1 Promoting Renewable Energy through Auctions 2014/12 88694 A KNOWLEDGE NOTE SERIES FOR THE ENERGY PRACTICE THE BOTTOM LINE Promoting Renewable Energy through Auctions Auctions in various forms are being used to promote the generation of electricity from Why is this issue important? This note singles out auctions as an important mechanism that has been implemented in a growing number of countries in recent renewable sources. Properly Experience with the use of auctions to promote decades. structured auctions can avoid renewable energy can guide future efforts the disadvantages feed-in tariffs and renewable purchase Among the examples of the benefits to be obtained from generating What has been the conventional wisdom? obligations. Moreover, they electricity from renewable sources are (i) increasing countries’ Feed-in-tariffs and renewable purchase obligations offer the best of both of these energy security by reducing their dependency on fossil fuel imports, (ii) reducing greenhouse gas emissions as part of a worldwide were the first approach taken early mechanisms, providing stable revenue guarantees for effort to mitigate climate change, (iii) promoting electrification while Historically, the most common means of promoting renewable investors while also avoiding reducing the need for isolated applications such as diesel generators, energy in the electricity sector have been feed-in tariffs (FITs) and the risk of overbuilding. They do and (iv) minimizing local pollution. renewable purchase obligations (RPOs, also known as renewable this by determining both price Eager to take advantage of these positive effects, policy makers portfolio standards, RPS). While usually supplemented by other and quantity in advance. in developed and developing countries alike have sought to promote official policies, such as government-mandated renewable energy the development of renewable energy at the international level, targets or tax reductions, these mechanisms are similar to auction through initiatives such as the United Nation’s “Sustainable Energy schemes in the sense that they can be adjusted flexibly to regulate for All” (SE4ALL) project, and at the national level. At the beginning of incentives and to ensure that some amount of renewable energy 2013, 127 countries had renewable energy support policies in force capacity will be built. The most important characteristics of both (REN21 2013), an indicator of global interest in promoting renewable types of policies are presented below. energy. FITs. A FIT fixes the price that will be paid for renewable energy On the other hand, an analysis of current policies reveals great fed to the grid. Open access to the grid is usually also guaranteed diversity in the mechanisms adopted by governments to meet under FIT schemes, thus minimizing barriers to market entry and Gabriela Elizondo this common goal. In addition, as the renewable energy sector preventing utilities from using their market power or power of incum- Azuela is a senior has matured, policy revisions have become increasingly common. bency to limit development of renewable energy. After the pioneering energy specialist in the Therefore, an in-depth analysis of individual countries’ experience U.S. Public Utility Regulatory Policies Act (PURPA) of 1978, the FIT World Bank’s Energy Practice. can be useful in guiding future regulatory action by providing detailed approach rapidly gained popularity both for its simplicity and for the information on the pros and cons of particular policies. A large body long-term revenue certainty that it offered to developers and investors. Luiz Barroso is a of literature has grown up around the features and performance of A challenge of FIT schemes, however, has been determining managing director at PSR in Brazil. various policies to promote renewable energy. the tariff level that will stimulate the desired investment. In an 2 Promoting Renewable Energy through Auctions environment of rapidly changing equipment costs and information What is the new evidence? asymmetry, there is a risk that the FIT may be set above market costs. When the FIT exceeds the levelized costs of energy1 by too Auction mechanisms tested in several countries have much, investors rush to the market and additions to capacity quickly been performing remarkably well exceed the official target, with the result that consumers end up pay- The schemes described in the previous section show an interesting ing too much for energy. (Situations like this have occurred in Spain symmetry. FITs control the price paid for renewable energy, leading “FITs control the price and Germany, for example.) So-called feed-in premium mechanisms to uncertainties with respect to the quantity of renewable capacity; paid for renewable energy, have recently been proposed as a way around this problem by mak- whereas RPOs control the quantity of renewable energy, resulting in leading to uncertainties ing investors sensitive to market price signals—at the cost, however, price uncertainties that must be managed by investors. Faced with of diminishing the revenue stability that helps attract investors. this conundrum, policy makers began to see in auction mechanisms with respect to the quantity RPOs. RPOSs basically require electricity suppliers to include an alternative that might yield the best of both worlds, providing of renewable capacity; a minimum amount of renewable energy in their supply. They are stable revenue guarantees for investors while avoiding the risk of whereas RPOs control often supplemented by a scheme for trading renewable energy overbuilding. Auction schemes do this by determining both price and the quantity of renewable certificates. The most important precursor of this sort of mechanism quantity in advance, using a public bidding process. energy, resulting in price was the Alternative Energy Law adopted in Iowa (United States) in Simply defined, an auction is a selection process designed to 1983. Because RPOs work by predetermining the amount of renew- procure (or allocate) goods and services competitively, wherein the uncertainties that must be able capacity to be built (and then allowing the market to determine allocation is determined based on financial offers from prequalified managed by investors.” how that capacity will be remunerated), the possibility of overshoot- bidders. Where competition is feasible and desirable, auctions have ing the desired capacity is not an important risk to consumers, as it proven very effective in attracting new players to the market and in is with FITs. efficiently matching supply and demand. Auctions also increase the On the other hand, RPO schemes offer less assurance to competiveness and transparency of the procurement process, making investors about future cash flows. In essence, the risk of overbuilding the resulting obligations less likely to be challenged when the political is transferred from consumers to investors. In addition, renewable or institutional landscape changes (Maurer and Barroso 2011). energy certificates presuppose the existence of a competitive Auction-based schemes to foster generation from renewable market. There is a risk, moreover, that their pricing may be manip- sources were first explored under the United Kingdom’s Non–Fossil ulated by an incumbent utility or a small group of large utilities. Fuel Obligation (NFFO) scheme, introduced in 1989. The results of this Another characteristic of this type of scheme is that it tends to favor first implementation were not very promising. The NFFO was seen as more mature technologies, since investors will seek the cheapest much more complex than alternative FIT schemes, and there were opportunities for the development of renewable generation. All of major concerns with underbuilding. In fact, of a total of 2,659 MW of these factors limit the magnitude, diversity, and pace of investment wind capacity rights awarded through auction, only 391 MW were under RPO schemes. effectively built. As a consequence, the United Kingdom switched to an RPO mechanism in 2002 (Pollitt 2010). Despite this early setback, auction-type mechanisms surged in popularity over the ensuing decade (del Río Gonzalez and Linares 1 The levelized cost of energy is the price of electricity required for a project to make the 2014). Between 2005 and 2013, while the number of countries imple- net present value of all revenues and costs equal to zero at a discount rate equivalent to the menting FIT or RPO schemes roughly doubled in size, the number required rate of return. It provides a convenient way of summarizing all relevant costs of energy in a single measure that is easily comparable across different types of technologies. implementing auction schemes increased sixfold (table 1). Much of 3 Promoting Renewable Energy through Auctions (expressed in terms of units of energy, capacity, or some other Table 1. Countries with active renewable energy policies of specific ancillary service) must be determined. Sophisticated mech- various types anisms in which the demand is allowed to vary with the auctioned Number of countries price are also possible. On the supply side, the auction mechanism with active policies may restrict bids to particular types of technologies or sites, and Mechanism 2005 2013 this restriction may be applied at several levels (technology-neutral, “Between 2005 and 2013, technology-specific, location-specific, or even project-specific). Feed-in tariff/feed-in premium payment (FIT) 34 71 while the number of Process for selecting winners. Typically, the winner of the Electric utility quota obligation (RPO/RPS) 11 23 countries implementing auction is determined by the lowest bid. However, other decision Public competitive bidding/tendering (auctions) 7 45 criteria are not uncommon, such as a compound index that ranks FIT or RPO schemes All renewable promotion policies (includes the the candidates. The process for selecting winners also defines 48 127 roughly doubled in size, support mechanisms listed above, plus others) whether the auction will include a price cap (which may be disclosed the number implementing Source: REN21 Renewable Energy Policy Network 2005; REN21 2013. or undisclosed) and how the ultimate remuneration of bidders will auction schemes increased Note: FIT = feed-in tariff; RPO = renewable purchase obligations; RPS = renewable portfolio be determined (first price, second price, and pay-as-bid are some standard. RPO and RPS are alternative names for the same basic instrument. sixfold.” common implementations) (Maurer and Barroso 2011). Another important component of the auction scheme is the the renewed interest in auction mechanisms was led by developing so-called price-discovery mechanism. The choice between sealed- countries (Lucas, Ferroukhi, and Hawila 2013). By contrast, RPO bid auctions and descending-clock auctions, in which bidders schemes were concentrated in high-income countries (figure 1). respond iteratively to earlier bids, often hinges on whether the Auction mechanisms can differ greatly from one implementation more effective price discovery of the descending-clock auction to the next, as features are adjusted to suit a particular country’s offsets the increased risk of strategic or collusive behavior among needs. While this characteristic can be a plus (auctions are very participants. Some countries (Brazil, in particular) have implemented adaptable instruments), it also makes it harder to draw cross-country comparisons and distill policy recommendations. However, some of Figure 1. Countries with policies to foster renewable energy in 2013, the most important elements at the core of by income category auction schemes are the following: 100 Specification of supply and demand. This part of the auction process determines 80 High-income countries who can participate in the auction and how Upper-middle-income countries 60 much product—in this case, contracts for the Lower-middle-income countries Percent supply of electricity produced from renewable Low-income countries 40 sources—will be contracted. Typically the recipients of the auctioned product are power 20 distribution companies or a government-con- 0 trolled entity that can offer reasonable financial Electric utility quota Feed-in Public competitive guarantees to bidders. The auction demand obligation/RPS tariff/premuim payment bidding/tendering Source: REN21 2013. 4 Promoting Renewable Energy through Auctions hybrid systems in an attempt to combine the best features of the India. Those case studies are part of the Live Wire series, as noted at two price-discovery processes. The greater complexity of the hybrid the end of this brief. mechanism is its chief disadvantage. Some highlights of the three countries’ auction design are Product characteristics. Typically, the product offered to the presented in table 2. winners is a long-term power purchase agreement. Among the important components of such agreements are duration, escalation How does this affect our thinking? “The choice between and indexation clauses, and the liabilities of the contracting parties. sealed-bid auctions and Depending on how the generator’s obligations are defined, an The right auction scheme for a given country depends descending-clock auctions accounting or settlement mechanism to deal with the intermittency on close analysis of production must usually be defined as well. An attractive prod- Choosing the best instrument to promote the development of often hinges on whether uct—that is, an agreement that protects investors from multiple renewable energy in a particular country hinges on multiple factors, the more effective price sources of risk (inflation risk, exchange rate, and resource availabil- but auction-based schemes are an alternative that policy makers discovery of the ity)—will tend to increase the number of participants in the auction should consider. Auctions appear as an effective way to stimulate descending-clock auction at the cost, of course, of transferring those risks to consumers. competition among investors, provide price disclosure while eliciting offsets the increased risk of Requirements and penalties. These terms are designed to the right amount of investment, and offer revenue stability via long- ensure that the winners of the auction will fulfill their obligations. term contracting. It is important, however, that policy makers have strategic or collusive Some standard practices include bid bonds (to be executed if bidders a clear understanding of the strengths and weaknesses of various behavior among do not meet their obligations), completion bonds (to be executed if auction schemes. participants.” project milestones are not met), and the possibility of contract ter- Auctions offer stable guarantees to both investors and mination after a predetermined period of delay. Sometimes, in order consumers. Auction winners are assured a stable, long-term reve- to prevent “adventurous” bidding, participants are asked to provide nue stream. Consumers have the security of knowing that the right guarantees of their financial health before they are allowed to bid. amount of renewable energy capacity will be built. This two-sided Strategy and coordination. Staging an auction implies prior benefit of the auction process is especially valuable when there work to coordinate the renewable capacity to be acquired through is reason to believe that the environment may be technologically, the auction with the expansion of the transmission grid and of the economically, politically, or institutionally unstable. generation system as a whole. At an even higher level, it may also Well-designed auction schemes can kick-start a country’s make sense to coordinate the expansion of renewable generation renewable energy program. Because organized auction pro- capacity with the manufacturing of required equipment for which cesses tend to attract attention from international players, they can the country has a relative comparative advantage. To further this be an interesting alternative for countries in which the energy market goal, domestic content requirements have been added to the terms lacks a mature renewable energy segment. In fact, this may be one of power purchase agreement in several cases. Even more subtle reason why auctions have been popular in emerging economies, measures, such as a long-term strategy involving periodic auctions, where the risk of a few firms exerting too much market power has can implicitly promote coordination by allowing industries to plan for been a barrier to RPO schemes. The three countries surveyed by the the longer term. World Bank have exploited the opportunity to develop their domestic National experience with renewable energy auctions has been capacity to produce renewable energy equipment as well as other quite diverse, reflecting the flexibility inherent in auction design. The supporting industries and services. Although domestic content World Bank has analyzed the current state of auction-based mecha- requirements have been challenged in international trade forums, nisms for the development of renewable energy in Brazil, China, and 5 Promoting Renewable Energy through Auctions Table 2.  Features of auctions designed to promote the generation of electricity from renewable sources in Brazil, China, and India Brazil India China Case study Wind: 11.7 GW awarded in 10 auctions, Solar: 4.4 GW awarded in 15 auctions, Wind: 3.5 GW awarded in 5 auctions, 2009–13 2011–13 (but only around 2.7 GW 2003–07 expected to materialize) “Auctions appear as an Solar: 0.3 GW awarded in 2 auctions, 2009–10 effective way to stimulate Offshore wind: 1.0 GW awarded in 1 competition among auction in 2011 investors, provide price Country renewable policy Target: No official target for renewable Target: 20 GW of solar by 2022 (National Target: 200 GW of wind, 50 GW of solar by disclosure while eliciting energy Solar Mission) 2020 (five-year plans) the right amount of Main fostering mechanism: sporadic Main fostering mechanism: RPO-based Main fostering mechanism: policy based technology-specific auctions; fiscal and in the long term, supported by auctions on FIT scheme investment, and offer financial benefits and FITs revenue stability via Auction types Regular auctions and reserve auctions, National-level auctions (large-scale Centralized tenders only, differing by long-term contracting.” both centrally organized but differing in and rooftop) and state-level auctions; technology type allocation of responsibilities decentralized implementation Main goals of auctions To exploit synergies between wind and To procure solar capacity at low cost Price-discovery mechanism to determine hydro, to correctly assess wind power’s in the scale-up phase of solar power benchmarks for setting FITs contribution to the system development Basic auction design Technology-neutral or technology-specific Technology-specific auction Project-specific tender for concession auctions sites Sealed bids Hybrid price discovery Sealed bids PPA without escalation Inflation-indexed PPA PPA without escalation Clear obligations and penalties Clear obligations and penalties Unclear obligations and penalties Unique design Yearly and 4-year settlements to Pricing based on the lowest bid received Multi-criterion winner selection innovations protect investors from wind generation (in some state-level auctions) “Average-price” criterion substituting the uncertainty Capital subsidy schemes (in some lowest-price criterion Attempts at generation-transmission national-level auctions) coordination Domestic content “Indirect” DCR, required to apply for DCR not implemented in many DCR of 50–70 percent was enforced up attractive loans from state bank (BNDES) state auctions; mixed signaling to to 2009. Domestic industry is currently manufacturers competitive Source: Authors. DCR = domestic content requirement; FIT = feed-in tariff; PPA = power purchase agreement; RPO = renewable purchase obligation. 6 Promoting Renewable Energy through Auctions a well-designed auction scheme can take advantage of existing Discouraging overoptimistic behavior has been a major MAKE FURTHER competitive and comparative advantages in the manufacturing of challenge of past implementations. Common problems, such as CONNECTIONS renewable energy equipment and in the provision of services in both delays in construction and underperformance, have been identified domestic and international markets. in systems using multiple auctions to foster renewable energy. Live Wire 2014/13. “Promoting Auction mechanisms should be fully integrated with Although these problems can be dealt with to a degree by stiffening Renewable Energy through other regulatory, planning, and economic strategies. Auctions penalties for failing to meet the original objectives, it does seem that Auctions: The Case of Brazil,” by do not operate in a vacuum. The interdependence between an the winning bid too often represents a best-case scenario rather Gabriela Elizondo-Azuela, Luiz auction scheme and a country’s regulatory structures and practices than a reasonable expectation. Policy makers should be aware of Barroso, and Gabriel Cunha. can be an asset or a liability to the auction’s success. Despite the this risk and seek to build a mechanism that can accommodate guarantees that auction mechanisms offer to investors, their success deviations in a robust way. Incentives to provide early warning of Live Wire 2014/14. “Promoting is likely to be limited if they are not supported by an environment of potential problems should be built in, so that mitigation measures Renewable Energy through regulatory stability, transparency, and fairness. On the other hand, can be taken at the earliest possible stage. Auctions: The Case of China,” by auction mechanisms that are deeply integrated with a country’s Xiaodong Wang, Luiz Barroso, energy planning can be very effective in expanding the generation and Gabriela Elizondo-Azuela. and transmission systems in a coordinated way, for the simple rea- References son that auctions signal what projects are to be built well in advance. Live Wire 2014/15. “Promoting Lucas, H., R. Ferroukhi, D. Hawila. 2013. “Renewable Energy Auctions Auction mechanisms can be very effective in reducing Renewable Energy through in Developing Countries.” International Renewable Energy prices. In Brazil, China, and India, auction mechanisms have been Auctions: The Case of India,” by Agency, Abu Dhabi, UAE. successful in bringing energy prices down, compared to levelized Ashish Khana, Luiz Barroso, and Maurer, L. T., and L. A. Barroso. 2011. Electricity Auctions: An Overview cost benchmarks calculated on the basis of “reasonable” assump- Gabriela Elizondo-Azuela. of Efficient Practices. Washington, DC: World Bank. tions (which are generally used to determine an auction’s cap price Pollitt, M. G. 2010. “UK Renewable Energy Policy Since Privatisation.” and price levels for FIT programs). In part, the price reductions can Electricity Policy Research Group Working Paper 1002, University be attributed to the development of industries and services that of Cambridge. support renewable energy generation, as described above. And, of REN21. 2013. Renewables 2013 Global Status Report. Paris: REN21 course, lower energy costs represent gains for consumers. Attracting Secretariat. additional bidders tends to be a more effective strategy for driving REN21 Renewable Energy Policy Network. 2005. Renewables 2005 prices down than choosing a lower price cap. Global Status Report. Washington, DC: Worldwatch Institute. Auctions are complex, and transaction costs can be sig- del Río Gonzalez, P., and P. Linares. 2014. “Back to the future? nificant. A criticism of auction schemes is that they are significantly Rethinking auctions for renewable electricity support.” more complex and more costly than either FIT or RPO mechanisms. Renewable and Sustainable Energy Reviews 35 (July): 42–56. Besides requiring more public resources to design, analyze, and carry out the selection procedure, this complexity (which is the downside The peer reviewers for this note were Luiz Maurer (principal industry special- of their flexibility) also makes it more difficult for smaller players to ist for climate strategy and business development, IFC) and Katharina Gassner participate because it is more difficult for them to dilute transaction (senior investment climate economist, World Bank Group). The authors thank costs in their portfolios. The cost of complexity must be kept in Gabriel Cunha (consultant) for his contributions to this note. mind when considering sophisticated auctions. Brazil’s auctions are an example of a high-complexity mechanism that had unforeseen consequences. 7 Get Connected to Live Wire Get Connected to Live Wire Live Wires have been designed for easy reading on the screen and for The Live Wire series of online knowledge notes is a new initiative of the World Bank Group’s downloading and self-printing “Live Wire is designed Energy Practice, reflecting the emphasis on knowledge management and solutions-oriented in color or black and white. knowledge that is emerging from the ongoing change process within the Bank Group. for practitioners inside Professional printing can and outside the Bank. Each Live Wire delivers, in 3–6 attractive, highly readable pages, knowledge that is immediately also be undertaken on relevant to front-line practitioners. 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Once a year, the Energy Practice takes stock of all notes that appeared, reviewing their quality and identifying priority areas to be covered in the following year’s pipeline. https://openknowledge.worldbank.org 1 U n d e r s ta n d i n g C O 2 e m i s s i O n s f r O m t h e g lObal energy seCtOr 2014/5 A KNOWLEDGE NOTE SERIES FOR THE ENERGY PRACTICE THE BOTTOM LINE Understanding CO2 Emissions from the Global Energy Sector the energy sector contributes about 40 percent of global 2014/4 emissions of CO2. three- Why is this issue important? xas The Case of Te renewable ene rgy T o T h eof quarters r i d : emissions gthose Mitigating climate change requires knowledge of the Figure 2. energy-related CO2 1 TransmiTTing come from six major Figure 1. CO2 emissions sources of CO2 emissions by sector emissions by country economies. although coal-fired LICs plants account for just Identifying opportunities to cut emissions of greenhouse gases 0.5% requires a clear understanding of the main sources of those emis- 40 percent of world energy Residential Other were Esions. N E R Carbon G Y P R A C T dioxideICE(CO2) accounts for more than 80 percent of 6% sectors Other MICs production, they S FOR T H E LEDGE NOTE SERIE 10% 15% A KNOW total greenhouse gas emissions globally, primarily from the burning 1 China responsible for more than Other HICs 30% of fossil fuels (IFCC 2007). The energy sector—defined to include Energy 8% 70 percent of energy-sector Energy to the Grid: fuels consumed for electricity and heat generation—contributed 41 Industry 41% Japan 4% emissions in 2010. if warming is Transmitting Renewable 20% Russia to be limited to two degrees percent of global CO2 emissions in 2010 (figure 1). Energy-related 7% USA THE BOTTOM LINE CO2 emissions at the point of combustion make up the bulk of such Other transport Road India 19% Celsius, therefore, steep 7% EU The Case of Texas emissions and are generated by the burning of fossil fuels, industrial 6% transport 11% states reductions will have to be made Texas leads the United 16% waste, and nonrenewable municipal waste to generate electricity with 9,528 mw of installed in the use of coal to generate face? and leakage emissions What challenge did they and heat. Black carbon and methane venting Notes: Energy-related CO2 emissions are CO2 emissions from the energy sector at the point wind power capacity—a electricity in the larger bunkers, domestic note. of combustion. Other Transport includes international marine and aviation ? are not included in the analysis presented in this level exceeded by only four Why is this case interesting economies. t was contingent on aviation and navigation, rail and pipeline transport; Other Sectors include commercial/public Transmission investmen yet needed to precede it tion, and other emissions not specified elsewhere; Energy = fuels consumed for electricity and and heat genera- services, agriculture/forestry, fishing, energy industries other than electricity countries. The state needed and accelerate more infrastructure to transmit Texas needed to prioritize Where do emissions generation come ents commitm from? HIC, MIC, and LIC refer to high-, middle-, wind sites tremendous needs for trans-heat generation, as defined in the opening paragraph. electricity generated from development of remote EmissionsTexas are faced the challenge of meeting concentrated in a handful of countries from and low-income countries. producer of generation renewable sources, but the century, Texas was a major e triggered by the scale-up Source: IEA 2012a. During much of the twentieth is now taking advantage and primarily mission come infrastructur from burning coal infrastructur e can take longer to regulator could not approve States. The state of petroleum in the United Vivien Foster is sector renewable sources. Transmission projects wind.for the Sus- leads It currently The geographical pattern of energy-related CO2 emissions closely transmission expansion a major renewable energy resource:manager only 0.5 percent by all low-income of power capacity middle-income countries, and in the absence of financially 9,528 MW of installed wind Depart- tainable Energy mirrors the distribution of energy consumption (figure 2). In 2010, To solve the United States with ment at the fifth World rank in wind Bank two zones energy with the countries put together. committed generators. were a country, would almost half of all such emissions were associated competitive renewable a (ERCOT 2011) and, if it (vfoster@worldbank.org). Figure 1. Texas’s five Coal is, by far, the largest source of energy-related CO2 emissions the problem, Texas devised largest global energy consumers, and more than three-quarters quickly generation worldwide. Daron program in 1999, it vowed to were associated with the top six emitting countries. Of the remaining Bedrosyan globally, accounting for more than 70 percent of the total (figure 3). planning process that When Texas reformed its energy works energy mix. It now uses a energy-related CO2 emissions, about 8 percent were contributed for London This reflects both the widespread use of coal to generate electrical connects energy systems increase the role of renewables in its Toronto. to increase Economics in utilities power, as well as the exceptionally high CO2 intensity of coal-fired to the transmission system. portfolio standard to require energy by other high-income countries, another 15 percent by other the renewable Previously, he was renewable sources. an To minimize power (figure 4). Per unit of energy produced, coal emits significantly The system is based on their energy generation from eligible energy analyst with the energy program created more CO2 emissions than oil and more than twice as much as natural designation of “competitive the state’s renewable Practice. Greenhouse Gas Inventory costs to the taxpayer, World Bank’s Energy rely on the private sector United Nations Framework Convention 1 on Climate Change, gas. renewable energy zones. energy zones that Data—Comparisons By Gas (database). http://unfccc.int/ghg_data/items/3800.php competitive renewable and trans- e and operations for generation to provide infrastructur and regulation provides planning, facilitation, mission, while the state (figure 1). electricity pro- standard mandated that The renewable portfolio by 2009. 2,000 MW of additional renewable energy viders generate and was followed Marcelino Madrigal met in just over six years (mmadrigal@worldbank This 10-year target was and mandated 20, which raised the targets .org) is a senior energy up in 2005 by Senate Bill reach 5,880 energy generation must specialist in the World that the state’s total renewable Furthermore, the 2015 and 2025 respectively. Bank’s Energy Practice. MW and 10,000 MW by energy target 500 MW of the 2025 renewable With Rhonda Lenai Jordan legislation required that sources other than wind. (rjordan@worldbank.org) be derived from renewable in is an energy specialist Source: ERCOT 2008. the same practice. 8 D o y o u h av e s o m e t h i n g t o s ay ? S ay i t i n L i v e W i r e ! Contribute to If you can’t spare the time to contribute to Live Wire, but have an idea for a topic, or case we should cover, let us know! Do you have something to say? We welcome your ideas through any of the following Say it in Live Wire! channels: Via the Communities of Those working on the front lines of energy development in emerging economies have a wealth of Practice in which you are technical knowledge and case experience to share with their colleagues but seldom have the time to active write for publication. By participating in the Energy Live Wire offers prospective authors a support system to make sharing your knowledge as easy as Practice’s annual Live Wire possible: series review meeting • Trained writers among our energy sector staff will be assigned upon request to draft Live Wire By communicating directly stories with staff active in operations. with the team (contact • A professional series editor ensures that the writing is punchy and accessible. Vivien Foster, vfoster@ • A professional graphic designer assures that the final product looks great—a feather in your cap! worldbank.org) Live Wire aims to raise the profile of operational staff wherever they are based; those with hands-on knowledge to share. That’s your payoff! It’s a chance to model good 2014/4 Texas d: The Case of rgy To The gri “knowledge citizenship” and participate in the ongoing change process at the Bank, 1 TransmiTTing renewable ene where knowledge management is becoming everybody’s business. A KNOWLEDGE NOT E SERIES FOR THE ENERGY PRACTICE Energy to the Grid: Transmitting Renewable gy sector 2014/6 1 s u lt s o f W o r l d B a n k l e n d i n g i n t h e e n e r M e a s u r i n g t h e r eLINE THE BOTTOM The Case of Texas states Texas leads the United with 9,528 mw of installed face? wind power capacity—a What challenge did they level exceeded by only four G Ethis E S Einteres case ting? was contingent on A KNOW WhyL E D is NOT RIES FOR THE ENERGY PRACTICE Transmission investment countries. The state needed Texas needed to prioritiz e and accelerate yet needed to precede it more infrastructure to transmit generation commitments wind sites for trans- electricity generated from development of remote faced the challenge of meeting tremendous needs Measuring the Results of World Bank Your Name Here THE BOTTOM LINE producer Texas of generation from renewable sources, but the century, Texas was a major mission infrastructure triggered by the scale-up During much of the twentieth e take longer to regulator could not approve States. The state is now taking advantag sion infrastructure can renewable sources. Transmis Lending in the Energy Sector petroleum in the United this note is the first report of leads n projects resource: wind. It currently of energy-sector indicators transmission expansio of a major renewable energy ly power capacity Become an author in the absence of financial 9,528 MW of installed wind reflecting the World Bank’s the United States with rank fifth in wind zones committed generators. To solve were a country, would the effort ive renewable energy to measure broad lending patterns during (ERCOT 2011) and, if it What challenges were faced Figure 1. in Texas’s five competit the problem, Texas is this a Whydevised issue important? fy 2000–13. to compile it, generation worldwide. 1999, it vowed to inresults? energy projects back to fy 2000 planning The need for accountability process that quickly has made When Texas reformed it critical its energyfor the program of Live Wire and energy mix. It now uses a to be retrieved and aligned for connects energy systems results of renewab les in its Data back to FY 2000 had were manually screened Energy Practice to measure increase the role utilities to increase results data comparable with to the transmission system. renewable portfolio standard to require energy with the new CSIs the tracks the outcomes on Bank of its projects in order to le sources. To minimize the standardized indicators The system is ThebasedWorld n from eligible renewab their energy generatio poverty le energy endingrenewab program created project in the energy sector had devised its own “competitive the goals of state’s each contribute to your how well they are advancing Previously, now used in the Bank’s designation of understand costs to the taxpayer, the zones. shared prosperity. For some years now those on the private sector which made it difficult to report the Bank’s corporate scorecard. in the renewable energyand promoting competitive renewab le energy zones that rely indicators of results, Corporate Scorecard s for generatio n and trans- in terms that were both broad and precise. With the outcomes have been reported in a Bank-wide and operation achievements future, automation will make to provide infrastructure that measure and n,of n Corporate Scorecard, however, the clear advantages of regulatio based on a set of so-called core sector indicators (CSIs) provides planning, facilitatio advent the it easier to collect, aggregate, mission, while the state practice and career! impact at the project level and permit aggregation of standardized being able to demonstrate results led the Energy Practice to examine and analyze data on project (figure 1). pro- data across the Bank. Each CSI is anrenewab indicator of output or outcome d that energy projects back to FY 2000 and, to the extent electricity Bank’s outcomes. The le portfolio standard mandate the to a particular sector or theme, such as l renewab le energy possible, to by 2009. retroactively harmonize or align the indicators used in that is strategically relevant MW of additiona Madrigal viders generate 2,000 years and was followed with those devised for the Corporate Scorecard. The Marcelino the energy sector. was met in just over six those projects (mmadrigal@worldba nk This 10-year target Energy Practice, targets and mandated exercise are reported in this note. Three CSIs are particularly central to the Bank’s Bill 20, which raised the results of this “archaeological” .org) is a senior energy up in 2005 by Senate must reach 5,880 here for the fiscal years 2000–13 are the because they reflect its engagement state’s in every step of the energy generationThe results reported specialist in the World that the total renewable energy the value chain—from generation to transmission and distribution (T&D) by 2015 and 2025 respectiv ely. first Furtherm such reportore, of energy-sector indicators reflective of the broad Sudeshna Ghosh With Bank’s Energy Practice. MW and 10,000 MW are: renewable energy target the World Bank during this period. customer connections. The to “last mile”Jordan three indicators that 500 MW of the 2025 lending patterns of Banerjee is a senior Lenai legislatio n required energy specialist in the Rhonda of people provided with access to electricity le sources other than wind. through To compile the report, all World Bank projects approved in the • The number (rjordan@w orldbank.o rg) be derived from renewab World Bank’s Energy specialist in connections energy space between FY 2000 and FY 2013 (approximately 70–80 household is an energy Source: ERCOT 2008. Practice (sgbanerjee@ same practice. projects per year on average) were screened to extract those the• T&D lines constructed or rehabilitated, measured in kilometers worldbank.org) that had adopted indicators similar enough to those used in the (km) Ruchi Soni (rsoni@ Corporate Scorecard that they could be mined for comparable data. worldbank.org) is an • Generation capacity constructed, measured in megawatts (MW). Information was extracted from two types of project documents: energy analyst in the More recently, additional indicators have been developed cov- the Implementation Completion and Results Report (ICR) for same practice. ering measurement of energy efficiency in heat and power (lifetime closed projects and the most recent Implementation Status and Elisa Portale (eportale@ savings, captured in MWh). Results Report (ISR) for active projects. In some cases, information worldbank.org) is an was referred back to project staff for confirmation or, where energy consultant, also discrepancies had been spotted, for correction. In a few cases in the Energy Practice. where indicators were not explicitly mentioned in the ICR or ISR,