INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: ISDSC376 Public Disclosure Copy Date ISDS Prepared/Updated: I. BASIC INFORMATION A. Basic Project Data Country: Project ID: Project Name: Task Team Leader: Estimated Appraisal Date: Estimated Board Date: Managing Unit: Lending Instrument: Sector: Theme: Financing (In USD Million) Financing Source Amount BORROWER/RECIPIENT 44.10 Global Environment Facility (GEF) 27.28 Total 71.38 Environmental Category: Is this a Repeater project? B. Project Objectives 10. The China Renewable Energy Scale up Program (CRESP) was the first program developed following the announcement the World Bank-GEF Strategic Partnership for Renewable Energy. The program included three GEF supported phases over a period of 12-15 years. The GEF program was justified by the long-term and complex nature of the policy issues hampering the scale up of renewable energy and the need for a flexible approach to adapt to the fast changing environment and the priorities as they emerge during implementation. Public Disclosure Copy 11. The CRESP program aims to move RE development in China from successful quantitative scale-up under Phase I to qualitative and sustainable scale-up under Phase II focusing on improving cost competitiveness of RE with fossil fuels. Then CRESP Phase III, coinciding with the 13th FYP (2016-2020), the last five-year to achieve the 15 percent non-fossil fuel target, is envisioned to fully integrate RE in competitive and open power markets (Figure 1). (Please see attached file to PCN package.) 12. The objective of the CRESP program (three phases) is to enable commercial renewable electricity suppliers to provide energy to the electricity market efficiently, cost-effectively and on a large scale. Building on achievements and lessons learned from CRESP Phase I, the objective of CRESP Phase II is to support Chinese government’s 12th FYP to enable efficient and sustainable scale-up of commercial renewable energy development through reduction of incremental costs, efficiency improvement, and smooth integration to power systems, thereby contributing to the government's target of reduction in carbon intensity. C. Project Description CRESP Phase II has four components: (1) policy support; (2) technology strategy and improvement; (3) pilot demonstration of distributed generation; and (4) capacity building, in addition to project management support. Component 1. Policy Support: CRESP II will support developing and implementing renewable energy legislations and policies under the new Energy Law and existing power sector framework to achieve cost reduction, efficiency improvement, and smooth grid integration; and develop RE policy direction to ensure timely coordination and alignment with envisaged power sector reforms including possible separating transmission from distribution. These market-oriented policy reforms are designed to address the new barriers and challenges facing RE development today. Based on lessons learned from Phase I, it is envisaged that policy studies under Phase II would cover few essential policy topics, jointly determined by National Energy Administration (NEA), Project Management Office (PMO), and the World Bank, with greater involvement of government selected policy institutions and world class consultants. The policy support will focus on five sub-components: (1) designing and piloting market-based mechanisms for mandated market shares and RE certificate trading; (2) assessing and implementing comprehensive energy pricing reforms, including but not limited to cost-based transmission pricing, carbon/energy tax, and RE pricing for small hydro and off-shore wind; (3) resolving grid integration bottlenecks through incentives and RE mandated shares on grid companies and improved Grid Code; (4) planning and developing grid access and financial incentive policies for pilot RE distributed generation; and (5) supporting implementation of RE under the 12th FYP, including studying alignment of RE policies with envisaged power sector reforms and coordinating government institutions for RE policies. Component 2. Technology Strategy and Improvement: The technology strategy and improvement component will consist of targeted studies to ensure strategic and optimal deployment of key RE technologies and cost sharing demonstration and deployment and technology improvement activities to enhance quality and reduce RE incremental costs. The technology strategy studies would include: (1) improving site layout design to decrease wake effects for GW-scale on-shore Wind Power Bases and off-shore wind to maximize outputs of wind, and developing wind farm development standard and implementation methodology; (2) developing strategies and a roadmap to scale up biomass technology and promotion of biomass manufacturing industry; and (3) improving RE grid integration and planning. The cost-sharing grants for technology improvements would include: (4) improving off-shore wind turbine technology and Public Disclosure Copy domestic manufacturing capacity through cost-shared demonstration and deployment; (5) developing grid integration technologies such as smart grids, grid-friendly wind turbines, and energy storage technologies in areas with large shares of wind in power generation; and (6) improving biomass technologies and domestic manufacturing capacity. Component 3. Pilot Demonstration of Distributed Generation: The government plans to pilot RE distributed generation in urban areas and green counties during the 12th FYP, in parallel to the efforts on GW-scale grid-connected RE bases. This component will support research, planning, and policies to pilot RE distributed generation applications in a few selected regions, cities, and/or counties, such as solar water heaters, roof-top solar PV, and heat pumps. It will require the pilot areas to achieve a high share of RE in final energy demand. The cost-shared grants will cover both technical assistance on planning, innovative business models and technologies, and policies, and possibly sharing the incremental costs of distributed generation applications in some cases (which will be mostly paid by the national and local governments as well as project developers). Component 4. Capacity Building: This component will build capacity of (1) governments at national level and in pilot demonstration areas (e. g. NEA, NDRC Pricing Bureau (for energy pricing reform), Ministry of Finance (for fiscal measures), Ministry of Water Resources (for small hydro), Ministry of Agriculture (for biomass), Ministry of Forestry (for biomass), Ocean Bureau (for off-shore wind), grid companies, RE power generators, municipal governments (for pilot distributed generation), and the relevant agencies in the pilot demonstration areas); (2) investors for the potential IBRD loans in RE innovative investments; and (3) selected universities to enter into twinning arrangements with leading international universities to develop post graduate level or specialist renewable energy engineering courses, particularly in Western China. Finally, project management support will (1) monitor the results of RE policies, set up a database, and evaluate the progress of achieving RE target; and (2) cover program management costs, donor coordination activities, and administration including fiduciary duties. D. Project location and salient physical characteristics relevant to the safeguard analysis (if known) Research studies are applicable throughout China. Location of pilot demonstrations will be determined during project implementation, based upon results of vario us research studies. E. Borrowers Institutional Capacity for Safeguard Policies Lessons learned from CRESP Phase I: CRESP Phase I is a fully blended IBRD/GEF project, which compromises of IBRD investments of 2 x 100 MW wind farms, a 25 MW biomass power plant, and 16 small hydro rehabilitation and new power plants, and GEF grant of capacity building and institutional strengthening activities. The safeguard performance of CRESP I is satisfactory. Under CRESP Phase I, the PMO has developed capacity for implementing safeguard requirements. Under Phase I, the sub-borrowers for two sub-projects (Fujian wind farm and Rudong biomass power plant) were diligent in implementing their Public Disclosure Copy EMPs, while for the other two sub-borrowers (Inner Mongolia wind farm and Zhejiang small hydro power plants) the constant presence of safeguard staff on supervision missions eventually led to improvements in implementation of environmental safeguard requirements. The lessons learned from Phase I was that: (a) a consistent presence of safeguard staff on the supervision team will eventually lead to improved environmental management when it was needed; and (b) when a sub-borrower is required to implement a safeguard Framework, there should be specific initial discussions with the sub-borrower so that relative institutional roles and responsibilities for Framework implementation are well understood. CRESP Phase II safeguard capacity assessment: CRESP Phase II is different from CRESP I, as the safeguard requirements for CRESP Phase I mostly focused on the investment lending, while CRESP Phase II is a stand-alone GEF project, primarily consisting of capacity building, policy analysis, and research related to renewable energy development. Nevertheless, to the extent applicable, lessons learned from Phase I safeguard implementation will be incorporated into preparation of CRESP Phase II. The Task Team will discuss further capacity needs with the PMO and develop appropriate arrangements satisfactory to the World Bank for addressing project related safeguard issues. F. Environmental and Social Safeguards Specialists on the Team II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered Yes No TBD Explanation Environmental Assessment OP/BP 4.01 ✖ The CRESP II is a stand-alone GEF project. It will consist primarily of capacity building, policy analysis, and research related to renewable energy development. Since the project might finance a Public Disclosure Copy limited number of small-scale RE investments, (e.g. roof-top solar PV) under the cost-shared grants and pilot demonstration components, the project will prepare generic EMPs or ECOPs to address the potential environment impacts from various pilot demonstration investments. The EMP or ECOP will also include implementation schedule including budget arrangements. Natural Habitats OP/BP 4.04 ✖ Any potential RE investments would likely be confined to urban areas, thereby the Natural Habitats Policy will not be triggered. Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Any potential RE investment would likely be confined to urban areas, where Chinese permitting procedures would prevent siting a project on or near areas of high cultural value. Indigenous Peoples OP/BP 4.10 ✖ The Indigenous Peoples Policy will not be triggered since all potential RE investment would likely be confined to urban areas, which are not locations normally inhabited by indigenous peoples. Involuntary Resettlement OP/BP 4.12 ✖ The proposed CRESP II will mainly consist of capacity building, policy analysis, and research related to renewable energy development, as well as a limited number of small-scale RE investments (e.g. roof-top solar PV) under the cost-shared grants and pilot demonstration components. These activities will be located within the premises of existing buildings, therefore, there will be no land acquisition. Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP ✖ 7.50 Projects in Disputed Areas OP/BP 7.60 ✖ III. SAFEGUARD PREPARATION PLAN Public Disclosure Copy A. Tentative target date for preparing the PAD Stage ISDS : 15-Feb-2012 B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing1 should be specified in the PAD-stage ISDS: None. IV. APPROVALS Signed and submitted by: Task Team Leader: Name: Date: Approved By: Regional Safeguards Coordinator: Name: Date: Comments: Sector Manager: Name: Date: Comments: 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.