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Evaluation Study on ADB's Energy Policy 2000
Completed: 2007

The Energy 2000: Review of the Energy Policy of the Asian Development Bank (2000 Review) was formulated within the framework of the 1995 Energy Policy. Its intent was for ADB to help create an appropriate policy and institutional environment and capacity support to develop and extend the availability of energy resources.

The strategic objectives of the 2000 Review reoriented policy goals of the energy sector operations to focus on

• poverty reduction,
  
• promoting private sector participation,
  
• regional and environment impacts, and
  
• regional cooperation.

The evaluation focused on

• examining the specific features of the 2000 Review, including their intent as directives, safeguards, and development approaches;
  
• assessing the adequacy of coverage and relevance of the 2000 Review to ADB operations, taking into account subsequent global and regional developments, and ADB initiatives in the energy sector;
  
• examining the extent to which guidance provided in the 2000 Review has been taken into account in project designs;
  
• examining the performance of ADB energy sector assistance before and after the 2000 Review, and identifying trends which may be attributed to the 2000 Review;
  
• identifying areas in the energy sector where ADB made a contribution to poverty reduction; and
  
• identifying lessons and issues to be considered in the formulation of the energy strategy.

Key Findings

• Overall the energy policy is rated "successful".



• The policy is "highly relevant" and was responsive to changing external environment and to the changing needs of ADB's client countries.



• The 2000 Review is rated as "effective". ADB's operations in the energy sector are generally effective. Of the 142 energy projects that have been rated, 82% were rated as satisfactory or better. This was one of the best results across all sectors in which ADB operates. The success rate for program loans for energy sector development and reforms was lower at 70%. This reflects the difficulty of planning and implementing sector reforms, a lesson that is common throughout the Asia Pacific Region.



• Overall, the 2000 Review is rated "efficient". Energy projects and programs overall have a high success rate in delivering expected outcomes through efficient use of resources.



• The 2000 Review is rated "highly sustainable" in the medium term due to the strong future pipeline of energy projects (i.e., demand from ADB's clients), the value added in terms of demonstration and replicability, and ADB's commitment to the sector as indicated in its second medium term strategy.



• The effectiveness rating of the poverty reduction objective of the 2000 Review is "partly effective", although the objective itself was rated as "relevant". The poverty reduction impact of operations in the energy sector was largely indirect and achieved through trickle down effects of economic growth to which the power sector development makes a significant contribution. There were few targeted interventions such as providing electricity to poor rural households.



• The 2000 Review is rated "highly relevant" and "highly effective" in supporting power sector restructuring/unbundling and increasing the role of private sector in the energy sector. ADB's private sector operations have been material, both in terms of catalyzing funding and reducing concerns of both project sponsors and financiers about project risks.



• The 2000 Review stated that ADB intended to address environmental issues by promoting energy efficiency, renewable energy, and the use of the clean development mechanism. Overall, this element of the 2000 Review is rated "highly relevant" but the implementation is rated "partly effective", given the low volume of lending in related areas.



• Overall, ADB's efforts to promote regional cooperation in electricity are rated "relevant" and "partly effective". Regional cooperation has been a continuing objective of ADB in the power sector but results have been slow to materialize, other than in the Greater Mekong Subregion. The initial expectations appear overambitious.

Recommendations

• ADB's support for the energy sector should be driven by two key policy considerations: energy efficiency and good governance. The objective should be to achieve a future in which the Asia Pacific region's growing need for energy is met by improvements in energy efficiency and energy technologies that minimize adverse impacts on the environment, and by applying governance measures which lead to commercial and financially-sustainable management principles.



• ADB's energy strategy should better reflect current context and development challenges and improve implementation effectiveness. There is also need to incorporate the various initiatives and strategies in the Clean Energy and Environment Initiative.



• Future operations in the energy sector should be driven by key policy considerations related to energy efficiency and addressing the energy/environment nexus; good governance; and results-based monitoring. This emphasis will require a holistic approach to the efficient development of the energy sector.



• The following areas of the energy policy are recommended for continuation with stronger client focus and more operational vigor: (i) private sector participation including unbundling, restructuring, and privatization with improved corporate governance; (ii) mitigation of environmental impacts through promoting cleaner technologies; and (iii) regional economic cooperation in the energy sector, considering also cross-border environmental implications.