Annex 1

02 November 2010

WEC Knowledge Network on

Energy and Mobility
Terms of Reference

Objective
The objective of WEC’s work undertaken in the Knowledge Network on Energy and Mobility is
to examine the future relationship between energy and mobility from the perspective of
technologies, policies and scenarios.

Mobility in all its forms (road, rail, air, and ship) accounts for approximately 27% of energy
usage globally, and a large fraction of fossil fuel use. With increasing awareness of the link
between fossil fuel use and climate change, and increasing issues with air pollution in urban
areas as well as with energy security, governments and industry are seeking ways to
enhance efficiency and reduce the dependency of the transport sector on fossil fuels.
Mandates for transport systems with significantly increased efficiencies and reduced or zero-
emissions as well as fiscal incentives to support the building of mass production stimulate
electric-powered transport – powered by battery, fuel-cell or hybrid-electric technologies, or
directly by electricity. However, the low capability of current battery technologies and high
cost of fuel cells make those solutions uneconomic for mass application and production today.
Modern combustion engines still have significant potential to reduce energy consumption
through increases in efficiency. In urban areas, choices have to be made between cleaner
and more efficient mass transport solutions or the building of secondary cities to avoid
commuter transport; the role of heavy duty versus light transportation will be part of the study.
Not least, the share of direct and indirect transportation costs in household budgets plays a
crucial rule. Also, the possibilities of modern communication and its increased use in order to
avoid transport need to be explored in depth. Different regions see very different growth
patterns and different countries will arrive at different solutions for their mobility issues, using
the whole mosaic of technological solutions.

Scope of Work
For the Energy and Climate Policy Assessment (2011) the Knowledge Network will identify
and evaluate policy examples from across the globe and highlight the rich diversity of efforts
to reduce energy consumption for mobility, especially of fossil fuels, in different countries and
regions. By looking in depth at specific policy examples and their implementation, the
Assessment will identify and highlight solutions that work in some countries, and may be
transferable to others.

The rapid growth of the transport sector especially in the rapidly growing BRIC economics
and its possible shift from liquid fuels to electric powered modes of transportation is a key
uncertainty to be considered by the new WEC Scenario Exercises. The new scenarios will
provide insight on the future of mobility, by harnessing regional and national knowledge on
relevant trends and requirements.

For the work undertaken in the Survey of Energy Resources and Technologies the
Knowledge Network will contribute data on the status of existing and emerging technologies
to achieve the goals of more efficient energy use and reduced environmental impact in the
mobility area.

Methodology
To achieve its objective, the Knowledge Network on Mobility will use the information from the
completed and on-going WEC research and studies, and from proprietary and publicly
available sources. Case studies and quantified examples of potentials, available and
emerging technologies and enabling policies will form the foundation for this work.

Deliverables
The WEC Mobility Knowledge Network will produce a report and develop main messages for
the annual “World Energy Insight” publication, and provide case studies and key messages
for all of WEC’s Activity Areas. Further, as it achieves appropriate milestones, the Knowledge
Network will also prepare articles for ad-hoc WEC media releases.
 Annex 1
02 November 2010

A special report (by early 2012) will contain a review of existing and potential transportation
modes, critical drivers and uncertainties shaping the mobility future, as well as a review of
regional factors and mobility solutions.

The Knowledge Network will define further deliverables for subsequent years.

Commitment of Knowledge Network Members

The members of the Knowledge Network are nominated by WEC Member Committees. The
Knowledge Network and its Leader will work closely with the Activity Area directors and
project managers on deliverables and timelines and will provide content as well as support to
the Activity Areas. They will meet 4-6 times per year, either physically and/or virtually.
Individual members will be expected to comment on draft reports in the respective Focus and
Activity Areas.
 Annex 2
02 November 2010

WEC Knowledge Network on

Energy Efficiency
Terms of Reference

Objective
The main objective of the WEC Knowledge Network on Energy Efficiency will be to review the current
patterns of energy use in exploration, extraction and transport of primary energy, its transformation,
transport and distribution, final consumption and decommissioning/waste management, and to provide
an estimate of the improvement potentials in the most energy consuming areas. The Energy Efficiency
Knowledge Network will also provide insights and guidance into the WEC Activity Areas (Scenarios,
Policy Assessment, and Survey of Energy Resources & Technologies), as required.
The recent developments in the global energy sector, including quick movements in energy prices and
the mounting concerns about security of supply and the environment, have created significant interest
in improving efficiencies throughout the entire energy value chain. However, this interest has not yet
transformed into sizeable improvements in energy efficiency which is still far from reaching its
potential.

Scope of Work
The Knowledge Network will
 evaluate the global energy efficiency potential and categorize it by relevant technology areas
(including behavioural aspects, where relevant) and geographical regions;
 identify the major technology areas with the highest improvement potentials and provide rough
estimates of these potentials;
 review the current and emerging technologies, in terms of their possible contribution to the
improvement potential (e.g. with input from the WEC Performance of Generating Plants);
 provide case studies to highlight the issues and the potentials (for example, possible E&P
improvements in the Oil & Gas sector; opportunities in power generation; T&D, “smart grids”,
energy use in buildings, transportation, final consumption, etc.);
 for the WEC Energy and Climate Policy Assessment, help identify relevant policy
examples, review the current energy efficiency policies and evaluate their effectiveness,
provide the basis for evaluation of the impacts of improved energy efficiency; support the
evaluation of impacts of certain policies, e.g. on tax revenues, energy security, emissions,
employment, public awareness, etc.;
 for the WEC Scenarios Activity Area provide insights and information on critical uncertainties
in the domain of energy efficiency;
 for the WEC Survey of Energy Resources and Technologies, integrate energy efficiency as
a “resource”, evaluate global potentials, and provide input in the Technology area.

Methodology
To achieve its objective, the Knowledge Network on Energy Efficiency will use the information from the
completed and on-going WEC research and studies, and from proprietary and publicly available
sources. Case studies and quantified examples of potentials, available and emerging technologies
and enabling policies will form the foundation for this work. Issues like those listed below will be
covered:
 cost/benefit analysis of energy efficiency improvements,
 cost of incentives / policies for promoting energy efficiency or renewables
 impact on emissions

Deliverables
The WEC Energy Efficiency Knowledge Network will produce a report and develop main messages for
the annual “World Energy Insight” publication, and provide case studies and key messages for all of
WEC’s Activity Areas. Further, as it achieves appropriate milestones, the Knowledge Network will also
prepare articles for ad-hoc WEC media releases.

For the year 2011, the objective is to provide an overall estimate of energy efficiency potentials over
different time periods (at least 2030/2050), and by technology area, and an analysis of selected
technology solutions that can make an important contribution to accelerating improvements in energy
efficiency worldwide.
 Annex 2
02 November 2010

The Knowledge Network will define further deliverables for subsequent years. These will include the
expansion of the analysis to additional technology solutions.

Commitment of Knowledge Network Members

The members of the Knowledge Network are nominated by WEC Member Committees. The
Knowledge Network and its Leader will work closely with the Activity Area directors and project
managers on deliverables and timelines and will provide content as well as support to the Activity
Areas. They will meet 4-6 times per year, either physically and/or virtually. Individual members will be
expected to comment on draft reports in the respective Focus and Activity Areas.
 Annex 3
02 November 2010

WEC Knowledge Network on

Innovative Financing Mechanisms
Terms of Reference

Objective
The objective of WEC’s work undertaken in the Knowledge Network on Innovative Financing
Mechanisms is to identify and examine innovative financing mechanisms from the perspective
of technology challenges (e.g. CCS, energy efficiency, etc.), policy implications (e.g.
investment challenge, tax implications, incentive frameworks, etc.) and scenario relevance
and to give insight and guidance to policy makers as well as to enrich the work of the WEC
Activity Areas.

One of the most important global challenges in the next few decades is securing very high
levels of investment in new energy infrastructure - to maintain and replace existing systems,
to meet growing demand and environmental objectives, especially in the developing world. In
2008 the IEA estimated that the world would need to invest more than USD26 trillion in
energy infrastructure by 2030. If the climate stabilization goal of Copenhagen is to be
achieved (less than 2 degree Celsius global warming), a further USD9.2 trillion would be
required, focusing on low-carbon power generation and energy efficient equipment and
buildings.

From a private sector perspective, companies have to take into account cost of capital when
deciding on the economic benefits of investment proposals. One of the big problems for
renewable and other low-carbon energy projects is the fact that project returns are often lower
or only marginally higher than cost of capital for large companies thus increasing the risk in
these investment decisions. Companies do not as a rule disclose their cost of capital, and it is
therefore most often calculated with the Weighted Average Cost of Capital (WACC) method,
or the Capital Pricing Method (CAPM). For large companies values between 7% and 10% are
assumed, which is above the average return on capital for most renewables projects. The
financial crisis has also caused increased volatility in cost of capital overall, making the issue
even more pronounced. However, in the US companies are already allowed to use innovative
approaches for project financing of wind projects, which can lower CoC by 1-2% and
therefore make those projects more economically attractive.

One major challenge is that there are still about 1.5 billion people without access to modern
energy services. There is a need to develop innovative financing mechanisms to provide
universal access preferably with low carbon energy projects. With only five years left until the
2015 deadline to achieve the Millennium Development Goals (MDGs) the world is on a path
to an “unacceptable failure, both moral and practical”. None of the MDGs can be delivered
without access to modern energy, as the lack of basic energy service impacts all aspects of
these people’s lives, from healthcare to clean water, safe housing, education and the potential
to earn a living.

This Knowledge Network will also focus on rural communities in developing countries, which
account for 85% of energy poor. Institutions, including the International Financial Institutions
(IFIs), and also most governments have so far focused on grid-expansion and densely
populated urban areas. This leaves the rural poor perpetually exposed and in the dark. The
objective will be to identify relevant stakeholders, i.e., development banks, institutions, etc.
and jointly develop an understanding of what kind of projects and what type of financing
mechanisms (“meso finance”) can deliver on rural energification schemes.

The securing of the needed investments requires innovative policies and appropriate
regulatory frameworks. Particularly in the wake of the current economic crisis, governments
must play a critical role to lower the risk of energy sector investments – through loan
guarantees, insurance schemes, co-investment and policy stability.

Scope of Work
For the Assessment of Energy and Climate Policies the Knowledge Network will
investigate specific policy examples that encourage investment and leave room for the
development and implementation of innovative financing mechanisms. It will assess policies
 Annex 3
02 November 2010

that have worked as well as policies that have not had the desired effects, and will work on
case studies and successful practices in order to provide examples of policies that may work
elsewhere, including the key elements of success or failure. Key factors such as stability, rule
of law, clarity of policy vision, institutional leadership, policy design, and effective industry
partnerships should be considered.

Potential constraints on the necessary investment funds constitute important limits to growth
for new technologies and energy infrastructure replacements. Innovative financing solutions
and their implementation for the different forms of energy investments and infrastructure
solutions are important drivers for the energy scenarios work. The Knowledge Network will
look at financing needs and estimate orders of magnitude, as input for the WEC Scenarios.

For the work undertaken in the Survey of Resources and Technology the Knowledge
Network will identify areas that require investments and the levels needed by providing
information on specific costs of various technologies and issues surrounding their application.

The Knowledge Network will contribute to the activity in Energy Access by identifying and
working with relevant stakeholders. It will develop a joint understanding of relevant projects
and what type of financing mechanisms can deliver rural energification schemes. The
Knowledge Network will work with other stakeholders to develop a concept of a dedicated
fund (global, regional or national) for energy access (similar to the Global Fund dedicated to
the big three diseases established in 2001).

Methodology
To achieve its objective, the Knowledge Network on Innovative Financing Mechanisms will
use the information from the completed and on-going WEC research and studies, and from
proprietary and publicly available sources. Case studies and quantified examples of
potentials, available and emerging technologies and enabling policies will form the foundation
for this work.

Deliverables
The WEC Knowledge Network on Innovative Financing Mechanisms will produce a report and
develop main messages for the annual “World Energy Insight” publication, and provide case
studies and key messages for all of WEC’s Activity Areas. Further, as it achieves appropriate
milestones, the Knowledge Network will also prepare articles for ad-hoc WEC media
releases.

The Knowledge Network will produce a special report by mid-2012.

The Knowledge Network will define further deliverables for subsequent years.

Commitment of Knowledge Network Members

The members of the Knowledge Network are nominated by WEC Member Committees. The
Knowledge Network and its Leader will work closely with the Activity Area directors and
project managers on deliverables and timelines and will provide content as well as support to
the Activity Areas. They will meet 4-6 times per year, either physically and/or virtually.
Individual members will be expected to comment on draft reports in the respective Focus and
Activity Areas.
 Annex 4
02 November 2010

WEC Knowledge Network on

Village Inventory
Terms of Reference

Objectives
With only five years left until the 2015 deadline to achieve the Millennium Development Goals
the world is on a path to an “unacceptable failure, both moral and practical”. None of the
MDGs can be delivered without access to modern energy services for the approximately 1.5
billion people who today live without it. A lack of basic energy service impacts all aspects of
these people’s lives, from healthcare to clean water, safe housing, education and the potential
to earn a living. Rural communities account for 85% of energy poor. Institutions, including the
International Financial Institutions and also most governments focus on grid-expansion and
densely populated urban areas. Key challenges include the lack of adapted financing
mechanisms that can deliver on rural energification schemes; inadequate education and
shortage of local skills for project initiation, implementation and system operation; the
absence of easy local access to components for equipment maintenance and enhancement;
the lack of understanding and political support necessary to replicate enduring local
ownership models.

The objective of the Knowledge Network on village inventory is to support the WEC Energy
Access Activity Area by providing a practical contribution to the on-going international efforts
to find solutions for meeting the MDGs. Data and information about the real circumstances in
rural areas are rare but necessary for project planning, design and implementation as well as
for efforts at scale that cluster villages with similar characteristics. The Knowledge Network
will assess, together with international government, business and finance communities and
other stakeholders the possibility of using village inventories and village clustering to achieve
economies of scale and avoid burdensome transaction costs for project funding.

Scope of Work
Initially, the Knowledge Network will
 identify potential partners/supporters for the work globally;
 identify a geographical pilot area (in India);
 test and if necessary adjust the methodology for village inventories;
 apply the acquired expertise to the next pilot area in another WEC region (e.g. in
Africa) and adjust as necessary;
 roll out the study to include other countries and regions.

Methodology and Modus Operandi

To achieve its objective, the Knowledge Network on Village Inventories will use the
information from the completed and on-going WEC research and studies, and from
proprietary and publicly available sources. It will develop a methodology and a survey
template for collection and analysis of information on selected village categories. A workshop
will be held to agree and finalise the methodology for the study. The methodology will be
tested and adjusted as necessary. Finding partner(s) to support WEC’s efforts will be
essential to the success of the work.

Deliverables
At the beginning of 2011, a geographical pilot project in India needs to be identified. During
the first half of 2011, a workshop will be held to discuss the pilot project, the methodology and
the plan of action. The pilot will be concluded by the end of 2011 with a summary report and a
proposal on how to upscale the work.

The WEC Knowledge Network on Village Inventory will produce a report and develop main
messages for the annual “World Energy Insight” publication. Further, as it achieves
appropriate milestones, the Knowledge Network will also prepare articles for ad-hoc WEC
media releases.

The Knowledge Network will define further deliverables for subsequent years.
 Annex 4
02 November 2010

Commitment of Knowledge Network Members

The members of the Knowledge Network are nominated by WEC Member Committees. The
Knowledge Network and its Leader will work closely with the WEC Energy Access Activity
Area director and project managers on deliverables and timelines and will provide content as
well as support to the Activity Area. They will meet 4-6 times per year, either physically and/or
virtually. Individual members will be expected to comment on draft reports in the respective
knowledge network and activity area.
 Annex 5
02 November 2010

WEC Knowledge Network on

Rules of Trade
Terms of Reference

Objective
The WEC Knowledge Network on Rules of Trade will concentrate on providing content for the
Global Frameworks activity area. The objective is to examine rules of trade dealing with
energy and energy investments and make recommendation to international agencies,
ensuring that energy industry considerations are put forth. Immediate efforts are to better
define important “energy and/or environmental goods and services (EGS)”, to investigate the
rising interest among governments of requiring work to be done within countries (local content
requirements), and to examine the efficacy of “border tax adjustments”. Services in this case
include the area of professional skills necessary for successful implementation and operation
of energy systems, including transportation systems. Critical issues in this context include
defining “green goods and services”, the efficacy of local content requirements, and the
legitimacy of “border tax adjustments” to avoid carbon leakage, or the promotion of
technology transfer to developing countries.

Resources and skills are unevenly distributed across the world and are often not at the places
where they are most urgently needed. Energy access, energy security and climate change
are global challenges that require global frameworks and have no economic and efficient
solutions within national boundaries. This underlines the role of trade in goods and services
and makes the global frameworks and rules that govern it an essential building block of the
global public good. Nationalistic solutions that lose sight of the global picture and the need for
a coordinated and collaborative approach delay the necessary international policy
convergence. The resulting highly uncertain investment framework makes infrastructure
investments unnecessarily risky and we will all pay the risk premium as part of higher energy
prices and further delay in climate change mitigation.

Scope of Work
The Knowledge Network will on the one hand examine the main legal and trade-related
issues facing the energy sector under various market-opening scenarios for energy goods
and services or “EGS” (under discussion in the WTO and elsewhere), including a possible
plurilateral agreement among like-minded countries. It will examine international approaches
to reduce trade-restrictive domestic laws, policies and practices that impact on investments,
competition policy and transfer of technology in respect of “green” energy in particular. It will
identify the key trade and investment related issues for the energy industry and make
recommendations to governments and to the industry for improving international rules in
these areas.

On the other hand it will examine the key legal and trade-related issues most directly affecting
the energy sector under the UNFCCC and the on-going efforts to achieve a set of post-2012
commitments by governments on reducing global warming. It will develop specific policy
recommendations for governments and industry aimed at balancing the need to protect the
global environment, on the one hand, with maintaining open energy markets and the integrity
of the multilateral trading system under the WTO, on the other. The activity will be guided by
the principle that economic growth can be best assured through open and accessible energy
markets. The Knowledge Network will take into account the needs of those developing
countries most at risk from global warming.

Methodology
To achieve its objective, the Knowledge Network on Rules of Trade will use the information
from the completed and on-going WEC research and studies, and from proprietary and
publicly available sources.

The Knowledge Network will use collective technical and institutional knowledge to work with
the WTO and other international organizations (e.g., ICTSD, ICC, OECD, World Bank,
UNCTAD) as the Doha Round or its successor proceed. By working with WTO, Member
Committees will have a direct conduit into definitions of existing trade rules in the energy
area.
 Annex 5
02 November 2010

Deliverables
Continue the 2007-10 work and enrich the list of green goods and services, channelling it into
the WTO negotiation, while at the same time engaging with other international organizations
(e.g., ICTSD, ICC, OECD, World Bank, UNCTAD).

The Knowledge Network will produce a report considering the efficacy of border tax
adjustments by early 2012 and develop main messages for the annual “World Energy Insight”
publication. Further, as it achieves appropriate milestones, the Knowledge Network will also
prepare articles for ad-hoc WEC media releases.

The Knowledge Network will define further deliverables for subsequent years.

Commitment of Knowledge Network Members

The members of the Knowledge Network are nominated by WEC Member Committees and
shall include legal experts from the energy industry. The Knowledge Network and its Leader
will work closely with the WEC Global Framework Activity Area director and project manager
on deliverables and timelines and will provide content as well as support to the Activity Area.
They will meet 4-6 times per year, either physically and/or virtually. Individual members will be
expected to comment on draft reports in the Focus and Activity Area.