1 Supporting Hydropower: An Overview of the World Bank Group’s Engagement 2014/36 This note is a joint product of the World Bank’s Energy and Extractives Global Practice and Water Global Practice. A Knowledge Note Series for the Energy & Extractives Global Practice 91154 The bottom line Supporting Hydropower: Hydropower development makes an essential contribution An Overview of the World Bank Group’s Engagement to reducing poverty, boosting shared prosperity, and Why is supporting sustainable hydropower economically with other large-scale energy generation technologies, improving sustainability. Water such as gas- and coal-fired plants. storage associated with some important for the World Bank Group? Large-scale hydropower is flexible and reliable. Hydropower hydropower projects can also Hydropower potential exists where electricity plants provide an almost instantly available source of power, make important contributions is most needed whereas other large-scale technologies can take hours or even days to water and food security to raise or lower their output. Hydropower can therefore be used to and to climate resilience. The In contrast to the industrialized world, where most of the available rapidly balance supply and demand in a national or regional power World Bank Group thus uses hydropower resources are being exploited, only a fraction of the system, thereby reducing the risk of power cuts for consumers. The multiple instruments to support hydropower potential of the developing world has been tapped. need for such system regulation becomes even more critical as more sustainable and responsible The United Nations’ Sustainable Energy for All (SE4ALL) initiative has intermittent power sources (such as wind and solar energy) come to hydropower projects of various identified 20 countries that together account for about two-thirds of supply the system. sizes and types, depending on the global deficit in access to electricity—some 750 million people local need. But hydropower can in all (World Bank and IEA 2013). Of also carry significant risks that these 20 countries, 14 have developed must be carefully managed. less than a third of their hydropower William Rex is a lead water Julia Bucknall is a practice potential—resources that could be resources specialist in the manager in the Energy and Extractives The World Bank Group is harnessed to benefit people who Water Global Practice. Global Practice. committed to helping its clients continuously improve the way currently lack access to electricity. they approach hydropower so Hydropower production is the least- as to better manage its risks cost method of providing electricity in Vivien Foster is a practice Rikard Liden is a senior and better share the benefits of many developing countries. In addition manager in the Energy and hydropower specialist in the this renewable resource. to being the largest and most readily Extractives Global Practice. Water Global Practice. scalable form of renewable power generation currently available, it is also often the cheapest, with an average levelized cost of $0.03–0.05 per kWh, Kimberly Lyon is a water according to the Intergovernmental policy specialist in the Water Panel on Climate Change (Kumar Global Practice. and others 2011). At such a low cost, hydropower can also compete 2 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Figure 1.  Hydropower potential, access to electricity, and its work on hydropower, the World Bank Group focuses on avoiding access deficit in 20 “high-impact” countries or mitigating these risks while helping countries capture the wide 100 range of benefits that hydropower offers. Country (group) Indonesia Pakistan Low hydro potential 90 High hydro potential How is the World Bank Group supporting sustainable hydropower? Philippines “Hydropower accounts 80 The World Bank Group has been steadily India for more than 80 percent 70 percentage access to electricity of the world’s installed scaling up its support for hydropower 60 renewable power Bangladesh The direction set in the World Bank’s 2003 Water Resources Strategy generation capacity, 50 Myanmar Nigeria (World Bank 2004) was confirmed in mid-2013 when the organiza- significantly reducing tion’s board emphasized the importance of hydropower in combat- 40 Afghanistan ting extreme poverty in an environmentally and socially sustainable reliance on the fossil way (World Bank 2013). Over the period 2002–14, World Bank Group 30 fuels responsible for Ethiopia Sudan Korea, Dem. Rep. funding of more than $8.8 billion has contributed to the installation or climate change.” 20 Congo, Dem. Rep Kenya restoration of 17 GW of hydropower (figure 2)—enough to meet the Tanzania Uganda Mozambique energy needs of Belgium.1 Madagascar 10 Burkina Faso Malawi The World Bank Group supports the responsible development of Niger hydropower projects of all sizes and types. Small-scale projects are 0 0 10 20 30 40 50 60 70 80 90 100 meeting the critical energy needs of rural communities and powering percentage of hydro resources exploited their economic development. Medium- to large-scale hydropower Source: World Bank and IEA 2013; IJHD 2013. projects power schools, factories and clinics, and deliver electricity Note: Size of bubbles indicates deficit in access to electricity. The deficit ranges from 13.6 million to the growing urban population who previously lived without people in Malawi to 306.2 million in India. reliable electricity. More than half of the projects supported by the World Bank Group are run-of-river projects that do not involve the construction of large dams. Around half of the hydropower plants Hydropower directly helps combat climate change. Currently, supported by the World Bank Group are smaller than 30 MW in hydropower accounts for more than 80 percent of the world’s capacity (figure 3). installed renewable power generation capacity (EIA 2013), signifi- The World Bank Group helps countries address the regional cantly reducing reliance on the fossil fuels responsible for climate dimensions of hydropower. When a hydropower facility is built on change. The Economist (September 20, 2014) suggests that, globally, a river that crosses international boundaries the countries affected hydropower reduces annual emissions by 2.8 billion tons of CO2 must cooperate to optimize the facility’s design and make it sustain- equivalent every year. In addition, multipurpose hydropower delivers able. The Rusumo Falls hydropower project offers a good example benefits from water storage, which improves the security of water of how regional cooperation can lead to regional benefits—new supplies for household consumption and irrigation. and much needed electricity for Burundi, Rwanda, and Tanzania. In However, hydropower can also have significant challenges. this project the World Bank played an important role in brokering an Depending on the nature of the project and the way it is managed, it can have negative social and environmental impacts, can be sub- 1 The International Bank for Reconstruction and Development and the International ject to significant cost inflation owing to hydrological or geological Development Association make up the World Bank. In addition to IBRD and IDA, the World Bank Group includes the International Finance Corporation (IFC), the Multilateral Investment Guaran- surprises, can miss production targets, and can pose safety risks. In tee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID). 3 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Figure 2. World Bank Group lending for hydropower development, fiscal years 1991–2014 2,200 World Bank commitments 3,000 IFC commitments 1,800 Three-year moving average 1,600 US$ (millions) 1,400 “More than half of the 1,200 1,000 hydropower projects 800 supported by the 600 400 World Bank Group are 200 0 run-of-river or small 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 projects that do not Fiscal year involve the construction Source: World Bank. of large dams. Around Note: Lending volumes represent funding for hydropower components in the year of approval. Volume of lending does not necessarily reflect the numbers of projects supported, since it is heavily influenced by the relative cost of projects and the proportion of total project financing that contributed by the World Bank Group. half … are smaller than 30 MW in capacity.” Figure 3. Focus, type, and size of hydropower plants supported by the World Bank Group, 2002–14 Pumped storage > 1,000 MW < 1 MW Small hydro 3% Rehabilitation 6% 8% and extension Greenfield program 8% Storage 26% 41% 41% 200–1,000 MW 18% Off-grid and microhydro 23% 1–15 MW 31% 100–200 MW 8% 50–100 MW 11% Studies, planning, and 15–50 MW technical assistance Run-of-river 25% 18% 33% Source: World Bank. Note: Figures in center chart are for greenfield and rehabilitation projects only. 4 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Figure 4.  Countries benefiting from World Bank Group support for hydropower, An important element in this broader per- 2002–14 spective may be the need to look at the combined impacts and opportunities of multiple projects. Cumulative impact assessments are an important tool for developing this understanding. Such broader perspectives help countries do the right “A hydropower facility projects. can have important While ideally each country would follow the regional benefits by systematic approach described above, many countries do not have the resources to do such feeding energy into a comprehensive planning, and when assessments regional power pool. and plans are financed by third parties, they may In some instances, it is have limited capacity to absorb and prioritize the the ability to sell power wide range of data and perspectives that have regionally that makes been provided. Further, many developing countries Category face urgent development needs. Wishing to meet a hydropower project Lending Lending + Technical Assistance those needs as quickly as possible, they may end ‘bankable.’” WBG Technical Assistance up trading off potentially bigger long-term benefits against short-term demands. For these reasons, Source: World Bank. the World Bank Group also works with countries to develop their planning capacity and governance approach that ensured that each country benefited fairly from the systems, while accepting that doing so is a long-term process. project. Whether or not it lies on a shared river, a hydropower facility Effective hydropower governance requires institutions that can have important regional benefits by feeding energy into a regional engage multiple parts of government, such as energy, water, power pool. In some instances, such as in Lao PDR, it is the ability to environment, health, labor, agriculture, and local government. It sell power regionally that makes a hydropower project “bankable.” also requires clear regulations and standards (including for social A key upstream challenge for many of the World Bank Group’s and environmental issues); coherent approaches to project finance, clients is how to manage their hydropower sector as a whole, royalty regimes, and benefit sharing; and strong capacity for monitor- including prioritization of potential projects based on benefits and ing and enforcement. The World Bank Group assists clients in several risks. Selecting and sequencing projects with reference to the broad of these areas, including water resource management and technical development picture is part of the support that the World Bank assistance programs focused on hydropower governance. Group provides to governments and regional power pools. In addition Over the last decade, the World Bank Group has provided techni- to energy needs, the process takes into account other uses of water, cal assistance for hydropower development in 50 countries, demon- notably water supply for households, industry, and agriculture, strating that its contribution is much broader than project finance navigation, fisheries, and environmental services. (figure 4). An example is the World Bank Group’s support for the Planning often requires a river-basin perspective and a long-term Indian state of Himachal Pradesh, which has included a development outlook, particularly given the role that climate change will play in policy loan triggered by lending for the Nathpa Jhakri and Rampur increasing the variability of water available for energy as well as the hydropower projects. The development policy loan includes actions need for water storage. aimed at building the state’s capacity to do integrated planning for 5 Supporting Hydropower: An Overview of the World Bank Group’s Engagement hydropower at the river-basin level. It led to a state law that returns design of mitigation and compensation programs, and the 1 percent of hydropower revenues to local communities. systematic implementation and monitoring of these programs. The public and private sectors both have important roles to play in hydropower development. By combining the private sector The World Bank Group is committed to continued analytic work investment and advisory work of IFC with the public sector focus of and partnerships aimed at improving the practice of sustainable the World Bank, the World Bank Group can help countries across the hydropower over time. Over the last decade a number of nongovern- “Planning often requires investment and policy landscape. In Nepal, for example, the World mental organizations in the environmental field, including WWF and a river-basin perspective Bank Group is working on a joint 3,000 MW program that spans the The Nature Conservancy, have reached out to the World Bank Group and a long-term outlook, private and public sectors. to improve the way that hydropower is developed globally. The World Bank Group can help governments develop their Such constructive dialog has helped the World Bank Group to particularly given the role hydropower potential in an optimal way. Hydropower projects are reflect on its own experience and practices and to consider how that climate change will complex, with significant financial, technical, social, and environ- various stakeholders can contribute to more sustainable practices play in increasing the mental risks. Doing such projects right requires extensive feasibility globally. The private sector, governments, NGOs, and multilateral variability of water available work, detailed environmental and social assessment, a well-designed organizations (including the World Bank Group) came together to for energy as well as the contractual and financing package, mechanisms that share benefits define the Hydropower Sustainability Assessment Protocol, which with the local community, and a rigorous approach to implementa- provides a useful and comprehensive framework for hydropower need for water storage. “ tion. Developing countries often lack the resources and capacity to developers to monitor and benchmark the performance of their do this preparatory work adequately, to negotiate with developers projects. The World Bank Group will continue to engage with the or contractors from a position of strength, and to supervise imple- forum that governs the Protocol to encourage its use and improve mentation effectively. Other sources of investment may not always the tool over time. place a high priority on long-term sustainability, which can result in Even though the World Bank Group accounts for only about 2 additional expenses, less-reliable power generation, unmitigated percent of worldwide investments in hydropower, some countries— social and environmental impacts, and lower economic returns. especially the poorest ones—rely heavily on concessional funding and Based on decades of experience, as well as constant learning its leveraging effect. The World Bank typically acts as a “convener,” from successes and mistakes, the World Bank Group can help bringing other financiers to the table. In fact, over the last five years, countries and companies prepare and implement hydropower the World Bank Group has only had to cover around half of the costs projects in the most sustainable way, helping them make the most of of the projects that it finances (55 percent), with the balance coming their scarce natural hydropower resources. Hydropower needs to be from other players, such as host country governments (19 percent), sustainable on at least three dimensions: the private sector (15 percent) and other development banks (10 • Physical sustainability, which is driven by design, construction, percent) (figure 5). In the case of Nam Theun 2 in Lao PDR (box 1), the operation, and maintenance of the hydropower plant and related World Bank Group contributed less than 2 percent of project financing, physical assets but through careful project structuring and guarantees, and by working with partners, the full project costs of $1.35 billion were met. • Financial sustainability, which relates to the realism of planning The World Bank Group supports only hydropower projects of and cost estimation, the terms and tenor of the financing demonstrated economic viability. For all projects the Group carefully package, delays in the commencement of operations, and assesses the macroeconomic and fiscal effects and risks of its financial returns once operations have begun investments on the national economy of the country. Because the • Social and environmental sustainability, which relates to the World Bank Group learns from its experiences, the costs estimated at quality and comprehensiveness of impact assessments, the the time a decision is made to go forward with a project have been relatively close to actual costs in most cases, with some coming 6 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Figure 5. Financing for World Bank projects that support hydropower, 2010–14 Private sector 15.5% IBRD Bank financing 27.6% 55% “Even though the World All other Multilateral/ financing bilateral Bank Group accounts 45% institutions 10.2% for only 2 percent of $7.67 billion $7.67 billion worldwide investments in hydropower … over the last decade it Borrower/ recipient provided technical 19.4% IDA Other Bank assistance in 50 countries, financing 27.1% 0.2% demonstrating that its Source: World Bank. contribution is much Note: IBRD = International Bank for Reconstruction and Development; IDA = International Development Association. IBRD and IDA make up the World Bank. Financing is for all components of the projects and not just the hydropower components. broader than project finance.” Box 1. Nam Theun 2—Lao PDR The 1,080 MW Nam Theun 2 (NT2) project generates 1,000 MW for export and the remainder for the local grid. Because NT2 had significant social and environmental impacts, measures were put in place to mitigate these impacts and to provide benefits at multiple levels. • At the national level, the project provides revenue, electricity, and growth. Through export sales, NT2 will yield about $2 billion in government revenues over the 25-year concession period, with that revenue to be used by the government to reduce poverty and protect the environment. Electricity genera- tion targets have been exceeded in every year of commercial operations to date. For example, in 2013 NT2 exceeded its export generation target by 10 percent and its domestic generation target by 26 percent. As a result NT2 has also been generating higher-than-expected revenue for the government. Finally, NT2 has had a significant impact on broader economic growth, adding 3 percent to GDP growth in the year that power production started. • At the local level, NT2 provided resettlers with high-quality housing, electricity, and improved water sources that they did not have before, as well as community infrastructure such as schools, health centers, and roads. A comprehensive livelihood support program was also put in place. As a result, school enrollment among 5–9 year olds has jumped from 31 percent to 90 percent, and access to improved sanitation is now at 93 percent, compared with 32 percent before the project. A 2013 household survey suggests that 97 percent of households have met the household income target. The focus is now on transferring program components to local communities and ensuring the sustainability of project benefits. • At the regional level, the export of energy to Thailand (5,636 GWh a year were planned; more than 6,000 GWh are actually being delivered) provides about 4 percent of Thailand’s energy consumption, reducing its dependence on fossil fuels and its average cost of power. • At the global level, NT2 will help avoid greenhouse gas emissions equivalent to about 45 million metric tons of CO2 over its lifetime, after accounting for reservoir emissions. Over a similar time frame, the World Bank Group has also supported a significant government rural electrification program (including some off-grid small hydro), which raised national access rates to 78 percent in 2011 from 46 percent in 2000. Lao PDR is an example of how big and small hydropower can play complementary roles. Source: World Bank. 7 Supporting Hydropower: An Overview of the World Bank Group’s Engagement in below estimated costs. On average, across the eight projects Table 1. Estimated cost compared to actual project cost for that have been completed in the last decade (table 1), actual costs recently commissioned World Bank Group projects of investment have been only 1 percent higher than original cost estimates. However, in small, fragile countries, controlling costs Estimated cost Actual cost Percentage can be challenging, as exemplified by the Felou HPP project. In this Project ($million) ($million) variation “On average … actual case, a combination of technical and governance issues significantly Yixing Pumped Storage 583 516 –12 costs of investment have increased the total cost of the project. project been only 1 percent Nam Theun 2 HPP 1,450 1,308 –10 What has been the impact of the World Bank Group’s higher than original cost support for hydropower? Bujagali HPP 798 900 13 estimates.” World Bank Group support for hydropower helps Rampur HEP 670 697 4 manage risks and can yield local, national, regional, Cuijiaying Multipurpose 211 254.2 20 and global benefits project Naji and Xiniu Multipurpose 250 219 –12 The World Bank Group’s social and environmental safeguards (and projects performance standards) provide a strong platform for managing Hubei HPPs (6 projects) 259 287 10 the social and environmental risks associated with hydropower. The effective implementation of these safeguards is thus a core focus of Felou HPP 100 176 76 the Group’s approach. The multiple benefits of hydropower, accompanied by the World Total 8 projects 4,321 4,357 1 Bank Group’s unique blend of support, create opportunities for local communities, advance national and regional power security, reduce Source: World Bank. global emissions of greenhouse gases, and improve practices for sustainable hydropower. With the right planning and management, a single project can deliver benefits at multiple levels (see, for example, peaking power will spur development of a functioning electricity box 1). market, helping to meet one of the key requirements for technical Many new projects supported by the World Bank Group have harmonization with the electricity market of the European Union and increased the reliability of power supply for consumers. With its increasing interconnection with the EU power grid. A third example unique ability to start and stop power production within seconds, consists of the recent Nathpa Jhakri (1,500 MW) and Rampur (412 hydropower can play a vital role in balancing and controlling a MW) projects in Himachal Pradesh, which have enabled India’s country’s power system. Developing countries often seek to develop northern electricity grid to deliver power at the correct frequency, hydropower because they have an urgent need to increase that thus avoiding the risk of power cuts (box 3). control. The Bujagali project in Uganda played such a role (box 2) by Most of the hydropower projects supported by the World Bank bringing an end to daily load shedding during peak demand. The reli- Group lower the average cost of power generation in the country. In ability and availability of Uganda’s power supply improved because all projects, hydropower has been selected as the least-cost alter- of Bujagali, leading to increased commercial and industrial activity. A native available. For that reason, it ultimately contributes to lowering second example is the ongoing Ukraine Rehabilitation project, which national energy costs—quite substantially in some cases (table 2). As addresses the acute shortage of regulating capacity in the Ukraine an example, the Dasu project in Pakistan is expected to reduce the power grid. Increasing hydropower capacity and the production of average power production cost for the energy utility by 16 percent, 8 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Box 2. Bujagali Hydropower Plant, Uganda Bujagali, a 250 MW run-of-river hydropower plant, was commissioned in 2012. Currently the largest independent power producer in Sub-Saharan Africa, it doubled Uganda’s available generation capacity when it came online. The commissioning of BHPP also reduced Uganda’s dependence on thermal generation based on expensive liquid fuels and helped eliminate subsidies to the energy sector, saving the government $120 million in 2012. The average “Hydropower projects are cost of electricity generation was lowered by $0.05/kWh. Businesses also saw significant benefits from reduced dependence on self-generation—which, while necessary during power outages, is five to six times the cost of grid electricity. Additionally, the project has resulted in emission reductions of complex, with significant 904,000 metric tons CO2 equivalent per year. financial, technical, social, As Bujagali transformed the previous power shortage into a power surplus, Uganda was able to begin expanding access to electricity among the and environmental risks. populace, which increased from 5 percent before the project to the current 14 percent. The success of BHPP has stimulated additional private investment in the sector, and more investors are showing interest in small hydropower producers to support the growing demand for electricity in Uganda. Doing such projects A mix of World Bank Group financing and guarantees made it possible for the private sector to participate in BHPP . The support provided by the right requires extensive International Development Association (the concessional financing arm of the World Bank) made up just 18 percent of the project’s total debt financing but catalyzed large amounts of cofinancing. Bujagali Energy Limited, a public–private consortium, will build, own, and operate the plant for 30 years before feasibility work, detailed transferring it to the government of Uganda. environmental and A variety of mitigation and compensation measures were put in place for households affected by the project, ranging from replacement land or housing, social assessment, a in-kind compensation for specific losses, cash compensation (including allowances for disturbance), and public services such as health and education facilities, roads, water supply, and electrification. well-designed contractual and financing package, Source: World Bank. mechanisms that share benefits with the local from $0.12 to $0.10 per kilowatt-hour. Least-cost alternative power Table 2. Production cost of power generated by hydropower community, and a sources ease the financial burden on the country’s taxpayers, who so projects supported by the World Bank Group compared rigorous approach to often have had to bail out government utilities when they struggle to with average national cost of generation implementation.” recover costs from their customers. Levelized By injecting a substantial amount of new energy into the power production cost of Average cost grid, hydropower projects make it possible to extend access to addi- power generated of generation tional households. The Bank-financed installation of more than 17 GW by project in country of new or restored hydropower since 2002 is expected to provide Project (US$/kWh) (US$/kWh) access to approximately 8.4 million2 people, 70 percent of them in Felou (Senegal, Mali, Mauritania) 0.070 0.24-0.35 the least-developed countries. When the World Bank Group supports Dasu (Pakistan) 0.03-0.04 0.12 hydropower, that support is combined with support for expansion of transmission and distribution networks and for energy efficiency. This Bujagali (Uganda) 0.060 0.25 was the case for the Bujagali Hydropower project profiled in box 2. World Bank Group support for hydropower can also stimulate Tarbela IV Extension (Pakistan) 0.025 0.12 new types of investments. For example, following the adoption of new energy regulations in India, IFC helped finance the first merchant Nam Theun 2 (Lao PDR/Thailand) 0.027 0.057 (Thailand) Rampur (India) 0.054 0.073 2 This estimate is based on the methodology developed in Live Wire 2014/6, “Measuring the Results of World Bank Lending in the Energy Sector,” by Sudeshna Ghosh Banerjee, Ruchi Soni, Source: World Bank. and Elisa Portale. 9 Supporting Hydropower: An Overview of the World Bank Group’s Engagement 1.1 billion metric tons of cumulative greenhouse gas emissions Box 3. Rampur HEP, Himachal Pradesh, India over the economic life of the projects (20–50 years), comparable to the emissions from the fossil fuels burned in all of Japan in 2010 or The Rampur Hydropower project is a 412 MW run-of-river scheme nearly twice the emissions of Sub-Saharan Africa in the same year.4 using water that exits the tailrace of the Nathpa Jhakri Hydroelectric The actual savings will likely be much higher, given that hydropower Plant upstream. Commissioned in 2014, Rampur provides clean “The hydropower projects energy to India’s northern electricity grid and contributes to the plants last far longer than their defined economic life. The emissions alleviation of many challenges in the Indian power sector, including low avoided by displacing or avoiding generation from power stations financed by the World levels of connectivity and insufficient supply. In tandem with Nathpa using fossil fuels (including coal and crude oil), as most of the World Bank Group since 2002 Jhakri, which was also financed by the World Bank, Rampur provides frequency control services to the grid, contributing to enhanced Bank Group’s hydropower projects have done, are equivalent to are expected to provide stability and reliability of the power system. shutting down 6 GW of brand new coal-fired plants for their entire access to 8.4 million With high standards of contract management, dispute resolution, and 40-year life. For example, the Tarbela IV Extension project in Pakistan people and, over the environmental remediation of muck disposal sites, the project will will avoid emission of 41 million metric tons CO2 equivalent over its serve as an example for future hydropower development in India. economic life span and will reduce the country’s total emissions lifetime of the projects, Its community development components have been replicated by the State of Himachal Pradesh in the form of a policy on local area by about 1 percent, all by adding an additional powerhouse to an to avoid nearly 1.1 billion development funds. existing dam. Cumulative project emissions for the portfolio reviewed metric tons of greenhouse The project did not require construction of a dam or inundation of any are estimated at 90.5 million metric tons CO2 equivalent, comprising gas emissions.” land; however, 29 families were relocated because of land diversion. reservoir emissions of 87 million tons CO2 equivalent and construc- To address these impacts, the project budgeted $6.5 million for tion emissions of 3.5 million tons CO2 equivalent. resettlement and compensation and an additional $6.2 million for community development. Moreover, all affected families will receive In addition to investments that deliver reliable power to national 1,000 kWh of free electricity per month, and local residents of all grids, the World Bank Group supports rural electrification projects, affected villages will share in the benefits of the project by means of including through new and rehabilitated micro-hydropower. In the an annuity payment funded by revenue derived from 1 percent of the power generation. last 12 years, 15 World Bank–supported projects delivered an addi- tional 33 MW and direct access to electricity in rural areas. In Nepal, An impact evaluation will be carried out at the end of the project, but mid-term results showed significant improvements in the incomes and for example, the World Bank is helping the government to install housing situation of affected families compared with the baseline and more than 1,000 micro-hydro plants in 52 districts, such as the 51 kW control groups. Ruma Khola plant, which supplies electricity to 700 households. The Bank’s financial support for small-scale hydropower development in Source: World Bank. Turkey demonstrated that long-term financing for renewable energy projects was viable and led national financing institutions to match hydropower plant,3 the 192 MW Allain Duhangan run-of-river project. their loan conditions to support such investments in the future. The project, which began commercial operations in 2010, addressed The World Bank Group’s hydropower investments often support a significant power shortage in northern India, while demonstrating a the adoption of sustainable hydropower policy frameworks. In new approach to electricity generation and sales. Ukraine the Hydropower Rehabilitation project included support for Support for hydropower is mitigating climate change by reducing the country’s power regulator, which led to a new electricity market reliance on fossil fuels. The new and rehabilitated generation law that took effect in January 2014. World Bank and IFC support capacity that will be provided by the projects that the World Bank in Lao PDR has led to a new national policy on sustainability of the Group approved between 2002 and 2014 will avoid approximately hydropower sector. The Rampur Hydropower project (box 3) led to 3 A merchant hydropower plant is a privately financed independent power producer with- out a long-term power purchase agreement. It sells electricity to a variety of customers based on the current market. 4 These are calculated net of any reservoir or construction emissions, where applicable. 10 Supporting Hydropower: An Overview of the World Bank Group’s Engagement the introduction of several good practices for contract management What are the World Bank Group’s remaining that were promptly adopted by the state hydropower developer. challenges in the hydropower arena? Research associated with the World Commission on Dams (WCD 2000) showed that hydropower resettlement had often further “Sustainable hydropower” is the big challenge impoverished poor communities. Significant progress has been As mentioned at the outset, sustainable hydropower has three “Most of the hydropower made in improving the design and implementation of resettlement dimensions: physical, financial, and social/environmental. While a projects supported by programs over the last 15 years. Data now suggest that responsible large amount of progress has been made on sustainability, partic- implementation of hydropower projects can bring benefits to local ularly over the last decade, new challenges continue to emerge or the World Bank Group communities. become more pressing. These include: lower the average cost The multipurpose hydropower projects supported by the World • Securing multiple benefits from investments in of power generation in Bank Group during 2002–14 have resettled about 70,000 people. hydropower. Energy generation, energy storage, grid regulation, the country … Moreover, Social surveys conducted so far for these projects have shown water storage, interbasin transfer, irrigation, transportation, improved livelihood for those resettled and for others affected by the with its unique ability tourism, watershed protection, and local development have all projects. By following safeguards and performance standards and by to start and stop power been linked with hydropower projects in the past. It is unrealistic forging partnerships with affected communities, governments, civil to expect every project to deliver benefits on every front, but production in seconds, society, and the private sector, the World Bank Group has demon- the key is to ensure that planners and decision makers are fully hydropower can play a vital strated in the projects it supports how to mitigate and compensate aware of the range and realism of potential benefits before for the negative impact of resettlement, and, more ambitiously, role in improving system they decide on a particular approach. The ability to assess and how to create positive effects by treating resettlement programs reliability.” harness financial benefits from related changes brought by the as development programs. The Nam Theun 2 project described in project (its “externalities”) lies at the core of this challenge. box 1 invested about $55 million in social measures, and a recent survey shows that 87 percent of resettlers report that their lives are • Managing cascades of projects. Depending on how they better than they were before resettlement. For the Rampur project are managed, multiple projects on a single stretch of river can (box 3), a recent survey shows the average income of affected present additional benefits or exacerbate negative impacts. families increased by 26 percent over the baseline in real terms, Understanding cumulative impacts, optimizing operating regimes, with an average reported income 41 percent higher than that of the and concluding contractual or governance arrangements that control group. However, such progress does not change the fact that encourage good management of cascades is a key challenge. large-scale resettlement is immensely disruptive to the communities • A more sophisticated understanding of land and water involved, and the first priority should be to avoid it wherever possible. interactions will help developers size projects appropriately. Between 2002 and 2014, the World Bank Group invested nearly $1.5 billion in rehabilitation or extension of 60 individual hydropower New challenges inevitably will emerge over time, and the World projects, increasing the life, safety, and performance of existing Bank Group remains committed to learning how to tackle them—and plants that continue to deliver cheap, clean power. As an example, to helping its clients to develop truly sustainable hydropower. the Ukraine Hydropower Rehabilitation project refurbished the oldest hydropower plant in the country, the Dnieper HPP , which was completed in 1932 before being destroyed and rebuilt twice during WWII. World Bank support will ensure that this plant will provide clean, affordable electricity for well over 100 years. 11 Supporting Hydropower: An Overview of the World Bank Group’s Engagement Bibliography World Bank. 2013. “Toward a Sustainable Energy Future for All: Make further Energy Sector Directions Paper.” Board Report 79597, World EIA (Energy Information Administration, U.S. Department of Energy). connections Bank, Washington, DC. http://documents.worldbank.org/curated/ 2013. International Energy Outlook 2013. Washington, DC. en/2013/07/18016002/toward-sustainable-energy-future-all-di- IJHD (International Journal of Hydropower and Dams). 2013. World Live Wire 2014/6. “Measuring the rections-world-bank-group%C2%92s-energy-sector. Atlas and Industry Guide. Wallington, Surrey: IJHD. Results of World Bank Lending in World Bank and IEA (International Energy Agency). 2014. Sustainable Kumar, A., T. Schei, A. Ahenkorah, R. Caceres Rodriguez, J.-M. the Energy Sector,” by Sudeshna Energy for All—Global Tracking Framework. World Bank: Devernay, M. Freitas, D. Hall, Å. Killingtveit, and Z. Liu. 2011. Ghosh Banerjee, Ruchi Soni, and Washington, DC. Hydropower. In IPCC Special Report on Renewable Energy Elisa Portale. WCD (World Commission on Dams). 2000. Dams and Development: A Sources and Climate Change Mitigation, edited by O. Edenhofer, New Framework For Decision-Making. London: Earthspan. R. Pichs-Madruga, Y. Sokona, K. Seyboth, P . Matschoss, S. Kadner, T. Zwickel, P. Eickemeier, G. Hansen, S. Schlömer, and C. von Stechow. Cambridge and New York: Cambridge University Press. Acknowledgments Skinner, J., and Haas, L. J. 2014. “Watered Down? A Review of Social and Environmental Safeguards for Large Dam Projects.” Natural Resource Issues 28, International Institute for Environment and Research support for this note was provided by Arsh Sharma, Asad Ahmed, and Samuel Oguah. Task Team Leaders contributed information on the Development, London. following projects: Fatouma Toure Ibrahima (Felou in Senegal), Ingo World Bank. 2004. “Water Resources Sector Strategy: Strategic Wiederhofer (Nam Theun 2 in Lao PDR), Masood Ahmad (Dasu and Tarbela Directions for World Bank Engagement.” World Bank, Washington, in Pakistan), Pekka Salminen (Ukraine Hydro Rehabilitation), Rohit Mittal DC. and Kwawu Mensan Gaba (Rampur in India), Shinya Nishimura (Turkey Small Hydro), and Somin Mukherji (Bujagali in Uganda). Meike van Ginneken peer-reviewed the note. 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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