying projects with a predominantly environmental 1 99 7 1 998 1 999 focus in Sub-Saharan Africa, whereas in contrast growth in the East Asia/Pacific and Europe/Central Asia portfo- lios was fueled to a significant degree by the uptake of the environmental theme. Figure 6 ESMAP Themes Implementing ESMAP Strategy: Meeting the Needs of the Energy Poor TECHNOLOGY - iP-FR-MBAN &-RURAL RErIEWABLE .,,,,v,,;-~~ ~ ~~~~~~~~~~~~~ v {: I ENVIRONMENT * (, ~~~~EFFICIEU0E TRADE .,.l':...',< e ----- -- - --- 18 Box 3 Uganda: Rural Electrification Strategy Study Issues Uganda offers planners, policy makers, governments, donors, and utilities a surprising and exciting new perspective on rural electrifica- tion. Rural people in Uganda pay high prices for a limited and inefficient supply of modern energy, particularly for electricity. They also use several inefficient forms of energy to make up for the general lack of access to the electric grid. Today, there may be more Ugandans "electrified" through the use of lead-acid batteries, small diesel and petrol generators, or photo- voltaic systems than Ugandans connected to the national grid. About 9 percent of the population-nearly 5 percent of all rural house- holds in the 12 districts surveyed by an ESMAP project-own and operate lead-acid (car) batteries to power their TVs and lights. They spend the equivalent of about $120 per year, including costs for charging, transport to the charging station, and the amortization of the battery, for an average cost of US$3.0 per kilowatt-hour. Furthermore, Ugandan households and businesses have imported generators with over 60 megawatts of cumulative capacity, repre- senting almost one-third of the Uganda Electricity Board's (UEB) installed generating capacity. Ugandan firms generate more than 100 gigawatt-hours per year at an average cost of US$0.19 per kilowatt-hour. With a supportive environment, cost-effective ways could be found to accelerate rural electrification. It would yield great social and economic gains, notably for local businesses. Indeed, one-half of imported generators are used to run agro-processing plants, mills, dairies, and light industries, or to power restaurants, hotels, etc. cre- ating jobs in rural and peri-urban areas. ESMAP's Work The ESMAP Rural Electrification Strategy Study was carried out in two stages. The first, in 1996, conducted a series of rural and peri- urban demand side surveys of 2,000 households. A second stage of supply side surveys was conducted in 1996 and 1997. It covered twelve districts where private generators, equipment suppliers and distributors, electricity consumers, industry representatives, and gov- ernment officials at all levels were interviewed. The surveys identified the types of lighting and other energy sources used, took a meas- ure of the quantities consumed and defined associated monthly spending patterns in non-electrified peri-urban and rural areas with a good potential for a renewable energy market and other modes of electrification (grid, mini/ micro/isolated grid, and non-grid electri- fication). Eventually, the survey: * Developed an information base and profile sketch of non-electrified rural households. They described households awareness of and ability to pay for alternative electricity services; * Measured the costs of existing energy services and compared them with other options; and * Analyzed the financial implications to households or electrification options to determine electrification steps to be taken to maintain or improve standards of living. Outcome, Lessons and Follow-up The study showed that high levels of rural electrification can be achieved without major government or donor intervention, or invest- ment from the national utility. It also suggests that new approaches to rural electrification can considerably accelerate access to elec- tricity in rural Africa. The challenge is to fashion an institutional structure that, as part of a power sector reform, will facilitate electrifi- cation without dampening individual drive and spirit. The ESMAP study provided crucial information for follow-up work of power sector reform in Uganda, helping catalyze government's attention on rural electrification issues. The study also helped in the preparation of a new electricity law and of an innovative project focusing on energy for rural transformation designed with help from the World Bank's Africa Rural and Renewable Energy Initiative (AFRREI) supported by the government of Denmark and other donors. Figure 8 Projects in Portfolio 120 Number of Projects in ESMAP Portfolio 1997-1999 107 100 90 89 . 80 -f 60 40 20 0 1997 1998 1999 - Project Implementation Out of the $27.7 million of the funding require- ments for ESMAP projects in the portfolio at the end of * 1999, some $13.7 million, had been disbursed at the end of 1999, corresponding to an implementation ratio of about 50% compared to 60% at the end of 1998. This - reduction is due essentially to the increase in the size of the overall portfolio, with a net gain of 18 new projects under supervision. The lower implementation ratios give an indication of sectors and regions where new projects have The distribution of disbursements by thematic been concentrated. However, when a low implementa- area and region is given in Table 4 and Table 5 for 1998 tion ratio is not associated with a recent increase in fund- and 1999. As an indication of the degree of project ing, it generally indicates delays associated with certain completion, an implementation ratio (IR) has been projects implementation. calculated for these two years. It reflects spending relative to funding allocations by theme and region. Table 5 Project Disbursement by Region as a Measure of Implementation Table 4 Project Disbursements by Theme as a Measure of Implementation By Region Percentage of Total IR 1998 IR 1999 Funding By Region Percentage of Total IR 1998 IR 1999 1998 1999 Funding Global 9.81 14.5 68.44 64.22 1998 1999 Sector Reform 16.99 20.1 72.43 55.31 Sub-Saharan Africa 26.02 26.69 80.96 69.22 Environment 15.17 14.54 45.15 32.94 East Asia & Pacific 8.92 12.66 73.32 58.58 Rural & Peri-Urban 21.42 27.08 67.66 44.29 South Asia 10.21 9.3 38.56 39.93 Renewables 21.91 6.84 27.42 49,83 Europe and Central Asia 5.81 9.98 80.33 36.7 Efficiency 19.95 23.51 84.06 74.17 LatinAmerica &Caribbean 36 21.14 38.67 33.89 International Trade 4.56 7.92 82.42 40.37 Middle East and North Africa 3.23 5.73 90.64 43.19 Total 100 100 59.92 48.05 Total 100 100 59.92 48.05 20 Box 4 Vietnam: Environmental and Safety Issues in Gas Development Background Energy sector development is crucial to Vietnam's economic prospects. From 1993 to 1997, consumption of commercial energy grew 30 percent faster than GDP. Continued expansion in energy supply is needed to support economic growth. Hydrocarbons is already a major local energy resource and accounts for 17% of exports. Most hydrocarbon production in Vietnam comes from the Bach Ho field in the Cuu Long Basin. The potential additional natural gas production is large, but the exploitation of hydrocarbon reserves and the construction of related infrastructure carry safety risks not to be neglected. ESMAP's Work ESMAP provided technical assistance to the Government of Vietnam in the oil and gas sector to support the development of indige- nous gas resources and to build up a modern gas industry from the wellhead to the burner-tip. ESMAP technical assistance includ- ed advice on: * Fiscal conditions for hydrocarbon exploration and development by private companies; * Methods for enhanced reservoir management; * Gas purchase contracts and gas sales contracts in accordance with best international practices; * Gas distribution and metering; * Institutional aspects of gas sector development, in particular the corporatization of Petrovietnam, the public monopoly responsi- ble for gas development; and * Environmental and safety aspects of gas sector development. Downstream Gas Development A study on the environmental impacts and safety aspects of downstream gas development was carried out by ESMAP with addi- tional funding from Denmark. It provided Petrovietnam with expertise on environmental and safety aspects of the development and management of an onshore gas industry. Petrovietnam often conflicting roles in environmental control and safety planning were analyzed. The ESMAP report recommended to create an institutional set-up that separates the policy, regulatory and operational functions related to environment and safety. A gas decree including technical and safety standards was also recommended, as well as the development of a more general assess- ment of the overall impact of gas development, and consultation with all stakeholders when preparing environmental impact assess- ments. Lessons and Follow-up The ESMAP study included investigations and recommendations on safety zones around gas transmission pipelines. Although the investigations were partly based on estimated risk for the population along specific gas transmission pipelines, they may be rele- vant for other densely populated regions in developing countries. Box 5 Improving Energy Efficiency Through Electricity Demand Management in Ghana, Kenya & Tanzania The Issues Ghana, Kenya and Tanzania regularly experience power shortages which often intensify in periods of drought. The shortages inconven- ience daily life and hamper economic growth. They force industrial and commercial users to use expensive additional power supply from on-site back-up generators. All three countries also have large technical losses and deep voltage drops especially at low voltage. Demand side and supply side management can help mitigate the effects of power shortages by reducing daily spikes in power demand and displacing part of the demand to off peak periods. Over the last 12 year the three countries have embarked on several such pro- grams which included: In Ghana * Pilot programs for power factor improvements, and load management and leasing schemes for purchase of capacitors; * Public information dissemination awareness raising; * Establishment of a nascent NGO, the Energy Efficiency Foundation; In Tanzania * A program to rehabilitate the supply grid * Training for energy audit staff from the public utility and assistance in conducting walk through audits of industrial and commer- cial establishments; In Kenya * Audit services to industry; * Creation of an energy service company (ELCO) with experience of performance contracting in the industrial sector. ESMAP's Work ESMAP, in association with international NGOs, bilateral and multilateral agencies and local counterparts reviewed the experience gained in implementing the programs outlined above. It convened a workshop in Arusha, Tanzania for regional and international efficiency experts. Some important lessons emerged from experience in the three countries: * Commitment--or lack of it--from organizations involved in implementing efficiency programs should be swiftly and clearly identified. Supply side activities of public utilities may weaken their capacity to implement demand side program. * Entrepreneurial orientation is critical for implementing organization to successfully deliver energy efficiency services. Open competi- tion should be the norm to select staff. * Demand side management must be a commercial activity, as demonstrated successfully by the experience of ELCO. Lessons and Follow-up The experience and the lessons learned confirmed those of similar programs elsewhere. Energy efficiency programs should emphasize direct provision of services to the end user through commercial arrangements. But intervention from public entities or competing pub- lic efficiency program may jeopardize the success of energy service companies. Box 6 Renewable Energy Strategy and Institutional Strengthening Study in the Arab Republic of . The Issues Good wind regimes, high solar radiation intensity, and significant quantities of agricultural and urban waste suitable for biogas produc- tion provide a good basis for renewable energy development in Egypt In the early 1980s after the energy shock, the Government of Egypt drew up a national strategy to take into account renewable energy resources, particularly wind, solar and bio-mass. In its policy statement for renewable energy, the Government's goals were to: * Establish and support the utilization and development of renewable energy; * Adopt technology/applications approaching maturity and that have potential for replicability; * Link renewable energy and energy efficiency; * Maximize utilization of renewable energy in the electric power sector as appropriate; and * Upgrade local capabilities and local technology content A national strategy adopted in 1982 and periodically reviewed. It sets quantitative targets for energy conservation and renewables share of total energy demand. Although the Ministry of Electricity and Energy is involved in implementing the startegy, the New and Renewable Energy Authority (NREA) has main responsibility to identify and evaluate renewable energy sources and plan for their devel- opment. ESMAP's Work In 1995, ESMAP completed an Energy Sector Assessment identifying issues retarding the development of renewables. It concluded that in a transition from demonstration to commercialization a review of the national strategy was appropriate and that such a review could develop capabilities, accumulate experience and identify areas where institutional development was required. The present ESMAP study set out to: * Identify and evaluate technologies with the highest potential to meeting the strategic targets; * Determine the likelihood of meeting the targets in the light of the assessed potential; and * Review institutional, technical and policy issues and requirements. Outcome and Follow-up First, the study estimated the gross potential based on constraints such as proximity to the grid. Economic constraints were then added to the model and expected reductions in costs by extending the time horizon were calculated. Two discount rates were applied to obtain an estimate of the range of the supply curve. Representative investment projects for promising technologies were developed to check the supply curve estimates, but alternatives to renewables or the impact competitive local market were not analyzed. The study concluded that few technologies are ready to substitute for conventional gas-based generation technologies. Despite this gen- eral conclusion, results indicate that: * Wind is the most commercially exploitable technology in propitious areas close to the grid; * Integrated solar thermal and gas power generation systems present a viable option; * Solar thermal heating has proven most successful. Conclusion Continued efforts to develop renewable energy technologies are appropriate, but the economic cost to achieve renewables targets is high. An upward revision in fossil energy reserves has weakened the rationale for renewables, and gas remains the fuel of choice in power system expansion plans. The targets will not be easily met without a mechanism to reduce the burden on consumers. The study also noted that some revision in institutional arrangements were required as renewables progress from research to development to com- mercialization., and NREA could become an effective "commercializer" of emerging technologies. Governance and Management a ,.N The Consultative Group recipient countries. In short, it was recommended that ESMAP be more strategic, more able to provide innova- The Governance structure of ESMAP includes a tive approaches with a broad potential to be replicated. It Consultative Group (CG) composed of representatives of also recommended that ESMAP be more active in dis- donors and members "at large" from the regions receiv- seminating its lessons of experience, and more vigorous ing ESMAP assistance. Since July 1997, the CG has been in devising new partnerships. chaired by Richard Stern, Vice President of the World Bank, and a former Director of its Industry and Energy The CG welcomed a 1999-2001 Business Plan Department. The two members "at large" representing prepared by the management of ESMAP and broadly developing and transition economies are Mr. Rufino endorsed it. The CG called for an in-depth discussion on Boomasang, presently President & CEO of PNOC the the Business Plan at the earliest opportunity. The CG National Petroleum Exploration Corporation of the members emphasized that Africa should remain a geo- Philippines, who has served on the CG since November graphic priority, recognized how critical social issues are 1997, and Mr. Kethane Sithole of Botswana who joined in the efforts towards poverty alleviation, and endorsed the CG in April 1999. Mr. Sithole, the Chief Executive the intention of ESMAP's management to address gender Officer of the Botswana Power Corporation, has had a issues more forcefully. The CG also fully supported a pro- long career with the Corporation which hejoined in 1978 posal to expand ESMAP's dissemination of its knowledge as a graduate engineer. In addition to rising rapidly through the ranks of the Corporation, heading various departments until his current appointment in 1992, he was seconded to the North Eastern Electricity Board in the United Kingdom in 1980-1981. During this second- ment he also worked in the East Northumberland L Engineering District. Mr. Sithole graduated with a B.S. b (Hon) degree in Electronics and Electrical Engineering form the University of Ile-Ife, Nigeria. He is a Fellow of ;_ the Institute of Electrical Engineers (United Kingdom), a Senior Member of the South African Institute of - Electrical Engineers, an Executive Member of the South i African National CIGRE Committee, an Executive w Committee Member of the Southern African Power Pool and Vice Chairman of the World Energy Council w Executive Assembly representing the African Continent. | The CG Roundtable and Annual meeting were held on April 12-13, 1999, at the World Bank's headquar- l, f _. , ters in Washington D.C. The CG reviewed the progress '. made with the implementation of the ESMAP strategy L approved at the previous annual meeting of the CG. It -. supported re-centering the Programme, as proposed by ESMAP management on finding solutions to bring ener- to a broader range of constituents. With respect to the gy services to the poor. The CG also re-emphasized a capacity to carry out the proposed Business Plan, con- three-prong approach with focus on energy access, sector cerns for mobilizing core funding and for increasing the reforms and energy environmental linkages. It was under- overall resources were acknowledged. The CG noted lined that ESMAP should become a leading force to bet- with satisfaction the close collaboration between ESMAP ter address economic and social development issues in and UNDP on a number of individual activities during the energy sector. It was stated that ESMAP should the last year and encouraged the consolidation of this increase its effort in helping build local capacities in collaboration. 25 Following up on the agenda of the annual meet- The TAG also reviews selected activities to draw lessons ing, an informal CG meeting was held on November 14- from past operations and advises on the impact and effi- 15, 1999 in The Hague, The Netherlands to deepen the ciency of ESMAP. discussion on ESMAP strategy and Business Plan. In par- ticular, donors discussed the comparative advantages and Two changes affected the composition of the relevance of ESMAP with respect to their own programs TAG in 1999: and priorities. The World Bank highlighted how ESMAP * Dr Andrew Barnett relinquished his responsibility as is a significant asset in implementing the Comprehensive Acting Moderator in April 1999, when the appoint- Development Framework (CDF), while several bilateral ment of the new Moderator, Mr. Alfredo Mirkin, donors explained how the Programme meets their con- became effective. During his tenure, Dr Barnett cern for poverty alleviation and economic development. worked with outstanding dedication, and brought Several donors stressed that, given the prominence of effectiveness and intellectual leadership during the environmental issues on the international political scene, transition period. a more precise definition of ESMAP activities in relation ......... to global environmental issues would strengthen the j _ l I political support ESMAP needs. The donors also had the ; opportunity to hear from other energy organizations and ., programs, such as the World Energy Council (WEC), the -, Shell Foundation or the E7 Network of Expertise for the a - . L ; Global Environment (E7) how they view ESMAP and an A ' expansion its partnerships. A consensus emerged that ESMAP is a unique OF program: it is global; it can rely on the expertise of sever- al hundred energy and other specialists; it is genuinely - multi-thematic with the potential to cover the entire field of energy and environment issues; it has a strong gover- nance with its Consultative Group and Technical Advisory Group; and benefits from a group of donors who have been working together for many years. It was recognized that ESMAP has the potential to further extend its net- work with the participation of other energy organizations and private sector foundations. The Final Communique of the April 1999 CG is attached as Annex 1. Summary Proceedings of the November Meeting are attached as Annex 2. * Mr. Alfredo Mirkin assumed his responsibilities as Moderator after the April 1999 meeting of the CG. Mr. The Technical Advisory Group Mirkin was one of the leaders of the transformation of the energy market of Argentina during the 1990's. He The Technical Advisory Group (TAG) comprised four has had a very prestigious career in the energy sector. members in 1999. The TAG's operate under a mandate Upon graduation from the School of Engineering of from the CG which also approves the terms of reference the Buenos Aires Federal University he worked with for the TAG. The line authority of the TAG is exercised Agua y Energia Electrica, the former state run bundled through the Chair of the CG. The TAG focuses on utility, where he rose through the ranks of manage- ESMAP's vision and strategic direction to advise the CG ment. Later on, he became Vice President and then and the management of ESMAP, notably on processes for President of CAMMESA, the wholesale power market project selection and monitoring to assure donors that management company in Agentina. In August 1996 he 26 the portfolio composition reflects the agreed strategy. was appointed First Secretary of Energy, a position he held until December 1998. During his tenure, he spear- In April and September 1999, the TAG met at the World headed the process of market reforms, including the Bank's headquarters in Washington D.C. The April meeting privatization of the gas sector. He is now a senior part- focussed on the preparations of the CG, and the TAG work ner in Mercados Energeticos S.A. a consulting firm, program for the rest of the year, the September meeting and consults internationally. reviewed ESMAP's comparative advantage in relation to other externally funded energy programs managed by the The TAG met on five occasions in 1999. The first World Bank, namely the Asia Alternative Energy Program meeting was in January 1999 in Bolivia, for a week-long (ASTAE), the Africa Rural and Renewable Energy Initiative evaluation of the Bolivia Program where the TAG was (AFRREI), and the Africa Regional Program for the joined by the Chairman of the CG, by representatives from Traditional Energy Sector (RPTES). The TAG also initiated the two sponsors of the Programme-the UNDP and the the evaluation of solar development projects in Africa, and World Bank-and by senior ESMAP staff. Preliminary find- of regional energy market development experience. These ings from the evaluation were discussed at a meeting of the two evaluations were to be carried out in FY2000. The TAG also assessed the results of the selection process and of the changing composition of the portfolio in relation to the agreed strategy. In June 1999, the TAG met in Paris for an infor- mal meeting with the ESMAP manager to take stock of --._ _J .; .,. progress and discuss the terms of reference for the pro- No, - posed evaluations. Finally, in November 1999, the TAG i - - - - _met in The Hague, The Netherlands, just before the ad- _ I 1 hoc donors' meeting. At its meeting in The Hague, the TAG focused on the funding strategy for ESMAP. _ 7-rn In addition to meetings, members of the TAG, !./i individually and collectively, maintained frequent con- ' it \ 9/; tacts with the ESMAP management team, and met with '_ \ S\= < l, ' several task managers, providing advice and guidance. Dr. Andrew Barnett completed an evaluation of ESMAP ' j:.X v Projects for renewable energy published in November rJ-t >-s 1999, and Mr. Jan Moen prepared a separate report on the lessons from the Bolivia experience with energy mar- ket reforms. This report was expected to be published in April 2000. TAG with the participation of Ing. Herbert Muller, ESMAP Management, Staffing and Minister of Finance of Bolivia, who, as former Minister of Procedures Energy and Moderator of the TAG had invaluable insights on the design and execution of the Bolivia program. Ing. Management and Staffing. The year 1999 was a year of con- Mueller provided also most useful reflections and an his- solidation in the managerial changes, operations, and torical perspective on links between the ESMAP program administration of the Programme which were initiated in and the Comprehensive Development Framework (CDF