Box 3. Transformational shifts through UNDP support. Improving the energy efficiency of lighting and other building appliances, Egypt

and monitoring for nationally appropriate mitigation actions in support of the UNFCCC.95 Compliance and regulations for energy efficiency can be challenging to achieve because they often do not lead to new market opportunities as quickly as, for instance, renewable policies.

UNDP has helped build co-financing of $542 million against total project/programme costs of $520 million. This co-finance for energy efficiency was primarily from the public sector and typically provides 89 percent of total costs,96 with donor funding in one programme driving the higher overall result.

Similar to the renewable energy work, a number of projects work with municipal or provincial stakeholders. working with multiple subnational partners (e.g., in Bosnia and Herzegovina, Serbia and Sri lanka) capitalizes on the ability of UNDP to work in complex institutional environments that may be too risky for others. In other cases (e.g., low-Carbon City project, Thailand), UNDP has focused on second-level cities, where risks and the need for demonstration are higher. In Bosnia and Herzegovina, the UNDP role in managing stakeholder interests was sufficiently important for it to lead the Swedish International Development Cooperation Agency evaluation of the green Economic Development phase II project to conclude: “This project represents a good example of how UNDP project should be – creating depth over time through strengthened trust and alliances with all relevant stakeholders. UNDP has really become an agent of lasting change in the area of energy efficiency in the country.”

BOX 3. Transformational shifts through UNDP support. Improving the energy efficiency of lighting and other building appliances, Egypt

This project had a transformational effect on energy consumption in Egypt, saving 2gw and $2 billion in generation costs. UNDP started with a large gEF energy-efficiency project for 2000-2010 that had limited impact because high electricity subsidies undermined the incentives for energy efficiency. Subsequently, a crippling electricity shortage and tariff increases provided strong incentives and political backing for improving energy efficiency. The project used established energy-efficiency interventions to raise awareness and pilot, provide grant finance for piloting and working with government to support the introduction of energy standards and monitoring. Due to delays in starting the project, the efficient lighting technology changed from CFl (compact fluorescent) to lED (light-emitting diode) but adaptive management coped with this.

Each component was successful but the innovative decision to allow private companies access to 25 percent grant financing for pilots was important as these convinced businesses such as supermarkets, hotels and banks to make this initial investment. Cooperating businesses found that the switch to lEDs led to a massive, unexpected reduction on demand for air conditioning, reducing electricity consumption in some cases by 40 percent. The grant financing and energy savings enabled payback periods of a year on average, and there was rapid private sector uptake. The public information component was also very successful, with a media campaign using Facebook and the Cairo Metro and an energy-efficiency competition with prizes. The focus on lEDs at the outset – “low hanging fruit” – was important to build momentum for subsequent energy-efficiency regulation. UNDP played an important role in project design and management but also as a trusted government partner, with the ability to work with a wide range of public and private stakeholders.

95 Three out of eighteen project evaluations. 96 Based on the median of co-finance to total project costs.

Considering the drivers of project performance (see annex 9), the “highly successful” projects all had strong government support (at national and where relevant, subnational levels). In these cases, energy efficiency was directly aligned with an important national agenda (e.g., green growth in Cundinamarca, Colombia) while in others it was a means to address a crisis (e.g., electricity supply shortages in Egypt). All the “successful” projects had political support to some degree and high levels of government or municipal commitment helped to offset challenges that would otherwise have held back implementation (e.g., significant institutional complexity in Bosnia and Hercegovina or lack of strategic focus in the low-Carbon City project in Thailand). Furthermore, highly successful projects found financial incentives for end users: municipalities in Armenia and the private sector in Colombia and Egypt saw sustainable financial returns within the project lifespan.

The difference between “successful” and “highly successful” energy-efficiency projects often relates to finding an appropriate finance model. A number of “successful” projects had financing components that worked reasonably well but less so than other project components (e.g., Morocco, Serbia, Sri lanka, Thailand). In these cases, there was limited scaling-up beyond demonstration. Moreover, where projects had significant problems with a financing component (e.g., Brazil and Republic of Moldova), this undermined the success of the entire project.

Projects typically failed to build capacity, pilot and secure legislation for energy efficiency in their lifetime. Strategic planning to build on earlier work (e.g., Armenia and Bosnia and Herzegovina) helped to add significant value relative to more ad hoc approaches elsewhere in the portfolio. In addition, many projects had to use adaptive management. In some cases, delays in implementation meant that the appropriate energy-efficiency technology changed (e.g., Egypt) but in general, it was required to modify limitations in project design and unforeseen implementation challenges.

The chances of sustainability are only moderately likely even when the projects were successful or very successful in delivering project outcomes.97 In Serbia, for example the project design was successful, but the project did not tailor the grant proportion to reflect the payback period and could not engage private finance. In Morocco, significant co-finance was provided by project stakeholders, but finance for the nationally appropriate mitigation action was not secured and further work over a longer period will be needed to expand coverage to the rail industry and to pass legislation. Mongolia has successfully engaged banks to provide financing for the nationally appropriate mitigation actions in the construction sector, and earlier UNDP/gEF projects enabled banks to provide financing for energy-efficient private houses. However, while buildings will be more energy-efficient, individuals lack incentives to save energy as tariffs are based on floorspace or volume.

Investors are often uncertain whether energy-efficiency measures will lead to cost savings that are sufficient to reward their investments, typically because they lack confidence in the equipment and the personnel in charge, e.g., energy planners and auditors. Standardization and accreditation of equipment and persons or organization involved respectively are thus considered as key to de-risking energy-efficiency investments. local private sector actors (e. g., energy service companies, engineering and installation firms, manufacturers) directly benefit from accreditation and standardization. Thus, closing the confidence gap has twofold benefits: it can lead to more investment through financiers and create business for private companies. UNDP planned to develop a DREI methodology for energy efficiency, such as grid-tied and off-grid renewable energy investments. However, due to the complexity of the topic, a standardized methodology for energy efficiency has not yet been implemented.

97 This is expressed in 14 of the 16 final evaluations.