Energy Policy

World Bank's Saghir describes new push on renewable power, climate change

At last summer's G8 meetings, world leaders called on the World Bank to do more to address climate change, including further investment in the development of clean energy sources. During today's OnPoint, Jamal Saghir, director of energy and water at the World Bank, talks about how the institution is meeting that goal, and about the bank's 2004 pledge to increase spending on renewable power and energy efficiency. Plus, Saghir responds to questions about the World Bank's track record on oil and gas development, and a controversial report suggesting that the bank end financial support for fossil fuel development efforts.


Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining us today is Jamal Saghir. He's the director of Energy and Water at the World Bank. Jamal thank you so much for being here today.

Jamal Saghir: Good afternoon.

Brian Stempeck: I want to start off with a question. In the summer of 2004 the World Bank came out with a goal of increasing renewable energy investment by about 20 percent per year through 2009. It's been about a year since then. I wanted to see how much progress the bank has made already.

Jamal Saghir: Well, I'm very pleased to report that the World Bank has achieved its objective. It has surpassed its objective. Last year we were able to deliver around $750 million in 48, in 50 projects. This represented a big increase in renewable energy and energy efficiency. So yes, I can say this year we delivered.

Brian Stempeck: What drove the bank to make this commitment of increasing 20 percent per year?

Jamal Saghir: The World Bank believed that energy is an important aspect in the growth agenda and the poverty agenda. All forms of energy have to look at it seriously. When we talk about renewable energies and energy efficiency this is an important aspect as we grow the developing economy. Efficiency is as important as renewable energy. And I would like to repeat it very clearly here. Energy efficiency is an aspect that we have been neglecting it, not only in the developing country, but also in developed country. And it has to grow. Renewable energy as an alternative source of energy. It could complement the traditional form of energy. It also provides, especially the biomass part of it, a source of energy for the poor. Hydropower is renewable energy. It's an important source of energy. And we have seen a lot of developed countries building their energy stock based on hydropower ... with the United States as you know.

Brian Stempeck: Let's talk specifically about some of the projects that you've worked on. In 2005 there was, as you said, I think about 40 projects or so. One of the major projects was working in China and helping them to kind of meet their renewable goals. Talk about how the bank helped out there.

Jamal Saghir: The World Bank is a player in China. And in China we have a long standing relation with the energy sector, as well as our tech ... project called renewable energy scale and project, this is basically to finance wind and finance biomass development. This is a project of the first phase is around $40 million. It's what we call a ducktail landing, which means you go phase by phase. We will go another $40 million to $80 million in the next few weeks. We are negotiating this loan. We have been helping the Chinese to build the legal framework, the regulatory framework, that will be giving the, enabling an environment for developing of renewable energy. We have been providing our technical expertise, our know how. Working in China is a big change for all of us. We are learning a lot from the Chinese counterpart. As you know they have built a stock of investment in really all forms of renewable energy as well as other traditional energy. But I think in the renewable energy, in the Bonn conference last year, they have put a clear target, if I remember, of around 15 percent of that equation of that energy balance will be renewable energy. And they are moving. And we were, two weeks ago, in Beijing for a major event on renewable energy. It is clear that they are moving on this direction.

Brian Stempeck: What are some of the other projects that you would choose to highlight from 2005, besides the work in China?

Jamal Saghir: We have to talk about also on the hydropower agenda. I talked to you already on the wind and the biomass. I think the Nam Theun project is another major hydropower project in Laos, which the objective is to build the stock of hydropower potential to sell electricity to Thailand. To bring the revenue of this project to help recycle it into energy poverty related projects. And this is an important project that we have done. We have done also some other project called renewable electricity services in Africa. I think another project that we have to think about is basically the Kenya energy sector recovery. We have Rwanda where we work on rehabilitation. Africa is a major challenge where basically we use a combination of traditional form of projects, where we talk about reform. Where we talk about generation, but also you bring alternative source of energy as possible. As you know the challenge of renewable energy is the cost. It might be least cost solution, but it's not always affordable to the poor. And that's what will be the challenge for Africa.

Brian Stempeck: As you mentioned, hydropower has been a major investment for the World Bank for years now. And it seems like it pretty much dominates your renewable spending. I think it's about $500 million were spend on hydropower compared to about $200 million on other renewables. How is the bank trying to get more invested in wind power and solar and the other technologies are basically coming-of-age a little bit behind hydropower?

Jamal Saghir: Maybe I would like maybe to give you a little bit of context. Eighty percent of the potential of hydropower, in the developed countries has been used. In the developing countries less than 20 percent of the hydropower potential has been harnessed. In Africa it could be less than 5 percent in some countries. So there is a huge potential of clean renewable energy available to the poor to have access to water, to have access to energy services. So I think the hydropower agenda has to be done in a social and environmental safeguard policies clearly defined and clearly implemented. And that's an important aspect. Now as you move on the hydropower agenda it's also important to move on the wind as well on the solar technology. Definitely the solar technology, the wind technology is moving very fast. We have seen major companies, major producers developing a new windmill which could have a huge capacity. And this is good news because in some remote areas access to wind is important. And there are some countries where the wind is so strong that this will be definitely an affordable solution. The solar energy are moving, but I think it's not moving as quick as the wind. The geothermal is another source. And that we've seen in some African country, like in Kenya, but in other words another potential source that we have to work hard on using it and harness it so that we can deliver an energy service.

Brian Stempeck: Last time we were at the [Group of Eight] meetings we saw the leaders of these countries basically come out and give a direction to the World Bank saying as you make decisions to do more lending in these countries, on energy projects, you need to think about climate change and how this is affecting these developing countries. How does the renewable energy tie into what you're doing to help some of these developing countries adapt to climate change?

Jamal Saghir: As I said earlier, renewable energy, the World Bank is a leader in renewable energy. We have a portfolio of over $9 billion, along with the international who ask that who shall where the number one. So I think we have been on this business for the last few years. So I think what happened with the G8 last July in Gleneagle, it gave us an impetus to do more. The idea was to develop a clean energy framework on which we are working now hard to deliver it by the spring meeting of the World Bank. We're basically looking at the financial aspect, looking at the technological aspect and looking at the implementation aspect. And we're working with other regional banks to put a framework on which, it's a process basically, on which the developing country will use it as a reference. Developing countries, we have to differentiate between them. You have what we call the Plus Five. We're talking about China, India, Mexico, Brazil. And these are important players in the equation right now. And they are obviously contributing a lot on the consumption side. So bringing renewable energy in that equation is an important aspect. But each country will have its own plan. Each country will have its own views on looking at renewable energy is part of it. And I think this is what the World Bank, we have to play ... . We're working hand in line with the G8 to deliver on this promise of the clean framework. We're working with other developing countries and listening to what they have to say. Providing the capacity building. And as you move you see the energy agenda moving, next year at the G8 summit I understand that energy security will be an important aspect in the St. Petersburg summit for the G8. Energy security will have also to be linked to the clean energy framework as well as to renewable energy and energy efficiency. This is the challenge that we see happening in the next few months. It's going to be exciting work for the energy world in the next 18 months as we go for the commission ... in New York, which will be on energy. As we see the Russian summit will be on energy security as well. And as we move on to the World Bank on delivering more on energy problems.

Brian Stempeck: One major issue for the World Bank in the past few years has been the idea of this Extractive Industries Review. This is a report that came out that basically recommended that the World Bank no longer invest in a lot of oil and gas projects which they found were very damaging to a lot of developing countries. The World Bank decided to basically move forward rejecting a lot of the findings of that report. And move forward saying it's going to increase the transparency, increase the way, improve the way that these projects were done. Talk a bit about how renewable energy and oil and gas have to balance each other. I mean the renewable spending is still only a fraction, a small fraction of what's being spent on the traditional oil and gas projects, correct?

Jamal Saghir: The Extractive Industries Review was an important review for us. I think what we have said is that we will not walk away from investing in oil and gas and mining. We will increase our work on renewable energy and energy efficiencies in parallel to moving on this direction. And I think that's what we have delivered this year. I think an extractive industry in general have a contribution to the poverty agenda. And we cannot simply say we walk away from this. This is important for our client. Many developing countries rely on extractive industry as a source of revenue. And the more we get involved in assuring transparent processes and the process is done properly I think we can have clean energy as well. So I think the role of the World Bank is to contribute to this agenda. Walking away by saying we're not going to invest, I am not sure that's the best solution. We have been in this business now for 50 years, developing is a long process. We don't switch in and switch off. It's a process which has to be continued, but we have to do a proper job. And I think working with renewable energy, hands on hand, while working on the renewable energy and energy efficiency and the global clean energy, this is a big challenge. And I think that's what we would like to see our developing countries, our borrower, helping us move on this agenda. So it depends, again, once again about how each country will move on its agenda. So yes, last year the Extractive Industry Review was a big challenge. Our board has reviewed it. And I think it agreed with us on the way to look at it. Transparency is definitely an important fight, an important fight to make sure these are done properly and also in the fight against poverty and the fight against corruption.

Brian Stempeck: All right Jamal, we're out of time. Thank you so much for being on the show today. I'm Brian Stempeck. This is OnPoint. Thanks for watching.

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