Mexico - Energy efficiency management technical assistance to the Comision Nacional para el Ahorro de Energia (CONAE)

1~~ 5 t 8 Energy Sector Management Assistance Programrie Mexico Energy Efficiency Management Technical Assistance to the Comision Nacional para el Ahorro de Energia (CONAE) Report No. 180/96 Ft L. . P=......  JOINT UNDP/WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURPOSE The Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) is a special global technical assistance program run by the World Bank's Industry and Energy Department. ESMAP provides advice to governments on sustainable energy development. Established with the support of UNDP and 15 bilateral official donors in 1983, it focuses on policy and institutional reforms designed to promote increased private investment in energy and supply and end-use energy efficiency; natural gas development; and renewable, rural, and household energy. GOVERNANCE AND OPERATIONS ESMAP is governed by a Consultative Group (ESMAP CG), composed of representatives of the UNDP and World Bank, the governments and other institutions providing financial support, and the recipients of ESMAP's assistance. The ESMAP CG is chaired by the World Bank's Vice President, Finance and Private Sector Development, and advised by a Technical Advisory Group (TAG) of independent energy experts that reviews the Programme's strategic agenda, its work program, and other issues. ESMAP is staffed by a cadre of engineers, energy planners, and economists from the Industry and Energy Department of the World Bank. The Director of this Department is also the Manager of ESMAP, responsible for administering the Programme. FUNDING ESMAP is a cooperative effort supported by the World Bank, UNDP and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and public and private donors from countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom, and the United States. FURTHER INFORMATION An up-to-date listing of completed ESMAP projects is appended to this report. For further information or copies of completed ESMAP reports, contact: ESMAP c/o Industry and Energy Department The World Bank 1818 H Street N.W. Washington, D.C. 20433 U.S.A.  TABLE OF CONTENTS PREFACE I. EXEC UTIVE SUMMARY ................................................1I Background .................................................1 Objectives and Methodology .................................................1 Implementation .................................................2 Key Issues ................................................3 Summary of Recommendations .................................................4 Institutional Reorganization .................................................4 Funding ........................................................5 Creation of Policy and Planning Unit ................................................. 5 Development of Proposals for World Bank/IDB Loan .............. ............6 Next Steps .................................................7 II. CONSULTANTS REPORTS Strengthening Mexico's National Energy Efficiency Function by John Armstrong Progamme Planning, Targeting and Monitoring by Andrew Gilchrist ANNEXES I. Executive Summary in Spanish II. Trip Report: Mexican Mission to Southeast Asia mII. ESMAP Activity Initiation Brief  Preface This report records the outputs of a technical assistance project in Mexico executed by the World Bank's Energy Sector Management Assistance Program (ESMAP) and financed by the German Goverrnent. The activity provided expert assistance to the Comision Nacionalpara el Ahorro de Energia (CONAE), Mexico's principal agency for energy conservation, in the specific areas of insitutional and policy analysis, and in program planning and evaluation. The specific issues arose from a previous World Bank review of CONAE's organization and programs, as well as from the institutional adjustments that had to be made in response to the recent economic crisis. It is considered that the most important outputs of the acitvity were the personal interactions of ESMAP experts with CONAE officials and staff during the missions to Mexico, and not the written reports themselves. These reports by the main consultants are nevertheless included in this document. The ESMAP activity benefited immensely from the support of CONAE officials, particularly Femando Bueno, the former Technical Secretary, and Odon the Buen, who is now Officer-in-Charge. The technical contributions of the staff, particularly Dr. Claudia Sheinbaum, Guilermo Rodriguez, Ricardo Escobar, Agustin Acosta, Guillermo Ortega and others too many to be named here are likewise well appreciated. The World Bank/ESMAP staff who managed the activity are Ernesto Terrado and Anke Meyer. Support was provided by LA2IN through Luis Luzuriaga.  Executive Summary Background CONAE, the national energy conservation commission in Mexico, was set up in 1989 as an interministerial agency, integrated by the Department of Energy, Mines and Parastatal Industries (SEMIP)-now simply the Department of Energy-and the Departments of Treasury (SHCP), Commerce and Industry (SECOFI), Communication and Transportation (SCT), Social Development (SEDESOL) and Public Education (SEP), as well as the Mexico City government, the national petroleum company PEMEX and the national electric utility CFE. The Secretary of Energy is CONAE's President while a Technical Secretary acts as chief executive officer. In June 1994, CONAE's management was replaced by an interim management team, headed by Fernando Bueno. The team assumed an active 't.aretaker" role, providing continuity to ongoing programs and implementing some limited measures to improve the administrative and technical effectiveness of the institution prior to the appointment of the new permanent management. In January 1995, after Presidential elections and the assumption of the new federal administration, the interim manager was formally appointed Technical Secretary of CONAE. However, in December 1995, after completion of the ESMAP main mission for the present technical assistance activity, Fernando Bueno was transferred to the Department of the Interior. Mr. Odon de Buen was named acting Technical Secretary and still has this position as of this writing. These organizational changes were largely induced by the national financial and economic crisis of 1994/1995 that severely reduced budgetary support for ma,;y public agencies and programs, including CONAE and its activities. During this period *'ON AE's total staff complement was reduced by about 30% as it reorganized *.self into a leaner agency. Among the major changes was the abolition of FONA: CONAE's technical implementing arm. Programs that required significant investments, such as cogeneration, have been generally put 'bn hold". However, some programs, such -;s that for transport, have even expanded because the higher prices of transport fuels caused by the crisis have provided added incentives for conservation. In a period of economic difficulties, energy conservation is increasingly seen as a key instrument for improving the competitiveness of Mexican industries. In sum, the economic downturn has not diminished the relevance of energy conservation efforts in Mexico but has underscored the need to make CONAE's programs more focused and sustainable. In turn, the need to put CONAE on a firmer institutional footing so that it can discharge its functions effectively has taken on some urgency. Objectives and Methodology The original objective of the ESMAP technical assistance activity was to help CONAE address some of the key deficiencies identified in the 1994 World Bank review of its 1  orgaizational setup and operations, particularly the need to delineate CONAEs institutional identity and strengthen its capability for strategic planning and internal evaluation of its programs. The advent of the economic crisis did not change these basic objectives. Some of these issues were already being examined by EEC experts in 1994/95 as part of a bilateral program and CONAE itself had already initiated some efforts in this direction, including the preliminary examination of options for institutional reorganization and the drafting of an energy efficiency law. It was thought that complementary international expertise provided by the ESMAP activity would strengthen these ongoing efforts and thereby accelerate the process. The expertise to be provided would be in the specific areas of institutional and policy analysis, and energy monitoring and targeting. In addition, resources were to be provided for one to two CONAE officials to undertake a study tour of energy efficiency institutions in Asia. In the course of the ESMAP activity, the possibility of inclusion of an energy efficiency component in a proposed WB/IDB energy sector loan emerged, with CONAE and FIDE as the potential beneficiaries. Consequently, the task of assisting CONAE to develop a preliminary package of activities for financing under the loan was added to the ESMAP activity. Implementation The above objectives were reaffirmed, with some revisions in scope and focus, during an ESMAP mission in May 1995. Specifically, it was agreed with CONAE that focus would be in: