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Sustainable Energy Sector Development. The World Bank Group. Paul de Sa Manager Oil, Gas, and Mining Sustainable Energy Department The World Bank . International Congress Energy Day Lima, 3 July 2012. Outline. Overview. Key challenges Main barriers to be tackled - PowerPoint PPT Presentation
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Sustainable Energy Sector Development
Paul de SaManager
Oil, Gas, and MiningSustainable Energy Department
The World Bank
International CongressEnergy Day
Lima, 3 July 2012
The World Bank Group
Overview
Key challenges Main barriers to be tackled Lessons from past experiences Opportunities for the future
2
Outline
Tackling the Challenge
3
World Bank Group Investing in Energy
2007 2008 2009 2010 2011 -
2,000 4,000 6,000 8,000
10,000 12,000 14,000
Bank Group
Policy lendingTransmission & distributionThermal generationEnergy efficiencyRenewable energyUpstream oil, gas & coalU
S$ m
illio
n
2007 2008 2009 2010 2011 -
500 1,000 1,500 2,000 2,500 3,000
International Finance Corporation
Transmission & distributionThermal generationEnergy efficiencyRenewable energyUpstream oil, gas & coal
US$
mill
ion
Almost $1.5 trillion a year in 2010 US$ is required in energy supply investment to 2035.
Challenges
4Source: IEA 2011.
Genera-tion; 58%
Transmission; 11%
Distribution; 31%
Power, $16.9 trillion
Up-stream;
87%
Transport; 3%Refining; 10%
Oil, $10 trillion
Up-stream;
71%
LNG chain; 6%
Transmission & dis-tribution; 23%
Gas, $9.5 trillion
Mining; 94%
Shipping & ports; 6%
Coal, $1.2 trillion
Without further action, by 2017, all CO2 emissions permitted in the 450 scenario will be locked in by existing infrastructure.
Challenges
5Source: IEA 2011.
Despite falling prices, renewable subsidies of $66 billion in 2010 (against $409 billion for fossil fuels) will reach $250 billion in 2035 with rising deployment.
Challenges
6Source: IEA 2011.
• 1.3 billion people lack access to electricity, majority of them in rural areas.
• Access to electricity and per capita emissions are inversely correlated.
Challenges
7
0 10,000 20,000 30,000 40,000 50,0000
20
40
60
80
100
GDP per capita in 2005 US$ at PPP
% o
f hou
seho
lds
with
ele
ctric
-ity
Note: Size of each bubble is proportional to the country’s CO2 emissions per capita.
&
Improve operational and financial performance
Strengthen governance
Improve access and reliability of energy supply
Shift to more environmentally sustainable energy sector development
The challenge is to balance the twin objectives of greater supply and sustainability
Principal Challenge
UN Sustainable Energy for AllA Global Initiative of UN Secretary General
Three goals for 2030:
9
Energy and Human Development
Universal energy access (electricity
and modern cooking fuels)
Double the renewable energy
share in global energy mix
Double the global rate of
improvement in energy efficiency
Multiple barriers must be overcome to tackle the twin challenges of adequate supply and reliability, and environmental sustainability High financing and investment
needs Weak institutional capacity at
national and local levels Lack of enabling policies and
regulations High and volatile oil prices Untargeted subsidies Low affordability and
willingness to pay for energy services
10
Main Barriers
Clean energy finance: demand and shortfall
~$2.1 trillion needed annually through 2035 to meet global energy demand while maintaining 450 ppm pathway
~$600 billion of this amount needed to cover incremental costs of clean energy technologies – and current global clean energy investment falls far short of this level
11
Example of barriers High financing and investment needs
Current Needed0
500
1,000
1,500
2,000
2,500
200600
1500
Current vs. needed annual global investment in clean energy
Billi
ons o
f US$
Oil price increases since 2009 have tempted a number of governments to reverse subsidy reform
Universal price subsidies remain common.
Weaker political legitimacy has led several governments to freeze prices.
Net oil exporters are far less likely to pass through world oil price increases.
LAC as a region has fared well, with least pass-through for kerosene.
12
Example of barriers High and volatile oil prices
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
0
5
10
15
20
25
30
35Crude oilDieselCoalNatural gas, Europe
US$/MMBtu
Hypothetical universal price subsidy for LPG
Example of barriers Untargeted fuel subsidies
05
10152025303540
% o
f sub
sidy
reac
hing
bo
ttom
40%
Albania Brazil Guatemala India Indonesia Kenya Nepal Pakistan Peru Sri Lanka0
20
40
60
80
100
% o
f the
poo
r rec
eivi
ng
subs
idy
Subsidies deter investment and healthy competition, ultimately harming consumers and the economy Investments dry up because they are not financially
attractive or even sustainable, resulting in refineries and power plants in state of disrepair• Iraq, Iran, and Nigeria are all petroleum product importers
Fuel and power shortages become frequent, requiring expensive back-up power generation
Black markets flourish, and the poor may even end up paying more than in the absence of subsidies
Fuels are smuggled out, with subsidies benefiting neighboring countries
Subsidized fuels are used to adulterate more expensive fuels, damaging vehicles and equipment
14
Example of barriers Untargeted fuel subsidies
No universal institutional model to tackle the electricity access gap – need customized solutions:• Centralized and decentralized• Public or private• Public-private partnerships
Explore all options: off-grid, cooperatives, pro-poor financing methods, affordable lifeline rates, sharply targeted subsidies
Lessons from past experience offer valuable guidance
Tackling the Challenge
15
Sound operational and financial performance should be ensured through improved institutional and technical capacity and governance
For the very poor, promoting productive applications for energy interventions is most important to improve access and affordability
Access to power Past experience
Subsidies are generally damaging and inefficient• Governance: Vulnerable to widespread corruption• Public expenditure efficiency: Inefficient use of limited government resources• Equity: Benefits accrue disproportionally to the rich• Business creation: Deter private sector investments• Environment: Low natural gas and power prices are usually the main reason for gas
flaring Targeted subsidies are possible for electricity and natural gas, but vigilance
is needed to discourage subsidy creep• Lifeline rates have a tendency to grow
Targeted subsidies are far more challenging for liquid fuels• Liquid fuels are much easier to transport and store• Chemical markers, dyes, policing, and other means have not been successful in
stopping diversion to black markets and other illegal activities Social protection mechanisms for the poor are much better suited to handle
concerns the subsidies are intended to address• For the poor, indirect effects through higher food and transport prices often
outweigh direct effects of higher prices of purchased fuel• Cash transfers, school feeding schemes, food assistance programs
Tackling the Challenge
16
Energy subsidies Past experience
Clean energy – action agenda
17
Options and opportunities
Action Area Stakeholders and Commitments
Scaling up investments (both public & private sources)
Strengthening the enabling environment:
• Overcoming legal and regulatory hurdles
• Pricing and other policies consistent with financial sustainability
• Capacity building
Focus on high-value, replicable targets and game changers
Civil Society
Public Sector
(Governments, state-owned enterprises, international development
banks, bilateral donors)
Private Sector
Expand energy supply base in a sustainable way
Promote energy trade and regional integration Invest in energy efficient technologies and processes Phase out distorting subsidies Diversify energy mix Accelerate technology innovation and transfer to ensure access to developing
countries Promote greater use of gas and eliminate gas flaring Develop technologies that can reduce the adverse impacts of fossil fuels (e.g., CCS)
Expand energy supply base in a sustainable way Put in place policies, regulations, and institutions that facilitate private sector
investment as well as promotion of clean technologies Build a new financial architecture by leveraging new financing sources (e.g. climate
funds, green funds, pension funds, carbon finance) Adopt innovative finance mechanisms that improve affordability for the poor (e.g.
micro credit) Foster institutional models to ensure participation of local communities 18
Options and Opportunities
Ensure adequate resources to achieve energy goals