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Promoting Energy Efficiency and Renewable Energy:GEF Climate Change Projects and Impacts

Eric Martinot and Omar McDoom

June 2000Global Environment FacilityWashington, DC

Published June 2000

This paper may be reproduced in whole or in part and in any form for educational or nonprofit uses,without special permission, provided acknowledgement of the source is made. The Global EnvironmentFacility Secretariat would appreciate receiving a copy of any publication that uses this paper as a source.Copies may be sent to GEF Secretariat, 1818 H Street NW, Washington, DC 20433.

No use of this paper may be made for resale or other commercial purpose without prior written consent ofthe Global Environment Facility Secretariat. The designations of geographic entities in this document,and the presentation of materials, do not imply the expression of any opinion whatsoever on the part ofthe GEF concerning the legal status of any country, territory, or area, or its authorities, or concerning thedelimitation of its frontiers or boundaries. The views expressed in this paper are not necessarily those ofthe GEF or its associated agencies.

Dr. Eric Martinot was formerly an Associate of the Stockholm Environment Institute— Boston andcurrently works for the GEF in the climate change program ([email protected]). OmarMcDoom, Me. and M.A., was formerly a UN Area Fellow with the GEF and currently works for theWorld Bank.

ISBN 1-884122-93-0

Table of Contents

EXECUTIVE SUMMARY..................................................................................................................vii

INTRODUCTION .................................................................................................................................1

SECTION A: CLIMATE CHANGE MITIGATION STRATEGIES.................................................31. National Development and Global Climate Change .................................................................32. Energy Efficiency and Renewable Energy Opportunities and Barriers......................................33. GEF Strategies for Climate Change .........................................................................................54. GEF Strategies in a “Logical Framework” Approach ...............................................................6

SECTION B: GEF CLIMATE CHANGE PROJECTS ......................................................................91. The GEF Project Portfolio .......................................................................................................92. Project Designs and Mechanisms for Promoting Technologies.................................................93. Equipment Installations and Demonstration ........................................................................... 154. Capacity Building.................................................................................................................. 165. New Institutions and Financing Services................................................................................ 206. Market Transformation.......................................................................................................... 207. Technology Research and Development ................................................................................ 228. Engaging the Private Sector in Projects.................................................................................. 229. Roles of Non-Governmental Organizations............................................................................ 24

SECTION C: PROJECT IMPACTS AND REPLICATION ............................................................271. Emerging Impacts of Completed or Continuing Projects ........................................................ 272. Project Sustainability and Replication.................................................................................... 293. A Proposed Framework for Measuring Changes in Markets................................................... 304. Programmatic Benefits from the GEF Project Portfolio.......................................................... 34

ANNEX A: OPPORTUNITIES AND BARRIERS............................................................................37

ANNEX B: THE GEF PROJECT PORTFOLIO..............................................................................471. Solar Home Systems and Rural Energy Services.................................................................... 472. Grid-Connected Renewable Energy (Wind, Small Hydro, Biomass, Geothermal)................... 573. Solar Hot-Water Supply ........................................................................................................ 634. Precommercial Renewable Energy Technologies (BIG/GT, Solar Thermal, Solar PV) ........... 655. Energy-Efficient Product Manufacturing and Markets (Lights, Boilers, Refrigerators) ........... 696. Energy Efficiency Investments in Industry............................................................................. 747. Energy-Efficient Building Codes and Construction................................................................ 828. District-Heating Energy Efficiency and Biomass/Geothermal Heat Production ...................... 869. Fuel Switching and Production/Recovery .............................................................................. 90

ANNEX C: EMERGING IMPACTS OF COMPLETED OR CONTINUING PROJECTS ............951. Solar Home Systems.............................................................................................................. 952. Grid-Connected Wind and Biomass Power ........................................................................... 973. Energy-Efficient Lighting...................................................................................................... 994. Fuel Switching and Production/Recovery ............................................................................ 101

REFERENCES .................................................................................................................................. 103

ENDNOTES....................................................................................................................................... 109

List of Tables and Boxes

TABLES

1. Program Objectives in a Logical Framework ..........................................................................82. Project Clusters and Approaches........................................................................................... 103. Mechanisms for Promoting Energy Efficiency ...................................................................... 124. Mechanisms for Promoting Renewable Energy..................................................................... 14

5. A Framework for Measuring Changes in Markets ................................................................. 34

A1. Generic Barriers Relevant to Energy Efficiency and Renewable Energy ............................ 40A2. Generic Barriers Relevant to Energy Efficiency ................................................................. 41A3. Generic Barriers Relevant to Renewable Energy ................................................................ 42

B1. Solar Home Systems and Rural Energy Services Projects ................................................... 52B2. Grid-Connected Renewable Energy Projects ...................................................................... 59B3. Solar Hot-Water Supply Projects........................................................................................ 64B4. Precommercial Renewable Energy Technologies Projects (OP7)........................................ 67B5. Energy-Efficient Product Manufacturing and Markets Projects........................................... 71B6. Energy-Efficiency Investments in Industry Projects............................................................ 77B7. Energy-Efficient Building Codes and Construction Projects ............................................... 84B8. District-Heating Energy Efficiency and Biomass/Geothermal Heat-Production Projects ..... 88B9. Fuel Switching and Production/Recovery Projects.............................................................. 91

BOXES

1. Beneficiaries of Capacity Building (Technical, Financial, and Regulatory Skills).................. 182. New Institutions ................................................................................................................... 213. Leveraged Financing from the Private Sector........................................................................ 244. Quantitative and Qualitative Characteristics of Markets ........................................................ 325. Three Types of Indicators to Measure Project Impacts .......................................................... 33

A1. Barriers to Diffusion of Solar Home Systems and Solar Hot-Water Heating ........................ 43A2. Barriers to Energy Efficiency in District Heating in Countries in Transition ....................... 44A3. Barriers to Energy Efficient Refrigerators in China ............................................................. 45

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Executive Summary

This paper provides the first systematic review ofGEF climate change projects, offering a catalogueof project types and design approaches. The 84projects reviewed represent an extensiveknowledge base and range of innovativeapproaches to promoting energy efficiency andrenewable energy. The paper also provides aninitial review of emerging project impacts acrossthe entire portfolio and suggests future evaluationmethods. The paper will interest those seeking tounderstand the GEF’s approach to climate changemitigation, those designing GEF climate changeprojects or any other project to build sustainablemarkets for climate-friendly technologies, andthose undertaking project impact evaluations. Thepaper does not evaluate project implementationperformance nor does it address the hugeimplementation challenges faced by projectmanagers.

Climate Change Mitigation Strategies

Energy-efficiency and renewable energytechnologies are prominent in most sustainabledevelopment programs, for example Agenda 21,and in scientific assessments like those of theIntergovernmental Panel on Climate Change(IPCC). Global climate change mitigationparticularly depends on widespread use of thesetechnologies in all countries. These technologiescan also advance important national developmentgoals, such as cleaner air, energy services for ruralpopulations, and energy-efficient domesticindustries. Many opportunities exist to utilizethese technologies although realization of theseopportunities is often constrained by many typesof barriers.

Since 1991, the GEF has assisted developingcountries and countries in transition in meetingboth national-development and global-climate-change objectives by means of energy efficiencyand renewable energy technologies. The GEF andits three implementing agencies, the UNDevelopment Program, the UN EnvironmentProgram, and the World Bank Group (including

the Group’s private-sector affiliate, theInternational Finance Corporation) havedeveloped, financed, and implemented a series ofprojects that reflect the GEF’s climate changemitigation strategies. Many types of agencies areexecuting the projects, including national andlocal governments, private-sector entities, andnon-governmental and community organizations.The range of project beneficiaries, cofinancingsources, and other stakeholders is equally diverse.

GEF climate change mitigation strategies haveevolved as the GEF continues to experiment, learnfrom experience, and leverage resources that aretiny relative to the enormous challenges posed byclimate change. An initial three-year pilot phasewas followed by the adoption of an operationalstrategy and three long-term operationalprograms. These long-term programs aredesigned to promote energy efficiency andrenewable energy by removing barriers, reducingimplementation costs, and reducing long-termtechnology costs. Programs are designed to buildsustainable commercial markets, leveragefinancing from public and private sources, andfacilitate technology diffusion. With its limitedresources, the GEF cannot significantly affectgreenhouse gas emissions in the short term; rather,the GEF promotes the development and use oftechnologies that are critical for addressing theclimate change problem in the long term.

The GEF continues to explore and adopt newstrategies and policies. For example, the GEF isconsidering how to further engage the privatesector in projects and strategic planning;contingent financing is being piloted as a way toreduce technology financing risks without theneed for direct grants; new strategic partnershipswith other agencies are being formulated; andnew ways for non-governmental organizationsand other stakeholders to participate in projectsare being considered.

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GEF Climate Change Projects

From 1991 to mid-1999 the GEF approved grantstotaling $706 million for 72 energy efficiency andrenewable energy projects in 45 countries. Thetotal cost of these projects exceeds $5 billionbecause the GEF grants have leveraged financingand other resources from governments, otherdonor agencies, regional development banks, theprivate sector, and the three GEF projectimplementing agencies. An additional $121million has been approved in grants for 20 climatechange “short-term response measures.” Directproject beneficiaries include governmentagencies, private-sector firms, communityorganizations, households, and providers of publicservices. The climate change project portfoliocontinues to grow as new projects are approved bythe GEF Council on a regular basis.

Existing project designs from the past eight yearsrepresent an extensive knowledge base and rangeof approaches to promoting energy efficiency andrenewable energy. Experience and knowledge ofexperts in each country are incorporated intoproject designs, along with substantial technicalreviews. Approved projects reflect innovative,experimental attempts to promote technologiesthrough new approaches and best practices.Experimentation is needed because GEF projectstake place in diverse national contexts andbecause accumulated international historicalexperience is still far from providing definitiveanswers about how to accomplish GEF objectivesin developing countries and countries intransition. Projects are often the first of their kindin the countries concerned. Project designscontinue to evolve based on information fromearlier projects, international best practices, andincreasing understanding of how to accomplishthe strategic goals of the GEF.

In order to make the project portfolio easilyaccessible, we organize it into clusters andsynthesize project approaches within clusters.Projects within a cluster share commonapproaches that can be highlighted despite theirdiversity. Examples of project approachesinclude: installing demonstration equipment;catalyzing sustainable markets by increasingmarket volume, reducing technology costs, and

raising consumer awareness; building capacitiesof public agencies, private-sector firms, and non-governmental organizations; creating orstrengthening technology intermediation centers;disseminating information; conducting studies ortargeted research; developing national strategiesor policy frameworks; providing new financingservices; and creating new institutions.

We define nine project clusters: solar homesystems and rural energy services, grid-connectedrenewable energy, solar hot-water supply,precommercial renewable energy technologies,energy-efficient product manufacturing andmarkets, energy efficiency investments inindustry, energy-efficient building codes andconstruction, district-heating energy efficiencyand biomass/geothermal heat production, and fuelswitching and production/recovery.

Key aspects of GEF projects include:

Equipment installations and demonstration.Many GEF projects install and demonstrateequipment, such as solar home systems, compactfluorescent lamps, and energy-efficient motors.The directly installed capacity and energy savingsfrom these projects can be significant, but theseinstallations are fundamentally intended asdemonstrations and must be replicated in order toachieve large-scale, indirect impacts.

Capacity building. Capacity building, a centralfeature of most GEF projects, assists beneficiariesin understanding, absorbing, and diffusingtechnologies. Projects develop the skilledpersonnel and institutional capacities that arewidely recognized as important for technologydiffusion. Projects strengthen the capacities ofpublic agencies, private-sector firms, financiers,consumers, community organizations, and non-governmental organizations. For example, manyprojects assist public agencies to regulate,promote, finance, and sustain technologies.Projects may also provide technical andcommercial information and training/advisoryservices to private-sector firms.

New institutions and financing services. Projectsare demonstrating a variety of new institutionsand financing services for promoting technology

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diffusion. For example, financing is provided tolocal community organizations, private-sectorfinanciers and financial intermediaries, localentrepreneurs, public or private revolving funds,private debt/equity funds, and private-sectorrenewable energy project developers. Projectspilot industrial-sector energy service companies(ESCOs), rural energy-service concessions, andutility-based demand-side management programs.Projects also provide combinations of differenttypes of financing for private-sector activities,such as grants, concessional (no- or low-interest)loans, and contingent loans (forgivable underspecified conditions).

Market transformation. Projects assistmanufacturing firms to develop and marketenergy-efficient products as part of so-called“market transformation” approaches in whichsupply and demand sides are stimulatedsimultaneously. These approaches can includetechnical and financial assistance to producers,new equipment standards and certification,consumer information and education, regulatorychanges, and other incentives.

Engaging the private sector in projects. Theprivate sector participates directly in GEF projectsas manufacturers and dealers, local projectdevelopers, financial intermediaries, recipients oftechnical assistance, technology suppliers andcontractors, and project executors. In addition,several GEF projects are designed to directlymobilize private-sector financing. TheInternational Finance Corporation is executingfive projects in which managed investment fundsare designed to leverage $375 million in financingfrom the private sector with $95 million in GEFgrants. Other projects competitively solicitfinancial contributions from manufacturers toreduce retail equipment prices.

Roles of non-governmental organizations (NGOs).GEF projects involve international and nationalNGOs, community-based organizations, industryassociations, consumer groups, and educationalinstitutions. These organizations may help designand prepare projects, execute projects, adviseimplementation committees, train projectbeneficiaries, supply services and equipment,

conduct social research, or provide technical orpolicy support.

Project Impacts and Replication

Although most approved projects are still beingimplemented, project experiences, impacts, andlessons are emerging. Out of 72 energy efficiencyand renewable energy projects approved since1991, eight were fully completed by mid-1999.We summarize the available information on GEFproject impacts from a variety of sources but findthe volume of current information small relativeto the potential for future project impactassessments as the portfolio matures. Very littlepost-project evaluation has been possible, to judgeindirect impacts on markets and stakeholdersthrough replication because insufficient time haselapsed since completion of these projects. Insome cases several years may be required to fairlyjudge indirect impacts. Evaluation activities bythe GEF and its implementing agencies have beenescalating as more results are becoming available.

Impacts are particularly visible from projectsinvolving solar home systems, grid-connectedwind and biomass power, energy-efficientlighting, and fuel switching andproduction/recovery. Completed or continuingprojects have fostered new national policy andregulatory frameworks, international technologytransfer through the private sector, growth ofdomestic industries for energy efficiency andrenewable energy technologies and services,increased sales and investments, and provision ofenvironmentally sound energy services to end-users. In addition to these development benefits,projects have directly and indirectly reducedgreenhouse gas emissions (quantified greenhousegas emissions reductions from individual projectsare not addressed in this paper).

Replication of direct impacts to produce indirectimpacts is integral to GEF climate changestrategies. Replication may occur, for example,from local to national markets, from one private-sector firm to others, from one local governmentto another, and from one country to another.Although there are a variety of mechanisms topromote replication that can be incorporated into

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projects, replication ultimately depends on actionsof governments, consumers, NGOs, and/or theprivate sector after a project is completed.

The problem of measuring direct and indirectimpacts is fundamentally one of measuringchanges in markets. There is scant publishedliterature on this subject and thus GEF projectevaluators tread in a relatively immature field.We propose a framework for measuring changesin markets that distinguishes between “physicalchanges,” such as changes in investments andsales, and “market structure/function changes,”such as changes in costs, transaction rules,availability of services, and human resource skills.In this framework, three different types ofindicators measure market interventions (directproject outputs), market development (indirectchanges catalyzed by projects), and marketsustainability (long-term impacts). Theframework has not yet been applied to completedGEF projects but suggests a direction for futureevaluations.

As the number of projects in the GEF portfoliogrows, there is potential synergy if projects indifferent countries or sectors reinforce each otherand if project beneficiaries share their experiencesand catalyze changes elsewhere. That is, a“critical mass” may be reached in sometechnology applications, project approaches, orcountries, which will provide a “programmaticbenefit” from the portfolio— that is, a benefitgreater than the sum of the individual projectbenefits.

Overall, prospects for sustainability andreplication of GEF climate change projects arestill mixed and uncertain. GEF projects haveattracted considerable attention from policymakers, the private sector, and NGOs. GEFstrategies continue to evolve in dialogue withthese and other stakeholders. Achieving anddemonstrating programmatic benefits from theGEF project portfolio will depend on continueddialogue and understanding of project designs andimpacts by all stakeholders.

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Acronyms and Units

BIG/GT Biomass Integrated Gasification/Gas TurbineCFL Compact Fluorescent LampCHP Combined Heat and PowerDSM Demand-Side ManagementESCO Energy-Service CompanyGEF Global Environment FacilityGHG Greenhouse GasGWh Gigawatt-hourIFC International Finance CorporationIPCC Intergovernmental Panel on Climate ChangeIPP Independent Power ProducerkW KilowattkWh Kilowatt-hourLPG Liquid Propane GasMSW Municipal Solid WasteMW MegawattMWe Megawatt-electricMWh Megawatt-hourMWp Megawatt-peakNFFO Non-Fossil-Fuel ObligationNGO Non-Governmental OrganizationOECD Organization for Economic Cooperation and DevelopmentOP Operational ProgramPIR Project Implementation ReviewPMU Project Management UnitPURPA Public Utilities Regulatory Policy ActPV PhotovoltaicPVMTI Photovoltaic Market Transformation InitiativeR&D Research and DevelopmentREEF Renewable Energy and Energy Efficiency FundSHS Solar Home SystemSHW Solar Hot WaterSME Small- and Medium-Size EnterpriseSTAP Scientific and Technical Advisory PanelSTRM Short-Term Response MeasureT&D Transmission and DistributionTVE Town and Village EnterpriseUNDP United Nations Development ProgramUNEP United Nations Environment ProgramUNFCCC United Nations Framework Convention on Climate Change

Introduction

Since 1991, the Global Environment Facility(GEF) and its three implementing agencies (UNDevelopment Program, UN EnvironmentProgram, and World Bank) have assisteddeveloping countries and countries in transition inpromoting energy efficiency and renewableenergy technologies. GEF strategies for suchassistance have evolved to meet nationaldevelopment goals and global climate changeobjectives. By mid-1999, 72 energy efficiencyand renewable energy projects had been approvedfor assistance to a variety of beneficiaries,including government agencies, private-sectorfirms, community organizations, households, andproviders of public services.

GEF projects are innovative and are often the firstof their kind in the countries where they occur.The experience and knowledge incorporated intoproject designs is extensive; projects aredeveloped by country governments and expertsand then undergo technical reviews by the GEFCouncil, the GEF’s Scientific and TechnicalAdvisory Panel (STAP), GEF secretariat staff, allthree implementing agencies, and the UnitedNations Framework Convention on ClimateChange (UNFCCC) Secretariat. Indeed, the firstGEF Assembly in 1998 agreed that the “GEFshould remain a facility at the cutting edge,innovative, flexible and responsive to the needs ofits recipient countries, as well as a catalyst forother institutions and efforts” (GEF 1998d, p.9).

GEF climate change projects represent anemerging body of experimental, case-orientedinformation on innovative approaches topromoting energy efficiency and renewableenergy technologies in developing countries andcountries in transition. Although much projectinformation exists in published and electronicform, no systematic review of these projectsexists.1 This paper provides the first suchsystematic review, beginning with evolving GEFclimate change strategies and ending withemerging project impacts. The paper covers bothlong-term projects and short-term responsemeasures but does not discuss other GEF climate

change initiatives such as enabling activities andthe small grants program.

Section A sets the context for understanding theGEF project portfolio by describing current andpast GEF strategies for climate change. Section Bdescribes the climate change projects that havebeen approved by the GEF and synthesizes thegeneral approaches taken and the specificmechanisms used in project designs. Section Balso discusses the roles of public-sector agencies,private-sector firms, and non-governmentalorganizations in GEF project designs. Section Creviews emerging impacts from completed orcontinuing projects and suggests an analyticalframework for understanding and evaluatingproject impacts and replication.

Three annexes present supplementary material.Annex A reviews technical-economicopportunities for energy efficiency and renewableenergy and barriers to technology diffusion.Annex B reviews the detailed characteristics andapproaches of all existing projects in the GEFportfolio, separated into nine different projectclusters. Annex C gives narrative descriptions ofemerging project impacts for four specific clustersof projects based on published evaluation reportsand unpublished data.

Several related topics are not covered in thispaper, such as project implementationperformance (project management, schedules,budgets, stakeholder involvement, etc.), theadequacy and coverage of existing strategies, theadequacy of monitoring and evaluation efforts,and the quantification of greenhouse gasemissions reductions (see Porter et al. 1998;World Bank 1998; GEF 1999a; Kaufman 2000).Nevertheless, the descriptive informationcontained in this paper provides a goodfoundation for addressing these issues.

Introduction Promoting Energy Efficiency and Renewable Energy

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Section A: Climate Change Mitigation Strategies

1. National Development and Global ClimateChange

Energy-efficiency and renewable energytechnologies are prominent in most sustainabledevelopment programs, for example Agenda 21(UN 1993). According to the IntergovernmentalPanel on Climate Change (IPCC) secondassessment report, stabilization of atmosphericgreenhouse gas concentrations at levels that willprevent serious interference with the climatesystem can only be achieved by dramaticallyincreasing utilization of renewable energysupplies. In one IPCC scenario, in whichgreenhouse gases are stabilized by the year 2050,the share of renewable energy in the global energybalance must increase by tenfold from currentlevels. In developing countries, the requiredincrease is even more dramatic, estimated attwenty-fold between 1990 and 2050. Further,improvements in energy efficiency and energyconservation can reduce emissions in the shorterterm, thus “buying time” for the required changesin energy production (IPCC 1996a, 1996b and1996c).

Energy-efficiency and renewable energytechnologies can also advance important nationaldevelopment goals, such as clean air, energyservices for rural populations, fuel importreductions, and more efficient domestic industries.For example, solar home systems (SHS) cansupply energy for lighting, radio, television, andoperation of small appliances in rural householdsthat lack access to electricity grids (see AnnexB.1). Solar home systems use photovoltaic solarpanels and storage batteries to provide modestamounts of electricity that can eliminate the needfor candles, kerosene, liquid propane gas, and/orbattery charging. Besides the avoided costs ofthese fuels, benefits include increasedconvenience and safety, improved indoor airquality, and a higher quality of light than kerosenelamps for reading. Large rural populationswithout access to electric grids could make use ofSHS at costs that are competitive with existingenergy sources, and are less expensive than

extending rural electricity grids (Goldemberg andJohansson 1995; Foley 1995; World Bank 1996).

Energy efficiency also provides domestic benefits,reducing costs and enhancing competitiveness.Energy-intensity improvements in industry canlower production costs, and energy efficiencyimprovements in manufactured product designscan reduce operation costs for a wide variety ofconsumers. Improvements can also delay or avoidthe costs of building new power plants. All ofthese opportunities can help make domesticindustries more competitive abroad. Theseimprovements are important; although energyintensities (energy consumption per unit of GNP)have fallen in the developed world during the pasttwo decades, in part because of energy efficiencyimprovements, energy intensities have notsimilarly decreased in many developing countriesand countries in transition (World Bank 1993).Even in countries such as China, where greatgains have been made in energy efficiency duringthe past two decades, the potential remains to domuch more (Sinton and Levine 1998).

2. Energy Efficiency and Renewable EnergyOpportunities and Barriers

Many opportunities to improve energy efficiencyare cost-effective at current energy andtechnology costs in developing countries andcountries in transition, using off-the-shelfcommercial technologies. Such technical-economic opportunities are defined by theirtechnical characteristics for reducing energyconsumption and by indicators of their cost-effectiveness, such as cost of conserved energy,simple pay-back time, and economic rate ofreturn.2 These opportunities have been called“win-win” for their potential to provide bothglobal and domestic benefits.

As noted by the IPCC in its second assessmentreport, several renewable energy technologiesalready have become cost-competitive with fossil-fuel-based technologies in many applications, or

Section A: Climate Change Mitigation Strategies Promoting Energy Efficiency and Renewable Energy

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would become competitive if implementationcosts could be lowered through practicalexperience and commercialization in themarketplace (IPCC 1996c). In other words,renewable energy options can be deployedprofitably today in a wide-range of applications,particularly in remote and rural areas. Still, inmany applications and resource conditions, thecosts of renewable energy technologies are not yetcompetitive with those of conventional energysupplies. In these cases, further intervention isneeded to reduce the costs of the technologiesthemselves. Cost-effective and near-commercialopportunities for energy efficiency and renewableenergy are elaborated below.

Energy Efficiency. A large number of scientificstudies combined with the extensive practicalexperience of the past 30 years point to manytechnology applications and markets that meetcost-effectiveness criteria (such as 20% rate ofreturn on investment or five-year simple paybacktime), and that offer large potential for CO2

emissions reduction.3 For many electricity-efficiency opportunities, conserving a kWh ofelectricity costs less than producing it. Ten to 30percent (or more) of energy consumption can besaved in many sectors in developing countries andcountries in transition using measures that havealready been commercialized and that are cost-effective to consumers and society. Opportunitiesto reduce energy use include (see Annex A fordetails and references):

• electricity consumption in industry and inbuildings;

• coal, oil, and gas consumption in industry;• space-heat consumption in buildings;• fuelwood and coal consumption in household

cooking;• electricity consumption in irrigation pump-

sets in agriculture;• fuel use in automobiles, buses, and trucks;• losses in electricity production, transmission,

and distribution; and• losses in oil and gas transmission and

distribution pipelines.

Renewable Energy. Renewable-energytechnologies that are already or nearly

commercialized and are cost-competitive withconventional energy sources in many applicationsinclude solar water heating, off-grid electrificationwith solar photovoltaics (PVs), small-scalebiomass power generation, biofuels, grid-connected and off-grid wind power, smallhydropower, geothermal power, and methaneutilization from urban and industrial waste.Renewable energy sources that are site specific,such as small hydro and geothermal, are expectedto play a more limited role than some of the othertechnologies. Potential depends greatly ongeographic resources such as wind speeds, solarradiation, and biomass residues from agricultureand other industries. If good geographic resourcesare present, several applications offer plentifulopportunities for cost-competitive commercial ornear-commercial renewable energy in developingcountries and countries in transition. Theseapplications have been identified by scientificstudies and practical program and projectexperience (see Annex A for details andreferences). They include:

• home electrification with stand-alone solarphotovoltaic systems;

• electricity for village-power applications frommini-hydro, wind, and solar;

• electricity for electric power grids frombiomass, wind, and geothermal;

• agricultural and domestic water supply withmechanical wind pumps;

• transportation fuels from biomass;• heating, cooling, and hot water for buildings

using solar technologies;• district heating from biomass and geothermal;

and• biogas digesters for lighting and water

pumping.

Other renewable energy technologies are not yetcommercial but show promise if their costsdecrease relative to the costs of conventional fuels(Johansson et al. 1993; Williams et al. 1998).Examples include:

• photovoltaics for grid-connected bulk powerand distributed power applications;

• advanced biomass power through biomassgasification and gas turbines;

Promoting Energy Efficiency and Renewable Energy Section A: Climate Change Mitigation Strategies

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• solar thermal electric technologies in high-insolation regions.

Many of the above opportunities for energyefficiency and renewable energy are not beingrealized fully because barriers of many types limitor prevent technology diffusion and investment(see Annex A for details and references). Barriershave been well characterized in energy efficiencyand renewable energy literature and are oftenreferred to as “market barriers,” “transactionbarriers,” “market failures,” and “marketimperfections.” The Intergovernmental Panel onClimate Change (IPCC) noted in its secondassessment report that:

Most studies suggest that a large potentialexists [for energy efficiency] in manysectors and regions, while at the sametime acknowledging that institutional,economic, and social barriers may delayor inhibit the achievement of fullefficiency potentials in the near future.(IPCC 1996a, p.12)

Barriers may be well known, but overcomingthem is a daunting challenge. For example, manypoint out that diffusion of renewable energytechnologies among commercially viableapplications has been slower than might beexpected based upon technology developmentprogress and economic costs alone (Kozloff andShobowale 1994; Jackson 1993). The lag in theadoption of renewable energy technologies isfrequently attributed to the difficulties ofovercoming barriers— including imperfect capitalmarkets, institutional barriers, poor marketacceptance, financing risks and uncertainties,transactions costs not included in market prices,and lack of skilled personnel.

3. GEF Strategies for Climate Change

In 1992, the UN Framework Convention onClimate Change (UNFCCC) designated the GEFas an interim financial mechanism to fundmitigation and response strategies in eligibledeveloping countries and countries in transition.4

This decision was the culmination of a remarkableinternational process to find mechanisms for

global environmental improvement (Sjoberg1994). GEF assistance is “additional” to existingdevelopment processes and the GEF funds onlythe “incremental costs” of greenhouse gasreductions (Ahuja 1993; GEF 1996d). GEFassistance takes the form of a series of projectsconducted by the three GEF implementingagencies: the UN Development Program, the UNEnvironment Program, and the World Bank(including the International Finance Corporation).Projects also leverage financing and otherresources from governments, bilateral donoragencies, the private sector, and the three GEFimplementing agencies.

The first three years of the GEF were considered apilot phase, in which projects demonstratedgreenhouse gas emissions reductions with lowcosts per ton of direct carbon abatement.5

Although the GEF has continued to finance short-term response measures in the tradition of thepilot phase, it was clear that the GEF’s limitedresources could not significantly affectgreenhouse gas emissions in the short term. Thus,following the pilot phase, GEF strategies began toevolve in order to attain higher leverage of limitedresources (Anderson and Williams 1993). GEFprojects began to enhance public-sector capacities,promote project sustainability and replication (i.e.,technology diffusion), and develop global,national, and local markets for technologies inwhich the private sector could play a major role.These goals were codified in 1996-97 when theGEF adopted an operational strategy and threelong-term operational programs designed topromote energy efficiency and renewable energyby removing barriers, reducing implementationcosts, and reducing long-term technology costs(GEF 1996a, 1997a). A significant goal of theseprograms is to catalyze sustainable markets in thelong term and enable the private sector to financeand diffuse technologies.

The three long-term operational programs forclimate change are:6

(i) Removing Barriers to Energy Conservationand Energy Efficiency. This program is designedto remove barriers to the large-scale application,implementation, and dissemination of least-economic-cost, commercially established or


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newly developed energy-efficient technologies;and to promote more efficient energy use where areduction in greenhouse gas emissions will result.

(ii) Promoting the Adoption of Renewable Energyby Removing Barriers and ReducingImplementation Costs. This program is designedto remove barriers to the use of commercial andnear-commercial renewable energy technologies,and to reduce additional implementation costs forrenewable energy technologies that result fromlack of practical experience, initial low-volumemarkets, or the dispersed nature of applications.

(iii) Reducing the Long-Term Costs of Low-Greenhouse-Gas-Emitting Technologies. Thisprogram is designed to accelerate technologicaldevelopment and increase the market share oflow-greenhouse-gas-emitting technologies thathave not yet become commercial, lower-costalternatives to fossil fuels but which showpromise of becoming so in the future.

The goals of the first two programs are similar.Both aim to reduce long-term CO2 emissionsassociated with energy consumption andproduction by promoting increased use ofcommercial or near-commercial technologies,removing barriers to market-oriented transactionsand policies, and catalyzing public- and private-sector investments in profitable mitigationprojects. Both programs encourage sustainabilityand replication of project impacts bydemonstrating cost recovery and facilitatingmainstream financial support, including supportfrom the multilateral development banks. Bothprograms also facilitate the learning processrequired for widespread replication oftechnologies and project approaches. Theprograms differ in that they address differenttechnologies that often face different key barriers.

The goal of the third program is cost reduction.The GEF expects that technological learning andeconomies of scale (also called cost “buy-down”),achieved at least in part through GEF projects,will reduce long-term costs to commerciallycompetitive levels. Such industrial “learningcurves” have been documented for a range oftechnologies and have been applied to renewableenergy technologies as well (Krawiec 1980;

Christiansson 1995). This program assumes thatwhen technology costs decline sufficiently,technologies will be adopted and replicated by theprivate sector. For many technologies in thisprogram, the “buy-down” process will take manyyears or even decades; the GEF’s goal is toaccelerate this process.

The GEF continues to explore and adopt newstrategic and policy directions. For example, amedium-sized project category was recently addedto the long-term operational programs to facilitateexpedited, flexible projects up to $750,000 for awide range of beneficiaries (GEF 1997d). Thisfollowed the establishment of a GEF-supportedsmall grants program by the UNDP that providesquick-response grants up to $50,000 (Richards etal. 1995; GEF 1997c; Wells et al. 1998). TheGEF is considering how to further engage theprivate sector in GEF activities, at both projectand strategic levels, such as with non-grantfinancing, support for investment feasibilitystudies, and long-term partnerships (GEF 1999b).Contingent financing (e.g., contingent grants andloans, partial credit guarantees) is being piloted asa way to reduce financing risk without the needfor direct grants (Ashford 1999). The GEF is alsoconsidering how to strengthen the roles of non-governmental organizations and otherstakeholders (GEF 1996b, 1996c). Additionalprograms for sustainable transport and integratedecosystem management related to climate changeare also being developed.

4. GEF Strategies in a “Logical Framework”Approach

GEF strategies can be understood in a “logicalframework” that illustrates how project activitiesare expected to meet GEF objectives (see Table1). Projects provide services to public- andprivate-sector beneficiaries, who in turn generateproject outputs or results (e.g., demonstrationinstallations, new commercial services, enhancedcapacities, new policy frameworks, and targetedresearch results). These outputs help to createsustainable technology diffusion and marketdevelopment, particularly through replication(e.g., lower costs, more investments or sales, moredomestic firms or joint ventures, greater public

Promoting Energy Efficiency and Renewable Energy Section A: Climate Change Mitigation Strategies

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acceptance and demand for technologies).Finally, as public and private entities adopttechnologies and place them in service,greenhouse gas emissions decline relative tobaseline or “business as usual” situations.

For example, a project to promote high-efficiencyrefrigerators could include activities likeconsumer education, support for product labeling,provision of dealer incentives, and technicalassistance to producers to upgrade refrigeratordesigns. Project outputs would be more awareconsumers, labeled products in stores, dealers whocarry high-efficiency refrigerators, and greaterproduction of high-efficiency models by somemanufacturers. Replication would meanexpansion of the number of manufacturers,regions, dealers and/or consumers (see alsoSection C). National market impacts would beexpected as high-efficiency refrigerators areproduced and purchased (measured at thedevelopment objective level). Other developmentimpacts could include reduced consumer energybills, reduced local air pollution resulting fromlower energy consumption, and greaterinternational competitiveness of domesticmanufacturers. Global impacts would result fromlower CO2 emissions associated with lowerenergy consumption.

The logical framework is understood “from thebottom up,” according to how fulfillment ofobjectives at lower levels leads to fulfillment ofobjectives at higher levels. Each level in thelogical framework is designed to support theobjective of the next higher level, provided thatthe assumptions hold true and risks provemanageable. For example, on the project-inputslevel, risks and uncertainties exist about howeffectively the specific project activities willachieve expected project outputs. On the project-outputs level, a key assumption is that removal ofspecific targeted barriers in a specific market isnecessary and also sufficient to stimulate markets.So appliance standards could be enacted, butmanufacturers might not adhere to them becauseof other barriers that are not addressed; or energyservice companies could be formed and trainedbut might still lack access to capital; or efficientcook stoves could be demonstrated but no firmsmight be willing to produce and sell them; orincentives could be created, but individuals ororganizations might not respond as predictedbecause of unanticipated political, social, cultural,or institutional factors, or because of inaccurateunderstanding of consumer needs and preferences.


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Table 1: Program Objectives in a Logical Framework

Framework level ObjectiveIndicators and

monitoring Assumptions and risksGlobal objective

(Avoided GHG emissions)

Reduce CO2 emissionsfrom energy consumptionand production

Avoided GHG emissionsthat result from marketdevelopment and otherchanges in practices andinfrastructure

Development objective

(National market and otherdevelopment impacts)

Build markets for energyefficiency and renewableenergy technologies

Market developmentindicators (see Section C)measure indirect projectimpacts

Changes in products, sales,and investments will avoidor reduce energyproduction from GHG-emitting sources

Project outputs

(The direct or intendedresults of projects)

Remove barriers as aconsequence of projectoutputs

Market interventionindicators (see Section C)measure project outputsand direct impacts

Project outputs arenecessary and sufficient tobuild markets

Project inputs

(Specific project activities)

Complete specificactivities within a project(e.g., training, institutionbuilding, research,demonstration, technicalassistance, informationdissemination, etc.)

Project performancemonitoring

Project activities takentogether are sufficient andnecessary to produceproject outputs

Section B: GEF Climate Change Projects

1. The GEF Project Portfolio

From 1991 to mid-1999, the GEF Councilapproved grants totaling $706 million for 72energy efficiency and renewable energy projectsin 45 countries. The total cost of these projectsexceeds $5 billion because the GEF grants haveleveraged financing through loans and otherresources from governments, other donoragencies, regional development banks, the privatesector, and the three GEF project implementingagencies (UN Development Program, UNEnvironment Program, and World Bank Group).An additional $121 million has been approved ingrants for 20 climate change “short-term responsemeasures” (GEF 1999c).

Existing project designs from the past eight yearsrepresent an extensive knowledge base with adiverse range of approaches to promoting energyefficiency and renewable energy. The designs ofapproved projects reflect innovative andexperimental attempts to promote technologiesthrough new approaches and best practices.Designs continue to evolve based on lessonslearned from earlier projects, international bestpractices, and improved understanding of how toaccomplish the GEF’s strategic goals. Theclimate change project portfolio continues to growas new projects are approved by the GEF Councilon a regular basis.

In order to make the project portfolio easilyaccessible, we organize it into clusters andsynthesize project approaches within clusters (seeAnnex B and Table 2). Projects within a clustershare many common approaches that can behighlighted despite their diversity.7 Examples ofproject approaches include demonstratingtechnical or commercial feasibility by installingdemonstration equipment; catalyzing sustainablemarkets by increasing market volume, reducingtechnology costs, and raising consumerawareness; building capacities of public agencies,private-sector firms, and non-governmentalorganizations; creating or strengtheningtechnology intermediation centers; disseminating

information; conducting studies or targetedresearch; developing national strategies or policyframeworks; creating new financing services;and creating new institutions.

We define nine project clusters: solar homesystems and rural energy services, grid-connectedrenewable energy, solar hot-water supply,precommercial renewable energy technologies,energy-efficient product manufacturing andmarkets, energy efficiency investments inindustry, energy-efficient building codes andconstruction, district-heating energy efficiencyimprovements in countries in transition, and fuelswitching and production/recovery.8 A fewprojects appear in more than one cluster becauseof the diverse nature of their components (thuscluster totals add up to more than the portfoliototal).9

2. Project Designs and Mechanisms forPromoting Technologies

The project approaches described above representa wide variety of mechanisms for promotingenergy efficiency and renewable energy. Thisdiversity results in part from the experimentalnature of GEF projects, which are often the first oftheir kind in the countries where they take place.Projects are experimental because of the widediversity of national contexts in which projectstake place and because historical experience andaccumulated international lessons are still far fromproviding definitive answers about how toaccomplish GEF objectives in developingcountries and countries in transition.

For example, although much has been writtenabout energy efficiency policies and programs,including utility-based demand-side managementand market transformation programs, much of theactual experience has occurred in developedcountries (Cavanagh 1989; Philips 1991; Levineet al. 1991 and 1992; Nadel 1992; World Bank1993; Geller and Nadel 1994; Nadel and Latham

Section B: GEF Climate Change Projects Promoting Energy Efficiency and Renewable Energy

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Table 2: Project Clusters and ApproachesProject Clusters Project ApproachesSolar home systems and ruralenergy services

21 projects; see Annex B.1

• Pilot private-sector delivery models• Pilot credit mechanisms and make systems affordable• Pay first-cost subsidies and lower import duties to make systems economically

competitive and to amass an installed base to lower future implementation costs• Build capacities of public agencies and private-sector firms• Enact codes and standards and put in place certification and testing institutions• Conduct consumer awareness and marketing programs

Grid-connected renewableenergy (wind, small hydro,biomass, geothermal)


• Demonstrate technologies and their commercial and economic potential• Build capacities of project developers, plant operators, and regulatory agencies• Develop regulatory and legal frameworks that encourage independent power

producers and establish transparent, non-negotiable tariff structures• Create financing mechanisms for project developers

Solar hot-water supply


• Reduce installed costs and make systems affordable• Raise awareness among consumers and policy makers• Promote a favorable policy framework• Improve product quality

Precommercial renewableenergy technologies(BIG/GT, solar thermal, PV)


• Select and install technologies for attractive niche markets with good cost-reduction potential

• Catalyze demonstration effects

Energy-efficient productmanufacturing and markets(lights, boilers, refrigerators,chillers)


• Provide technical assistance and technology transfer to manufacturers to upgradeproduct designs to be more energy efficient

• Reduce retail prices of technology through subsidies, bulk procurement, ormanufacturer contributions

• Pilot new distribution mechanisms through retailers, dealers, or electric utilities• Educate consumers/users about the characteristics, costs, and benefits of energy

efficiency technologies• Develop technology standards and/or certification mechanisms• Conduct utility-based DSM programs

Energy efficiencyinvestments in industry


• Pilot innovative financing mechanisms• Promote or create energy service companies• Create or strengthen dedicated energy efficiency centers• Build capacity of industrial enterprises to understand, select, finance, and install

energy-efficient technologies• Demonstrate the technical, economic, and commercial viability of energy

efficiency and energy conservation measuresEnergy-efficient buildingcodes and construction


• Collect and disseminate data on building characteristics• Develop new codes and standards and establish new agencies or institutional

mechanisms to enforce the standards and/or certify equipment• Demonstrate and/or test technical measures for improving energy efficiency• Conduct studies of potential energy savings and audit selected buildings

District-heating energyefficiency andbiomass/geothermal heatproduction


• Create new financing mechanisms, particularly involving the private sector• Build capacities among municipal governments, district heating companies, and

households to understand, finance, and implement energy efficiency projects• Create new regulatory frameworks that provide incentives to improve energy

efficiency and conserve energy for households and heat suppliers• Demonstrate technologies and disseminate information on technology

characteristics, costs, and benefits to households and heat suppliersFuel switching andproduction/recovery


• Demonstrate technical, economic, and commercial feasibility of low-carbon-fuelplants or fuel production/recovery techniques

• Develop national strategies, plans, and institutions for promoting fuel switchingand production/recovery technologies

Promoting Energy Efficiency and Renewable Energy Section B: GEF Climate Change Projects

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1994; Reddy et al. 1997; Martinot and Borg 1998;IPCC 1996b and 2000). Still, there are goodexamples where developing countries have madegreat progress with energy efficiency programs(Sinton and Levine 1998; Januzzi et al. 1997).

Many policies for promoting renewable energythat have been adopted in developed countrieshave not yet been tried in developing countries,such as PURPA (Public Utility and RegulatoryPolicy Act) in the United States, NFFO (non-fossil-fuel obligation) in the United Kingdom, andelectricity-feed laws in Germany (Shepherd1998). Nevertheless, experience withdevelopment assistance for renewable energyprojects in developing countries during the past 25years is substantial and has taught many lessons(World Bank 1981; Barnett 1990, Hurst 1990;Qiu et al. 1990; Jackson 1993; Saunders 1993;Foley 1993; Kozloff and Shobowale 1994;Liebenthal et al. 1994; Goldemberg andJohansson 1995; World Bank 1996; IPCC 2000).

Among the lessons learned from developmentassistance for renewable energy are that failuresoccurred because projects emphasized one-timetechnology demonstrations that did notdemonstrate incentive structures and institutionaland commercial viability (including maintenancerequirements), and did not create sustainablemarkets for the technologies demonstrated. It hasbecome clear that overall assistance plans shouldincorporate ways to develop commercial marketsand local production capabilities, create access tofinancing, facilitate stakeholder partnerships, anddevelop information channels and institutionalcapacities. All of these features are all part ofproperly functioning markets.

Through extensive technical reviews, includingthose by a scientific and technical advisory panel(STAP), the GEF has benefited from thishistorical experience. GEF projects are alsocreating a new knowledge base that can add toongoing policy research, future projects, and othertechnology diffusion efforts by national andinternational and national agencies concernedwith climate change (see Section C and AnnexC).10

The diversity of project approaches to fit adiversity of national contexts is illustrated by the20 GEF projects to diffuse photovoltaictechnologies in rural areas (see Annex B.1).These projects use a variety of diffusion (or“delivery”) mechanisms: through localcommunity organizations in Bolivia; throughprivate-sector financial intermediaries in India andSri Lanka; through local photovoltaicdealers/entrepreneurs in Peru, China, Zimbabwe,Vietnam, and Indonesia; and through ruralenergy-service concessions in Argentina, Benin,and Togo.

The diversity of approaches also highlights thewide range of public-sector, private-sector, andnon-governmental beneficiaries of GEF assistancethat are responsible for building, operating, andreplicating these diffusion mechanisms. Forexample, on the public-sector side, the GEFprovides technical assistance and capacitybuilding to strengthen public agencies inregulating, promoting, financing, and sustainingtechnologies. On the private-sector side, GEFprojects provide technical and commercialinformation and training/advisory services toprivate-sector entities. GEF projects also providecombinations of different types of financing to theprivate sector, including grants, concessionalloans (no- or low-interest loans), and contingentloans (forgivable under specified conditions).

Tables 3 and 4 present mechanisms for promotingtechnologies and removing barriers and giveexamples of GEF projects utilizing thesemechanisms. The following sections and AnnexB elaborate on key aspects of GEF projectdesigns.


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Table 3: Mechanisms for Promoting Energy EfficiencyMechanism Description GEF Project ExamplesNational,regional, andlocal energystrategies andplanning

Policy makers can formulate least-cost integratedenergy strategies that consider both demand and supplysides. Policies can include capital investments, energyprice reforms, institutional and regulatory reforms, andenergy-sector privatization.

Egypt, Palestinian Authority, Syria(national energy conservationprograms)

Syria (integrated resources planning)Sectoral policydevelopmentat national,regional, andlocal levels

Sectoral policies affecting energy use can be designedto reduce energy consumption. Examples includetransportation planning; road and parking fees andtaxes; land-use planning and zoning; building codesand standards; housing policies and institutionalreforms affecting ownership and responsibility;industrial equipment and consumer appliancestandards; and agricultural water policies affectingirrigation.

Brazil, Côte d’Ivoire, Mexico,Senegal, Thailand, Tunisia (buildingefficiency codes and standards)

Lebanon (industrial equipmentstandards)

Russia (municipal heat supplyregulations)

Peru (industrial air emissions)Energy servicecompanies

Energy service companies can provide information;training; project identification; financial and technicalanalysis; financing, contracting and installationservices; monitoring; and shared savings arrangements.GEF support can facilitate creation and strengtheningof energy services companies with training, businessand contractual models, market studies, and financing.

Brazil, Chile, China, Hungary, India,Lebanon, Malaysia, Mexico/SME(industrial energy efficiencyimprovements)

Demand-sidemanagementprograms byelectricutilities

Demand-side management (DSM) programs by electricutilities can reduce electricity demand and providedirect financial benefits to the utility. Programs mayinclude direct investments, appliance and lightingequipment rebate/sales programs, improved energymanagement systems, and time-of-use rates andcontrols. Utilities' low cost of capital andunderstanding of the opportunities combined withregulatory incentives can make utilities successfulintermediaries for electricity efficiency improvements.

Jamaica, Mexico, Thailand (DSMoffice, sales of efficient lightingproducts, commercial building codes,appliance and equipment standardsand labels)

Argentina, Czech Republic, Hungary,Latvia, Peru, Philippines, SouthAfrica (efficient lighting)

Markettransformation

A market transformation approach simultaneouslyprovides both “market push” and “market pull” for aparticular technology. Market research, information,technology promotion, and technical assistance canboost market demand for more efficient products whilesimultaneously increasing the willingness of suppliersto produce them. Otherwise, producers are unwillingto produce because no established market exists andconsumers do not demand the product because it is notproduced or sold. Revised product designs, appliancestandards, product labeling, and consumer education(see below) are often part of market transformation.

Argentina, Czech Republic, Hungary,Jamaica, Latvia, Mexico, Peru,Poland, Philippines, South Africa,Thailand (efficient lighting)

Thailand (chillers for buildings)

China (industrial boilers)

China (household refrigerators)

Revisedproductdesigns

Technology transfer and technical assistance tomanufacturers can allow them to upgrade productdesigns to more-energy-efficient models. Capacitybuilding to assist manufacturers in marketing more-efficient models is also important.

China (efficient industrial boilers)

China (efficient householdrefrigerators)


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Table 3: Mechanisms for Promoting Energy Efficiency (continued)Mechanism Description GEF Project ExamplesAppliancestandards,productlabeling, andconsumerinformation

Appliance standards can push average applianceefficiencies closer to levels of minimum total life-cyclecosts. At the same time, labels for appliances andlighting, along with consumer information campaigns,can pull consumer demand in the direction of higherefficiency models.

Poland (CFL labeling)

China (refrigerator labeling)

Thailand (appliance and industrialmotor standards, labeling, testing,and certification)

Argentina, Czech Republic, Hungary,Latvia, Peru, Philippines, SouthAfrica (Efficient Lighting Initiative)

Collection andsynthesis ofnew data andinformation

Individual audits, surveys, and analysis of end-useenergy consumption and technical-economicopportunities; end-user preference surveys; costestimations; reliability estimations; and preliminarydesigns can all reduce generic information barriers ifthe information obtained is widely applicable in aparticular market and distribution mechanisms exist.

Peru (survey of industrial and dieselvehicle emissions)

Jamaica (building energy audits)

Lebanon (industrial energy audits)

Côte d’Ivoire, Senegal (benchmarkdata on building energy efficiency)

Malaysia (industrial energyefficiency performance benchmarks)

Financingmechanisminnovations

Specific financial-institutional transaction models canbe designed to provide capital under conditionsacceptable to both lender and borrower and toovercome barriers of capital availability, perceptions ofrisk, lack of collateral or guarantees, and high front-endcapital costs.

Hungary (commercial cofinancingand guarantee mechanism)

Chile, Brazil (revolving funds)

India (financing through specializedgovernment agency)

Kenya (commercial financiers)

China (industrial TVE capital fund)Informationcenters andservices

Information about opportunities, costs and benefits,sources of financing, and sources of procurement andinstallation skills can be provided through a variety ofchannels. Services that provide indicators of energyperformance and promote awareness of these indicatorscan lead to greater demand for energy-efficientequipment and buildings. Information and design toolsand services can also be provided directly to architectsand builders to enable them to make their designs moreenergy efficient.

China (energy-efficiency andperformance-contracting informationdissemination centers)

China (dissemination of high-efficiency industrial boiler designs)

Syria (energy services center)

Bulgaria (energy and environmentoffices)

Awarenesscampaigns

Increased awareness by potential end-users about costs,benefits, performance, and maintenance ofcommercially available technologies can provide animportant stimulus to market demand.

Almost all GEF projects

Trainingprograms

Training can provide technical, business, regulatory,managerial, financial, and legal skills needed forpurchasing, promoting, regulating, financing, andcommercializing technologies.



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Table 4: Mechanisms for Promoting Renewable EnergyMechanism Description GEF Project ExamplesNational,regional, andlocal energystrategies andplanning

Policy-makers can plan least-cost energy strategies andenact or revise policies that “level the playing field” forrenewable energy relative to conventional energysources, by means of government investments, energyprice reforms, institutional and regulatory reforms, taxincentives, and privatization and competition in theenergy sector.

Sri Lanka, Zimbabwe (lower importduties on PV components)

India, Morocco (macroeconomic,investment, and tax policies)

India (national bioenergy board,national small hydro strategy)

Lao PDR (national ruralelectrification plan)

Electric powerutilityregulation

Changes to regulatory and legal frameworks canencourage independent power producers to finance andinstall new renewable generation sources in existinggrids and sell the power to electric utilities.

China, India, Indonesia, Sri Lanka(non-negotiable power tariffs and/orpower purchase agreements)

Codes andstandards

Codes, standards, and certification can reducecommercial and purchase risks as well as negativeperceptions of technology performance. Certificationand testing agencies can allow manufacturers to easilyverify compliance with standards and providepurchasers with performance assurance.

Argentina, Benin, China, Ghana,Indonesia, Mexico, Morocco, Peru,Sri Lanka, Togo, Uganda (solarhome systems and solar-hot-waterheating equipment standards)

China, Indonesia, Morocco (test andcertification facilities or agencies)

Informationcenters

Information centers can provide education, analyticaldesign tools, market analysis, and information forevaluating technological options, determining relativecosts and benefits, and understanding implementationrequirements and operation and maintenance ofrenewable energy technologies. These centers canactively promote information dissemination amonggovernment officials, electric utilities, potential end-users, and the general public.

China (technology center for solarhome systems)

Resourceassessments

Access to existing resource assessments, resourceassessment tools and techniques (including training andassistance in using the tools), and resource monitoringand data-acquisition programs can reduce risksassociated with renewable energy-resource uncertainty.

China, Ghana, Peru (solar resourcemeasurement and databases)

Sri Lanka (wind, small hydro, andbiomass resources)

Indonesia (hydro and geothermalresources)

Financingmechanismsand guaranteeinnovations

Innovative financing mechanisms and financialintermediaries can connect end-users to sources ofcapital and bundle small projects for commercialfinancing. Successful examples of revolving loanfunds or microcredit for renewable energy already existin many developing countries. Intermediaries can takemany forms, including local development NGOs andenergy service companies.

Uganda, Zimbabwe (revolving fundsfor consumer credit)

India (financing through specializedgovernment agency)

Dominican Republic (SME), India,Indonesia, Kenya, Morocco, SriLanka, Vietnam (SME) (commercialfinancing of private entrepreneurs)


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Table 4: Mechanisms for Promoting Renewable Energy (continued)Mechanism Description GEF Project ExamplesTechnologyresearch anddemonstration

Technology research and demonstration can lowerlong-term technology costs, improve availableinformation, and reduce uncertainty. Sometechnologies may require further application-orientedresearch, for example to better understand anddemonstrate installation costs, performance, reliability,and institutional issues in a specific context.

Brazil (BIG/GT power plant)

India and Morocco (solar thermalhybrid power plant)

Philippines (distributed on-grid PV inconjunction with hydropower)

Localdevelopmentor communityorganizations

Local organizations, whether municipal agencies,cooperatives, or non-governmental organizations, canpromote renewable energy locally and provideresources for energy enterprise development, financing,and technology assessment, as well as adaptation forlocal needs and conditions.

Uganda, Zimbabwe (solar energyindustries associations)

Bolivia (installation and maintenanceof village-power and householdsystems)

Energy servicecompanies

Energy service companies can be especially importantfor small-scale dispersed renewable energyapplications. An energy service company shouldintegrate technical, legal, managerial, and financialcapacities for identifying, assessing, proposing,financing, and implementing renewable energyprojects.11

Argentina, Benin, Peru, Togo(regulated rural energy-serviceconcessions)

Sri Lanka (private SHS dealerproviding fee-for-service systems)

Ghana (public utility, private sector)Awarenesscampaigns

Increased awareness by potential end-users about costs,benefits, performance, and maintenance ofcommercially available technologies can provide animportant stimulus to market demand.


Training Training can provide technical, business, regulatory,managerial, financial, and legal skills needed forpurchasing, promoting, regulating, financing, andcommercializing technologies.


3. Equipment Installations and Demonstration

Many GEF projects install and demonstrateequipment, such as solar home systems, compactfluorescent lamps, and energy-efficient motors.The directly installed capacity and energy savingsfrom these projects can be significant, but theseinstallations are fundamentally intended asdemonstrations and must be replicated in order toachieve large-scale indirect impacts.

Energy efficiency projects target substantial directenergy savings and installed energy efficiencyequipment. For example, three projects inMexico, Poland, and Thailand target sales of morethan 3 million compact-fluorescent lamps (AnnexB.5). The China Efficient Industrial Boilersproject expects that by 2002, annual production ofmore-efficient boilers by participatingmanufacturers will reach 35% (by capacity) of

their total boiler production (Annex B.5). Inanother China project, refrigerator and compressormanufacturers will upgrade designs and sell anexpected 20 million higher-efficiency refrigeratorsby 2012 (Annex B.5). A demand-sidemanagement program in Thailand expects toreduce peak load by more than 200 megawatts andsave more than 1,000 GWh of electric powerannually through energy efficiency programs(Annex B.6). The Hungary Energy EfficiencyCo-Financing project expects total directgreenhouse gas emissions reductions associatedwith energy efficiency improvements over thefund’s expected life to be in the range of 750,000to 1 million tons of carbon (Annex B.6). InTunisia, service-sector buildings and residentialhousing are being retrofitted with energyefficiency measures. And in Russia, a municipalgovernment is installing autonomous heatingboilers in apartment buildings to demonstrate the


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technical and commercial viability of thistechnology (Annex B.8).

Renewable energy capacity installations expectedfrom GEF-supported projects is small but stillsignificant relative to world markets (IEA 1996;USEIA 1998). For example, installation of 350megawatts of wind and biomass power capacity isexpected; this total is relative to a total installedworldwide capacity of 7,200 megawatts, andrelative to the total installed capacity indeveloping countries of 1,200 megawatts (AnnexB.2). Solar thermal capacity expected fromapproved projects is 165 megawatts, whileplanned installations by the private sector (there isone major global supplier of solar thermaltechnology) from 1995 through the early 2000stotal 400 megawatts (Annex B.4). The GEF hasapproved 440 megawatts of geothermal electricityprojects, about half of the 1,100 megawattsinstalled worldwide from 1991 to 1996 (AnnexB.2). In Tunisia and Morocco, two projectsexpect 150,000 m2 of installed solar collector areafor household and commercial solar hot-waterheaters (Annex B.3). An estimated 300,000 to500,000 solar home systems are now installed indeveloping countries; approved GEF projectsexpect to greatly expand this number, addingmore than 700,000 systems during the nextseveral years (Annex B.1).

The above figures have been called “papermegawatts” by some. Many of these projectswere only approved during the past few years,which, coupled with slow implementationprogress in many older projects, has meant thatactual installed capacities as of 1998 were still asmall fraction of the total expected capacitiesfrom these approved projects (see Section C andAnnex C).

4. Capacity Building

Capacity building is a central feature of most GEFprojects and is resulting in indirect impacts oncountries’ abilities to understand, absorb, anddiffuse technologies. Projects build the humanresources and institutional capabilities that arewidely recognized as important conditions fortechnology diffusion. Projects target a wide range

of capacity building among public agencies,private-sector firms, financiers, consumers,community organizations, and non-governmentalorganizations. In the public sector, projectsstrengthen the ability of agencies to regulate,promote, finance, and sustain technologies. In theprivate sector, projects provide technical andcommercial information and training/advisoryservices. Capacity building is discussed below,broken down into several categories.

Technical, Financial, and Regulatory Skills.Projects build specific skills among policy-makersand individuals in the private sector (see Box 1 forexamples). Common technical and environmentalskills targeted include: energy auditing andmanagement, power plant operations andmaintenance, integrated energy planning,renewable energy resource assessment, projectpreparation and appraisal, project evaluation, andenvironmental assessment. Many projectsincrease the business development skills of publicand private enterprises and financiers to manage,finance, and/or market energy efficiency andrenewable energy technologies. Many projectsalso develop public agencies’ regulatory skills.

Consumer and Policy-Maker Awareness.Many projects specifically include activities tobuild awareness of renewable energy and energyefficiency technologies and their commercialviability. Such activities target government policymakers, industrial enterprises, energy suppliers,and commercial and residential consumers.Awareness is also enhanced through informationdissemination, which may occur through themedia or specialized technology centers,conferences, and workshops. Examples include:

Solar home systems and solar hot-water heating.Most solar home systems projects incorporateextensive media campaigns, informationdissemination, or other forms of outreach to ruralhouseholds to educate residents about thetechnology and its cost and benefits. Someprojects, like one in China, explicitly assist solarhome systems dealers with marketing to ruralhouseholds. Two solar hot-water projects inTunisia and Morocco conduct awarenesscampaigns among a wide variety of private andpublic establishments (e.g., hotels, government


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buildings, mosques, schools, and apartmentbuildings). Awareness campaigns target policy-makers to influence their decision making andtarget opinion leaders in the architecture andengineering communities to influence professionalpractices (Annexes B.1 and B.3).

Energy efficiency. Energy-efficient lightingprojects in Mexico, Poland, and Jamaica allinclude consumer education and outreachprograms to promote lamp sales. Projects conducttelevision, newspaper, and radio campaigns andconduct outreach through utilities. The Polandproject used a special “green” product logo topromote lamp sales and conducted an energy andenvironmental education program in primary andsecondary schools. The Tunisia Building Codesproject conducts a public awareness campaign topromote support for building codes and standards.The Romania Capacity Building projectdisseminates information about energyconsumption and energy efficiency to municipalcouncils, large industrial consumers, small- andmedium-size enterprises, the general public, tradeunions, associations, and school children.Information is disseminated through energyexhibitions, school curricula, and publications(Annexes B.5, B.7 and B.8).

Fuel production/recovery. The China Coal-BedMethane project builds awareness of coal-bedmethane technology among state policy makers,coal-mine engineers, and coal-mine managers.Similarly, the India Biomethanation projectdisseminates information through nationalworkshops, publishes promotional literature, andconducts a media campaign to raise publicawareness of biomethanation and biogas (AnnexB.9).

Regulatory Frameworks. Some projectspromote or pilot new regulatory frameworks forindependent power production to assist public andprivate project developers in installing grid-basedwind, biomass and geothermal technologies(China, India, Philippines, Sri Lanka, Indonesia,Mauritania, Mauritius; see Annex B.2). InBulgaria, Romania, and Russia, projects assistgovernment agencies to develop and strengthenregulatory frameworks for municipal heatingmarkets in formerly planned economies (Annex

B.8). Regulatory frameworks are direct outputs inseveral projects, for example:

Building codes and standards andimplementation/enforcement mechanisms. TheThailand Electricity Efficiency project institutes amandatory energy code for commercial buildings.The West Africa (Côte d’Ivoire and Senegal)Building Energy Efficiency project helps finalizean existing energy efficiency code for air-conditioned buildings and drafts a thermalcomfort code for buildings without airconditioning; in both cases the project assists withimplementation of the codes. And the TunisiaBuilding Codes project helps validate energyefficiency standards for all new buildings in thecommercial and residential sectors (Annex B.7).

District heating regulatory frameworks. Projectsin Russia and Bulgaria develop regulatoryframeworks for metered heat consumption inresidential buildings, including new institutionsfor consumption-based heat-meter reading andbilling. The Russia project studies unresolvedregulatory, institutional, and technical questionssurrounding installation of autonomous,decentralized heat-production units in buildings,and the implications of heat-supply customersdisconnecting from centralized heating networks.The Bulgaria project recommends a new legalframework for energy efficiency investments,including legislative and regulatory measures,taxation and fee structures, and utilityinfrastructure requirements (Annex B.8).


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Box 1. Beneficiaries of Capacity Building (Technical, Financial, and Regulatory Skills)

Technical Skills

Engineering and environmental management departments of the Philippine National Power Corporation trained toperform social and environmental impact assessments of the corporation’s activities (Philippine Leyte-LuzonGeothermal project; Annex B.2).

Indian Ministry for Non-Conventional Energy Sources, state agencies, equipment manufacturers, industryassociations, and NGOs trained in the planning, design, construction, operation, maintenance, management, andrevenue collection and expenditure related to small hydel projects (India Hilly Hydel project; Annex B.2).

Technical and managerial staff at bagasse and coal plants trained in plant operation and maintenance (MauritiusSugar Bioenergy project; Annex B.2).

Technicians from local Mauritanian enterprises trained to assemble, manufacture, install, operate, and maintain windturbines (Mauritania Windpower project, Annex B.2).

Private-sector project developers (independent power producers) trained to conduct feasibility studies and undertakeprojects. State Electricity Board, private-sector firms and NGO trained in technical, financial, institutional, andbusiness aspects of renewable energy project design (Sri Lanka Energy Service Delivery project, Annex B.2).

Staff of provincial power companies trained to measure wind resources, conduct feasibility studies, and constructwind-farm subprojects (China Renewable Energy Development project, Annex B.2).

Government agencies and private firms trained to promote, evaluate, and install solar hot-water systems (Moroccoand Tunisia solar hot-water projects, Annex B.3).

Existing Town and Village Enterprise regional energy conservation centers in China provided with basic computingand teaching materials, library facilities on domestic and international technologies, and technical assistance on howto develop training programs and materials; also trained to perform energy audits (China Town and VillageEnterprise project, Annex B.6).

A national network of energy auditors from small- and medium-size enterprises trained to identify and evaluateenergy efficiency opportunities and prepare and implement energy-saving measures. Kenyan Association ofManufacturers trained in energy management and efficiency (Kenya energy efficiency project, Annex B.6).

Peru Center for Energy Conservation (CENERGIA), having already earned the trust of the private sector, trained toprovide advice and support to clients in the public and private industrial sectors on potential energy efficiency andconservation savings (Peru energy conservation project, Annex B.6).

China Coal-Bed Methane Company trained in coal-bed methane technology; coal geology companies, researchinstitutes, and coal-mining administrations trained in vertical well-drilling techniques for coal-bed methane recovery(China Coal-Bed Methane project, Annex B.9).

Government and national laboratory personnel exposed to foreign biomethanation technologies through study toursand fellowship opportunities (India Biomethanation project, Annex B.9)

Central Mine Planning and Design Institute trained to identify, design, and implement programs to recover andutilize coal-bed methane (India Coal-Bed Methane project, Annex B.9)

Sichuan Petroleum Administration trained to manage, operate, and maintain the gas transmission and distributionsystem (China Sichuan Gas project, Annex B.9).


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(Box 1 Continued)

Financial/Business Skills

Solar home system dealers/installers/entrepreneurs and rural energy-service concessions trained in business andentrepreneurship and solar PV technologies (solar home systems projects, Annex B.1).

Rural community-based organizations and households trained to finance, contract, and oversee installation andmaintenance of renewable energy systems (Bolivia PV project, Annex B.1).

Policy makers, energy professionals and businessmen trained in market-based renewable energy developmentthrough study tours, international workshops, and local consultants (China Rapid Commercialization of RenewableEnergy project, Annex B.1).

India Renewable Energy Development Agency trained in renewable energy project finance (India Alternate Energyproject, Annex B.2).

India Renewable Energy Development Agency trained to finance and market the concept of performance-basedenergy efficiency contracting with energy service companies, clients in end-user industries, equipmentmanufacturers, state electricity boards, and private electric utilities (India Energy Efficiency project, Annex B.6).

Three energy service companies trained to undertake performance contracts with industrial enterprises (ChinaEnergy Conservation project, Annex B.6).

City of Vladimir government, district heating companies, gas companies, and major local private enterprises trainedto conduct financial and economic analysis and feasibility studies of energy efficiency projects and to monitorenergy efficiency projects (Russia Capacity Building project, Annex B.8).

Municipal employees, architects, engineers, and industry managers trained to design, conduct, implement andevaluate energy efficiency projects (Bulgaria Energy Efficiency project, Annex B.8).

Romania Agency for Energy Conservation (a central state entity with regional offices) trained to identify anddevelop energy efficiency projects and present them to potential financiers (Romania Capacity Building project,Annex B.8).

Private entrepreneurs and financiers trained to understand, propose, and finance energy efficiency and renewableenergy investments (investment-fund projects executed through the IFC, Annexes A.1 and A.6).

Regulatory Skills

National and regional regulatory agencies trained in rural energy-service concession bidding and contracting, tariffsetting, and monitoring and regulation of concessions (solar home systems projects using an energy-serviceconcession model, Annex B.1).

Electric utilities and government regulators assisted in establishing small-power-purchase tariffs and model powerpurchase agreements for renewable energy projects installed by private independent power producers (IndonesiaSolar Home Systems and Sri Lanka Energy Services Delivery projects, Annex B.2).

State Electricity Board assisted in strengthening regulatory frameworks for service quality standards, tariff approval,environmental protection, and technical and performance norms (Cape Verde Energy Sector Reform project, AnnexB.2).

Government of Morocco assisted in reviewing the overall policy/regulatory framework and recommending possiblechanges such as reduced VAT and import duties, electric utility regulation, energy price changes, public-sectorprocurement guidelines, and equipment standards and codes) (Morocco solar hot-water project, Annex B.3).


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5. New Institutions and Financing Services

Projects are testing and demonstrating a variety ofnew institutions and financing services forpromoting technology diffusion. For example,projects provide financing to local communityorganizations, private-sector financiers, localentrepreneurs, public or private revolving funds,and private-sector renewable energy projectdevelopers. Projects promote industrial-sectorenergy service companies, rural energy-serviceconcessions, and utility-based demand-sidemanagement programs. Projects also providecombinations of different types of financing forprivate-sector activities, such as grants,concessional loans (no- or low-interest loans), orcontingent loans (forgivable under specifiedconditions). Box 2 provides examples of newinstitutions created in GEF projects.

New financing services are an important aspect ofGEF renewable energy projects. In many solarhome systems projects, new credit mechanismsare developed that can make systems moreaffordable to consumers. In some projects,private dealers obtain commercial financing andthen extend credit to their customers; in others,existing microcredit organizations offer financing;and still others involve rural energy servicecompanies operating on a fee-for-service basiswith low monthly payments so that poorcustomers can afford the technology. In India, theAlternate Energy project develops the institutionalcapacity of the India Renewable EnergyDevelopment Agency to finance renewableenergy subprojects. In Sri Lanka, the EnergyServices Delivery project develops a non-negotiable power-purchase tariff and standardpower-purchase agreements so that projectdevelopers can obtain commercial financing forgrid-connected renewable energy projects(Annexes B.1 and B.2).

For energy efficiency improvements in industry,energy service companies (ESCOs) are beingpiloted in several countries to demonstrate theircommercial viability to financiers, in order tofacilitate future energy efficiency investments.The China Energy Conservation project isespecially noteworthy. No energy servicecompanies exist yet in China, but provincial

energy efficiency centers previously operatingunder public funds are coming under increasingpressure to operate as commercial entities,possibly using an ESCO model (Sinton andLevine 1998; see Annex B.6). In other words,the potential for replication is large. The projectaims to achieve sustainable investments andincreases in energy efficiency in part through thedemonstration of energy performance contractingby three pilot energy service companies (in theproject called “Energy Management Companies”),followed by a program to support proliferation ofthe performance contracting concept.

Investment funds are another financingmechanism used in several projects to solicitcofinancing from the private sector (see Box 3 inSection B.8).

6. Market Transformation

Seven projects assist manufacturing firms todevelop and market energy-efficient products aspart of so-called “market transformation”approaches in which both supply and demandsides of a market for more efficient technologiesare stimulated simultaneously.12 Theseapproaches can include technical and financialassistance to producers, new equipment standardsand certification, consumer information andeducation, regulatory changes, and otherincentives.

Two projects provide direct assistance to Chinesemanufacturers for developing and marketingenergy-efficient refrigerators and industrial boilersthrough foreign technology transfer (Annex B.5),along with consumer education and incentives.The China Efficient Industrial Boilers projectaims to develop cleaner, affordable, and energy-efficient industrial boiler designs; to massproduce and market these designs; and todisseminate them throughout China. The projectprovides technology transfer and technicalassistance to nine competitively selectedparticipating boiler manufacturers who willdevelop high-efficiency boiler models. GEFgrants pay for advanced equipment from abroad toupgrade production with the new boiler models.


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Box 2: New Institutions

Courses on PV technology at two colleges and one polytechnic institute; M.Sc degree in Renewable Energy Systemsoffered at University of Zimbabwe (Zimbabwe Photovoltaics for Household and Community Use project, AnnexesB.1 and C.1).

Renewable energy center/clearinghouse for information, training, and market facilitation programs ( China RapidCommercialization of Renewable Energy project, Annexes B.1 and B.2).

A Demand-Side Management Office within the national electric utility (EGAT) to conduct a variety of end-useefficiency programs in the residential, commercial, and industrial sectors (Thailand Electricity Efficiency project,Annex B.5).

Syrian Energy Services Center with expertise in energy auditing, heat engineering, power system planning,ventilation, refrigeration, air conditioning, motor systems, marketing, and financial and economic analysis (SyriaSupply-Side Efficiency and Energy Conservation Planning project, Annex B.6).

Energy Conservation Information Dissemination Center for providing industry with information and best practiceson energy efficiency improvements (China Energy Conservation project, Annex B.6).

Energy audit program, with energy audit teams formed in the cement, ceramic, food, glass, iron, steel, pulp, paper,and rubber subsectors. Audit teams receive training in energy management and auditing, conduct audits, and trainother auditors (Malaysia Industrial Energy Efficiency Improvement project, Annex B.6).

Energy conservation centers in the Egyptian government and Palestinian Administration to serve as focal points formeasures to establish codes and standards and activities for energy efficiency and energy conservation in Egypt, theWest Bank, and Gaza (Palestinian/Egyptian Regional Energy Efficiency project, Annex B.6).

A network of Energy and Environment Offices (EEOs) in 20 municipalities to share information and experiencesabout energy efficiency programs and a central Demonstration Zone Support Office to act as liaison with thenational government and to coordinate with regional EEOs (Bulgaria Energy Efficiency project, Annex B.8).

A new department within the City of Vladimir administration to implement consumption-based heat billing; thisdepartment will create and maintain a database of apartments, read heat-meters, perform accounting and billing, andconduct media campaigns (Russian Capacity Building project, Annex B.8).

A National Bioenergy Board to coordinate research and operational activities in biomethanation and eventuallyoversee implementation of a national bioenergy strategy. The board seeks national-level awareness of the benefitsof recovering and using biogas (India Biomethanation project, Annex B.9).

A research, training and information center to educate, train, and assist landfill operators, energy service companies,and municipalities to build and operate landfill energy plants and to conduct research to improve methane recoverytechnology (China Methane Recovery project, Annex B.9).

China National Petroleum Corporation and Sichuan Petroleum Administration restructured into joint-stockcompanies with commercial accounting systems and an independent regulatory agency to set, monitor, and enforcesafety standards on gas production in Sichuan (China Sichuan Gas project, Annex B.9).


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Technical assistance is provided for developingproduction, marketing, and financing plans for thenew boiler models and for strengthening customerservice. The project also provides technicalassistance and training for industrial enterprises tounderstand, procure, and operate the higher-efficiency boilers, and for design and researchinstitutes and government agencies to disseminatethe technologies to other boiler manufacturers.

The China Efficient Refrigerators project takes asimilar approach to that of the Efficient Boilersproject in addressing both the demand side of therefrigerator market in China and upgrading thetechnologies used by Chinese refrigeratormanufacturers. The project addresses the keymarket, technological, social, and commercialbarriers both to the adoption of high-efficiencyrefrigerator technology by Chinese manufacturersand to the acceptance of high-efficiencyrefrigerators by Chinese consumers. Activitiesinclude technical assistance and training forcompressor and refrigerator manufacturers,incentives for energy-efficient product design andmodification and conversion of factory productionlines, national efficiency standards, a nationallabeling program, consumer education andoutreach, dealer and manufacturer incentiveprograms, and a consumer buyback/recyclingprogram.

Transformation of markets for energy-efficientlighting products is part of utility-based demand-side management programs in Thailand, Mexico,and Jamaica (Annexes B.5 and C.3). The PolandEnergy Efficiency Lighting project and theEfficient Lighting Initiative also use a market-transformation approach to promote private-sectorsales of efficient lighting products (Annex B.5).

7. Technology Research and Development

Four projects under the operational programReducing the Long-Term Costs of Low-Greenhouse-Gas-Emitting Technologies supportresearch and development for renewable energyapplications that show promise for reducing long-term technology costs. In Brazil, a $137 millionR&D investment in a 40-megawatt-electric(MWe) biomass integrated gasification/gas

turbine power plant is expected to reduce the costsof future plants. Cost reductions from both designand operational experience are expected. Once agas-turbine design is developed to utilize the low-calorific gas produced from the gasifier, theturbine design can become standard (“off theshelf”) and can be produced at roughly half thecost of the original gas turbine utilized in theproject. The gasifier component will undergocontinual performance improvement during theproject as the plant operates, so that future,higher-performance gasifiers can be producedmore cheaply based upon the project’s experience.

In the Philippines, an $8 million R&D investmentin a grid-connected 1-megawatt-peak (MWp)solar photovoltaic power plant is demonstratingexpected near-commercial economic benefits in aniche application that shows widespread promisein many countries. In this application thephotovoltaic power plant is coupled with ahydroelectric power plant on the distributionsystem to achieve firm baseload power withouthaving to strengthen the transmission system orincur high transmission/distribution losses. InIndia and Morocco, a combined $360 millionR&D investment in two grid-connected 150-megawatt (MW) solar thermal power plants isdemonstrating the economic and technicalfeasibility of integrating solar-thermal-trougharrays with combined-cycle natural-gas-fueledpower plants.

8. Engaging the Private Sector in Projects

Private-sector entities participate in GEF projectsas manufacturers, dealers, consultants, localproject developers, financial intermediaries,recipients of technical assistance, technologysuppliers and contractors, and project executors.Significant aspects of private-sector involvementinclude:

New commercial entities. In some projects,creation of a new commercial entity is a primaryoutput. Three projects in China have this feature:the Coal-Bed Methane project establishes the firstcommercial company in China to focus onexploiting coal-bed methane-recovery technology;the Energy Conservation project establishes pilot,


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quasi-private energy service companies todemonstrate the feasibility of energy performancecontracting; and the Sichuan Gas project creates aSichuan Gas Transmission and DistributionCompany (Annexes B.6 and B.9). The UkraineCoal-Bed Methane project also creates acommercial coal-bed methane recovery company(Annex B.9).

Financing from the private sector. Severalprojects are designed to mobilize financingdirectly from the private sector. Some projectscompetitively solicit manufacturer contributionsto reduce retail equipment prices, such as thePoland Efficient Lighting project and the EfficientLighting Initiative (Annex B.5). Others establishinvestments funds. In particular, the InternationalFinance Corporation is executing five investment-fund projects designed to leverage $375 million infinancing from the private sector with $95 millionin GEF grants (see Box 3).

Renewable energy developers/dealers. In mostrenewable energy projects, private-sector firmsdevelop subprojects or sell equipment to end-userswithin the framework of the project. In most solarhome systems projects, private-sectorentrepreneurs and/or energy service companiesare the specified purveyors of technology tohouseholds (Annexes B.1 and C.1). Private-sectorproject developers install grid-connectedrenewable energy technologies in several projects(Annexes B.2 and C.2). In some of these sameprojects, like Sri Lanka Energy Services Delivery,commercial financiers “on-lend” World-Bank-provided financing to project developers.13

Product manufacturers. In two energy efficiencyprojects in China, the Efficient Industrial Boilersproject and Efficient Refrigerators project, acompetitively selected group of manufacturingcompanies are the project’s direct beneficiaries;the project assists them in improving the energyefficiency of their product designs (Annex B.5).

Voluntary agreements. In Thailand, a DSMproject successfully orchestrated a voluntaryagreement among Thai fluorescent lightingmanufacturers and importers to convertproduction and imports to more efficient models.In exchange for the project providing consumer

education and promotional campaigns related tothe switchover, these manufacturers and importersagreed to convert their production and imports attheir own expense. The entire Thai market of 45million fluorescent lamps per year was convertedto production and sales of more efficient lamps ina short period of time (Annex B.5 and AnnexC.3).

Project executing agencies. Private-sector electricutilities are executing agencies for several IFC-executed projects, such as the PhilippinesDistributed Generation PV Power Plant project(Annex B.3) and the Poland Efficient Lightingproject and Efficient Lighting Initiative (AnnexesB.5 and C.3). A private heat-supply company isthe executing agency for the Czech RepublicWaste Heat Utilization project (Annex A.9).


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Box 3: Leveraged Financing from the Private Sector

Executed through the International Finance Corporation, five GEF projects are designed to leverage $375 milliontotal financing from the private sector with $95 million total in GEF grants: 14

1. Hungary Energy-Efficiency Cofinancing Program (HEECP). This program provides partial credit guarantees(with funds reserved to cover guarantee liabilities) and cofinancing loans for eligible local financial intermediaries.The program is designed to facilitate and leverage private-sector financing for energy efficiency investments (i.e., byenergy service companies, project developers, and equipment manufacturers), including domestic bank capital andcredit lines from international financial institutions (Annex B.6).

2. Renewable Energy and Energy Efficiency Fund (REEF). This fund makes debt and equity investments inprivate-sector renewable energy and energy efficiency projects. The fund targets projects in the $5-30 millionrange, a range that is often considered too small, too complex, or too risky by institutional investors. The fund iscofinanced from other private-sector sources (Annexes B.2 and B.6).

3. Photovoltaics Market Transformation Initiative (PVMTI). This project finances the business plans ofcommercial PV entrepreneurs in three countries with commercial loans at below-market rates or using otherfinancing methods such as partial guarantees or equity. Business plans are selected according to a competitivesolicitation process. The primary purpose of the project is to stimulate PV business activities (Annex B.1).

4. Solar Development Group (SDG). Similar to the Photovoltaics Market Transformation Initiative, this projectprovides debt and equity financing to PV-related businesses (Annex B.1).

5. Small and Medium Scale Enterprise Program (SME). Financial intermediaries on-lend GEF funds to small- andmedium-scale enterprises for GEF-eligible subprojects (including energy efficiency and renewable energy). Theintermediaries ultimately repay the GEF at a low interest rate, after being repaid by the enterprises. Subprojects mayalso be cofinanced by other sources. The program supports investments in relatively high-risk experimentalsubprojects where normally priced capital may be unobtainable (Annexes B.1 and B.6).

9. Roles of Non-Governmental Organizations

GEF projects involve international and nationalNGOs, community-based organizations, industryassociations, consumer groups, and educationalinstitutions. More than 25 climate change projectsexplicitly involve NGOs in roles such as:15

• project design and preparation;• project execution;• project implementation or advisory committee

participation;• training, education, and awareness building

for project beneficiaries;• service and equipment supply;• social research;• technical, business, and policy support; and• demand-side management program

implementation.

Examples of these NGO roles are describedbelow.

Project design and preparation. NGOs assistwith the design and preparation of many projects.For example, in Mauritania, the internationalNGO GRET, created to provide technicalassistance to developing countries, has workedclosely with UNDP in the preparation andtechnical design of the Wind Electric project.GRET has assisted with project pre-identification,drafting of the project brief and project document,a study of existing windpower equipment, andtesting of three pilot wind systems with electronicdata acquisition.

Project execution. GRET is also the principalexecuting agency for the Mauritania WindElectric project. In addition to GRET, Espace


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Eolien Regional, a French NGO, is conductingpre-feasibility studies; IDM, a local subsidiary ofanother French NGO, is identifying anddeveloping appropriate financing mechanismsbetween windpower developers and rural end-users; and CARITAS, an international CatholicNGO, is assisting in bringing windpower tooutreach health clinics. In Kenya, the KenyanAssociation of Manufacturers is executing anenergy efficiency project for small- and medium-scale enterprises. Finally, in the Small andMedium Scale Enterprise (SME) project (an IFCglobal project), NGOs execute some of thesubprojects; the project has also selected NGOsas some of the financial intermediaries that on-lend and manage GEF funding to subprojectexecutors.

Project implementation or advisory committeeparticipation. In some projects, NGOrepresentatives sit on project implementationcommittees along with government and industryrepresentatives (for example in the India HillyHydel project), or on project coordinating oradvisory committees. This process increases localownership of projects and can be a significantfactor in sustainability and replication. Forexample, in the Mauritania Wind Electric project,many NGOs are represented on the projectsteering committee (some of these areinternational NGOs with local offices).

Training, education, and awareness building forproject beneficiaries. In many projects, NGOsprovide consulting or training services tobeneficiaries. For example, in the India HillyHydel project, NGOs train rural households to usenew, low-wattage appliances for cooking, heating,and storage using the hydel power provided by theproject. They also train local groups, such asvillage committees, in planning, design,construction, operation, maintenance, andrevenue-collection for small hydel projects. In theIndia biomethanation project, NGOs train private-sector, municipal agency, and village personnel inbioenergy technologies. In the Malaysia EnergyEfficiency project, various industry associationshelp identify and train technicians in energyauditing and energy management. In the SyrianEnergy Efficiency and Conservation project, auniversity conducts seminars to promote energy

efficiency awareness among managers in theprivate and public sectors. In Kenya, the KenyanAssociation of Manufacturers is responsible forcoordinating enterprise audits and conductingseminars and workshops. And in the RegionalWest Africa Building Efficiency project, NGOsbuild consumers’ and decision-makers’ awarenessof demand-side management and least-costplanning.

Service and equipment supply. NGOs act asequipment suppliers/dealers or energy servicecompanies in several solar home systems (SHS)projects. In Sri Lanka, NGOs are allowed to serveas SHS dealers. Two NGOs are selling SHS; oneof these, Sarovodia, is a large, nationalorganization that has been well established in SriLanka for many years while another is an existingNGO that was an established SHS dealer beforethe project began. In Bolivia, a project attemptsto create new institutional and legal models soNGOs can become renewable-energy-based ruralelectricity providers. In its last phase, the IndiaAlternate Energy project is similarly attempting toenlist local community-based religiousorganizations to become energy servicecompanies to lease SHS to rural households.

Social research. In some projects, NGOs and/oruniversity researchers conduct social studies. Forexample, in the Regional West Africa BuildingEfficiency project, NGOs study social andeconomic impacts of the project. In the SyrianEnergy Efficiency project, a local evaluationinstitute collects feedback from consumer groupsregarding attitudes about energy efficiency andconservation.

Technical, business, and policy support. The PeruEnergy Conservation project increases thetechnical capacities of the non-profit Center forEnergy Efficiency (CENERGIA) to assist theDepartment of Energy and Mines in implementinga national energy conservation policy. After theproject trains CENERGIA staff to conduct energyaudits, conduct project feasibility studies, andevaluate industrial emissions abatement,CENERGIA will become a center to traintechnicians from other parts of Latin America insimilar skills. In Zimbabwe and Sri Lanka, solarenergy industry associations have formed to


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support the business activities of private-sectorPV firms, develop equipment standards andcertification procedures, and/or provide educationand outreach to households. In Morocco, a solarenergy industry association also supports theactivities of the solar hot-water industry.

Demand-side management programimplementation. The Jamaican Demand-SideManagement (DSM) project utilizes local NGOsin four areas: (1) to identify and contact localorganizations and associations with interests inDSM; (2) to organize public forums for localcommunities to express their views; (3) todisseminate information to the public on the DSMprogram; and (4) to assist in program design andimplementation by providing a forum for publicparticipation and education. These local NGOswill be supported with technical know-how frominternational NGOs with experience in energyefficiency.

Section C: Project Impacts and Replication

1. Emerging Impacts of Completed orContinuing GEF Projects

Although most approved projects are still beingimplemented, project experiences, impacts, andlessons are emerging. Out of 72 energy efficiencyand renewable energy projects approved since1991, eight were fully completed by mid-1999.16

This section and Annex C describe emergingimpacts of completed and continuing projects,organized into four clusters.17 Data sources forthese evaluations vary. The GEF conducts anannual Project Implementation Review (PIR),which primarily reflects status reports fromproject implementing agencies. Where possible,we have supplemented information from the PIRwith project supervision reports and other internaldocuments, published material, field visits, andinterviews with project managers and stakeholders(see Porter et al. 1998; Martinot 1998a; Martinotand Borg 1998; GEF 1997b, 1998b, 1998c, 1999a;and other references given in Annex C).

We summarize below and detail in Annex C theavailable information on GEF project impactsfrom these sources. This summary and Annex Care neither exhaustive nor definitive, but dopresent the bulk of available information onimpacts achieved to date. Obviously, much moreextensive data collection and analysis arewarranted, and the reader is likely to be leftunsatisfied. On a positive note, GEF evaluationactivities are escalating, including thematicreviews by project cluster, and implementing-agency evaluation activities should expand as theportfolio matures.18 Project implementation andmanagement lessons and difficulties are notdiscussed in this paper but are also the subject ofnumerous other GEF monitoring and evaluationactivities.

Very little post-project evaluation has been doneon completed projects because insufficient timehas elapsed since project completion to judgeindirect impacts on markets and stakeholdersthrough replication (see next section).Nevertheless, evidence of impacts is emerging in

two key areas: (1) direct and indirect energycapacity installed or energy savings realized; (2)capacity-building and institutional developmentactivities. At this juncture, project sustainabilityand replication are usually difficult to judge;future GEF evaluation activities are expected toaddress these issues.

Solar Home Systems Projects (Annex B.1, AnnexC.1). Through the Zimbabwe solar home systemsproject, private-sector dealers installed about10,000 solar home systems, as a result of directsubsidies, lower import duties, and growth of thecountry’s dealer/installer industry. Many othermarket changes have taken place, includingincreased numbers of producers and dealers,reduced prices, new equipment standards, newcertification institutions, changes in perceptionsabout the technology among consumers andfinanciers, increased technical skills, and ademonstration of a revolving fund mechanismthrough the Agricultural Finance Corporation. InSri Lanka, Bangladesh, the Dominican Republicand Vietnam, solar home system delivery modelsusing private-sector entrepreneurs and microcreditfacilities appear to be working in the initialphases; several hundred systems have beeninstalled.

Grid-Connected Renewable Energy Projects(Annex B.2; Annex C.2). In India, more than 900megawatts (MW) of wind turbines have beeninstalled in recent years through joint ventureswith western wind turbine manufacturers and bydomestic Indian producers and private-sectorproject developers. These installations were inpart a result of favorable tax regimes andenhanced willingness of commercial banks toprovide financing, outcomes that the GEF helpedcatalyze. In Costa Rica, a significant private-sector wind-power industry has emerged fromdialogue and policy frameworks fostered by theGEF project there even though the project itselfhas not yet installed a planned wind farm. So far,20 MW have been installed by the private sector,and other countries in Central America are takingnote of Costa Rica’s experience. In the

Section C: Project Impacts and Replication Promoting Energy Efficiency and Renewable Energy

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Philippines, 385 MW of geothermal powercapacity have been installed, and the project thereanticipates that installed facilities will be able tosupply the power-purchase-agreement target of3,000 GWh per year (however, power pricing mayaffect the viability of the power productionentities involved). In India, the approaches beingdeveloped in the Hydel project for involving localdecision-makers in the planning process are beingconsidered for inclusion in the government’sstandard practice for small hydro initiatives. Inaddition, a local educational establishment nowoffers a postgraduate program on alternate hydroenergy, and 18 out of 100 planned watermillshave been built. In Mauritania, 19 villages havebeen electrified with decentralized village-scalewind power, and the implementation approachfrom the GEF project has been adopted in afollow-on project and has influenced governmentapproaches to rural electrification.

Solar Hot-Water Supply (Annex B.3). In Tunisia,a GEF project has installed approximately 10% ofthe 50,000 m2 target for SWH collectors.Indirectly, a private-sector market for SWHinstallations is slowly emerging, with 3,600 m 2

having been installed independently of the projectbut influenced by the project’s public awarenesscampaign. The project launched a promotionalcampaign in newspapers, radio and television; thetelevision campaign in particular was deemedeffective, generating more than 80 telephone callsper day from interested households at one point inthe campaign. A robust competitive equipmentmarket is emerging with several differentequipment brands now on the market.

Energy-Efficient Product Manufacturing andMarkets (Annex B.4; Annex C.3). In Thailand, aDSM project successfully orchestrated a voluntaryagreement among Thai fluorescent lightingmanufacturers and importers to convert theirproduction and imports to more efficient models;the entire Thai market of 45 million fluorescentlamps per year was converted to production andsales of more efficient lamps in a short period oftime. In Poland and Mexico, efficient lightingprograms successfully sold to households thetargeted number of compact fluorescent lamps(CFLs), 3 million total, during the projectimplementation periods (through the private

sector in Poland and through an electric utility inMexico). Other indirect market effects are visiblein Poland. For example, consumers surveyedreported that the special “environmentallyfriendly” label developed during the project wasof “great or decisive importance” in theirpurchases. A school education program wascommended by the Polish Ministry of NationalEducation, which wrote that “it is apparent that asa result of the project large numbers of studentsand teachers have gained a useful insight into theuse of energy and its impact on the environment.”

Energy Efficiency Investments in Industry (AnnexB.6). In Hungary, the GEF has helped establish anew private-sector energy service company(ESCO) for energy efficiency investments and issupporting development of other ESCOs inpartnership with local banks. Domesticcommercial financiers are showing strong interestin financing ESCOs, in part because of thetraining provided to financiers for energyefficiency project evaluation. Another GEF-financed ESCO in Mexico is pioneering“performance contracting” there and has begun tomake investments in industry. In Chile, a GEFproject has shown that ESCOs are probably not aviable mechanism for energy efficiency in themining industry, and alternative models areneeded.

Energy-Efficient Building Codes and Construction(Annex B.7). In the African countries of Senegaland Côte d’Ivoire, a GEF project has increasedhuman and institutional capacities for achievingenergy efficiency and conservation in buildings.For example, an Energy Operation Committeewas established in several major urban buildingsto oversee energy management. The projectretrofitted several buildings to demonstrate theenergy savings and cost-effectiveness of energyefficiency and conservation measures. Almost200 people in the private and public sectorsreceived training in energy efficiency andconservation techniques. The project contributedto texts on energy efficiency in buildings in a1997 National Environmental Code.

Demand-Side Management Programs (Annex B.5;Annex B.6; Annex B.7). In Thailand, the nationalutility’s DSM program, supported by a GEF

Promoting Energy Efficiency and Renewable Energy Section C: Project Impacts and Replication

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project, has exceeded targets, with a 383-MWpeak load reduction and 1,868 GWh annualenergy savings. The utility created a dedicatedDSM office that now has a staff of 375 people.The DSM office is implementing 13 differentenergy efficiency programs for refrigerators, airconditioners, green buildings, industrial costreduction, industrial ESCO development, motors,compact fluorescent lamps, street lighting,thermal storage, stand-by generation, interruptibleloads, time-of-use tariffs, and public awarenesscampaigns. The private sector has been engaged,through workshops with distributors and retailers,to encourage sale of high-efficiency refrigeratorsand air conditioners and through negotiations withmanufacturers to produce high-efficiencyequipment. In Jamaica, 1,200 MWh/year energysavings have been realized through a DSMprogram targeting office lighting and airconditioning conversion. An additional 3,050MWh/year energy savings have been achievedamong 25,000 participating residential customers.

Fuel Switching and Production/Recovery (AnnexB.9; Annex C.4). In China, a GEF project at threesites has demonstrated technologies to reduceatmospheric methane emissions from coal minesand to recover these emissions for use as a fuel.The project published a detailed assessment ofChina's coal-bed methane resources andstrengthened national capacity to conduct suchassessments routinely. The project created theChina United Coal-Bed Methane DevelopmentCorporation as a venture among three Chinesegovernment agencies and has been activelyseeking new business opportunities to exploitcoal-bed methane. Several additional explorationand development agreements have beennegotiated with foreign partners. Gas pricingpolicies (i.e., higher prices more closely reflectingproduction costs) have been identified as a keyfactor for sustaining incentives to reduce pipelineleakage. Also in China, landfill-gas recoverydemonstrations at three different sites weresuccessful in building understanding of theeconomic and environmental benefits of landfillgas recovery and utilization. In India, four of atargeted 29 biomethanation units have beencompleted. In Poland, a large coal-to-gas industryhas emerged, along with significant sources ofgovernment and private financing, influenced at

least partly by increased awareness amonggovernment officials engendered by the earlystages of the GEF project.

2. Project Sustainability and Replication

Replication of project impacts on larger scales isintegral to GEF climate change strategies.Replication may occur, for example, from localmarkets to national markets, from one private-sector firm to others, from one local governmentto another, and from one country to another.Although there are a variety of mechanisms topromote replication that can be incorporated intoprojects, replication ultimately depends on actionsof governments, consumers, NGOs, and/or theprivate sector after a project is completed.Replication also requires a lengthy time period tomonitor and evaluate (i.e., several years afterproject completion).

Directly installed capacity, direct energy savings,and directly avoided CO2 emissions in GEFprojects are important to measure and track, butthese outputs constitute only a portion of GEFproject impacts.19 Indirect impacts may be quitelarge. Indirect impacts occur if project outputs aresustainable and have been replicated beyond thescope of the original project. Several factorscontribute to project sustainability and replication:

• ability to meet user needs• favorable technology performance• availability of maintenance services and spare

parts• demonstrated cost recovery• permanence and viability of new institutions• retention of skilled personnel• continued operation and viability of financing

mechanisms or services• participation of local stakeholders

These factors suggest that it may take severalyears to build up sustainable programs. Forexample, the Chinese biogas program, which hasresulted in more than 5 million household biogasdigesters in operation today, shows that biogasdiffusion is a long-term process that requiresdedicated personnel in all aspects of the program.


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Approximately 40,000 people have been trainedin China as “biogas doctors” for construction,operation, and maintenance of biogas digestersover several years (Qiu 1990).

Stakeholder participation is equally important forsustainability and replication. As the World Bank(1996) notes, “the development of micro-grids,whatever their primary source of energy, requiresa significant level of community consensus andsupport regarding such factors as billing, service,and organization. Local participation is a keyingredient in the design of such isolated systems,in their implementation, and in their day-to-dayoperation” (p.46).

Macroeconomic policies and conditions alsoaffect project sustainability and replication. Forexample, in Zimbabwe, a sustained reduction inimport duties for PV components appears to bekey to sustaining the market development fosteredby the GEF project there (Annex C.1). Alsoimportant in Zimbabwe are continued commercialviability of PV dealers and continued ability of theAgriculture Finance Corporation to extend creditbeyond the project’s completion. In India,continued growth of the wind industry maydepend upon continued government investmenttax credits (Annex C.2). In the Philippines,although the National Power Corporation hasestablished a new tariff structure to reflect itsoperational costs and debt service, the region’sfinancial crisis has raised questions about futureelectric power capacity investments.

In DSM projects such as those in Jamaica,Thailand, and Mexico, project sustainability iscontingent on the institutional strength of theDSM unit and/or program created in the utilityand on continued financing (although in Jamaicathe DSM unit will be transformed into afinancially autonomous ESCO) (Annex A.5).

Replication lessons can also be learned fromhistorical development assistance programs.Agencies such as the German assistance agencyDeutsche Gesellschaft für TechnischeZusammenarbeit (GTZ), which has promotedrenewable energy in developing countries sincethe late 1970s, can offer a wealth of experiencevaluable to ensuring replication and sustainability.

For example, GTZ has concluded that purelytechnical solutions fail without a commercialinfrastructure, access to capital, and regionalplanning (Kozloff and Shobowale 1994).

Finally, replication also depends upon how wellusers’ needs are met. Hurst (1990) argues thatsolar hot-water heaters in several countries,micro-hydro in Nepal, and wind-turbine waterpumps in Argentina were successful because“relatively little change of behavior was involved.People were already heating water, treatingagricultural produce, and pumping water for cattlebefore any new technology came along. The newequipment acted as a substitute to a well-practicedalternative, rather than needing a completelydifferent activity to justify it” (p.608).

3. A Proposed Framework for MeasuringChanges in Markets

GEF projects have both direct and indirectimpacts. Direct impacts occur during a projectitself in the form of specific project interventions(“project outputs”). Indirect impacts occur as thedirect impacts of the project “ripple out” in spaceand time or among institutions to influence amarket in a geographically broad, long-term,and/or institutionally diverse manner. Althoughtraditional project performance monitoring usuallycaptures direct impacts, it falls short ofunderstanding how projects have broad, long-termimpacts on market development and marketsustainability. Indirect impacts are often difficultto measure.

For climate change projects financed by the GEFwhose goal is removing barriers to energyefficiency and renewable energy, the problem ofmeasuring indirect impacts is fundamentally oneof measuring changes in markets. There is scantpublished literature on this subject and thusevaluators of GEF projects’ indirect impacts treadin a relatively immature field. Demand-side-management program evaluation literature ishelpful, as is a relatively new literature on“market transformation” assessment, from whichmuch of the discussion below is derived (seeMartinot 1998a for a review of this literature). 20


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Measuring changes in markets is not simplebecause markets are complex phenomena (Box 4).Although no overarching theory or framework hasbecome widely accepted, research and practicehave produced useful insights. According toFeldman (1994), the three key definingdimensions of a market are: (1) the number andnature of participants, (2) the variety andcharacteristics of the products and servicesavailable, and (3) the rules governing exchangesin the marketplace. These dimensions representthe different components of a “snapshot” of themarket for a particular technology application atany given time. Changes in these dimensions canbe tracked over time to provide a dynamic pictureof market development. These dimensions alsowill vary spatially— even neighboring regions canexhibit quite different market characteristics. Measuring changes in markets requires thinkingbeyond measuring direct energy savings or energyproduction. Saxonis (1997) argues that“evaluation may not be viewed as simply anexercise in counting kWh but as a seriousexamination of the marketplace before, during,and after program intervention.... It may be moreimportant to focus on indicators such as dealerstocking patterns than actual kWh savings”(p.171). Feldman (1996) proposes that “theeffectiveness of market transformation programsshould not be judged only by savings achieved orby surrogate measures such as sales of efficientproducts and services. Instead, evaluation ofmarket transformation programs should also focuson the identification and measurement oftransaction costs” (p. ii). In Table 5 and Box 5 we propose a framework formeasuring changes in markets that distinguishesbetween “physical changes” like changes ininvestments and sales and “marketstructure/function changes” like changes in costs,transaction rules and regulations, availability ofservices, and human resource skills. In thisframework , three different types of indicatorsmeasure market interventions (direct projectoutputs), market development (indirect changescatalyzed by projects), and market sustainability(long-term impacts). These indicators measurethree different ranges of “directness” of marketimpacts or their “proximity” to the project, in

terms of time, space and/or institutions. Thisframework was first proposed by Martinot(1998a). The framework has not yet been appliedto completed GEF projects because of theimmaturity of the GEF project portfolio and thelack of post-project evaluation information, butsuggests a direction for future evaluations(Martinot, 1998a, applies indicators from theframework to several GEF projects currently inprogress). The China Efficient Boilers project (Annex B.5)can be used to illustrate the concept of“proximity” and the use of the framework and itsindicators. In this project, a large group of boilermanufacturers was invited to participate in aproject to upgrade the efficiency of their products.Nine manufacturers were selected. Theirperformance in designing, producing, andmarketing more efficient boiler models throughthe project could be measured using marketintervention indicators. Through replication anddissemination efforts (especially by the Ministryof Machinery), other manufacturers (i.e., thosethat were involved in the initial stages andsubmitted proposals for participation but were notchosen for the project) would be better able andmore motivated to upgrade and market their boilermodels as well. These indirect impacts would bemeasured by market development indicators, forexample surveys of the “non-participating”manufacturers and industrial enterprisespurchasing their boilers. Finally, marketsustainability would be measured by identifying asustained market share of more efficient boilersindustry-wide (almost 100 manufacturers) at alevel commensurate with their economic potential.


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Box 4: Quantitative and Qualitative Characteristics of Markets

Quantitative Characteristics

• sales volumes of the target technology to different groups of purchasers• stock of the target technology owned by different groups of purchasers• prices, technical characteristics, and quality of the target technology available in the market• number, size, and characteristics of producers, distributors, or service firms in the market• demographics and other characteristics of different groups of purchasers in the market Qualitative Characteristics • accessibility of technology information, financing, purchase opportunities (stores, catalogs, etc.), and

maintenance and repair services• awareness of and attitudes toward the target technology• motivations and incentives to purchase and install the target technology• programs and plans to produce, market, or purchase the target technology• distributors’ and dealers’ practices for stocking and promotion of the target technology• degree to which standard practices or habits with already-established technology are entrenched among users• capability of purchasers to assess, choose, specify, and use the target technology• capability of producers to develop, produce, and market the target technology• capability of distributors and service firms to market and service the target technology• existence of opportunity information like renewable-energy geographical-resource assessments and engineering

estimates of energy efficiency potential• existence and use of standard contractual models (e.g., independent-power-purchase contracts and non-

negotiable power-purchase tariffs)• existence and use of financing (e.g., dealer or producer credit, revolving funds, commercial loans)• existence of formal or informal industry codes of conduct for market actors (and degree of compliance with

these codes)• existence of technical codes and standards for the target technology (and degree of compliance with these codes

and standards)• existence of institutions that allow groups of individual purchasers to make collective decisions (e.g.,

condominium associations)• characteristics of relevant legal institutions, regulatory frameworks, taxes, duties, and other macroeconomic and

legal conditions

Source: Martinot 1998a.


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Box 5: Three Types of Indicators to Measure Project Impacts Market intervention indicators measure the specific interventions that a project makes in a market. These impactstypically occur during the project itself and will generally be known by the time a project is completed. Generally,these are direct project outputs under the control and responsibility of project management. Market development indicators reflect changes in the broader market beyond direct project impacts. Marketdevelopment impacts are facilitated by the project but are beyond the immediate control of project management andthus are considered “indirect impacts.” Most market development indicators measure activity that occurs after theproject is completed although some indirect impacts may occur during the project. Market sustainability indicators reflect the degree to which a market is sustainable without the need for furtherinterventions. There are three key aspects: (a) the degree of cost-competitiveness of a technology application in theabsence of subsidies or special tax treatment; (b) the degree to which essential market functions are performed bythose who profit from the market; and (c) the sustainability of public-sector institutions (including regulations) thatprovide essential market functions. Another way to think about market sustainability is the degree to which barriersare removed permanently— i.e., the likelihood that barriers will reemerge. The three indicators measure different degrees of “barrier removal” in space and time and among institutions. Forexample, a project that pilots a financing mechanism in a specific region of a country might reduce the financingbarrier by demonstrating a viable financing mechanism in that region. After the project, if the mechanism is provensuccessful, it could be replicated in other regions. Replication would be measured by market developmentindicators. Finally, the long-term persistence of such a mechanism (for example, repayment rates and reinvestmentrates of revolving funds) would be measured by market sustainability indicators. As shown in Table 5, each of the three types of indicators can measure investments or sales ( physical changes) orchanges in the institutions, capabilities, knowledge, and transaction rules that underlie markets ( marketstructure/function changes). For example, physical market intervention indicators would reflect hardwareinstallations that can be directly attributed to the project (e.g., the project procured the hardware directly, providedfinancing for it, or provided direct subsidies to producers or consumers). Physical market development indicatorswould reflect sales or investments that are not directly provided, subsidized, or financed by a project. Source: Martinot 1998a.


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Table 5: A Framework for Measuring Changes in Markets Time, Space, and/or Institutional Proximity to Project

<<<---- Closer --------------------------------------------------- Farther --->>> Type ofchange

Market intervention indicators

Market developmentindicators

Market sustainabilityindicators

Physical:• investments• sales

Direct investments or salessupported by the project:• direct project subsidies• direct project financing• project financing through

private-sector entities

Indirect investments or salesnot financed or subsidized bythe project

Evolution over time ofinvestments and sales to asustainable level appropriate toeconomic potential

Marketstructure andfunction:• institutions• capabilities• knowledge• transaction

rules• types of

goods andservices

Direct results of technicalassistance:• institutional development• enhanced capabilities• information dissemination• new contractual

mechanisms• new regulations• new codes and standards

Market participants (i.e.,producers, dealers, consumers,service firms, financiers):• number of participants• awareness• capabilities• perceptions• plans• decisions• satisfaction Technologies:• prices• characteristics• quality Basis of market transactions:• contract forms• codes, standards, and

certification• product labeling• other regulations

Evolution over time of marketcharacteristics thatdemonstrate marketsustainability

Source: Martinot 1998a.

4. Programmatic Benefits from the GEFProject Portfolio

As the number of projects in the GEF portfoliogrows, there is potential synergy if projects indifferent countries or sectors reinforce each other,and if project beneficiaries share their experiencesand catalyze changes elsewhere. That is, a“critical mass” may be reached in sometechnology applications or for certain projectapproaches that provides a “programmaticbenefit” from the combined portfolio of projectsunder a GEF operational program. Programmaticbenefits largely result from replication andsustainability. Because it is still too early toassess the full indirect impacts and replication

resulting from GEF projects, even recentlycompleted ones, programmatic benefits from theGEF project portfolio (as opposed to individualproject impacts) will remain elusive in the nearfuture.

Many strategic questions remain for the GEF toaddress in order to achieve and measureprogrammatic benefits. These questions includehow to achieve portfolio synergies and cross-project impacts; how to allocate resources amongdifferent operational programs; how to selectfuture projects given the existing portfolio; howto promote strategic partnerships with otheragencies; and how to define, implement, andevaluate replication and sustainability. These


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questions are beyond the scope of this paper butmany ongoing or planned GEF efforts areaddressing them. Ongoing evaluation activitieslike annual project implementation reviews,portfolio status reports, development of programperformance indicators, thematic or programmaticreviews, workshops, and working papers are alsoimportant.

The GEF has already learned a lot from pastefforts. The GEF pilot phase was evaluated by theUNDP, UNEP, and World Bank (UNDP et al.1994). The first three years of the post-pilot(“operational”) phase were similarly evaluated(Porter et al. 1998). The operational-phaseevaluation highlighted the strategic trade- offsbetween “barrier-removal” projects forcommercial applications and “cost-buy-down”projects for precommercial technologies. Theevaluation also highlighted the distinct risks ofeach type of project: “technology risk” in the caseof “cost-buy-down” projects, meaning that the“technologies now being backed may turn out tobe the wrong ones” (p.82); and risks associatedwith sufficiently removing the right barriers sothat sustainable commercial replication occurs inthe case of “barrier-removal” projects. Theevaluation concluded that the present emphasis inthe climate portfolio on barrier removal isappropriate, and that “the increased orientation ofclimate projects toward technologycommercialization and market transformation andaccompanying private-sector financing increasesthe sustainability of the GEF climate portfolio”(p.36).

Overall, prospects for sustainability andreplication of GEF climate change projects arestill mixed and uncertain. GEF projects haveattracted considerable attention from policymakers, the private sector, and NGOs. GEFstrategies continue to evolve in dialogue withthese and other stakeholders. Achieving anddemonstrating programmatic benefits from theGEF project portfolio will depend on continueddialogue and understanding of project designs andimpacts by all stakeholders. This paper shouldhelp inform that dialogue.


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Annex A: Opportunities and Barriers

1. “Win-Win” Opportunities for EnergyEfficiency

Many “win-win” opportunities for energyefficiency exist that can provide both global anddomestic benefits (Levine et al. 1991, Schipperand Meyers 1993, Reddy and Goldemberg 1990,Levine et al. 1992, U.S. Congress 1993, WorldBank 1993 and 1996, Schipper and Meyers 1993,Kammen 1995, Keyun 1995, Martinot 1998b).These opportunities include:

• Reducing electricity consumption in industryand in buildings. In addition to incorporatingenergy management systems and betterindustrial cost management in general,measures include: (a) incremental designimprovements to improve the efficiency ofequipment such as refrigerators, freezers, airconditioners, industrial motors and pumps,heating and ventilating equipment, andelectric furnaces and boilers; (b) replacementof conventional lighting with high-efficiencylighting; (c) addition of variable-speedcontrols to existing motors; (d) improvedoperation and maintenance of industrialequipment such as air compressors; and (e)upgrade of entire industrial processes withmore efficient processes.

• Reducing coal, oil, and gas consumption inindustry. Measures include cogeneration,secondary process heat recovery, renovationof boilers and furnaces, insulation of process-heat system components, improved operationand maintenance practices, and many otherindustrial process improvements specific toeach industry. Many of these measures areconsidered "low-cost/no-cost," meaning thatthey have low capital requirements or payback in one year or less. Some of thesemeasures, like cogeneration and boilerrenovations, can also involve switching fromhigh-carbon to lower-carbon fuels (e.g. fromoil or coal to natural gas).

• Improving the efficiency of electricityproduction, transmission, and distribution.Cost-effective technical opportunities includeboiler and turbine improvements,improvements to instrumentation andcontrols, repair and replacement of pumps andheaters, installation of distribution-linecapacitor banks, and better management andscheduling of plant operation andmaintenance.

• Reducing space-heat consumption inbuildings. In many economies in transition,the efficiency of space heating supplied bycentralized district heating systems isdegraded by poorly insulated buildings,inadequate controls, and large production anddistribution losses. Energy-efficiencymeasures include adding pipe and wallinsulation, heating controls and valves,window weatherization, and boiler tuning andcontrols. In developing countries, energyefficiency can be increased by improving theinsulation of building shells in new designsand in retrofits, by adding windowweatherization, and by improving furnacesand heating equipment.

• Reducing fuelwood and coal consumption inhousehold cooking. For coal stoves or insituations where cookstove use contributes tonet deforestation, energy efficiencyimprovements will reduce CO2 emissions.Experience has shown that improvedcookstove designs can, realistically, improveenergy efficiencies by 15-25% or more inmost households, with payback times of oneyear or less.21

• Adopting more-efficient irrigation pump-setsin agriculture. In some countries,replacement of existing inefficient irrigationpump-sets is cost-effective (or would be withunsubsidized electricity prices).

Annex A: Opportunities and Barriers Promoting Energy Efficiency and Renewable Energy

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• Using more-efficient vehicles and changingland-use patterns. The average fuelefficiency of domestically produced andimported automobiles, buses, and trucks canbe improved. Land use and developmentpatterns can emphasize and encourage mass-transit and reduced driving distances inprivate vehicles.

• Reducing losses in oil and gas transmissionand distribution pipelines. Pipeline losses canbe reduced through leak detection;improvements to pipes, valves, and seals; andmore efficient pumps.

2. Opportunities for Renewable Energy

If good geographic resources are present, severalapplications offer plentiful opportunities for cost-competitive commercial or near-commercialrenewable energy in developing countries andcountries in transition. These applications havebeen identified by scientific studies and practicalprogram and project experience (see U.S.Department of Energy 1990; Hurst 1990; U.S.Congress 1992 and 1994; Jackson 1993;Johansson et al. 1993; Ahmed 1994; Kozloff andShobowale 1994; Goldemberg and Johansson1995; IPCC 1996a and 1996b; Cabraal et al. 1996;World Bank 1997; Williams et al. 1998; Kammen1999). Renewable energy opportunities include:

• Home electrification with stand-alonephotovoltaic systems. Where extending thepower grid to particular geographic areas istoo costly, individual homes can receiveelectricity from small-scale (20- to 100-watt)photovoltaic/battery systems that cost roughly$300-$1,500. If economic savings fromavoided battery, kerosene, candle, or dieselfuel use are considered, solar home systemsare often economically competitive with theseconventional energy sources. There is apotential global market for hundreds ofmillions of systems because an estimated 2billion people worldwide lack access toelectricity grids.

• Electricity for village-power applications.Where extending the power grid to specificvillages is too costly, mini-grids can providepower to individual villages or groups ofvillages. Viable technologies for thisapplication include wind power, biomasspower (from animal, agricultural or forestindustry residues), small-scale hydroelectricpower, and hybrid PV/wind/diesel systemsintegrated with battery storage. Such systemscan range in size from 1 to 1,000 kilowatts(kW).

• Electricity for electric power grids. For urbanand industrial electricity needs, competitiveand viable technologies include wind farms,biomass power (from agricultural and forestindustry residues), geothermal power, andmethane from urban and industrial wastes (tofuel gas turbines). Installations can range insize from one to hundreds of megawatts andmay include cogeneration. These applicationscan produce electricity at costs from 2 to 7cents/kWh, which can be competitive withconventional forms of base-load and/or peak-load electric power.

• Mechanical water pumping for agricultureand domestic water with wind pumps. Windpumps can provide mechanical power forwater pumping in areas not connected tocentral electric power networks. Where windresources are good, wind pumps can becheaper than alternative means of waterpumping although their cost depends onwhether they can be manufactureddomestically or must be imported.

• Transportation fuels. Brazil’s experienceduring the past two decades with convertingsugar cane into ethanol for motor vehicles hasproven this technology’s commercialviability. More than 60% of sugar caneproduced in Brazil goes to ethanol production(Goldemberg and Johansson 1995).Technological advances have continued toimprove the economic competitiveness ofethanol and gasohol relative to conventionalgasoline, but the price of oil greatly affectscompetitiveness.

Promoting Energy Efficiency and Renewable Energy Annex A: Opportunities and Barriers

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• Building heating, cooling, and hot-water withsolar technologies. Active and passive solarheating and cooling and solar hot-waterheating can reduce the energy consumption ofmany types of residential and commercialbuildings. Passive solar designs can beincorporated into building architecturaldesigns. Active solar hot-water heatingsystems can be installed during buildingconstruction or retrofitted afterwards.Depending upon electricity prices and solarresources, solar hot-water heating can beeconomically competitive with electric waterheating but generally not with natural gaswater heating.

• District heating from biomass andgeothermal. In many of the economies intransition, centralized district heating systemsprovide the majority of residential spaceheating. Smaller boiler plants burning coal oroil can be converted to burn biomass fuels.Geothermal sources can also feed into thesesystems and reduce fuel consumption.Experience in several countries demonstratesthat conversions to biomass fuels are cost-effective and commercially viable.

• Biogas digesters for lighting and waterpumping. Family-size digesters can providefuel for home lighting (as is true in more than5 million Chinese households) whilecommunity-size digesters coupled withengines and electric generators can provideelectricity for water pumping and lighting (ashas been demonstrated in India).

3. Barriers to Energy Efficiency andRenewable Energy

Tables A1-A3 describe generic barriers to energyefficiency and renewable energy. Barriers relategenerally to lack of information about

technologies, opportunities, costs, and benefits;imperfect capital markets; lack of human resourceand institutional capacities to evaluate, finance,and conduct investment projects; technical andmarket risks associated with introducingestablished technologies into new markets; risksand difficulties of new institutional concepts andmechanisms; high transaction costs; and otherinstitutional constraints. Many of these barriersare common to both renewable energy and energyefficiency; others apply to only one category.Still other barriers, for example those related tofuel-price risk, while theoretically applicableequally to both renewable energy and energyefficiency, are more significant in actual practicefor renewable energy than for energy efficiency,partly because investment time frames on thesupply-side are greater than those on the demand-side. Another example, technology prejudice andacceptance, applies to both energy efficiency andrenewable energy but in practice also tends to be amore significant barrier for renewable energy.

The generic treatment of barriers in Tables A1-A3is inadequate for the purposes of preparingprojects. Only some of the barriers in Tables A1-A3 will be present in any specific situation. Thechallenge in preparing projects to overcome thesebarriers is to identify the most relevant andoperative barriers in a specific context and toaddress only those. Barriers are extremelydependent upon local and national contexts,including macroeconomic and policy frameworks,the degree of market development, the presence ofpotential interest groups and proponents, and ahost of other factors. Boxes A1 and A2 provide amore specific look at barriers for two clusters ofprojects in the GEF portfolio, and Box A3provides a description of barriers from a specificGEF project proposal.


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Table A1: Generic Barriers Relevant to Both Energy Efficiency and Renewable EnergySubsidized or average-cost energy prices

Energy prices may be subsidized or may equal average cost rather than long-runmarginal cost, thus distorting markets and reducing financial returns from energyefficiency or renewable energy. Further, the full value of wind or solar power thatcoincides with daily demand peaks may not be captured if energy prices reflectaverage rather than time-of-use marginal costs.

Lack of information Consumers, managers, engineers, architects, lenders, or planners may lack informationabout technology characteristics, economic and financial costs and benefits, energysavings potentials, geographical resources for renewable energy, operating experience,maintenance requirements, potential partners and their financial health, sources offinance, and installation services. The lack of information may increase perceiveduncertainties and block decisions.

Transaction costs Many costs associated with transactions for identifying, procuring, installing,operating, and maintaining energy-efficient equipment may limit even informed,motivated actors from undertaking these transactions. Because renewable energyprojects are typically smaller than conventional energy projects, the transaction costsof each project— planning and developing project proposals, assembling financingpackages, and negotiating power-purchase contracts with utilities— may be muchlarger on a per-kW basis than for conventional power plants.

High front-end capitalcosts

Despite high rates of return, energy efficiency investments may require large capitalexpenditures at the start, necessitating credit mechanisms and making investments lessattractive to first-cost-sensitive investors. Even though low operating costs may makerenewable energy cost-competitive on a life-cycle-cost basis, higher initial capitalcosts may mean that renewable energy provides less installed capacity per initial dollarinvested than do conventional generation sources. High front-end costs createadditional cost-recovery risks, for which capital markets may demand a premium inlending rates.

Lack of credit Consumers or firms may lack access to credit because of lack of collateral, poorcreditworthiness, or distorted capital markets; loan terms may be also be too shortrelative to the investment lifetime.

High user discount rate Consumers may have higher discount rates than prevailing market rates or thandiscount rates for energy supply investments.

Perceived technologyperformanceuncertainty and risk

Proven, cost-effective technologies may still be perceived as risky if there is littleexperience with them in a new application or region. For example, the lack of visibleinstallations and the lack of familiarity and experience with renewable energytechnologies can lead to perceptions of greater technical risk than for conventionalenergy sources. These perceptions may increase required rates of return, result in lesscapital availability, or place more stringent requirements on technology selection andresource assessment.

Institutional mismatchof energy costs andcapital costs

Equipment purchase decisions (e.g., for furnaces and appliances) or building designdecisions (e.g., for thermal insulation and passive solar designs) may not be made bythose who will pay the future energy costs that result from these decisions.

Lack of legalframework forcogeneration orindependent powerproduction.

Cogeneration by electric utility customers may not be legal, or cogenerators may notbe allowed to sell excess power back to electric power utilities. Renewable energyproject developers may not be able to obtain power purchase agreements from electricutilities or may not be able to plan and finance projects on the basis of transparenttariff and regulatory frameworks.

Lack of technical orcommercial skills

A country's or region's aggregate ability to evaluate, design, and install energyefficiency improvements and energy-efficient equipment and infrastructure may belimited by the availability of appropriately trained personnel. Skilled personnel whocan maintain renewable energy technologies may not exist in numbers. Projectdevelopers may lack sufficient technical, financial, and business development skills.

Sources: see sources for Table A2 and Table A3.


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Table A2: Generic Barriers Relevant to Energy EfficiencyBiases toward supply-side investments andlarge-scale financing

Financial institutions may only extend credit for large-scale supply-side energyinvestments because of tradition, familiarity, and perceptions of risk. That is,institutional biases may favor a small number of large projects on the supply siderather than a large number of small projects on the demand side.

Unavailability oftechnology

Hardware may not be readily available in a particular region or country and may needto be imported on a case-by-case basis.

Competing purchasedecision criteria

Purchasers of equipment may consider energy efficiency characteristics of equipmentto be less relevant or important than other characteristics affecting performance andaesthetics

Uncertain future energyprices

Uncertainty about future energy prices may create uncertainty about the costs andbenefits of energy efficiency investment decisions.

Sunk investments ininefficient equipmentand infrastructure

Investments already made and equipment already purchased may have long usefullifetimes remaining; retrofits may not be possible, and complete replacement may notbe cost-effective.

Disinterest or lack ofattention

On both personal and organizational levels, there may be a simple lack of interest orlack of attention to consider alternatives to the status quo.

Lack of managerialincentives

Especially in monopoly and state-protected enterprises, managers may have littleincentive to minimize costs or innovate.

Mismatch of energyconsumption andpayment of true energycosts

Consumers of energy may not pay for their own consumption, may pay fixed amountsrather than consumption-based amounts, or may pay average costs rather than truemarginal costs.

Free riders Incentives may be weakened if one consumer benefits from the energy-efficientactions of another consumer but does not share in the costs (e.g., insulation in oneapartment warming neighboring apartments), or when benefits are the collective resultof many individual actions (e.g., many consumers connected to the same energymeter).

Physical or technicalincompatibility

Energy efficiency may be physically or technically impossible, more costly, orunreliable because of specific characteristics of the infrastructure or application.

Favoring of lowest-costequipment

Equipment producers and builders faced with markets in which consumers aresensitive to initial capital costs (“first costs”) may make purchase price the firstconcern rather than energy efficiency characteristics and total life-cycle costs(including energy and operating costs over the life of equipment).

Uncertain markets forhigher-efficiencyequipment

Market research or experience may not exist to inform manufacturers or contractorsthat demand for energy-efficient products and infrastructure will justify design andmarketing expenses.

Narrow planningprocesses

Utility planning may not encompass the full range of supply- and demand-side optionsto produce the lowest costs for consumers for specific levels of energy services.

Lack of governmentinterest

Governments may perceive their countries’ problem as not enough energy and thusperceive reduced energy consumption as the wrong direction, equating energyconsumption with energy services.

Import duties High import duties may make unprofitable otherwise cost-effective energy-efficienttechnologies that are not produced domestically.

Need for multi-agencyinvolvement

Energy ministries or other energy efficiency agencies may lack the power to influencepolicy decisions made by agencies in the transport, residential, agricultural, andindustrial sectors that affect energy consumption.

Sources: Stern and Aronson 1984; Reddy 1991; World Bank 1993; Howarth and Andersson 1994; Levine et al.1992 and 1994; Golove and Eto 1996.


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Table A3: Generic Barriers Relevant to Renewable EnergyLack of utilityacceptance oftechnologies

Utilities may be hesitant to develop, acquire, and maintain unfamiliar technologieswith which they have had no direct experience, and renewable energy technologiesmay not receive proper attention in planning frameworks.

Difficulty of firmdispatch in utility gridoperations

Power from sources such as solar and wind may not provide the same levels of firmdispatch to which a utility is accustomed and may require changes to a utility’sdispatch procedures.

Technical limits toutility integration ofintermittent sources

There are technical limits on the degree to which intermittent sources, such as solarand wind, can be integrated into existing utility grids, depending upon the type andmixture of other existing generation sources

Competition for accessto resources

Competition, real or perceived, for land use with agricultural, recreational, scenic, ordevelopment uses can occur among government agencies, agricultural interests, privateinterests, or environmental interest groups

Restrictions on urbansiting and construction

Waste-to-energy facilities may face permit problems in urban areas. Solar hot-waterheating or photovoltaic installations on rooftops may face building restrictions basedupon height, aesthetics, or safety. Nearby inhabitants may perceive aesthetics andnoise of wind farms as undesirable.

Lack of utility gridaccess to remote sites

Grid access to remote renewable energy sites may be blocked by transmission-accessrulings or right-of-way disputes.

Risks of permit process The perceived length and difficulty of the permit process for potential renewableenergy projects may add risks of additional costs or delays.

Difficulty of future-fuel-price riskassessment

Risks associated with fluctuations in future fossil-fuel prices may not be quantitativelyconsidered in decisions about new generation capacity because these risks areinherently difficult to evaluate and to weigh against other factors. Because renewableenergy technologies reduce future-fuel-price risks, they do not receive the premiumthey might if such risk factors were explicitly and quantitatively included in economicanalysis and technology assessments.

Institutional mismatchof capital costs andfuel-price risks

In many existing regulatory regimes for electric power utilities, in which fuel costs arefactored into rates, consumers rather than utilities bear the burden of future-fuel-pricerisks for conventional energy sources; thus, renewable energy sources, without fuel-price risks, may be less attractive to utility decision-makers.

Difficulty ofquantifyingenvironmental costs

Environmental externalities may be difficult to evaluate in comparisons betweenconventional and renewable energy sources, so analyses may not include the reducedenvironmental costs from renewable energy.

Lack of detailedgeographic resourcedata

Data may not exist on the wind, solar, geothermal or biomass resources available indifferent regions, which can make project feasibility assessment and preparationdifficult or costly.

Prejudice against atechnology because ofpoor past performance

Consumers who might benefit from renewable energy may be prejudiced against itbecause of past histories of poor performance in installations of which they may beaware.

Lack of governmentsupport

A government may see renewable energy as a low priority and unworthy of legislativeor executive action or research funding.

Opposition of existinginterest groups

Interest groups that benefit economically or politically from the status quo reliance onconventional energy sources may block renewable energy development throughpolitical or coercive means.

High costs ofdeveloping newinfrastructure andmarket institutions

“Energy conversion technologies which have extensive production, delivery andmaintenance systems already in place have a considerable advantage over thosetechnologies that do not....In order for newer technologies to provide a better choicefor rural users, they have to provide similar levels of service. The costs associatedwith such service are an essential part of the investment required to introduce a newtechnology” (Barnett 1990, p.550).

Sources: U.S. Department of Energy 1990; Barnett 1990; U.S. Congress 1992 and 1994; Jackson 1993; Saunders1993; World Energy Council 1994; Goldemberg and Johansson 1995; World Bank 1996; Martinot 1998b.


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Box A1: Barriers to Diffusion of Solar Home Systems and Solar Hot-Water Heating

High first cost and unaffordability. Solar home systems and solar hot-water heating represent initial capitalinvestments that reduce or eliminate a stream of future payments for fuels and batteries. But the high “first cost” ofthis capital investment may make affordability an important constraint.

Lack of credit. Credit can improve affordability but there may be a lack of credit access and credit deliverymechanisms. Financiers may not perceive rural households as credit worthy. Lack of practical collateral or legalenforcement of contracts may inhibit financing.

Insufficient technological track record. There may be an insufficient technological track-record to dispel users’,financiers’ and dealers’ misconceptions about technology costs, benefits, and performance. Experience may existelsewhere but may not be accessible, visible, or credible in the specific locality where doubts exist. For solar hotwater, low quality or performance of existing systems on the market may not provide good demonstrations of thetechnology’s potential, and may create negative perceptions.

Lack of codes and standards. The absence of norms, standards, certification, codes of practice, and performancedata hinders competition based on product price and quality.

High transactions costs. Identifying possible projects may be expensive and time consuming, especially for urbancompanies or financiers operating in rural areas. Numerous small-scale installations may make projectimplementation challenging. Pre-investment risks associated with the costs of marketing, contracting, and collectinginformation may be high.

Policy constraints. Subsidies for conventional fuels, inappropriate tariff structures, import duties for renewableenergy equipment, lack of attention to environmental externalities, and other policy conditions can be seriousobstacles. For solar hot water, different government agencies (e.g., housing vs. energy agencies) may be in conflictover responsibilities and policy influence for development of the technology.

Lack of objective market, business, and quality information. Information may be lacking about the financialcondition and business track record of entrepreneurs or about the technical characteristics and quality of theirsystems. Market information may be needed about potential households, their incomes, their interest in SHS, andtheir current expenditures for candles, kerosene, and other forms of energy. Information about solar insolation indifferent geographical regions may also be lacking.

Lack of business capacity. Businesses wishing to produce and market solar technologies may lack capacity todevelop business plans and obtain commercial financing.

Low volume/high costs. Because of the low volume of existing markets, dealers may face high per-unit costs andmay be unwilling to provide service and maintenance.

Uncertain or unrealistic grid expansion plans. Unrealistic political promises for future electricity-grid expansioncan reduce demand for solar home systems if households believe “the grid is coming.” But such promises may lacksubstance or financial backing. The lack of coordination between SHS market development and rural electrificationprograms and policies can impair markets.

Source: adapted from GEF project documents


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Box A2: Barriers to Energy Efficiency in District Heating in Countries in Transition

Lack of incentives and undeveloped regulatory frameworks. In many cities in countries in transition, heat supplymarkets have yet to move to a market orientation. Heat is still often sold at fixed monthly tariffs rather than at pricesbased on actual metered consumption, which discourages conservation. Other regulatory frameworks may be eithermissing or deficient, for example those providing incentives for district heating companies to reduce losses in theirnetworks.

Lack of capital. Because of poorly developed capital markets, there may be difficulties in obtaining financing forenergy efficiency investments, which discourages the involvement of private and NGO actors. The characteristicsof some capital markets, specifically high interest rates and short financing terms, may make them inappropriate forenergy efficiency investments.

Lack of financial and managerial skills. Many of the legal, financial and managerial skills needed for projectdevelopment, financing, and implementation are relatively unfamiliar to managers trained in a centrally plannedeconomy, not only in the public sector but also among private and NGO actors.

Lack of information. Engineers, managers, financiers and consumers may lack information on energy-efficienttechnology characteristics, economic and financial costs and benefits, and amounts of potential energy savings.

Source: adapted from GEF project documents.


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Box A3: Barriers to Energy-Efficient Refrigerators in China

Lack of awareness of the life-cycle economic benefits of high-efficiency refrigerators. Consumers remain highlysensitive to the first costs of their purchases, preferring models with low purchase prices and higher electricity costsbecause the idea that total life-cycle costs can be much lower for high-efficiency models is unclear.

Lack of reliable, comparative information available to consumers about specific models. Even if consumers want topurchase models with low life-cycle costs, they are unable to make comparisons among models because labels donot exist to provide such information in a consistent and easy-to-understand manner. Labels that have appearedrecently on some models lack certification based on national energy efficiency criteria, and provide inadequateinformation. This has led to consumer confusion and growing government concern over proliferation of multiplecriteria.

Manufacturer uncertainty about market demand for high-efficiency models. Manufacturers have had access to few,if any, market research studies about the potential demand for high-efficiency models in the Chinese market. Onlyrecently, with rising electricity prices, more disposable income among a growing segment of Chinese society, and agreater emphasis on competitiveness in industry, has consumer attention turned to high-efficiency products.

Manufacturer uncertainty about cost-effectiveness of high-efficiency models. Manufacturers are uncertain aboutboth the costs of developing and producing high-efficiency models and the price premium that high-efficiencymodels might command. Therefore, manufacturers are reluctant to commit resources to developing and producinghigh-efficiency models.

Lack of expertise in energy-efficient refrigerator design. The majority of Chinese manufacturers lack engineeringand design expertise to develop new energy-efficient refrigerator models or improve the efficiency of existingmodels, for three reasons. First, manufacturers have not cultivated these skills. Second, most domesticmanufacturers have relied heavily on imported or licensed technology and therefore are reluctant or unable todevelop new energy-efficient designs. Finally, many domestic manufacturers have in the past relied on a limitedand unchanging product line for their sales and therefore have extremely limited experience in product design andredesign. For these reasons, many manufacturers are uncertain of their ability to move in new technology directionswithout targeted training.

Higher-efficiency compressors are not available domestically. The high-efficiency compressors needed to producehigh-efficiency refrigerators are not available domestically; the high cost of imported high-efficiency compressors isa strong disincentive for domestic refrigerator manufacturers to utilize them.

Dealer reluctance to stock or promote high-efficiency models. Uncertainty about consumer demand, the need toeducate their sales force, and fear of reduced sales because of higher refrigerator prices all make dealers reluctant tostock high-efficiency models. Survey results have also indicated that sales staff are uneducated about the benefits ofenergy efficiency and unable to provide consumers with reliable information.

Lack of an appliance recycling program. The lack of an appliance recycling program means that unnecessaryrefrigeration is occurring. As China’s refrigerator market matures, an increasing proportion of purchases involve thereplacement of an old refrigerator. Unlike most developed countries, where older appliances are scrapped orrecycled, market research indicates that 50% of new buyers in China keep their old refrigerators. These olderrefrigerators still in use may offset much of the efficiency gain from the purchase of new refrigerators.

Lax efficiency standards. China’s current efficiency standards, promulgated in the 1980s, were established in viewof the needs of hundreds of small refrigerator producers. They are currently outdated, and provide no incentives forcompanies to increase the energy efficiency of their models. Experience in countries that have adopted mandatoryefficiency standards has proven standards effective in removing the most inefficient models from the market andcreating expectations of periodic increases in minimum energy performance standards.

Source: project proposal submitted to GEF Council by UNDP, 3/98


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Annex B: The GEF Project Portfolio22

B.1. Solar Home Systems and Rural EnergyServices

Twenty-one projects promote solar home systemsand rural energy services (Table B1). Despitedifferences in design details, these projects sharemany approaches, so much can be said about themas a group. GEF experience with solar homesystems (SHS) projects has evolved steadily sincethe first project, the India Alternate Energyproject, was approved in 1991. Installations as adirect result of these projects could total morethan 700,000 systems, which would significantlyexpand the installed base in developing countries,now estimated at between 300,000 and 500,000(Foley 1995; Kammen 1999; unpublishedmaterial). Projects employ several approaches,described below (Martinot et al. 2000a).

Pilot Private-Sector Delivery Models. Projectshave employed two basic private-sector-orientedmodels for delivery of SHS: “dealer sales” and“energy service companies.” A dealer-salesmodel means that a dealer purchases systems orcomponents from manufacturers and sells themdirectly to households, usually as installedsystems. The household then owns and isresponsible for servicing the system. Dealersoffer warranties, provide maintenance and repairservices, and may provide flexible payment orcredit mechanisms to make systems moreaffordable. An energy-service-company (ESCO)model means that an ESCO owns the SHS,charges a monthly fee to the household, and isresponsible for service. The ESCO may be amonopoly concession regulated by government toserve specific geographic regions, or it mayoperate in an open market. Combinations of thesetwo forms of ESCO start with monopolyconcessions and progressively open up markets tocompetition after a some number of years (theCape Verde project is an example).

Dealer sales. Dealer sales models are being usedin Zimbabwe, India, Indonesia, Sri Lanka andChina. Dealer eligibility varies among projects.

In the India project, any dealer could participatethrough financial intermediaries; the Indonesiaproject, in order to better ensure dealer success,competitively selects dealers based upon existingbusiness competence and market infrastructure inrelated rural sales/service markets. In the Chinaproject, any entrepreneur who passes the project’seligibility criteria can participate.

Energy service companies. In Argentina, theESCO concession model is being used becauseArgentina already has substantial experience withconcession systems. For each of 10 provinces, thegovernment awards a monopoly concession basedupon a competitive selection process. Five otherprojects, in Benin, Togo, Cape Verde, Ghana, andPeru, also use the ESCO concession model. InBenin and Togo, like Argentina, monopolyconcessions will be granted for 15 years intargeted regions to the winners of a competitiveselection. In Ghana, the public rural electricutility acts as the ESCO. In Peru, concessions areestablished in four separate regions based upon alegal model that the project is developing basedon Peru’s existing Electrification Law. Butconcessions in the Peru project do not havemonopoly status after the project; rather, eachregion will have an installed customer base togenerate sufficient local demand for spare parts,replacements, and maintenance services so thateach region will be a worthwhile market forfurther private-sector investment. Businessfinancing for ESCOs comes from a number ofsources, including governments, multilateralbanks, and commercial financiers.

Combination approaches. The Sri Lanka projecthas built-in flexibility to accommodate ESCOs aswell as dealers. Both types of firms can obtaincredit from the financial intermediariesestablished under the project. Additionalflexibility means the dealer or ESCO doesn’t haveto be a private company but can be a non-governmental or community organization.Another project, PVMTI, is a purely private-sector approach that allows for both dealers andESCOs, as well as other models. The project

Annex B: The GEF Project Portfolio Promoting Energy Efficiency and Renewable Energy

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establishes a fund that finances commercialbusiness plans of companies intending to operatein PV markets in India, Kenya, or Morocco.These business plans are being selected through acompetitive solicitation process. Flexiblebusiness financing for commercial PV companiesis also the approach used in the SolarDevelopment Group project (IFC global project).

The Mauritania project provides low-interestfinancing directly to local enterprises for theinstallation and maintenance of smalldecentralized wind electric equipment. Theproject also establishes a mechanism for longer-term financing of rural electrification, usingoptions such as a specialized wind equipmentfinance company, a standard credit mechanism forproject developers, and Islamic lease finance.

Government procurement. For some GEFprojects, government procurement is tied toprivate-sector or community delivery. Forexample, in Uganda, where a few PV dealers haveoperated in a limited PV market, the projectidentifies pilot sites and technical specifications,identifies credible commercial PV dealers, andawards installation contracts to these dealers. InLao PDR, the national electric utility will install20 solar battery charging stations for a pilotdemonstration of the technology as part of a largerrural electrification project. The project will alsotrain staff in a number of village electricityassociations to plan and manage off-gridrenewable energy projects, thus increasing theprospects for community delivery of PV systems.In Mexico, a project will procure and install avariety of demonstration equipment for waterpumping and refrigeration.

Pilot Credit Mechanisms and Make SystemsAffordable. Affordability and financing areimportant barriers to overcome. Market studiesassociated with GEF projects have revealed thatthe majority of rural households that haveincomes less than $250/month and are notconnected to rural electricity grids pay $3 to $15per month for energy (kerosene, battery chargingand disposable batteries). These surveys haverevealed that households are willing to pay forenergy for the end-uses they value the most—

including lighting, television and radio. BecauseGEF projects target these lower-incomehouseholds, solar home systems must overcomethe barrier created by their high initial costrelative to conventional alternatives. In otherwords, projects must find a way for households tocontinue to pay amounts equivalent to or less thanthose expended for conventional energy. Severalapproaches have been used to improveaffordability:

• offer long-term credit so monthly paymentsare not higher than current energyexpenditures, either through third-partycommercial credit, dealer credit, ormicrofinancing;

• provide “first-cost subsidies” to reduce initialconsumer payments;

• offer energy services on a fee-for-servicebasis (energy-service business);

• sell smaller-size systems initially and providetrade-in or resale mechanisms for consumersto “trade up” to more expensive systems;

• change trade policies to reduce import dutieson PV system components.

Third-party commercial credit. Zimbabwe wasthe first PV project to pilot third-party, long-termcredit. The Agricultural Finance Corporationsuccessfully provided below-market-rate credit tohouseholds to purchase solar home systemsthrough a revolving loan fund. Third-party long-term credit was also tried in India but provedinfeasible for rural households (see Annex C.1).The Uganda project also attempts to establishthird party financing; SHS customers applydirectly to commercial banks for credit under apre-established mechanism. In the Sri Lankaproject, larger customers like NGOs andcooperatives can borrow directly fromcommercial financiers.

Dealer credit. In Indonesia, credit is extended bycommercial financiers to SHS dealers; SHSdealers in turn lend to their customers. Dealersextend credit to households in the form of termloans (expected terms are about four years) andbear the collection risk for repayments. In turn,dealers have access to credit from commercialbanks at prevailing market interest rates on-lent

Promoting Energy Efficiency and Renewable Energy Annex B: The GEF Project Portfolio

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from the World Bank. The commercial banksbear the responsibility for appraising dealerrequests for credit, and for the commercial risk onthe credit extended to a dealer. Like in India, anapparent problem in Indonesia is proving to bethat financiers consider dealers uncreditworthy,and dealers consider their customersuncreditworthy. In Sri Lanka, dealers can alsoborrow from commercial financiers so they canoffer credit to their customers.

Microcredit. Microcredit is another financingapproach in which households receive small loansfrom community-based microcredit lenders. TheSri Lanka project incorporates microcredit;microcredit organizations borrow from thecommercial financiers participating in the project.Another idea advanced by the project is formicrocredit organizations to directly receiveWorld Bank financing on-lent by the governmentalthough World Bank eligibility criteria forfinancial intermediaries might need to be relaxedto accomplish this.

Cash sales. A cash sales model without credit isemployed in a few projects. In China (RenewableEnergy Development), extending credit to ruralhouseholds was not considered feasible given thealmost complete absence of experience withconsumer credit in general in China, so a cash-sales model was used. Although case sales werenot originally in the project design, Sri Lanka,midway through project execution, is consideringthem as a way to reduce transaction costs andfinancing risks, perhaps by allowing more-affordable systems of capacity smaller than 30Wp to be eligible for GEF grants under theproject. Offering smaller systems sizes and cashsales is an approach incorporated into severalprojects and is being proposed for the Indonesiaproject because of reduced incomes from therecent economic downturn in that country. InZimbabwe, many of the sales were cash.

Pay First-Cost-Subsidies and Lower ImportDuties. First-cost subsidies are incorporated intoprojects in Zimbabwe, China (Renewable EnergyDevelopment), Indonesia, Argentina, Benin,Togo, Cape Verde, Peru, and Sri Lanka. Thesesubsidies are intended to reduce household

monthly payments for a SHS to make them asclose as possible to current monthly payments forenergy (i.e., kerosene and batteries). First-costsubsidies are generally related to the differencebetween the life-cycle costs of the SHS and thecosts of kerosene, candles, and other fuel sourcesdisplaced by the SHS. First-cost subsidies arejustified by cost reductions expected over the lifeof the projects, which should eliminate the futureneed for subsidies to make purely commercialmarkets sustainable. Cost reductions are expectedas a result of increasing market volume andcompetition, refinement of procurement methodsand bulk purchasing, economies of scale in salesand service networks, standardization ofcomponents and installation processes, andimproved quality and acceptance of technologywith the introduction of technical standards andcertification.

Fix cash grants. Some projects offer fixed cashgrants for each system installed once certificationof the installation is available. In the Zimbabweand China Renewable Energy Developmentprojects, a $100 cash grant is paid directly to theSHS dealer. In Sri Lanka, a $100 cash grant ispaid to the commercial financier. In Indonesia,grants are $75 in Java and $125 elsewhere, paiddirectly to dealers.

Declining cash grants. Declining cash grants on asliding scale over the life of the project are builtinto more recent projects to “push” the marketearly on and then allow a transition to a fullycommercial market. The idea of declining grantsis that, as a project gets closer to completion,existing businesses will be able to offer cheapersystems to customers, and thus smaller grants areneeded to maintain the same levels ofaffordability. For example, in Argentina, ESCOconcessions are given a variable cash grant fromthe GEF for each system installed during the firstfive years of the project. The cash grants declinefor installations made in later years of the project,gradually reaching zero by the end of the project.Grants also depend on system size. In Benin,Togo, Peru and Cape Verde, declining grantssimilar to Argentina’s are used. For example, inPeru, grants start at $200 in the first year butdecline to $70 for installations in the last year ofthe project.


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Reduced import duties. In addition to first-costsubsidies, reduced import duties on PVcomponents can make solar home systems moreaffordable for rural households. Governmentsreduced import duties in conjunction with GEFprojects in Zimbabwe, Uganda, and Sri Lanka(duties were 40% before the project inZimbabwe). With this approach, however,continued reduction of import duties after theproject is a key element of market sustainability.

Build Capacities of Public Agencies andPrivate-Sector Firms. There is a need to developthe commercial skills of delivery firms, whetherthey are acting as dealers or ESCOs. Deliveryfirms may be entirely new business ventures withlittle business and/or PV experience. Existingcompanies operating in rural areas, for exampledealers selling TVs and radios, may also becomeSHS delivery firms if they want to expand theirbusiness activities and increase demand for theirother businesses; these firms still need to learnabout how to market and service solar homesystems.

Dealer capacities. Grants strengthen the businesscapabilities of competitively selected SHS dealersin several projects. In Indonesia, because cashflow was recognized as the key constraint on theemerging enterprise of selling solar home systemson credit, training efforts for dealers arespecifically targeted at how to develop anattractive business plan and approach a banker forbusiness financing. In Sri Lanka, grants areavailable to dealers to cover up to 90% of theexternal consultant costs (not dealers’ own directcosts) of preparing a specific investment proposalor business plan for approval by a commercialfinancier. In the China Renewable EnergyDevelopment project, grants enable dealers toimprove system quality, warranties and after-salesservice, and to strengthen technical, financial, andmanagerial capabilities. In Mexico, similartraining targets technicians and private-sectorvendors.

Energy service company capacities. Projectsbuild the capacities of ESCOs and provide themwith business services. In Cape Verde, ESCOs

are assisted with business planning, technicaltraining for staff and managers, delivery systemsand infrastructure setup, market development andresearch, consumer promotion, establishment andnegotiation of regulatory norms, and developmentof technical standards. In Argentina, provincialgovernments assist concessions by preparingdetailed market studies; conducting disseminationworkshops for concessionaires, customers, andNGOs; and studying how to improve theavailability of DC appliances compatible withSHS in rural areas. In Benin and Togo, the ruralelectric utility conducts marketing activities tosupport ESCOs; the utility polls communities ontheir interest in and willingness to pay for solarhome systems, collects information on villagedemographics, and installs solar-resourcemonitoring stations.

Regulatory agency capacity. For projects usingthe ESCO concession model, technical assistanceto national regulatory agencies is also includedfor: concession bidding and contracting, trainingof agency staff, and monitoring and regulation ofconcessions. Examples of regulatory agencies areprovincial governments in Argentina; the nationalenergy agency (INERG) in Cape Verde; and theAgence d’Electrification Rurale (AER) in Beninand Togo. In Argentina, sustainability isenhanced by strengthening provincial regulatoryfunctions and institutions and offering appropriateincentives and returns for the concessionaires.

Market building activities. In some projects,capacity building and technical assistance isdirected at initial conceptual, institutional, andmarket building activities. The Bolivia projectformulates and evaluates institutional and legalmodels for implementing rural renewable-energy-based electricity companies (e.g., NGOs, public-private enterprises) using Bolivia’s PopularParticipation Law. The project also providestechnical assistance to evaluate rules andprocedures that hinder commercial financing ofrenewable energy, and to strengthen financialinstitutions interested in renewable ruralelectrification. The China Capacity Buildingproject conducts workshops focusing on marketpenetration, foreign investment, power-purchaseagreements, and information needs; establishes amajor renewable energy center/clearinghouse;


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trains policy makers, renewable energyprofessionals, and buinessmen in market-basedrenewable energy development and best practices;and builds capacity to assess renewable energyresources.

Enact Codes and Standards and Put in PlaceCertification and Testing Institutions. Codes,standards and certification are important elementsof reducing commercial risks and purchase risksand making markets sustainable. Most projectsdevelop and establish PV component and systemsstandards to ensure quality, safety, and long-termreliability, some at the national level (like inMalawi and in the Benin and Togo projects wherethe rural electrification agencies issue and enforcea “PV code of practice” and technical standards).Projects also ensure that directly installed systemsmeet these standards. Some projects, such as inIndonesia, provide assistance to get equipmentcertified by international laboratories for dealerswith approved financing.

Certification and testing agencies. Domesticcertification and testing agencies are important.The Indonesia project provides technicalassistance for strengthening capabilities of theAgency for the Assessment and Application ofTechnology for solar PV testing and certification.In Uganda, in addition to establishing equipmentstandards and codes of practice, the project willstrengthen the Uganda Bureau of Standards andcreate a balance-of-system test facility. TheChina Renewable Energy Development projectprovides equipment and training to create anational PV Testing and Certification Center.

Assistance for testing and quality improvement.Most projects provide capacity building to ensurethat quality systems are installed. This assistanceis important not only to protect consumers butalso the reputation of an industry striving forlarge-scale commercialization. In Sri Lanka,assistance is provided to dealers for testing andquality improvements and a consumer protectionagency is being established. The ChinaRenewable Energy Development project alsoprovides capacity building for quality assuranceand consumer protection. In Benin and Togo, therural electrification agency is developing the

capability to spot check installed systems andconduct regular consumer surveys. The Ugandaproject, in conjunction with the national bureau ofstandards, will monitor system installation toensure conformity to contract specification andinstallation codes of practice. Similarly, in Peru,installation technicians will be trained tounderstand the new PV standards and will becertified proficient at following PV installationguidelines.


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Table B1: Solar Home Systems and Rural Energy Services ProjectsProject Objective Intended ResultsZimbabwePhotovoltaicsfor HouseholdandCommunityUse (1991)

UNDP$7 m. GEF$7 m. total

Supply basic electricservice to ruralpopulations lackingaccess to gridextension; demonstratealternatives to plannedelectric utility gridextensions.

1. Install 10,000 SHS financed through the project.

2. Establish revolving-fund mechanisms for financing SHS and pilotcommercial, utility, and local-community-organization deliverymechanisms for SHS.

3. Strengthen the business and technical capabilities of domesticsolar PV firms and the PV industry as a whole.

4. Conduct public awareness and education campaigns.India AlternateEnergy /RenewableResources(1991)

World Bank$26 m. GEF$186 m. total

Promotecommercialization ofwind power and solarPV technologies inIndia. In particular,pioneer financing andmarket deliverymechanisms based onprivate-sectorintermediaries.

1. Finance private developers to install wind farms and mini-hydroprojects through the India Renewable Energy Development Agency(IREDA). Target: 85 MW total.

2. Strengthen the functions and capabilities of the India RenewableEnergy Development Agency (IREDA) to develop, market, andfinance renewable energy projects.

3. Establish a solar PV credit line and marketing program.

4. Conduct studies for improving policy environment for small-scaleindependent power producers (IPPs).

MauritaniaDecentralizedWind ElectricPower forSocial andEconomicDevelopment(1992)

UNDP$2.3 m. GEF$2.3 m. total

Establish a widely usedmechanism for thediffusion and support ofsmall-scaledecentralized windturbines

1. Install 55 demonstration wind-electric powered systems.

2. Conduct market research, including the publication of a surveyand analysis of the need for decentralized small-scale electricity.

3. Develop a wind-energy database and atlas in collaboration withthe Mauritanian Department of Energy.

4. Promote consumer awareness through the local news media and aseries of publications and presentations on the opportunities andexperiences with small wind electric systems.

5. Develop financing and institutional mechanisms for furtherdevelopment of small wind electric systems.

IndonesiaSolar HomeSystems(1995)


Promotecommercialization ofsolar photovoltaic homesystems in Indonesiathrough local private-sector entrepreneurs(dealers); strengthenIndonesia’s institutionalcapacity to support andsustain decentralizedrural electrificationusing SHS.

1. Train a competitively selected group of SHS entrepreneurs inbusiness and technical skills

2. Establish credit mechanisms for on-lending WB financing throughcommercial financiers to local SHS entrepreneurs.

3. Sell and install 200,000 SHS through local entrepreneurs, financedthrough the project.

4. Educate and provide information to rural households about SHS

5. Establish government agency capability to test and certify SHSand to monitor installed system performance in the field.


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Project Objective Intended ResultsUgandaPhotovoltaicPilot Projectfor RuralElectrification(1995)


Lay a firm foundationfor the sustainabledissemination and useof solar PV systems inrural areas that cannotbe accessed by thenational electric grid.

1. Install 840 SHS and 4 community-based PV systems throughcontracts with commercial firms and financed through third-parties.

2. Pilot third-party financing mechanisms for PV (i.e., revolvingfund) through commercial banks, NGOs and cooperatives; trainfinancial institution staff to appraise and administer loans for PV.

3. Strengthen the capacity of private-sector firms to design, install,service, and eventually manufacture PV systems; and of publicagencies to promote, monitor, and evaluate PV system installations.

4. Conduct consumer education campaigns.

5. Establish an industry association, equipment standards and codes.Sri LankaEnergyServicesDelivery(1996)


Promote the sustainableprovision, by theprivate sector, NGOs,and cooperatives, ofgrid and off-grid energyservices in Sri Lankausing renewable energytechnologies;strengthen theenvironment for DSMimplementation.

1. Finance private sector project developers, cooperatives, andNGOs to construct renewable energy subprojects (subproject target:16 MW of wind farms, SHS, and village hydro).

2. Establish a Standard Small Power Purchase Agreement, non-negotiable power purchase tariff for wind farms and village hydro.

3. Strengthen capabilities of project developers, public agencies,NGOs, and cooperatives to develop, finance, and install projects.

4. Create a code of practice for energy efficiency in commercialbuildings and strengthen the capabilities of public agencies andprivate firms to incorporate into building designs and operations.5. Conduct consumer awareness and marketing programs.

PV MarketTransform-ation Initiative(PVMTI)(1996)

WorldBank/IFC$30 m. GEF$120m. total

Stimulate PV businessactivities in India,Kenya, and Moroccoand demonstrate thatquasi-commercialfinancing can acceleratesustainablecommercialization andfinancial viability in thedeveloping world.

1. Finance commercial business ventures to install SHS according toindividual business plans competitively selected by the project.

2. Finance business plans with commercial subloans at below-marketterms or with partial guarantees or equity instruments.

3. Pilot an External Management Team as to administer financing toa large number of small subprojects and to support SHS businesses.

4. Provide technical assistance to businesses on planning, financing,operations, and technology (by the External Management Team).

GhanaRenewableEnergy-BasedElectricity forRural, Socialand EconomicDevelopment(1996)


Facilitate thewidespread use of low-carbon, renewable-energy-basedelectricity-supplytechnologies to meetelectricity needs in themore than 3,000presently unelectrifiedcommunities; provide amodel for large-scaleuse of suchtechnologies.

1. Provides SHS to 800 households in nine villages and providehybrid PV/diesel systems to 800 households in three other villageson a fee-for-service basis (by a quasi-public rural electric utility).

2. Conduct market and community surveys of energy use and solarresource assessments; form village committees to assist witheducation and awareness and assist with payments.

3. Train the electric utility, local operators, and NGOs on PVtechnology and establish a local operation and maintenance center.

4. Establish equipment technical standards.

5. Design standard contracts for private-sector based ESCOs; trainprivate-sectors firms on PV technology and business skills.


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Project Objective Intended ResultsLao PDR S.ProvincesRenewableEnergy Pilot(1997)

World Bank$0.7 m. GEF$2.1 m. total

Increase access toelectricity in remote,rural areas of Laos anddemonstrate thatrenewable energytechnologies (micro-hydro mini-grids andsolar battery charging)are viable off-gridelectrification optionsto displace diesel powergeneration.

1. Install 20 solar battery charging stations as a pilot demonstrationof the solar technology (by the national electric utility).

2. Train staff within the national electric utility and within a numberof village electricity associations to plan and manage off-gridrenewable energy projects.

3. Draft a national rural electrification plan that incorporates off-gridrenewable energy technologies.

ChinaCapacityBuilding forthe RapidCommercial-ization ofRenewableEnergy (1997)


Promote the widespreadadoption of renewableenergy sources in Chinaby strengthening thecapacity of Chinesegovernment agencies toimplement identifiedpolicies and byremoving barriers tosolar and wind hybridsystems, wind farms,biogas, bagasse, andsolar hot water

1. Conduct workshops focusing on market penetration, foreigninvestment, power purchase agreements, and information needs.

2. Establish a major renewable energy center/clearinghouse forinformation, training, and facilitation programs.

3. Train policy makers, renewable energy professionals andbuinessmen in market-based renewable energy development and bestpractices; build capacity to assess renewable energy resources

4. Develop standards, codes of practice, and certification procedures.

5. Install 200 pilot SHS and several biogas digestion plantsBolivia: AProgram forRural Electri-fication withRenewableEnergy Usingthe PopularParticipationLaw (1997)


Promote the widespreadadoption of renewableenergy in Bolivia bypiloting an off-gridelectrification programin one set of villagesthat can be replicated inother areas of thecountry.

1. Formulate and evaluate institutional models for implementingrenewable-based rural electricity companies (i.e., NGO, public-private enterprises); formulate standard contracts

2. Provide technical assistance to evaluate rules and procedureshindering commercial finance of renewable energy, to strengthenfinancial institutions interested in renewable rural electrification.

3. Train local electricity companies in technical, business, andoperational aspects of renewable energy.

4. Install pilot installations of PV and wind technologies in 25selected communities using a small revolving fund.

5. Develop PV equipment standards and certification procedures (byNational Institution of Standards and Certification Procedures).

ArgentinaRenewableEnergy inRural Markets(1997)


Provide rural off-gridenergy services inArgentina sustainablythrough the privatesector using renewableenergy systems.

1. Bid and award standard concession contracts to ESCOs forproviding electricity services to rural markets (by provincialgovernments).

2. Install 108,000 SHS in households and public agencies (by ESCOconcessions).

3. Strengthen capability of provincial governments to regulate andcontract with concessions.

4. Conduct consumer awareness and information campaigns.

5. Establish technical standards and certification systems forequipment and installers (by provincial governments).


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Project Objective Intended ResultsSmall andMedium ScaleEnterpriseProgram(replenishmentin 1997)

IFC

Stimulate involvementof small and mediumscale enterprises inGEF-eligible activities;on-lend GEF grantfunds to intermediaries,which finance GEF-eligible small andmedium scale enterpriseprojects.

Vietnam ($750,000): Solar Electric Light Company sells andinstalls 12,000 SHS systems during the first two years; some may befinanced through a Vietnamese agricultural (third-party) bank.

Bangladesh ($750,000): Grameen Shakti sells 1,800 SHS tohouseholds; some may be financed by microcredit for existingmembers of the Grameen Bank.

Dominican Republic ($75,000): SOLUZ sells and installs 5,000SHS systems for cash based on a replicable, sustainabledealer/sales/service business model.

PeruPhotovoltaic-based RuralElectrification(1998)


Remove barriers tosuccessfulimplementation of ruralrenewable energyprojects usingphotovoltaic technologyand create incentivesfor increased public andprivate sectorinvestment inrenewable energy

1. Establish PV concessions under the existing Electrification Law;concessions install 12,500 SHS in four regions

2. Finance concessions through participating commercial financiersand develop frameworks for future financing of renewable energy.

3. Develop and adopt PV systems standards.

4. Conduct training and educational programs for universitystudents, installation technicians, and PV system users.

5. Develop solar energy technology and resource databases.Cape VerdeEnergy &Water SectorReform andDevelopment(1998)


Promote a sustainablemarket for PV in CapeVerde; promote the useof wind power in theelectric power system;increase operational andend-use efficiency inthe power and watersectors.

1. Install 7.8 MW of wind farms financed through the project,representing 25% grid penetration for the 31 MW grid (by an electricpower utility undergoing privatization).

2. Install 4,000 SHS in rural households financed through the project(by private-sector PV concessions).

3. Create the capabilities in public agencies to promote SHS and tocontract and regulate PV concessions.

ChinaRenewableEnergyDevelopment(1998)


Develop commercialmarkets for wind farmsand PV systems inChina

1. Install 190 MW of wind farms financed through the project (bypublic provincial electric utilities).

2. Install 200,000 SHS in rural households financed through theproject (by private-sector PV entrepreneurs).

3. Conduct a program to encourage technology innovation bymanufacturers of wind turbine and PV system components (based onindustry proposals for cost-shared technology innovation grants).

4. Establish a PV test center and national PV system standards.

5. Conduct consumer awareness and education campaigns.SolarDevelopmentGroup (1998)

WorldBank/IFC$10 m. GEF$50 m. total

Accelerate growth ofPV systems in the rural,off-grid market of anumber of GEF-eligiblecountries by providingfinancing and businessadvisory services to PVcompanies

1. Provide debt and equity financing to PV-related businesses,including local assemblers/system integrators, distributors, retailers,ESCOs, NGOs, and commercial financiers (by investment fund).

2. Provide technical assistance and business services to PV-relatedbusinesses.

3. Conduct broad awareness, marketing, training, standards-setting,and capacity building activities.


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Project Objective Intended ResultsBenin Off-gridElectrification/ TraditionalEnergy (1998)


Create an enablingenvironment conduciveto investment in PVtechnology, promoteprivate-sector marketpenetration of PV inrural areas, and createrural deliverymechanisms through aparticipatory process.

1. Establish private-sector SHS concessions; these concessionsinstall 5000 SHS financed through the project.

2. Strengthen the capacity of the public rural electrification agencyto contract, regulate, and monitor rural energy concessions.

3. Conduct training and information programs to accredit PVtechnicians.

4. Conduct consumer awareness and marketing programs.

5. Develop codes of practice and standards.Togo Off-gridElectrification/ TraditionalEnergy (1998)


Create an enablingenvironment conduciveto investment in PVtechnology, promoteprivate-sector marketpenetration of PV inrural areas, and createrural deliverymechanisms through aparticipatory process.

1. Establish private-sector SHS concessions; these concessionsinstall 5,000 SHS financed through the project

2. Strengthen the capacity of the public rural electrification agencyto contract, regulate, and monitor rural energy concessions

3. Conduct training and information programs to accredit PVtechnicians.


5. Develop codes of practice and standardsMexicoRenewableEnergy forAgriculture(1999)

World Bank$8.7 m. GEF$26 m. total

Promote the use ofrenewable energy forproductive purposes inMexico’s agriculturalsector.

1. Conduct information and media campaigns to increase awarenessof renewable energy among farmers and associated private-sectorcompanies and government agencies.

2. Install demonstration equipment: 840 solar water pumpingsystems in 28 states, 33 wind water pumping systems in 11 states,and 16 solar refrigerated milk storage tanks in 8 states; disseminatethe experience from these installations among neighboring farmers.

3. Train technicians, extension workers, and private-sector vendorson renewable energy system design, operation, maintenance, andbusiness management.

4. Conduct market assessments and technology assessments toencourage private-sector equipment and service providers to enterthe market; test vendor financing of farm-based renewable energy.

MalawiBarrierRemoval toMalawiRenewableEnergyProgramme(1999)


Promote a market forthe purchase and use ofPV technologies inrural and peri-urbanareas of Malawi.

1. Contribute to the design of enabling renewable energy policies;develop financing mechanisms for PV systems and businesses.

2. Demonstrate and promote PV applications (targets: 4,000 homelighting systems, 600 public building lighting systems, 190 fans, and2,000 commercial refrigerators and lighting.

3. Increase awareness of energy issues in Malawi citizens’ groups.

4. Build institutional and technical capacity among financiers, thePV industry, government agencies, NGOs, and utilities to deliveryrenewable energy services.

5. Develop and institute standards and codes of practice for PVtechnologies and their installation and maintenance.


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B.2. Grid-Connected Renewable Energy

Twelve projects incorporate grid-connectedrenewable energy technologies for generatingelectric power from wind, biomass, bagasse, mini-hydro, and geothermal resources (Table B2).Projects take the following approaches:

Demonstrate Technologies and theirCommercial and Economic Potential. Projectsconstruct pilot or demonstration installations toshow technical, economic, environmental, andcommercial feasibility, thus stimulating andsustaining interest in renewable energytechnologies among a variety of stakeholders,including local and national government agencies,financial institutions, state-owned or privateenterprises (including utility companies), privateentrepreneurs, and consumers.

Wind turbines. In the India Alternate Energyproject, private sector developers install 85megawatts of wind turbine and mini-hydrocapacity, financed through the India RenewableEnergy Development Agency (IREDA). TheMauritania project selects, procures, installs, testsand evaluates 55 wind-electric-power systems ofdifferent sizes and configurations for waterpumping, battery charging, refrigeration, icemaking, lighting, and other uses. In Costa Rica,the state utility company constructs ademonstration 20-megawatt wind farm. The SriLanka Energy Services Delivery projectconstructs a pilot 3-megawatt wind farm. In theChina Renewable Energy Development project,public-sector wind farm companies (structured assubsidiaries of the State Power Company andprovincial/municipal power companies) construct190 megawatts of wind farms at five sites in fourseparate provinces.

Mini-hydro, biomass, and geothermal. The IndiaHilly Hydel project constructs 20 small hydrounits to serve as models for replication throughoutthe hilly regions of India. In the Sri Lanka EnergyServices Delivery project, private-sector projectdevelopers, NGOs, and/or cooperatives constructan anticipated 16 megawatts of village-scalehydro, grid-connected mini-hydro systems, andbiomass power. In Indonesia, private-sector

project developers construct up to 90 megawattsof wind, biomass and mini-hydro. ThePhilippines project constructs 440 MW ofgeothermal capacity.

Build Capacities of Project Developers, PlantOperators, and Regulatory Agencies.Technical, financial, environmental, managerial,and project appraisal skills are essential to themarket sustainability of renewable energytechnologies. Projects provide education,training, market studies, resource assessments,and contracting skills and models. For example,the India Alternate Energy project increases thecapacity of IREDA to finance and promoterenewable energy technologies, particularlyamong private-sector project developers. InMauritania, foreign wind turbine equipmentsuppliers train technicians from local Mauritanianenterprises to assemble, manufacture, install,operate, and maintain the wind turbines, in returnfor gaining access to the local market. And t heIndonesian project assists private-sector projectwith environmental reviews, project management,and pre-feasibility and feasibility studies (forfurther examples see also Box 1 in Section B).

Develop Regulatory and Legal Frameworksthat Encourage Independent Power Producersand Establish Transparent, Non-NegotiableTariff Structures. Development of regulatoryand legal frameworks can encourage projectdevelopers, typically from the private sector, tofinance and install new renewable energygeneration sources and sell power to an electricutility or directly to consumers. Regulationsgoverning independent power producers, powerpurchasing agreements, and/or published,transparently determined power purchase tariffscan all remove barriers. The establishment ofcodes of practice, industry standards, andequipment certification procedures will alsoencourage more private- sector initiatives. Forexample, the Cape Verde Energy Sector Reformproject strengthens the regulatory framework ofthe State Electricity Board in terms of servicequality standards, tariff approval, environmentalprotection, and technical and performance norms.


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Power purchase agreements and tariffs. TheIndonesia project establishes a small-power-purchase tariff under the State Electricity Board(small power is defined as 30 MW or smaller inJava and 15 MW or smaller elsewhere). Underthe tariff, the power purchase price is non-negotiable and set at the State Electricity Board’savoided cost of producing electricity. Similarly,the Sri Lanka Energy Services Delivery projectestablishes a standard small-power-purchaseagreement and non-negotiable power purchasetariffs for wind farms and village hydro under theState Electricity Board. Twelve power purchaseagreements are expected during the project,including at least one with a private-sector projectdeveloper. The China Renewable EnergyDevelopment project pilots power purchase andother commercial and legal agreements to pavethe way for private-sector participation in futurewind power projects even though the 190 MW areinstalled by public-sector wind farm companies.

Create Financing Mechanisms for ProjectDevelopers. Several projects develop newfinancing mechanisms. Some examples:

India. In the India Alternate Energy project,IREDA provides low-interest loans to wind farmdevelopers. Loans are expected to progressivelyapproach commercial market rates as thetechnology gains wider acceptance and wereconsidered more transparent and more effective atreducing product costs than direct subsidies. TheIndia Hilly Hydel project establishes a revolvingfund, also administered by IREDA, to providelow-interest financing to private entrepreneurs forsmall hydel projects. Like in the India AlternateEnergy project, these loans are expected toprogressively approach commercial market ratesas the technology gains wider acceptance. TheIndia Hilly Hydel project also creates a nationalstrategy and master plan with detailed investmentproposals for additional small hydel projects.

China. The China Renewable EnergyDevelopment project develops a strategy toencourage private-sector financing of wind farms.The project prepares pre-investment feasibilitystudies for several wind farm sites for potentialprivate investment through commercial banks,

including technical, legal, and contractualdocumentation.

Indonesia. The Indonesian project provides long-term financing to private power developersthrough state-owned or private commercialfinanciers. Grants help cover information,transaction and pre-investment costs.

Global. The Renewable Energy and EnergyEfficiency Fund provides financing to projectdevelopers for grid-connected, medium-sized ($5to $30 million) renewable energy projects for allGEF-eligible countries.


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Table B2: Grid-Connected Renewable Energy ProjectsProject Objective Intended ResultsIndia AlternateEnergy /RenewableResources(1991)


Promotecommercialization ofwind power and solarPV technologies inIndia. In particular,pioneer financing andmarket deliverymechanisms based onprivate-sectorintermediaries.

1. Install wind farms and mini-hydro projects financed through theIndia Renewable Energy Development Agency (by private powerdevelopers). Target: 85 MW total.

2. Strengthen the functions and capabilities of the India RenewableEnergy Development Agency to develop, market, and financerenewable energy projects.

3. Establish a solar PV credit line and marketing program.

4. Conduct studies for improving policy environment for small-scaleindependent power producers (IPPs).

MauritiusSugar Bio-EnergyTechnology(1991)


Expand electricitygeneration frombagasse; promote theefficient use of biomassfuels from the sugarindustry for energyproduction; andstrengthen themanagement and co-ordination of theBagasse EnergyDevelopment Program

1. Construct a baseload power plant to provide continuous power tothe utility, using bagasse during the crop season and coal in the offseason.

2. Promote investments in sugar mill efficiency to generate surplusbagasse fuels.

3. Strengthen the capabilities of the Mauritius Sugar Authority andthe Central Electricity Board to promote and regulate independentpower producers, to implement a national bagasse energy program,and to develop and finance projects.

4. Conduct studies on ways to decrease the transport costs forbagasse and to optimize the use of sugar cane for power generation.

PhilippinesLeyte-LuzonGeothermal(1991)


Develop the market forgeothermal energy tomeet the energydemand of the Leyte-Luzon region; promoteincreasing private-sector participation inpower generation.

1. Expand the present capacity of the Leyte-Luzon geothermal plantfrom 200 to 640MW and construct associated power transmissionlines to serve the geothermal plant.

2. Train staff of the National Power Corporation to conduct socialand environmental impact assessments.

3. Support the implementation of a government energy-sector plan,including regulatory development, private-sector participation,power and oil pricing, environmental management, energyconservation, and operational efficiency.

IndiaOptimizingDevelopmentof Small HydelResources inHilly Areas(1991)

UNDP$7.5 m. GEF$15 m. total

Optimize developmentof small hydelresources in theHimalayan and sub-Himalayan regions.

1. Install 20 commercially viable hydel demonstration projects toprovide electricity to inaccessible areas.

2. Create a national strategy and master plan for the hydel subsectorwith detailed investment proposals for 3 MW of hydel plants for theentire region.

3. Establish management and ownership models that will fosterlocal stakeholder responsibility for the hydel projects.

4. Train the Ministry for Non-Conventional Energy Sources, stateagencies, equipment manufacturers, industry associations, andNGOs in planning, design, construction, operation, maintenance,management, and revenue collection for small hydel projects.


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Project Objective Intended ResultsCosta RicaTejona WindPower (1992)


Demonstrate and helpto commercializeutility-scale windenergy technology inCosta Rica

1. Install a 20MW wind power plant in the Guanacaste province ofCosta Rica.

IndonesiaRenewableEnergy SmallPower Project(1995)


Facilitate private-sectorinvestment in smallrenewable energyprojects; strengthenIndonesia’s capacity tosustain renewableenergy development.

1. Finance private developers to install, own and operate renewableenergy power generation subprojects and sell electricity to the stateelectricity company.

2. Create and publish a small-power-purchaser tariff.

3. Create a database on known sites for hydro and geothermalresources and disseminate to private-sector project developers.

4. Assist private-sector project developers with environmentalreviews, project management, and feasibility studies.

Sri LankaEnergyServicesDelivery(1996)


Promote the sustainableprovision by the privatesector, NGOs andcooperatives of grid andoff-grid energy servicesin Sri Lanka usingrenewable energytechnologies;strengthen theenvironment for DSMimplementation.

1. Finance private-sector project developers, cooperatives, andNGOs to install renewable energy subprojects (target: 16 MW ofwind farms, SHS, and village hydro).

2. Establish a Standard Small Power Purchase Agreement, non-negotiable power purchase tariff for wind farms and village hydro.

3. Develop and publish a technical guide on existing gridinterconnection specifications and mandate technical standards andcertification procedures for equipment.

4. Strengthen capabilities of project developers, public agencies,NGOs, and cooperatives to promote, develop, finance and installrenewable energy projects.

5. Create a code of practice for energy efficiency in commercialbuildings and strengthen the capabilities of public agencies andprivate firms to incorporate into building designs and operations.


7. Install a demonstration 3- MW wind farm.


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Project Objective Intended ResultsSri LankaRenewableEnergy andEnergyEfficiencyCapacityBuilding(1996)

UNDP$1.5 m GEF$1.5 m. total

Encourage investmentsin wind, small hydroand biomass energyprojects; improveaccess to andconfidence inrenewable energytechnologies in SriLanka; improveawareness of andfamiliarity withrenewable energy.

1. Measure the wind resource potential, develop a methodology forevaluation of mini hydro potential of river systems, and conduct astudy to identify land available for commercial fuelwood plantations.

2. Establish performance and quality specifications and guidelinesfor PV and mini hydro equipment.

3. Strengthen capabilities of the private sector by providing energyefficiency training through the development of updated resourcematerials for national training centers.

4. Incorporate renewable energy and energy efficiency into thecurriculum of educational institutions.

5. Encourage cooperation among domestic and foreign renewableenergy equipment manufacturers to improve the quality and range ofequipment available locally.

RenewableEnergy andEnergyEfficiencyFund (1996)

WorldBank/IFC

$30 m. GEF$130 m. total

Mobilize new financialresources forinvestments in energyefficiency andrenewable energyprojects by the privatesector in non-OECDcountries; attain acompetitive risk-adjusted rate of returnon these projects.

1. Establish a fund capitalized with minimum of $130 million.

2. Establish a balanced portfolio of energy efficiency and renewableenergy subprojects financed from the fund.

ChinaCapacityBuilding forthe RapidCommercial-ization ofRenewableEnergy (1997)


Promote the widespreadadoption of renewableenergy sources in Chinaby strengthening thecapacity of Chinesegovernment agencies toimplement identifiedpolicies and byremoving barriers tosolar and wind hybridsystems, wind farms,biogas, bagasse, andsolar hot water.

1. Conduct workshops focusing on market penetration, foreigninvestment, power purchase agreements, and information needs.

2. Establish a major renewable energy center/clearinghouse forinformation, training, and facilitation programs.

3. Train policy makers, renewable energy professionals and businesspeople in market-based renewable energy development and bestpractices; build capacity to assess renewable energy resources.

4. Develop standards and codes of practice in collaboration withnational, regional, and local industry associations. Developcertification procedures and select institutions to serve ascertification centers.

5. Install 200 pilot SHS and several biogas digestion plantsCape VerdeEnergy &Water SectorReform andDevelopment(1998)


Promote a sustainablemarket for PV in CapeVerde; promote the useof wind power in theelectric power system;increase operational andend-use efficiency inthe power and watersectors.

1. Install 7.8 MW of wind farms financed through the project,representing 25% grid penetration for the 31 MW grid (by an electricpower utility undergoing privatization).

2. Install 4,000 SHS in rural households financed through the project(by private-sector PV concessions).

3. Create the capabilities in public agencies to promote SHS and tocontract and regulate PV concessions.


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Project Objective Intended ResultsChinaRenewableEnergyDevelopment(1998)


Develop commercialmarkets for wind farmsand PV systems inChina.

1. Install 190 MW of wind farms (by public provincial electricutilities).

2. Sell or lease 200,000 SHS to rural households (by private-sectorPV entrepreneurs).

3. Train the staff of provincial power companies to measure windresources, conduct feasibility studies, and construct wind-farmsubprojects.

4. Train the State Power Company and wind farm companies on thetechnical, legal, financial, and contractual requirements for obtainingprivate investment.

5. Assess renewable energy resource potential for follow-upinvestments and disseminate information on wind resources, sitecharacteristics, and equipment performance.

6. Award grants on a competitive basis to local and joint venturemanufacturers of wind turbine and PV system components to enablethem to lower technology costs and improve performance.

7. Establish a PV test center and national PV system standards.

8. Conduct consumer awareness and education campaigns.


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B.3. Solar Hot-Water Supply

Two solar hot-water projects in Tunisia andMorocco take four main approaches (Table B3):

Reduce Installed Costs and Make SystemsAffordable. Projects directly install a sufficientvolume of solar hot-water systems to produceeconomies of scale for manufacturers and createviable business opportunities for local production,service, and maintenance organizations. TheTunisia project provides more than $20 million offinancing for solar collectors, which could amountto 50,000 m2 installed if the average collector costwas $400/m2. The Morocco project plans 80,000m2 of collectors installed. In addition, theMorocco project demonstrates rehabilitation ofexisting solar hot-water heaters, which could bean affordable alternative to many newinstallations. The Morocco project also designsand lobbies for practical mechanisms that wouldallow permanent reductions in VAT and importduties on solar water heaters. Finally, a variety offinancing mechanisms are developed and pilotedto reduce first-costs to consumers and thus makesystems more affordable.

Raise Awareness and Build Capacity AmongConsumers and Policy Makers. Both projectstraining government agencies and private firms topromote, evaluate and install solar hot-watersystems. Awareness campaigns are spread over alarge number of sectors. In Tunisia, beneficiariesinclude a variety of private-sector and public-sector establishments, such as hotels, schools,mosques, sports centers, and apartment buildings.Morocco similarly targets a wide variety of publicand private users. Awareness campaigns aretargeted at policy makers in connection withestablishing policy frameworks, and at opinionleaders in the architect/engineering communitiesto influence architectural/engineering practices.In Morocco these activities are coordinatedthrough a national solar water heaters marketingplan. Demonstration projects are also set inpublic facilities and other visible places in ruralareas where large groups of potential future end-users can be introduced to solar hot-water heaters.

The Morocco project also provides business plantraining for SHW firms.

Promote a More Favorable Policy Framework.The Morocco project takes Moroccan publicsector representatives on study tours to meet theircounterparts in other Mediterranean countries andholds national workshops to develop public-private partnerships. Through these tours andworkshops, the project aims to analyze policycontexts favorable to solar water heaters in otherMediterranean countries and draw lessons that canbe adapted to Morocco. The project also aims toreview the country’s overall policy and regulatoryframework and recommend macro-economicpolicy changes. Potential changes includereductions in VAT and import duties, regulationsfor electric utilities, changes in energy prices, anddevelopment of public-sector procurementguidelines and equipment standards and codes.

Improve Product Quality. The Morocco projectdevelops norms, standards, testing procedures andtrained test personnel, certification and labeling,and associated enforcement mechanisms. Theproject introduces assemblers and manufacturersto improved standards and specifications tofacilitate compliance, trains architects andengineers to apply the standards and procedures,and develops codes of practice for constructors,installers, and plumbers along with training tofacilitate compliance.


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Table B3: Solar Hot Water Supply ProjectsProject Objective Intended ResultsTunisia SolarWater Heating(1993)


Promote the use ofsolar hot-water heatingin commercial,residential, and public(schools, hospitals)buildings and enhancethe economic viabilityof investments in solarhot-water heating.

1. Install about 150 subprojects for solar hot-water heaters in hotels,schools, and apartment buildings, financed 35% by the project and65% from third-party or self-financing (beneficiaries conductinstallations).

2. Train private firms and the project executing agency ( Agence pourla Maitrise de l’Energie) to promote, evaluate, and install solar hot-water systems.

MoroccoMarketDevelopmentfor SolarWater Heaters(1999)


Remove barrierspreventing sustainablemarket development forsolar water heaters inMorocco.

1. Analyze policy contexts favorable to solar water heaters in otherMediterranean countries and draw lessons that can be adapted toMorocco.

2. Review policy and regulatory framework and recommend macro-economic policy changes, including reduced VAT and import duties.

3. Raise awareness of solar water heaters among public and privatedecision makers and architects and engineers. Provide informationon best practices and equipment available internationally.

4. Install new equipment (total 80,000 m 2) and rehabilitate existingequipment (target: 50 units) to demonstrate the potential forrehabilitation

5. Develop a national marketing plan, including media campaignsand information dissemination.

6. Create new financing mechanisms for SWH businesses.

7. Conduct training workshops on preparing business plans forbankable solar water heating projects.

8. Develop norms, standards, testing procedures, certification andlabeling, and associated enforcement mechanisms.


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B.4. Precommercial Renewable EnergyTechnologies (OP7)

A number of renewable energy technologyapplications are still not commercial; furtherresearch, development, and demonstration areneeded to bring long-term costs for thesetechnologies down sufficiently to createcommercial markets for them. To reduce long-term costs, four projects install demonstrationhardware and provide training and disseminationmechanisms (Table B4). Projects rely heavily onthe demonstration effects from these installationsand on the technology development effects fromdesigning, bidding, constructing, and operating asingle plant. Planned project clusters usingsimilar technology across diverse geographicregions, for example in the case of solar-thermalpower plants, are expected to demonstratetechnical performance over a wide range ofclimate and market conditions. In these projects,long-term cost reductions are achieved throughtwo main approaches:

Select Technologies for Attractive NicheMarkets with Good Cost-Reduction Potential

Central-station photovoltaic. Since the 1980s,central-station photovoltaic (PV) power plantshave been developed in a relatively small numberof installations globally. Although it is stillseveral times more expensive on an installed-kWbasis than conventional power plants, solar cellcosts are declining and this technology ispromising because it entails no fuel costs andoffers other application-specific benefits. The firstproject was approved for the Philippines in 1999.This central-station PV power plant is used toeven out the load curve for hydropower, avoidingthe need to install thermal power generation(mainly diesel and oil-fired gas turbines) for thispurpose. The PV is installed on the distributionsystem of a district electric power utility, whichavoids transmission capital costs. The nature ofthe avoided generation (peaking) and avoidedtransmission costs enhances the cost-competitiveness of the PV technology in thisapplication.

Solar thermal. Solar thermal technologies alsoare significantly more expensive thanconventional technologies on an installed-kWbasis. Nevertheless, costs have been fallingsharply, from $5,000 per kW for plants in the1980s to recent projections of $2,000 per kW. Inthe India and Morocco projects, demonstrationhybrid-solar-thermal/fossil-fuel electric powerstations are installed. These power stationsconsists of solar-trough-collector arrays integratedwith a combined-cycle natural-gas thermal powerplant (with total capacity in the range of 150MW). In Morocco, the type of solar-thermaltechnology to be used is left open in the projectdesign; the final specifications will be selected bythe project after competitive bidding, to ensureminimum costs and maximum plant efficiency.The open specification will also help to ensurethat the resulting design is more likely to bereplicated by the private sector in the future.Several other countries have expressed interest insolar thermal technologies, including Egypt,Tunisia, Israel, Jordan, Spain, Italy, Greece, andother African countries with high solar insolation.

Biomass integrated gasification/gas turbine.Biomass integrated gasification/gas turbine(BIG/GT) technology is a promising way toutilize biomass wastes (i.e., sugar cane bagasse orwood chips) to generate grid-connected electricityin favorable regions with good fuel sources. InBrazil, studies have shown that this technologycompares favorably with hydropower resources interms of cost and overall energy potential.However, using gasified biomass with relativelylow calorific value to generate power through gasturbines has not yet been demonstratedcommercially. Following extensive research andstudies on BIG/GT technology in the 1980s werefunded by the Brazilian government, internationalprivate-sector firms, and international assistance;as a result of this research, three GEF projects inBrazil have been approved to demonstratecommercial viability. The first project conductedpre-feasibility and project design activities (i.e.,technology development, basic engineering, andinstitutional and commercial arrangements forproject implementation). The second projectstudies the feasibility of new fuel sources andmodes of obtaining bagasse/biomass fuel suppliesfor BIG/GT plants in Brazil; green sugar cane


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bagasse and trash are potential fuel sources. Thethird project is for the bidding, construction, andoperation of a 30-megawatt pilot plant.

Catalyze Demonstration Effects

Central-station photovoltaic. The Philippinesproject, by demonstrating PV technology in acompetitive niche market, hopes to expand the useof PV in such applications by several orders ofmagnitude. The main idea is to generate greatervolume in worldwide PV demand. Theassumption is that greater volumes in globaldemand will accelerate declines in global long-term costs for PV. Demonstration results will bedisseminated through presentations and site tours.

Solar thermal. In India, a variety ofdemonstration effects are expected.Demonstration of the plant’s operational viabilityin India is expected to result in follow-upinvestments by the private sector both in themanufacture of the solar field components and inlarger solar stations within India. Insights gainedinto local design and operating factors such asmeteorological and grid conditions and use ofavailable back-up fuels, are expected to lead toreplication tailored to local conditions. Theproject is also expected to revive (from a slumpsince the late 1980s) and sustain the interest of theinternational business and scientific community inimproving solar thermal plant design andoperation. Demonstration effects are strengthenedby involving a range of stakeholders, such as localindustries, the Rajasthan State Electricity Board,the Rajasthan Energy Development Agency, theMinistry of Non-Traditional Energy Sources andIndian technical institutes. Operational results aredisseminated to these stakeholders as well as othermembers of the Indian and international solarenergy industry.

Biomass integrated gasification/gas turbine. Inthe Brazil Biomass Integrated Gasificationproject, the technology demonstration is intendedto spur further research, development, andcommercialization of the technology worldwide.The indirect impacts of the project can bemeasured by adoption of this technologyworldwide as costs are reduced and perceptions of

its commercial feasibility change. The thirdBrazil project will disseminate information on theBIG/GT technology and lessons learned from thedemonstration stage to practitioners elsewhere inBrazil and in other countries.


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Table B4: Precommercial Renewable Energy Technologies (OP7)Project Objective Intended ResultsBrazilBiomassIntegratedGasification/GasTurbine—Project I(1992)


Establish a globallyreplicable prototypeunit on a commercialscale for thecogeneration ofelectricity based on thegasification of woodchips or sugar canebagasse.

1. Develop and test a gas turbine for burning gas of low-heat-valueof the type produced by biomass air-blown gasification. 2. Develop and test a fuel-plant engineering process suitable forbiomass gasification and gas cleaning. 3. Complete the basic engineering design for the gasification plantand specify the main plant equipment and construction activities. 4. Select a site for building a pilot plant and conduct environmentalassessment studies. 5. Develop a plan for the next phase of the project (bidding,construction, and operation); conduct economic studies and elaboratecontract models for fuel supply and energy sales.

India SolarThermalElectric (1996)

World Bank$49 m. GEF$245 m. total(major fundsfrom Germanagency KfW)

Demonstrate theoperational viability ofparabolic trough solarthermal powergeneration in India andpromote commercialdevelopment of solarthermal technology andcost reduction.

1. Construct a 150-MW-range hybrid power plant using solar-thermal-trough-arrays integrated with a combined-cycle natural-gasthermal power plant.

2. Promote solar thermal technologies among potential investors.

3. Train and develop plant staff and a local consult base.

4. Collect and measure solar insolation data and map solar resources.

BrazilBiomassPowerGeneration:Sugar CaneBagasse andTrash— ProjectII (1996)


Determine availablevolumes, quality andcost of bagasse/trashbiomass for potentialuse in BIG/GT systems,to facilitate planned andfuture investments thattarget wide-scalereplication and costreduction.

1. Conduct studies on trash availability and quality and on herbicidereduction through use of trash substitution.

2. Develop new equipment for green cane harvest and handling andconduct an assessment of the environmental impacts of the proposedgreen cane system on agro-ecosystems.

3. Conduct gasification tests of green cane and trash.

4. Analyze BIG/GT-sugar mill integration.

5. Develop an information dissemination strategy; produceinformational materials; conduct media campaigns; conductworkshops for public and private-sector sugar cane producers.

BrazilBiomassPowerCommercialDemonstration— Project III(1997)


Demonstrate thecommercial viability ofusing wood as afeedstock for powergeneration using theBiomass IntegratedGasification/GasTurbine (BIG/GT)concept.

1. Construct a 30-MW demonstration Biomass IntegratedGasification/Gas Turbine plant. 2. Develop new environmental, operational, administrative, andprocurement procedures associated with BIG/GT technology. 3. Conduct an assessment study of the environmental aspects ofwidespread replication of the BIG/GT technology in NortheastBrazil. 4. Plan a commercial dissemination phase for the project.


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Project Objective Intended ResultsMorocco SolarBased ThermalPower Plant(1999)


Demonstrate theeconomic feasibility ofsolar-thermal-basedpower generationworldwide byestablishing anddisseminating projectexperience.

1. Construct a 150-MW-range hybrid power plant using solar-thermal-trough arrays integrated with a combined-cycle natural-gas-fueled power plant.

PhilippinesCEPALCODistributedGeneration PVPower Plant(1999)

WorldBank/IFC$4 m. GEF$8 m. total

Demonstrate thetechnical, operationaland economicfeasibility of utilizingPV based solar energyfor supplementing andfirming up theproductive capacity ofexisting hydropowerprojects, initially in thePhilippines, but also asa model that can bereplicated elsewhere inthe developing world.

1. Construct a 1-MWp PV generating plant to operate in conjunctionwith an existing 7-MW hydroelectric plant with dynamic loadcontrol, effectively providing “firm” generating capacity.


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B.5. Energy-Efficient Product Manufacturingand Markets

Seven projects foster a “market transformation”approach to energy-efficient product supply anddemand, which simultaneously provides both“market push” and “market pull” for a particulartechnology (Table B5). Market research, markettesting, technology promotion, consumereducation, product labeling, technical assistance,and technology transfer can, in combination, boostmarket demand for more efficient products whileincreasing the willingness of suppliers to producethem. A market transformation approachovercomes the “chicken-and-egg” problem:producers are unwilling to produce a productbecause no established market for it exists, andconsumers do not demand the product because itis not produced or sold or they are unaware of it.Projects utilize a variety of approaches to removebarriers to markets for more energy-efficientproducts:

Provide Technical Assistance and TechnologyTransfer to Manufacturers to Upgrade TheirProduct Designs. The China Industrial Boilersproject provides technology transfer and technicalassistance to nine competitively selected boilermanufacturers to allow them to develop high-efficiency boiler models. As part of thetechnology transfer, the project acquires advancedequipment from abroad to upgrade these firms’designs to new boiler models. The project alsoprovides technical assistance to the nine boilermanufacturers to develop, produce, market, andfinance the new models and to strengthencustomer service programs. Similarly, the ChinaEfficient Refrigerators project provides technicalassistance and training for compressor andrefrigerator manufacturers to produce moreefficient designs. In this case, targetingcompressor manufacturers is especially important,because virtually all Chinese refrigerators useChinese-produced compressors, and compressordesigns have remained less efficient than theycould be. The project creates specific incentivesfor these manufacturers to modify their productdesigns and to convert production lines. In bothprojects, the actual costs of conversion are

financed from commercial or government sourcesarranged as part of the project.

Reduce Retail Prices of Technology throughSubsidies, Bulk Procurement, or ManufacturerContributions. Projects to promote CFL marketsemploy three mechanisms to reduce retail prices.First, the Poland, Mexico and Jamaica projectsprovide per-unit subsidies for CFLs on the orderof several dollars. Second, the ThailandElectricity Efficiency, Mexico and Jamaicaprojects also substantially lower retail prices byrelying on the economies of bulk purchases frommanufacturers. Third, the Poland project, in aunique approach, obtained subsidy contributionsfrom lighting manufacturers. Manufacturerscompeted to provide the largest guaranteed salesat the lowest project subsidy cost, providingsubsidies themselves on a contractual basis thatspecified wholesale and retail prices. Thissubsidy program allowed large retail pricereductions with smaller project subsidies becauseof the manufacturer contributions, as well as themultiplier effects of VAT tax and retail markups.This approach to manufacturer contributions,having been deemed very successful in Poland, isbeing replicated in the Efficient Lighting Initiativeproject in seven countries.

Pilot New Distribution Mechanisms throughRetailers, Dealers, or Electric Utilities. InMexico and Jamaica, the electric utilitiesdistribute CFLs through utility offices. In theThailand Electricity Efficiency project, lampdistribution through a chain of “7-11”convenience store is a new distributionmechanism in that market. In Poland, distributionthrough existing retailers was enhanced throughthe use of a special “green” product logo. TheEfficient Lighting Initiative project in sevencountries develops new financing mechanisms,such as energy service companies, which couldserve as new distribution vehicles.

Educate Consumers/Users about theCharacteristics, Costs, and Benefits of theEnergy-Efficient Technology. All projectsconduct consumer education and outreach


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programs. In some projects, like in Mexico, thisis done primarily through utility offices to reachthe utility’s customer base. Most projects usemedia advertisements— television, newspaper,and radio. The Poland project utilized a special“green” logo to promote CFLs sales and alsoconducted an energy/environmental educationprogram in primary and secondary public schools.The China Industrial Boilers project providestechnical assistance and training for industrialenterprises to understand, procure, and operate thehigher-efficiency boilers, and for design andresearch institutes and government agencies todisseminate the technologies to other boilermanufacturers. In addition to consumer educationand outreach, the China Efficient Refrigeratorsproject enacts a national refrigerator labelingprogram to educate consumers at the point-of-sale. The project also provides dealer incentiveprograms to encourage dealers to actively stockand sell more efficient refrigerators. Finally, theproject conducts a consumer buyback/recyclingprogram for old refrigerators, to provideincentives and opportunities for consumers totrade their less efficient models for more efficientones.

Conduct Utility-Based Demand-SideManagement (DSM) Programs. Utility-basedDSM projects in Mexico, Thailand ElectricityEfficiency, and Jamaica are vehicles throughwhich energy-efficient product markets arepromoted. In Mexico, the project particularlytargeted low-income consumers because theutility was paying large subsidies for electricitypurchased by these consumers. In the ThailandElectricity Efficiency project, the national electricutility (EGAT) was keen to avoid subsidyprograms and instead relies on voluntaryagreements, market mechanisms, and intensivepublicity and public education campaigns. InJamaica, the utility extends credit to consumersfor purchasing energy efficient equipment;consumers have the option of financing theequipment with 12 monthly payments throughtheir electricity bills. The Efficient LightingInitiative project helps utilities develop DSMprograms for lighting in seven countries. In theindustrial sector, the Thailand ElectricityEfficiency project offers rebates to purchasers of

new, more efficient motors and offers free auditsto encourage replacement of existing inefficientmotors. The project also develops efficiencystandards and testing capabilities and conductsefficiency certification for selected equipmenttypes by establishing test procedures andminimum efficiency requirements. In theThailand Chillers project, EGAT replaces chillerswith high-efficiency models and pilots an energyservice company mechanism that could bereplicated by the private sector after the project iscompleted.


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Table B5: Energy-Efficient Product Manufacturing and MarketsProject Objective Intended ResultsMexico HighEfficiencyLighting Pilot(1991)


Pilot a utility DSMprogram to sell CFLs toresidential consumers.

1. Finance the national utility (CFE) to p urchase 1.7 million CFLsand sell them directly to consumers through its offices.

ThailandPromotion ofElectricityEnergyEfficiency(1991)


Conduct a five-yearutility DSM program bythe national electricutility responsible forpower generation(EGAT); pilot differentmarket interventionstrategies thatdemonstrate on a largescale the potential forelectricity efficiency.

1. Create a Demand-Side Management Office within EGAT. 2. Conduct voluntary agreements with Thai lighting manufacturersand importers to improve the efficiency of their lighting products. 3. Purchase in bulk a planned 1.5 million CFLs and sell themthrough a distribution network of 7-11 convenience stores. 4. Promote low-loss magnetic ballasts through bulk procurement. 5. Develop and promulgate new commercial building codes andconduct demonstration commercial building retrofits.

6. Develop labeling and standards for household appliances andindustrial motors.

7. Conduct consumer education and awareness campaigns.

8. Provide end-user and manufacturer incentives for producing andpurchasing more efficient equipment.

JamaicaDemand SideManagementDemonstration(1993)


Test and demonstratethe marketing,technical, financial, andeconomic feasibility ofimplementing cost-effective DSMmeasures, particularlyin the residential sector.

1. Create a DSM program unit within the Jamaica Public Service Co(JPSCo) utility. 2. Provide free CFLs to 100 homes to test and establish technicalcriteria regarding equipment performance, customer response, andinstallation problems. 3. Sell 100,000 CFLs to 30,000 households at discounted prices, aspart of energy savings packages that may include other equipmentlike low-flow showerheads and outdoor lighting controls. 4. Conduct public education and information campaigns throughutility mailings, offices, and the media

5. Conduct energy audits in 20 large-scale and 10 small-scalebuildings (new and existing) in the commercial sector, focusing onlighting, air conditioning, refrigeration, and water heating.

6. Assess the solar water heater market in Jamaica and strengthen themarket by providing information and installation and maintenanceassistance, and by monitoring existing installations.


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Project Objective Intended ResultsPolandEfficientLightingProject (1994)

IFC/WorldBank$5 m. GEF$5 m. total

Stimulate the nationalmarket for energy-efficient lighting inPoland and acceleratethe market by fiveyears.

1. Sell 1.2 million CFLs directly under the project throughcommercial retailers, utilizing both direct product subsidies andindirect manufacturer-contributed wholesale price decreases. 2. Conduct a pilot peak-load-shaving DSM program by sellingdiscounted CFLs to residents in specific districts where peak electriccapacity was constrained (done by three municipal governments andlocal electric utilities). 3. Sell discounted CFL luminaires through a wholesale buy-downprogram. 4. Conduct a public education program, including a special logo topromote CFLs, television and press advertising, and anenergy/environmental education program in primary and secondarypublic schools.

ChinaEfficientIndustrialBoilers (1996)


Develop affordable,energy-efficient, andcleaner industrial boilerdesigns; mass produceand market these high-efficiency boilerdesigns; anddisseminate moreenergy-efficient andcleaner boilertechnologies throughoutChina.

1. Provide technology transfer and technical assistance to ninecompetitively selected boiler manufacturers to allow them to develophigh-efficiency boiler models.

2. Acquire advanced equipment from abroad to upgrade productionwith new boiler models.

3. Provide technical assistance to nine boiler manufacturers todevelop, produce, market, and finance plans for the new boilermodels and to strengthen customer service programs.

4. Provide technical assistance and training for industrial enterprisesto understand, procure, and operate the higher-efficiency boilers, andfor design and research institutes and government agencies todisseminate the technologies to other boiler manufacturers.

China BarrierRemoval fortheWidespreadCommercialization of Energy-Efficient CFC-FreeRefrigeratorsin China(1998)


Remove barriers to thewidespreadcommercialization ofenergy-efficientrefrigerators in China.

1. Provide technical assistance and training for compressor andrefrigerator manufacturers.

2. Create incentives for energy-efficient product design ormodification and conversion of factory production lines.

3. Enact national efficiency standards.

4. Enact a national refrigerator labeling program.

5. Conduct consumer education and outreach.

6. Conduct dealer and manufacturer incentive programs.

7. Conduct a consumer buyback/recycling program for oldrefrigerators.


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Project Objective Intended ResultsEfficientLightingInitiative(1998)


Promote marketexpansion for energy-efficient lighting inArgentina, the CzechRepublic, Hungary,Latvia, Peru, thePhilippines, and SouthAfrica.

1. Sell on the order of 3 million CFLs directly under the projectthrough commercial retailers, utilizing both direct product subsidiesand indirect manufacturer-contributed wholesale price decreases.23

2. Provide financial advisory services and develop local, sustainablefinancing mechanisms to overcome first-cost barriers (i.e., leasing,energy service companies, partial guarantees).

3. Conduct consumer education and marketing campaigns toincrease consumer awareness of life-cycle costs, energy efficiency,and climate change issues.

4. Collaborate with local utilities to develop DSM programs.

5. Support establishment of industry associations.ThailandBuildingChillerReplacementProgram(1998)


Remove barriers towidespread replacementof low-energyefficiency chillers withnew, high-efficiency,non-CFC chillers inThailand.

1. Replace 440 chillers with new high-efficiency chillers.

2. Pilot an energy service company model in which the nationalutility (EGAT) replaces chillers and charges customers on a fee-for-service basis.

3. Establish a zero-interest revolving loan fund for end-userinvestments in chillers.

4. Disseminate information on high-efficiency chillers in Thailand.


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B.6. Energy Efficiency Investments in Industry

Fourteen projects directly target energy efficiencyin the industrial sector (Table B6). These projectstake the following approaches:

Pilot Innovative Financing Mechanisms.Projects pilot a number of innovative financingmechanism designed to reduce financing barriersto energy efficiency improvements. Examplesinclude:

China. The China TVE Phase II projectestablishes a Working Capital Fund (WCF) toprovide loans for energy conservation projects.The fund is initially seeded with funds from theGEF, the Ministry of Agriculture, and theAgricultural Bank of China. The fund provides,initially, 20% of the necessary project financing,the remainder comes from the project developerand the Agricultural Bank of China.

Hungary. The Hungary project provides partialcredit guarantees to domestic commercialfinanciers to reduce the credit risk of debt orlease-financing to ESCOs, project developers, orequipment manufacturers and suppliers. Inaddition to partial credit guarantees, the projectprovides incremental financing when theparticipating commercial financier reaches its ownassessed lending ceiling. Commercial financiersare responsible for selecting individual projectsand conducting due diligence. Financing ismedium to long term so that investments can beself-financing from the energy savings realized.Once commercial viability of energy efficiencyinvestments has been demonstrated, the fund isexpected to be replicated by commercialfinanciers; the level of participation risk and theamount of partial guarantees will diminish as theproject develops until commercial financiers areable to operate without it.

India. In the India project, IREDA finances thedirect production, purchase and installation ofenergy efficiency equipment for a range of end-use technologies including electric motors,refrigeration, industrial cogeneration, boilers,steam drives, and lighting. Project costs varyfrom $25,000 to $250,000.

Kenya. The Kenya project makes SMEs aware offinancing that is already available and affordableto them as the private financial sector in Kenya isalready well established. The project publishes aGuide for Kenyan and Foreign InvestorsParticipating in the Implementation of EnergyEfficiency and Energy Conservation projects toprovide information on taxes, regulations andsources and types of financing available and underwhat terms. The project also conducts financialengineering courses to train SME managers onhow to develop investment projects acceptable tocommercial financiers.

Global. The Renewable Energy and EnergyEfficiency Fund provides capital for energyefficiency projects with rates of return oruncertain risk-profiles that would discourage fullcommercial backing. The fund will invest inmedium-sized projects (US $5-30 million) thatmeet GEF criteria.

Promote or Create Energy Service Companies.In many countries there are importantopportunities for energy service companies(ESCOs) to profit from energy efficiency byadvising and supporting end-users to implementenergy efficiency measures and by engaging inenergy performance contracting.

Create new ESCOs. The China EnergyConservation and Brazil projects directly createand finance demonstration or pilot ESCOs. TheChina project creates three ESCOs to demonstrateenergy performance contracting for the first timein China. These ESCOs are responsible foridentifying industrial clients, financing theinvestments, and bearing the financial andtechnological risk. Under the performancecontract, ownership reverts to the host enterpriseonce the ESCO’s costs and a reasonable profit arerecouped from avoided energy costs, equipment.Similarly, the Brazil project creates demonstrationESCOs to implement performance contracts andalso creates a credit facility from commercial ordevelopment banks to encourage third-partyfinancing of ESCO projects.

Finance and promote existing ESCOs. Otherprojects do not attempt to establish ESCOs


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directly but rather provide financing for private-sector ESCOs that submit viable financingproposals. In the India project, IREDA financesprivate-sector ESCOs to implement performancecontracts in the range of $0.25 to $1 million withlarge industrial and commercial users such as thesteel, chemical and distillery industries. TheHungary project also provides explicit financingfor ESCOs. The Malaysia project illustrates anational effort to further promote the ESCOconcept in a country where ESCOs are alreadywell established. The project will address the lackof awareness and information on ESCOs byinstituting a national workshop to promote theESCO concept and a cooperative workshop todevelop the legal and institutional framework forthe delivery of ESCO services as well asdeveloping tools for use by energy engineers inESCOs and a marketing strategy for ESCOs. Theproject also conducts surveys to determine theexisting ESCO density in Malaysia, and monitorsand evaluates existing ESCO programs. TheBrazil project designs and implements a financingfacility for energy efficiency activities by ESCOsand promote performance contracting amongindustrial firms, public institutions, financiers, andengineering service companies.

Lay the groundwork for future ESCOs. Otherprojects lay the institutional and capacity buildinggroundwork for future ESCOs once markets forenergy efficiency technologies and servicesmature. Projects first create government or quasi-government agencies and develop theircapabilities in delivering energy efficiencyservices. Then these agencies are expected toevolve or split into private-sector ESCOs. TheLebanon project creates the Lebanese Center forEnergy Conservation and Planning, initiallystructured as an independent entity within theMinistry of Hydroelectric Resources. Initially,only a portion of the costs of the center will berecovered from its clients. However, over timeand as a market is established, full cost recoveryfrom clients is expected and ultimately theactivities that generate revenue will be privatizedinto an energy service company. Similarly, thePalestinian/Egyptian project establishes two pilotenergy consumer service centers to reachindustrial, commercial, and other private-sectorenergy consumers and to gather and disseminate

information about energy consumption andconservation. These centers will help to createprivate-sector ESCOs and eventually are expectedto become privately owned and managed ESCOsthemselves. In the Thailand project, the nationalelectric utility (EGAT) anticipates turning oversome its DSM activities to ESCOs once themarket for these investments is proven (a secondThailand project for chillers involving EGAT,described in Annex B.5, also expects to bereplicated by private-sector energy servicecompanies).

Create or Strengthen Dedicated Energy-Efficiency Centers. Projects in China, Egypt,India, Lebanon, Malaysia, Palestine Authority,Peru, and Syria create or strengthen a number ofdifferent types of dedicated centers orintermediary organizations to support energyefficiency improvements in industry.

China. The China TVE Phase II projectestablishes a Production Technology and ProductMarketing Consortium (PTPMC) to assist townand village enterprises (TVEs) with feasibilitystudies, staff training, energy management, qualitycontrol measures, construction, commissioningand operation of subprojects. The China TVEPhase I project strengthens the capabilities ofthree existing TVE regional energy conservationcenters by providing them with basic computingand library facilities and technical assistance fordeveloping training programs. The China EnergyConservation project establishes an EnergyConservation Information Dissemination Centerto provide industry with information on energyefficiency improvements and best practices.

India. The India project increases the capacity ofIREDA to finance and market energy efficiencyinvestments, particularly the concept ofperformance-based energy efficiency contractingusing ESCOs. IREDA’s clients include industry,equipment manufacturers and vendors, stateelectricity boards, and private electric utilities.IREDA assists these clients with financing,investment planning, business plan development,project development, and procurement.


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Peru. The Peru project strengthens theinstitutional and technical capabilities ofCENERGIA, a non-profit entity with strong linksto the public and private sectors, to provide adviceand support to its clients in the public and privateindustrial sectors on potential energy efficiencyand conservation savings. CENERGIAexperiences and knowledge will be shared withpublic and private educational institutions andwith energy conservation professionals from otherLatin American countries.

Syria. The Syria project establishes an EnergyServices Center with expertise in energy auditing,heat engineering, power system planning,ventilation, refrigeration, air conditioning, motorsystems, marketing, and financial and economicanalysis. The center assists public and privateentities with task such as energy audits, buildingcodes, and access to credit in the longer term.

Build Capacity of Industrial Enterprises toUnderstand, Select, Finance, and InstallEnergy-Efficient Process Technologies. A fewprojects directly develop the capabilities ofpersonnel within industrial enterprises.Capabilities developed include project appraisalskills, financial and commercial marketing skills,and energy auditing and energy managementskills. The Kenya project trains energy auditorsand establishes a national network of auditors toincrease their capacity to identify and evaluateenergy efficiency opportunities. The projecttrains personnel from small and medium scaleenterprises, through a series of seminars andworkshops, to prepare and implement energy-saving measures. The project also trains a unitwithin the Kenyan Association of Manufacturerson energy management and international bestpractices. The Egypt/Palestine project assists theprivate sector to develop energy planning, projectfeasibility analysis, and conceptual design skills.The project also provides energy auditing andconservation and engineering services toindustries and commercial firms. And theMalaysia project establishes an energy auditprogram in which audit team members fromvarious industrial subsectors receive training in allaspects of energy management and auditing,conduct audits, and train other auditors.

Demonstrate the Technical, Economic andCommercial Viability of Energy Efficiency andEnergy Conservation Measures. Projects inBrazil, China, India, Kenya, Malaysia, Peru, andSyria directly finance energy efficiencysubprojects that demonstrate the commercial andtechnological viability of energy efficiency andconservation in selected subsectors. Projects alsoconduct information and awareness campaigns todisseminate demonstration subprojectexperiences, including both financial andtechnical data and results. The China TVE PhaseI project conducts one technology demonstrationproject in each of eight provinces and fourindustrial subsectors (brick-making, coking, metalcasting, and cement making). The Malaysiaproject conducts demonstration projects in thecement, ceramics, food, glass, iron/steel, pulp,paper, and rubber industries, co-financed with theprivate sector. The Syria project rehabilitatesselected facilities in one electric utility; as theproject builds awareness of energy efficiencytechnologies among managers and policy makersand disseminates experience to other utilities, it isexpected to be replicated. The Brazil projectconducts and evaluates a series of demonstrationprojects for commercial customers, largeindustrial customers, and public facilities. Theproject also establishes a “best practices” programbased upon collected experiences from thedemonstration projects, which will disseminate tothe financial community project information suchas rates of return and profitability.


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Table B6: Energy-Efficiency Investments in IndustryProject Objective Intended ResultsPeru TechnicalAssistance toCenter ofEnergyConservation(1991)


Enable the Peruviannon-profit entityCENERGIA to becomea regional energyefficiency and energyconservation trainingand service center topublic and privateindustrial clients.

1. Train CENERGIA’s technicians in energy conservationtechniques and in evaluation and control of industrial and vehicularemissions.

2. Provide CENERGIA with materials and equipment to implementenergy conservation and emissions testing techniques.

3. Survey environmental pollution in the most energy-intensiveindustries and survey diesel vehicle emissions.

4. Establish a national program to minimize and regulate industrialemissions.

5. Conduct six demonstrations of energy efficiency and conservationmeasures in industrial enterprises identified by CENERGIA audits.

ChileReduction ofGHGs (1992)


Demonstrate thecommercial viability ofmaking energyefficiencyimprovements inindustry.

1. Create two ESCOs (done by mining companies).

2. Conduct three demonstrations of energy efficiency improvementsfor industrial motors.

3. Establish a revolving fund to finance the incremental costs ofenergy efficiency investments.

4. Conduct a feasibility study for a biomass plant.China EnergyConservationand PollutionControl inTownship andVillageEnterpriseIndustries(TVE) Phase 1(1995)


Demonstrate the valueof energy efficiencyimprovements inChina’s Town andVillage Enterprises(TVEs), specifically inthe brick-making,coking, metal castingand cement sectors.

1. Conduct surveys at 76 existing TVEs with high energyconsumption and pollution levels; identify 8 pilot sites and conductdemonstrations of energy efficiency technologies.

2. Develop training materials and programs for three existing TVEEnergy Conservation Centers to train TVE managers and techniciansin energy conservation project appraisal and industrial management.

3. Train energy auditing trainers and project management trainers inat least 10 TVE service organizations.

4. Conduct pre-investment feasibility studies to build a portfolio ofpotential energy conservation projects.

RenewableEnergy andEnergyEfficiencyFund (1996)


Mobilize new financialresources forinvestments in energyefficiency andrenewable energyprojects by the privatesector in non-OECDcountries; attain acompetitive risk-adjusted rate of returnon these projects.

1. Establish a fund capitalized with a minimum of $130 million.

2. Establish a balanced portfolio of energy efficiency and renewableenergy projects financed from the fund.


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Project Objective Intended ResultsSyria Supply-side Efficiencyand EnergyConservationPlanning(1996)


Improve the efficiencyof electric powergeneration and increasethe capacity ofdomestic entities toevaluate and implementenergy-conservationactivities.

1. Rehabilitate an existing power plant to demonstrate improvementsin thermal efficiency.

2. Train power plant operators in plant management andmaintenance practices for greater efficiency.

3. Establish a Syrian Energy Services Center and train its personnelto perform audits and retrofits and eventually provide credit lines tocustomers.

4. Conduct seminars for Ministry of Environment decision makers toraise awareness of energy efficiency technologies and practices.

5. Establish a National Energy Efficiency Program and integratedresource planning at the Ministry of Environment

HungaryEnergyEfficiency Co-FinancingProgram(1996)


Demonstrate theviability of co-financingto leverage domesticprivate capital forenergy efficiencyinvestments.

1. Establish a co-financing program with domestic commercialfinanciers to leverage $25 million over five years in medium to longterm finance.

2. Establish a partial credit guarantee mechanism for participatingcommercial financiers to reduce credit risks.

3. Promote the marketing of energy efficiency financial servicesoffered by commercial financiers.

China EnergyConservation(1997)


Increase energyefficiency savingssustainably through theestablishment ofESCOs and promoteawareness of theviability of energyefficiency investments.

1. Establish three pilot ESCOs to demonstrate energy performancecontracting in China (called “Energy Management Companies”).

2. Finance the three pilot ESCOs to conduct energy efficiencyprojects in industry.

3. Create a national Energy Conservation Information DisseminationCenter and distribute materials and information to industry aboutenergy conservation opportunities and technologies.

4. Create an Energy Management Company Development Unit todisseminate information about performance contracting andencourage further formation of ESCOs in China.

5. Disseminate energy efficiency information through government,industry and professional networks in the form of newsletters, sitevisits, workshops and published professional articles.


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Project Objective Intended ResultsBrazil EnergyEfficiency(1997)


Create a market-basedenergy efficiencyindustry by removingmarket barriers,enhancing institutionaldelivery mechanisms,and encouraging thedevelopment of ESCOs.

1. Conduct pilot and demonstration energy efficiency projects foremerging technologies; PROCEL documents and disseminates theexperience and “best practices” derived from these projects.

2. Design and implement a financing facility for energy efficiencyactivities by ESCOs and promote performance contracting amongindustrial firms, public institutions, financiers, and engineeringservice companies.

3. Enhance testing, certification, and labeling of energy efficiency ofequipment.

4. Establish a revolving fund for public sector and electric powerutilities to finance energy efficiency investments.

Egypt andPalestinianAuthorityEnergyEfficiencyImprovements(1997)


Strengthen thecapability of thePalestinian Authority tomanage energy systemsand improve energyefficiency; enable amarket for energyefficiency investmentsin Egypt.

1. Establish an energy conservation program and an EnergyConservation Center within the Palestinian Energy Agency.

2. Establish two pilot energy consumer service centers that areexpected to be converted to ESCOs in the future.

3. Provide energy auditing, conservation, and engineering services toindustries and commercial establishments.

4. Identify, evaluate, and prepare projects for loss reduction in theelectric power transmission and distribution system.

5. Draft codes and standards for energy efficiency in buildings andappliances.

6. Conduct educational, awareness, and outreach campaigns amongthe public and private sectors.

KenyaRemoval ofBarriers toEnergyConservationand EnergyEfficiency inSmall andMedium-ScaleEnterprises(1998)


Develop SME capacityto identify appropriateenergy efficiencymeasures, to implementdemonstration energyefficiency projects, andto pioneer financialdelivery mechanismsfor these projects.

1. Conduct demonstration energy efficiency investments withindesignated industrial subsectors.

2. Train small- and medium-scale enterprises and commercialfinanciers to appraise and implement energy efficiency projects andto pioneer new financial mechanisms.

3. Train small- and medium-scale enterprise staff and local energyauditors in energy efficiency.


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Project Objective Intended ResultsIndia EnergyEfficiency(1998)


Promote and financethe delivery of energyefficiency services andequipment,implementation ofDSM schemes, and thedevelopment of ESCOs.

1. Increase the institutional capacity of IREDA to directly financethe production, purchase, and installation of energy efficiencyequipment and to encourage the creation of ESCOs.

2. Establish credit lines for end-users, equipment manufacturers andESCOs to undertake energy efficiency investments. IREDAappraises, finances, and supervises energy efficiency projects.

3. Support private-sector ESCOs to provide turnkey energyefficiency services including energy audits, feasibility studies andperformance contracting.

4. Conduct a national survey to collect, collate, and synthesizeinformation related to energy efficiency business development andinvestments.

MalaysiaIndustrialEnergyEfficiencyImprovementProject (1998)


Implement capacity-building anddemonstration incentiveschemes to addressinadequate informationand perceived risks ofenergy efficiencytechnologies amongenergy producers.

1. Establish industry energy performance benchmarks and energyratings for energy efficiency industrial equipment and machinery.

2. Train personnel from various subsectors in energy auditing andenergy management.

3. Provide incentives to local manufacturers to produce more-efficient equipment (motors, heat exchangers, pumps, fans, boilers).

4. Hold national workshops to promote the ESCO concept. Monitorand evaluate the performance of existing ESCOs.

5. Conduct energy efficiency projects on a 50/50 cost-sharing basiswith project developers.

LebanonBarrierRemova1 forCross SectoralEnergyEfficiency(1999)


Improve demand-sideenergy efficiencythrough the creation ofa multi-purposeLebanese Center forEnergy Conservationand Planning.

1. Establish the Lebanese Center for Energy Conservation andPlanning as an autonomous public corporation.

2. Conduct 300-400 audits of industrial plants to identify potentialenergy savings and conduct feasibility studies outlining energyefficiency measures suggested by the audits.

3. Devise financing mechanisms that create incentives forinvestments in energy efficiency and conservation.

4. Conduct an assessment of demand-side energy efficiency potentialby end-use technology, by sector, and by energy source.

5. Conduct an information and awareness campaign to promoteenergy efficiency and specific cost-effective options for varioussectors and end-use technologies.

6. Draft energy conservation codes and standards for industrialequipment.

7. Make policy recommendations for legislative action on pricing,tariffs, taxation, incentives, and equipment standards.


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Project Objective Intended ResultsChina EnergyConservationand GHGEmissionReduction inChineseTownship andVillageEnterprises(TVE) Phase 2(1999)

UNDP$8 m. GEF$19.6 m. total

Demonstrate the valueof energy efficiencyimprovements inChina’s Town andVillage Enterprises(TVEs), specifically inthe brick-making,coking, metal casting,and cement sectors.

1. Establish a Production Technology and Product MarketingConsortium that will provide project support and advice, such asfeasibility studies of energy conservation, to TVEs.

2. Establish a Working Capital Fund to provide access tocommercial financing (initially to finance 20% of project costs, withthe remainder financed by the project developer and AgriculturalBank of China).


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B.7. Energy-Efficient Building Codes andConstruction

Four projects demonstrate the potential for energysavings in existing buildings and for settingenergy efficiency codes and standards for newlyconstructed buildings (Table B7). These projectsshare some of the following approaches:

Conduct Energy Audits and Collect andDisseminate Data on Building Characteristics.Two projects collect and disseminate data onbuilding characteristics as a way to overcomeinformation barriers, especially those related toopportunities and costs of energy efficiencyimprovements. The West Africa (Cote d’Ivoireand Senegal) project collects and analyzes energydata from public and commercial buildings (e.g.,hotels and banks). The project surveys buildingowners and obtains information on buildingspecifications, structural materials, fittings,energy-related equipment, and the costs ofmaterial and equipment. The Jamaica projectcollects information on commercial buildingsthrough a series of energy audits in commercialbuildings (20 audits of large buildings and 10audits of smaller buildings), focusing on lighting,air conditioning, refrigeration, and water heating.

Establish Building Codes and Standards andEstablish New Agencies or InstitutionalMechanisms to Enforce the Standards and/orCertify Equipment. Building codes andstandards and implementation/enforcementmechanisms are prominent parts of three projects:

Thailand. The Thailand project institutes amandatory energy code for commercial buildingsto compel building owners who would nototherwise participate in the project’s DSMprograms. In addition to minimum mandatorystandards, the project provides financial incentivesfor building owners who exceed the establishedstandards. Implementation of the building code isundertaken by a working group established by thegovernment with representatives from thearchitectural and engineering communities as wellas manufacturing firms.

West Africa (Cote d’Ivoire and Senegal). TheWest Africa project helps finalize an existingenergy efficiency code for air-conditionedbuildings and helps implement the code; theproject consults with affected parties, tests theapplication of the code to several buildingprojects, trains construction operators tounderstand and apply the code, and introduces thecode into building permit procedures. In additionto the energy efficiency code, the project drafts athermal comfort code for buildings without airconditioning and assists with its implementation.

Tunisia. The Tunisia project helps validateenergy efficiency standards for all new buildingsin the commercial and residential sectors. Theproject selects a representative sample of 10buildings from the service sector (including ahospital, a shopping mall, and an office building)and 36 residential projects (equivalent to 840house lots). The public and private sectors areinvited to bid to implement energy efficiencymeasures in these buildings, with awards going tobids that best comply with the standards.

Demonstrate Technical Energy EfficiencyMeasures. The Jamaica project conducts severaldemonstration subprojects in buildings. In thecommercial sector, 20 audits are conducted on arepresentative sample of buildings over 1,000 m2

(typically office buildings). The audits focus onthe potential for energy savings from energy-efficient lamps, ballasts, refrigeration, and air-conditioning and ventilation systems. Ten smallerbuildings are also audited and retrofitted. Also inthe commercial sector, the project conductsstudies that analyze the technical, financial, andeconomic feasibility of cogeneration as analternative to energy conservation, particularly inhotels. In the residential sector, the projectconducts a study on the technical potential forsolar water heating and lighting and conductssmall demonstration projects. In the West Africa(Côte d’Ivoire and Senegal) project, onerepresentative building from each country will beaudited and retrofitted, with an emphasis on airconditioning and lighting. In the Tunisia project,builders submit designs and compete to receivefinancial awards that cover the incremental


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architectural and construction costs for complyingwith the standards.

Conduct Utility-Based DSM Programs. TheThailand and Jamaica projects are discussed inAnnex B.5 in relation to efficient lightingimprovements and products. Both programs alsoaddress energy efficiency of buildings. TheThailand project provides free lighting audits andrebates to encourage building owners in thecommercial and public sectors to retrofit/replaceinefficient lighting systems. The project alsodevelops and promulgates building codes toenforce minimum efficiency standards. Theproject proposes modifications to existing codesand encourages their enforcement by providingfinancial incentives for energy efficiencymeasures that exceed the existing standards.


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Table B7. Energy-Efficient Building Codes and Construction ProjectsProject Objective Intended ResultsThailandPromotion ofElectricityEnergyEfficiency(1991)


Conduct a five-yearutility DSM program bythe national electricutility responsible forpower generation(EGAT); pilot differentmarket interventionstrategies thatdemonstrate on a largescale the potential forelectricity efficiency.

1. Create a Demand-Side Management Office within EGAT. 2. Conduct voluntary agreements with Thai lighting manufacturersand importers to improve the efficiency of their lighting products. 3. Purchase in bulk a planned 1.5 million CFLs and sell themthrough a distribution network of 7-11 convenience stores. 4. Promote low-loss magnetic ballasts through bulk procurement. 5. Develop and promulgate new commercial building codes andconduct demonstration commercial building retrofits.

6. Develop labeling and standards for household appliances andindustrial motors.

7. Conduct consumer education and awareness campaigns.

8. Provide end-user and manufacturer incentives for producing andpurchasing more efficient equipment.

West Africa(Côte d’Ivoireand Senegal)Control ofGHG ThroughEnergyEfficientBuildingTechnology(1992)


Demonstrate theeconomic andenvironmental benefitsof the large-scaleapplication of energyefficiency measures innew and existingbuildings and in theequipment andmaterials used for thesebuildings.

1. Collect data on energy efficiencies of representative types ofbuildings (from public and private sectors) and distribute datathrough a national network of government agencies and NGOs.

2. Incorporate energy management techniques into buildingoperations management in selected buildings (i.e., air renewal rates,temperature specifications, and equipment operation times).

3. Develop, implement, and assess the impact of energy efficiencycodes for air-conditioned buildings and thermal comfort codes fornon-air-conditioned buildings.

4. Develop a portfolio of buildings for future investment projects.

5. Conduct design studies for new buildings to show how newenergy efficiency and thermal comfort codes can be met.

6. Train state environmental personnel to measure the impact of thebuilding code in terms of greenhouse gas reduction, ozone depletion,and the immediate local environment.


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Project Objective Intended ResultsJamaicaDemand SideManagementDemonstration(1993)


Test and demonstratethe marketing,technical, financial, andeconomic feasibility ofimplementing cost-effective DSMmeasures, particularlyin the residential sector.

1. Create a DSM program unit within the Jamaica Public Service Co(JPSCo) utility. 2. Provide free CFLs to 100 homes to test and establish technicalcriteria regarding equipment performance, customer response, andinstallation problems. 3. Sell 100,000 CFLs to 30,000 households at discounted prices, aspart of energy savings packages that may include other equipment,such aslow-flow showerheads and outdoor lighting controls. 4. Conduct public education and information campaigns throughutility mailings, offices, and the media.

5. Conduct energy audits in 20 large-scale and 10 small-scalebuildings (new and existing) in the commercial sector, focusing onlighting, air conditioning, refrigeration, and water heating.

6. Assess and strengthen the solar water heater market in Jamaica byproviding information and installation and maintenance assistance,and by monitoring existing installations.

TunisiaExperimentalValidation ofBuildingCodes andRemoval ofBarriers totheir Adoption(1998)


Remove barriers to theadoption andenforcement ofregulatory measuresthat introduce thehighest attainableenergy-efficientbuilding standards forall new buildings in thecommercial service andresidential sectors.

1. Retrofit 10 demonstration service-sector buildings and 840residential housing units using previously identified buildingstandards; validate the standards.

2. Conduct awareness campaigns to promote public support for theadoption of the highest building standards.


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B.8. District-Heating Energy Efficiency andBiomass/Geothermal Heat Production

Five projects in countries in transition (Bulgaria,Lithuania, Romania, Russia, and Slovenia)improve energy efficiency in municipal district-heating networks and associated buildings,undertake municipal energy-saving projects, anddemonstrate and promote heat production indistrict-heating systems from biomass andgeothermal energy (Table B8). These projectstake the following approaches:

Create New Financing Mechanisms,Particularly Involving the Private Sector. TheRomania project demonstrates the overallfeasibility of energy efficiency projects tostimulate long-term financing on a sustainablebasis. The project reviews potential domestic andinternational sources of financing and consultswith government and other stakeholders toidentify viable financing mechanisms. Theproject plans to establish a grant-loan financingscheme to leverage loans and other resources forenergy efficiency investments; it is expected thatthis mechanism would eventually finance aportfolio of energy efficiency projects and buildfinancial, managerial and technical experienceamong the public, private, and NGO sectors. TheBulgaria project develops business infrastructureand market conditions for energy efficiencyinvestments. The project publishesdocumentation accessible to potential investors ontaxation, fees, budget regulations, liability, andlabor practices, and establishes a clearinghouse tobring together municipal entrepreneurs withnational and international sources of funding. Theproject also facilitates joint-venture energy servicecompanies between Bulgarian and foreigninvestors and undertakes subprojects todemonstrate financial rates of return.

Build Capacities among MunicipalGovernments, District-Heating Companies,and Households to Understand, Finance, andImplement Projects

Russia. The Russia project trains personnel fromthe municipal government of Vladimir, local

universities, the municipal gas company, and themunicipal district-heating company to conductfinancial and economic analysis of the feasibilityof energy efficiency projects. The experiencegained from the training will be disseminated toseveral other Russian cities.

Bulgaria. Likewise, the Bulgaria project trainsmunicipal employees, local architects andengineers, and industry and institutional managersto design, implement and evaluate energyefficiency projects. The Bulgaria project alsobuilds a network of Energy and EnvironmentOffices (EEOs) in 20 municipalities to shareinformation and experience from energyefficiency programs.

Romania. The Romania project trains a broadspectrum of actors: government agencies,“recipient-side” stakeholders of energy efficiencytechnologies, and personnel from the private andNGO sectors. In particular, the project builds thecapacity of the Agency for Energy Conservation,a central government agency with regionaloffices, to identify and develop energy efficiencyprojects and present them to potential financiers.Assistance to this agency includes training andimproved access to information (printed andelectronic) and fostering of links with financialinstitutions and other entities interested in energyefficiency. On the recipient side, small, mediumand large enterprises, municipal and governmentauthorities and utility companies participate inthematic training/awareness events about energyefficiency.

Create New Regulatory Frameworks thatProvide Incentives for Improving EnergyEfficiency and Conserving Energy AmongHouseholds and Heat Suppliers

Russia. The Russia project develops a prototypesystem of metered heat consumption in residentialbuildings, including an entirely new set ofinstitutions for heat meter reading and billingusing heat meters installed (under a separateproject) in buildings. In addition, the projecttargets housing policies that presently do notallow tenant associations to be formed to makeinvestment decisions about the buildings in which


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they reside but do not usually own. The projectalso studies the unresolved regulatory,institutional, and technical questions surroundinginstallation of autonomous, decentralized heatproduction units at the building level, whichwould mean customers disconnecting fromcentralized heating networks.

Bulgaria. Similarly in Bulgaria, although there isalready some metered heat consumption in thecity of Gabrovo, the project introduces acomprehensive system of metering and billing topave the way for eventual privatization of district-heating companies. The project recommends anew legal framework to support energy efficiencyinvestments; the city of Gabrovo, based onexperience from the project, will write a report on“Model Policies and Legislation forMunicipalities Seeking Energy EfficiencyInvestments.” The report will outline legislativeand regulatory measures, taxation and feestructures, and utility infrastructure requirementsneeded for energy efficiency investments, and willbe disseminated to other municipalities.

Disseminate Information on theCharacteristics, Costs, and Benefits of Energy-Efficiency Technologies to Households andHeat Suppliers. All three projects disseminateinformation to a variety of stakeholders. InRussia, information gaps are disincentives to theprivate sector to invest in autonomous heatproduction; the project will install demonstrationsof autonomous boilers and disseminate

information on their feasibility. In addition, theproject conducts a public information campaign toincrease households’ awareness of consumption-based heat metering, and a handbook is beingpublished outlining the city of Vladimir’sexperience in implementing consumption-basedheat billing. Information from Bulgaria’stechnology demonstration subprojects isdisseminated to a variety of potential investorsand financiers. In Romania, workshops, publicawareness campaigns and other participatoryactions are conducted for the public, NGOs, andthe private sector.

Demonstrate Equipment Performance andCommercial Viability. The Russia projectinstalls demonstration autonomous heating boilersin two or three selected buildings to demonstrateinstallation costs, metering issues, operation andmaintenance, and safety and security. TheLithuania project installs a demonstrationgeothermal plant that provides 150 GWh of heatannually to a municipal district heating network,the first geothermal heating plant in the region.Although the calculated economic rate of return ofthe protype is relatively low by commercialstandards, subsequent plants may cost less oncelocal engineering and other technical skills aredeveloped under the project. The Slovenia projectdisseminates information from demonstrationbiomass district-heating/cogeneration installationsbeing done by other agencies and constructsadditional demonstration installations as well.


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Table B8: District-Heating Energy Efficiency and Biomass/Geothermal Heat-Production ProjectsProject Objective Intended ResultsLithuaniaKlaipedaGeothermalDemonstration(1995)


Demonstrate thefeasibility and value ofusing low temperaturegeothermal water as arenewable indigenousenergy source in districtheating systems at theregional and nationallevels.

1. Construct a demonstration geothermal plant that produces 150GWh/yr of heat for a municipal district-heating system.

2. Provide technical assistance for the design of the geothermal loopbetween the plant and the district heating system.

3. Train plant managers and operations staff in the operation of aplant.

RomaniaCapacityBuilding forGHGReductionThroughEnergyEfficiencyImprovements(1995)


Remove technological,institutional andfinancial barriers tosustainable energyefficiency investmentsin Romania.

1. Train municipal authorities, state agencies, and small/mediumenterprises to analyze, prioritize, develop, and appraise "bankable"energy efficiency projects.

2. Train private sector companies and NGOs to understand andinvest in energy efficiency improvements, through workshops andpublic awareness campaigns.

3. Consult with local banks and other potential financiers, explorepossibilities for co-financing energy efficiency projects, andestablish a new financing schemes for energy efficiency projects.

4. Develop a legal, regulatory, and institutional framework and/orfinancing mechanism to ensure sustainable energy efficiencyinvestments.

RussiaCapacity-Building toReduce KeyBarriers toEnergyEfficiency inRussianResidentialBuildings andHeat Supply(1996)


Create incentives andopportunities for energyefficiencyimprovements andenergy conservation inresidential buildingsand municipal heatsupply systems, anddemonstrate thefeasibility of usingautonomous heatingboilers in residentialapartment buildings.

1. Create a prototype regulatory and institutional model forconsumption-based heat and hot-water metering and billing.

2. Conduct a study of the technical, economic, and institutionalfeasibility of investments in autonomous heat supplies in residentialand public buildings.

3. Install autonomous heating boilers in two or three selectedbuildings to demonstrate installation costs, metering issues,operation and maintenance, and safety and security.

4. Increase the skills and capabilities of the city of Vladimir toconduct project financial and economic analyses and to undertakeproject feasibility studies for public and private financing sources.

BulgariaEnergyEfficiencyStrategies toMitigate GHGEmissions(1996)


Build national capacityto implement energyefficiency andconservation programsin Bulgaria anddemonstrate theviability of renovatingdistrict-heating systemsto make them moreenergy efficient.

1. Establish a network of municipal governments to disseminateinformation on energy efficiency.

2. Create an Energy and Environment Office in 20 municipalgovernments to develop and implement energy efficiency programs.

3. Train and educate municipal government personnel to design andimplement energy efficiency programs, including specific training inenergy auditing and energy management.

4. Conduct a feasibility study on renovation of the city of Gabrovo’sdistrict heating system and introduce a consumption-based heatmetering and billing system.


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Project Objective Intended ResultsSloveniaRemovingBarriers to theIncreased Useof Biomass asan EnergySource (1999)

$4.4 m. GEF$12.3 m. total

Promote the market forbiomass technologiesfor district heating andcogeneration inSlovenia.

1. Prepare and disseminate experience and information on biomassdemonstration projects being conducted by other agencies inSlovenia; conduct hearings, seminars, and study tours.

2. Prepare guidelines for training local communities, industry, andconsultants to evaluate and prepare “bankable” biomass projects.

3. Train local professional groups to install, maintain, and operatebiomass district heating and other biomass energy installations.

4. Formulate a cross-sector national biomass energy program / actionplan; develop a model for long-term biomass supply agreements.

5. Prepare, finance, and implement three to five biomass districtheating and/or cogeneration projects.


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B.9. Fuel Switching and Production/Recovery

Eighteen fuel switching and production/recoveryprojects demonstrate technologies for switchingfrom combustion of existing high-carbon fuels(primarily coal) to low-carbon fuels (such as gas),as well as producing methane fuels from coal bedsor municipal and agricultural wastes that wouldotherwise contribute to greenhouse gases (TableB9).

Because most of these projects, strictly speaking,fall outside of the three GEF long-termoperational programs for energy efficiency orrenewable energy, they are designated as short-term response measures (STRM).24 One of threeprincipal criteria for STRM projects is a lowcarbon abatement cost— less than $10 per ton ofcarbon emissions directly reduced. Nevertheless,many of the projects in this category alsodemonstrate technologies and build capacities,which can result in replication and indirectbenefits. Projects in this category follow twoprimary approaches:

Demonstrate Technical, Economic, andCommercial Feasibility of Low-Carbon-FuelPlants or Fuel Production/RecoveryTechniques. Coal-bed methane collection andutilization technologies are demonstrated in China(to coal-mine owners and interested commercialenterprises) and India. Also in India(Biomethanation), public and private companiesdemonstrate the technical and commercialviability of recovering methane from agricultural,municipal, and industrial wastes. Energyproduction using methane produced from landfilland/or industrial wastes is also demonstrated inChina, Jordan, Latvia and Tanzania. Combined-

cycle combined-heat-and power plants and wasteheat recovery are demonstrated in the Czech andSlovak Republics. A district-heating combined-cycle power plant fueled by both natural gas andwaste straw is demonstrated in Hungary.Conversion of heating boilers from coal to naturalgas fuels is demonstrated in Poland.

Develop National Strategies, Plans, andInstitutions for Promoting Fuel Switchingand/or Production/Recovery Technologies. TheChina Coal-Bed Methane project establishes anew joint venture, the China Coal-Bed MethaneCompany, to continue to commercialize coal-bedmethane recovery in China and to facilitate futurepartnerships and investments between Chineseand overseas developers. The China Sichuan Gasproject restructures the China National PetroleumCorporation and the Sichuan PetroleumAdministration into joint-stock companies withcommercial accounting systems and establishes anindependent regulatory agency to set, monitor,and enforce safety standards on gas production inSichuan. The Poland project establishes aprogram within the Polish Bank forEnvironmental Protection to finance theconversion of a number of small- and medium-sized boilers from coal fuel to natural gascogeneration. The India Biomethanation projectestablishes a National Bioenergy Board tocoordinate research and operational activities inbiomethanation, to raise national awareness of thebenefits of recovering and using biogas, and tooversee the implementation of a nationalbioenergy strategy. The China Methane Recoveryproject develops a national action plan for landfillgas recovery.


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Table B9: Fuel Switching and Production/Recovery ProjectsProject Objective Intended ResultsChinaDevelopmentof Coal-BedMethaneResources(1991)


Demonstratetechnologies andtechniques to reduceatmospheric methaneemissions and to cost-effectively recovermethane for use as anenergy source.

1. Install demonstration methane recovery technologies at three sitesand specifically demonstrate vertical well-drilling techniques and anintegrated recovery system using in-seam horizontal drain holes.

2. Create a database and financial/economic assessments of coal-bedmethane resources in five Chinese coal-mining administrations.

3. Conduct study trips abroad for policy-makers to learn about thetechnologies and sponsor an international conference to increaseunderstanding among coal mine engineers and policy makers.

4. Train technicians from coal geology companies, researchinstitutes, and coal-mining administrations in vertical-well drillingtechniques.

Poland Coal-to-Gas (1991)


Demonstrate the cost-effective substitution ofgas for coal andtechnologicalinnovation to improveenergy efficiencythroughout the heatsupply chain.

1. Construct two coal-to-gas conversion projects to utilizing bothcondensing-boiler and gas-turbine cogeneration technologies.

2. Establish a program to select and finance additional boilerconversion projects through the Bank for Environmental Protection.

3. Train staff of Polish Bank for Environmental Protection in projectengineering, appraisal, and supervision.

4. Assist boiler owners in identifying, proposing and implementingboiler conversion projects.

5. Install energy efficiency equipment in 670-800 residential homes.China SichuanGasTransmissionandDistributionRehabilitation(1992)

World Bank$10 m. GEF$123m. total

Optimize the safety,operational efficiency,and environmentalmanagement ofSichuan's gasproduction and theT&D system.

1. Restructure the China National Petroleum Corporation and theSichuan Petroleum Administration (SPA) into joint-stock companiesand introduce commercial accounting systems.

2. Drill a 100-well field in Sichuan to expand gas production.

3. Rehabilitate and upgrade 90 gas wells and the gas T&D system inSichuan to reduce methane losses.

4. Train SPA personnel to more effectively manage, operate, andmaintain the T&D system.

5. Establish an independent Office of the Regulator to set, monitor,and enforce safety standards on gas production in Sichuan.

RussianFederationGreenhouseGas Reduction(1992)


Identify and appraiseprojects to decreaseGHG emissionsthrough increasedefficiency in natural gasproduction,transmission,distribution andutilization.

1. Identify and evaluate sources of GHG emissions in the productionand processing of natural gas, the transmission system, and thedistribution network.

2. Propose methods for GHG emissions reduction and estimatefuture emissions levels at selected sites. Evaluate and prioritize aseries of investment subprojects.

3. Conduct energy audits, surveys, and interviews in four cities toidentify and estimate actual and future levels of GHG emissionsfrom the industrial, municipal, residential and commercial sectors.


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Project Objective Intended ResultsMaliHouseholdEnergy (1992)


Promote popularparticipation inhousehold energyactivities, rational useof household energyservices, and improvedhousehold fuels use.

1. Sell improved kerosene and charcoal stoves that are subsidized bythe project (done by private-sector dealers).

2. Mobilize popular participation in the management of naturalforests and restructure the fuelwood trade.

MoroccoRepowering(1992)World Bank$6 m. GEF$46 m. total

Demonstrate thecommercial viability ofmodern repoweringtechnology using gasturbines

1. Install a 60-MW gas turbine at an existing steam-power-plant.

2. Monitor and evaluate the technical, environmental, and financialperformance of the hybrid plant and make this information availableto other electric utilities.

TanzaniaElectricity,Fuel andFertilizer fromMunicipal andIndustrialWastes(1993)


Establish medium- andlarge-scale biomassproduction facilities inTanzania and otherAfrican countries;create education andmanagement base forsustainabledevelopment of biogasproduction facilities.

1. Construct a medium-scale demonstration biogas plant fortreatment of organic municipal and industrial wastes in Dar- es-Salaam.

2. Demonstrate using biogas as fuel for automobiles.

3. Build the capacity of local educational, technical, andadministrative instititutions in the biogas field to replicate theproject.

IndiaDevelopmentof High-RateBio-MethanationProcesses toReduce GHG(1994)


Promotebiomethanationtechnologies and theutilization of biogas toabate methaneemissions fromindustrial, municipaland agricultural waste.

1. Develop a national strategy for bioenergy generation from high-rate biomethanation and establish a National Bioenergy Board tocoordinate bioenergy development

2. Conduct biomethanation subprojects.

3. Train government and national laboratory personnel inbiomethanation technologies through foreign study tours andfellowship opportunities.

4. Disseminate information on biomethanation and biogas utilizationthrough workshops, promotional literature, and media campaigns.

JordanReduction ofMethaneEmissions andUtilization ofMunicipalWastes forEnergy inAmman(1995)


Demonstrate theviability of utilizingmunicipal solid waste(MSW) as an energysource.

1. Conduct a study of the composition and quantities of MSW at theselected site and estimate its atmospheric emissions andenvironmental impacts.

2. Train plant technicians and engineers about bioenergy technologyand how to operate medium- and large-scale biogas plants.

3. Construct a combined landfill gas plant and medium-scale biogasplant for treatment of organic and industrial waste at a selected site.

4. Develop a national strategy and master plan for bioenergy.

5. Develop a plan for collection and transport of organic wasteresources to landfill and biogas plant.

6. Collect information on the potential for environmental benefitsand financial savings at other landfill sites in Jordan.


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Project Objective Intended ResultsChinaPromotingMethaneRecovery andUtilization forMixedMunicipalWaste (1996)


Demonstrate thecapture and burning oflandfill methane togenerate electricity orfor direct use as a fuelin the industrial,commercial, anddomestic sectors.

1. Study the MSW composition, disposal practices, and the results offield trials of landfill gas technology at three pilot sites.

2. Conduct workshops to identify financiers and end-users and tohelp define the institutional arrangements for the use and sale ofenergy products from landfill gas at the three pilot sites.

3. Conduct subprojects demonstrating landfill gas collection andrecovery technologies at the three pilot sites.

4. Develop a national action plan for the promotion and widespreadadoption of landfill gas recovery and utilization technologies.

5. Establish a research, training and information center to educate,train and assist landfill operators, energy service companies, andmunicipalities to build and operate landfill energy plants and toconduct research to improve methane recovery technology.

SenegalSustainableandParticipatoryEnergyManagement(1996)


Inter-fuel substitutionoptions component:Promote substitution ofkerosene and liquidpetroleum gas forcharcoal anddisseminate efficientcharcoal stoves.

1. Set up a charcoal reserve stock to stabilize the flow of charcoal tothe principal urban centers and to reduce the risk of artificial supplyshortages.

2. Reorganize and modernize the urban charcoal trade to establishlong-term contract supply agreements between rural communitiesand selected urban traders; provide technical assistance and limitedsupport for the diversification of existing urban charcoal traders.

3. Provide support for the continuation of inter-fuel substitutionoptions (kerosene and LPG) and dissemination of improved stovesby the private sector and NGOs.

Latvia SolidWasteManagementand LandfillGas Recovery(1997)


Demonstrate financiallyself-sustaining, modernmanagement ofmunicipal solid wasteand methane recoveryand develop landfill gasas an energy source.

1. Remediate an existing waste disposal site to prevent leachate fromreaching groundwater aquifers and contaminating the water supply.

2. Establish a sorting line at the landfill to separate out recyclableand toxic materials.

3. Construct a plant to collect landfill gas and generate electricityfrom the gas.

CzechRepublicKyjov WasteHeatUtilization(1997)


Demonstrate thecommercial andtechnological viabilityof gas-fired combined-cycle cogeneration andthe benefits ofcombining theproduction of industrialprocess heat withdistrict heating.

1. Reconstruct an existing glass manufacturing plant with acombined-cycle turbine and harness waste heat for the local districtheating system.

2. Create a regulatory pricing framework, based on avoided-costprinciples, for district-heating company purchases of heat from localindustries.

3. Establish a joint venture company as an implementation model forfuture projects.


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Project Objective Intended ResultsIndia Coal-Bed MethaneRecovery andCommercialUtilization(1997)


Demonstrate theeconomic viability ofharnessing coal-bedmethane in the Indiancoal mining sector.

1. Train personnel in the Central Mine Planning and Design Instituteto identify, design, and implement programs to recover and utilizecoal-bed methane.

2. Conduct four subprojects to demonstrate coal-bed methanerecovery techniques using vertical surface wells drilled in advance ofmining and horizontal drainage boreholes.

4. Recover methane from demonstration drilling to fuel the mine'sgas-fueled vehicles, to supply a pipeline, and to bottle for sale.

5. Establish a clearinghouse for the dissemination of information andthe coordination of meetings and seminars for potential foreignbusiness partners on coal-bed methane recovery and uses.

HungaryRenewableEnergy andRegionalDevelopment(1997)


Demonstrate thetechnical feasibility oflarge-scale utilization ofwaste-straw for district-heat production andcombined-cycle electricpower production.

1. Construct a 18-MWt straw-fired boiler, a 25-MWe gas turbine anda 7-MWe steam turbine to generate electricity and to provide hot-water to the district heating system.

2. Create a new market for regional farmers to supply waste straw tothe power plant.

SlovakRepublicChemosvitCogenerationProject (1999)


Demonstrate gas-firedcombined cycle CHPtechnology; stimulatetechnological andinstitutional changeswhich would promoteenergy efficiencythrough developingcombined-cycle heatand power CHPsystems.

1. Construct a 14-MW CHP plant, pipelines, heat exchangers, steamreduction technology, and an energy management system for theplant.

2. Develop a replicable and cost-effective monitoring protocol forassessing the performance of the project.

Ukraine Coal-Bed MethaneRecovery(1998)


Promote thecommercial extractionof coal-bed methaneand increaseproductivity and safetyof coal mines.

1. Demonstrate methane recovery technology.

2. Create a commercial coal-bed methane recovery company.

PolandGeothermalandEnvironmentProject (1999)


Exploit geothermalresources for districtheating systems.

1. Drill geothermal wells and construct a 60- to 70-MW capacitybaseload geothermal district-heating plant, supplementary gas-firedpeaking capacity, and a new district-heating network.

Annex C: Emerging Impacts of Completed orContinuing Projects25

C.1 Solar Home Systems

The Zimbabwe Photovoltaics for Household andCommunity Use project was the only GEF solarhome system project that was fully completed byearly 1999 (see Annex B.1 for a complete list ofall solar home systems projects). Four otherprojects, the Sri Lanka Energy Services Deliveryproject and three subprojects in Vietnam,Bangladesh and the Dominican Republic underthe Small and Medium Scale Enterprise Program,are in the early stages of implementation and havereported preliminary results.

In Sri Lanka, more than 1000 solar home systemshad been installed by 1999 by two commercialfirms and one NGO. The commercial firms werefocusing on cash sales while the NGO, a large andestablished national institution, was sellingsystems financed under its existing microcreditprogram (on-lending GEF project financingthrough the microcredit program). Two largercompanies, one multinational and one domestic,were considering entering the solar home systembusiness in Sri Lanka as part of the project, whichwould help meet the project’s target of 30,000installed systems by 2002. Preliminaryimplementation experience suggests that dealer-supplied credit may be problematic; smallerdealers, although able to manage the risksassociated the marketing and technical aspects ofproduct delivery and service, do not want toassume the risks of being credit suppliers as well.Thus the Sri Lanka project has begun to considerfurther promotion of microfinance mechanismsthrough established microfinance organizations.

Under the Small and Medium Scale Enterprise(SME) Program, a private company supported bythe SME program in the Dominican Republic hadsold or rented approximately 3,500 systems by1999. Grameen Shakti in Bangladesh hassuccessfully started providing credit to consumersand has sold more than 1000 solar home systems.

And a private company has initially sold about100 systems for cash in Vietnam.

In the India Alternate Energy project, there havebeen problems with extending credit to potentialrural PV consumers. Evidence suggests thatfinancial institutions perceive rural consumers asunwilling to repay loans and therefore theseinstitutions have not extended credit. Also, thelack of infrastructure for after-sales support andservice has emerged as an additional difficulty inrural markets. Most of the project’s PV sales havebeen to commercial customers. Nevertheless,domestic production capacity for solar moduleswent from 3 MWp in 1991 to 8 MWp by 1996,and the number of companies involved in the PVindustry went from 16 in 1991 to more than 70 in1998 (although it is difficult to attribute theseindustry changes to the GEF project).Promotional efforts and numerous businessmeetings organized under the project haveincreased awareness of various PV applicationsamong potential users.

The Zimbabwe project was designed to enhanceand upgrade indigenous solar manufacturing anddelivery infrastructure, to develop an expandedcommercial market in rural areas for affordabledomestic solar electric lighting by providing low-interest financing through existing institutions,and to establish new credit mechanisms at thegrassroots level to benefit lower income groups inrural areas (both households and community-based institutions). Over the five-year projectperiod, the project expected a direct impact ofabout 9,000 PV systems installed on low-interestfinancing terms provided by the project. Theproject also originally expected an indirect impactof up to another 9,000 systems sold without creditor subsidies during the five-year project period, asa result of market development fostered by theproject. The project has had a number of impactson the market for PV systems in Zimbabwe:

Annex C: Emerging Project Impacts Promoting Energy Efficiency and Renewable Energy

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Number of producers and dealers in the market.Prior to the project there was one PV module andsystems manufacturer, and three smaller firmsperforming installation and system integration. Atthe completion of the project, 60 firms wereregistered with the Solar Energy IndustriesAssociation although only 30 have since renewedand only six accounted for 80% of the marketshare for the project. No new module assemblycompanies have emerged as a direct result of theproject because of a lack of funds for plants andmachinery. Some project observers have worriedabout industry shake-outs after the project thatmay leave the industry in a weakened or chaoticstate; certainly many firms are similarly worriedabout the future market and whether they willsurvive.

Changes in market prices. Import duties of 40%on imported components were waived during theproject, which resulted in substantial costreductions for installed PV systems. There wasspeculation that these duties will be put back inplace now that the project is completed, whichwould have significant bearing on future marketprices. The number of producers and dealersremaining in the market (see above) will alsoaffect future market prices.

Technical knowledge. Technicians from fiveinstaller companies were trained during theproject. Two colleges and one polytechnicinstitute will begin to provide courses on PVtechnology initially in the form of adult educationcourses. The University of Zimbabwe began tooffer a M.Sc degree in Renewable EnergySystems in 1996. The project management unitand the Solar Industries Association haveproduced a solar magazine.

Standards enacted and in use. The StandardsAssociation of Zimbabwe and the Solar EnergyIndustries Association created PV modulestandards that are being used to certify andwarranty installed systems. Standards were stillbeing drafted for batteries, lamps, and chargecontrollers.

Certification procedures and institutions exist andactive. Certification procedures were institutedfor suppliers during the project, but it is not clear

whether these procedures were institutionalizedafter project completion. The projectmanagement unit enforced component andinstallation standards during the project, assistedby its own small testing laboratory. A code ofconduct for the Solar Energy IndustriesAssociation has been included in theorganization’s constitution.

Operating financing mechanisms. TheAgricultural Finance Corporation successfullyprovided low-interest credit to 4,200 PVconsumers through a revolving fund mechanism.No data are available on the repayment rates andturnover for the revolving fund, and thus whatadditional resources will be required to sustain it.“It is obvious now that the prevailing interest rateof 15% is sub-economic and as such the fund willcertainly deplete to zero if no corrective action istaken,” the project’s terminal evaluation reported.During the project an additional credit facility wasestablished to help suppliers with cash flow and toenable suppliers to procure imported components(from the PMU) before they were paid for thesystems. This credit was available based uponPMU certification of suppliers.

Perceptions of commercial credit viability. Priorto the project, ZIMBANK was making loans forsolar PV but then stopped. The projectdemonstrated that loans for solar PV systems areviable under the terms given (Z$8,000 to Z$9,000principal, 15% nominal interest rate that isactually a negative real interest rate, and three- tofive-year term).

Degree and quality of information available andknown by consumers. “There is now much greaterawareness by government, NGOs, and the publicabout home PV systems than before the project,”according to one evaluation report.

Presence and function of market intermediaries.During the project, the project management unitplayed a critical role in reducing barriers. Its“market intermediation” functions includedprovding long-term credit for purchasers,certification of suppliers, commercial credit forcertified suppliers to assist with cash flow,technical standards for components and systems,and bulk procurement and import of components.

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It is not clear how these functions will besustained and to what degree they will still benecessary now that the project is completed. ASolar Industries Association was established priorto the project and continues to function.

Number of systems installed. As a direct marketimpact, 10,000 systems had been installed by1997, 300 of which were provided by non-governmental organizations and the rest of whichwere provided by private sector dealers. Anestimated 3,000 PV systems had been installedprior to the project, mostly in rural and semi-urban centers like health clinics, schools,community centers, and commercial farms, so theproject has great increased the installed base. Amarket baseline, estimated before the projectstarted, projected sales of 320 home systems peryear, which would equal roughly 1,600 systemsover the five-year project.

Sources of Data for Annex C.1: internal GEFdocuments; internal UNDP documents,interviews with project participants; Nagendran1999; Martinot 1998a; Martinot et al. 2000a and2000b.

C.2 Grid-Connected Wind and Biomass Power

Six projects for grid-connected wind, biomass,and geothermal power have been completed or arenearing completion: Costa Rica Wind Power,Mauritius Bioenergy, Philippines Geothermal,Mauritania Wind Electric, India Hilly Hydel, andIndia Alternate Energy (see Annex B.2 for projectdetails).

India. The India Alternate Energy project wasstarted in 1991 to promote commercialization ofwind power and solar PV technologies in India.The project was designed to support existinggovernment policies to promote wind powerthrough special tax incentives. The project alsowas designed to pioneer financing and marketdelivery mechanisms based on private-sectorintermediaries and incentive schemes and policiessuitable for small independent power producers.Markets for these technologies were catalyzedthrough large-scale demonstration, increasedconsumer confidence, and enhanced willingness

to pay. The project channeled financing throughthe India Renewable Energy DevelopmentAgency (IREDA) and strengthened IREDA’scapabilities to promote and finance private-sectorinvestments.

By 1998, more than 270 megawatts of windpower had been financed by IREDA andcommissioned, including 41 megawattscommissioned with GEF and IDA financing and10 megawatts commissioned with Danish funds.In parallel with these direct project impacts, atotal of 968 megawatts (MW) of wind farms wereinstalled and operating in India, of which 917MW were commercial and privately operated.Highly favorable investment tax policies stronglyinfluenced these commercial installations.26 Newsuppliers entered the wind power market; beforethe project there were three major companiesinvolved in the wind industry, but by 1998 asmany as 26 companies were engaged in the windturbine manufacturing industry, many withforeign partners. High-technology wind turbinedesigns up to 600-kW with variable speedoperation were being produced by 14 companies.Domestic production of blades began and exportsof blades and synchronous generators to Europewas under way. Wind turbine exports to othercountries had also begun. The installed costs ofwind turbines in India declined.

The GEF project indirectly helped catalyze thesemarket changes by helping to raise awarenessamong investors and banking institutions of theviability of wind power technology and byhelping to lobby for lower import tariffs for windsystems. Many financial institutions decided tooffer financing for wind farms, and a wind-powerloan portfolio among commercial bankinginstitutions emerged (this was a key project goal).The number of Indian consultants capable ofdeveloping wind power investment projectsincreased dramatically, in part because of GEF-supported training and networking activities forconsultants, technicians, and private firms (aroster of consultants was available from IREDAfor reference by investors).

Also in India, the Hilly Hydel project hasidentified 20 sites to demonstrate the benefits ofsmall hydro installations and increase awareness


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of the cost-effectiveness of hydro-electricity.Capacity-building activities so far have trainedmore than 50 officials abroad in small hydropower planning, design, construction,management, and maintenance. A localeducational establishment now offers apostgraduate program on alternate hydro energy.Ten states have issued guidelines for engaging theprivate sector in the commercial installation ofsmall hydro. Local ownership and managementmodels are being tested at three of thedemonstration sites.

Mauritius. The objectives of the Mauritius SugarBio-Energy project were to expand electricitygeneration from bagasse, to promote the efficientuse of biomass fuels from the sugar industry forenergy production, and to strengthen themanagement and coordination of the BagasseEnergy Development Program. To achieve theseobjectives, the project sought to build a baseloadpower plant that would provide continuous powerto the utility, using bagasse during the crop seasonand coal in the off season. The plant was to be thefirst in a series of regional plants, and its outputwas to depend in part on investments in efficiencyimprovements of regional satellite sugar mills(financed under the project) to provide surplusbagasse for power generation. The project alsoincluded components for technical assistance andtechnology demonstrations to promoteprivate/public sector cooperation in power plantventures and evaluate ways to decrease thetransport costs for bagasse and optimize the use ofsugar cane for power generation. One of the major intended project outputs, abagasse power plant, was not constructed and theutility had to invest in an additional diesel-fueledplant to make up for the power supply shortfall.Instead, however, $6 million was dispersed underthe project for efficiency investments in sugarmills to provide surplus bagasse for powergeneration. These investments had not beenprojected to occur in the baseline. The project appears to have indirectly catalyzeddramatic changes in electricity generation inMauritius. Electricity generation from bagasseincreased from 70 GWh/yr in 1992 to 118GWh/yr by 1996. Several sugar mills have

completed or embarked upon bagasse power plantinvestments on their own, independent of the GEFproject, including the original mill that had beentargeted for the bagasse power plant under theproject. The European Investment Bank hasagreed to finance a bagasse/coal-fired powerplant. There was no baseline projection of whatbagasse power plant development would havebeen in the absence of the project; thus, it isunknown how strongly linked these developmentsare to the project. A project completion reportstates that “extensive dialogue between the publicand private sector on design work, the least-costpower development plan, and power purchasingagreements have directly or indirectly led to thedevelopment of other power plants.” The same project-completion evaluation reportstates that there has been “demonstration value”from the project and that the project led toestablishment of a framework for independent-power-producer (IPP) development and anadministrative focal point for private/public sectorpartnership in IPP development. The evaluationalso states that “the project’s majoraccomplishment was progress in helping toestablish an institutional and regulatoryframework for private power generation inMauritius and the provision of technical studiesand trials to support technologies for improvedbagasse production and improved environmentalmonitoring.”

Costa Rica. A significant private-sector wind-power industry has emerged from new dialogueand policy frameworks engendered by the GEFproject even though the project has not yetinstalled wind turbines (the installationcomponent of the project has been delayed). Sofar, a 20-megawatt wind farm has been installedby the private sector and began operating in 1997.This installation could be considered an indirectproject impact. In addition, other countries inCentral America are taking note of Costa Rica’sexperience. Technical questions still remain, asabout one-third of the wind turbines in the 20-megawatt wind farm have been damaged bylightning and other climate conditions.

Sources of Data for Annex C.2: internal GEFdocuments; interviews with India project


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participants; internal World Bank documents;Martinot 1998a.

C.3 Energy Efficient Lighting

The GEF has funded four energy efficiencyprojects with lighting components (see Annex B.5for project details): Mexico High EfficiencyLighting project, Poland Efficient Lightingproject, Jamaica Demand Side ManagementDemonstration project, and Thailand Promotion ofElectricity Efficiency project. These projectsprimarily promote compact fluorescent lamps(CFLs) for residential use, but the Thailandproject has had significant impacts on the Thaimarket for ordinary fluorescent tube lamps aswell. Impacts have occurred in all four projects.The Poland and Mexico projects have been fullycompleted, after successfully selling tohouseholds the targeted number of CFLs (3million total for both countries) during projectimplementation. In the Thailand utility DSM project, lampdistribution through a chain of “7-11”convenience stores, coupled with price reductionssolely through bulk purchases by the electricutility (no direct price subsidies) appears to beworking well. This approach has made CFLsmore accessible to a larger base of consumers.With bulk purchases but no subsidies, the retailprices of CFLs (estimated at $9) are about 40%lower than normal retail prices. In 1996-97, theprogram sold 230,000 CFLs, but recent economicdifficulties in Thailand will undoubtedly increasethe first-cost barrier among a larger group ofconsumers and reduce program delivery.

The Mexico and Jamaica utility DSM projectsalso lowered retail CFL prices. In Mexico,consumers received a very favorable retail priceestimated at about $5 to $8 (compared with amarket price of up to $25 or more) as a result of autility subsidy (estimated at about $7 to $10 perlamp) and economies from bulk purchases by theutility. The Mexican utility sold 1.7 million CFLswith no difficulty. In Jamaica, an estimatedsubsidy of $6 per lamp, combined with bulkpurchases by the utility, led to an estimated retail

price of around $6 per lamp (price data aresketchy, however).

The Poland subsidy program was unique in theway subsidies were channeled through the private-sector. The intention was to use manufacturers’knowledge of the marketplace to maximize CFLsales per dollar of available subsidy. In this case,a large retail price reduction (about $6) waspossible with a smaller program subsidy (about$2) because of manufacturer subsidy contributionsand the multiplier effects of VAT tax and retailmarkups. During 1995-1997, in two separatepromotions, consumers bought 1.2 million CFLsthrough the project (half within the first month ofeach promotion); more than 40 different modelswere represented. This program was easy tomanage, was considered cost-efficient, andallowed use of available distribution channels.Five manufacturers participated in the subsidyprogram although two manufacturers dominatedit.27 Both of these manufacturers were seriouslypursuing the Polish market before the projectbegan.

In Jamaica, a CFL sales program by the utilitybegan slowly with mail solicitation only, butparticipation greatly accelerated once a direct-contact strategy, in which applicants couldinteract with a customer service office staff, wastried. Half of the consumers paid for the energyefficiency measures with credit provided by theutility, suggesting the high-first-cost barrier issignificant.

Another successful approach was a voluntaryagreement by manufacturers to produce moreefficient lighting products in the Thailandprogram. Such an agreement was instrumental intransforming the entire Thai market for T-12lamps into a market where only the more efficientT-8 lamps are sold. This market is estimated at 45million lamps per year. Under the voluntaryagreement, all manufacturers and importers of T-12 lamps agreed to produce or import T-8 lampsexclusively. In return, the Thai electric utility(EGAT) engaged in an extensive public educationand information campaign during 1993-95.EGAT also conducted testing to ensure uniformperformance of the new T-8 lamps. By 1995, alllamp manufacturers and importers had complied


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with the agreement, and almost all T-12 lampshad been eliminated from the market. Successwas aided by a zero net cost to manufacturers(reduced T-8 production costs paid for theproduction conversion), and T-8 retail pricessimilar to those for the T-12 lamps. Success wasalso attributed to cultural factors; the utility statedthat the public considered such voluntaryagreements more desirable and fairer than priceincentives like rebates or subsidies.

The educational and marketing effectiveness ofthese programs is more difficult to assess, andevaluations are generally limited to anecdotes.For example, in Poland survey results indicatedthat a majority of consumers felt that speciallabeling for environmentally friendly productswas of “great or decisive importance” in theirdecision making (NECEL 1997). The schooleducation program was commended by the PolishMinistry of National Education, which wrote aletter to the project management in June 1997saying “it is apparent that as a result of the projectlarge numbers of students and teachers havegained a useful insight into the use of energy andits impact on the environment.” In the view ofproject management, the public educationcomponent was most successful with print mediaand educational efforts involving NGOs and localgovernments.

The Poland case provides the best data so far onthe potential market transformation effects from aCFL program because of extensive pre-projectand post-project market research that has beencarried out in conjunction with the project. Forexample, retail prices of CFLs are lower byapproximately 30% in real terms after the project.A global manufacturer of CFLs and foreigncompanies from Germany, China, and Japan haveall entered the Polish market. The project led to alarge change in consumer awareness about CFLsand the number of households with CFLsincreased from 11.5% to 19.6% of all households.The percentage of retailers stocking CFLs climbedfrom 70.5% to 74.6% of retail lighting stores. Asustainable market is also aided by word-of-mouthfrom those with positive experiences; in onesurvey, 97% of consumers said they were“satisfied” or “very satisfied” with the CFLs,while in another, 43% said CFLs performed better

than expected— and only 3% said they performedworse (NECEL 1997; EEI 1997). One set ofobstacles to market transformation in a situationlike Poland’s is that high inflation, electricitytariff increases, and quarterly or semiannual utilitybilling can obscure the bill savings from CFLsbecause utility bills keep changing. This tends todiminish the verification of savings by the publicover the longer term.

In the case of a utility-implemented program likein Mexico, continued replication of the programdepends upon continued utility implementationand financing. When program participants wereasked in a survey if they would buy CFLs in thefuture at market prices, however, only 30%answered no. Market transformation effects aredifficult to assess in the Mexico case because ofthe lack of established baselines and surveys ofnon-participants. The CFLs installed under theprogram are likely to have a demonstration effect,but this may be insufficient to catalyze a broadermarket. Although there are no data available onthe current private-sector CFL market anddistribution networks in Mexico, the utility-distribution mechanism may tend to have adampening effect on market development at theretail level. It appears that wealthy consumers areleaders in technology adoption, because of theirability to pay, knowledge, and/or higher electricityrates. Surveys of program participants haveshown that 50% already knew about CFLs beforethe program, both through seeing them insupermarkets and hearing about them throughfriends. Between 9% and 19% of participants hadalready purchased CFLs before participating inthe program. No survey data are available of non-participants to see how overall public awarenesshas changed.

Like Mexico, the Thailand CFL program is beingimplemented by a utility, but distribution isoccurring through a convenience-store distributionnetwork. The Thailand program is thus creatingnew private-sector distribution networks that canpresumably lead to lasting market transformationonce the utility program is finished. The Thailandprogram also differs from the Mexico program inthat subsidies are not provided, so the functions ofbulk purchasing and marketing could more readily


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be taken over by private-sector entities once theutility program is completed.

Besides the indirect market impacts of theprograms discussed above, there are also follow-up activities initiated by these programs. Ofcourse the sustainability of utility rebate programsdepends upon continued utility financing, andsuch financing appears likely in several cases. InMexico, the utility has gained extensiveexperience in implementing CFL projects andconsiders the project successful. With the revenuefrom the sales of CFLs already purchased underthe program and with additional contributions, theutility was reportedly planning to purchase anadditional 900,000 lamps, which would bring theproject total to 2.5 million. It is also planning anationwide CFL project to sell consumers fourmillion CFLs by the year 2000 using the Ilumexmodel. In Poland, there are plans for a newprogram to push purchases of hard-wiredluminaires by housing cooperatives, and a new“Green Lights” program is beginning withdemonstration lighting replacements in a fewschools.

Sources of Data for Annex C.3: internal GEFdocuments; internal World Bank documents;Sathaye et al. 1994; Friedmann et al. 1995;Granda 1997; NECEL 1997; EEI 1997; Harris1997; Ratanopas 1997; Martinot and Borg 1998.

C.4 Fuel Switching and Production/Recovery

The GEF has approved 15 projects to demonstratethe commercial and technical viability of fuel-switching from coal to gas and of fuelproduction/recovery (see Annex B9 for projectdetails). Although only one of these projects isformally completed, another three aresubstantially implemented and show documentedimpacts from implementation.

The China Coal-Bed Methane project is the firstfuel production/recovery project to be completed.This project aimed to: (1) demonstratetechnologies that reduce methane emissions andrecover gas for use as a fuel; (2) assess themethane resources of coal mines and the potentialfor using methane gas as a domestic energy

source; and (3) increase the awareness of toppolicy-makers of the benefits of coal-bed methanerecovery and use. The project successfullydemonstrated at three sites a number of techniquesand technologies that Chinese coal mines canemploy to reduce atmospheric methane emissionsand recover methane as a fuel, and held trainingworkshops at these sites to this end. The projectpublished a detailed assessment of China's coal-bed methane resources and strengthened nationalcapacity to conduct such assessments routinely.More than 500 people were trained, from seniorgovernment policy makers to senior managers andengineers of coal mining companies. Trainingwas accomplished through study tours, domesticworkshops, and overseas programs. The joint-venture China United Coal-Bed MethaneDevelopment Corporation was created and hasbeen actively seeking new business opportunitiesto exploit coal-bed methane. Several additionalexploration and development agreements withforeign partners have been negotiated. Policiesand regulations for the coal-bed methane industrywere in the process of being enacted.

The China Sichuan Gas project is designed toincrease gas production and improve theefficiency, safety, and reliability of the Sichuan'sPetroleum Administration (SPA) natural gaspipeline network by upgrading the network’senvironmental standards and by detecting andrepairing leaks. By 1998, gas conservation underthe project had led to an overall improvement ingas recovery from a range of 60-70% to a range of70-80% and had increased gas reserves by 70billion cubic meters (bcm). Total production ofgas during the period 1995-1997 (22.1 bcm) was5.9 bcm higher as a result of the project, andannual production of 7.5 bcm/year in 1997 wasapproaching the project’s target of 8 bcm/year by2000.

The India Biomethanation project aims to developa National Master Plan for the generation andutilization of bioenergy and to createcommercially viable and replicable packages ofbiomethanation technology. By 1998, 29subprojects were approved for demonstrating avariety of possible biomethanation substratesincluding sewage, abattoir waste, and paper milleffluent. The project impacts so far are increased


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awareness and knowledge. Representatives fromvarious technical institutes and governmentagencies have participated in overseas study toursto visit biomethanation plants, manufacturers, andexperts in the field of waste-to-energy. Aquarterly newsletter on bioenergy is beingpublished. The project has also prepared adirectory of entities and individuals working inthe field of waste-to-energy and was sponsoring anumber of conferences and workshops to shareexperiences with biomethanation.

The Poland Coal-to-Gas project promotes theconversion of small- and medium-sized boilersfrom coal to natural gas fuels and promotesenergy-efficient practices in the architecturaldesign and operation of new residential buildings.By 1998, 28 boiler conversion subprojects wereunder construction and eight residential energyefficiency subprojects were under way.Throughout its history, the project has raisedawareness of the potential for coal-to-gasconversions in Poland. In particular, many ofPoland’s environmental investment funds, like theBank for Environmental Protection, have begun tofund coal-to-gas conversions since the projectbegan in 1991. In fact, a large coal-to-gasindustry has emerged in Poland with many boilerconversions taking place using Polish governmentand private financing. Although theseconversions are not directly connected to the GEFproject, the GEF project has helped contribute to agreater awareness and priority within thegovernment to address boiler conversionsnationwide. The project has generatedinformation, publicity, and promotion that hasinfluenced the thinking of boiler owners andfinanciers. In addition, the EU Phare program hasnoted the GEF project in Poland and has begun todevelop similar project concepts for coal-to-gasconversions in one or two other target countries intransition (i.e., Baltic States, Slovenia, Romania,or Bulgaria).

Sources of Data for Annex C.4: internal GEFdocuments; interviews with Poland projectparticipants.

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Endnotes

1 Many GEF documents, including project proposals and policy documents considered by the GEF Council, areavailable in electronic form at http://www.gefweb.org.2 The term "cost-effective" expresses the condition that the economic rate of return of an energy efficiencyinvestment is greater than the prevailing cost of capital (see for example World Bank 1993).3 The classification of categories is oriented towards the technologies employed and the types of interventionsnecessary in specific institutional contexts. Some of these categories overlap with one another; for example,electricity consumption and fuel consumption in industry might be treated as one set of opportunities from a sectoralrather than technical viewpoint; electricity consumption in buildings and space-heat consumption in buildings mightbe treated as one set of opportunities or overlap if electric heating is used; and electricity consumption in industryand in buildings might overlap with electricity production, transmission, and distribution in the context of integratedresource planning and demand-side management frameworks and strategies.4 The UNFCCC is an international treaty that seeks to stabilize atmospheric greenhouse gas concentrations at levelsthat would prevent dangerous anthropogenic interference with global climate (UN 1992).5 During the pilot phase and continuing to the present, a set of enabling activities has also assisted countries todevelop national communications under the climate change convention.6 These three operational programs are numbered 5, 6, and 7, respectively, in GEF operational work. Additionalclimate-change-related operational programs for transport and integrated ecosystem management (numbered 11 and12 respectively) have recently been adopted but are not covered in this report. The other operational programs (1 to4 and 8 to 10) relate to biodiversity and international waters.7 Project approaches and mechanisms described in this report are based on written project documentation, such asproject proposals, GEF project documents, internal unpublished reports, published literature, and informationsupplied by implementing agencies in annual project implementation reviews. Actual or planned activities andresults during implementation may differ from the existing documentation due to time lags or the inability of theauthors to conduct detailed discussions with project executing agencies on individual projects. It is expected thatsubsequent evaluation activities by the GEF will expand and clarify this “knowledge base.”8 Cluster definitions have not been formally adopted by the GEF; these clusters are the authors’ definition.9 Annex B contains 84 distinct projects; 72 are classified as long-term projects and 12 are classified as short-termresponse measures.10 For example, a report by the Intergovernmental Panel on Climate Change (IPCC) on technology transfer hasbenefited from GEF portfolio experience (IPCC 2000).11 One prominent example is in China, where more than 700 biogas "service stations" operate as profit-and-losscompanies that build digesters, sell materials, provide management and technical consulting, and train technicalpeople (Qiu et al. 1990).12 Although many of the renewable energy projects could also be considered “market transformation” approaches,particularly those for consumer equipment like solar home systems and solar hot-water heating systems, the term“market transformation” is generally reserved in the literature for energy efficiency. Nevertheless, the sameprinciples apply equally to both energy efficiency and renewable energy.13 “On-lending” means that a financier borrows from the World Bank (usually through the national government) andthen approves sub-loans to individual borrowers using that financing. The financier bears the sub-loan risk, not theWorld Bank, although partial guarantees may also exist through the government.14 These figures include $21 million in GEF financing and $51 million in leveraged financing for the GEF/IFCSmall and Medium Scale Enterprise Program, only a portion of which is applied to climate change subprojects.15 Besides references in project documents, data on NGO involvement is sometimes difficult to obtain, so the actualnumber is likely to be higher than 25 projects. See also UNDP (1997).16 An additional six climate change short-term response measures, out of 20 total approved, were completed by mid-1999.17 The project impact evaluations presented in this report do not reflect official views of the GEF, its implementingagencies, or the countries concerned, but are the authors’ interpretations based on available information. Manyaspects of project impact evaluations can be controversial, because different stakeholders may have contradictoryviews as to what has happened or what is important.

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18 For example, the IFC has recently completed a post-project evaluation of the Poland Efficient Lighting project,which is not incorporated into this paper; and the World Bank should shortly prepare a project completion report forthe India Alternate Energy/Renewable Resources Development project. The first thematic review conducted by theGEF (Martinot et al. 2000b) was to be published in the summer of 2000, with additional thematic reviews underwayin 2000-2001.19 For a discussion of measuring avoided greenhouse gas emissions from GEF projects, see World Bank 1994 and1998; Vine and Sathaye 1997; and Kaufman 2000.20 See also Herman et al. 1997; Lee and Conger 1996; Prahl and Schlegel 1993; Reed and Hall 1997; Rogers 1995;Violette et al. 1995; Henriques 1993.21 In China, an ambitious program to replace coal- and wood-burning stoves with more efficient models resulted inmore than 150 million households obtaining new stoves between 1985 and 1993 (Smith et al. 1993).22 Each project is listed in Tables B.1 to B.9 with the year of GEF Council approval of the GEF grant component ofthe project. Implementing agency approval dates and actual implementation start dates are generally several monthsto a year or more later than these dates. Project financing amounts given in Tables B.1 to B.9 are indicative andsubject to revision. Project objectives and results given in Tables B.1 to B.9 may be based upon early projectdocumentation and thus may not fully reflect current project designs or decisions made during implementation.23 The project documentation does not provide a specific figure for expected CFL sales. Approximately $10 millionof GEF grants are expected to provide no more than $3.15 in subsidies per CFL sold.24 Six projects in the fuel switching and production/recovery project category were approved under the energyefficiency and renewable energy operational programs (Morocco under OP5; India Biomethanation, Jordan, Mali,Tanzania and China Coal-Bed Methane under OP6). Out of 20 climate change short-term response measures, 12 areshown in Table B9; the eight others not included are for research, carbon sequestration, and biomass resourcemanagement (six global projects, one in Benin and one in Sudan) and are beyond the scope of this paper.25 Project experience and impacts are very dynamic. The information in Annex C reflects basic project informationas of mid-1999. Ongoing monitoring and evaluation efforts by the GEF, associated agencies, and independentevaluators will continue to supplement, update, and revise the information discussed in this report.26 Investment tax credits have been a powerful stimulus to market development, but some observers have questionedwhether the wind farms, markets and joint ventures would remain sustainable if the credits were removed.27 At every step of the project, an open and competitive process was used and the GEF executing agency (IFC) wentto considerable lengths to avoid any conflicts of interest in administering the program.

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