results from the gef climate change program 2002

Evaluation Report #1-02

Results from the GEF Climate Change Program

Global Environment Facility1818 H Street, NWWashington, DC 20433 USATelephone: 1(202)473-0508Fax: 1(202)522-3240Internet: www.gefweb.org

Printed on recycled paper

Results from the GEFClimate Change Program

Global Environment FacilityMonitoring and Evaluation Unit

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Foreword

The GEF Council, at its meetings in December 1999 and May 2000, requested a review of GEF opera-tions prior to discussions on the next trust fund replenishment, which began in 2001.1 This review, theSecond Study of GEF’s Overall Performance (OPS2), was carried out by a fully independent team in2001. The OPS2 is the third major GEF-wide review to take place since the GEF was created.2 Amongthe broad topics the OPS2 team assessed were:

• Program Results and Initial Impacts• GEF Overall Strategies and Programmatic Impacts• Achievement of the Objectives of GEF's Operational Policies and Programs• Review of Modalities of GEF Support• Follow-up of OPS1

To facilitate the work of the OPS2 team, GEF's Monitoring and Evaluation team, in cooperation withthe implementing agencies, undertook program studies in three GEF focal areas—biodiversity, climatechange, and international waters. These program studies provided portfolio information and substantiveinputs for the OPS2 team's consideration.

This report summarizes the findings of the Climate Change Program Study. That study was undertakenin 2000-2001 by an interagency team comprised of staff from the GEF Secretariat, the three GEF imple-menting agencies, and the GEF Scientific and Technical Advisory Panel, with additional support fromconsultants. The team worked under the guidance of an interagency steering committee.

Jarle HarstadSenior Monitoring and Evaluation Coordinator

1 Joint Summary of the Chairs, GEF Council Meeting, December 8-9, 1999, and GEF/C.15/11.

2 The first two studies, respectively, were Global Environment Facility: Independent Evaluation of the Pilot Phase, UNDP,UNEP, and World Bank (1994) and Porter, G., R. Clémençon, W. Ofosu-Amaah, and Michael Philips, Study of GEF'sOverall Performance, Global Environment Facility (1998).

Acknowledgements

Several individuals and organizations within and outside the GEF family of institutions supported andcontributed to the Climate Change Program Study. In particular, an interagency Steering Committeeguided the study. Members of the committee included Dennis Anderson, GEF Scientific and TechnicalAdvisory Panel; Jarle Harstad, GEF Monitoring and Evaluation Team; Richard Hosier, United NationsDevelopment Programme; Eric Martinot, GEF Secretariat; Alan Miller, GEF Secretariat; RameshRamankutty, GEF Monitoring and Evaluation Team (task manager); Mahesh Sharma, World Bank; andRavi Sharma, United Nations Environment Programme.

The exercise was carried out by a team consisting of staff from the GEF Secretariat, the GEF imple-menting agencies, and the GEF Scientific and Technical Advisory Panel (STAP), along with severalconsultants working under the guidance of the Steering Committee. Individuals involved in the specificcomponents of the study were as follows:

• Portfolio Coverage Analysis: Dilip Ahuja, Indian Institute for Advanced Studies, Bangalore, India

• Solar Thermal Cluster Review: Dennis Anderson and Jason Mariyappan, Imperial College of Science,Technology and Medicine, London, UK

• Energy Service Companies Cluster Review: Tony Wilson and Andy Gilchrist, AEA TechnologyEnvironment, Oxfordshire, UK

• Energy Efficient Products Manufacturing and Marketing Cluster Review: Sabrina Birner, JuneConsulting, Paris, France; Eric Martinot, GEF Secretariat

• Solar PV Cluster Review: Eric Martinot, Ramesh Ramankutty, and Frank Rittner, GEF Secretariat

• Grid-connected Renewable Energy Cluster Review: Eric Martinot, GEF Secretariat

• China Country Review: Eric Martinot, GEF Secretariat; Nandita Mongia, United NationsDevelopment Programme, New York; Li Junfeng, Consultant, Center for Renewable Energy, Beijing,China

• Mexico Country Review: Martin Krause, United Nations Development Programme, New York;Yasemin Biro, GEF Secretariat; Walter Vergara, World Bank; Sergio Sanchez, Consultant

In addition, Mahesh Sharma (World Bank), Ravi Sharma (UNEP), Dana Younger (IFC), Alan Miller(GEF Secretariat) and Chona Cruz (GEF Secretariat) provided input, advice, and guidance to the study.

We would like to thank the governments and other partner agencies of Bangladesh, China, Egypt, Ghana,Hungary, Mexico, Sri Lanka, Thailand, Tunisia, and Uganda for facilitating country visits under thevarious study components.

Special thanks are due to my partner in this enterprise, Eric Martinot, GEF Secretariat, for his collabora-tion in conceiving and implementing this study, and to my supervisor, Jarle Harstad, the SeniorMonitoring and Evaluation Coordinator of the GEF, for his valuable guidance throughout the course ofthis exercise.

Ramesh RamankuttyTask Manager

iii Results from the GEF Climate Change Program

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Contents

Executive Summary v

1. Scope and Approach of Study 1

2. The GEF Climate Change Portfolio 5

3. Overall Findings 9

4. Findings from Cluster Reviews 15

v Results from the GEF Climate Change Program

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Background

During the last decade, the Global EnvironmentFacility (GEF) has provided more than US$1billion for more than 270 climate change-relatedprojects in 120 countries. Not counting enablingactivities and some short-term measures, 120 ofthose projects in 60 countries demonstrate animpressive range of approaches to promotingenergy efficiency, renewable energy, and (to alesser extent) sustainable transport. The ClimateChange Program Study, initiated in June 2000,set out to answer four questions about that subsetof 120 projects:

1. Are activities relevant to country needs and global objectives?

2. What are the most significant implementa-tion issues and lessons?

3. What are the impacts/likely impacts of GEF projects?

4. What are the factors influencing sustain-ability and replication?

The study resulted in seven new reports andincorporated one previously completed report:

1. Energy-efficient products manufacturing and marketing cluster review.

2. Grid-connected renewable energy cluster review.

3. Energy service company cluster review.

4. Solar thermal power plant cluster review.

5. Rural solar photovoltaic (PV) cluster review (previously published August 2000).

6. Assessment of GEF climate change portfoliocoverage.

7. Two country reviews, for China and Mexico,that assess how GEF projects are collectivelyaddressing country and global environmentobjectives.

The present report provides a brief synthesis ofthe results from these reports, organized by thefour basic questions.

Scope of the Climate ChangePortfolio

The initial direction of the climate change port-folio was established by the Ad-hoc WorkingGroup on Global Warming and Energy(AWGGWE), set up by the GEF Scientific andTechnical Advisory Panel (STAP). Based on alist of technical interventions that reduce or limitemissions of greenhouse gases developed by theSTAP, early GEF projects often focused ondemonstrations of a variety of technologies.More recent projects have gone beyond tech-nology demonstrations to focus on sustainablemarket-oriented approaches that pilot new busi-ness models, financing mechanisms, demand-side incentives, and means of publicinvolvement. Over time, the portfolio hasbecome dominated by a smaller number of tech-nology applications and strategies that are notnecessarily related first and foremost to short-term greenhouse-gas reduction, but rather reflecta complex balance of needs, interests, and inter-actions among governments and GEF imple-menting agencies.

Executive Summary

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Due to the confines of time and resources avail-able for the program study, it was not possible toarrive at a definitive assessment of the degree towhich country needs have been met throughGEF-financed projects. Such an assessmentwould require a comparison of needs existingbefore initiation of the projects with thoseexisting now. Such data are often lacking or diffi-cult to obtain. In addition, national communica-tions under the United Nations FrameworkConvention on Climate Change (UNFCCC) donot always fully reflect national developmentpriorities.

Detailed reviews of the GEF-financed climatechange portfolios in two countries—Mexico andChina—indicate that GEF projects are consistentwith national priorities in those countries.Furthermore, the technology applicationspromoted in GEF projects are broadly relevant toat least some national objectives in virtually allcountries. For example, the GEF has clearlyhelped with a number of core country priorities,such as promoting renewable-energy-based ruraldevelopment and electrification programs andreducing electric power demand. Still, it is fair tosay that most GEF projects do not result fromcoherent, integrated approaches to developmentand environment at the country level, but arerather conceived on an ad-hoc basis.

As the portfolio evolved, the need to supportrural energy enterprises, provide financial inter-mediation, and attract private sector financingbecame apparent. To respond to these needs anddemonstrate how the GEF can leverage privatesector resources to achieve global benefits, theInternational Finance Corporation (IFC) of theWorld Bank Group developed five projects thatfeature new forms of enterprise support, financialintermediation, and private sector co-financing.These projects have used GEF funding commit-ments to mobilize more than $200 million ofprivate sector co-financing to date. Impacts fromtwo of these projects are described in the clusterreviews, while the other three have just started.All five will warrant a separate cluster review inthe future.

Replication of successful outcomes and modelshas gained increased attention in more recentprojects. Because GEF projects are small relativeto the scale of the climate change problem,recognition has grown that achieving global envi-ronmental objectives depends greatly on replica-tion and indirect impacts through demonstration ofproject benefits. Measuring achievement of globalenvironmental objectives is challenging becausereplication of GEF projects is difficult to monitor.Some projects—such as those for efficientlighting, efficient refrigerators, rural solar PV,coal-bed methane, and electric power demand-side management—have clearly been replicated.Replication of other projects has so far beenminimal or remains undocumented.

Emerging Lessons

Eight significant lessons emerging from theclimate change program study are highlighted inthis synthesis:

1. Lessons and good practices are emerging butneed to be better incorporated into projectdesigns to promote learning. One of the keyadvantages of supporting projects throughGEF Operational Programs is to facilitate thedissemination of lessons among all partici-pants in the GEF programs. This study findsthat such dissemination is slow and onlyrecently has become more efficient. Althoughthe annual project implementation reviewsprovide a forum for learning, the firstconcerted effort to pass on lessons from theclimate change program was the solar PVcluster review, which was completed in 2000.

2. Indirect influences and impacts are key GEFresults. Some of the key impacts of GEF-financed projects are indirect in the sense thatthose impacts were not explicit objectives ofthe projects. In many cases, significant impactsfrom projects have been recorded duringproject preparation (PDF) phases or early inproject implementation.


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3. Replication of project results is not wellplanned or monitored. In general, GEF proj-ects have not been operational long enough togauge how well their replication is providingglobal environmental benefits. Still, most proj-ects contain few provisions or plans forachieving or monitoring replication.

4. Project risk assessment and management needto be strengthened. Implementation of projectsis often hindered by project managers’inability to adjust to changes in markets, poli-cies, macroeconomic conditions, co-financing,and government commitments.

5. Transfer of technological know-how is moredifficult than project proponents anticipate.Such transfer appears impeded by problemswith technology acquisition and application todomestic conditions.

6. Long-term programmatic approaches requiresufficient GEF “credibility” and experience ina country. Country stakeholders need time toaccumulate experience with GEF-financedprojects before they are willing and able todevelop long-term programmatic approachesthat apply the principles of GEF OperationalPrograms over longer time frames with morecomprehensive results.

7. The GEF's potential for influencing policyneeds to be better utilized. The influence ofGEF projects is evident in three policy areas—national codes and standards, electric powersector policies, and rural electrification poli-cies. But that influence has so far been modest,and additional policy areas could be addressed.

8. The contribution of GEF-financed projects tosocial benefits and poverty alleviation needs tobe assessed. The social and development bene-fits of GEF projects, especially those that caterto rural energy development needs, need to bebetter documented. An assessment of thesebenefits is key to helping countries improvesustainable development programs. Many proj-ects do promote strong beneficiary participa-tion, but fail to document benefits or impactsoccurring in local communities.

Impacts

Eleven projects in the portfolio were completedas of early 2001. Another 25-30 projects havebeen operational long enough for their impacts tobegin to become evident. The impacts of these35-40 projects have been analyzed by projectapplication (cluster):

Energy-efficient products. GEF-financed projectshave demonstrated important and effectiveapproaches for facilitating and acceleratinggreater demand for and supply of energy-efficientmanufactured products, particularly lights (nearly5 million of which have been installed throughGEF projects), but also refrigerators, motors, andbuilding materials. Some project approaches haveresulted in sustained reductions in the price of theproducts and in highly cost-effective abatementof carbon emissions. Market gains for efficientlights in particular are being sustained and repli-cated.

Grid-connected renewable energy. The GEF hasfacilitated implementation of important regula-tory frameworks supportive of grid-connectedrenewable energy, but has done so in only twocountries so far (Mauritius and Sri Lanka). Otherimpacts have been limited to one-time technologydemonstrations, research, and increased skillsand awareness. The GEF's largest market impacthas been in India, where direct and indirect influ-ences on private sector power project develop-ment and financing have resulted in nearly 1000MW of new renewable-energy generatingcapacity.

Off-grid solar PV. Rural applications of solarphotovoltaics (PV) constitute the largest singlegroup of projects in the climate change portfolio.However, most of these projects have little or noimplementation experience yet. Of roughly600,000 solar home systems expected fromapproved projects, only 18,000 have beeninstalled thus far. Several business models andschemes to extend credit to businesses andconsumers show promise of being sustainableand further replicated. Awareness of solar homesystems is increasing in several countries andtechnical standards are improving. The impact of

ix Results from the GEF Climate Change Program

projects on rural electrification planning andpolicies has been small, but more recent projectsare emphasizing these issues.

Energy service companies. Viable energy servicecompanies (ESCOs) have been established in twocountries (Tunisia and China) as a result of GEFprojects. Financing for existing ESCOs has beenfacilitated in the Hungary project. Other projectswith ESCO components provide technical assis-tance, training, and audits, but are not expectedto lead to full-service (i.e., “performance-contracting”) ESCOs. With the exceptions ofChina and Hungary, no other countries havedocumented replication or energy-savingsimpacts of ESCOs from GEF projects. Prospectsfor the emergence and sustainability of ESCOsappear strongest as a result of the China project,which is also pioneering the resolution of keypolicy and legal issues to allow growth of theESCO industry. Several GEF projects appear tobe increasing awareness and acceptance ofESCOs among industrial clients, policy-makers,and financiers.

Other applications. Projects for coal-bedmethane, gas-pipeline leakage repair, fuelswitching, decentralized wind power, utilitydemand-side management, village-scale mini-grids, and district heating-efficiency improve-ments have all shown significant impacts andcould all be replicated on larger scales and usedas models for ongoing and future GEF projects.So far, three projects—coal-bed methane inChina, decentralized wind in Mauritania, anddemand-side management in Thailand—arebeing replicated.

Sustainability

The Climate Change Program Study found thatprojects have promoted sustainability by:

• Demonstrating models for sustainable busi-nesses, both public and private

• Promoting “market transformation”approaches that expand markets for energy-efficient products

• Negotiating voluntary agreements with theprivate sector to take energy-inefficient prod-ucts off the market

• Creating new legal frameworks and precedentsfor energy service companies.

The study also revealed factors that can nega-tively influence sustainability:

• Privatization of power utilities without consid-eration of the future existence and role ofdemand-side management units

• Short-term power-purchase tariffs for grid-based renewable energy that hold such tariffshostage to fluctuations in conventional fuelprices

• Dependence of consumer finance and ruralbusinesses on the resources of GEF projectswithout creating viable and sustainablecommercial sources

• Project implementation arrangements that fallinto an “equipment installation and demonstra-tion” role and fail to demonstrate businessmodels.

Scope and Approach of Study 1

The overall objective of the Climate ChangeProgram Study was to assess the achievements ofGEF-financed climate change operationalprograms. To assess those achievements, thestudy attempted to answer four key questions:

1. Collectively, are the program activities both relevant to client country needs (as articulatedby national communications or other nationalstrategies/plans) and effective in meetingglobal environmental objectives?

2. What are the most significant implementationissues and lessons? Are these issues andlessons country-specific?

3. What are the impacts/likely impacts of GEFprojects?

4. What are the primary factors influencingsustainability and replication prospects ofclean energy alternatives promoted by theGEF—within projects, within countries,regionally, and internationally?

In answering these questions, the study consid-ered the applications and markets targeted by theGEF portfolio of projects, the results of reviewsof individual groups of projects (cluster reviews),and the results of reviews of portfolios in selectedcountries.

Portfolio Coverage

The study assessed the relevance of the port-folio’s technology applications and targetmarkets in meeting global environmental objec-tives and supporting client countries’ develop-ment priorities. Are GEF programs targeting the

1. Scope and Approach of Study

most effective technologies? Are technologyapplications really “win-win?” Do key barriers toadoption of technology applications remain unad-dressed in particular markets? The analysis wasconducted as a desk study, supplemented, asappropriate, with material from the other compo-nents of the program study.

Cluster Reviews

Work on GEF climate program indicatorssuggested that clusters of projects with similartechnology applications or approaches to barrierremoval can be effectively and collectivelyassessed with one set of indicators. Clusteringfacilitates aggregation of project-level results tothe program level and highlights program-levellessons about relevance, sustainability, replica-tion, and impact. Four new reviews of projectclusters were undertaken. A review of a fifthcluster, off-grid solar PV, was completed in May2000. The four clusters covered under thereviews are as follows:

• Grid-connected wind, biomass, and small-hydro power (14 projects)

• Solar thermal power plans (4 projects)

• Energy service company models and perform-ance (10 projects)

• Energy-efficient product manufacturing andmarkets—lights and boilers (8 projects).

Many of the projects in three of these clustershave significant amounts of implementationexperience and evaluation information, and manyof them contain lessons relevant to recently

approved projects, including pipeline projects.The solar thermal cluster review can aid strategicconsiderations of Operational Program #7 andmay reveal important indirect influences onrenewable energy technology markets. The fourclusters, together with the projects in the off-gridsolar PV cluster, account for 59 projects—nearlytwo-thirds of the GEF projects being imple-mented.

In keeping with the study’s objectives, the clusterreviews addressed the following topics:

(a) Broad Trends. With respect to what national and international policy, investment, tech-nology, business development, and cost trends should projects be evaluated? What issues do the relevant trends suggest are most deserving of further attention or of intervention?

(b) GEF Program Results. What are thespecific results being achieved under proj-ects, and how do these results aggregate to the program level, making use of the seven program indicators?

(c) Influence of GEF Projects on Trends. Are the GEF project results, or the very process ofdeveloping those projects, influencing policy,investment, technology, business develop-ment, and cost trends? Are the lessons ofthose projects being utilized in projects notfinanced by the GEF?

The solar thermal cluster review was conductedas a technology assessment/strategic reviewwithout country visits. That review consideredthe role and influence of the GEF in promotingthese technologies in a primarily internationalcontext. None of the solar thermal projects havebeen implemented to date.

Country Reviews

Country-level programmatic approaches have notbeen implemented in practice in GEF clientcountries. However, China, India,3 and Mexicohave two or more GEF projects. Reviews of howthose projects, collectively, are addressing eachof the three countries’ development goals andglobal environment objectives are proving usefulin establishing principles and frameworks for thedevelopment and implementation of country-wide GEF-financed programs.

Each review attempts to answer the four questionsnoted above on the basis of project reports andevaluations, cluster reviews with relevance to thegiven country, and field information.

Program Indicators

The GEF has developed seven project-perform-ance indicators for the climate change operationalprograms.4 The Climate Change Program Studyhas attempted to test the application and appro-priateness of these indicators in assessing thesuccess of (a) the entire GEF project portfolio,(b) individual clusters of projects, and (c)country-wide programs.

The seven performance indicators are

1. Energy production or savings and installedcapacities

2. Technology cost trends

3. Businesses and supporting services develop-ment

4. Financing availability and mechanisms

5. Policy development

2 Results from the GEF Climate Change Program

3 The review of the India portfolio could not be carried out due to the earthquake in Gujarat, a province in India, duringearly 2001.

4 See Measuring Results from Climate Change Programs: Performance Indicators for GEF, GEF Monitoring andEvaluation Working Paper 4, September 2000 (Washington, DC: GEF).

6. Awareness and understanding of technologies

7. Energy-consumption and fuel-use patterns andshares.

The data for these indicators have come frompublished literature, project documentation andevaluation reports, phone and e-mail communica-tions and interviews with project personnel andother stakeholders, and country visits bymembers of the study team or by local or interna-tional consultants.

Scope and Approach of Study 3

The strategy of GEF-financed climate changeprograms is to “support sustainable measures thatminimize climate change damage by reducing therisk, or the adverse effects of climate change.”5

The strategy is implemented through four opera-tional programs, enabling activities, and someshort-term measures projects.

Operational programs support measures designedto achieve long-term impacts:

(a) Operation Program #5, Removal of Barriers to Energy Efficiency and EnergyConservation, seeks to remove barriers tolarge-scale application, implementation, anddissemination of least-economic-cost, energy-efficient technologies.

(b) Operational Program #6, Promoting the Adoption of Renewable Energy by RemovingBarriers and Reducing Implementation Costs,is focused on (1) removing barriers tocommercial or near-commercial renewableenergy technologies and (2) reducing anyadditional implementation costs for renewableenergy technologies that result from a lack ofpractical experience, initially low-volumemarkets, or scattered applications, so thateconomically profitable “win-win” transac-tions and activities will increase the deploy-ment of renewable energy technologies.

(c) Operational Program #7, Reducing the Long-term Costs of Low Greenhouse Gas-EmittingEnergy Technologies, aims to reduce green-house gas emissions from anthropogenicsources by increasing the market share of low

greenhouse gas-emitting technologies thathave not yet become widespread, least-costalternatives in recipient countries for specifiedapplications.

(d) Operational Program #11, Promoting Environmentally Sustainable Transport,supports a long-term shift toward low-emis-sion forms of transport. Program #11 is a newprogram, introduced in 1999, and therefore isnot examined by the Climate ChangeProgram Study.

Enabling activities provide support for planningand endogenous capacity building, includinginstitutional strengthening, training, research, andeducation, that will facilitate implementation ofeffective climate change response measures inaccordance with the United Nations FrameworkConvention on Climate Change.

Short-term measures are projects that reducegreenhouse gases in the short term. Such projectsmay not be part of an operational program. Theyare funded if they are priorities of a country, cost-effective in the short term, and likely to succeed.

Approved GEF Projects

As of June 30, 2000, the Global EnvironmentFacility had approved 272 climate change-relatedprojects. The total GEF allocation to those proj-ects amounts to $1.08 billion, and the total costof those projects is $7.1 billion. The portfolio ismade up of full-size projects, medium-sized proj-ects, and enabling activities, as shown in Table 1.

The GEF Climate Change Portfolio 5

2. The GEF Climate Change Portfolio

5 GEF Operational Strategy, pp. 31.

Short-term Enabling OP #5 OP #6 OP #7 OP #11 TotalMeasures Activities

Number of Projects 25 142 40 52 10 3 272

GEF Allocation 137.25 82.45 250.69 394.64 200.29 15.22 1,080.56(US$ million)

Total Project Cost 628.31 88.61 1,727.18 3,948.26 684.08 25.55 7,101.97

Agency Number of GEF Allocation Total Project CostProjects (US$ millions) (US$ millions)

UNDP 174 298.98 675.91

UNDP/UNEP 1 2.16 3.26

UNEP 29 20.7 25.21

World Bank 68 758.53 6,397.6

Total 272 1,080.56 7,101.97

Type of Project Number of GEF Allocation Total Project CostProjects (US$ millions) (US$ millions)

Full-size Projects 108 982.43 6,967.99

Medium-size Projects 22 15.68 45.36

Enabling Activities 142 82.45 88.61

Total 272 1,080.56 7,101.97


Table 1. GEF Portfolio (approved for work program entry as of June 30, 2000)

Table 2. GEF Climate Change Portfolio Across Implementing Agencies(approved for work program entry as of June 30, 2000)

Table 3. Operational Programs in the GEF Climate Change Portfolio

(approved for work program entry as of June 30, 2000)

In terms of GEF allocation, regular projectsaccount for about 90 percent of the portfolio. Theportfolio distribution across the ImplementingAgencies is shown in Table 2. While the UNDP

accounts for the largest share of projects (64%),the World Bank accounts for the largest share ofthe GEF allocation (70%).

Support for operational programs is indicated inTable 3. Among those programs, Operational

Program #6 has the largest number of projectsand the largest allocation of GEF resources.

The GEF Climate Change Portfolio 7

Completed Projects and Projects in Progress

The major focus of the Climate Change ProgramStudy is full-size projects. Medium-sized projectsare relatively new. Enabling activities weresubjected to an extensive review6 and the findingsfrom that review are incorporated into this study.

As of June 30, 2000, 30 climate change-related

projects had been completed. Those projectswere allocated about $150 million of GEFresources. As of that same date, 58 projectsaccounting for about $400 million of GEFresources had been in the implementation stagefor at least a year.

6 Samir Amous, et al., Review of Climate Change Enabling Activities, October 2000 (Washington, DC: GEF).

Results from the GEF Climate Change Program8

countries. In some cases, as in projects to intro-duce CFLs, the technology has been locallyadapted, and manufacturing capacities have beenestablished or given additional support. In othercases, such as rural solar PV, local manufacturersmay produce items such as charge controllers,batteries, and lamps, even if the solar panelscontinue to be imported. Most projects appear tohave enhanced local capacity through training oflocal technicians, development of financing andinstitutional capacity, or support of regulatory orlegal development, all activities that set the stagefor project replication.

Unlike other climate change operationalprograms, which involve a comparatively largenumber of technologies, Operational Program #6(Promoting the Adoption of Renewable Energyby Removing Barriers and ReducingImplementation Costs), emphasizes only a fewtechnologies, primarily home systems for off-grid solar-energy applications. The projects underthis program have demonstrated the viability ofusing renewable energy sources in meeting ruralelectrification objectives. Challenges for theseprojects are (a) addressing issues of affordabilityand sustainability; (b) systematically incorpo-rating in project design linkages between ruralelectrification strategies and rural developmentneeds associated with health, education, water,sanitation, and employment; and (c) documentingincome generation and other social benefitsknown to have resulted from the projects.

This last point is particularly important becausevery little documentation is available on theextent to which GEF-supported rural energy proj-ects serve development objectives such asincreased employment and livelihood, health,sanitation, water access, and literacy.

Overall Findings 9

3. Overall Findings

Relevance of GEF-Financed Projectsto Country Needs and GlobalObjectives

Assessment of the relevance of the GEF projectportfolio to client countries’ needs is hindered bythe lack of data and difficulty of obtaining dataon the needs existing before initiation of the proj-ects and those existing now. To determine theextent to which the portfolio has met needs, theClimate Change Program Study relied on reviewsof country-wide GEF programs in China andMexico.

Portfolio coverage has evolved and expanded butnot necessarily in a directed, strategic manner.After the GEF was restructured and became afinancial mechanism of the UNFCCC, thefacility’s operational strategy and programs weredeveloped to respond to guidance from theconvention. As a result, the scope of appropriateactivities expanded. Because the GEF rarelyrejects sensible proposals for renewable energyor energy savings projects, the GEF project port-folio reflects diverse technologies, applications,and sectors. Making a judgment about the meritsof proposals that were never presented to theGEF because of decisions made by governmentsor GEF implementing agencies is, of course,difficult.

The GEF project portfolio addresses two keypriorities of developing countries: technologytransfer and capacity building. Most climatechange projects are directed, at least in part,toward increasing the understanding, awareness,diffusion, and adaptation of environmentallyfriendly technology and toward promotingdomestic manufacturing appropriate to client


Under Operational Program #7 (Reducing theLong-term Costs of Low Greenhouse Gas-Emitting Energy Technologies), four solarthermal power plant projects are proceeding inaccordance with the program’s original philos-ophy—that sequential support of multiple proj-ects would reduce costs through economies ofscale and learning by doing. In practice, however,the projects may be undertaken simultaneously,rather than sequentially. With the exception ofstationary fuel cells, most technologies envi-sioned under the program are represented by atleast one project in progress or in the pipeline.

Significant Implementation Issuesand Lessons

Eight significant lessons emerging from theClimate Change Program Study are highlightedhere. Although some of these lessons arecountry-specific, most are applicable to allprograms in the GEF program portfolio.

Lesson 1: Lessons and good practices areemerging but need to be better incorporatedinto project designs to promote learning.

Lessons from completed projects can inform thedesign of other GEF projects, as well as otherinitiatives external to the GEF. In general, theavailable lessons from early projects are justemerging as a body of knowledge. A few recentprojects have built on the lessons from earlierprojects: the Global Efficient Lighting Initiativeemployed lessons from earlier efficient lightingprojects in the GEF portfolio; the China TVEPhase II Project built on the lessons of the ChinaTVE Phase I Project; and a recent demand-sidemanagement (DSM) project in Vietnam hasdrawn from the DSM project in Thailand. Off-grid solar PV projects have begun to benefit fromsome of the early solar PV projects in the port-folio, particularly since completion of the solarPV portfolio review by the GEF Secretariat in2000. Annual project implementation reviews doprovide one forum for learning, even if the infor-mation available is insufficient to provide in-depth understanding of project performance.

The opportunity and need for the GEF to facili-

tate learning among participants in the GEF’sfour solar thermal projects is considerable. Theprojects (three approved by the GEF Council inIndia, Morocco, and Mexico, and one approvedfor project development financing in Egypt)account for about $150 million of GEF resourcesand are expected to install 137 MW of solarcomponents. The cluster review of those projectssuggests that the GEF would benefit from muchgreater efforts to disseminate lessons learned byparticipants in any one project to participants inthe other projects.

Lesson 2: Indirect influences and impacts arekey GEF results.

Many GEF-financed projects have indirectlyinfluenced investment decisions and policyactions, sometimes even before any hardware isinstalled through the project. These influencesmay not be explicit objectives of projects, butnonetheless represent key GEF results. In asurprising number of cases, indirect influencesand impacts have occurred during early projectpreparation activities. A variety of stakeholders,including policy-makers, financial institutions,firms, utilities, investors, and NGO, have becomemore knowledgeable and confident about tech-nologies as a result of the GEF’s commitment offunds, along with the dialogues, training efforts,priority-setting exercises, and institutional coor-dination that typically occur during projectpreparation and implementation. Increasedawareness and confidence have in turn influencedinvestment decisions or policy actions in parallelwith the GEF project. Some examples:

The Mauritius Bagasse Power Project influencedseveral sugar mills to make bagasse power plantinvestments on their own, independent of theproject. The project also prompted the govern-ment to create stronger regulatory frameworksfor independent power producers using bagasse.These indirect impacts occurred even though ademonstration power plant planned for theproject was never built.

The positive experience of the Mexican utility

Overall Findings 11

CFE with the Mexico Efficient Lighting Project(1991-97) led it to run an ambitious follow-onprogram. From 1998 to 2000, the new programsold 4.8 million CFLs all over Mexico. With theexperience gained from the GEF project, the newprogram was able to run without subsidies, withreduced administrative costs, and with shorterrepayment terms. CFE staff have indicated thattheir experience with the GEF project played animportant role in the design of subsequent nation-wide energy saving programs.

The business climate for rural PV sales andsupporting infrastructure created in part throughthe Sri Lanka Energy Services Delivery Projectconvinced Shell International Renewables toenter the Sri Lanka PV market (by purchasing anexisting dealer). In addition, the project indirectlyinfluenced a decision by a nationwide departmentstore in Sri Lanka to enter the solar PV business.

The Costa Rica Wind Power Project helpedsupport the emergence of a significant privatesector wind power industry due to the govern-ment’s decision to engage in the power supplybusiness. Although the planned government-owned 20 MW demonstration wind farm has notyet been constructed, the GEF-supported projectdid renew the government’s dialogue with privatedevelopers and helped establish a regulatoryframework that resulted in more than 30 MW ofoperational privately financed wind farms.

Soon after the Poland Coal-to-Gas Project wasinitiated, many of Poland’s environmental invest-ment funds began to fund coal-to-gas conver-sions. In fact, a large coal-to-gas industryemerged. Many boiler conversions took placewith government and private financing, longbefore any GEF-supported installations occurred.The project is credited with catalyzing thesebroader trends.

The China Efficient Refrigerators Project devel-oped and helped enact new national refrigeratorstandards during the project development phase.Chinese refrigerator manufacturers, influencedby project preparations, began to expect a much

larger market for efficient refrigerators andstarted to develop high-efficiency prototypes andproduction models even before the projectstarted.

Other countries in Asia are launching projects toemulate the China Efficient Lighting Project,even before the project is implemented. Togetherwith an earlier UNDP project in which the GEFand other donors collaborated, the efficientlighting project is increasing the countries’ expe-rience with and confidence in efficient lighting.

Preparation activities, studies, dialogues, andGEF commitment associated with the MexicoRenewable Energy in Agriculture Project,together with enhanced capacities fosteredthrough GEF-supported enabling activities,assisted the Mexican government in redesigningits rural development plans to emphasize renew-able energy rather than costly grid extensions.The approach, first tried in a few municipalities,is being implemented in as many as 28 states,potentially affecting more than half a millionfarms.

The approval of the Malawi Renewable EnergyProject encouraged the government to paygreater attention to the success of prior pilotmicrocredit and community banking approaches,serving primarily women, and to incorporatethose approaches into its energy and sustainabledevelopment program, even before the GEFproject started.

Solar thermal power plant projects approved bythe GEF for India, Morocco, Mexico, and Egypthave lent credibility to the technology, createdfresh interest in applications of that technology,and positively affected the development of otherprojects in both developed and developing coun-tries. GEF support has helped put this technologyon the agenda of other organizations and givencredence to or helped expand ongoing research,development, and commercialization programs inseveral countries.

Lesson 3: Replication of projects is not well


planned or monitored.

A few projects have been replicated. A goodexample is the Mexico Efficient Lighting Project,which has been replicated by the national utilityCFE on a larger scale. Another example is theChina Coal-bed Methane Project, which hasbeen replicated by the newly established ChinaCoal-bed Methane Corporation. Replication canoccur within a project, as happened in Thailand.The Thailand DSM Project was expanded in1997 to include a DSM component for theBangkok distribution utility, MEA, under aWorld Bank-supported power distributionproject. Similarly, the China EfficientRefrigerators Project spawned parallel effortsduring early project stages that could be consid-ered replication. And the Hungary EnergyEfficiency Co-financing Program has promotedfinancing of energy efficiency investments byHungarian commercial banks, another form ofreplication.

Replication of a successful GEF approach led toa subsequent GEF project in one case. During theimplementation of the Poland Efficient LightingProject, the IFC received requests from othercountries wishing to host a similar CFL promo-tion program. These requests prompted IFC todesign the GEF-supported Efficient LightingInitiative, now being implemented in seven coun-tries.

In general, projects in the GEF project portfolioare too new to gauge how well their replication isproviding global environmental benefits.Replication has tended to happen unpredictablyrather than through specific planned activitieswithin projects, and has tended to be reportedanecdotally. Many more instances of replicationmay already have occurred but remain undocu-mented because project monitoring has notfocused on replication.

Lesson 4: Project risk assessment andmanagement need to be strengthened.

Energy-efficiency projects in Peru, Tunisia, andChile illustrate the need to recognize, in projectdesign and implementation, the state of energy-

efficiency markets, macroeconomic conditions,and education of users. The Peru projectsupported the Centro de Conservacion de Energiain establishing energy service contracts forenergy-efficiency investments within the textileand steel industries. But no agreements werecompleted, in part because insufficient effortswere made to help client companies understandthe ESCO concept. The economic recession andchanges in government made energy saving proj-ects a lower priority in Peru. Finally, companiesunexpectedly failed to meet the financial guaran-tees demanded by banks as part of a financingmechanism under the project.

Unfamiliarity with performance contracting and adistrust of consultants among industrial firms inTunisia have thwarted attempts by a GEF-supported energy service company to engage inenergy performance contracting. The localTunisian ESCO has been successful, however, inmarketing its services under contractual arrange-ments that do not rely on performance contracts.And in Chile, electric power restructuring led to adecrease in the bulk power tariffs imposed oncopper mines. This decrease, along with higherprofits from increasing world prices for copper,left these mines with less interest in and incentiveto invest in energy efficiency. Planned invest-ments under the Chile project never were made.

Selection of suitable consumer credit schemeshas greatly affected the progress of projectsinvolving solar home systems. The Sri LankaEnergy Services Delivery Project started withdealer-supplied credit but soon switched tomicrofinancing, which appeared more viable, inpart because of the long-established history andtradition of microfinance institutions in thatcountry. Implementation of the Indonesia SolarHome Systems Project ceased during thatcountry’s macroeconomic crisis, in part becausedealers were unable to obtain commercial financeto support the dealer-supplied credit modelemployed in that project. In solar home systemsprojects in Sri Lanka and Vietnam, uncertainrural electrification policies have depresseddemand for solar home systems. In Ghana,imported equipment costs are rising due tocurrency depreciation, while political pressure is

Overall Findings 13

reducing fees charged to rural households forsystem use, thus calling into question the prof-itability (and the sustainability) of the project.

Institutional conditions have played major rolesin the progress of grid-connected renewableenergy projects. In Sri Lanka, the tough chal-lenge of allowing third-party, small-hydropowerproducers into a previously monopoly utilitysystem has resulted in compromise powerpurchase frameworks that are not sustainablefrom the private producers’ viewpoint. In China,changing institutional arrangements in the elec-tric power sector due to restructuring have leftprovincial utilities unable or unwilling to embarkon planned investments of 190 MW in new windpower capacity as part of a GEF-supportedproject. Almost all of that investment will becancelled.

In some cases, changes in co-financing orgovernment commitment have hindered projectprogress. In the China biomethanation project,for example, changes in local government leader-ship and lack of promised co-financing fordemonstration projects have delayed implemen-tation by many years. Such changes should betracked carefully in the future to gauge howsignificantly they could affect other projects inthe GEF portfolio.

Designing a project to exactly fit market, macro-economic, and policy conditions is difficult. Butadjusting the design during project implementa-tion can enhance project performance. Even ifthe design reflects conditions at the time ofproject start, flexibility during implementation torespond to changing conditions is important.Given that only a few projects have successfullyadapted to changing conditions during imple-mentation, it will be useful for the GEF toemploy flexible funding mechanisms such asadaptable program loans.

Lesson 5: Transfer of technological know-howis more difficult than project proponentsanticipate.

Two China projects for efficient boilers and effi-

cient refrigerators provide direct support tomanufacturers for acquisition of technologicalknow-how. In both cases, this acquisition isproving more difficult than originally expected,suggesting that attempts in other GEF projects totransfer technological know-how directly todomestic manufacturers may prove difficult. Theefficient boilers project had problems with a firstround of technology license acquisition becauseforeign manufacturers wanted more money thanthe project had allocated and because foreigntechnology was not directly applicable to China’sneed to burn raw coal. The project did acquireone license for a new technology package for oneChinese manufacturer by allocating that manu-facturer a larger share of project funds, but settledfor acquisition of lesser improvements to existingboiler designs and of product design tools for theremaining eight manufacturers. In the efficientrefrigerators project, planned visits of Chinesemanufacturers to foreign manufacturers wererefused by the foreign manufacturers because ofmarket competition concerns. Instead, Chinesemanufacturers must rely on study tours to foreignacademic and research institutions, which do notadequately convey the technological andcommercial know-how that Chinese manufac-turers want.

Lesson 6: Long-term programmaticapproaches require sufficient GEF “credi-bility” and experience in a country.

The China country review highlights the chal-lenges of programmatic assistance frameworksand the need for the GEF to possess sufficientcredibility in its recipient countries. Two suchframeworks have been under development inChina, one for energy efficiency and one forrenewable energy. However, the review foundthat even as late as 1996, the credibility of theGEF in China was relatively low and such frame-works would not have been viable. Only a fewprojects had been approved or put into develop-ment. Now that more projects have been imple-mented, Chinese stakeholders have embraced theprinciples of the GEF’s operational programs,and the GEF has gained credibility among offi-

cials and industry. The GEF and China haverecently been able to agree on development oflong-term programmatic approaches to energyefficiency and renewable energy under develop-ment by the UNDP and the World Bank.

Lesson 7: The GEF’s potential for influencingpolicy needs to be better utilized.

GEF projects have influenced policy develop-ment in three areas—national codes and stan-dards, electric-power-sector policies, and ruralelectrification policies. Although generallymodest, project impacts on policy have beensignificant in a few cases, suggesting that proj-ects’ potential to facilitate appropriate policieshas been underutilized. Projects have success-fully supported codes and standards for efficientlights in Mexico, efficient refrigerators in Chinaand Thailand, and solar home systems inZimbabwe, Sri Lanka, and Indonesia. The GEFhas proven quite capable of facilitating importantregulatory frameworks supportive of grid-connected renewable energy in two countries—Mauritius and Sri Lanka. And rural electrificationpolicies and planning have been influenced by atleast two projects in Argentina and Sri Lanka.When asked to identify the most importantimpacts of existing and new GEF projects inChina, a Chinese government official rankedhighest the projects’ influence on policy.

Lesson 8: The contribution of GEF-financedprojects to social benefits and poverty allevia-tion needs to be assessed.

GEF projects, especially those that cater to ruralenergy development needs (particularly off-gridrenewable energy projects) provide social bene-fits for participants, but those benefits need to bedocumented. More than three-quarters of GEF-supported off-grid projects are implemented

through multi-stakeholder steering or advisorycommittees made up of representatives of theprivate sector, NGOs, and consumer groups. Butthese stakeholders are generally not encouragedor required to report or document social anddevelopment impacts.

The extent to which GEF projects have benefitedcommunities by increasing incomes and employ-ment and by expanding social services needs tobe assessed. As projects mature, efforts to userenewable energy are expected to be integratedwith redefined sustainable development andpoverty alleviation programs and with new tech-nology delivery and financing models, includingcommunity-based enterprises and microfinance.Assessment and documentation of social anddevelopment benefits from renewable energy areimportant for promoting the incorporation ofrenewable energy into sustainable developmentprograms.

Mexico and Malawi are among the countries thatare redefining their sustainable developmentprograms. In Mexico, the government’sredesigned rural development plan reflects aswitch from grid-connected rural electrificationto solar- and wind-powered systems. In Malawi,the government has integrated microcredit andcommunity banking approaches into its energyand sustainable development program. Otherexamples of rural “productive use” approaches inthe GEF portfolio that could affect sustainabledevelopment programs by documenting socialbenefits include the energy and water sectorreform project in Cape Verde, which extendswind power and solar PV to community-basedelectricity cooperatives for street lighting andwater pumps, and a GEF project in Bolivia thatestablished a revolving fund to support smallenterprises in 23 municipalities.


Project Implementing Agency Year Approved by GEF Year Completed

Mexico Efficient Lighting World Bank 1991 1997

Thailand DSM World Bank 1991 2000

Poland Efficient Lighting IFC 1994 1998

China Efficient Boilers World Bank 1996

China Efficient Refrigerators UNDP 1998

Annual Project Performance Reports, countryvisits, cluster reviews, agency reports, andinformal communications have documented theimpacts of 32 projects in operational programs#5, #6, and #7. In addition, the impacts of threeenergy-related, short-term response measureshave been documented. Of these 35 total proj-ects, 11 are formally completed. This sectionsummarizes the significant impacts of projects infour thematic clusters and notes the impacts ofother projects outside these four clusters. Arecent working paper suggested that impactsshould be organized by cluster and discussedwith respect to seven performance indicators.7

The discussion below follows these suggestions.

Energy-Efficient Products Cluster

Summary: GEF-financed projects have demon-strated important and effective approaches forfacilitating and accelerating greater demand forand supply of energy-efficient manufacturedproducts, particularly lighting, but also refrigera-

tors, motors, and building materials (see tablebelow). The benefits from almost 5 million effi-cient lights installed through GEF projects arebeing sustained and replicated on larger scales.Some project approaches have resulted insustained reductions in the price of the productsand in highly cost-effective abatement of carbonemissions. Market gains for efficient lights inparticular are being sustained and replicated.

Energy production or savings and installedcapacities. Three projects in Thailand, Mexico,and Poland have resulted in installation of morethan 4.6 million compact fluorescent lamps(CFLs) and electricity savings of 3,400 GWh(equivalent to several months’ output from a1,000 MW coal or oil power plant). Other energyconsumption reductions were achieved throughindustrial, commercial, and residential energy-efficiency improvements in the Thailand project.One of the most notable achievements of thatproject was the compete transformation of thefluorescent-light market, representing 20 million

Findings from Cluster Reviews 15

4. Findings from Cluster Reviews

7 See Measuring Results from Climate Change Programs: Performance Indicators for GEF, GEF Monitoring andEvaluation Working Paper 4, September 2000 (Washington, DC: GEF).

Energy-Efficient Products Cluster

annual sales, in which virtually all sales of less-efficient T-12 lights were replaced with sales ofT-8 lights that are 10 percent more efficient.

Costs per technology unit or measure installed.The most visible price-reduction effects of theGEF portfolio have occurred in this cluster. Threecompleted projects clearly decreased prices of thetechnologies they targeted. The Poland projectresulted in a sustainable price decrease for CFLsof at least 35 percent. In fact, one of the project’skey impacts was the lowering of CFL prices. InThailand, sales of low-price CFLs increased inpart because of the widespread publicitycampaign promoting the benefits of CFLs sold at“7-11” convenience stores nationwide, andoffered at lower prices due to bulk purchases bythe national electric utility. Bulk procurement inthe Mexico project, coupled with utility-providedsubsidies, reduced consumer prices to $5-8, frompre-project prices of up to $25. Since the projectwas completed, average CFL prices have furtherdeclined, by up to 30 percent, and the project iscredited with accelerating price reductions thatwould have happened more slowly otherwise.

Business and supporting services development.Supporting institutions for energy efficiency havebeen strengthened through several projects. Aspart of the Thailand DSM Project, the nationalelectric utility (EGAT) created a demand-sidemanagement office. This office has successfullynegotiated voluntary T-12 to T-8 lampchangeovers, conducted bulk procurement anddistribution of CFLs through convenience storesnationwide, led campaigns to promote publicawareness of energy efficiency and conservation,promoted awareness of appliance energy labels,and disseminated classroom educational mate-rials. The experience that the Mexican utilityCFE gained during the Mexico project hasallowed it to proceed with additional DSMprograms without GEF support, including thesale of an additional 4 million CFLs. The ChinaEfficient Refrigerators Project resulted in theenactment of new energy-efficiency standards forrefrigerators. The China Industrial Boilers

Project has provided nine Chinese boiler manu-facturers with technology licenses from foreignsuppliers for upgraded or new industrial coal-fired boiler technologies that are more efficient.

Financing availability and mechanisms. ThePoland project established an innovative subsidymechanism whereby an overall GEF subsidy of$2.6 million leveraged a total CFL retail pricereduction worth $7.2 million through competi-tively solicited manufacturer subsidies and retailmarkup effects. The Mexico project introduced toMexico two new mechanisms for consumerfinancing of CFLs: (a) pay-on-the-bill financing,whereby the price of the lamp is deducted ininstallments off of a customer’s electricity bill,and (b) a similar procedure managed byemployers, in which an employee’s investment inCFLs is made through paycheck deductions.Both of these financing approaches continue tobe used after the completion of the project.

Policy development. Policy development in atleast three projects has focused on national codesand standards for energy-efficient equipment. Inthe Mexico project, the development of nationalCFL quality standards began in the early stagesof project development. The standards were thenlaunched and enforced during the project. Anincreasing number of CFL models are being soldand labeled according to these standards. In theThailand project, EGAT’s DSM Office workedwith the Thai Consumer Protection Agency tomake energy-efficiency labeling mandatory onsingle-door refrigerators. In the China project,national energy-efficiency standards for refrigera-tors were enacted.

Awareness and understanding of technologies.The Poland project has produced the most data ofany project8 on changes in awareness and under-standing of technologies, in this case of CFLs.Before the project began, only one in 10 Polishhouseholds owned at least one CFL. Thisincreased to one in 3 households a year after theprogram. Also, about 97 percent of the CFLpurchasers surveyed intended to replace their


8 A comprehensive monitoring and evaluation program was designed and effectively implemented for the Poland EfficientLighting Project.


India Renewable Resources World Bank 1991

India Small Hydel UNDP 1991

Mauritius Bagasse World Bank 1991 1997Cogeneration

Philippines Geothermal Power World Bank 1991 2000

Brazil Biomass Gasification I UNDP 1992 1996Project

Costa Rica Wind Power World Bank 1992

India Biomethanation UNDP 1994

Sri Lanka Energy Services World Bank 1996

Brazil Biomass Gasification UNDP 1996Project II

China Renewable Energy UNDP 1997Capacity Building

existing CFLs with new CFLs after they burn out.After the project, a larger number and widervariety of stores (from small shops to supermar-kets) began to sell CFLs. Stores also began tocarry a wider variety of CFL models. Print mediacoverage of CFLs increased and shifted fromdescribing CFLs to explaining where and how tobest use them. The Ministry of Education wrotethat “it is apparent that as a result of the projectlarge numbers of students and teachers havegained useful insight into the use of energy andits impact on the environment.” The Thailandproject conducted a major public awarenesscampaign that made 87 percent of Thais aware ofenergy-efficiency issues, particularly the advan-tages of energy-efficient lighting, refrigerators,and air conditioners.

Energy consumption, fuel-use patterns, andimpacts on end users. Several energy-efficiencyprojects affected energy consumption patterns, asevidenced by changes in market shares associatedwith those projects. The Poland project increasedthe percent of households with CFLs from 11.5percent to 19.6 percent. The Thailand project alsohad significant impacts on market shares: An airconditioner program increased the market shareof energy-efficient air conditioners from 19

percent in 1996 to 38 percent in 1998, and arefrigerator program transformed the single-doorrefrigerator market, increasing the market shareof the most efficient units from 12 percent in1995 to 96 percent in 1998. One of the mostnotable achievements of that project was thecompete transformation of the fluorescent-lightmarket, representing 20 million in annual sales,in which virtually all sales of less-efficient T-12lights were replaced with sales of T-8 lights thatare 10 percent more efficient.

Grid-Connected Renewable EnergyCluster

Summary: The GEF has facilitated implementa-tion of important regulatory frameworkssupportive of grid-connected renewable energy,but has done so in only two countries so far(Mauritius and Sri Lanka). Other impacts havebeen limited to one-time technology demonstra-tions, research, and increased skills and aware-ness. The GEF’s largest market impact has beenin India, where direct and indirect influences onprivate sector power project development andfinancing have resulted in nearly 1000 MW ofnew renewable energy generating capacity.


Grid-Connected Renewable Energy Cluster

Energy production or savings and installedcapacities. Directly installed grid-connectedrenewable energy capacity from two projectstotals 110 MW (86 MW in India and 24 MW inSri Lanka). Indirectly, at least another 840 MWof capacity has been influenced by GEF support.The India Renewable Resources Project assistedthe India Renewable Energy DevelopmentAgency (IREDA) to promote and finance morethan 360 MW of wind projects and 65 MW ofmini-hydro projects by the private sector. TheMauritius project indirectly influenced almost adoubling of electricity generated from bagasse inthat country, with the addition of an estimated 3-5 MW of new bagasse generation capacity. TheCosta Rica project indirectly helped to supportmore than 30 MW of privately financed and oper-ated wind farms. The Philippines projectexpanded by 390 MW the capacity of an existinggeothermal facility and transmission system. TheIndia Biomethanation Project has so far resultedin six demonstration installations, including three180-kW biogas engines and four 450-kW dual-fuel engines for power generation from biogasfrom two sewage treatment plants. Other subpro-jects nearing completion include a 1-MW powerplant that uses biogas from a sugar factory.

Business and supporting services development.GEF projects have fostered business developmentin Mauritius, Sri Lanka, Costa Rica, and India byfacilitating conditions for independent powerproducers in those countries. The India SmallHydel Project has resulted in supporting servicesfor small hydro business development. Throughcapacity-building activities, more than 50 offi-cials have been educated about the planning,design, construction, management, and mainte-nance of small hydro power. Local ownership andmanagement models are being tested at three ofthe demonstration sites. An “Alternate HydroEnergy Center” has strengthened its capability totest equipment and train stakeholders, and a localeducational establishment now offers a postgrad-uate program on alternate hydro energy. Thirteenstates have issued guidelines for engaging theprivate sector in the commercial installation ofsmall hydro plants. Renewable energy businessassociations have been fostered in Sri Lanka and

China, and the China Renewable Energy CapacityBuilding Project created the China RenewableEnergy Industry Association, which hassupported new activities by its members toexpand their business and link with foreignexpertise.

Financing availability and mechanisms. Projectsin Costa Rica, Sri Lanka, and India (small hydro,biomethanation, and renewable resources) haveprovided direct financing for power projectdevelopers and for demonstration installations.But only one project has so far facilitated a long-term financing mechanism for grid-based power:The India Renewable Resources Project strength-ened the capabilities of the India RenewableEnergy Development Agency (IREDA) topromote and finance private sector investments.As a result, more than 360 MW of wind projectsand 65 MW of mini-hydro projects have beenfinanced through IREDA. The project also helpedto raise awareness among investors and bankinginstitutions of the viability of wind power tech-nology and helped to lobby for lower importtariffs for wind systems. During the 1990s, manyfinancial institutions decided to offer financing forwind farms in India, a key project goal. Otherimpacts on financing availability of other projectshave not been documented.

Policy development. Electric-power-sector poli-cies supportive of renewable energy have beeninfluenced by the GEF in Sri Lanka andMauritius. The Sri Lanka project has developedregulatory frameworks for independent powerproducers (IPPs), including standardized “non-negotiable” power-purchase tariffs and contracts(PPAs). This project encouraged the nationalutility to adopt IPP frameworks and agree toPPAs, which together with demonstrations ofprior mini-hydro installations and new incentivesfor developers (such as import duty waivers andincome tax concessions), spurred the market.Likewise, the Mauritius project led to the estab-lishment of a framework for IPP development. Aproject evaluation states that “the project’s majoraccomplishment was progress in helping to estab-lish an institutional and regulatory framework forprivate power generation in Mauritius and the



India Renewable Resources World Bank 1991

Zimbabwe Solar Home UNDP 1991 1997Systems

Bangladesh Grameen Shakti IFC 1994(SME)

Dominican Republic Soluz IFC 1994(SME)

Vietnam SELCO (SME) IFC 1994

Sri Lanka Energy Services World Bank 1996Delivery

Argentina Renewable World Bank 1997Energy in Rural Markets

Mexico Renewable Energy World Bank 1999in Agriculture

Malawi Renewable Energy UNDP 1999Program

provision of technical studies and trials to supporttechnologies for improved bagasse productionand improved environmental monitoring.”

Awareness and understanding of technologies. Allprojects have fostered greater awareness of grid-connected renewable energy technologies amongpolicy-makers, utilities, private firms, and finan-ciers. The India Biomethanation Project hasincreased awareness of and knowledge aboutbiomethanation technologies in India.Representatives of various technical institutesand government agencies have participated inoverseas study tours to visit biomethanationplants, manufacturers, and experts in the field ofwaste-to-energy. A quarterly newsletter on bioen-ergy is being published. The project has alsoprepared a directory of entities and individualsworking in the field of waste-to-energy and spon-sored conferences and workshops to share experi-ences with biomethanation. In Costa Rica,greater awareness of wind energy applicationshas helped to foster government decisions thatallowed greater private sector investments inwind farms.

Off-Grid Solar PV Cluster

Summary: Rural applications of solar photo-voltaics (PV) constitute the largest single groupof projects in the climate change portfolio, butmost of these projects have little or no implemen-tation experience yet. Of roughly 600,000 solarhome systems expected from approved projects,only 18,000 have been installed thus far. Severalbusiness models and schemes to extend credit tobusinesses and consumers show promise of beingsustainable and further replicated. Awareness ofsolar home systems is increasing in several coun-tries and technical standards are improving. Theimpact of projects on rural electrification plan-ning and policies has been small, but more recentprojects are emphasizing these issues.

Energy production or savings and installedcapacities. About 18,000 individual solar homesystems have been installed through five projectsin Zimbabwe (10,000), Sri Lanka (2,000),Bangladesh (1,500), the Dominican Republic(3,500), and Vietnam (1,000). The India projectsupported village-scale applications of PV, in


Off-Grid Solar PV Cluster


which five PV power plants of 25 kWp eachsupply electricity to about 500 families connectedinto village-scale mini-grids managed and main-tained by a cooperative society. The Mexicoproject has so far resulted in installation of onesolar water-pumping station for agricultural use.

Costs per technology unit or measure installed.Very little data are available on any cost reduc-tions occurring during solar PV projects. Reportsfrom the Zimbabwe project stated that marketprices declined, in part through elimination ofimport duties on imported components. Datafrom other projects indicate current sale pricesfor systems, but do not indicate the changes inthose prices over time. Two projects have influ-enced a reduction in import duties for PV systemcomponents: in Zimbabwe, import duties werereduced from 40 percent to zero and, in SriLanka, duties were reduced from 30 percent to 10percent.

Business and supporting services development. Fivesolar home systems projects have had significantimpacts on business and supporting services. Thetechnical and business capabilities of dealerswere enhanced in Zimbabwe (more than 20dealers), in Sri Lanka (three primary dealers),and in Bangladesh, Vietnam, and the DominicanRepublic (one dealer in each country). TheZimbabwe project expanded the network ofdealers, established PV module standards tocertify and warranty installed systems, and devel-oped equipment certification institutions.Evolving business models in these five projectsserve as examples to spur business development.The Dominican Republic project, for example,helped a dealer to develop a promising fee-for-service business model that targets up to 50percent of the population in the rural communi-ties it serves and charges $10 to $20 per monthfor electricity service. By improving the businessmodel, the dealer is approaching a “proof ofconcept” at a scale of 5,000 fee-for-servicecustomers. Such a model could be replicatedelsewhere by other firms.

Financing availability and mechanisms.Consumer credit for rural households to purchasesolar home systems has been a central feature of

many GEF project designs. Three projects havedemonstrated credit delivery models (as theyprogress, many more projects are designed todemonstrate a variety of credit models). TheZimbabwe project provided consumer creditthrough the Agricultural Finance Corporation(AFC) to 4,200 households through a revolvingfund mechanism. The Bangladesh project isdemonstrating a successful application of a“dealer-supplied credit” model in which oneorganization (Grameen Shakti, legally a non-profit), performs all functions: marketing, sales,service, credit provision, collections, and guaran-tees. The Sri Lanka project is demonstrating theinitial viability of a microfinance model, in whichhouseholds purchasing solar home systems fromdealers can obtain consumer loans from anational microfinance institution (MFI). The MFIhas many local branches and strong ties to thecommunities in which it operates.

Policy development. Policy development in off-grid solar PV projects has focused on standardsand rural electrification policies. Standards forsolar home systems were first developed underthe Indonesia project. The Sri Lanka EnergyServices Project at first adopted the standardsused in Indonesia, but then modified the stan-dards to allow smaller systems better suited to SriLanka’s consumer demand and solar insolationcharacteristics. Later, in both Indonesia and SriLanka, minimum requirements were furtherreduced because of consumer demand for avariety of systems, and because some dealerscontinued to have trouble meeting the standards.Rural electrification policies and planning bygovernments have been influenced by at least twoGEF projects: The Sri Lanka project has encour-aged the national electric utility and the govern-ment to more explicitly recognize andincorporate solar home systems into rural electri-fication planning, and the Argentina project hasresulted in the government developing a policythat increases support for rural energy serviceconcessions.

Awareness and understanding of technologies.Several solar home systems projects haveconducted activities to increase end users’ aware-ness of the technologies and benefits, but the


impacts of these activities have not been directlymeasured. The Sri Lanka project conductedvillage-level workshops throughout the countryto promote solar home systems. In these work-shops, dealers demonstrate their products, andvillage leaders learn about the technology. Inaddition, potential local microfinance organiza-tions have learned about the project and gaugedlocal interest in solar home systems. In its firstseries of training courses, the Mexico projecttrained 180 farmers and state and local authori-ties to use the systems.

Energy consumption, fuel-use patterns, andimpacts on end users. Neither data on amounts offuel displaced by solar home systems in GEFprojects nor data on social benefits and otherincome-generation effects are available. Ingeneral, project M&E plans have not addressedthese issues.

Energy Service Company (ESCO)Cluster

Summary: Viable energy service companies(ESCOs) have been established in two countries(Tunisia and China) as a result of GEF projects.Financing for existing ESCOs has been facili-tated in the Hungary project. Other projects withESCO components provide technical assistance,training, and audits, but are not expected to leadto full-service (i.e., “performance-contracting”)ESCOs. With the exceptions of China andHungary, no other countries have documentedreplication or energy savings impacts of ESCOsfrom GEF projects. Prospects for the emergence

and sustainability of ESCOs appear strongest asa result of the China project, which is alsopioneering the resolution of key policy and legalissues to allow growth of the ESCO industry.Several GEF projects appear to be increasingawareness and acceptance of ESCOs amongindustrial clients, policy-makers, and financiers.

Energy production or savings and installedcapacities. Few energy savings impacts havebeen quantified for projects in this cluster, withthe exception of the China and Hungary projects.Estimated lifetime energy savings from approvedsubprojects under the China project amounts to3.3 million tons coal equivalent (mtce), or theequivalent of 2.2 Mt carbon emissions reduction.

Business and supporting services development.Two projects have established new ESCOs towork with industry and utilities to make energy-efficiency investments. These ESCOs pilot busi-ness models that are the first of their kind inthese countries, and thus a major result of theprojects is demonstrations of the viability of suchbusiness models. The Hungary project hasstrengthened the capabilities of 20 energy-effi-ciency companies to market, assess, and financeenergy-efficiency projects. The China projectestablished three pilot, private sector ESCOs thathave so far invested $30 million in 150 projectsusing energy performance contracting models forthe first time in China. The project is alsoencouraging more widespread use of the ESCObusiness model throughout China. More than 80potential ESCOs have expressed interest inparticipating in a second phase of the project,


Peru TA for Energy Efficiency UNDP 1991 1995

Tunisia ESCO (SME) IFC 1994

Hungary Energy Efficiency IFC 1996Co-financing Program

China Energy Conservation World Bank 1997

Egypt and Palestinian UNDP 1997Authority Energy Efficiency

Energy Service Company (ESCO) Cluster


China Coal-bed Methane UNDP 1991 1997

Poland Coal-to-Gas World Bank 1991

China Sichuan Gas World Bank 1992

Mauritania Decentralized Wind UNDP 1992 1996

Jamaica Demand-Side World Bank 1993 1999Management

Sri Lanka Energy Services World Bank 1996Delivery

Bulgaria Energy Efficiency UNDP 199


and more than 10 additional ESCOs have begunoperating. The Tunisia project established oneESCO as a joint venture between a CanadianESCO and a group of Tunisian banks; after twoyears of operation, this ESCO has completed 70energy audits, made 35 proposals, and under-taken one investment project. The Egypt projecthas supported 70 industrial audits, and 12 sitescurrently employ the audit results to implementenergy saving measures. The Egypt project hasnot yet resulted in creation of a commercialESCO model, although other developments inEgypt, including an operating ESCO fundedthrough the IFC/GEF Small and MediumEnterprises Program, suggest that commercialESCO models can be viable.

Financing availability and mechanisms. Threeprojects in particular have expanded financingavailability. The Hungary project has piloted newfinancing mechanisms that have facilitated andguaranteed financing for energy service compa-nies. Three Hungarian financial institutions haveutilized the project’s “partial guarantees”(provided on a “first loss” basis), to fund, on atransaction-by-transaction basis, an initial sixinvestment projects valued at $1.6 million. Theproject has helped lower credit risks and hencehas demonstrated the financial viability of invest-ment projects. The project has also generatedinterest from most major commercial banks inHungary, providing a good foundation for expan-

sion via a recently approved IFC parallel invest-ment program. In the Egypt project, commercialbanks are lending to individual energy-efficiencyprojects. The China project has attracted theinterest of commercial banks in financingESCOs, and increased their willingness to do so.

Other Applications/Impacts

Summary: Projects for coal-bed methane, gas-pipeline leakage repair, fuel switching, decentral-ized wind power, utility demand-sidemanagement, village-scale mini-grids, anddistrict heating-efficiency improvements have allshown significant impacts and could all be repli-cated on larger scales and used as models forongoing and future GEF projects. So far, threeprojects—coal-bed methane in China, decentral-ized wind in Mauritania, and demand-sidemanagement in Thailand—are being replicated.

Sri Lanka Energy Services influenced develop-ment of 80 village-scale mini-grids using smallhydro serving about 3,500 people (using 500 kWtotal capacity). Seven of these schemes werefinanced directly through the GEF project(totaling 70-100 kW capacity); the remainingschemes were financed by international donorsand local government.

China Sichuan Gas made a substantial contribu-tion to increasing gas reserves and gas production

Other Applications

capacity in Sichuan province, as well as toimproving safety and environmental protectionthroughout the province’s gas transmissionnetwork. The project increased the provenreserves from 400 bcm in 1993 to 554 bcm in1998 and increased annual production capacityfrom 6.5 bcm to 9.3 bcm over the same period.The project also helped to reduce pipeline leak-ages and introduced the process of leakage detec-tion and repair to the gas transmission companyfor the first time. The company hadn’t realizedthe importance of pipeline monitoring and had tobring in new analytical tools and gain new skills,including the establishment of a new pipelinemonitoring and rehabilitation center. As a resultof the project, system leakage rates reduced from3.6 percent in 1996 (the first time leakage hadbeen monitored) to 1.5 percent in 1998.

China Coal-bed Methane created the ChinaCoal-Bed Methane Corporation, which is facili-tating joint ventures and providing financing forexploitation of coal-bed methane. This projecthas created new business infrastructure andsupporting services to recover coal-bed methane.At three sites, the project demonstrated tech-niques and technologies that Chinese coal minescan employ to reduce atmospheric methane emis-sions and recover methane as a fuel. Trainingworkshops were held at these same sites. Theproject published a detailed assessment ofChina’s coal-bed methane resources andstrengthened the country’s capacity to conductsuch assessments routinely. More than 500people were trained, from senior governmentpolicy makers to senior managers and engineersof coal mining companies. Several additionalexploration and development agreements withforeign partners have been negotiated since theproject was completed.

Mauritania Decentralized Wind installed demon-stration wind-electric systems for rural electrifi-cation in 19 villages with 900 households. Theproject piloted sustainable service-delivery

models (with cooperatives), trained local techni-cians, promoted consumer awareness, and devel-oped financing and institutional capability forfurther development of small wind-electricsystems. A second phase, extending the experi-ence to 100 villages, has started with financingfrom the French government.

Poland Coal-to-Gas promoted the conversion ofsmall- and medium-sized boilers from coal tonatural gas fuels. The project raised awareness ofthe potential for coal-to-gas conversions inPoland. In particular, many of Poland’s environ-mental investment funds, like the Bank forEnvironmental Protection, began to fund coal-to-gas conversions. In fact, a large coal-to-gasindustry emerged in Poland. Many boiler conver-sions have occurred with Polish government andprivate financing. The project helped increase thegovernment’s awareness of the need to addressboiler conversions nationwide. The project gener-ated information, publicity, and promotion thatinfluenced the thinking of boiler owners andfinanciers. In addition, the EU Phare* programtook note of the project and began to developsimilar projects for coal-to-gas conversions inneighboring countries.

Bulgaria Energy Efficiency has conducted studiesof the feasibility of several municipal energy-efficiency projects, and a number of energy-effi-ciency investment projects are now underway asa result of the project’s capacity building andinstitutional development. These projects involvea school, district heating improvements, residen-tial apartment buildings, and street lighting.

Factors Influencing Sustainability andReplication

The Climate Change Program Study highlightedsome of the factors that appear to influencesustainability, either positively or negatively.


* The Phare program is one of the three pre-accession instruments financed by the EU to assist the applicant countries ofCentral Europe in their preparations for joining the EU.

Some examples of positive influences on sustain-ability:

• Demonstration of sustainable business models.“Demonstration of a viable business model,whether that business is public, private, utility,or even permanently subsidized, is key toachieving project sustainability and achievingthe GEF programmatic objective of trans-forming (or developing) markets for solar PV,”concluded the solar PV cluster review. Twoprojects may be close to demonstratingsustainable business models. In Sri Lanka, apartnership between dealers of solar homesystems and a rural microcredit organizationappears to offer a sustainable model for house-hold purchases of these systems. In theDominican Republic, the firm SoluzDominicana is close to demonstrating a “proofof concept” for a business model for servingup to 5,000 households using a “fee-for-service” approach.

• “Market transformation” approaches. Themarket changes brought about by the PolandEfficient Lighting Project have been sustain-able. Two years after the close of the project,the market changes resulting from the projectwere still in place. Retail prices of CFLs inPoland decreased by 34 percent in real terms,and Polish CFL market experts and manufac-turers agree that the project was largelyresponsible for this dramatic price decrease.The project helped increase sales volumes andmanufacturer competition, and the publiceducation campaigns helped increaseconsumer demand to the point at which theprice decrease was sustainable. In Thailand, arefrigerator program appears to have sustain-ably transformed the refrigerator market.High-efficiency refrigerators are now thenorm, and the unit with the highest highestlevel of efficiency became the dominant uniton the market as early as the second year ofthe program. In fact, surveys show that avariety of energy-efficient appliancespromoted through the Thailand project havesustained markets. Customers have beenhighly satisfied with the reliability of the

energy-efficient products, which suggests thatthe gains from the market transformationprograms are not likely to be reversed.

• Voluntary agreements with the private sector.Two of the Thailand DSM market transforma-tion programs (fluorescent tubes and refriger-ator labeling) have had sustainable impacts onthe market. The voluntary agreementconcluded between EGAT and fluorescent tubemanufacturers effectively and completely“washed” the Thai market clear of inefficient T-12 fluorescent tubes. In 1994, when theprogram began, efficient tubes had a 40percent market share, and by the end of 1995,the efficient tubes had achieved a 100 percentmarket share.

• Establishment or precedents of new legalframeworks. Projects can foster new legalframeworks and promote sustainabilitythrough adoption of these frameworks. Aproject may encourage lawmakers or adminis-trators to consider and define legal issues theyotherwise would have ignored or consideredunworthy of attention. The best example is theChina Energy Efficiency Project, whose valuemay be as much about encouraging new legalprecedents or contractual forms as it is aboutdirect energy-efficiency investments. Theproject is likely to set a precedent for the legalaccounting status of ESCOs in China. Such aprecedent is important for the future growth ofthe ESCO industry in China, and was onlypossible after the three pilot ESCOs had grownand accumulated assets sufficient to drawgovernment scrutiny. The contractual formsthat the three ESCOs have used with theirclients also came under government auditorscrutiny and created the need for the govern-ment to formally classify these types ofcontracts. Once a legal ruling occurs, otherfuture ESCOs and their clients will face lowerrisks and place greater confidence in applyingperformance contracting models, establishingbusiness plans, and understanding the legaland tax implications of performancecontracting.


Some examples of factors that can negativelyinfluence sustainability:

• Privatization of power utilities supportingdemand-side management. In Thailand, thefate of the highly successful Demand-SideManagement Office (DSMO) of the nationalelectric utility (EGAT), created under a GEFproject, is uncertain in the face of EGAT’splanned privatization. Despite impressiveachievements under the project, the publiclysupported DSMO (the main innovation pilotedby the project) may not be sustainable.

• Short-term power-purchase tariffs for grid-based renewable energy. A sustained marketfor small hydropower development under theSri Lanka Energy Services Project is question-able, given the way power-purchase tariffswere established. Tariffs were tied to short-runavoided utility costs based on the internationalprice of oil. In 1997 and 1998, tariffs were setat the equivalent of 5 cents/kWh, and mini-hydro development flourished. Because of thedownturn in oil prices in 1998-99, however,prices were only the equivalent of 3.5cents/kWh in 1999. As a result, all develop-ment essentially stopped in 1999. And thisfluctuation has seriously hurt the longer terminterest of private mini-hydro developers in SriLanka. “The low tariffs and unresolved dispute[on tariff calculation methods] have caused adeep slump in mini-hydro development,”stated a project status report in 2000.

• Consumer finance and rural business depend-ence on project resources. The ZimbabweSolar Home Systems Project greatly expandedthe network of private dealers and resulted inthe sale of 10,000 systems, but there are ques-

tions about how the consumer credit will besustained after the Agricultural FinanceCorporation revolving fund winds down. Thisfund is becoming depleted, in part because ofconcessional terms and in part because ofmacroeconomic conditions. Also in question iswhether many of the businesses established orstrengthened during the project are sustain-able. During the project, businesses weredependent on the Project Management Office(PMO) for customers, credit, equipment subsi-dies, and even the equipment itself. Withoutthe PMO, many of these businesses have beenunable to operate on their own and haveclosed.

• Project implementation arrangements that donot demonstrate business models. The GhanaSolar PV Project was originally designed todemonstrate a business model in which thenational utility, the Volta River Authority,would provide fee-for-service to rural house-holds using solar home systems. At the conclu-sion of the project, it was intended that theutility would assess the costs, service, cashflow, and management of these systems interms of the viability of this business model.The demonstration of this model could also beused to convince other private companies toenter the market, an explicit project objective.But responsibility for implementation of theproject was transferred to the Ministry ofMines and Energy early on. This office maysucceed in installing and servicing a givennumber of home solar systems. But given thatthe office is subject to government rules andregulations, its ability to demonstrate andjudge business viability in a transparentcommercial manner is questionable.


Evaluation Report #1-02


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results from the gef climate change program 2002

Documents

gef monitoring

gef scientific

gef council meeting

gef focal areasbiodiversity

gef family of institutions

gef implementing agencies

gef secretariat alan

review of gef operations