Closing the Gap: GEF Experiences in Global Energy Efficiency
By Ming Yang, GEF Climate & Chemicals Team
Written in anticipation of the 20th anniversary of the 1992 United Nations Conference on Environment and Development, in Rio de Janeiro, Closing the Global Energy Efficiency Gap: The GEF Experience tells the story of how the GEF serves as the mechanism for financing, technology transfer, and capacity building in climate change programs. The book focuses on GEF efforts financing energy efficiency projects in developing countries and economies in transition over the past 20 years.
The "gap" as described in the book refers to the energy efficiency gap, defined as the difference between the levels of investment in energy efficiency that appear to be cost-effective based on engineering andeconomic analysis and the lower levels of investment that are actually occurring. Incremental costs are the additional costs associated with transforming a project with national benefits into one with global environmental benefits. Since the first Rio Conference, the GEF has invested over $872.2 million toward incremental costs to fill efficiency gaps in 162 energy efficiency projects in 35 countries. These projects cover almost all aspects of energy efficiency including policy, standards, codes, technologies, engineering, energy service companies, industry, commerce, households, buildings, lighting, energy supply side and demand side. With nine chapters describing 49 case studies, the book analyzes the GEF energy efficiency investment portfolio, funding sources and uses, cost-effectiveness of investments, and implementation and termination of projects. Both quantitative and qualitative analysis is included. In this article, we summarize major findings of one chapter of the book: "GEF Energy Efficiency Investment Portfolio." More detailed information and findings of the study will be published in the second half of 2012.
GEF FUNDS IN CLIMATE CHANGE
Figure 1 Distribution of the GEF US$ 9,083 million funding in focal areas
GEF FUNDS IN ENERGY EFFICIENCY
Within the climate change focal area, energy efficiency has risen in importance in the investment portfolio. Of the $2.891 billion GEF funds invested in climate change projects, $872.2 million (or 30.2 percent) were allocated as incremental costs to fill energy efficiency gaps, the second-largest investment area after renewable energy. If the projects with major energy efficiency components and minor renewable energy components are accounted as energy efficiency projects, the proportion of energy efficiency investment over the total GEF investment rises to 35.2 percent, ranking first among the climate change sub-focal areas. Figure 2 shows the distribution of the GEF funds in these areas. The $872.2 million of GEF incremental costs were invested in 162 purely energy efficiency projects. In this study, a pure energy efficiency project is defined as one that only contains an energy efficiency component; it does not contain any other component such as renewable energy. The analysis in this study is limited to those projects that contain energy efficiency components.
Figure 2 Distribution of the GEF US$ 2891 million funding in climate change sub-focal areas
The GEF's $872.2 million of investment in the 162 pure energy efficiency projects can be divided into sub-areas according to their technologies and applications. In this study, the GEF Secretariat classifies its investment in energy efficiency projects into the following 10 sub-areas: (1) appliances & equipment; (2); building; (3) industry; (4) energy supply; (5) lighting; (6) energy service companies (ESCOs); (7) heating; (8) financing; (9) national strategy; and (10) others. The last sub-area contains projects in research and development, energy market development, and those with mixed purposes.
Shown in Figure 3 is the distribution of GEF energy efficiency funds invested in the 10 sub-areas. An amount of US$167.2 million was invested in the building sub-area, which represents 19 percent of total GEF energy efficiency funds, the highest percentage among all sub-areas. The Industry and Energy supply sub-areas are the second and the third, respectively, among sub-area in terms of shares of GEF funds. Representing the major share of energy use in industrial sector, these two sub-areas together utilized US$212.6 million, or 24 percent of GEF energy efficiency funds. The remaining seven sub-areas mainly involve the residential sector, as well as the government policy and institutional capacity building sector.
Figure 3 Distribution of the GEF funds used as incremental costs in energy efficiency sub-areas
GEOGRAPHIC DISTRIBUTION OF THE GEF ENERGY EFFICIENCY PROJECTS
Asia, Eastern Europe and Central Asia are the regions where GEF energy efficiency funds were primarily put to use. These regions together utilized $694.1 million out of $872.2 million, or about 80 percent of the total funds invested. This $694.1 million went toward 112 projects representing 69 percent of the total project number. In terms of the share of funds used, Latin America is the third largest region, where the GEF invested $86.0 million in 20 projects. In terms of the number of projects, Africa ranked the third with 24 projects, but only $63.7 million GEF funds were utilized (Table 1). This stems from the lower overall level of development in Africa and an emphasis in other focal areas in the African development community.
Table 1 Geographic distribution of GEF funds as incremental costs utilized in energy efficiency
Source GEF PMIS (2010)
DISTRIBUTION OF GEF ENERGY EFFICIENCY PROJECTS AMONG GEF AGENCIES
Of the ten GEF implementing agencies, the United Nations Development Programme and the World Bank acted as the GEF's major partnership agencies for implementation of GEF energy efficiency projects. In terms of fund distribution, the World Bank ranks first, utilizing $463.0 million, amounting to about 53 percent of the total. In terms of the number of projects, the UNDP developed 86 projects, or 53 percent of the total number, and utilized $320.0 million or about 37 percent of the total funds. The Asian Development Bank, the African Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank, the United Nations Environment Programme, and United Nations Industrial Development Organization jointly utilized $89 million, or 10 percent of the total GEF energy efficiency funds, and developed 24 projects, or 15 percent of the total number of the energy efficiency projects (Table 2).
Table 2 Distribution of GEF funds used as incremental costs utilized by agencies in energy efficiency
Source: PMIS (2010)
COUNTRY OWNERSHIP AND STATUS OF GEF PROJECTS
The GEF's 162 energy efficiency projects are located in 35 countries, an average of about 4.6 projects per country. These countries are Argentina, Brazil, Bulgaria, China, Chile, Cote d'Ivoire, Croatia, Czech Republic, Egypt, Estonia, Hungary, India, Jamaica, Kenya, Latvia, Lebanon, Lithuania, Malaysia, Mexico, Mongolia, Morocco, Palestinian Authority, Peru, the Philippines, Poland, Romania, Russian Federation, Senegal, Slovak Republic, Sri Lanka, Syria, Thailand, Tunisia, Ukraine, and Vietnam. Some countries host a large number of energy efficiency projects while others are home to only one or two projects. At the upper end, China utilized US$ 260 million for energy efficiency projects accounting for 52.8 percent of the GEF energy efficiency funds used as incremental costs; these funds went toward 18 projects representing 11 percent of the total projects funded by the GEF.. Belize, on the other hand, developed one energy efficiency project and utilized US$185,100, amounting to about 0.01 percent of the GEF funds used as incremental costs utilized in energy efficiency.
The GEF's investments in 162 energy efficiency projects can be categorized into four types according to their status of implementation. The first category includes projects that have been approved but which have not yet reached the implementation stage. There are 28 projects of this sort. The GEF funds used as incremental costs for those 28 approved projects have been reserved but not yet utilized. The second category classifies projects that are under implementation. As of June 30, 2010, the GEF had 85 such projects. A part of these funds used to cover incremental costs has been spent on such projects, but not all funding has been distributed. The third category includes funds used as incremental costs for completed projects. Funds for such projects have been fully expended and have gone toward project implementation. As of June 30, 2010, the GEF had completed 49 energy efficiency projects. Table 3 shows the distribution of the number and funds of the GEF energy efficiency projects in the aforementioned three different categories. Besides these 162 investment projects, the GEF has 75 terminated energy efficiency projects including 65 pure energy efficiency projects and 10 multiple sub-focal area projects that contain an energy efficiency component. These terminated projects were initially developed and some of them utilized small amounts of GEF funds, but they did not generate much benefit.
Table 3 Categories of the GEF energy efficiency projects
GEF COMPLETED ENERGY EFFICIENCY PROJECTS
The distribution of the GEF funds used in the completed 49 energy efficiency projects differs from that in the total GEF energy efficiency funds use portfolio. Figure 4 presents GEF funds used in the 49 completed energy efficiency projects within the 10 defined sub-areas. Different from the information presented in Figure 3, the energy service companies category, or ESCOs, has the highest amount – $76 million – representing about 24 percent of total GEF funds used in completed energy efficiency projects. Heating and national strategy are the second and the third sub-areas with high shares of GEF funds. These two sub-areas utilized $64.9 million and $43.9 million respectively. Industry and financing sub-areas ranked the fourth and fifth, using $30.2 million and $26.6 million of the GEF funds respectively. These two investments combined are less than the amount in either ESCOs or heating. The other five sub-areas are mainly comprised of the residential sector areas and energy supply sector, with a total amount of $72.1 million or about 23 percent of the total. The forthcoming chapters of this book focus on the 49 completed pure energy efficiency projects, as well as the 65 terminated projects since data for these projects are certain.
Figure 4 Distribution of the GEF funds in energy efficiency sub-areas (US$313.2)
The World Bank, the UNDP and the UNEP enacted the 49 completed energy efficiency projects in the GEF project portfolio. The World Bank and the UNDP implemented 24 and 23 projects respectively, and the UNEP carried out only two. Figure 5 shows the amounts of funds and numbers of projects utilized and implemented by these three agencies. The other seven GEF implementing agencies were also involved in implementing GEF energy efficiency projects, but these projects were not completed as of June 30, 2010. Thus, these agencies were not shown in the figure.
Figure 5 Use of GEF US$313.2 million for closed EE projects by agencies
During the past two decades, addressing climate change has become a top priority in the GEF investment portfolio. As of June 30, 2010, the GEF had invested US$ 9.083 billion amongst six focal areas, of which climate change utilized 32 percent, the largest proportion of funds. Energy efficiency was the second largest sub-focal area (30.8 percent) in terms of funding allocated, which was only exceeded by renewable energy in the climate change focal area. By June 30, 2011, the GEF had invested US$ 872.2 million as incremental costs to fill gaps in 162 energy efficiency projects in 35 countries. Among the 35 recipient countries, China received the largest amount of funds used and implemented the largest number of projects, while GEF energy efficiency funds were primarily put to use in Asia, Eastern Europe and Central Asia in terms of geographical regions. These regions together utilized $694.1 million, or about 80 percent of the total funds.
PMIS (2010), PMIS-Project Management Information System (2010), the GEF database for project management. http://www.gefpmis.org Accessed on December 1, 2011.
The author is a senior climate change specialist at the GEF.