100989 2015/52 k nKonw A A weldegdeg e ol n oNtoet e s eSrei r e ise s f ofro r p r&a c t hteh e nEenregryg y Etx itcrea c t i v e s G l o b a l P r a c t i c e The bottom line Private Sector Participation in Transmission Systems: In the presence of the right policies and investment climate, Making It Work private sector participation in transmission systems can Why is this issue important? The short answer is yes. Between 1994 and 2013, the private improve the security, reliability, sector, particularly in Latin America, invested nearly $27 billion in and quality of supply in a In many developing countries, power transmission infrastructure in low- and middle-income countries, cost-effective manner. Ample transmission systems are a bottleneck to accounting for 78 percent of total costs of the projects in which lessons exist for replication. expansion of electricity service it was involved.1 Of the $27 billion, $12 billion was raised in Brazil Strong, independent regulatory (2000–13). The concentration of activity in Latin America makes institutions are critical. Such Power grids require regular investments to meet growing demand, sense, as utilities in most of the countries of the region had recently institutions should be equipped maintain service reliability, and meet the international goals of uni- undergone at least some power sector reforms and restructuring. to develop detailed expansion versal access and a doubling of renewable-energy capacity. In many In Peru, private sector participation has driven down both plans that make it possible to countries power generation markets have been liberalized to attract investment and operation and maintenance (O&M) costs. In a sample identify and select projects. But private investment, but congestion in transmission lines, which have of 15 projects, winning bids were, on average, 36 percent lower than the government must be willing remained largely public, constrains the power trade and frustrates estimated annual costs (which also set the price cap). In the extreme to see reforms through. Partial competition. The investments needed to relieve that congestion may case, the winning bid for the Carhuamayo–Paragsha–Conococha– or incomplete reforms can not be readily available from public sources. Huallanca–Cajamarca–Cerro Corona–Carhuaquero line was 58 be expensive and ineffective. The private sector can be a strategic partner in building and percent lower than the estimated annual cost (table 1). Of paramount importance is maintaining transmission networks, depending on how well its partic- Upper-middle-income countries account for about 65 percent a commitment to cost-based ipation is structured to achieve the desired outcomes. Experience of the private capital raised for investment in transmission infra- pricing. in several countries, especially in Latin America, shows that private structure between 1994 and 2013 (figure 1). A threshold for private participation can improve transmission service and reduce costs. sector entry is formed by a combination of system size and per Power utilities in the Republic of Korea, Singapore, and Taiwan, capita income (Besant-Jones 2006).2 A large group of middle-income China, demonstrate that state-owned utilities can operate at high Pedro E. Sanchez standards of efficiency and management, although many do not. At is a lead energy specialist the same time, the interests of private owners create an incentive 1. According to the Private Participation in Infrastructure (PPI) Project Database, managed by the World Bank and the Public-Private Infrastructure Advisory Facility (http://ppi.worldbank.org). The database records contractual arrangements in with the World Bank’s for maximizing efficiency, an incentive markedly different from the which private parties assume operating risks in low- and middle-income countries. Some of these projects are public-private Energy and Extractives vote-winning and rent-seeking interests of politicians and bureau- partnerships. Global Practice. 2. Besant-Jones argues that country income level has more influence than system size on the roles of the public and private crats (Besant-Jones 2006). But, in challenging legal and institutional sectors and on access to electricity services, whereas system size has more influence on market structure. When countries Samuel Oguah is an environments, is it possible to entice private companies to invest in such as Peru opened up their grid to private investment, the grid was weak and in dire need of capital (World Bank 2012). energy specialist in the transmission infrastructure? India’s first experience with private participation in transmission infrastructure came when India was still classified as a low-income country. Bearing out Besant-Jones’s thesis, Cambodia is the only low-income country with more than one such World Bank’s Energy and transaction. Extractives Global Practice. 2 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k Figure 1. Distribution of private sector investments in transmission infrastructure by country income levels, 1994–2013 6,000 Low income 5,000 Lower middle income Upper middle income Private investment (US$ million) “Proposals to reform the 4,000 power are often met with the argument that power 3,000 supply is a strategic matter or a social service that 2,000 should be controlled by the state.” 1,000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: World Bank Private Participation in Infrastructure (PPI) Project Database. countries meets these threshold values with systems larger than a Another argument advanced for keeping transmission networks thousand megawatts and national per capita income above US$900; in government hands is that they are essential for system optimi- a small group of low-income countries falls below the threshold . zation. Over the years, this argument has proven unconvincing, About two-thirds of developing countries fall into these two groups. provided the asset owner relinquishes control over dispatch to an independent service operator. What have been the obstacles to private participation? State control of the transmission network is sometimes justified on grounds that power is a natural monopoly and therefore best Old arguments for exclusive public ownership of managed by the public sector. Although it is true that the operation transmission lines have faded only slowly of transmission grids, by their nature, cannot be competitive, this Proposals to reform the power are often met with the argument that does not preclude the private sector from investing in transmission power supply is a strategic matter or a social service that should be infrastructure, although the approach must differ from that taken controlled by the state. To cite one example, before sector reforms in in the case of private participation in generation. Many developing Peru, it was illegal to disclose maps showing transmission lines—for countries do not meet the conditions necessary for attracting sub- reasons of national security. Similar sentiments are often expressed stantial amounts of private investment, but the case for private sec- with regard to water supply, roads, and other infrastructure. tor participation rests on how well it would achieve desired reform outcomes under prevailing operating conditions (Besant-Jones 2006). 3 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k Table 1. Cost estimates and winning bids of public-private transmission projects in Peru, 1998–2013 Annual transmission cost (US$ millions) Winning bid Length Capital Cost as fraction “Where the incentives Year of of line Capacity investment Winning estimate of cost are right, private sector award Project (km) (MVA) (US$ million) bid (price cap) estimate (%) 1998 Mantaro–Socabaya 700 300 179.0 27.6 42.6 35 participation can reduce 1999 Southern electric transmission system reinforcement 444 180 74.5 11.5 14.3 19 operating costs, technical 2008 Eléctrica Carhuamayo–Paragsha–Conococha–Huallanca– 696 360 106.1 10.0 42.6 58 losses, theft of service, and Cajamarca–Cerro Corona–Carhuaquero price levels while improving 2008 Eléctrica Mantaro–Caravelí–Montalvo and Machu Picchu Cotaruse 200 350 35.7 5.4 5.6 4 availability and quality of 2008 Chilca–La Planicie–Zapallal 94 1,400 52.2 8.1 14.5 45 service compared with 2009 Zapallal–Trujillo 530 1,000 167.5 25.8 32.0 19 2010 Chilca–Marcona–Montalvo 872 700 291.0 48.2 61.6 22 state-owned or privately 2010 Tintaya–Socabaya and associated substations 207 400 43.6 6.7 12.3 46 regulated, vertically 2010 Talara–Piura 102  — 14.6 2.3 2.5 9 integrated monopolies.” 2010 L.T. Machupicchu–Abancay–Cotaruse 204 500 62.5 9.8 14.2 31 2011 Trujillo –Chiclayo 325 —  101.4 15.6 15.8 1 2012 Carhuaquero–Cajamarca Norte–Cáclic –Moyobamba 402 450 106.9 16.2 22.2 27 2013 Machupicchu –Quencoro –Onocora–Tintaya and associated 356 354 114.3 16.7 28.5 41 substations 2013 Mantaro–Marcona–Socabaya–Montalvo and associated substations 900 —  278.0 41.4 63.5 35 Note: MVA = megavolt amperes; O&M = operations and maintenance. Using Peru as an example again, before the transmission sector was What forms does private participation in opened to the private sector there, electricity users were already transmission infrastructure take? paying cost-reflective tariffs (World Bank 2012). Yet another objection to private involvement in transmission A wide variety of models exists to suit infrastructure is that private participation increases the cost of national circumstances service to the end-user. Here, too, experience suggests otherwise, as Private participation in transmission infrastructure can take many long as private participation is designed and pursued with adequate forms, varying in terms of ownership of assets, assumption of risk, incentives. Where the incentives are right, private sector participation responsibility for investment, and duration of contracts. Ownership can reduce operating costs, technical losses, theft of service, and models tend to be long term to allow investors to recoup invest- price levels while improving availability and quality of service com- ments at set tariff levels and to transfer risks and responsibilities pared with state-owned or privately regulated vertically integrated to the private sector. In the concession model, the private investor monopolies (Joskow 2008; World Bank 2012; IEA 2005). 4 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k runs the business but does not own the infrastructure assets. In What has to be done to attract private investment? other cases, the private investor runs the business and owns the infrastructure assets. These conditions apply to both existing and Success depends on a strong and independent new transmission infrastructure. The variety in investment forms is regulator, the right investment climate, and apparent in the names by which the corresponding contracts are good planning known: build-lease-transfer (BLT), build-own-operate (BOO), build-op- “Independent regulatory Regulations. Any reform designed to attract private sector erate-transfer (BOT), build-own-operate-transfer (BOOT), build-reha- investment depends on the existence of a sound legal and policy institutions and strong legal bilitate-operate-transfer (BROT), rehabilitate-operate-transfer (ROT), framework. systems are required to build-transfer-operate (BTO), or a mix (UNESCAP 2011; World Bank Independent regulatory institutions and strong legal systems are 2015). Projects identified in transmission master plans are awarded enforce legal and policy required to enforce legal and policy requirements, minimize political through competitive selection. requirements, minimize influence, and promote fairness. Unless the regulator has sufficient Peru, for example, transferred provisional ownership of some political influence, and autonomy to carry out its duties, and in the absence of transparency transmission facilities through ROT contracts but favored BOOT in procedures and processes, investors quickly lose confidence in promote fairness.” contracts for new transmission lines, as did Argentina, Brazil, Chile, the credibility of reforms. The damaged trust is difficult and expensive India, and Zambia. The steps of a typical BOOT model, as used in to repair (Besant-Jones 2006). In fact, restoring investor confidence Peru, are described in box 1. after a breach of rules, regulations, and trust can be harder than Project revenues are paid by clients (generators, large consum- starting the reform process, because such conduct sets a precedent ers, and distribution utilities) in proportion to their energy consump- that is not easily ignored. tion and time of maximum demand, thus introducing an incentive The legal and regulatory framework for how the power sector among consumers to switch their consumption from peak hours. will operate should be put in place before attempts to elicit private Project risks are borne by the transmission project; market risks, interest begin. It should strike a balance between rigor and ease of by the whole system. The model has been effective in attracting implementation. A regulatory framework that is too onerous may investment from the global capital market (World Bank 2012). deter new investment by making regulatory requirements too costly for investors. Regulations should be closely monitored and adjusted in Box 1. Steps in the BOOT transmission model implemented response to system conditions. Interviewees in Peru admitted in Peru that, although reforms had been largely beneficial, they had been performed with excessive optimism and without a full understanding 1. Every second year, the system operator prepares a transmission of the implications of adopting, with only minor modifications, a expansion plan based on least-cost, multi-attribute criteria. Chilean model that had yet to be tested. The initial set of reforms 2. Transmission projects that are part of the “guaranteed system” was therefore followed by a round of corrections. Growing concen- undergo international bidding. tration in ownership in the sector caused by a set of mergers made 3. The bidder with the lowest guaranteed annual return is selected. it necessary to adopt an antitrust law to reduce the risk of vertical 4. The BOOT contract guarantees the winner bidder’s revenue reintegration and restricted competition. While regular reforms are requirements for a 30-year period. necessary to take corrective action, change comes at a cost that Source: World Bank 2012. needs to be balanced with the benefits. 5 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k Poor pricing and cost-allocation mechanisms can undermine (Besant-Jones 2006), especially in countries where reforms have the reform process. Electricity tariffs should be designed for full cost been halting or where earlier reforms have been reversed. The recovery and sustainability. Regulations can also be used to provide additional measures needed to attract private investment may incentives for improving operating conditions. include arrangements in which the government shares risk with Investment climate. Perhaps the most important element to private investors until the preconditions for viability are met. foster a positive investment climate is the political will to sustain Planning. A centralized planning process is required to ensure “Liberalization is a long reform efforts and policies. Liberalization is a long process rather that only lines that lead to least-cost expansion are selected for process rather than a than a single event; it requires an ongoing commitment by the gov- implementation by the private sector. In Peru poor planning resulted single event; it requires an ernment to resolve challenges when vested interests and cross-sub- in the development of a radial transmission system that raised sidies are exposed (IEA 2005). Valuing predictable conditions to risks of congestion, did not promote energy efficiency, failed to ongoing commitment by manage risks and avoid threats to investment returns, private contribute to regional energy integration, and failed to improve one the government to resolve investors attach great importance to stability and adherence to laws of the lowest rates of access to electricity in rural Latin America. challenges when vested and contracts. For that reason, a credible regulatory system requires The planning process should identify cost-effective projects in a interests and cross- more than a new regulatory body. Effective commercialization of the subsidies are exposed.” transmission system cannot be achieved even under private ownership if politicians continue to interfere in procedures (Besant- Jones 2006). Extending beyond the power sector, a stable macroeconomic environment (including low inflation), sound taxation policies, access to foreign exchange, and fiscal prudence, are important for attracting private investment (Besant-Jones 2006). Even after reforms are introduced, early investors may need additional assurances or incentives to cover perceived risks. In Kenya, where reforms did not provoke suffi- cient interest in the private sector, guaran- tees from the World Bank Group and direct capital injections from the International Finance Corporation were needed to boost investor confidence. Under a new and untested reg- ulatory regime, specific contractual arrangements may be needed to provide stability and credibility for private investors Photo: Thinkstock 6 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k transparent manner, thereby increasing the credibility of the regula- References Make further tory framework (World Bank 2012). Besant-Jones, J. 2006. Reforming Power Markets in Developing connections Planning for power system expansion should be proactive, Countries: What Have We Learned? Washington, DC: World Bank. transparent, and based on solid forecasting and analysis. Given the Gassner, K., A. Popov, and N. Pushak. 2009. Does Private Sector Live Wire 2014/1. gestation period of projects, planning should be done in advance, so Participation Improve Performance in Electricity and Water “Transmitting Renewable that the transmission network keeps up with growing demand and Distribution? World Bank, Washington, DC. Energy to the Grid,” by new capacity. Projects must be executed in line with the schedules IEA (International Energy Agency). 2005. Lessons from Liberalised Marcelino Madrigal and proposed in the expansion plan. Procurement and licensing pro- Electricity Markets. Paris. http://www.iea.org/publications/free- Rhonda Lenai Jordan. cesses must not be allowed to cause delays. publications/publication/lessonsnet.pdf. Right-of-way acquisition and permitting and licensing processes Live Wire 2014/17. IMF (International Monetary Fund). 2013. Energy Subsidy Reform in can discourage the private sector from implementing projects. In “Incorporating Energy from Sub-Saharan Africa: Experiences and Lessons. Washington, DC. Peru disputes over development of transmission lines and other Renewable Resources into https://www.imf.org/external/pubs/ft/dp/2013/afr1302.pdf. infrastructure have stalled several major projects, jeopardizing Power System Planning,” Joskow, P . 2008.”Lessons Learned From Electricity Market system security and reliability. Developers there are responsible for by Marcelino Madrigal and Liberalization.” Energy Journal (Special issue entitled “The Future obtaining social and environmental licenses, but this function could Rhonda Lenai Jordan. of Electricity: Papers in Honor of David Newbery”): 9–42. be better performed by the public entity. UNESCAP (United Nations Economic and Social Commission for Asia Restructuring and reforms should factor in possible loss of and the Pacific). 2011. A Guidebook on Public-Private Partnership jobs. On average, state-operated utilities employ more people than in Infrastructure. Bangkok: United Nations. http://www.unescap. privately run ones to produce the same level of output, as exempli- org/sites/default/files/ppp_guidebook.pdf. fied in Peru (World Bank 2012). Gains in labor productivity following World Bank. 2012. International Experience with Private Sector the introduction of the private sector are usually linked to a reduction Participation in Power Grids: Peru Case Study. Washington, DC. in staff (Gassner, Popov, and Pushak 2009). Policy makers need to ———. 2015. “Expanding on the methodology described on PPI weigh the tradeoff between an increase in output and service quality database site.” http://ppi.worldbank.org/resources/ppi_method- and a reduction in staff, keeping in mind that staff reductions can ology_expanded.aspx. occur over several years and are usually small relative to the national labor force. The authors acknowledge comments received from Luiz T. A. Maurer. The authors also appreciate the support of Ruchi Soni and Morgan Bazilian, of the World Bank’s Energy and Extractives Global Practice. 7 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k Get Connected to Live Wire Live Wires are designed for easy reading on the screen and for downloading The Live Wire series of online knowledge notes is an initiative of the World Bank Group’s Energy and self-printing in color or “Live Wire is designed and Extractives Global Practice, reflecting the emphasis on knowledge management and solu- black and white. tions-oriented knowledge that is emerging from the ongoing change process within the Bank for practitioners inside Group. For World Bank employees: and outside the Bank. 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Once a year, the Energy and Extractives Global Practice takes stock of all notes that appeared, reviewing their quality and identifying priority areas to be covered in the following year’s pipeline. Please visit our Live Wire web page for updates: http://www.worldbank.org/energy/livewire e Pa c i f i c 2014/28 ainable energy for all in easT asia and Th 1 Tracking Progress Toward Providing susT TIVES GLOBAL PRACTICE A KNOWLEDGE NOTE SERIES FOR THE ENERGY & EXTRAC THE BOTTOM LINE Tracking Progress Toward Providing Sustainable Energy where does the region stand on the quest for sustainable for All in East Asia and the Pacific 2014/29 and cenTral asia energy for all? in 2010, eaP easTern euroPe sT ainable en ergy for all in databases—technical measures. This note is based on that frame- g su v i d i n had an electrification rate of Why is this important? ess Toward Pro work (World Bank 2014). SE4ALL will publish an updated version of 1 Tracking Progr 95 percent, and 52 percent of the population had access Tracking regional trends is critical to monitoring the GTF in 2015. to nonsolid fuel for cooking. the progress of the Sustainable Energy for All The primary indicators and data sources that the GTF uses to track progress toward the three SE4ALL goals are summarized below. consumption of renewable (SE4ALL) initiative C T I V E S G L O B A L P R A C T I C E ENERGY & EXTRA • Energy access. Access to modern energy services is measured T E S E R I E S F O R T H EIn declaring 2012 the “International Year of Sustainable Energy for energy decreased overall A KNO W L E D G E N Oand 2010, though by the percentage of the population with an electricity between 1990 All,” the UN General Assembly established three objectives to be connection and the percentage of the population with access Energy modern forms grew rapidly. d Providing Sustainable accomplished by 2030: to ensure universal access to modern energy energy intensity levels are high to nonsolid fuels.2 These data are collected using household Tracking Progress Towar services,1 to double the 2010 share of renewable energy in the global surveys and reported in the World Bank’s Global Electrification but declining rapidly. overall THE BOTTOM LINE energy mix, and to double the global rate of improvement in energy e and Central Asia trends are positive, but bold Database and the World Health Organization’s Household Energy for All in Eastern Europ efficiency relative to the period 1990–2010 (SE4ALL 2012). stand policy measures will be required where does the region setting Database. The SE4ALL objectives are global, with individual countries on that frame- on the quest for sustainable to sustain progress. is based share of renewable energy in the their own national targets databases— technical in a measures. way that is Thisconsistent with the overall of • Renewable energy. The note version energy for all? The region SE4ALL will publish an updated their ability energy mix is measured by the percentage of total final energy to Why is this important ? spirit of the work initiative. (World Bank Because2014). countries differ greatly in has near-universal access consumption that is derived from renewable energy resources. of trends is critical to monitoring to pursue thetheGTF in 2015. three objectives, some will make more rapid progress GTF uses to Data used to calculate this indicator are obtained from energy electricity, and 93 percent Tracking regional othersindicators primary will excel and data sources that elsewhere, depending on their the while the population has access le Energy for All in one areaThe goals are summarized below. balances published by the International Energy Agency and the the progress of the Sustainab respective track starting progress pointstowardand the three SE4ALL comparative advantages as well as on services is measured to nonsolid fuel for cooking. access. Accessthat they modern to are able to energy marshal. United Nations. despite relatively abundant (SE4ALL) initiative the resources and support Energy with an electricity connection Elisa Portale is an l Year of Sustainable Energy for To sustain percentage of by the momentum forthe the population achievement of the SE4ALL 2• Energy efficiency. The rate of improvement of energy efficiency hydropower, the share In declaring 2012 the “Internationa energy economist in with access to nonsolid fuels. three global objectives objectives, andathe means of charting percentage of the population global progress to 2030 is needed. is approximated by the compound annual growth rate (CAGR) of renewables in energy All,” the UN General Assembly established the Energy Sector surveys and reported access to modern universalAssistance The World TheseBank and data are the collected International using household Energy Agency led a consor- of energy intensity, where energy intensity is the ratio of total consumption has remained to be accomplished by 2030: to ensure Management Database and the World of theenergy intium of 15 renewable international in the World Bank’s Global agencies toElectrification establish the SE4ALL Global primary energy consumption to gross domestic product (GDP) energy the 2010 share of Program (ESMAP) relatively low. very high energy services, to double Database. measured in purchasing power parity (PPP) terms. Data used to 1 t ’s Household provides Energy a system for regular World Bank’s Energy the global rate of improvemen and Extractives Tracking Framework Health (GTF), which Organization in the energy intensity levels have come and to double the global energy mix, Global Practice. (SE4ALL 2012). based on energy. of renewable The sharepractical, rigorous—yet energy given available calculate energy intensity are obtained from energy balances to the period 1990–2010 global reporting, Renewable down rapidly. The big questions in energy efficiency relative setting by the percentage of total final energy consumption published by the International Energy Agency and the United evolve Joeri withde Wit is an countries individual mix is measured Data used to are how renewables will The SE4ALL objectives are global, economist in with the overall from renewable energy when every resources. person on the planet has access Nations. picks up a way energy that is consistent 1 The universal derived that isaccess goal will be achieved balances published when energy demand in from energy their own national targets through electricity, clean cooking fuels, clean heating fuels, rates the Bank’s Energy and countries differ greatly in their ability calculate this indicator are obtained to modern energy services provided productive use and community services. The term “modern solutions” cookingNations. again and whether recent spirit of the initiative. Because Extractives Global rapid progress and energy for Energy Agency and the United liquefied petroleum gas), 2 Solid fuels are defined to include both traditional biomass (wood, charcoal, agricultural will make more by the refers to solutions International that involve electricity or gaseous fuels (including is pellets and briquettes), and of decline in energy intensity some t of those of efficiency energy and forest residues, dung, and so on), processed biomass (such as to pursue the three objectives, Practice. depending on their or solid/liquid fuels paired with Energy efficiency. The rate stoves exhibiting of overall improvemen emissions rates at or near other solid fuels (such as coal and lignite). will excel elsewhere, rate (CAGR) of energy will continue. in one area while others liquefied petroleum gas (www.sustainableenergyforall.org). annual growth as well as on approximated by the compound and comparative advantages is the ratio of total primary energy respective starting points marshal. where energy intensity that they are able to intensity, measured in purchas- the resources and support domestic product (GDP) for the achievement of the SE4ALL consumption to gross calculate energy intensity Elisa Portale is an To sustain momentum terms. Data used to charting global progress to 2030 is needed. ing power parity (PPP) the International energy economist in objectives, a means of balances published by the Energy Sector International Energy Agency led a consor- are obtained from energy The World Bank and the SE4ALL Global Energy Agency and the United Nations. Management Assistance agencies to establish the the GTF to provide a regional and tium of 15 international for regular This note uses data from Program (ESMAP) of the which provides a system for Eastern Tracking Framework (GTF), the three pillars of SE4ALL World Bank’s Energy and Extractives on rigorous—yet practical, given available country perspective on Global Practice. global reporting, based has access Joeri de Wit is an will be achieved when every person on the planet The universal access goal heating fuels, clean cooking fuels, clean energy economist in 1 agricultural provided through electricity, biomass (wood, charcoal, to modern energy services The term “modern cooking solutions” to include both traditional and briquettes), and Solid fuels are defined the Bank’s Energy and use and community services. biomass (such as pellets 2 and energy for productive petroleum gas), and so on), processed fuels (including liquefied and forest residues, dung, involve electricity or gaseous at or near those of Extractives Global refers to solutions that overall emissions rates other solid fuels (such as coal and lignite). with stoves exhibiting Practice. or solid/liquid fuels paired (www.sustainableenergyforall.org). liquefied petroleum gas 8 P r i v a t e S e c t o r P a r t i c ipa t io n i n T r a n s m issio n S y s t e m s : Ma k i n g I t W o r k Contribute to If you can’t spare the time to contribute to Live Wire, but have an idea for a topic, or case we should cover, let us know! 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Morgan Bazilian, mbazilian@ worldbank.org) Live Wire aims to raise the profile of operational staff wherever they are based; those with hands-on knowledge to share. That’s your payoff! It’s a chance to model good uroPe and cenT ral asia 2014/29 all in easTern e ble energy for “knowledge citizenship” and participate in the ongoing change process at the Bank, v i d i n g s u s Ta i n a ess Toward Pro 1 Tracking Progr where knowledge management is becoming everybody’s business. A KNOWLEDGE NOT E SERIES FOR THE ENERGY & EXTRACT IVES GLOBAL PRAC TICE rgy Providing Sustainable Ene Tracking Progress Toward Or 2014/5 1 U n d e r s ta n d i n g C O 2 emissiOns frOm the glObal energy seCt THE BOTTOM LINE pe and Cen tral Asia for All in Eastern Euro stand where does the region on the quest for sustaina ble based on that frame- measures. This note is databases—technical updated version of energy for all? The region SE4ALL will publish an has near-universal access to WhyD is this important? ERGY PRACTICE work (World Bank 2014). E G E N O T E S E R I E S F O R T H E E N to electricity, and 93 percent of A K N O W L g regiona l trends is critical monitoring the GTF in 2015. data sources that the GTF uses to Trackin The primary indicator s and the population has access s of the Sustain able Energy for All the three SE4ALL goals are summari zed below. the progres track progress toward Understanding CO Emissions from the Global Energy Sector nonsolid fuel for cooking. is measured to modern energy services THE BOTTOM LINE to Your Name Here t (SE4ALL) initiativ e Energy access. Access connection despite relatively abundan 2 population with an electricity ional Year of Sustainab le Energy for by the percentage of the access to nonsolid fuels. 2 hydropower, the share the energy sector contributes In declaring 2012 the “Internat objectives percenta ge of the population with establish ed three global and the and reported about 40 percent of global of renewables in energy All,” the UN General Assembly using household surveys Why is this issue important? access to modern These data are collected 2030: to ensure universal and the World Become an author has remained emissions of CO2. three- consumption to be accomplished by of renewable energy in in the World Bank’s Global Electrification Database high energy knowledge the share of the 2010 . energy requires very relatively low. Mitigating climate change services, to 1 double ld Energy Database quarters of those emissions rate of improvement Organization’s Househo CO2 intensity levels have come and to double the global Figure 1. CO2 emissions Health Figure 2. energy-related The share of renewable energy in the energy come from six major the global energy mix, sources of CO question s2 emissions to the period 1990–201 0 (SE4ALL 2012). by sector Renewab le energy. emissions by country consumption down rapidly. The big economies. although coal-fired in energy efficiency relative countries setting percenta ge of total final energy mix is measured by the of Live Wire and global, with individual LICs evolve les will opportunities to cut emissions of greenhouse aregases used to plants account for just are how renewab Identifying The SE4ALL objectives le energy resources. Data 0.5% picks upunderstanding of the main sources ofin those a way that is consistent with emis- the overall that is derived from renewab energy balances published 40 percent of world energy when energy demand requires a clear their own national targets in their ability are obtained from calculate this indicator Other Carbonrates for more than 80 percent of differ greatly countries Residential production, they were again and whethersions.recent dioxide (CO2) accounts spirit of the initiative. Because 6% sectors progress Other MICs nal Energy Agency and the United Nations. will make more rapid 15% intensity gas emissions globally, 1 primarily from the burning s, some 10% by the Internatio China improvement of energy efficiency is contribute to your responsible for more than of decline in energytotal greenhouse to pursue the three objective on their Other HICs . The rate of energy sector—defined include toexcel elsewhere, depending Energy efficiency 30% growth rate (CAGR) of energy will continue. of fossil fuels (IFCC 2007). The will 8% in one area while others by the compound annual Energy 70 percent of energy-sector as well as on 41% approxim and heat generation—contributed and compara tive advantages 41 ated Japan 4% energy the ratio of total primary Industry emissions in 2010. despite fuels consumed for electricity respective starting points 20% Russia energy intensity is that they are able to marshal. in 2010 (figure 1). Energy-related intensity, where USA product (GDP) measured in purchas- improvements in some percent of global CO2 emissions the resources and support 7% gross domestic practice and career! up the bulk of such ent of the SE4ALL Other consump tion to India 19% intensity is an at the point of combustion make for the achievem calculate energy countries, the global CO2 Elisa 2 emissions COPortale To sustain momentum transport Road 7% EU terms. Data used to andinare generated by the burning of fossil is needed. global progress to 2030 6% transport fuels, industrial ing power parity (PPP) the International economist objectives, a means of charting balances published by emissions 11% emission factor for energy energy 16% EnergyandSector nonrenewable municipal waste to generate nal Energy Agency led electricity Internatio a consor- are obtained from energy The World Bank and the thewaste, generation has hardly changed United Nations. ent Assistance venting and leakage to establish the emissions SE4ALL Global Energy Agency and the sector at the point and over the last 20 years. and heat. Black carbon and methane Managem tium of 15 international agencies Notes: Energy-related CO2 emissions are CO2 emissions from the energy from the GTF to provide a regional of the for regular This note usesanddata domestic Program (ESMAP) are not included in the analysis presented in this rk note. which provides a system (GTF), of combustion. Other Transport includes international marine aviation bunkers, of SE4ALL for Eastern Extractives Tracking Framewo available Other Sectors rail and pipeline transport; perspect ive on the three include pillars commercial/public World Bank’s Energy and given aviation and navigation, country on rigorous—yet practical, services, agriculture/forestry, fishing, energy industries other than electricity and heat genera- Global Practice. global reporting, based elsewhere; Energy = fuels consumed for electricity and Where do emissions come from? tion, and other emissions not specified as has in the opening paragraph. HIC, MIC, and LIC refer to high-, middle-, access Joeri de Wit is an will be achieved when on the planet heat generation, every person defined The universal access goal of countries heating fuels, energy economistare Emissions concentrated in 1 in a handful to modern energy services provided through electricity, fuels, clean and low-income clean cooking countries. cooking solutions” to include both traditional biomass (wood, charcoal, agricultural The term “modern Source: IEA 2012a. Solid fuels are defined and briquettes), and the Bank’s Energy and use and community services. biomass (such as pellets 2 and come primarily from burning and energy coal for productive electricity or gaseous fuels involve (including liquefied petroleum gas), of and forest residues, dung, and so on), processed Vivien Foster is sector Extractives Global refers to solutions that overall emissions rates at or near those other solid fuels (such as coal and lignite). with stoves exhibiting or solid/liquid fuels paired emissions closely manager for the Sus- The geographical pattern of energy-related CO Practice. gas 2 (www.sustainableenergy forall.org). liquefied petroleum middle-income countries, and only 0.5 percent by all low-income tainable Energy Depart- mirrors the distribution of energy consumption (figure 2). In 2010, ment at the World Bank countries put together. almost half of all such emissions were associated with the two (vfoster@worldbank.org). Coal is, by far, the largest source of energy-related CO2 emissions largest global energy consumers, and more than three-quarters globally, accounting for more than 70 percent of the total (figure 3). Daron Bedrosyan were associated with the top six emitting countries. Of the remaining works for London This reflects both the widespread use of coal to generate electrical energy-related CO2 emissions, about 8 percent were contributed Economics in Toronto. power, as well as the exceptionally high CO2 intensity of coal-fired by other high-income countries, another 15 percent by other Previously, he was an power (figure 4). Per unit of energy produced, coal emits significantly energy analyst with the more CO emissions than oil and more than twice as much as natural 2 World Bank’s Energy Practice. Gas Inventory 1 United Nations Framework Convention on Climate Change, Greenhouse 0.php gas. Data—Comparisons By Gas (database). http://unfccc.int/ghg_data/items/380