The World Bank and IFC should - Create incentives and mobilize resources to support effective pilot, demonstration, and technology transfer projects that have a clear logic of demonstration and diffusion. This will include mobilizing Global Environment Fund and other concessional funds to mitigate World Bank borrower risk; reshaping incentives for staff and managers; providing adequate resources for the design and supervision of complex projects; and making available specialized expertise in technology transfer and procurement through a real or virtual technology unit.
Original Response: Ongoing/Agree This recommendation is consistent with the SFDCC. Key ongoing work consistent with the recommendation include: i) WBG expects to expand its partnership with GEF, which is well positioned to take on early research and development risks, through the recently established Technology Transfer Program and GEF/IFC Earth Fund; ii) Through the Clean Technology Fund (CTF), Scaling-up Renewable Energy Partnership (SREP) and Forest Investment Partnership (FIP), WBG is supporting technology scale-up with the help of innovative financing; iii) A Climate Technology Program, launched in September 2009, is exploring the feasibility of climate technology innovation centers in developing countries as a way to stimulate locally relevant climate technologies and harness economic opportunities at the small and medium enterprise (SME) level (first centers already under development in Brazil, India, and Kenya); iv) A new MDTF has been established for supporting the introduction of CCS technologies and providing TA to clients; v) IFCs cleantech investment practice will be housed in the newly-created Climate Business Group. CLEANTECHNET is a practice group that meets virtually and in person to share knowledge and issues in the technology space; vi) The potential for additional initiatives to support these objectives will also be explored in the energy strategy.
Some of the Management update is about the Banks's general support for renewable energy and energy efficiency. IEG does not believe that large-scale investments necessarily lead to spillover effects - though they can do so when demonstration was explicitly and deliberately tied into the project design. The IEG evaluation noted that many examples that claimed a demonstration goal did not have a clear chain of what was being demonstrated to whom, and recommended that this kind of logic of demonstration be built into the design of operations.
However, many of the specific projects discussed in the Management update do appear to have the potential for effective piloting, demonstration and technology transfer effects, particularly in concentrated solar power, where the large scale nature of investments has been central to the ability of projects to contribute to cost reductions and learning by doing. The Bank deserves credit from learning from its previous experience with CSP in the design of this more recent support. It is too soon to tell if the geothermal operations will lead to effective replication and diffusion, but it is positive both that the Bank is focusing in innovative areas where there is potential for demonstration, and that demonstration logic is being built into project design. Experimentation with innovative financing mechanisms may be successful, but maximize its effects only if it can catalyze other effects beyond the project.
The workshops and knowledge sharing events are also positive steps and are consistent with the recommendation.
However, the Management update does not engage with a substantial part of the recommendation: changing incentives within the Bank to make it easier for teams to support innovative but potentially risky operations. The CTF offers an important source of concessional funds, though its future is not clear. But the recommendation also emphasized the need for resources for design and supervision of complex projects, and the need for specialized expertise in technology transfer and procurement.
This is the end fourth update since the evaluation, so the recommendation will be made inactive.
From FY10-15, the World Bank provided $11.5 billion of IDA/IBRD resources along with $13.5 billion in co-financing for renewable energy (RE) and energy efficiency (EE) together. A significant share of the co-financing has come from climate financing, including the Global Environment Facility (GEF, $370 million) and the Climate Investment Funds (CIFs) through the Clean Technology Fund (CTF, $2.2 billion) and the Scaling-up Renewable Energy Program (SREP, $208 million).
The World Bank has been supporting complex and demonstrational operations that aim to achieve large-scale deployment of renewables (e.g., solar, wind, geothermal). The adoption and large-scale deployment of technologies for low carbon development is a key aspect of transformational change in recipient countries. The World Bank has also mobilized concessional financing in support of investments in enabling infrastructure, which can become a bottleneck for greater use and dispatch of renewable energy. World Bank projects in countries such as Morocco, Turkey, Armenia, Chile, India, Mexico, and St Lucia will help understand how public financing can be used more effectively to scale-up and reduce costs of Concentrated Solar Power (CSP) and geothermal technologies. In Morocco, the World Bank has supported the development of the 500+MW Noor (formerly Ouarzazate) Solar Complex, which is the first utility-scale solar energy complex in Morocco and one of the largest in the world. The projects innovative financing support mechanism has brought down final projects costs 25% lower than initial projections for Noor I and 10% for Noor II and III. The lower than projected costs provide a positive indication for national and worldwide replication of CSP technologies. Moreover, the learning results from the complex and lengthy tendering process especially to build Noor I would lead to further cost reductions for future projects. In Turkey, the World Bank will use CTF funds in the form of contingent recovery grant to pilot an innovative risk sharing mechanism that will help reduce the risks faced by private developers at early stages of geothermal development, therefore overcome the main barrier hindering geothermal development. The proposed risk sharing mechanism is a pilot that, if successful, could be expanded with additional resources from the Government or other sources for ongoing support to the riskier phases of geothermal project development in Turkey and elsewhere. Also in Turkey, the deployment of smart-grid investments through the CTF-funded Renewable Energy Integration project will allow large-scale integration of intermittent renewable resources. The move to a smarter grid will ensure that the integration of increasing amounts of wind energy would not be constrained by stability considerations of the grid. In Armenia, the World Bank will support the development of Armenias first geothermal power project, whose successful implementation will increase domestic capacity in the sector and build investors confidence that geothermal is a viable and profitable investment opportunity in Armenia. In Chile, the World Banks technical assistance project will support a set of market enhancing reforms that will impact the investment climate underlying the entire geothermal sector. By doing so, the World Bank will kick-start and transform a nascent industry into a more mature, commercially viable, and sustainably industry that will enhance the overall energy sector in Chile. In India, the World Bank will use CTF funding to mobilize investments in support of investments in transmission infrastructure to help evacuate significant amounts of renewable energy, including over 4 GWh annually of solar-based electricity generated under another CTF-funded solar power project. In Mexico, the GEF-funded World Bank Sustainable Energy Technology Development project will help improve the institutional capacity of public and private entities working for sustainable energy and fostering commercialization of sustainable energy technologies by providing financial incentives to the private sector. In St Lucia, the World Bank is using GEF funding to undertake key preparatory activities to develop geothermal resource as a low-carbon power generation source.
The World Bank has supported innovative financing mechanisms that aim to address market failures which are inhibiting the development of viable energy efficiency markets. In India, the Partial Risk Sharing Facility (PRSF) project has introduced an innovative risk sharing mechanism to seize on the potential for Energy Sector Companies (ESCOs)-implemented energy efficiency projects. The use of CTF and GEF funds to provide first and second loss coverage for ESCOs will help establish an energy efficiency ecosystem that would be essential to catalyze the market for energy efficiency investments. The pairing of this financing facility together with strong technical assistance and capacity building will be fundamental to foster the growth and ensure the sustainability of the nascent ESCO and energy efficiency market in India.
The World Bank has been actively engaged in south-south learning exchanges aimed at scaling-up the deployment of Concentrated Solar Power (CSP) and geothermal technologies. The World Bank, together with the African Development Bank, organized a MENA CSP workshop with representatives from Algeria, Egypt, Jordan, Morocco, and Tunisia to discuss the CSP experience in Morocco and the costs and benefits of CSP compared to concentrated photovoltaic power. Also in the CSP arena, the World Bank participated in a series of CSP dialogues with representatives from government, industry, multilateral development banks, and others to discuss the global experience in CSP development and to generate recommendations on future targeting of concessional financing. The World Bank has also contributed with specialized expertise to the CIF-supported analytical work on concentrated solar power (CSP) and geothermal power, which has increased global understanding among key players on how public finance can be utilized more effectively to scale-up global deployment of CSP and geothermal power. The World Bank Institute, in collaboration with the Climate Investment Funds (CIFs), has developed an e-course on low emission investment planning that is targeted to government policy makers, planners, and climate change practitioners involved in planning for environment and climate change, clean energy, sustainable transportation, and energy efficiency. The World Bank has also helped expand knowledge on how to ramp up geothermal deployment. In particular, the World Bank helped organize a series of three geothermal dialogues that brought together major actors involved in the financing of geothermal development to enable global sharing of experiences and help policymakers and donors understand which financing tools to use for a cost-effective deployment of geothermal energy. The dialogues were attended by government policymakers, project developers and financiers, multilateral development banks, and insurers. Finally, the World Bank has led the development of the Readiness for Investment in Sustainable Energy (RISE), an initiative that provides indicators to compare countries investment climate for sustainable energy. Countries will be able to use the RISE framework to report on their progress in developing enabling environments. The global rollout of RISE has started in 2015.
The recommendation focused not on the sheer volume of low carbon projects, but rather on the extent to which they effectively demonstrate technologies and catalyze their diffusion, or address client risk aversion through grant funding. The CTF investment plans potentially give scope for this approach. Some of the CTF-supported projects are consistent with this, notably the large-scale effort to promote concentrating solar power. The recommendation refers also to reshaping incentives and shifting resources to encourage projects and programs with a clear logic of demonstration -- that is, projects which target specific kinds of knowledge creation and behavioral change leading to technology adoption. Change of this sort is less evident.
The Clean Technology Fund (CTF) offers countries incentives to move forward with the demonstration, deployment, transfer, and replication of clean technologies that reduce greenhouse gas emissions. The CTF Trust Fund Committee has endorsed 13 CTF investment plans with funding allocation (and two additional investment plans without funding allocation), which are projected to leverage an additional $36 billion in co-financing on a $4.5 billion CTF investment. This projected leveraging ratio of more than 1:8 represents a significant investment in climate change mitigation in CTF partner countries. It is now proven that in underdeveloped but promising niche markets, even limited CTF resources can significantly increase low baseline investments and lay the groundwork for transformational change. For example, in Mexico, the CTF is accelerating the development of Mexico's private wind market by targeting the untapped wind power potential in the state of Oaxaca (more than 5,000 megawatts of world-class wind potential, of which only 88 megawatts are currently operational). The government plans to use the CTF funds to build a wind power generation plant and attract private commercial banks to provide debt financing for the construction and implementation of wind projects. The CTF investment in the MNA regional project is expected to support the deployment of about one gigawatt of CSP generation capacity, almost tripling current global levels. In addition, with support from the Scaling Up Renewable Energy Program in Low Income Countries (SREP), six low income countries (Ethiopia, Honduras, Kenya, Maldives, Mali, and Nepal) announced their intention to invest in renewable energy services as a means to grow their citizens much-needed energy access and leapfrog into climate-friendly development. Kenya has submitted its investment plan for endorsement by the Trust Fund Committee.
In providing support through CTF, SREP, and other funds for technology transfer, the World Bank has been stepping up technical assistance for elements of integrated resource planning, which evaluates the full range of alternativesincluding such supply options as cogeneration, supply efficiency measures, and renewable energy resources as well as end-use energy conservation and efficiencyto provide adequate and reliable service to customers while minimizing long-term costs. This approach encourages governments to consider a new way of planning investments and expansion, including new technology options. The analytical support also enables a better understanding of trade-offs in opting for cleaner technologies. Accordingly countries have developed low carbon investment plans that allow them to adapt and apply newer technologies to their particular business context.
This recommendation has three emphases. One is to use concessional funds to buy down risks for demonstration projects that are potentially economically viable but face high perceived risks (as opposed to paying for environmental benefits in projects that are otherwise not viable). The second is to build systems for technology transfer into demonstration projects and programs. In both cases IEG notes some incremental progress. For instance, the Mexico and Egypt CTF projects have mechanisms for learning and for technology transfer; the Mexico project is interesting for its planned impact evaluation study. The Climate Technology Program of InfoDev is an interesting pilot, though there is as yet no mechanism for tracking sustainable take-up of innovations. IEG looks forward to seeing approaches of this kind mainstreamed in the Bank Group's climate mitigation and energy business. The third emphasis is on changing staff incentives. The creation of Cleantechnet is a supportive step but is not yet accompanied by an incentive shift to mainstream learning and diffusion in lending.
Ongoing / Agree: This recommendation is consistent with the SFDCC. Key ongoing work consistent with the recommendation includes:
(i) GEF: WBG has expanded its involvement in the GEF Technology Transfer Program by gaining approval for a first-of-its-kind project focused on research, development and early stage investment for sustainable energy technology development in Mexico;
(ii) Through the Clean Technology Fund (CTF) and Scaling-up Renewable Energy Program (SREP), WB is supporting technology scale-up with the help of innovative financing; The CTF has allocated over $1.8 billion for WB projects. Of these, $1.1 billion has been committed for ten projects and $0.7 billion is available for 15 projects currently under preparation. CTF financing is important to finance the viability gap and also allow governments to test innovative business models, which among other things, can have high replication and private sector engagement potential. For instance, the Morocco and South Africa CSP (concentrated solar power), as well as Indonesia geothermal projects would unlikely have happened without viability gap funding from CTF. It is expected that $1.8 billion of CTF funds allocated through WB will leverage approximately $15 billion from other sources. The SREP has allocated $94 million for seven WB projects currently under preparation. These CTF funds are expected to leverage an additional $527 million from other sources
(iii) The Climate Technology Program of infoDev, empowers developing countries to proactively and profitably transfer, develop and deploy climate smart technologies and business models that meet local needs and drive growth, competitiveness, and employment. It targets the early stages of innovation, including the key role of entrepreneurs and new ventures, thereby complementing later-stage World Bank and IFC initiatives. The CTP is currently developing Climate Innovation Centers (CICs) in 8 countries: Kenya, Ethiopia, India, South Africa, Ghana, Caribbean, Morocco and Vietnam which are expected to launch or commence implementation in FY13 14. Each Center provides a range of early-stage financing, business advisory and market development support, tailored to the specific needs, circumstances, and barriers to innovation of the host country. They will be run and operated by local organizations and staff, linked globally to other CICs and the international community through the CTP's Global Activities. The first CIC was launched in Kenya in September 2012 and has reached over 100 climate tech companies so far and provided direct financing and/or business acceleration support to over 20 companies.
(iv)The CCS TF supports work programs to promote CCS capacity building activities in developing countries. It was established in December 2009, with contributions of approximately $6 million from the government of Norway, and $2 million from the Australia based Global Carbon Capture and Storage Institute. In December 2010 the Government of Norway contributed a further $3 million, making the overall funding approximately $11 million. Programs carried out under the CCS TF are split into two categories, country programs and analytical studies. Total project commitments amount to $7.9 million for ten activities, including analytical work (Economic and Sector Work), as well as eight country/regional activities (China, Jordan, Maghreb, Botswana, South Africa, Egypt, Kosovo and Mexico) funded through child TFs assigned and managed by the regions, with TTLs in the regional departments. A new capacity building program in Indonesia for $850,000 is close to approval.At the end of 2012, the UK DECC and Norway MFA contributed a total of about $40 million in new contributions to the CCS TF. In connection with these new contributions, the scope of the trust fund, currently focused on capacity building and technical assistance, has been broadened to include financing for pilot and demonstration activities.
(v)IFC's cleantech investment practice will be housed in the newly-created Climate Business Group. CLEANTECHNET is a practice group that meets virtually and in person to share knowledge and issues in the technology space
The recommendation was focused on the degree to which the Bank was supporting demonstration and technology transfer that incorporated clear mechanisms through which technology would be developed, adapted, and transferred. The motivation for this was that the evaluation found that many activities with pilot or demonstration labels did not articulate what was being demonstrated, to whom, and with what expected impact.
IEG notes the specific inclusion of innovation, technology transfer, and demonstration as specific goals in the paper Toward a Sustainable Energy Future for All: Directions for the World Bank Group's Energy Sector which provides guidance on strategic directions for energy in the absence of an energy strategy. IEG notes some ongoing activities with specific mechanisms for technology development and diffusion, including support for the Kenya Climate Innovation Centre, and the CCS Trust Fund, and recognizes that there are further technology projects in the pipeline. The Last Mile Financing Facility is not yet approved and is too soon to evaluate.
The joint evaluation of the Climate Investment Funds found that the operations supported under these have been inconsistent in prioritizing demonstration effects. Though demonstration was a major goal of the Clean Technology Fund (CTF), many CTF investment plans and projects lack a convincing theory of change that explains how replication and broader uptake could be achieved. It did note however some positive examples of demonstration and scale-up, as in investments in concentrated solar power, and in forest investments in Mexico.
Reshaping incentives and resourcing for complex and innovative operations are not discussed in the management update. The major restructuring 2014 of the World Bank Group had changing incentives to support risk taking and innovation as stated goals, but it is too soon to assess whether incentives have changed and are supporting this recommendation. While there are sources of support within the Bank for technology transfer, there is as yet no unit or community of practice with specific expertise in technology transfer issues including procurement. Nor is there yet a specific funding facility to support the cost of preparing complex, higher risk but high value demonstration projects.
With the integration of knowledge, partnership and innovation functions from the erstwhile EBI into the Group Climate Change Vice-Presidency, this space has become more active than before, and in addition to the support via CIFs and CCS Trust Fund described above, the team is now working actively with IFC and WBLLI to explore innovatiive options for a Last Mile Financing Facility that will include Rural Electrification and potentially other Energy and development financing where conventional financing options are struggling to provide cover. This wil be rated in the current FY when the facility is expected to be delivered.