Making appliance energy efficiency the new global standard

The Collaborative Labeling and Appliance Standards Program (CLASP) is seeking assistance with a small-scale and quick turn-around project for the Tokyo Electric Power Co (TEPCo).

The goals of this research are to:

1. Qualitatively estimate the current global level of policy development assistance (PDA) for energy efficiency (including but not limited to standards and labeling S&L) globally and in Asia; and
2. Speculations on how much PDA could be usefully applied to enhance developing countries' economic growth and reduce carbon emissions.

CLASP has already done a rough analysis of the situation for PDA by donor as represented in the memo detailed in Annex1: Work To Date [pdf]. This task seeks to build on that memo with as many days of research as the available funds can provide.

Working under direction from CLASP's President of the Board, Steve Wiel, the selected implementing partner will:

1. Further research the level of funding for EE policy analysis beyond that which is detailed in Annex 1: Work to Date [pdf]; and
2. Prepare a single report with an overall bottom line picture of findings that result from spending the set number of days agreed to in the fixed fee contract. This bottom line picture is as important as the case-by-case findings, so time must be allocated to synthesize all research in a coherent, summary statement. The report will include all relevant background information as appendixes or references to web pages. The report has a strict deadline – the end of the contract term.

The contract term is anticipated to last 6 to 8 weeks. The contract will be let within a week of selection, with a work start date of approximately July 30, 2007.

A committee appointed by CLASP will evaluate qualifications received from respondents. Selection of qualified experts will be based upon the following criteria:

• Overall level of EE experience;
• Ability to hit the ground running based on existing knowledge of international funding portfolios for EE;
• Quality of approach to the research;
• Number of billable days for the fixed fee of around $6000; and
• Availability.

Additional information about CLASP's selection process is available here. 

This invitation is open to all registered CLASP Implementing Partners. Qualified persons may register as a CLASP Implementing Partner here.

An interested party should submit:

1. A full resume, including contact information for the individual proposed to do this work;
2. A two-paragraph statement of suitability explaining:
   1. The number of billable days the applicant could provide for a fixed fee of $US 6,000;
   2. How he or she would approach the research;
   3. Existing familiarity with international donor portfolios on energy efficiency, especially in Asia; and
   4. A statement of availability for work during the anticipated contract time period.

We request that these two documents be submitted as a single file in pdf format. We further request that the file be named as per the following example: "Company (or person) XXX RFP#1-07."

If necessary for the selection process, CLASP may request additional information from any applicant.

Interested Implementing Partners must submit the requested information by e-mail (please include "Response to RFP #1-07" in the subject line) to Steve Wiel at swiel@clasponline.org.

All questions may be directed to Nadia Smiecinska at nsmiecinska@clasponline.org. We request all enquiries be made by email and not by phone. 

Work to Date 

MEMORANDUM

June 21, 2007

TO:  Taishi Sugiyama
FROM:  Stephen Wiel
RE:  Energy Efficiency TA Around the World

You asked for a rough estimate of the current global level of policy development assessment (PDA) for energy efficiency in Asia and some thoughts on how much could be effectively used to enhance developing countries' economic growth and reduce carbon emissions.

Here's some information that might help, although much of it is rough judgment because the historic data you seek is not kept by many of the organizations providing PDA. For example, much of the PDA that addresses energy policy that is provided by the World Bank Group (WBG) is buried within its sector loans. This PDA is in the form of a loan and is a small part of the total. The bank keeps no separate record of such PDA.  The WBG also provides some non-loan PDA but this is usually combined with other types of technical assistance (TA) for energy and sometimes is combined with TA outside the energy sector. The information below contains some judgments by one of the WBG employees who provide PDA for Asia, but they are only rough judgments.  So much for cautionary notes.  Here's what I've found so far.

The organizations that I've contacted for information are the World Bank (WBG), the Global Environmental Facility (GEF), the United Nations (UN), the Asian Development Bank (ADB), the United States, Agency for International Development (USAID), and the Energy Foundation (EF).  My apologies for having no contacts with European country foreign aid organizations.  The following paragraphs report on what I've found from each. At the end, I'll speculate on what might be.

WBG

The WBG's latest annual 'Bonn Report' addresses total investment in renewable energy and energy efficiency:

"In fiscal year 2006, the WBG’s financial support for renewable energy and energy efficiency was US$860 million. Commitments for new renewable energy and energy efficiency were US$668 million, more than double the Bonn 20 percent target. This represents a 45 percent increase over the amount of commitments made by the WBG to new renewable energy and energy efficiency in fiscal year 2005. Total WBG renewable energy and energy efficiency financing in fiscal year 2006 supported 61 projects in 34 different countries.[1]

About half of this is for energy efficiency.  Most of it is investment in facilities and implementing projects and 70% of the energy efficiency portion is distributed through the International Finance Corporation (IFC) and is thus for private ventures.  Only a fraction is for PDA to governments.

The WBG reports on its non-loan TA for all aspects of energy efficiency (public and private, policy and implementation) as follows:

"For the past 16 years, the WBG has been engaged in promoting energy efficiency, having financed investments totaling $2.2 billion for over 100 projects in more than 40 countries. The projects span all regions, but with a significant concentration in Europe and Central Asia, and East Asia and Pacific, and in a few sectors, in particular the delivery of district heating and electric power services. In FY2006, the WBG committed $490 million for energy efficiency projects, addressing the full range of end-use and supply-side opportunities and also aiming to remove institutional, regulatory, financial and technical barriers. At the 2004 Bonn International Conference for Renewable Energies, the WBG committed to increase financing for renewable energy and energy efficiency operations by 20 percent a year over the next five years. ... Budget for non-loan energy-efficiency TA FY07-09 = $17.7 million."[2]

One of my colleagues at the WBG estimates that most of the TA money reported above is for the accession countries of the European Union and the former Soviet Republic. He also believes that much of it is through the GEF, which is reported below.  His best judgment is that the WBG's annual non-loan PDA for Asia is roughly USD6 million, plus or minus a few million.

GEF

GEF funding for climate change is recorded in seven categories, one of which is 'energy efficiency'.  GEF reports its funding for energy efficiency in three-year lumps as follows[3]:

Pilot Phase (1991-94):  $70.6 million
GEF-1 (1995-98):  $128.6 million
GEF-2 (1999-02):  $200.1 million
GEF-3 (2003-06):  $286.7 million

My sources at GEF have no breakdown of the portion of energy efficiency funds going to Asia. I believe that China has been the largest individual country recipient and that India has received some large GEF energy efficiency grants.

GEF keeps no record of how much of its energy efficiency grants are for PDA to governments, but my own experience tells me that much of it is for that purpose.

UN

The United Nations provides PDA through several of its agencies, including UNDP, UNEP, UNDESA and UNIDO. I've not been able to find data on total or non-GEF energy efficiency TA. The judgment of my colleagues is that it is not large and is shrinking.

ADB

ADB, unlike the WBG, has a separate TA product. Therefore, we can know ADB's spending on TA. ADB reports the following totals for it energy TA approvals[4]:

1996: $11.3 million
1997: $11.4 million
1998: $11.1 million
1999: $10.1 million
2000: $8.8 million
2001: $9.0 million
2002: $10.0 million
2003: $13.1 million
2004: $15.1 million
2006: $14.4 million

I don't know whether ADB tracks the energy efficiency component of its energy TA; I couldn't find any allocation.

Looking forward, ADB's Energy Efficiency Initiative (EEI) reports the need for large investments in energy efficiency:

"Feedback from DMCs (developing member countries) has shown that financing is necessary to overcome high first cost barriers, and EE (energy efficiency)[5] growth has been constrained by a lack of adapted financing. ... The EEI Task Force made a top-down estimate of the EE market size for DMCs based on certain assumptions about technical and economic potential that are considered reasonably conservative. Assuming that 15% of current energy consumption can be saved with investments having an average payback period of 3 years, the total market size for supply and energy use-side efficiency improvements is about $140 billion or $14 billion annually for 10 years. ... For now, the general conclusion is that the EE market is a large field of opportunity, consisting of a range of market segments, and a combination of TA, market development tools, policies, and incentives will be needed to turn EE’s technical and economic potential into well-prepared investments."[6]

I have no idea what portion of ADB's USD14 billion investment target is for PDA, but I suspect it is a ramping up of the TA described above and that only a portion of it is for energy efficiency.

USAID

My personal involvement with USAID funding over the past decade and a half has taught me that energy efficiency TA is fragmented within the organization.  There is a separate budget for global support from Washington DC and for each of USAID's regional missions. The Asian portion includes the SARI and ECO projects. I've found no summary data. The USAID website reports that:

"Over the past decade, USAID has targeted some $15 million in technical assistance for the energy sectors of developing countries. U.S. assistance has built a $50 billion annual market for private power. U.S. firms are capturing the largest share of these markets, out-competing Japan and Germany."[7]

I suspect that they mean USD15 million per year over the past decade.  The Washington DC portion has dropped from over USD6 million per year to less than a third of that over the past few years.

EF

The Energy Foundation in the U.S. has one international program called the 'China Sustainable Energy Program' (CSEP). It has been funding energy TA for China for about a decade.  Its 2004 budget was USD18 million.  The folks at EF have promised to send me the complete funding history on Monday.

SPECULATION ON WHAT'S NEEDED

It's clear from the information from the organizations surveyed above that past PDA for energy efficiency in Asia can be measured in the tens of millions of dollars per year.  Considering other organizations not surveyed, especially the Dutch, German, Norwegian, and British governments, the global annual spending on energy efficiency PDA might be as high as USD100 million.

It's also clear that whatever the total is, it's not anywhere near enough.  The progress in energy efficiency improvements around the world is frustratingly slow. Energy efficiency technology continues to advance.  Governments continue to lag in their policies for accelerating the adoption of cost-effective new technologies into the marketplace.  I expect that PDA funding two to four times the current amount could easily be effectively applied and would still not bring us to an optimal level of efficiency.

There are several ways that governments can act to effectively accelerate the uptake of new efficient technology. The energy efficiency PDA touched on above goes toward several different government policies and programs, primarily (1) energy efficiency standards and labels for appliances, equipment, and lighting products, (2) government programs including government procurement policies, (3) building codes, (4) utility demand-side management (DSM), (5) industrial efficiency technical support, (6) financing mechanisms for energy efficiency, and (7) consumer education.

A couple of years ago I prepared an analysis for the GEF of what level of GEF funding would be appropriate for their global initiative on one policy -- energy efficiency standards and labels. This was a hypothetical calculation showing that USD50 million over ten years is an appropriate budget for GEF support for regional S&L (just the technical assistance portion, not the government's investment or the manufacturers' participation). The annual spending over this ten-year period ramps up to USD10 million in the sixth and seventh years and then ramps back down. Assuming that GEF is the primary funder for this assistance and that GEF typically gets 50-50 matching, that's USD100 million for TA for S&L.  That's for regional programs; there probably could be an additional USD100 million for national assistance or some national assistance would be provided within the USD100 million regional program.  Since there's a limit to the world's capacity to competently provide S&L assistance, I think USD100 million over a decade, which would probably be a tenfold increase from current levels, would take us a long way.

If I wanted a comprehensive market transformation globally, I'd want similar programs for each of the other six government energy efficiency programs. I've not made estimates of the PDA needed for each of these other policies/programs but my experience suggests that some of them would require considerably more than S&L.  So my bottom line is that an appropriate budget for a new comprehensive and coherent energy efficiency market transformation program over the next decade, in addition to the scattered efforts that are currently underway, would be between USD0.7 billion and USD$1.4 billion. The funding would necessarily have to ramp up to allow international technical experts to shift their focus and local experts to learn the craft. I see no justification for ramping down in the foreseeable future.

I hope these rambling thoughts help.  Please feel free to write or call (+1-510-813-1426) for clarification or additional information.

---

Since we received no responses to our partner call due on July 19th, CLASP has decided not to bid out this contract. Instead we have found and are in the process hiring a sole source contractor to perform the work.