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The World Bank’s energy lending is stuck in the past

There’s no question that solar and wind power are experiencing a remarkable rise. The latest energy studies show that investments and newly installed capacity for wind and solar are far outstripping other types of energy, including hydropower (which declined for the second year in a row). As leaders grapple with how to respond to climate change, the reduced cost of wind and solar technologies and the rapid clip of installation should be cause for celebration.

The World Bank’s President Jim Kim has been vocal about the need for governments to increase solar and wind generation to help address climate change, but it turns out that the Bank’s own lending is out of step with these trends. A review of the last five years of its lending practices shows that the bulk of the Bank’s renewables lending still focuses on large hydro – at a time when the rest of the world is going in the opposite direction.

Large hydropower is an outdated, expensive technology that suffers cost and time overruns, a long deployment period and vulnerability to climate change. Hydropower reservoirs are also major emitters of methane, an especially potent greenhouse gas.

Rather than lead by example, the World Bank has fallen behind governments and markets, which have readily adopted solar and wind as the future of renewable energy generation. A review of World Bank lending since 2010 shows 65% of its lending for renewable energy supported conventional hydro over new renewables. (The World Bank considers hydropower as renewable.)

In Africa, where energy access rates are the lowest, the World Bank is even farther behind the curve – nearly three quarters of World Bank renewables lending is going towards hydropower, versus just 10% and 6% for solar and wind respectively.

 

This despite the findings of the International Energy Agency (IEA), which estimates that to deliver energy access to the 1.3 billion globally who lack it – about half of whom are in Africa – two-thirds will have to come from renewable sources such as solar, wind, biomass and micro-hydro. Large hydro, however, requires a centralized grid. So who’s getting the energy? It’s not those suffering from systemic energy poverty.

In the 1970s, building a dam may have looked like the best option. But in the intervening decades, the cost of solar power has dropped dramatically. Given that Niger is located on edge of Sahara Desert, an area with some of the highest solar potential in the world, solar is the best option. In addition, studies show that solar can be harnessed for both on- and off-grid-based generation widely in Africa.

The World Bank’s current lending strategies are doing impoverished countries a disservice, particularly in Africa. They are foisting outdated and expensive hydropower projects on the continent most vulnerable to climate change-induced drought and floods. And they’re doing it at a time when wind and solar have never been easier, faster or cheaper to deploy.Nowhere is this truth more stark than in Niger, where the World Bank is currently supporting a $1 billion “prestige” project cooked up in 1970s: the Kandadji Dam. Kandadji would deliver, at most, 130 MW to the power-starved country during the rainy season, and considerably less the rest of the year. Even more troubling, the project will have a massive social footprint – over 60,000 people will have to be relocated to make way for the dam’s reservoir.

The World Bank likes to present itself as a lender at the cutting edge of new developments. In reality, it would help if they could at least catch up with the rest of the world. The future of millions depends on it.

 

Josh Klemm is Policy Director at International Rivers

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