World Bank Group Sets Direction for Energy Sector Investments

Nearly one-sixth of today’s global population – 1.2 billion people – lives without access to electricity. Their businesses can’t operate after dusk, their schools lack power for technology, their children struggle to study by candlelight. The lack of power limits their opportunities, keeping communities in poverty.

Two-fifths of the population – 2.8 billion people – still relies on solid fuel such as wood, charcoal, dung, and coal for cooking and heating, resulting in three and a half million deaths every year from the effects of indoor air pollution.

Delivering reliable energy services for economic development and providing access to electricity and modern household energy services to these billions living without it is essential to reducing poverty and building shared prosperity. That is why expanding access to energy, along with accelerating energy efficiency and renewable energy, is at the core of the World Bank Group’s future work in the energy sector, as described in a new Energy Sector Directions Paper discussed by the Bank Group’s Executive Board on July 16. With the Executive Board’s support, the World Bank Group will use the paper to inform its operations going forward.

The paper states that the World Bank Group will make every effort to “minimize the financial and environmental costs of expanding reliable energy supply” while also recognizing that “each country determines its own path for achieving its energy aspirations.” It emphasizes the importance of selecting areas in which the Bank Group can best help countries mobilize energy solutions that reduce poverty sustainably.

World Bank Group President Jim Yong Kim, who led the discussion with the Executive Board, said the paper’s directions are anchored in the World Bank Group’s overarching goals of reducing the global rate of extreme poverty to 3 percent by 2030 and fostering the income growth of the bottom 40 percent in every country.

 “We need affordable energy to help end poverty and to build shared prosperity,” Kim said. “We will also scale up efforts to improve energy efficiency and increase renewable energy—according to countries’ needs and opportunities.” 

Guiding principles

The paper is closely aligned with the Sustainable Energy for All initiative’s goals for 2030 to achieve universal access to modern energy, double the global rate of energy efficiency improvement, and double the share of renewable energy in the global energy mix. 

It focuses on a long-term system-wide approach that enables governments to manage resources in an integrated way and address the needs for energy supply and demand at once. At the regional level, it could promote regional integration to develop cross-border energy markets to deliver more reliable and affordable energy.

Other guiding principles identified in the paper include an emphasis on improving the financial, operational, and institutional environment for the energy sector in countries to help stimulate private sector investment, and consulting with affected communities and civil society organizations, as well as industry.

The paper addresses the use of fossil fuels. It affirms that the World Bank Group will “only in rare circumstances” provide financial support for new greenfield coal power generation projects, such as “meeting basic energy needs in countries with no feasible alternatives,” It says the Bank Group will scale up its work helping countries develop national and regional markets for natural gas, the fossil fuel with the lowest carbon intensity.  The paper also confirms the Bank Group’s intention to increase support for hydropower projects.

In addition to its focus areas, the paper calls on the World Bank Group to “intensify global advocacy.” This includes encouraging developed countries and large emerging economies to lead efforts on pricing carbon, moving new technologies and other innovations to markets, and deploying them at scale. 

“It’s a pragmatic set of directions for energy development,” said Rachel Kyte, World Bank Vice President for Sustainable Development. “We need to ensure that everyone is reaping the benefits of modern energy by 2030, and we need to do so sustainably. This paper positions us to partner with our countries to realize this vision.”

The World Bank Group's work

The World Bank Group’s work in energy today is already designed to help client countries secure the affordable, reliable, and sustainable energy supply needed to reduce poverty. 

The Bank Group has provided seed financing to support the construction of concentrating solar plants in North Africa, the installation of millions of off-grid household solar power systems across Bangladesh and Mongolia, the development of wind farms in Turkey, regional hydropower developments in Africa and South Asia, and geothermal power exploration in Kenya. 

In Belarus and other states of Eastern Europe, it supports energy efficiency projects that are warming schools and hospitals and saving money on utility bills that can instead be put into much-needed equipment. 

In Africa, where about 20 countries reach less than 20 percent of their populations with electricity, the Bank Group has worked to expand access to electricity. Power connections in Rwanda have more than tripled since 2009, and more schools and hospitals are connected with power grids, lowering costs and improving reliability. Globally, low-income countries – with 12 percent of the population – consume 1 percent of total global energy and have an average electrification rate of 30 percent. 

The directions paper provides a map for the Bank Group to reach more of these communities with the energy they need to help lift those in extreme poverty and boost economic opportunities in sustainable ways.