The World Bank The World Bank Europe and Central Asia (ECA) Region— Energy Sector Program Washington DC, November 6, 2013 Salvador Rivera, Lead Energy Specialist

The World Bank Discussion Outline  Directions for Energy Sector Investments  World Bank Group Energy Lending  Who are we? Energy Program in Europe and Central Asia (ECA) Region…a Region with a Spectrum of Challenges.  Regional Energy Sector Challenges  Energy Program Overview 2

The World Bank Directions for the World Bank Group’s Energy Sector Universal Access Accelerate efficiency gains Expand renewable energy Creating an enabling environment Intensify global advocacy 5 Guiding principles for energy sector investments:  Engage holistically with clients to catalyze the transformation of the energy sector in the context of long-term system-wide planning  Continue emphasizing improvements in the financial, operational, and institutional environment of the sector  Seek market solutions and help governments foster private sector participation and investments  Embrace a multi-stakeholder, inclusive approach to energy development  Diversity of energy challenges calls for an approach that is tailored to individual countries and regional circumstances 3  Objective : Support client countries in securing the affordable, reliable, and sustainable energy supply needed to end poverty and build shared prosperity  Endorsed in July 2013

The World Bank World Bank Group Energy Lending 4 * Excludes IFC due to change in reporting methodology

The World Bank World Bank Group Energy Lending  Bank-wide, the majority of investment projects in the energy sector are > US$100 million and rely heavily on large goods contracts  In ECA, there are many smaller scale energy projects (<US$100 million) 5

The World Bank World Bank – Europe and Central Asia (ECA) Region 6 Energy Program in ECA  Programs in 22 countries  About US$ 6.4 billion in energy lending since 2009  New lending of about US$2.5 to 3 billion in the next 2-3 years

The World Bank ECA Regional Energy Sector Challenges  One of the most energy inefficient regions worldwide  5% of global GDP and 10% of global energy consumption  Large energy (cost) savings and co-benefits through energy efficiency investments  If ECA were as efficient as OECD average, it could save the equivalent of South Americas entire energy consumption in

The World Bank ECA Regional Energy Sector Challenges  Looming energy crunch – growth constraint  Both in electricity and primary fuels such as natural gas  Demand for energy is expected to increase by as much as 50% over 2005 levels by 2030  Identified as a significant constraint by investors in “Doing Business” surveys  Aging infrastructure and maintenance deficit  Over half of the energy infrastructure over 30 years old  Poorly maintained – lower effective capacity, efficiency and reliability  More than 60% of the primary energy used to provide electricity is lost in processing or delivery  Projected needs for primary energy development for are estimated at almost US$1.3 trillion  Decline in post-crisis capital flows and commercial financing  private capital flow decline has not reversed  bond spreads increasing 8

The World Bank ECA Regional Energy Sector Challenges 9  High CO 2 emissions relative to GDP  Substantial reliance on domestic coal  ECA faces an estimated US$ 19 billion in health costs from fossil fuel power generation Data source: CARMA/CGD

The World Bank Energy Program Overview 1.South East Europe (Western Balkans) 2.South Caucasus 3.Central Asia 4.Ukraine, Belarus, Moldova (EU Eastern Neighborhood) 5.Turkey 6.Russia 7.Central/South Europe/Baltics (EU Member States) 1.South East Europe (Western Balkans) 2.South Caucasus 3.Central Asia 4.Ukraine, Belarus, Moldova (EU Eastern Neighborhood) 5.Turkey 6.Russia 7.Central/South Europe/Baltics (EU Member States)

The World Bank Energy Program in South East Europe  Support implementation of the Energy Community Treaty  Supporting the Energy Community Dialogue  Scaling-up implementation through investment support for Energy Community programs and technical assistance -Investments to strengthen regional power interconnection (Macedonia – Serbia; US$44.1 million)  Development of a regional Energy Sector Strategy  Advisory services on South East Europe Gas Power Consortium – Western Balkans Gas Ring  Enhance energy security and supply reliability  Optimizing hydro cascades and rehabilitation in Albania (US$56.9 million) and Macedonia (in preparation: US$ 70 million)  In Preparation: Power Recovery Project in Albania (US$150) and facilitating construction of new generation facilities in Kosovo (US$50 million)  Technical assistance to help prioritizing energy sector investments (Macedonia) 11

The World Bank Energy Program in South East Europe  Scaling up energy efficiency in public buildings throughout the Western Balkans  Strong investment and technical assistance program to support scaling up energy efficiency in public buildings - Recently closed: Energy Efficiency Projects in Macedonia and Serbia - Ongoing: Energy Efficiency Project in Montenegro (US$9.4 million) - Pipeline: Montenegro, Bosnia and Herzegovina, Kosovo, Serbia (US$72+million) - Regional and country specific studies on scaling up energy efficiency in buildings (Serbia, Macedonia, Kosovo) 12

The World Bank Energy Program in South Caucasus  Supporting use of renewable energy and improving energy efficiency  Support development of renewable energy potential in Georgia and Armenia - Supporting preparation of SREP Investment Plan with other IFIs - Technical assistance to support development of hydro power potential in Georgia - Preparing technical assistance activity on renewable energy assessment in Azerbaijan  Scaling up energy efficiency improvements in public and social facilities in Armenia (US$1.8 million GEF)  Strengthening power supply reliability  Ongoing Electricity Supply Reliability Project (US$39 million) and two new projects under preparation (US$80 million) in Armenia – Electricity Supply Reliability Project and Power Transmission Improvement Project  Facilitating regional power trade  In preparation: Investment project in Georgia (Transmission Grid Strengthening Project; US$60 million), which would also help to facilitate regional power trade  Azerbaijan: Transmission Strengthening Project (tbc).  Regional power trade study: Underpinning our lending portfolio 13

The World Bank Energy Program in Central Asia  Strengthen Energy Security and Supply Reliability  Strengthening transmission network in Kazakhstan (US$78million) and Uzbekistan (US$110 million)  Energy Loss Reduction Project in Tajikistan (US$35.5 million)  Advanced Electricity Metering Project in Uzbekistan (US$180 million)  In preparation: Electricity Supply Accountability and Reliability Project in Kyrgyz Republic (US$15 million); District Heating Rehabilitation Project in Uzbekistan (US$150 million); Electricity Distribution Rehabilitation Project in Uzbekistan (US$200 million)  Technical assistance to assess and identify viable heating options in Tajikistan and Kyrgyz Republic  Introduce international standard for assessing the development of new HPP projects (assessment studies for Rogun project in Tajikistan)  Catching up on energy efficiency with the rest of ECA – most inefficient sub- region  Improving energy efficiency in public and social facilities in Kazakhstan and supporting development of sustainable energy financing mechanisms (TF US$21.8 million)  Enhancing energy efficiency in industries in Uzbekistan (US$125 million) 14

The World Bank Energy Program in Central Asia  Support energy market development  Improve accountability and financial sustainability of power utilities in Tajikistan and Kyrgyz Republic (e.g. technical assistance for tariff setting methodology and development of performance monitoring framework in Kyrgyz Republic)  Strengthen regional energy trade  Central Asia South Asia Regional Electricity and Trade (CASA 1000) Project – connecting Tajikistan and Kyrgyz Republic with Afghanistan and Pakistan to provide clean energy to energy deprived South Asia  Development of Central Asia regional electricity trade  Central Asia Energy Water Development Program 15

The World Bank EU Eastern Neighborhood  Strengthening District Heating Sector  In preparation: District Heating Energy Efficiency Project in Ukraine (US$300 + $50 million CTF), District Heating Efficiency Improvement Project in Moldova (US$40 million and US$80 million coverage of debt restructuring using PCG), and Biomass District Heating Project in Belarus (US$90 million)  High level energy pricing dialogue in coordination with IMF and other IFIs in Ukraine  Technical assistance to regulator in Ukraine to reform heat billing practices (SIDA TF)  Support for heat tariff reforms and social impact measures in Belarus  Improving Energy Efficiency  Credit-line for industrial and municipal energy efficiency investments in Ukraine (US$200 million)  Energy Efficiency Project in Belarus focusing on CHPs (US$ 215 million)  Support for energy sector reforms and efficiency improvements in Moldova (SIDA TF US$2.6 million)  Technical assistance on municipal energy efficiency investment financing in Ukraine 16

The World Bank EU Eastern Neighborhood  Scaling up Climate Change Action  Supporting carbon market development in Ukraine (Partnership for Market Readiness)  Strengthening Power Sector  Ongoing and planned investments in transmission and hydropower rehabilitation in Ukraine (US$716 million), including support for power market reforms  Energy Community Treaty alignment with specific focus on ENTSO-integration in Ukraine  Assessment of Power Market Options in Moldova  Supporting Gas Sector Reforms in Ukraine  Ukraine is member of the Extractive Industries Transparency Initiative (EITI)  EC Ukraine Gas Trust Fund to support implementation of the gas sector reform program (scope defined and agreed with EC-EBRD-EIB and awaiting Government endorsement) 17

The World Bank Turkey  Scaling up private sector investments in renewable energy and energy efficiency  Increase private sector investments in renewable energy and energy efficiency (US$1 billion + $100 million CTF)  Credit-lines for energy efficiency investments in SMEs (US$201 million + $3.6 million GEF)  In preparation: Renewable Energy Integration Project (US$300 million)  Review and assessment of the energy efficiency institutional framework  Improve electricity and gas supply security and reliability  Gas sector development project (US$325 + $225 million AF in preparation)  Adaptable program loan (US$220 million) to support strengthening and expansion of transmission system and electricity market development  Support energy reforms  EU/IPA technical assistance program for energy sector reforms, energy efficiency and renewable energy (US$14 million)  Support Climate Change Action  Support development of carbon market (Partnership for Market Readiness) 18

The World Bank EU Member States  Strategic Focus in new EU Member States  Policy and program support to achieve EU goals  Advisory services to help prioritizing and support more effective use of EU structural funds  Policy support in energy market development  Program  Developing financing and implementation mechanisms for energy efficiency and renewable energy in Poland  Support development and implementation of climate change and green growth strategies, policies and mechanisms, including energy efficiency, in Romania  Review of district heating sector and related energy efficiency potential in Croatia  Energy sector dialogue and power sector assessment in Bulgaria 19 Russia  Scaling up energy efficiency in industry and municipalities  In pipeline: Credit-line for energy efficiency investments in industries and municipalities (US$500 +$23 million GEF)

The World Bank Thank you Outage – Investment Shortfalls in the Power Sector in Eastern Europe and Central Asia, April 2011 Lights Out? The Outlook for Energy in Eastern Europe and Central Asia, May Future of the Natural Gas Market in South East Europe July For information about the World Bank’s energy work: Project documents – appraisal reports for investment projects and program documents for DPLs also available: > projects and operations > documents 20