Sector-wide Evaluation: ADB Energy Policy and Program, 2009–2019
Economies benefit from abundant access to energy that is efficient, secure, equitable, and environmentally and financially sustainable. Much progress has been made in improving access to electricity in the Asia and Pacific region. Even so, energy reliability and sustainability need to improve. While total energy supply and demand in the region has more than doubled since 2000, the primary energy mix has not changed significantly and is still heavily reliant on coal and crude oil, affecting the long-run sustainability of energy systems. Electricity and heat generation is responsible for over 30% of total emissions, making the sector highly intertwined with efforts to address climate change, particularly by enhancing mitigation efforts through the energy sector.
Recent technological advances in clean energies and grid control systems are significantly transforming the global energy sector. Renewable energies have been the fastest growing power generation technology and are in many cases price-competitive with fossil-fuel generation. Recent advances in battery storage technologies have the potential to support higher levels of renewable integration. The average price of battery storage dropped 87% from 2010 to 2019, and it is expected to fall further. Such rapid technological developments risk stranding fossil-fuel power assets earlier than expected. In this context, this sector evaluation of Asian Development Bank (ADB) Energy Policy 2009 and the subsequent ADB program provides timely inputs to the formulation of a new energy policy, which should be aligned with the recently approved ADB corporate Strategy 2030 and the ongoing sector transformation. The evaluation assessed $42.5 billion of ADB financial support for the energy sector across all ADB developing member countries (DMCs) from 2009 to 2019. Sovereign loans and grants accounted for three-quarters of ADB’s total support, with electricity transmission and distribution being the dominant subsector. Renewable energy generation was financed mainly by private sector operations. In terms of performance, ADB energy sector projects generally outperformed those in other sectors, with a success rate of 81% (other sectors averaged 65%). Of the energy subsectors, renewable energy generation was the most successful, followed closely by conventional energy generation and gas infrastructure. ADB support for energy sector development and institutional reforms struggled, with more than half of the projects rated less than successful.
Regarding results on the ground, the ADB energy program provided much needed basic infrastructure that enabled countries to boost electricity access and increase supply reliability. ADB had less of an impact on supporting new electricity connections and demand-side energy efficiency. This was in part due to power grid connection rates in many DMCs reaching near-universal levels during the evaluation period. ADB fell short in contributing to building efficient and financially sustainable sector institutions and improving policies and regulations.
The Energy Policy 2009 was relevant to the ADB program during the period, but it is no longer adequately aligned with the global consensus on climate change, the ongoing international transformation of energy sectors, the recent changes in the energy sectors of DMCs, or with ADB’s new institutional priorities. The policy addressed DMC energy requirements during the evaluation period but was of limited use in prioritizing specific energy subsectors or operations. Finally, with respect to financing coal-fired power plants, there is a disconnect between what the policy formally allows and what ADB finances in practice.
Key areas for improvement identified by the evaluation include updating the energy policy, while emphasizing climate change mitigation and adaptation measures, promoting a higher level of engagement in DMCs’ by supporting institutional reforms and energy efficiency, and focusing on knowledge, innovation and cross-sectoral work.