REAs/REFs in Rural Electrification A Review of three EU Rural Electrification Reports

Transcription

1 REAs/REFs in Rural Electrification A Review of three EU Rural Electrification Reports African Electrification Initiative Practitioner Workshop Dakar, November 2011 Ralph Karhammar rkarhammar@gmail.com 1

2 Structure of the Presentation Three EU Rural Electrification Reports Power Market Reforms Rural Electrification (RE) Reforms What Has Happened Under the RE Reforms? EU Reports Conclusions Recommendations page 2

3 The three European Commission RE Studies Mostert, 2008 looked at institutional set ups, in particular experience of Rural Electrification Agencies and Funds SOFRECO, 2010 looked at strategies for increased access to affordable and sustainable energy services through REAs/REFs COWI, 2010 looked at policy issues on how to increase sustainable energy investments in Africa The two latter dealt substantially with rural electrification implemented through Public Private Partnerships (PPPs) and implementation issues around the PPP contract between a responsible public body and a rural electrification operator. page 3

4 Back drop: Power Market Reform Most SSA countries are in transition phase due to recent power sector reform processes, main objective being to open the sector to new operators. Constrained by lack of country commitment, macroeconomic and political crises, lack of experience with political economy factors. Desired outcomes only partly achieved: - better service quality, - improved government fiscal position, - affordable access for the poor. Many unfortunate experiences for investors: - the overall disappointing view outweighs some good experiences (ENRON, AES, etc.). page 4

5 Rural Electrification Reform Historically GRID EXTENSIONS HV-MV extended by public authorities to local administrative centres Low density of LV electrification, limited coverage, high connection fees High costs due to inappropriate standards Cost-ineffective due to low demand OFF-GRID RENEWABLE PROGRAMS Near 100% investment subsidy, grants, O&M left to end-user communities maintenance problems Limited service, low- consumption Innovative schemes outside of the Regulatory Framework, donor agency focus Reform CENTRALISED RE National or regional companies still have monopoly concession DECENTRALISED RE REA/REFs created to manage RE funds to multitude of actors private companies, project developers o/s sector and community/ cooperatives REA/REFS serve different situations, policies & practices Unleashing multiple [private] actors: bring in extra capital, higher efficiency, new actors page 5

6 Approach spectrum from no change to full PPP Implementation Countries with Ministry of Energy in charge of planning where public utilities build and operate the networks (e.g. Ghana) Countries with laws accepting new RE utilities, but majority of financing still into grid extensions (e.g. Zambia, Uganda) Countries in transition to building up new utilities (e.g. Tanzania) Countries building up rural electrification with new utilities (e.g. Senegal, Mali) page 6

7 Approach - Full PPP - Senegal, Mali: Boldly gone where few have gone before Characteristics: Major utility concession limited to areas it serves and excluded from further participation New procedures aimed at PPP with independent distributors Top- down national or regional projects: areas prioritised, calls for tender to find operators Down- top : calls for tender, promoters propose local projects developed by private stakeholders BOT contracts Initial investment subsidy (50-70%), no further operation subsidy PPP scheme logic: Low connection fees/higher tariffs (within WTP) Focus on density, high load factors Technology neutral May include house wiring and energy efficiency Predictable business environment, delimited RE concession areas and clear rules Differential rural tariffs or subsidy scheme to compensate for national tariff page 7

8 Some Issues with Bold Approach: Successes: 12 regional concessions (SEN) 10 regional concessions (MAL) 41 locally initiated projects (diesels and minigrids) (MAL) Specific tariff structure (connection fees, usage) Standardised shared evaluation tools for PPP environment, e.g. business plans, reference cost tables, manuals, etc. Issues: Little private equity capital attracted PPP environment issues point to need for PPP capacity development and advisory facility Need to look at slow uptake in RE concessions, until reaching critical mass More involvement of IFIs, Partial Risk Guarantees/Local Banks, Partial Credit Guarantees/MFIs page 8

9 Approach - Grid: Ghana, Zambia, Mozambique: Anything wrong with Grid Extensions? Traditional pre-reform RE schemes: with government fixing global milestones, grid extension planning left to utilities: often cheapest way to reach new consumers often necessary for equitable regional development Off-grid suitable for populations far from the grid or with small demand 80 to 95 % of unserved communities to receive electricity via the grid Countries in Time Warp - really? Ghana succeeded in 20,000 new rural connections/year, urban electrification rate of 87% and rural 35%, innovative low cost schemes: the Self Help Scheme, the Shield Wire Distribution Mozambique succeeded in reaching 60,000-70,000 new connections/year (10,000 in early 90s), now embarking on SWER technology Zambia with national rural master plans now on target to double new connection rate from 3,000 to 6,000/month due to innovative deferred connection payment scheme page 9

10 There is no evidence for the superiority of any specific institutional model for electrification Some successful cases based on public/ private/cooperative models and REAs (World Bank 2010: Addressing the Electricity Access Gap ): Key: institutional framework consistent with country s strengths/problems RE programs require strong leadership by an efficient distribution utility or specially designated agency, efficient chain of contractors and small service providers Countries with diverse institutional approaches succeeded with RE, provided that programs and strategies ensure efficient and sustainable execution Use the centralized RE approach for grid extensions in combination with REA/REF for off-grid electrification (Mostert, 2008) page 10

11 Conclusions from the three RE Studies- Important Factors Policy Framework: government support, financing & specialized RE Institutions, PPPs facilitated, PPP assistance resource centre, RE facilitating policies, light handed regulation, transparent and inclusive RE planning Supply Chain: qualified consultants, constructors and private firms, training and support to chain actors, international/national energy/engineering companies, CSO Technical Standards & Costs: mitigate inexplicably high unit costs, low-cost techniques, appropriate standards, up-to-date reference unit price Financing & Sustainable Operations: adapt IFI instruments - especially Partial Risk Guarantees, long term local bank loans - government Line of Credit and credit enhancing, e.g. involve Microfinance Institutions, mitigate slow uptake in RE concessions Electricity demand: critical mass of consumers, high system load factor - to improve load factor e.g. trough promoting productive use (loans to equipment ) and promoting domestic use (lending to promote domestic appliances) page 11

12 How clear are the conclusions from the three RE Studies on REA/REF general principles Independence of the REAs (funding, board decisions, management autonomy) Detailed and public rules (regulation, procurement, contracting) Flexibility left to the project proposals (technologies, costs, tariffs) Fair bidding procedures for tenders/calls for proposals Transparent evaluation tools (reference costs, business plans) Public info on procedures, developer support, decisions, etc. page 12

13 REA/REF recommendations from the EU reports - keys Consider signing performance contract with REA defining number of electrified villages and households/year (Burkina Faso) Contract local bank as Trust Agent administering REF loans for fixed annual fee, interest in rural finance as normal commercial activity (Guinea, Tanzania) For Local Financing Institutions long term loans: (i) line of credit on near-commercial terms (Tanzania) (ii) credit-enhancing partial risk guarantee ( for RE projects and PV-dealers (Mostert, COWI) (iii) refinancing facility to match usual long payback time of investments (Uganda/IDA ERT) Consider encouraging microfinance institutions (MFIs) to finance interior equipment, consumption, small businesses and capacity building (SOFRECO 2010, Senegal) Consider mitigating slow customer uptake in RE concessions, e.g. subsidization of connection fees/investment costs until reaching financial viability (COWI 2010) Promote productive and domestic use, improve system load factor, establish special credit facility through Rural Banking System - credits to households for wiring and upfront connection costs (Ghana) page 13

14 REA/REF recommendations tools Develop public rules for regulation, standards, tariffs, bidding, contributions (Burkina Faso) Pool projects into single tender to benefit from economies of scale, avoid collusion between suppliers and project promoters (Guinea) Develop shared evaluation tools, e.g. standardised business software models, reference spreadsheet tariff calculating models, manuals, reference cost tables (Senegal, Mali, Guinea, Burkina Faso) Reduce project application costs by coordinating procedures, e.g. single application forms package, one focal point/institution involved, REA to follow process from beginning to end (Guinea) page 14

15 In spite of all this, why is so little RE happening? Depoliticises/mechanizes project selection Arms-length REF management Subsidies paid against milestones Turns non-commercial projects - to commercially viable Bottom-up project development - local/private initiatives Old Concept New Concept REA/REF 15

16 Thank you for your attention!