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World Bank Group’s Support to Renewable Energy Development
- 1. World Bank Group’s Support to Renewable Energy Development Sameer Shukla Practice Manager World Bank Group Energy & Extractives
- 2. Outline • Why is renewable energy (RE) deployment important for Uzbekistan? • How did other countries make transitions? • What are some good practices? • How can the WBG support Uzbekistan in RE development
- 3. • Why is renewable energy (RE) deployment important for Uzbekistan? • How did other countries make transitions? • What are some good practices? • How can the WBG support Uzbekistan in RE development
- 4. 1. Why is RE development important for Uzbekistan? 88.2% 5.2% 2.8% 2.0% 1.8% 0.0% Overall Energy Production and Imports in Uzbekistan Gas Production Oil Production Coal Production Electricity Import Hydro Production Oil Import Source: International Energy Agency • Energy security. Help diversify the energy mix and improve the long-term reliability of supply. • Economic efficiency. Reduce the use of natural gas for power production, which has a high opportunity cost • Business opportunities. Create an industry with new employment opportunities • Environmental and health benefits. Improve public health and environmental quality through reduction of fossil fuel combustion • Climate change. Fulfill the country’s climate change commitment (6% by 2030)
- 5. 2. Why is it important to start now? Decline in installed costs Pricing trends Global trends Completion of resource assessment in Uzbekistan Technical potential: Solar – 530 GW, Wind – 520 GW, hydro – 27 billion kWh. Local resource Diversification and long term energy security - Strategy of Actions for 2017-2021, - Presidential Decree on RE development in 2017-2021, - Draft RE law, - Wind Atlas, - Solar Energy Road Map Government commitment Long lead times for energy transitions
- 6. • Why is renewable energy (RE) deployment important for Uzbekistan? • How did other countries make transitions? • What are some good practices? • How can the WBG support Uzbekistan in RE development
- 7. 7 3. How did other countries make transitions to RE? (1/2) INDIA Government’s goals backed by strong planning and investments • Dedicated Governmental institutions for renewables • Vision and mission statements for future energy mix • Grid code and technical standards • Market mechanisms to incentivize investment in renewable generation sources • Transmission expansion recognizing renewable capacity addition • Competitive bidding and auctions for RE power procurement • Dedicated RE control centers • Capacity building and specialist certification of RE integration for the system operator PERU Sector reform and stability of RE framework • Legal and regulatory stability • Non-discriminatory treatment of investors • Clear E&S regulation and procedures • Clarity on sector regulation (Tariff and Adjustments)
- 8. 8 3. How did other countries make transitions to RE? (2/2) ARGENTINA Guarantee for termination payments • An up to $500 million Payment Guarantee to backstop obligations of GoA to replenish the FODER trust fund if it cannot make termination payments • Expected private financing mobilized: about US$1.5-2 billion MOROCCO Development of utility-scale solar • Establishment of specialized institution: MASEN • Public-Private Partnership to develop 500 MW Ouarzazate solar complex led to mobilization of private capital. • Drove the price of CSP to 11.5c/kWh and encouraged local industrialization • Clear land access through PPA ZAMBIA WB/IFC/MIGA Solar PV auction with pre-selected sites • IDC - dedicated government agency • Creating market scale through standardized process • USc 6/kWh non-indexed (an average of USc 4.7/kWh over contract lifetime) • De-risking through WB and MIGA guarantees
- 9. • Why is renewable energy (RE) deployment important for Uzbekistan? • How did other countries make transitions? • What are some good practices? • How can the WBG support Uzbekistan in RE development
- 10. 4. Key messages – market trends
- 11. Now is a good time to start planning for RE Decreasing prices for PV electricity
- 12. 4. Key messages – policy Enabling environment helps reduce impact on tariffs • Transparent legal and regulatory frameworks for renewable energy (RE Laws, secondary regulations, etc) • Stable investment environment for private sector financing • Grid access and pricing regulations • Resource mapping and planning for renewable in generation expansion • Utility financial viability • Effective and transparent procurement and tendering approaches • Capable agency with clear mandate
- 13. Enabling Environment Helps Reduce Impact on Tariffs Strong enabling environment Low risk Low financing costs Positive impact on CAPEX-intensive RE 0 20 40 60 80 100 120 140 160 180 5.0% 7.5% 10.0% 12.5% 15.0% 17.5% 20.0% LEVELIZEDCOST($/MWH) WACC Capex O&M Cost of capital
- 14. 4. Key messages – grid integration No significant issues at low level of RE penetration, but plan for greater share of VRE • For a greater level of integration, technical and economic impacts of VRE integration should be analyzed • VRE forecasting is critical • VRE should be geographically scattered to gain the smoothing effect • Regional integration is effective to mitigate impacts • Transmission grid and dispatch center should be modernized. • Technical standards for VRE should be prepared
- 15. 4. Key messages – financing Government, together with IFIs, has an important role to play to control risks for private investments • Pros and cons for feed-in-tariff and auction mechanisms to promote renewable energy • Clear tender processes important to promote competition • Tariffs may need to be increased but in the interim, support mechanism will be required • Project financing requires controlling and allocating various project risks, and the Government and IFIs can provide mitigation for some of them
- 16. 4. Key messages – project management Building the enabling environment and project development can proceed in tandem • Stakeholder management • Good to involve trusted advisors • Adequate resource assessment • Land acquisition • Environmental and social assessments • Strong procurement and contract management
- 17. 5. Recommendations for: Policy makers • Enact renewable energy law with clear institutional responsibilities • Ensure cost-recovery tariff setting, and additional financing mechanisms • Maintain predictability of RE support policies • Develop a fair competitive bidding procedure and auctions mechanism • Provide support to private developers throughout project cycle Utilities • Prepare the power systems for greater integration of RE • Conduct system planning incorporating greater RE penetration, • Conduct grid integration assessments • Prepare and implement corporate financial recovery plans • Invest in modernization of power systems • Move towards greater power system integration with neighboring countries IFIs • Transaction advisory, RE policy and regulation framework • Help prepare bankable projects feasibility assessments • Finance critical infrastructure for RE integration • Provide credit enhancement measures for RE investments to make them more affordable • Share knowledge and practices
- 18. • Why is renewable energy (RE) deployment important for Uzbekistan? • How did other countries make transitions? • What are some good practices? • How can the WBG support Uzbekistan in RE development
- 19. 6. How the World Bank Group can support the Government IFC • Transaction advisory • Financing IBRD TA • Policy environment • Regulations and by laws • Assessments • Capacity building IBRD Finance • Loans for grid infrastructure • Loans and credit lines for private investments • Guarantees for investments and commercial finance MIGA • Political risk insurance • Debt guarantees • Other investment guarantees
- 20. 6. How the World Bank Group can support the Government IFC IBRD TA IBRD Finance MIGA IFC finance and transaction advisory • Preparation and execution of transactions • Loans • Equity • Trade and commodity finance • Syndications • Derivative and structured finance • Blended finance
- 21. 6. How the World Bank Group can support the Government IFC IBRD TA IBRD Finance MIGA IBRD Programmatic TAs • Policy environment • finalization of RE law, development of PPP law, drafting RE development strategy and program, design financing mechanism for RE development) • Regulation and bylaws • grid codes - transmission, distribution-, RE licensing, incentives for RE, technical standards on RE, procurement • Assessments • resource assessment -wind, solar – incl. rooftop PV-, site identification and preparation, bankable feasibility studies, tariff policy review, market assessment of RE manufacturers, supply chain development • Capacity building • institutional coordination, environmental and social safeguards framework, technical, economic and financial aspects of RE generation and system integration, training, retraining, and professional development
- 22. 6. How the World Bank Group can support the Government IFC IBRD TA IBRD Finance MIGA IBRD Financing • IBRD loans for RE investments • credit lines with commercial banks • first-loss facilities • IBRD guarantees for RE investments • payment guarantees • loan guarantees
- 23. 6. How the World Bank Group can support the Government IFC IBRD TA IBRD Finance MIGA MIGA Guarantees • Political risk insurance • Remittance and forex risk • Contract termination guarantee • Conflict • Expropriation • Debt guarantees • Other investment guarantees
- 24. 7. Concluding thoughts • Significant resource potential and the government’s commitment can help diversify the energy mix. • Building the right enabling framework takes time but project preparation can start in tandem. • The enabling framework needs to be flexible enough to be adjusted based on lessons learned. • Under the right conditions, private sector can help scale-up RE development. • Despite the required effort, the benefits of RE scale-up are significant. • The World Bank Group stands ready to provide support.
- 25. THANK YOU!
Editor's Notes
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- Based on the global experience, strong enabling environment is crucial for renewable energy development. It would give predictability in development, operations, and financial returns, help reduce the real and perceived risks for renewable energy, lower financing costs, and thereby help mitigate the impact on tariff. Given that renewable energy is usually upfront capex-intensive, lowering the cost of capital would be an essential consideration to keep the levelized cost of electricity and the impacts on tariffs.
- There is an alignment of multiple factors that play into Uzbekistan’s favor. Globally, we have witnessed a rapid decline in prices for RE technologies. Through a combination of falling costs of production and increasingly innovative financing using private capital, countries have recorded low levelized costs from solar and wind projects. The best prices are also linked to the quality of the resource. In Uzbekistan, we now know enough about Uzbekistan’s resource endowment to determine that the quality as good as countries like Mexico have recorded some of the lowest costs. The recent wind assessment supported by the World Bank uncovered tremendous protential estimated to be in the region of 700GW. And finally, through the Presidential decree on RE, the government has demonstrated a strong commitment to develop these resources to diversify the energy mix and increase the security of supply. Strong commitment from the government is an platform on which the enabling environment for RE development is built.
- To help scale up renewable energy, and establish an enabling environment for renewable energy deployment, the World Bank Group is able to provide a range of technical and financial support to Uzbekistan. The World Bank supported the preparation of resources measurement and the pre-feasibility study reports for wind power development. The World Bank is ready to provide programmatic TAs, and financing including various credit enhancement measures. The Bank is reviewing the draft Renewable Energy Law and will provide inputs for the Government’s consideration. The transaction advisory and various forms of TAs can be implemented in parallel.
- To help scale up renewable energy, and establish an enabling environment for renewable energy deployment, the World Bank Group is able to provide a range of technical and financial support to Uzbekistan. The World Bank supported the preparation of resources measurement and the pre-feasibility study reports for wind power development. The World Bank is ready to provide programmatic TAs, and financing including various credit enhancement measures. The Bank is reviewing the draft Renewable Energy Law and will provide inputs for the Government’s consideration. The transaction advisory and various forms of TAs can be implemented in parallel.
- To help scale up renewable energy, and establish an enabling environment for renewable energy deployment, the World Bank Group is able to provide a range of technical and financial support to Uzbekistan. The World Bank supported the preparation of resources measurement and the pre-feasibility study reports for wind power development. The World Bank is ready to provide programmatic TAs, and financing including various credit enhancement measures. The Bank is reviewing the draft Renewable Energy Law and will provide inputs for the Government’s consideration. The transaction advisory and various forms of TAs can be implemented in parallel.
- To help scale up renewable energy, and establish an enabling environment for renewable energy deployment, the World Bank Group is able to provide a range of technical and financial support to Uzbekistan. The World Bank supported the preparation of resources measurement and the pre-feasibility study reports for wind power development. The World Bank is ready to provide programmatic TAs, and financing including various credit enhancement measures. The Bank is reviewing the draft Renewable Energy Law and will provide inputs for the Government’s consideration. The transaction advisory and various forms of TAs can be implemented in parallel.
- To help scale up renewable energy, and establish an enabling environment for renewable energy deployment, the World Bank Group is able to provide a range of technical and financial support to Uzbekistan. The World Bank supported the preparation of resources measurement and the pre-feasibility study reports for wind power development. The World Bank is ready to provide programmatic TAs, and financing including various credit enhancement measures. The Bank is reviewing the draft Renewable Energy Law and will provide inputs for the Government’s consideration. The transaction advisory and various forms of TAs can be implemented in parallel.
- Doubling the share of renewables increases direct and indirect employment in the sector to 24.4 million by 2030.