Course on Regulation and Sustainable Energy in Developing Countries - Session 1

(Off-Grid) Rural Electrification
with Renewable Energies in Developing Countries

Leonardo Webinar 1st December 2011

Dr Xavier LEMAIRE, Research Associate
Sustainable Energy Regulation Network - REEEP
University College London – Energy Institute

Summary

 1. Status of rural electrification in developing
countries
 2. Various RE technologies for rural
electrification
 3. Emerging forms of rural decentralised
electrification
 4. Main features of an off-grid framework

Part 1. Current status

countries
 2. RE technologies for rural electrification
electrification

High disparity of non-electrification rate (2008)

Source: UNDP/WHO, 2009

Large part of the world in the dark

“The amount of electricity consumed in one day in all sub-Saharan
Africa, minus South Africa, is about equal to that consumed in New
York City” (Fatih Birol, IEA's chief economist)

Number of people without electricity will remain high…

Source: IEA/OCDE,2009

Why rural electrification is lagging in some part of the
world?

 (1) Historical reasons
 Ex-colonies – colonizer not interested in rural electrification

 (2) Demographic impact
 (3) Lack of financial resources
 (4) Lack of “political commitment”
 Rural inhabitants far from decision-makers!

 Bias in favour of limited extension of the grid
 Priority to urban areas
 Remote areas with low density: too costly/uncertain benefits

Vicious circle linked to financial situation of utilities

4. Priority 5. Lack of investment
power generation in urban areas in network and rural areas
Consumption subsidised Poor maintenance

1. Poor quality of service/pricing
3. Lack of financial return for electric companies Lack of control
Increase of consumption = increase of financial gap

2. Unauthorised
Connection
/
Low energy tariff
=
Non efficient energy appliances

Self-perpetuating logic

 Utilities tend “naturally” to focus on electrification of areas with high
density/high income where they can sale electricity produced with
conventional energy sources

 Utilities tend to ignore areas difficult to reach, where income can be very low
and electricity has to be produced by decentralised systems
 High operating costs / logistic difficulties
 Systems with RET out of their field of knowledge

 (Poor) regulation/ (weak) institutions and policies for centralised system
ignore small decentralised generation anyway
 Rural inhabitants “in the dark”
 OR unregulated electrification of remote areas by small private investors

 Privatisation/unbundling/transparency/tariff
  de-politicisation of the electricity sector?
 BUT economic barrier remains = rural electrification costly – private investors?

Rural electrification?

 Necessity:
 of a rural electrification policy !
 of a central institution to promote this policy & channel
funding
 of an (adapted) regulatory framework

 No fatalism
 Some countries have made spectacular progress in few
decades
 Mexico, Thailand, Bangladesh, Tunisia, China, South
Africa,…

Part 2. RE technologies in rural areas

countries
electrification & case studies

Hydro Power

 The technically feasible potential of hydro-electricity developing
part of the world:
 less than 7% in Africa exploited

 Around 22% in Asia exploited

 and 33% in Latin America exploited
(World Atlas of Hydropower and Dams, 2002).

 Furthermore, funding for hydro-electricity goes mainly, if not
exclusively, for large hydro-electricity.

 Class Station Capacity
 Micro Hydro Up to 100 KW
 Mini Hydro From 100 KW to 2 MW
 Small Hydro From 2 MW to 25 MW

Micro Hydro (100 kW Manali District - Himachal Pradesh)

Wind power

 Large generators (0.750 MW to 5 MW)
 Big players – emerging countries
 India: 14,5 GW installed in March 2011
 China: 40+ GW installed end 2010
 “Small” players in emerging/developing world
 Turkey, Brazil, Mexico, Egypt, Morocco, South Africa,

 Small generators (0.5 kW to 300 KW)
 Electricity with hybrid system (wind + hydro, wind + diesel)
 Or wind pump for water

Small wind generator in developing countries

 200kW in Sri Lanka  Wind pump in Guatemala

Biogas generation

 Produces gas
 Cooking/Heating
 China, India, Nepal,…
 + Generator = Electricity 0.4 kW to 700 KW

 Help to remove waste
 Reduce Green House Gas emissions

“Big” photovoltaic system 200 Wp

Pico-photovoltaic?

Source: Lighting Africa

Solar generation

 The Watt Power output of a Solar module is the number of Watts
Output when it is illuminated under standard conditions of 1000
Watts/meter2 intensity, 25°C ambient temperature and a spectrum
that relates to sunlight that has passed through the atmosphere (AM
or Air Mass 1.5).
 A 1 kWp system will produce 1 kW under ideal conditions

 Typical Solar Home System
 in Europe – 1 kW peak to several kW peak for households
 With 2kWp = 50% of electricity of an household in the UK (10+ K£)

 In a developing country :
 10 Watt peak to 150 Watt peak – light / TV
 Around 200 W peak – solar fridge
 Water pump one to several kW peak

PVGIS copyright European Commission 2001-2008 and HelioClim-1
copyright Mines ParisTech / Armines 2001-2008. Source:
/
http://www.soda-is.com/eng/map

Particular interest of solar
 Reduction of the cost / Wp of more than 80% since early 1980s of the solar
panels from the manufacturers to 2004, stable for few years then since
2008 another 60%.

 Current long-term growth rate of the photovoltaic market + 40%/year
 BUT photovoltaic panels only part of the cost (40/50%)
 against batteries (20%)
 and installation costs (40%)

 Cost decreasing but still quite high initial investment (350-1000 US$ for a 50
Wp system) if it has to be borne by end-users.

 Solar interesting in remote areas/scattered houses for low loads compared
to:
 Candles, paraffin - quality of light with PV is superior
 Diesel generators - mechanical parts and cost of fuel
 Connection to the grid - high costs of substation

How rural areas could benefit from new technologies?

Paradox of solar energy: in rural areas of developing countries
where it could be useful – solar remains expensive

Source: REN 21

Part 3. Emerging forms of decentralised
electrification

countries
electrification

Main barriers for rural electrification with RET?

 Diffusion of a new but now mature technology
 Technology-driven not sufficient  Needs a context
 Institutions and people
 Financing scheme
 Companies
 End-users
 Training / Knowledge scheme
 Companies / Utilities / Decision-makers
 End-users
 Financial institutions

 Sustainable market
 Market-driven  Stable & adapted regulatory framework

Toward a new generation of RET projects?
1) First generation of projects funded by aid
transfer of technology  passivity of receptors
 Renewable systems were given
 Not maintained by local beneficiaries of aid

2) New generation of projects
Energy just a technical problem?
 Social needs (not just kWh!)
 To provide a service (not just to sell & install a product)
 Maintenance of systems even if the cost is low has to be borne by the
end-users
 Clients selected according to their purchasing power
 Selection of local entrepreneurs
 Market-driven (and not just donor or technology-driven)
 Far larger scale than previous projects
 Economies of scale and density

How to design a rural electrification scheme…
 New actors for public-private partnership,
 private entrepreneurs, NGOs, cooperatives,…

 Overcome barriers of up-front costs
 Rural electrification  subsidies
 Access to diversified sources of funding
 Innovative financial scheme

 Reduce costs of installation & maintenance
 Local manufacturing
 Clear definition of who is responsible of systems and monitoring

 Find good combination conventional & new technologies
 Integrated energy services and not just promotion of one technology

 Long-term commitment of public authorities
 Stable regulatory framework

Source: World Bank/ESMAP, 2008.

Part 4. Main features of an off-grid framework

countries
electrification

A robust institutional framework
FUNCTIONS Regulation by the national electricity
regulator with a specialised
Defines rules for Function of department
competition: tariff for RE; OR
(integrated planning);
independent
Regulation by the government entity
standards regulator that provides installation subsidies
Operational measures
(energy surveys) and
funding/bundling (loans,
Rural electrification
grants) notably CDM
Control agency / fund
standards
Install, collect fees AND
guarantee functioning of and tariffs Control standards and
sustainable energy tariffs
systems
complaints

Variety of approach possible
for institutional design. But all
ESCOs ESCOs ESCOs
functions needs to be
covered and clear definition Same entity (or linked entities)
of who is responsible of what responsible for installation AND
Delegation / sub-contracting maintenance of a system
x x x x xxx x x xx x x x x xx xxx xx x xxx x xx end-users

Clear repartition of roles
 Functions/roles to be fulfilled
 <> creation of new departments not always needed.

 Reduction of costs for end-users and funding agencies
 Off-grid regulation
 Regulation can be sub-contracted to rural electrification agency
(expertise)
 Rural electrification plan and strategy
 Organisations capable of evaluating local needs
 Sub-contracted to NGOs/close supervision of rural electrification
agency
 Evaluation & feed-back
 Need to monitor and evaluate the scheme ex-post
 Delegated/subcontracted to consultants
 End-users can nominate a delegate

Appropriate regulation for off-grid

 Light-handed approach

 Protection of consumer

 Adapted standards

 Importance of correct tariff setting

Light-handed regulation?
 Regulation often adapted first and foremost to
conventional utilities

 Avoid over-regulation:
 Regulation of small utilities <> large utilities
 Licensing procedures & control shall be adapted to small
operators
 Over-regulation = no regulation (illegality)

 Protect small operators against encroachment
/expansion of grid by large utilities or give them
financial compensation

Case of Bolivia: Recognition of the impossibility of
implementing conventional regulation*
Before 2000, all operators of isolated village mini-grids above 300kW installed generating capacity
were required to acquire concessions

BUT
 Concessions could only be granted to entities that were shareholder companies /
2/3 of mini-grids operated by cooperatives
 The reporting requirement and technical standards were too costly to satisfy by small
cooperatives
 Better to have light regulation than to have multiple unlicensed operators (safety,…)

Partial intermediate solution
 Raise the threshold of regulation to 500 kW peak demand
 Allow cooperatives to maintain their legal status for an initial period of 7 years
 Discussion to lower reporting and technical requirements for all mini-grids with less than 2,000 users.

Proposed final regulation
 Systems above 1 MW
 Regulated as before
 Systems between 300kW and 1 MW
 Fewer reporting requirement and less stringent service standards
 Systems under 300 kW
 No obligation for operators except to register themselves and provide a yearly update of basic information

* Working paper from ESMAP/World Bank, 2006.

Role of regulator – protection of consumer

 Communication / public awareness
 Control of level of expectations of end-users
 What RE can do and cannot do

 Energy efficiency measures
 RE implies energy efficiency

 Complaints of end-users
 In rural areas, end-users are isolated
 Channel of information?
 Rural companies can abuse their power
 Revoke license?

Role of regulators - standards

 Standards have a cost
 High standards = high costs
 Compromise - what is really needed

 Regulators can refer to already existing standards for materials in other countries:
 photovoltaic
 solar heater installations

 Regulation of the market has a tremendous impact for limited cost
 Avoid sub-standards products or installation
 Guarantee consumer satisfaction

 Important to monitor / regulate effectively the market
 Periodic control
 Staff specialised on rural electrification
 Specialised department of the regulatory body
 Or can be left to the rural electrification agency
 Or subcontracted (regulation by contract)

 Awareness and training are fundamental part
 Regulators, technicians, end-users
 Get local institutions involved (universities, NGOs,…)

Role of regulator: tariff setting
 Kind of tariff
 Flat tariff for individual systems
 Metering systems when connected to collective central system

 Offer: importance of cost recovery for sustainability of business
 Operating costs of utilities
 Needs to be covered ! public subsidies for investment costs only !
 Importance of creation of provision/batteries fund for solar
 Part of capital costs?
 If tariff covers part of capital cost, utilities can expand to new customers
 If not, continuous public subsidies are needed for expansion
 Subsidies = the ones given for grid-connection

 Demand: tariff that can be afforded by end-users
 Survey of structure of incomes
 % of the inhabitants of an area to be reached

 Procedure for annual revision
 High inflation rate in some countries
 Rate of exchange / US dollar (imported components)
 Capacity of payment of end-users

Central role of rural electrification agency

 Integrated planning
 Energy surveys
 Socio-economic comparisons

 (Regulation)
 Tariff
 Standards and codes of practices

 Funding
 Interlocutor of international agencies
 Bundling small scale projects (Clean Development Mechanisms)

 Monitoring and evaluation

  Rural agencies
 Central interlocutor of local utilities (and end-users)
 Importance of permanent trained and dedicated staff
 Importance of financial resources – own budget
 Operating autonomy with rural electrification as primary objective

Appropriate planning & design system

 Design local generation and distribution system
 Comparisons
 Cost RE technology
 Cost hybrid system
 Cost connection to the grid

 Least cost planning (not just energy supply)
 Energy efficiency and demand-side management

 Lifetime of the project: 20/30 years
 Rising operating costs and risk linked to conventional energies

 Increase of the demand
 Demography

 Future extension of the grid?
 What is planned by the utility

Technology neutral:
combination of various technologies
 Technology neutral with an “optimal” combination of:
 Centralised systems – grid / Decentralised / mini-grid systems / Individual systems
 Market open to new entrants with new technologies Not just one source of energy, but a combination of
energies

* Electricity
When available: small hydro / wind / biomass / geothermal
Otherwise solar photovoltaic
 Intensity of solar radiation (5-6 kWh/m2)
 Low density of population in some areas
 Flexibility of the investment
+ diesel generation as a complement (for productive use) and not necessarily main source:
 High operational costs / difficulty of supply of fuel and repair mechanical parts in remote areas
 Rising costs of energy & risk
* Heat / cooking
 LPG, biomass, SWH, solar cooking,…

 Individual needs / productive use – precise evaluation of energy needs
  fees and income generated locally, spatial location of energy needs
 SHS ideal for basic needs: light, radio, TV, mobile phone
 Solar for use with low loads: solar pump, schools, health centres…
 Other energies / small grid for productive use

Combination of mini-grid & individual systems

Minimum costs
= mini grid for
78 HH and
individual solar
home systems
for 22 HH

Source: WordPower, 2000

Long term comparison of total costs (case PV)
High
investment
costs
High operating costs

Low investment $
costs = genset
Low operating costs
$

batteries
Long-term integrated comparisons
Life cycle costing

N+20 or even N+30 N+20 or even N+30
Diesel systems Solar Home Systems

Implement institutions to solve the questions of high
investment costs in rural areas and long-term maintenance

1. Support mechanisms to reduce
$
up-front costs / creation of rural
funding agencies (subsidies,
integrated planning) Reduction of up front
2. Creation of organisations to costs of RET
spread the up-front costs and
maintain systems
Spread RET up front
- “Banks”: Micro-credit / revolving costs
credit / loan
- Utilities: Fee for service / ESCOs,…
N+20

Rural energy service companies

 Deliver an energy service
 Electricity (SHS or hybrid)
 Heat/cooking (LPG – Liquefied Petroleum Gas, biogas)

 May diversify to other services / products
 Water? Solar water heaters
 But then increase complexity of management

 Existing structure or new enterprises?
 Add activities to consolidate electrification business
 Synergies: LPG, Solar water heaters,…
 Specialisation on core activities

 Long-term financial sustainability
 Branch of a major company
 Independent enterprise

Elements of conclusion
 New institutions / new way of thinking

 Market-driven (and not just donor-driven)

 Training is crucial (at every level)

 Focusing on sustainability in the long term of delivery of energy services (and not just kWh)
 Appropriate level of financing of the operators
 Maintenance of the energy systems
 Long-term homogenous & stable regulatory framework

 … with regulation adapted to new actors
 Adapted to small companies = introduce new actors
 Limit the power market of existing utilities
 Rural electrification depoliticised (independence and transparency)

 … framed by a real energy strategy/policy
 Long-term commitment of the government
 Energy + industrial policy + local development
Nurse a market = create jobs locally and nationally + local expertise

References to go further

 Electrification and Regulation: Principles and a Model Law Discussion
Paper No. 18 by Kilian Reiche, Bernard Tenenbaum, and Clemencia Torres
de Mästle. World Bank, Energy and Mining Sector Board, July 2006. World
Bank
http://siteresources.worldbank.org/INTENERGY/Resources/EnergyPaper18.
pdf

 Comparative Study on Rural Electrification Policies in Emerging countries,
Keys to Successful Policies, by Alexandra Niez, OECD, 2010.

 Rural Electrification in the Developing World: A Summary of Lessons from
Successful Programs, by Douglas Barnes and Gerard Foley, Esmap –
World Bank, 2004.

 Douglas B. (Ed.), 2007. The Challenge of Rural Electrification – Strategies
for Developing Countries, Resources for the Future – ESMAP.

Contact

 University College London -Energy Institute. Central House - 14
Upper Woburn Place London WC1H 0NN United Kingdom
 Xavier.Lemaire@reeep.org

 REEEP - Sustainable Energy Regulation Network
 http://www.reeep.org/830/sern.htm

Course on Regulation and Sustainable Energy in Developing Countries - Session 1

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