Post on 07-Oct-2020
Third Annual CO3OL WorkshopDecember 2016, Washington DC
Ashok Sarkar
Delivering Energy Efficiency in the Appliances SectorPerspectives on Implementation Practices and Financing Models
Global Energy Usage- Buildings 2014
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Global Electricity Demand Growth and
Savings in the Buildings Sector, 2013-2040
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Cost of Saved Energy (Demand Side)(IEA New Policies Scenario)
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Complexities of Energy Efficiency Market Transformation:
(Barriers Beyond Cost-Effectiveness)
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Scaling Up EE Needs an Integrated Enabling Ecosystem:
(finance is one part of the puzzle)
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Roadmap for Scaling Up Appliance EE:Striking a Balance Between Policy Regulations & Public Financial Incentives
Source: IEA (2012)
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Global Energy Efficiency Trends
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Encouraging Progress on EE in last few years vis-à-vis SE4ALL Goals
Global Untapped EE Potential by Sector(IEA New Policies Scenario)
• Share of energy consumption in buildings sector growing at the most rapid pace. Within
that, space cooling energy consumption share remains highest and continues to grow
even faster.
• Unprecedented temperatures, income growth, and more accessible AC models in the
market are driving space cooling load growth at unprecedented levels – more than 20%
annually in some developing countries
• More than 80% of world’s buildings in 2040 have not been built. This also provides an
opportunity to develop the buildings sector in a sustainable manner
• Policy mechanisms like Building EE Codes and Appliance EE Minimum Energy
Performance Standards (MEPs) integrated with financial incentive mechanisms help in
long-term market transformation towards higher energy efficiency
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Space Cooling Challenges in Mexico(Illustrative Example)
• The current market penetration of air conditioners is 12% - 14%, but estimated to increase rapidly
• The housing stock is projected to rise by 50% from 2005 to 2030
• An additional 53 million people are expected to be living in urban areas by 2050
Residential Space Cooling Scenarios (IEA, 2015)
Energy efficient scenario using IEA’s Energy
Technology Perspectives 2°C Scenario and
more energy intensive scenarios.
IEA’s 6°C Scenario
IEA’s 2°C Scenario
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Space Cooling Challenges in India(Illustrative Example)
• The air conditioner market growing rapidly (2003-2004: 1 M 2016: 4-5 M 2040: 50-70 M)
• Minimum Energy Performance Standards (MEPS) and EE Labeling exists for some ACs
Annual Household Electricity Consumption in India (IEA, 2015) Annual Household Energy Usage Breakdown -India (IEA, 2015)
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Appliance Energy Efficiency Market Potential in India:
Goes Beyond Space Cooling
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SectorDSM Investment
potential ($ billion)
Energy savings
potential (Billion
kWh/annum)
Avoided Generation
Capacity (MW)
Industry 1.8 49 8964
Residential 14.1 89 41002
Commercial Buildings 0.2 2 313
Municipal
Infrastructure3.9 8 3365
Agriculture 4.6 30 5488
Total 24.6 178 59132
End use
Investment
potential
($ billion)
Energy savings
potential (Billion
kWh/annum)
Avoided
Generation
Capacity (MW)
Cost of saved
capacity
(‘000 $ / MW)
Residential appliances 14.2 89 41002 350
Lighting - Self ballasted LED
bulbs and tubular lamps3.5 26.64 20361 173
Energy efficient ceilings fans 7.4 40 11218 660
Energy efficient room air
conditioners3.2 21.98 9423 350
DSM potential unlocked from the residential appliance efficiency improvement opportunities
Source: PwC Analysis
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Supporting Appliance EE ProgramsRole of Multilateral Finance Institutions
Carbon Market/ CDM/TCAF/etc
Domestic Public Finance
+
Development Assistance (eg., IDA or IBRD)
Leveraging
Private Sector Capital
•Utility Demand Side Management (DSM)
• On-bill• Pay-As-You
Save• Std Offers• ESCOs
•Public Procurement (Super ESCO or GovtImplementing Entity)
•Financing Schemes• EE Funds• EE Credit
Lines• EE Risk
Sharing Gaurantees
•Policy Support
INSTRUMENTS
Global Environment
Facility
Climate Finance
(CTF, GCF, Gr Bonds
TA, Awareness and Capacity Building, Institutional Support (Utilities; Municipalities, Super ESCOs, etc)TA, Awareness and Capacity Building, Institutional Support (Utilities; Municipalities, Super ESCOs, etc)
MLF
Incentives
FINANCING SOURCES AND
SUPPORT
The “Big Picture”: Alignment of Climate and
Sustainable Energy Commitments• World Bank Climate Change Action Plan was approved in 2015.
• WBG’s commitment to increase the climate-related share of its portfolio from 21 to 28% by
2020 in response to client demand, with total financing (including leveraged co-financing) of
potentially $29 billion per year by 2020.
• To get impact at scale, the Action Plan is focused on helping to shape national investment
plans and policies and leveraging the private sector.
• World Bank Energy Strategy (Energy Directions Paper) was approved in 2013; WB
commitment to UN SE4ALL goals, including doubling of the rate of improvement of energy
efficiency by 2030.
• Renewable Energy and Energy Efficiency. The WBG will increase its share of energy
efficiency operations and aim to invest $1 billion to promote energy efficiency and resilient
building in urban areas. The WB will aim to mobilize $25 billion of commercial funding for clean
energy over the next five years.
• >USD 400 billion/year investment required to meet the SE4All’s EE Goals
• Public, Multi-lateral, Climate Finance not enough
• Private Sector Capital Influx into EE is Required (>85% of future needs)
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World Bank Activities in Buildings & Energy Efficiency(Tailored to meet Institutional, Implementation and Policy Challenges)
• Building Types:
• Public Buildings: Largest single user. Often the highest EE Potential. Examples of China,
Mexico, Easter Europe; Easiest to implement; Sets an example for the rest of the sector
• Commercial Buildings : Hotels, Office Space, etc. Example of China (also supported by tools
like EDGE of IFC); Relatively less assistance required
• Residential Buildings: Fastest growing in developing world. Examples of Bulgaria, Rwanda,
Bangladesh, Mexico; Most difficult to implement;
• Existing buildings and new buildings mix requires different interventions
• Both electricity and thermal, including district heating (China, Mongolia, Eastern Europe)
• Cross-sectoral:
• Cuts across multiple sectors- urban energy systems, urban land use planning
• Diagnostic Tools used include : TRACE, CURB, etc.
• Instruments and Mechanisms:
• Policy Development and Regulations Support (Building EE Codes, Appliance EE Standards)
• Utility Demand Side Management (DSM)
• EE Funds, Credit Lines, Risk Sharing Facilities
• Energy Service Companies (ESCOs)
• Technical Assistance (TA) and Analytical and Advisory Services (ASA)
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Sustainable “Energy Efficiency Financing Ladder”
Market
Maturit
y
Commercial
Financing
Public
Financing
Advanced commercial or project financing (ESCOs)
Grants/ Subsidies
EE Funds (Revolving, Special, Mezzanine)
Utility “on-bill” financing (DSM)
MOF financing w/ budget capture
Public ESCOs (Super ESCOs)
Credit line with municipal (development) bank
Credit line with commercial bank(s)
Partial risk (first loss) guarantees
Commercial financing, bonds
Vendor credit, leasing
Budget financing, grants w/ co-financingPu
bli
c E
E fi
na
nc
ing
M
ec
ha
nis
ms
4Source: World Bank
Determining Factors
for the Choice of
EE Financing Mechanisms
• >USD 400 billion/year investment required to meet the SE4All’s EE Goals
• Public, Multi-lateral, Climate Finance not enough
• Private Sector Capital Influx into EE is Required (>85% of future needs)
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How Ready Are Countries for Leveraging Private
Sector Investment in Energy Efficiency
Supportive energy policy frameworks are essential to attract private investment
• RISE assesses laws, regulations, incentives, subsidies, sector planning and governance, and more
• The “right” policy designs will differ from country to country, but universal good practices exist
• But… policy support is only part of a strong enabling environment: RISE focuses on what policymakers can control
• In case of Energy Efficiency, 12 Core Indicators and 31 Sub-Indicators
Readiness for Investment in Sustainable Energy (RISE)
http://rise.worldbank.org
(111 Countries covered; Pilot tested earlier in 17 countries)
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Sustainable “Energy Efficiency Financing Ladder”
Market
Maturit
y
Commercial
Financing
Public
Financing
Advanced commercial or project financing (ESCOs)
Grants/ Subsidies
EE Funds (Revolving, Special, Mezzanine)
Utility “on-bill” financing (DSM)
MOF financing w/ budget capture
Public ESCOs (Super ESCOs)
Credit line with municipal (development) bank
Credit line with commercial bank(s)
Partial risk (first loss) guarantees
Commercial financing, bonds
Vendor credit, leasing
Budget financing, grants w/ co-financingPu
bli
c E
E fi
na
nc
ing
M
ec
ha
nis
ms
4Source: World Bank
Determining Factors
for the Choice of
EE Financing Mechanisms
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Energy Efficiency Funds: Typical Structure
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Source: World Bank
EXAMPLES:
Bulgaria Energy Efficiency Fund
Romania Energy Efficiency Fund
Armenia Renewable Energy and Energy
Efficiency Fund
Thailand - Energy Conservation Fund
(ENCON)
Korea – Korea Energy Management Fund
India – State Energy Conservation Funds
Sri Lanka – Sustainable Energy Fund
China - National incentive fund based on
coal savings
South Africa – Central Energy Fund
Dedicated Energy Efficiency Credit Line: Typical Structure
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Create interest on the part of commercial banks in financing EE projects
Enhance technical capacity of banks to scale up EE lending
Leverage parallel financing from the participating banks for EE financing
Strengthen the participating bank’s capacity in identifying and managing project risks
Assist banks in exploring business opportunities in other low carbon lending businesses.
Source: World Bank (2014),
Designing Credit Lines for
Energy Efficiency
Energy Efficiency Credit Lines - World Bank Examples
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Source: World Bank (2014), Designing Credit Lines for Energy Efficiency
Energy Efficiency Credit Line in China:China EE Financing Program (CHEEF)- supported by the World Bank
World Bank China Energy Efficiency Financing Program
Credit lines from World Bank to three banks in China
Exim, Minsheng and Huaxia Bank
Local Bank and
Other Sources
$1.5 B
World Bank
$400 M
World Bank
$400 M
Project AProject A
Project BProject B
Project CProject C
70%
Debt30%
Equity
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• China Energy Efficiency Financing Project I, II, and III:• WB loan ($400M): credit line to three local banks for EE investment
• GEF grant ($13.5M): capacity building to banks and EE policy support
• Focus: large and medium industrial enterprises, recently expand to ESCOs and building EE
• Achievements:
• $400M IBRD leveraged $1,900M; Annual energy savings of 3 Mton of coal equivalent and CO2 emission reduction of 7.3 Mtons
• Substantially increased PFI’s interests, capacity, and confidence in EE lending
• Lessons Learned: • Participating banks’ internal organization: Management
commitment, dedicated teams, and incentives to staff are the most important success factor
• Technical Assistance to participating banks is critical • Generating sufficient deal flows has not been easy• New business model to bundle small-scale EE projects: target
at large enterprises, and aggregate small-scale EE investments at the subsidiaries
• Encouraging participating banks to expand support to SMEs has been a challenge
Risk Sharing Guarantees for Energy Efficiency Example: India Partial Risk Sharing Facility (for Supporting EE Investments through ESCOs)
Small Industries Development Bank of India
Small Industries Development Bank of India
Lenders - Participating Financial Institutions (PFIs)
Lenders - Participating Financial Institutions (PFIs)
Energy Service Companies (ESCOs)
Energy Service Companies (ESCOs)
Host Entity (Municipalities, Large Industries, MSMEs, and Commercial Buildings)
Host Entity (Municipalities, Large Industries, MSMEs, and Commercial Buildings)
Independent M&V AgencyIndependent M&V Agency
Participants in Energy Efficiency Lending under
PRSF
Access to Risk Sharing
Monitoring & Verification
Partial Risk Sharing FacilityGEF $12 M + CTF $25 M
Partial Risk Sharing FacilityGEF $12 M + CTF $25 M
Technical Assistance(GEF $6 M)
Technical Assistance(GEF $6 M)
Risk Sharing FacilityRisk Sharing Facility
Energy Efficiency Services LimitedEnergy Efficiency Services Limited
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• Designed to address the problem of
access to finance
• Risk perception of banks and financial
institutions
• Government or donor agency provides a
partial guarantee covering loan loss from
default
• Participating banks sign agreements
specifying loan targets and conditions
• Banks conduct due diligence and process
loans
• In case of loan default the guarantee
covers a portion of the loss – the program
may also include a “first loss reserve”
• Substantial technical assistance also
provided to banks, project hosts and
project developers (ESCOs)
Mobilize
private
financing:
US$37 m of
GEF and CTF
resources are
expected to
mobilize over
US$100 m of
commercial
financing for
energy
efficiency
investments
Utility Demand Side Management (DSM)
Started after the 1970s/80s oil crisis, with US pioneering
Utilities have many advantages for pursuing DSM but also mixed incentives
Load management vs. energy conservation vs. energy efficiency (and DR!)
Recent proliferation of utility appliance programs, many on EE Lighting
Modalities: Rebates; Pay-as-you-save; On-bill Financing, etc
“Post-DSM” models – DSM bidding, standard offer, EE power plant
Revenue Recovery or Performance Incentive models (US Market)
Argentina
Brazil
Burundi
India
Mexico
Pakistan
Philippines
Rwanda
South Africa
Sri Lanka
Thailand
Uruguay
Vietnam
Bangladesh
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Source: Edison Instutute for Electric Efficiency,. “State
Electric Efficiency Regulatory Frameworks”. June 2011
Snapshot of Utility DSM Obligations in Other Countries
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Country Target Obligated parties Enforcement
mechanism
Compliance mechanism Performance incentives
for obligated parties
Australia - New
South Wales
0.4% of total electricity sales in
2009
Increasing to 4.0% in 2014
Electricity retailers and
customers who purchase
power directly from
wholesale market
Combination of legislation
and regulation
Financial penalty for non-
compliance
Self-achievement of
savings Or Purchase of
energy efficiency
certificates
Trading of energy
efficiency certificates
among obligated parties
Canada – Ontario 1330 MW reduction in peak
demand by 2014
6,000 GWh of energy savings by
2014
Electricity distribution
licensees
Combination of legislation
and regulation
Self-achievement of
savings verified by third
party and approved by
regulator
CAD 0.3 to 1.8 per unit
allowed for goal
achievement ranging from
80% to 140%
China 0.3% of electricity sales and
maximum load in the previous
year
Government-owned grid
companies
Regulation issued by
central government
agency
Self-achievement of
savings verified by third
party
Not documented
Italy 6 Mtoe cumulative in 2012 Distributors of electricity
and natural gas
Combination of legislation
and ministerial decrees
Financial penalty for non-
compliance
Self-achievement of
savings Or Purchase of
energy efficiency
certificates
Trading of energy
efficiency certificates
among obligated parties
Poland 53,452 GWh by 2016 Electricity, natural gas,
and district heating
companies and brokers
Combination of law and
regulation
Financial penalty for non-
compliance
Self-achievement of
savings Or Purchase of
energy efficiency
certificates
Trading of energy
efficiency certificates
among obligated parties
United States –
California
6,965 GWh, 1537 MW, and 150
million therms in 2010-2012 for
investor-owned utilities;
700,000 MWh for publicly owned
utilities
Investor-owned and
publicly owned electricity
and natural gas utilities
Combination of legislation
and regulation
Financial penalty for non-
compliance
Self-achievement of
savings rigorously verified
by third party contractors
Capped at 450 million
USD for investor owned
utilities
United Kingdom 12.4 MtCO2 under CERO
6 MtCO2 under CSCO and
£3.7 billion under the Home
Heating Cost Reduction
Obligation
Large energy suppliers Combination of legislation
and regulation
Self-achievement of
savings
Not documented
Utility DSM Evolution in India
Enforcement of DSM regulations continues to be limited
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1980s 1990s X Plan XI Plan XII Plan
First pilot DSM
program by
Ahmedabad Electric
Company
Industry oriented DSM
programs by GRIDCO
Orissa
Onset of megawatt scale DSM programs – CFL promotion
under BEE’s BLY scheme
BEE’s National Ag DSM and Mu DSM schemes
Onset of DSM Regulations – Maharashtra, Model Regulation
by FOR followed by seven more states
Formation of DSM cells within Utilities
Inception of Energy Efficiency Services Limited
Formation of Energy Conservation Cell by the
Gujarat Electricity Board
Rectification of electric pump sets, energy audits
and awareness programs by State Electricity
Boards and Rural Electrification Corporation
Pilot DSM programs by
BESCOM, MSEDCL,
Reliance Power;
Inception of Time of Day
Tariffs, Power factor Load
factor incentives
DSM Capacity Building Program across 33
states;
EESL’s UJALA - active in more than 24
states with over 180 million LED lamps
sold among households;
Notification of DSM Regulations - 17 states
(+7 UTs)
Provision of including DSM related
expenditure in the annual revenue
requirement petitions has established a
definite mechanism for financing and cost
recovery of Utility DSM investments
India: Bulk Procurement “Super ESCO” EESL Model
http://www.ujala.gov.in; http://www.eeslindia.org/slnp/27
• Fills in the Gap in the Indian EE Market created by:• Lack of an active large-scale ESCO Market- especially Shared Savings Model
• Limited implementation of utility DSM
• Long-term roadmaps of EE policies and regulations (building codes, appliance MEPs, etc.)
• Strong Government mandate and support, and mature EE Policy Environment
• EESL’s role as a public “Super ESCO”:• Bulk procurement cost reduction affordability
• Quality Controls and Benchmarking
• Awareness Building
• Robust Distribution, Transaction Contracts and Revenue Recovery through Savings (on-bill, PAYG)
• Strong Monitoring and Evaluation of Impacts
• Started with LED lamps for household sector, and Urban Street lighting
• Expanding into Ceiling Fans, Air Conditioners, Irrigation Pumps, Public
Buildings,
THANK YOU
Ashok Sarkar, Ph.D.
Senior Energy Specialist
Energy & Extractives Global Practice
The World Bank
Washington DC
asarkar@worldbank.org
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