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MIRREIA

Mitigating Risk and Strengthening Capacity for Rural Electricity Investment in Africa

Deliverable 5.3 RURAL ELECTRIFICATION

WORKSHOP PROCEEDINGS

AUGUST 2006

Supported By:

MITIGATING RISK AND STRENGTHENING CAPACITY FOR RURAL ELECTRICITY

INVESTMENT IN AFRICA

MIRREIA

RURAL ELECTRIFICATION WORKSHOP PROCEEDINGS

1ST to 3 rd March 2006,

UNEP, Nairobi Kenya.

MIRREIA: Mitigation Risk and Strengthening Capacity for Rural Electricity Investment in Africa Rural Electrification Workshop Proceedings

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TABLE OF CONTENTS

TABLE OF CONTENTS ..............................................................................................................................3

1 INTRODUCTION .................................................................................................................................4

2 OVERALL WORKSHOP OBJECTIVES .........................................................................................5

3 WORKSHOP PROGRAMME ............................................................................................................5

4 WORKSHOP REPORT ......................................................................................................................6

4.1 Opening ............................................................................................................. 6 4.2 Session 1 – Scene Setting.............................................................................. 6 4.3 Session 2 – Rural Electrification: Project Identification.............................. 7 4.4 Session 2.1 – Rural Electrification: Project Identification (Case Studies)7 4.5 Session 2.1 – Rural Electrification: Project Identification (Discussion groups) ........................................................................................................................... 8 4.6 Session 3– Rural Electrification: Project Development.............................. 8 4.7 Session 3.1 – Rural Electrification: Project Development (Case Studies) 9 4.8 Session 3.1 – Rural Electrification: Project Development (Discussion Groups) .......................................................................................................................... 9 4.9 Session 4 – Rural Electrification: Project Implementation ....................... 10 4.10 Session 4.1 – Rural Electrification: Project Implementation (Case Studies) ........................................................................................................................ 10 4.11 Session 4.1 – Rural Electrification: Project Implementation (Discussion Groups) ........................................................................................................................ 11 4.12 Session 5 – Rural Electrification: Project Operation................................. 11 4.13 Session 5.1 – Rural Electrification: Project Operation (Case Studies) .. 12 4.14 Session 5.1 – Rural Electrification: Project Operation (Discussion Groups) ........................................................................................................................ 12 4.15 Session 11 – Conclusions............................................................................. 12

5 KEY FINDINGS .................................................................................................................................13

APPENDIX 1: WORKSHOP PROGRAM ...............................................................................................16

APPENDIX 2: LIST OF PARTICIPANTS ...............................................................................................20

APPENDIX 3 – WORKSHOP DISCUSSION GROUP OUTCOMES ..................................................22


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1 INTRODUCTION The Mitigating Risk and Strengthening Capacity for Rural Electricity Investment in Africa (MIRREIA) project seeks to identify and mitigate the risks associated with investment in renewable energy projects for rural electrification. The project’s goal is to develop and support the efforts of independent power producers, public private partnerships, and rural electricity suppliers in Kenya, Uganda, and Tanzania to deploy renewable energy for development and poverty alleviation. The European Commission’s Intelligent Energy for Europe (IIE) programme is supporting MIRREIA, which UK-based Energy for Sustainable Development is implementing with project partners in Uganda (Power Networks), Tanzania (TRCL), and Kenya (Energy for Sustainable Development Africa). At present, ESD and MIRREIA partners are assisting project developers in Uganda, Kenya, and Tanzania who are developing small hydro, bagasse cogeneration, and wind projects. Extensive work has been ongoing in the region for a number of years in supporting rural electrification programmes. The aim of this activity was to bring together the key players to encourage dialogue on the major issues and review barriers and innovative approaches. A Rural Electrification Agency has already been operating in Uganda for a number of years and a Rural Energy Authority is presently being established in Tanzania. In Kenya, there are also plans to establish such an agency. Between these key organisations and other major players there are many lessons to be learned. The initial plan was to bring together the key player in March/April 2006 for a one day workshop. During the initial planning of this workshop in late 2005, ESD were approached by the e8 Fund (previously e7) who were also keen to run a rural electrification workshop in the region as part of their training and capacity development programme. This was aimed as a follow on from a similar workshop in Bangkok for the region. The e8 Fund had teamed up with UNEP and requested ESD to facilitate the development of the key concepts for the workshop, identify key players in East and Southern Africa and assist in facilitating with some of the logistics (invitations, programme, break out sessions etc.) Although the geographic scope of the e8 Fund workshop was much greater than that of the MIRREIA project, there were many overlaps in terms of the aims and objectives. It was therefore agreed with the e8 and the EU that a single workshop would be held to avoid duplication and to add value to both projects. The experience and issues identified under the EU MIRRIEA project provided a framework and the


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guiding principles for the e8 workshop. In addition, the MIRREIA team would be able to bring in the key players, both on the policy side and also project developers who had been working with the project teams in each of the countries. Although the MIRREIA workshop would have only involved Kenya, Tanzania and Uganda, with e8 and UNEP backing, the workshop brought participants from the following countries: Botswana, Kenya, Ethiopia, Lesotho, Mozambique, Namibia, South Africa, Tanzania, Uganda, and Zambia. Participants included a mixture of public and private sector. In many cases, the project team aimed to identify at least one public and one private sector representative from each country. 2 OVERALL WORKSHOP OBJECTIVES The overall workshop objectives were as follows

• Identify the main challenges of rural electrification, based on a review of project experiences covering all stages of the cycle;

• Review best practices and determine effective approaches by which to address the challenges of rural electrification in the local context;

• Specify roles that stakeholders can play in ensuring that rural electrification projects are consistent with sustainability principles; and

• Improve the ability of rural electrification project developers to develop project proposals that are able to access funding and/or technical support.

The workshop aimed to produce recommendations on how to better align rural electrification projects to sustainable development goals, while reducing transaction costs and accelerating the transition from concept to implementation.

3 WORKSHOP PROGRAMME The full workshop agenda can be found in Annex 1. Although the majority of the workshop covered the general issues within the workshop objectives, a special session was held on the 2nd day at which the MIRREIA project team from the three countries presented the project and the status and objectives. The structure of the overall programme was designed to follow the project cycle: from identification, development, implementation and operation. Each of the four sessions included an opening presentation and overview of the key issues, two relevant case studies and break out discussion groups.


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The break-out discussions were aimed at providing an opportunity for greater dialogue between participants on specific issues. During each session, three break-out groups were established to discuss one topic and then feedback to the plenary. All MIRREIA workshop presentations are available on the project website: http://mirreia.energyprojects.net All other presentations are available on the e8 website: http://www.e8.org/Projects/RuralElectrification/Nairobi/Menu.htm 4 WORKSHOP REPORT 4.1 Opening Mwangi Kiunjuri ( Ministry of Energy in Kenya) and Andy Riley (e7-Scottish Power) welcomed the participants on behalf of the Ministry of Energy in Kenya and the e7 as organizers and opened the workshop with brief remarks. They encouraged the participants to take the opportunity to work with and to learn from each other. Then they passed the floor to Mr. Zhijia Wang's division of Regional Co-operation for the opening speech.

Zhijia Wang (Officer in charge, Division of Regional Cooperation UNEP) stressed the need of rural electrification as a driver for rural development and as a contribution towards the alleviation of rural poverty. He pointed out the benefits of rural electrification such as giving access to communication, improving education and health care systems and as an opportunity for small industries which would subsequently create jobs.

4.2 Session 1 – Scene Setting Andy Riley (Scottish Power, UK) made a presentation on the activities the e7 does around the world. He gave a general idea on what is the e7, its composition and its strategic objectives. He also emphasized the main objectives to be accomplished during the workshop: the encouragement of dialogue, promotion of mutual learning and stimulating exchanges on real life experiences and not theory.

Mike Bess (ESD) made a presentation on the historical background for rural electrification in Africa. He gave a general overview on the actual situation on electrification in the Northern and Southern hemispheres. He explained the 21st century paradigm shift and presented the status in the Sub Saharan Africa. He further elaborated on the status of the new RE and the implications on RE investment. He indicated that the two main pillars for supporting rural transformation were the productive uses as well as the essential services. He pointed out that the role of key players such as national government, regulators, and national electricity companies was still not clear and that more concerted efforts to support private investment must be made.


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Njeri Wamukonya (UNEP, Kenya) talked about the main objectives that were pointed out by the invitees. She presented the backgrounds and types of projects that invitees were involved in, and also indicated what their expectations were; for instance identifying the challenges and the solutions for RE, and sharing experiences on the different stages of projects.

Catherine Valle (UNEP, Kenya) talked about GEF`s portfolio, whose objectives are to influence, develop and transform the markets for energy and mobility in developing countries in order to promote their growth along a path that will be less carbon-intensive, and therefore sustainable, in the long term. She also explained the different co-funding opportunities for climate change.

4.3 Session 2 – Rural Electrification: Project Iden tification Jean Jaujay (e7-EDF) presented an overview of how to identify rural electrification projects. The first part focused on determining the constraints and realities, emphasising the need to take into account the lessons learned such as obtaining a fair balance of risks between state, private sector and financial agencies. He then discussed how to identify the demand (domestic and commercial). Based on these studies a proposal should be assessed, taking into account the substitution of thermal generation, with their inherent climate change impacts, by more economic and cleaner solutions.

Mr Jaujay then continued to present some of the problems being faced in the area of rural electrification. Some recommendations for both the local and foreign private sector were suggested that might support the scale-up of electrification. He concluded by giving an identification checklist to guide the RE identification process.

4.4 Session 2.1 – Rural Electrification: Project Id entification (Case Studies)

Pascale Bonzom(UNDP) and Sacha Thielman (GTZ) made a very extensive presentation on the Lokoho Project, Madagascar. Sacha Thielman gave an overview on growing sustainable businesses; He explained the multi-stakeholder approach and contributions from different parts such as business, governments, local communities and development partners. He also explained how the identification process is carried out, and gave an overview on the three steps followed. The first of these concerns the participation of the companies involved, the consultation of other stakeholders, and the identification of potential sustainable business opportunities. The second step consists of the establishment of a National forum/Coordinating group, a multi stakeholder working forum, to share information and build trust, to resolve issues in an open, transparent manner. The third step is aimed at operationalising investments, a detailed design scheme and a bridge to access finance. Pascale Bonzom started by explaining what the e7 project criteria were and how the Lokoho project had satisfied these conditions. She also explained what the main objectives of the project were such as to improve the access to electricity for the rural population, to improve the access to basic services, to develop the local economy, to reduce


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the use of diesel and to fight deforestation. She continued by giving an overview on the technical project design and project targets. She then presented how the project was established and who the main project partners were.

Aliou Niang (Senegalese Agency for Rural Electrification) made a presentation on the status of rural electrification in Senegal. He started by giving an overview on the situation of RE in Senegal before the 1998 reforms. He indicated, that prior to the reform at the institutional level, a public monopoly was established and that there were no incentives for the private sector. He indicated the consequences of these actions such as the poor access to electricity in rural areas. He then continued by explaining the objectives since the reform had taken place. Some of these objectives were to establish an open market and to set up an appropriate framework for a public-private partnership aimed at increasing the means of production and financing rural electrification. He explained the tools that were used in order to improve rural electrification. Some of the tools used within the state`s planned approach were a division of the country into rural electrification concessions, allotted to private operators through a process of competitive bidding. The characteristics for each concession were defined in terms of duration, size of the markets and type of tariffs. Mr. Niang also explained the different financial instruments that were used.

4.5 Session 2.1 – Rural Electrification: Project Id entification (Discussion groups)

The invitees were divided into three different breakout rooms. They were given the following question:

1. Identify three key strengths and three key weaknesses in rural electrification policies and regulations related to the identification and development of projects?

2. Choose three key success and risk criteria for screening projects and determining their impacts?

3. Propose institutional mechanisms required to promote the utilisation of sustainable / renewable energy technologies for RE?

At the end of their discussion, they were requested to give feedback to the plenary.

The main outcomes of the workshop are presented in Appendix 3.

4.6 Session 3– Rural Electrification: Project Devel opment Jonathan Curren (e7-SP) opened the sessions on project development with an overview of the context for the following presentations. Two detailed case studies from Ethiopia and the European Union in session 3 would provide the basis for the working groups. Before he passed the floor to the experts from Ethiopia and the European Union, he gave the recipe for preparing and developing successful RE projects. He started by giving the main ingredients to make the business case


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for a feasible project and to mitigate risk. Among these ingredients he defined the following: government and regulatory framework, market demand, the right business model, the right partnership framework, and finance.

4.7 Session 3.1 – Rural Electrification: Project De velopment (Case Studies)

Melessaw Shanko ( MEGEN Power Ltd., Ethiopia) introduced the Ethiopian public private partnership case study. He started by giving a country overview on the electricity status in Ethiopia. He then gave an overview on three case studies where a high level of PPP, weak or no PPP had been established. The first case integrated a high level of PPP in the community of Yaye Town, the second case study showed a showed weak level of PPP established in the community of Bonosha Town and finally the third case study presented no contribution of public and private partnership in the region of Bonna Town. Some of the lessons learned from these three communities were the following:

- Balanced and well defined public and private partnership sector roles needed to be defined.

- Planning to meet not only current but also future demand for electricity was required.

- Transparency and the involvement of community members during tariff setting were recommended.

- Financial sustainability through cost recovery tariff and skill management was an important issue.

Derek Fee (EU Delegation to the Republic of Kenya) introduced the different types of funding schemes for energy in developing countries. These are the EU Energy Initiative for poverty eradication and sustainable development (EUEI), the EUEI partnership and dialogue facility (EUEI-PDF), Energy Facility (EF) and COOPENER programme. Mr. Fee indicated the objective of the EU is to facilitate the achievement of the millennium development goals and reduce the number of people in extreme poverty and meet other MDGs by 2015, through the provision of adequate, sustainable energy services. He also indicated the different levels of cooperation the EUEI had put in place in developing countries and at sub-regional level as well as at the International Level.

4.8 Session 3.1 – Rural Electrification: Project De velopment (Discussion Groups)

The invitees were divided in three different breakout rooms. They were given the following question:

1. Can the private sector / public private partnerships deliver rural electrification? If so, what is necessary to achieve this? Can lessons be learned from other sectors e.g. mobile phones?


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2. How can costs be reduced to achieve affordable rural electrification? 3. What are the key criteria to ensure long term sustainability of projects –

e.g. customer growth, affordable tariffs, viability of the commercial enterprise etc?

At the end of their discussion they were requested to give feedback to the plenary.

4.9 Session 4 – Rural Electrification: Project Impl ementation Guy Marboeuf (e7-EDF) opened the sessions on project development with an overview about the presentations to be given in this context. Two detailed case studies from Mpeketoni (Kenya) and West Nile Uganda would provide the basis for the working groups' discussions. Before he passed the floor to the experts from Kenya and Uganda, he gave the main points to take into account when implementing and developing successful RE projects. He started by indicating what would be the main aspects to know before hand during the feasibility study such as a good knowledge of the local context and main technical choices. He also indicated that financing needed to be ensured and that an existing contract with local authorities needed to be established. He continued by explaining the role of renewable energies. He mentioned that renewable energies should be favoured. He concluded by giving the three phases for implementation:

- First phase - the setting up of a local company taking into account the legal aspects, choice of establishments, human resource implementation, management tools. During this phase commercial implementation and technical studies should also be taken into account.

- Second phase - construction and commissioning as well as organizing a customer management tool in order to determine their situation is of main importance.

- Third phase - the main aspects to take into account were to organise maintenance, to build finance linkages, education of customers and to organise monitoring, evaluation and feedback.

4.10 Session 4.1 – Rural Electrification: Project I mplementation (Case Studies)

Paul Mutinda Kituku ( Mpeketoni Electricity Project, Kenya) introduced the electricity project taking place in Mpeketoni, Kenya. He started by giving an overview of the Mpeketoni community. He then continued by giving a historical synopsis of the project, and then indicated who would be the major consumers among them 130 shops, 90 households, and 4 flourmills. In total, a demand of 190,000 KWh per year was required. He then indicated the recent increase on tariff on the Mpeketoni community. He concluded by giving the following steps e7 and MEP were about to take on this project.


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Kevin Kariuki (IPS, Kenya) started by introducing IPS and their function on AKFED. AKFED is an agency involved in long term investments that operates in Kenya, Tanzania and Uganda. He then introduced the traditional IPP model, which foresees an increase in generation capacity, an improvement of the quality of services and an increase in access to services. He then gave a general overview of the West Nile RE project in Uganda which is a first of its kind in Africa. He concluded by explaining what had been the challenges and lessons learned from the West Nile RE project.

4.11 Session 4.1 – Rural Electrification: Project I mplementation (Discussion Groups)

The invitees were divided in three different breakout rooms. They were given the following question:

1. What are the key risk facing investors for rural electrification projects? How to reduce the risks for projects to encourage the private sector, including commercial banks, to invest?

2. What are the key training needs for rural electrification in the region – institutions/ private developers/ community based organisations?

3. What are the environmental impacts of rural electrification and how can the positive impacts be enhanced and promoted?


4.12 Session 5 – Rural Electrification: Project Ope ration Enrique Rodriguez Florez (e7-RWE) opened the sessions on project development with an overview about the presentations to be given in this context. Two detailed case studies from Zambia and South Africa would provide the basis for the working groups' discussions. Before he passed the floor to the experts from Zambia and South Africa, he gave the main points to take into account for operating a successful RE projects. He started by indicating that a successful operating RE project should provide efficient, reliable and affordable energy that is sustainable and environmentally sound. He then explained what can be problematic issues for RE - among them we had affordability and financial viability. He then concluded by explaining what were the finance, technical and environmental aspects to be taken into account. For the financial aspect, he indicated that a reasonable investment cost for the technology provided should be taken into account. He also indicated that the involvement of the private sector, transparent pricing, clear financing, affordable tariffs, business oriented were to be considered. For the technical aspect, among all recommendations optimal matching resource with demand assessment and consumption behaviour must be considered.


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4.13 Session 5.1 – Rural Electrification: Project O peration (Case Studies)

Charles Rea ( Zengamina, Zambia) started his presentation by giving a general overview of the project. He then indicated the technical specifications, environmental impact, and financial issues. He then concluded by explaining what the major assets of this project were and stressed the importance of a professional feasibility study. He also indicated that due to the location of the project created challenges for the construction of the project and impacts on some construction costs.

Rolf Niemand ( Kwazulu Energy Services, South Africa) started his presentation by giving background information about the Kwazulu energy systems and the energy in South Africa. He then explained the type of technology and the management system Kwazulu Energy Services was using in order to electrify remote areas. He gave useful recommendations regarding the operation of the system and the case of non payment situation. He indicated the non payment issue was a management issue and that it was in no way a technological issue. He indicated that KES had reduced this problem by improving its management system thus achieving 90 percent of payments in 2006.

4.14 Session 5.1 – Rural Electrification: Project O peration (Discussion Groups)

The invitees were divided in three different breakout rooms. They were given the following questions:

1. What are the main new technologies that would benefit rural electrification in Africa that require promotion and development assistance?

2. Is Carbon Financing a realistic option for supporting rural electrification in Africa?

3. What should be put in place to share experiences on rural electrification throughout the region/ globally?


4.15 Session 11 – Conclusions Andy Riley (e7-Scottish Power) thanked participants noting the high level of participation in all sessions. He expressed appreciation to all panellists for their presentations which enriched the workshop by valuable country experience and encouraged participants to make use of the network which the workshop had helped to establish.


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5 KEY FINDINGS All workshop attendees were very skilled and experienced with rural electrification projects. The representation of participants with institutional backgrounds and those from the practical level proved to be well balanced. This facilitated the active involvement of participants in the workshop, which was excellent.

The key findings from the overall workshop are as follows:

• Representatives from Governments, Agencies, utilities, CBOs and NGOs, private sector (consultants, investors and operators, and international financing institutions) met for three days of intense exchange of experience and discussions

• 13 countries, from EAC and SADC, as well as Senegal attended • In order to promote solutions for rural electrification that are key to local

development and MDG achievement, the workshop prepared the following recommendations:

INSTITUTIONAL

• Rural Electrification must be a priority in governments’ agendas, in order to increase production in rural areas.

• An institutional, legal regulatory and fiscal framework should be defined and adequate budget funding should be available.

• Each government should identify main institutions, namely regulator, local governments, national utility, rural agency … and clarify responsibilities for each institution.

• Planning processes for grid-non grid/rural agency-electric utility should be implemented and updated.

• The government should have a long term vision of “rural electrification for economic development”, including a multi-sector approach that engages the private sector, and mobilise the necessary means to facilitate this.

• Creation of a rural electrification agency is recommended to enhance the development of RE (planning, mobilization of finance).

• Community capacity building and cross border and regional integration must be sought.

• Coordination of external donors is of paramount importance.

TECHNOLOGIES • Renewable sustainable energies including hybrids should be promoted. • Proven technologies based on available resources (neutrality) and

adequate to demand must be chosen. • Design standards and normalized RE products, adapted and adaptable to

the long term planning process, are to be implemented. • Research institutions should be involved and centres of excellence for

particular technologies should be supported.


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FINANCE

• Need for capital subsidies, thus governments should continue to play a leading role in RE.

• Development agencies (multilateral and bilateral) should provide the necessary subsidies.

• Resource assessment, project developments costs and capacity building should be also eligible for total or partial subsidies.

• Monitoring and evaluation of the project should also be taken into consideration.

• The barriers to local and small size commercial finance availability should be removed (guarantees, securities).

• External donors and finance institutions should coordinate.

BUSINESS MODEL • The business model should be financially viable and sustainable taking

into account the previous recommended capital subsidies and alleviation of commercial bank barriers.

• The business model should be based on productive use. • Financial involvement of local stakeholders should be sought in

implementation as well as the commercial aspect. • Working capital should be provided by line of credits. • Consumer installation cost should be included in the business plan.

PRIVATE SECTOR INVOLVEMENT • Build confidence between private sector, government organization and

communities. • Accept that RE should be a profitable business. • Incentives through finance and business models. • Open, transparent and fast track procedures for development subsidies,

authorizations and investment funding • Data collection and adequate (GIS) mapping of existing infrastructures

and housing should be made be made available for project developers. • Adequate allocation and mitigation of risks between acting stakeholders

must be discussed and implemented.

DISSEMINATION OF INFORMATION • Access to success stories, good practice examples and exchange

programs should be facilitated by multilateral agencies (UNEP, UE and other institutions) and should help their coordination.

• Reliable data bank (including resource availability, current activities, training and exchange programs etc)and website, managed and maintained by existing structures (Ministries?) to be promoted

• Legal framework necessary to ensure their maintenance and budget • Research institutions should be involved and centres of excellence for

particular technologies should be supported.


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CDM

• Normal Carbon Fund procedures are too expensive. • Pooling of projects to share transaction costs (small and large) (Example :

UNDP MDG Carbon Facility). • All small scale Renewable Projects in Africa to be considered as a group

for Carbon Fund. • Local capacity building needed in the countries (local authorities). • Necessity of simplified methodologies (baselines) to be recognized by the

CDM executive board. • To promote all projects to the DNA (Designated National Authority) in each

country before their international meeting in May 2006 in Germany.


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APPENDIX 1: WORKSHOP PROGRAM

DAY 1 – Wednesday, March 1

Workshop Registration

8:30 UNEP Gigiri

Workshop Opening

9:00 Welcome Mr Mwangi Kiunjuri Assistant Ministry of Kenya

9:15 UNEP & rural electrification Zhija Wang, Officer in charge, Division of Regional Co-operation, UNEP

9:30

9:50

e7 and Rural Electrification, contribution to Sustainable Development and overview of workshop approach and objectives of workshopHousekeeping

e7 Conference Chair: Andy Riley, Scottish Power e7 Conference Chair

Session 1 – Scene Setting

10:00 Session introduction - short summary of session aims and introduction of presenters

Mr. Andy Riley, Scottish Power, United Kingdom

10:10

Presentation 1 – Overview of situation and developments across region, drawing on presenter’s experience + feedback from countries

Mr. Mike Bess, Energy for Sustainable Development

10:40 Coffee Break

Session 1. 2 – Scene Setting (continued)

11:00 Presentation 2 – Highlighting issues identified from invitee questionnaire

Dr Njeri Wamukonya, UNEP, Kenya

11:30 Open forum for participants to briefly highlight key issues and concerns regarding rural electrification

Mr. Andy Riley, Scottish Power, United Kingdom

12:00 Lunch Break

13:15 UUNNEEPP aanndd GGEEFF ffoorr RRuurraall EElleeccttrr ii ff iiccaattiioonn IInn AAffrr iiccaa CCaatthheerriinnee VVaalllleeee--SSPPOO

Session 2.1 – Rural Electrification: Project Identi fication Session Chair: Ms. Justina Uisso Senior Research Officer, Ministry of Energy and Minerals, Tanzania

13:45 Identifying potential RE Projects - overview � with special focus on: institutional (policy)

framework � also: regulatory issues, socio-economic

aspects, planning, cross sector identification)

Jean Jaujay, EDF, France

Session 2.1 – Rural Electrification: Project Identification (Case Studies)

14:05

14:25

Case study: Lokoho Madagascar Case study: ASER Senegal

Ms Pascale Bonzom (UNDP) and/or Dr Sascha Thielman (GTZ) Aliou Niang


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14:45

15:00

Key issues and presentation of discussion topics - turning theory into practice (establish 3 discussion groups) Discussion groups (3 off)

Jean Jaujay, EDF, France Facilitators

16:00 Coffee Break

Session 2.2 – RE Identification

16:30

17:30

Feedback to plenary

Summary of days findings and close of day

Facilitators Session chair

End of Workshop Sessions Day 1

DAY 2 – Thursday, March 2

Session 3.1 – Rural Electrification: Project Develo pment Session Chair: Mr Patrick Nyoike, Permanent Secretary, Ministry of Energy, Kenya

8:30

8:45

09:05

09:25

09:45

Introduction and overview to the day and housekeeping Developing RE Projects - overview with special focus on: � institutional (policy)

framework, finance and technical aspects

� private sector involvement and carbon finance

Case study: Public-Private Partnerships Case study: Energy & Poverty, EU Support Programmes Key issues and presentation of discussion topics - turning theory into practice (establish 3 discussion groups)

e7 Conference Chair Mr. Jonathan Curren, e7 Delegate from Scottish Power, United Kingdom Mr Melessaw Shanko, Director, MGP/Megen Power Ltd Mr Derek Fee Infrastructure section, Delegation of the European Commission to the Republic of Kenya Mr. Jonathan Curren, e7 Delegate from Scottish Power, United Kingdom

Coffee Break

Session 3.2 – Project Development

10:15

11:15

Discussion groups (3 off) Feedback to plenary

Group Facilitators


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12:30 Summary of session findings

Session Chair

Lunch Break

Session 4.1 – Project Implementation Session Chair: Dr Sascha Thielman, GTZ, Madagascar

14:00

14:20

14:40

15:00

Implementing RE Projects (overview) with special focus on: • finance, technical and

environmental aspects • human capacity building Case study: Mpeketoni Electricity Project Case study: West Nile Uganda Key issues and presentation of discussion topics - turning theory into practice (establish 3 discussion groups)

Guy Marboeuf, EDF, France Mr Dawson Mwangi/ Mr Paul Kituku Mutinda, MEP, Kenya Mr Kevin Kariuki, Head of Infrastructure, Industrial Promotion Services, Uganda/Kenya Guy Marboeuf: EDF

Coffee Break

Session 4.2 – Project Implementation

15:30 16:30 17:15

Discussion groups Feedback to plenary Summary of days findings and close of day

Group Facilitator Session Chair

Special Session – EU Coopener Project MIRREIA

17:30 Presentation and discussion on EU Coopener Project – MIRREIA

(Mitigating Risk to Investment in Rural Electrification in East Africa)

MIRREIA Presentation MIRREIA activities MIRREIA Project Objective MIRREIA in Tanzania

DAY 3 – Friday, March 3

Session 5.1 – Project Operation Session Chair: Mr Martin Masemola Senior Mgr., Integrated National Elec. Programme, South Africa

08:30

08:45

Introduction and overview to the day and housekeeping Operating RE Projects - overview with special focus on: finance, technical and

E7 Conference Chair Mr Enrique Rodriguez-Flores – RWE


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09:05

09:25

09:45

environmental aspects Case study: Kalane Hill Mini Hydro Case study: Kwazulu Energy Services /Nura Key issues and presentation of discussion topics - turning theory into practice (establish 3 discussion groups)

Mr Charles Rea, Zengameni Power Company, Zambia Mr Rolf Niemand, MD NUON RAPS, South Africa Mr Enrique Rodriguez-Flores – RWE

Coffee Break

Session 5.2 – Project Operation

10:30

11:30

12:15

Discussion groups Feedback to plenary Summary of days findings and close of day

Group facilitators Session Chair

Lunch Break

Session 6 – Conclusions

14:00

14:30

15:00

Feedback session Wrap up and summary of workshop finding Closing remarks

e7 Conference Chair E7 Conference Chair Mr. Patrick Nyoike, Permanent Secretary, Ministry of Energy, Government of Kenya

End of Workshop


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APPENDIX 2: LIST OF PARTICIPANTS 1. Andy Riley (e7-SP), United Kingdom 2. Jonathan Curren, United Kingdom 3. Enrique Rodriguez Florez (e7-RWE), Germany 4. Jean Jaujay (e7-EDF), France 5. Guy Marboeuf (e7- EDF), France 6. Luis Calzado (e7 Secretariat), Canada 7. Njeri Wamukonya (UNEP Regional Office for Africa), Kenya 8. Girma Alemu, Project Appraisal &Licensing Team Leader, Ethiopia 9. Melessaw Shanko, MEGEN Power Ltd. Managing Director, Ethiopia 10. Frederick O. Nyang, Electricity Regulatory Board, Kenya 11. Peter M. Okwany, Rural Energy Specialist, Kenya 12. Nganga Munyu, Head of Rural Electrification Department, Kenya 13. Paul Mutinda Kituku, Mpeketoni Electricity Project executive, Kenya 14. Dawson Mwangi Kinyanjui, Mpeketoni Electricity Project executive, Kenya 15. Hlopheho Moses Ntlamelle, Department of Energy, Lesotho 16. Sello Raymond, Project Engineer Ministry of Natural Resources, Lesotho 17. Cosmas Gutu, Lesotho Electricity Corporation Managing Director 18. Hary Andriantavy, General Secretary, Madagascar 19. Rasolojaona Rivoharilala, Executive Secretary, Madagascar 20. Pascale Bonzom, Global Compact/GSB Initiative, Political Strategies Unit,

Madagascar 21. Ulrich HArmut Von Seydlitz, Electrical Engineer, Namibia 22. Kavepurua Kaventuna, Electrical Engineer Ministry of Mines and Energy,

Nambia 23. Silas Ruzigana, Energy advisor to the ministry, Rwanda 24. Martin Masemola, Senior Manager Electrification Planning, South Africa 25. Luis Anton Olivier, Electrical Engineer, South Africa 26. Justina Uisso, Senior Research Officer , Ministry of Energy and Minerals,

Tanzania 27. J. Ngeleja, Electrical Engineer, Tanzania 28. Frank Sebbowa, Electricity Regulatory Agency, Uganda 29. Kevin Kariuki, Head of Infrastructure , Industrial Promotion Services, Uganda 30. Arnold Simwaba, Senior Electrification Officer, Zambia 31. Wakunda Siwakwi, Acting Economic Specialist, Zambia 32. Charles Rea, Developer and Investor, Zambia 33. James Manda, Energy Regulation Board, Zambia 34. Arnold Simwaba, Information System Director, Senegal 35. Aliou Niang, ASER General Manager, Senegal 36. Anne Rehner, GTZ Energizing Africa 37. Holger Liptow, GTZ Energizing Africa 38. Anani Appolinaire, Secretary General Adviser 39. Sacha Thielman, GTZ Infrastructure Policy Adviser 40. Rolf Niemand, MD NUON RAPS South Africa 41. Isaac Sokopo, Corporate Specialist Eskom


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42. Andrew Yager, Sustainable Energy Adviser 43. Andre Ramon Silva, Ministry Energy Mines Brazil 44. Izael Pereira da Silva, Centre for research in energy conservation 45. Mike Bess, ESD Director International Division 46. Tasco Mbinda, Regional Energisation Manager Zambia 47. G.S. F Matlawe, Regional Energisation Manager Zambia 48. Mohau Nketsi, Regional Energisation Manager Zambia 49. Greal Ambani, Regional Energisation Manager Zambia 50. Yesse Mubangizi, Power Networks, Zambia 51. Cyril Batalia, TRCL, Tanzania 52. Shalini Ramanathan, ESD, Kenya


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APPENDIX 3 – WORKSHOP DISCUSSION GROUP OUTCOMES Session 2.1 Workshop Discussion group outcome

Workgroup 1

Workgroup 2

Chose three key success and risk criteria for scree ning projects and determining their impacts? Local Buy-In

• Sustainability + viability impacted with local ‘ownership’ & participation • Engagement with wide range of local stakeholders (LA.s, NGOs,

institutions) – NB external stakeholders must understand who stakeholders are

• Understanding local community governance & stakeholder ‘structures’ – local knowledge is key – is source of significant risk for external investors

• Project must form part of development strategy of community – endorsement from key stakeholders

Political risk

• Investors need stability in order to be assured of investment return (regulatory & political framework). Clearly defined rules. Transparency. Supportive.

Ownership Issues

• Clear defined ownership structure – preferably limited liability company – can act as vehicle for investment (banks want to lend to formal entities)

Regulatory & Legal Compliance • Environmental impact assessment of some sort – is necessary in order to

engage with funding bodies etc • Rights of access to resource? Who governs that access? • Regulatory compliance is major obstacle to private investment • Technical standards – demand driven not technology driven – balance

Affordability

• How do we measure it? • Not sufficient in isolation. • Cost per connection good benchmark for assessing affordability • Connection targets • Benefit per connection (e.g. kWh usage per connection) • Available subsidies? Necessary subsidies? • Cost for project identification


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Customers • Is the demand there? Clear understanding of that market is necessary.

Can customers pay? Degree/ method of subsidization necessary. • Customer mix – industrial v commercial v domestic

4. Workgroup 3 Propose institutional mechanisms required to promot e the utilisation of sustainable / renewable energy technologies for RE? • Zambia:

– programmes spearheaded by Govt – Project fail after time – Programmes should be spearheaded by private sector

• Private sector is paramount BUT Govt support is essential • Community participation and education is necessary

– Maintenance/ theft etc • South Africa

– Govt involved in finance – Criticism – lack of continuity (year by year changes)

• Zambia – Govt contributed funds • RSA Renewable energy policy • Kenya – high use of solar 200, 000 solar PV systems, but limited Govt

intervention, but many systems fail • Solar PV • Barriers

– Low power – Does not provide total energy solution for household – Upfront cost – Manufacturing - panels going to Europe

• Solutions – Energy solution – also look to solar stoves – Need to clarify goals (solar is not as expensive as other energy

sources to cover basic needs) – Microfinance – Govt subsidies – Institutional capacity to implement – Detailed mix defined in master plans – Capacity for technicians/ training required - servicing

• Govt – Setting guidelines – Norms and standards – Targets – Subsidies – Regulate – Capacity building /training


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– Resource assessment – wind/ hydro – Regulatory framework - PPA – No taxing of equipment (solar PV) – Priorities on essential services – Mitigation of risk – through legislation – Govt encourage private investment/ competition – Education – include in curriculum – Support for local participation

• Partners in development – Securing of loans – Train technicians/ capacity building – Need to make sure donors do not undercut private sector – manage

strategy – Subsidies (Wpeak for solar) – Pilot/ roll out appropriate delivery models – Must be tailored to specific local needs – Focus on end user participation

• Private sector – Public private partnerships (Utility/ communities) – Cross border

• Civil Society – Community mobilisation/ sensitisation

Session 3.1 Workshop Discussion group outcome

Workgroup 1

Can the private sector / public private partnership s deliver rural electrification? If so, what is necessary to achiev e this. Can lessons be learned from other sectors e.g. mobile phones?

• Can PPPs deliver RE?

– Planning, financing, roll-up – Scale?

• Definition of the framework, the role of the PPP (Licensing, access to resources, to land, etc.)

• Alternative: state owned utility? Other? • What the public sector wants, to define clearly the roles… • In SA a formal structure exists for PPP • Support from business or commercial or public? • Who initiates it, will influence the roles • Often, lack of empowerment of local government • No problem with the concept, but:

– How to define the roles? – How to limit the risks? – Etc.


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• Unstable environment is a risk for the business, political situation… • People think that RE is the responsibility of the State • RE: social or commercial approach? • Water, transport are issues for local communities, what about

electrification? Who has the responsibility for what? • A big challenge for operators: to get skilled staff • Importance of tariffs or PPA contracts • Synergies between private needs (factories) and public ones (RE) • Role of generator versus role of distributor • Billing collection system efficiency: micro finance? • Local organisation to facilitate maintenance • Agreement between local communities (municipalities) and operators • Viability of a PPP versus size of the programme? • Customer mix – cross subsidization?

Workgroup 2

How can costs be reduced to achieve affordable rura l electrification? Cost Reductions

• Pre Project Costs • Importance of planning

• Finance costs • Smart subsidies • Duty/ tax exemptions • Repayment terms (NB not cost reduction measure, affordability)

• Generation Costs • On Grid/ Off Grid/ Mini Grid • Expertise in particular technologies • Use of agricultural residues

• Transmission & Distribution Costs • New technologies (SWER etc), network design

• O&M Costs • Capacity building (training)

• Why must we have cost reductions? • Insufficient funding available

• Where are you providing electricity (location, pop. density, geographical features)

Grid Factors • Pre Project Costs

• Proper planning • Use local expertise (studies, local knowledge, equipment specs.)

• Finance costs • Smart subsidies • Duty/ tax exemptions • Repayment terms (NB not cost reduction measure, affordability)


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• Generation Costs • On Grid/ Off Grid/ Mini Grid • Expertise in particular technologies • Use of agricultural residues

• Transmission & Distribution Costs • Minimize use of copper • Optimize use of equipment (e.g. transformer capacities, voltage) • Choice of voltage (e.g. 22kV vs. 33kV)

Off-Grid Factors • Pre Project Costs • Finance costs

• Local manufacture of components/ equipment? • Competitive sourcing of equipment • Good governance & transparency • Conditions attached to financing (e.g. % of equipment from specific

source) • Life cycle costs

• Generation Costs • Hybrid systems

• Distribution Costs • Loss reduction measures (cost v benefit balance) • Energy efficiency • Theft of electricity

• Affordability for end-users • Developing affordable standards (local) • ‘Ready boards’ + prepayment meters

Standalone Installations

• Choice of technology – life length • SHS • Taxation regime • Reduce size of loads (e.g. LED lighting) • Modular approach – increase capacity in line with load growth • Subsidies

Workgroup 3

What are the key criteria to ensure long term susta inability of projects – e.g. customer growth, affordable tariffs, viability of the commercial enterprise? 1. Social - - Quality of life - Level of income


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- Affordability, ability to pay and willingness to pay - Acceptance of service offering - Cooperate social responsibility 2. Technical - Allowance of growth demand - Choice of technology - Skills, capacity and resources - elaborate maintenance plan - Resource assessment - secure fuel and material supply - Adaptation to local circumstances - Appropriate norms and standards - Adequate quality of supply and service - Safety 3. Institutional - Commercially enabling political environment - Predicable and transparent regulatory framework - Ownership model - PPP

- Community - Defined responsibilities/ roles of key players - Incentives (tax/ subsidies) - Acceptance by various (local and national) government structures 4. Environmental - Appropriate legislative frameworks - Compliance with legislative frameworks - Emphasis on encouraging clean technology - Holistic view of relationship with surroundings – look at external effects of project – knock on effects (positive and negative) - Mitigation of negative aspects - Monitoring and feedback mechanisms 5. Financial

- affordable tariffs and connection costs - sufficient rate of return to meet ongoing expenses – i.e. sensible way of

setting tariffs - income


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o sales o subsidies o supporting projects o revenue generation

- availability of local finance for developers and consumers - tariff setting - efficiency for operation and maintenance - loss and credit control - political acceptance of financial realities - policies to regulate financial aspects and avoid mismanagement and

abuse Session 4.1 Workshop Discussion group outcome

Workgroup 1

What are the key risk facing investors for rural el ectrification projects? How to reduce the risks for projects to encourage t he private sector, including commercial banks, to invest? • Internal project risks: responsibility of the operator • External risks: responsibility of the local authorities

• Ex - Political uncertainty

– Possible return on investment for the investor – Institutional framework and international donors

• Ex - Regulatory uncertainty and transparency of procedures – Reinforcement and compliance of regulation

• Financial: risk for borrower and lender – adequation between the duration of loan and the recovery period – To increase the pay back period

• Possibility for the consumer to pay – loss of cash crop incomes

• Good governance and transparency RE not attractive for private investors: how to attract them? Lack of commercial viability, except if appropriate subsidies are necessary to make the project commercially viable

• Major risk: regularity of income of the consumer => the operator should

take insurances to prevent this risk • Lack of local counterpart: to discuss with possible donors • RE is not a priority on the government agenda • Low population density • Time is cost

– Need to raise the financing – Financing of the development – Time needed for the development of the project


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– Bureaucracy is a very big risk • Problem of seasons risks for hydraulic – quality of resources data • Lack of appropriation of the project by the consumers:

– illegal connections, etc. (it is not specific to RE) – Lack of ownership by the consumers

• Country risks = > higher level of subvention • Poor customers mix • Complexity of financing model and sourcing

• Local currency presents a risk of exchange with foreign currency (of the

donors…) • Theft of PV panels

Workgroup 2

What are the key training needs for rural electrifi cation in the region – institutions/ private developers/ community based o rganisations?

Local Government

• Understanding legal framework • Responsibilities • RE development issues • Project prioritization (needs assessment) • Elicit support from government, donors etc

(including project proposals) • Project co-ordination (communities,

developers) • Environmental Impact Assessments

Ministry • Communications • Policy & planning • Rural development (multi sectoral knowledge) • Network economics, ops. & technology • Understanding of legal framework

Regulator • Understanding of legal framework • Tariffs setting & review – understanding

customers • Setting standards • Project cycle understanding • Arbitration skills

RE Agency

• Finance, technologies, business planning (business skills)

• Markets • Community engagement • Contract letting & management • Monitor contractor performance


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Workgroup 3

What are the environmental impacts of rural electri fication and how can the positive impacts be enhanced and promoted? Biomass IMPACTS Negative

Deforestation Land degradation and soil erosion Air pollution Loss of biodiversity Labour intensive Health issues

Positive

Carbon fixation Job creation Reforestation Waste management

MITIGATION/ENHANCEMENT Reforestation Reforestation Improved technology Regulatory measures, protection and regeneration Technology Improved and efficient appliances and awareness Carbon offsets and CDM Laws and regulation/ training and capacity building Policies to support Carbon offsets/CDM, laws and regulations n

Solar IMPACTS Negative Battery disposal Acid soil contamination Health and safety Theft Positive Clean Easy to operate No carbon emissions Job creation (technicians)

MITIGATION/ENHANCEMENT Recycling facilities Standards Education and training Protective devices/ social facilitation/ ownership Promote social acceptance Awareness Carbon offsets/ CDM Education and training and local participation

Diesel


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IMPACTS Negative Water, soil and air pollution Carbon emissions Sulphur and NOX Noise Dirty Fuel transportation Positive

MITIGATION/ENHANCEMENT Use and alternative technology or improve the efficiency and operation

Hydro

IMPACTS Negative Water, soil and air pollution Carbon emissions Sulphur and NOX Noise Dirty Fuel transportation Positive

MITIGATION/ENHANCEMENT Use and alternative technology or improve the efficiency and operation

Wind

IMPACTS Negative Impact on landscape/ visual intrusion Noise Interference with wildlife/ birds Disruption during construction (access roads) Loss of land Positive Clean No Carbon Emissions Limited land required

MITIGATION/ENHANCEMENT Planning and community participation Technology Regulation/Wildlife survey Planning Planning Carbon offset/CDM

Transmission Line


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IMPACTS Negative Deforestation Disruption during construction Positive

MITIGATION/ENHANCEMENT

Session 5.1 Workshop Discussion group outcome

Workgroup 1

1. What is the logic behind carbon financing? What are the technologies that have potential in Africa?

– CDM => project based – to reduce CO2 emissions – Certified Emission Reductions (CER) to be sold – Under Kyoto Protocol – Countries of annex 1 (northern countries) – based line – Executive board which approves the project

– Credit fund – similar principles but different rules – There are easier rules for small scale projects up to 15 MW or 15

000 t/y – It’s a carbon finance system: to be settled in the feasibility phase

(not in construction phase or after) – technologies that can benefit from CDM in RE: PV, hydro, wind,

biomass

2. What is the potential to support rural electrification in Africa? • CDM is not a development financing system • CF should not replace RE financing • RE should get all the support it can get including CF which can

come on top of RE financing (but transaction costs for small projects are too high)

3. What would be needed to improve CF in Africa?

• Normal CF projects are too expensive • Pooling of projects to share transaction costs (small and large)

(Example : UNDP MDG Carbon Facility) • All small scale Renewable Projects in Africa to be considered as a

group for CF? • Local capacity building needed in the countries (local authorities) • Local examples of best practices • Necessity of simplified methodologies (baselines) recognized by the

CDM executive board • To promote all projects to the DNA (Designated National Authority)

in each country before their international meeting in May in Germany


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Workgroup 2

Sharing Experiences

• Practical experience v. important – case studies are v. informative • Reliable data bank (including resource availability, current activities etc) –

maintained by Ministries? • Website – obvious but who will initiate/ develop/ maintain it? • Definition of what is RE – not commercially viable • ‘Trade organization’ for RE players? • Don’t invent new structures if possible • Calendar of events developed/ distributed annually • Exchange programs – between countries • Research institutions should be involved in exchange programs • Centers of excellence for particular technologies • Find donors willing to train countries in RE • Who will co-ordinate/ manage the exchanges?

• Link back to SADC • Data management within existing structures • ‘Legal’ framework necessary to ensure data is maintained • Funding necessary for facilitating exchange (travel etc) • Experience best shared face to face • Different platforms necessary – what is to be shared, how and where?

Workshops, website, exchange programs, inter-utility activities • Coordination is key to building on current level of activity • What is trying to be achieved through information exchange? • E7 involvement in order to facilitate development of appropriate

structures? • UPDEA need to be ‘sensitized’ to requirements of RE • Other stakeholders need to be sensitized also • Power Pools involvement?

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