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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No: 48347-RW
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED GRANT
FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND
IN THE AMOUNT OF US$ 4.5 MILLION
TO THE
GOVERNMENT OF RWANDA FOR A
RWANDA SUSTAINABLE ENERGY DEVELOPMENT PROJECT
September 18, 2009
Africa Energy Group Sustainable Development Department Eastern Africa Country Cluster II Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective April 30,2009)
AfDB BADEA BTC CAS CEDP CFR DRC DSM EC EDPRS RECO E W A FMR GEBs GEF GOR GTZ
GWh HFO IBRD ICB ICT IDA KIST kV kWh LPG LV MinaLoc MinInfra Minisante MiniTerre MV M W
Currency Unit = Rwandan Franc US$1 = RwF568.33
US$ 1 = SDR0.67199785
FISCAL YEAR July 1 - June 30 (starting July 1,2009)
ABBREVIATIONS AND ACRONYMS African Development Bank Arab Bank for Economic Development Belgian Technical Cooperation Country Assistance Strategy Competitiveness and Enterprise Development Project Country Framework Report Democratic Republic o f Congo Demand Side Management European Commission Economic Development and Poverty Reduction Strategy Energy and Water Authority Financial Monitoring Report Global Environment Benefits Global Environment Facility Government o f Rwanda Gesellschaft fiir Technische Zusammenarbeit (Corporation for Technical Cooperation - Germany) Gigawatt Hours Heavy Fuel Oi l International Bank for Reconstruction and Development International Competitive Bidding Information, Communications, & Telecommunications International Development Association Kigali Institute o f Science and Technology Ki lo Volt Kilowatt Hour Liquid Petroleum Gas Low Voltage Ministry o f Local Government Ministry o f Infrastructure Ministry o f Health Ministry o f Lands, Environmental Protection, Water, and Natural Resources Medium Voltage Megawatt
FOR OFFICIAL USE ONLY
NDF NEAP OD OP OPEC PCU PEPFAR PPA PPIAF PRSP PRSC/G RECO RET PV R U M RWASCO SBD SEDP Sida S IL Sinelac
SNEL S S M SWAP SHS SWH TA TBIF
UERP UNIDO
Nordic Development Fund National Electricity Access Program Operational Directive Operational Procedure Organization o f Petroleum Exporting Countries Project Coordination Unit President's Emergency Project For Aids Relief Power Purchase Agreement Public Private Infrastructure Advisory Facility Poverty Reduction Strategy Paper Poverty Reduction Support CrediUGrant Rwanda Electricity Corporation Renewable Energy Technology Photovoltaics Rwanda Utility Regulatory Authority Rwanda Water and Sanitation Corporation Standard Bidding Documents Sustainable Energy Development Project Swedish International Development Agency Specific Investment Loan SociCtC Internationale des Pays des Grands Lacs (Regional Electricity Company of the Great Lakes) SociCtC National d'E1CctrcitC (National Electricity Company ofDRC) Supply Side Management Sector Wide Approach Solar Home System Solar Water Heater Technical Assistance Technology & Business Incubation Facility (to support renewable energy enterprises) Urgent Electricity Rehabilitation Project United Nations Industrial Development Organization
Vice President: Obiageli Katryn Ezekwesili Country Director: Johannes Zutt
Sector Director: Inger Andersen Sector Manager: S. Vijay Iyer
Task Team Leader: Erik Fernstrom
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
RWANDA Sustainable Energy Development Project
CONTENTS
Page
STRATEGIC CONTEXT AND RATIONALE .................................................................. 1
Country and sector issues .................................................................................................... 1 Rationale for Bank involvement ........................................................................................... 4
Higher level objectives to which the project contributes .................................................... 6
PROJECT DESCRIPTION ................................................................................................. 6
Lending instrument.. ........................................................................................................... -6
Project development objective and key indicators .............................................................. 7 Project components.. ............................................................................................................ 8
Lessons learned and reflected in the project design .......................................................... 10
Alternatives considered and reasons for rejection ............................................................ -11
IMPLEMENTATION ....................................................................................................... 12
Partnership arrangements .................................................................................................. 12 Institutional and implementation arrangements ................................................................ 13 Monitoring and evaluation o f outcomeshesults ................................................................ 13
Sustainability and Replicability ......................................................................................... 14
Critical risks and possible controversial aspects ............................................................... 14 Loadcredit conditions and covenants ............................................................................... 15
APPRAISAL SUMMARY ................................................................................................ 15
Economic and financial analyses - Incremental cost analysis ........................................... 15 Technical ........................................................................................................................... 16
Fiduciary.. .......................................................................................................................... 16
Social ................................................................................................................................ -17
Environment ...................................................................................................................... 18
Safeguard policies .............................................................................................................. 18
Policy Exceptions and Readiness ...................................................................................... 19
. .
A . 1 . 2 . 3 . B . 1 . 2 . 3 . 4 . 5 . C . 1 . 2 . 3 . 4 . 5 . 6 .
D . 1 . 2 . 3 . 4 . 5 . 6 . 7 . Annex 1: Country and Sector Background ................................................................................ 20
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...................... 3 1
Annex 3: Results Framework and Monitoring .......................................................................... 33
Annex 4: Detailed Project Description ...................................................................................... 39
Annex 5: Project Costs .............................................................................................................. 46
Annex 6: Implementation Arrangements .................................................................................. 47
Annex 7: Financial Management and Disbursement Arrangements ........................................ -49
Annex 8: Procurement Arrangements ....................................................................................... 59
Annex 9: Incremental Cost Analysis ......................................................................................... 66
Annex 10: Safeguard Policy Issues ........................................................................................... 78
Annex 1 1 : Project Preparation and Supervision ........................................................................ 83
Annex 12: Documents in the Project File .................................................................................. 84
Annex 13: Statement o f Loans and Credits ............................................................................... 85
Annex 14: Country at a Glance: ............................................................................................... -86
Annex 15: Maps ........................................................................................................................ 88
RWANDA
RW: SUSTAINABLE ENERGY DEVELOPMENT PROJECT (GEF)
PROJECT APPRAISAL DOCUMENT
AFRICA
AFTEG
Date: September 18,2009 Country Director: Johannes C.M. Zutt Sector ManagerAIirector: Subramaniam V. Iyer Project ID: PO978 18 Focal Area: Climate change Environmental Assessment: Partial Assessment Lending Instrument: Specific Investment Loan
Team Leader: Erik Magnus Fernstrom Sectors: Renewable energy (70%); General energy sector (30%) Themes: Climate change (P);Rural services and infrastructure ( S )
Project Financing Data [ ]Loan [ ] Credit [XI Grant [ 3 Guarantee [ 3 Other:
For Loans/Credits/Others: Total Bank financing (US$m.): 0.00
Total: 1 S O 6.80 8.30
Borrower: Republic o f Rwanda
Responsible Agency: Rwanda Electricity Corporation (RECO) B.P. 537 Rwanda Tel: 250-573666 Fax: 250-72976
lCumulativel 0.50 I 1.50 I 3.00 I 4.50 I I I I I
Project implementation period: Start December 3 1 2009; End: December 3 1 20 13 Expected effectiveness date: December 3 1 2009 Expected closing date: January 3 1,201 4 Does the project depart from the CAS in content or other significant respects? Re$ PAD I.C. Does the project require any exceptions from Bank policies? Re$ PAD IKG.
I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD III.E. Does the project meet the Regional criteria for readiness for implementation? Re$ PAD IKG. Project development objective Re$ PAD II.C., Technical Annex 3 The overall goal o f the project i s to strengthen and consolidate the Rwandan Renewable Energy market. The PDO for SEDP is:
[ No
[ ]Yes [XINO
[ ]Yes [XINO
[ ]Yes [XINO
[XIYes [ ] N o
Have these been approved by Bank management? [ ]Yes IN0
1.
2.
Improve policy and institutional framework o f the Renewable Energy and Energy
Increase Private sector Participation in the Renewable Energy Sector efficiency sub-sectors
Global Environment objective Re$ PAD ZI.C., Technical Annex 3 The project’s global environmental objective i s to achieve greenhouse gas reductions through use o f renewable energy technologies as well as through increased end-efficiency in the energy sector.
Project description [one-sentence summary of each component] Re$ PAD II.D., Technical Annex 4 The Project scope consists o f five sub-components;
Component A: Strengthening o f Renewable Energy Policy, Strategy and Management- addresses the execution o f policies into strategies and projects.
Component B: Efficient utilization o f biomass resources - addresses the unsustainable use o f firewood and charcoal as demand i s outgrowing supply threatening scarce natural resources and biodiversity.
Component C: Sustainable development o f micro hydro resources - The scope o f the component i s to provide transparent market regulation and guidelines to facilitate small distributed power production and distribution services while building local private sector capacity that can plan, design, implement and operate the plants.
Component D: Solar Energy- focuses on three core measures: 1) Developing national standards for institutional PV applications, 2) Building capacity and conducive frameworks to allow local private f i r m s to participate in international tendering for the Rwandan market, 3) developing a commercial SHS (solar Home System) market for rural areas. The project will also provide initial support to develop the market for solar water heaters (SWH) in Rwanda.
Component E: Energy efficiency and demand side management (DSM) - Will focus on reducing the technical losses in the RECO (formerly Electrogaz) grid, and energy efficiency in larger buildings.
Which safeguard policies are triggered, if any? Re$ PAD I K F . , Technical Annex 10 The GEF funded investments will support investments in micro/mini-hydro systems, efficient charcoaling and stove technologies and solar energy from Thermal (Le. Water Heating) and photovoltaics. These investments are expected to have overall positive social impacts, simply because increased access to reliable power services facilitate improvements in health and education facilities, agricultural processing, employment creation opportunities, etc. Potential negative social impacts are expected to be small, but will not be ignored. These are primarily associated with temporary and permanent use o f small areas o f land for the investments the project will support, for which land acquisition or resettlement o f Project Affected Persons or relocation o f their places o f livelihood may be necessary. Such activities trigger O.P. 4.01 Environmental Assessment and O.P. 4.12 Involuntary Resettlement. The requisite safeguards instruments are an Environmental and Social Management Framework and a Resettlement Policy Framework. These have been disclosed at the World Bank Infoshop and in country.
Significant, non-standard conditions, if any, for: Re$ PAD III. F. Board presentation: Loadcredit effectiveness:
(a) The Subsidiary Agreement has been executed o n behalf o f the Recipient and the Project Implementing Entity.
(b) The Clean Energy Investment Framework Trust Fund Grant Agreement has been executed and delivered and al l conditions precedent to its effectiveness or to the right o f the Recipient to make withdrawals under it (other than the effectiveness o f this Agreement) have been h l f i l led.
(c) The Program Management Directorate has been established by the Project Implementing Entity.
(d) The Project Implementation Manual has been adopted by the Project Implementing Entity.
The Project Implementing Entity to second an accountant to the Program Management Directorate.
Appointment by RECO o f satisfactory external financial auditors within a month o f credit effectiveness.
Covenants applicable to project implementation: None
A. STRATEGIC CONTEXT AND RATIONALE
1. C o u n t r y and sector issues
1. Rwanda i s a small, landlocked country in the Great Lakes region o f Africa, bordered by the Democratic Republic o f the Congo (DRC), Burundi, Tanzania and Uganda. Total land area i s about 24,950 sq. km., and inland lakes cover about 1,390 sq. km. The terrain i s mostly hilly and mountainous, with grassy uplands.
2. Rwanda was ravaged by civil war and genocide in the early 199Os, followed by border wars that finally ended in 2002-3. The domestic population has fluctuated considerably due to genocide and migrations associated with conflict. It i s currently estimated to be about 9.7 million (2007). Habitation patterns have also changed considerably - over the last decade Kigali, the capital city, has grown from around 300,000 to close to 1 million, and new rural agglomerations known as “Imidugudus” are emerging. At more than 320 people per square kilometer, the aggregate population density i s among the highest in the world. Natural population growth rate - i.e., apart from return o f the refugees - i s high at 3 percent p.a., and l i fe expectancy at birth i s s t i l l only about 46 years.
3. Rwanda i s largely an agricultural economy with small-holder farming and some commercial agriculture (tea, coffee being privatized). Agriculture accounts for about 3 5 percent o f GDP, though up to 50 percent o f the fanners do not effectively participate in the exchange economy. The manufacturing sector comprises o f a few enterprises in small-scale industry - agro-processing, brewery, textiles, mining, sugar, and cement.
4. Overall, the business environment i s s t i l l weak, and specialized institutions to support private sector development - e.g., Investment Promotion Agency, Arbitration Center, Private Sector Federation, SME Promotion Center, and the Utility Regulatory Agency - are s t i l l in e&ly stages o f development. The pace o f reform has increased during 2007-08 and i s reflected in the improvement in overall ranking for Rwanda from 148 in 2007 to 139 in 2008 on the Doing Business ranking carried out by the World Bank’. Rwanda was also deemed to be among the 10 fastest reforming countries among the 18 1 nations scrutinized in the report.
5. During the last years Rwanda has made considerable gains on a number o f focus areas. Primary school enrollment has risen sharply to a point where the government i s now focusing on quality o f the education rather than quantity. Access to health insurance was scaled up from 7 to 75 percent o f the population between 2003 and 2008, leading to increased use o f health services. Through the GoR program to extend water supply services, 65 percent o f Rwandans now have access to an improved Water source.
6. However despite the gains in social services growth has slowed. In the aftermath o f the genocide and associated conflicts (1996-2000), real GDP grew at over 10 percent per year as the economy recovered from a low base. After a decade o f economic and political stability, this post- conflict economic growth recovery effect was temporarily wearing off. GDP growth was in the range o f 4-6 percent during the period 2004-06. Estimates are that the economy grew by 8.5
See http://www,doingbusiness.org/economyrankings/
1
percent in 2008, fueled, in large part, by a strong recovery in agriculture, which grew by nearly 15 percent, with the ongoing expansion o f the crop intensification program (CIP). This contrasts with the 7.9 percent growth that occurred in 2007 which was driven by growth in the services and manufacturing sectors; agricultural output expanded by just less than 1 percent in 2007 due mainly to poor weather conditions which also contributed to a 50 percent decline in coffee output. Growth rates need remain in the range o f 4 to 6 percent in the long term, to meet the GoR's 2020 poverty reduction targets. The GoR's medium term outlook i s for real GDP growth to be maintained at 6 percent with economic growth being driven by increased productivity in the agricultural and services sectors, accompanied by strong public and private sector investment activity.
7. Infrastructure bottlenecks in the urban areas and limited access in the rural areas have emerged as a significant constraint to continuing economic growth and human capital development. In the 2008 Investment Climate Assessment survey carried out by the World Bank 340 Rwandan private enterprises identified Infrastructure, or the lack o f it, as the primary barrier to growth with the quality o f Electricity, Transportation and Telecom services all among the top 10 constraints.
8. Small and fragile modern energy sector: Most o f the energy consumption i s in the form o f wood fuels; the modern energy sector i s very small - consisting o f about 55 M W o f peak electricity demand on the national utility, Rwanda Electricity Corporation (RECO, formerly Electrogaz) and about 182,000 cubic meters o f o i l products consumption. A majority o f the consumption o f hydrocarbons stems from the transport and industrial sectors but the Electricity sector has rapidly increased i t s share o f the petroleum imports as thermal generation had to be expanded following the 2004-2005 energy crisis. So far, the majority o f electricity supplies to Rwanda i s generated from hydroelectric power produced domestically and imports from Socie'te' Internationale des Pays des Grands Lacs (Sinelac) - an electricity company owned jointly by Burundi and the Democratic Republic o f Congo (DRC) - as well as from Socie'te' National d'Ele'ctrcite' (SNEL), the national electricity company in DRC. In 2005 the government moved to sign a rental agreement to add 10 MW (later an additional 5MW) o f diesel rental power to stem the power supply deficit while the longer term investments are being put in place. The temporary rental diesel generators are expected to be phased out as the Government i s expected to take into service the IDA financed Jabana 20MW HFO Power Station (on l ine since May 2009). The government i s also developing another 37.5 M W o f new grid connected hydro. These include Rukarara Hydro Power station (9.5 MW, early 2010), and Nyabarongo Hydro Power station (27.5 MW, 2012). In addition, following development o f the Lake Kivu Methane Gas resource Pilot plant producing 1.8 MW since October 2008, the GOR recently signed a power purchase agreement with a private sponsor, Contour Global, to develop 100 M W o f electricity generation in two phases. The first 25 M W plant may be in operation by early 201 1.
9. Per capita consumption o f electricity and o i l products i s among the lowest in the world and low even in comparison to neighboring countries, mainly due to the low electricity access and limited industrial production. In addition to high inland transport costs from Eldoret or even Mombasa, o i l products imports are also subject to various duties and taxes, so that on average, retail prices o f petroleum products are about 100 percent higher than acquisition costs f.0.b. main supply sources (e.g., Arab Gulf markets). Development o f Rwanda's energy resources - additional hydroelectricity, natural gas dissolved in Lake Kivu, peat, geothermal, solar - has
2
been constrained by small market size, lack o f financing and an inadequate institutional framework. ’
10. High costs o f thermal power generation to meet the supply gap: In the near term, Rwanda will increasingly have to rely o n higher-cost thermal power, to reduce the supply/demand gap. The dependency on rental diesel capacity has already resulted in Rwanda having one o f the highest tariffs in Sub-Saharan Afr ica at -21 USckWh’ (+ VAT). To stem the increasing cost o f diesel fuel, GoR is in addition subsidizing the RECO operations by approximately U S D 1 mi l l ion per month and is offering a tax and duties exemption o n imported diesel fuels. The subsidies are expected to be phased out during 2009 when the Jabana 2 0 M W plant is fully operational.
1 1. Renewable energy development: Renewable energy sources and technologies are s t i l l an untapped potential in Rwanda. Although optimal utilization o f locally available renewable energy resources and efficient end-use will help Rwanda alleviate the current supply gap and minimize i t s dependency o n costly fue l imports, it is the benefit for rural, non-grid areas that constitutes the prime driver. Donor-driven projects and financing have increased in this area during the last decade but interventions remain scattered and largely outside o f the national energy planning process and government efforts have only recently taken off. The level o f local capacity in the area o f renewable energy also remains l o w both in the public as wel l as private sector. This project proposes to mainstream renewable energy within the national energy planning process and support renewable energy market development. O f particular and immediate interest to the government i s the development three Renewable Energy Technologies (RETs): solar and hydro resources minimizing the need for diesel fired thermal generation, as wel l as improving the efficiency o f the use o f traditional fuels. The challenge for al l three RETs is to find sustainable solutions that fit the Rwandan context and will operate under local conditions. Solar irradiation i s abundant but the Rwandan solar market i s very small and mainly limited to the ‘project’ market driven by donor funding. Micro-hydro, after many years o f neglect, has recently received considerable attention in Rwanda and a number o f projects are in pipeline. The use o f traditional fuels, such as biomass, has accelerated due to increased population and urbanization reaching unsustainable levels, with deforestation and soil deterioration as a result. The task at hand i s to build functioning energy markets for a l l three RETs integrating private sector actors at an optimal extent by providing incentives and regulatory frameworks.
12. Limited access to electricity constrains broad-based welfare gains: RECO (formerly Electrogaz) has only approximately 110,000 customers and barely about 6 percent o f the households have access to electricity, almost entirely in the urban areas. Kigal i alone accounts for about 2/3‘d o f the total number o f customers and total demand o f electricity. Grid extension beyond the urban areas has been extremely limited. About 2 1 isolated micro-hydro plants existed before the 1994 genocide, but only a few have survived. The need has been recognized by the GoR and the donor community and several programs funded by bilateral partners are underway to rehabilitate existing sites and develop new opportunities identified in the recently competed Rwanda Hydro atlas. However, to reap the long-term benefits o f the revival o f the Micro-Hydro development agenda, there is an urgent need for clearly established frameworks to set a level
’ U S Dollar charge per Kilowatt Hour.
3
playing f ield for small electricity operators including O&M guidelines, standardized PPAs and transparent pricing for bulk supply.
13. Rapid urbanization and industrial demands add the pressure on wood fuel supply systems: Wood and charcoal remain the most significant - and often the only - fuels available to households and the productive sectors o f the economy. Urbanization and industrial growth - combined with l imited access to electricity and high cost o f petroleum products - have led to a rapidly accelerating growth in urban charcoal demand. The use o f wood fue l i s unsustainable for several reasons. First, severe deforestation during the conflict periods, in part by internally displaced persons and returning refugees, but also the failure o f reforestation programs o f the 1970s and 1980s that have essentially halted and need to be revived. Second, large-scale demands for charcoal-making, construction materials, and agro-industrial, institutional and commercial customers also contribute to the ‘overuse’ o f wood-based resources.
14. Third, the inefficiency o f the charcoal value chain leads to unnecessary depletion o f wood resources. The high cost adds to the increase o f end-user charcoal prices both in real and nominal terms. The number o f middlemen and increasing distances for large-scale movement o f wood and charcoal supplies are contributing factors. In response to a perceived wood fuel shortage, the GoR has issued decrees strictly regulating the use o f wood, further escalating charcoal prices as there are few substitutes in the market. There are recent indications that private woodlots, using planted fast growing eucalyptus, are providing an increasing part o f the wood fuel to the Rwandan market, including wood for charcoal making3.
15. Sector reforms have accelerated, though much remains to be done: During the last years fol lowing the energy crisis, progress has been made to establish the legal and regulatory frameworks for the energy sector, safeguarding the rights o f consumers and a new breed o f small-scale operators emerging in rural areas. A multi-sectoral Rwanda Utility Regulatory Agency (RURA) has been established, and key staff has been recruited. R U M is receiving start-up support through the IDA financed Competitiveness and Enterprise Development Project (CEDP) and the’UERP but has yet gain sufficient experience to fully carry out its mandate. N e w Electricity and Gas laws clearly delineating the role o f the private sector, government and the utility regulator are expected to be approved by parliament during 2009.
2. Rationale for Bank involvement
16. As the largest donor in the sector, the IDA project portfolio constitutes a cornerstone o f the sector investment plan in areas where private sector financing is not available (i.e. transmission and distribution).
The ongoing IDA financed Urgent Electricity Rehabilitation Project (UEW) has been instrumental in supporting the sector turn-around that the proposed project is building on. The UERP has funded key TA support, such as the new Electricity and Gas laws, as wel l as investments to diversify power generation resources and rehabilitate priority grid infrastructure including a new main substation for the capital Kigali.
~~
BEST, 2008
4
0 Electricity Access Scale-up and Sector-wide Approach (SWAP) Development Project (FY09): The GoR has designated, and Donors have endorsed the Bank’s role as the lead donor in the energy sector, as well as the “donor representative” o f the energy sector cluster and Sector Working Group, formalized in the signed Energy SWAP M O U July 2008. Under this framework the Bank assisted GoR to prepare a National Electricity Access Program (NEAP) to triple access to electricity services in only 4 years. The cost o f the program has been estimated at USD 377 million o f which IDA will be contributing USD 70 million focusing on grid extension in urban and peri-urban areas.
17. dialogue and technical assistance in the following areas:
The Bank program also supports the energy sector through ongoing policy reform
0 PRSG series supports reform o f the energy sector through policy dialogue.
Technical assistance and transaction advisory support for Nyabarongo hydro power plant, and Lake Kivu methane gas.
18. Rationale for GEF funding: World Bank/GEF involvement, as outlined in the SED project, i s highly complementary to the Banks existing and future energy portfolio as it provides the ability to balance the activities focusing on grid extension with strong strategic and technical support to the emerging off-grid and renewable energy sector dominated by SMEs and community operated schemes.
19. The main rationale for project support i s to complement existing and on-going investment in the renewable energy sector in a synergistic manner by a distinct emphasis on technical assistance (TA) that contributes to sustainability in the sector. Hence, the project aims to safeguard sustainability o f the GoR’s existing and future Renewable Energy (RE) portfolio (investments) financed either by the Government o f Rwanda or in partnership with donor agencies. The project intends to strengthen these by adding synergistic activities that focus on long-term sustainability and to improve the capacity o f local companies and organizations. The GEF components will concentrate on identified windows o f opportunity complementary to existing activities thus significantly leveraging the current RE program with the core emphasis to accelerate the integration o f local private sector into the planning process and implementation o f renewable energy projects.
20. The GEF inputs are essential for transforming the energy system in a sustainable way by bringing in components that are sparsely addressed in national programs and other donor-funded
.programs. The approach i s to create a transparent base for the private sector by establishing a regulatory framework that provides clear guidelines for investors paired with initial added incentives through temporary tax refundshbsidies. In order to develop a competitive commercial market, the number o f entrants must pick up in all sub-sectors as in most there are only a handful companies. An additional requirement i s to upgrade competencies at all levels; organizational, technical, and marketing.
21. To conclude, the GEF involvement in this project would help the Government in mainstreaming renewable energy development within the national Energy-S WAp,
5
complementing the efforts made on grid extension, through the proposed IDA financed Electricity Access Scale-up and SWAP Development project (EASP), to reach rural growth centers where grid connection i s not economically viable. In addition, GEF support would be instrumental in mainstreaming energy efficiency/DSM capacity within the electric and water uti l i t ies in Rwanda further minimizing Rwanda’s costly dependence on thermal generation based on imported fuels.
3. Higher level objectives to which the project contributes
22. Economic transformation to create employment and generate exports i s one o f the three flagship programs called for in GoRs Economic Development and Poverty Reduction Strategy (EDPRS 2008-2012). Within th is flagship program, a key priority i s rapidly expanding access while also improving the quality o f and lowering the cost o f economic infrastructure - especially transport, power, and communications. The current CAS for Rwanda4 i s closely aligned with national priorities and budget framework. It focuses Bank engagement in support o f Rwanda’s four year medium-term development framework (EDPRS) - primarily in activating new drivers o f growth that can be sustained over time. The CAS primary objective to which the project contributes i s ‘promoting sustainable growth and private sector development,’ The project will contribute to this objective through (i) providing incentives for private sector investment in renewable domestic power resources such solar and hydro for expanding access beyond the grid; (ii) increasing the efficiency o f Biomass usage for household energy uses and; (iii) building capacity in the area o f utility and institutional Demand Side Management (DSM).
B. PROJECT DESCRIPTION
1. Lending instrument
23. The proposed lending instrument will be a 4-year Specific Investment Loan’ (SIL) financed by a USD4.5 million dollar GEF Grant co-financed (j’oint) by complementary grant financing o f USD3.8 million from the AFREA-TF (Africa Renewable Energy Access Trust Fund)’ provided by the CEIF MDTF access window donated by the government o f the Netherlands. Other co-financing (parallel) includes USDl.8 million from the IDA supported UERP, USD11.88 million from the European Commission (EC), USD4.2 million from the DutcWGTZ, USD21.36 mill ion from government o f Belgium, USD21.77 mill ion from Government o f Rwanda and USDl.95 mill ion leveraged from the private sector. The duration o f the project i s 4 years.
covering the period 2009-2012 and presented to the Board on September 25,2008 The S I L i s financed exclusively by grant financing to Government o f Rwanda. The AFREA program i s managed by AFTEG and funded through a contribution from the Government o f the
Netherlands to the ESMAP CEIF (Clean Energy Investment Framework) Multi Donor Trust Fund
6
2. Project development objective and key indicators
Project Development Objective
24. Energy market. The PDO for SEDP is :
The overall goal o f the project i s to strengthen and consolidate the Rwandan Renewable
1. Improve policy and institutional framework o f the Renewable Energy and Energy Efficiency sub-sectors
2. Increase Private sector participation in the Renewable Energy Sector
25. To achieve the PDO the project will work in the areas o f Biomass, Micro-Hydro plants, Solar Energy and Energy Efficiency. The main target group i s the private sector operating in renewable energy sectors but also institutions supporting such development as sector associations, NGOs, financial institutes, and relevant ministries.
26. The SEDP was developed under GEF-3 set o f priorities, especially OPs 5 and 6. Although this was the starting point, the project i s l ine with the GEF-4 overarching goal to reduce GHG emissions through market transformation. It i s further aligned with the GEF-4 Strategic Objectives in the Climate Change Focal Area. In particular, it addresses strategic objective 4 (To promote on-grid renewable energy), but also to SO 5 (To promote the use o f renewable energy for the provision o f rural energy services (off-grid), which mainly l i n k s to Strategic Programs 3, (Promoting market approaches for renewable energy). In addition it also contributes to SP 4 (Promoting sustainable energy production from biomass).
27. Consistency with the strategic priorities i s broadly categorized as follows: (a) promotion o f renewable energy-based off-grid electricity supplies to remote public institutions and independent grid supplies to ‘pockets o f potentials’ for rural non-farm employment generation meet the strategic priority CC4; (b) technical assistance and capacity building in the GoR, RECO, and private sector for promotion o f electricity efficiency programs, meet the strategic priority CC 1.
Key indicators
28.
e
e
e
e
e
e
The project key indicators are as follows:
Renewable energy and Energy efficiency strategy adopted by Government
# o f enterprises graduating the incubator program with a business plan in place that i s approved by TBIF
the national building code integrates Energy Efficiency
Feed-in and Bulk-purchase tariffs agreed with RECO and approved by RUM.
Installation and user guidelines for Solar PVs in public institutions approved.
% o f Micro-Hydro plants that comply with new Micro-Hydro O&M guidelines
7
# o f Local Solar PV Dealers with field presence in at least one province outside Kigali offering sales and maintenance services
N o o f staff employed in the RE sector
29. The key global performance indicator is: avoided carbon dioxide emissions. Total estimated emission reductions from the activities under the various components during project l i fe are estimated at 0.646 mill ion metric tons o f C02, over the lifetime o f the systems. The long te rm national impact o f this Project i s expected to be much larger than this number, as broad replication i s expected to occur through the establishment o f a national bottom-up legal and regulatory framework for rural electrification that will use a similar approach to that o f the Project.
3. Project components
30. The GEF Sustainable Energy Development Project i s a grant to the Government o f Rwanda to support renewable energy development. A key mechanism for sustainable development comprises the emphasis on the private sector as the main delivery vehicle.
31. The GEF scope o f intervention was identified in a participatory process in which main stakeholders have been consulted. The scope consists o f five sub-components; 1) policy, strategy, and management, 2) efficient utilization o f biomass resources, 3) sustainable development o f micro hydro resources, 4) solar energy (PV & SWH) and 5) energy efficiency.
32. Component A: Strengthening of Renewable Energy policy, strategy and management - addresses the execution o f policies into strategies and projects. Hence, the focus i s not on policy development per se. The main objective i s to help the Ministry o f Infrastructure (MININFRA) streamline and coordinate activities by supporting the development o f operational guidelines for project design and implementation. An important sub-objective comprises the integration o f the private sector in the process. More specifically the GEF sub-component contains the four following parts: policy, strategy, M&E (Renewable Energy Sector M&E and Scientific monitoring for Lake Kivu), and an Incubation Program for RE SMEs. The component wi l l also provide funding for the incremental cost for the RECO Project Management Department (PMD) to handle the implementation and reporting tasks.
33. Component B: Efficient utilization of biomass resources - addresses the unsustainable use o f firewood and charcoal as demand i s outgrowing supply threatening scarce natural resources and biodiversity. The aim i s to increase the efficiency in the charcoal value chain by promoting more efficient stoves and charcoal production methods. The approach adopted i s to focus on the “industrialization” o f the manufacturing o f stoves and kilns in addition to work in down stream parts o f the charcoal value chain such as organizing o f sales points, logistics and wholesale buyers.
34. Component C: Sustainable development of micro hydro resources - deals with the issue o f private sector participation, which has only recently been introduced. The scope o f the component i s to provide transparent market regulation and guidelines to facilitate small distributed power production and distribution services while building local private sector capacity that can plan, design, implement and operate the plants. A remaining challenge to be
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addressed during project implementation i s the lack o f venture capital as most commercial banks are st i l l reluctant to fund this type o f private sector investments. A possible cooperation with IFC will be explored. The project will also provide technical assistance to ensure long-term sustainable operation o f the existing micro-hydro plants commissioned by the government o f Rwanda including support to create a “micro-Hydro helpdesk” to provide technical and operational advice to operators.
35. Component D: Solar Energy - focuses on promoting the current weak private sector. This will be accomplished by three core measures: 1) Developing national installation and user guidelines for institutional PV applications, 2) Building capacity and conducive frameworks to al low local private f i r m s to participate in international tendering for the Rwandan market, 3) Supporting the development o f a commercial SHS (Solar Home System) market for rural areas. The project will also provide initial support to develop the market for solar water heaters (SWH) in Rwanda. Due to the small market size the support will focus on building early market incentives and promotions including support for market surveys, technical specifications and guidelines for procurement, advice on appropriate taxes incentives and capacity building o f private sector companies, etc.
36. Component E: Energy efficiency strategy development - Will focus o n reducing the technical losses in the RECO grid, and energy efficiency in larger buildings. The first part will analyze RECO network to understand h o w the losses are distributed in the grid and identify the potential for improving efficiency. This study will build o n the 2004 “Energy Loss Reduction Assessment and Loss Reduction Strategy”’, the second part, DSM, comprises a study o f energy use in larger institutional/commercial buildings and in industrial processes. One objective i s to enhance the awareness o f energy use and how electricity consumption can be minimized. The findings will be fed into the policy process to establish guidelines for adding energy efficiency to the national building code.
37. Below in table 1 i s a presentation o f the five project components and details on core and co-funding arrangements. The proposed project has core funding o f U S D 8.3 mil l ion complemented by approximately USD 63 mil l ion in parallel funding. The parallel projects represent the platform o f the project by its emphasis o n physical investment in the renewable energy sector.
’ Lahmeyer/NETGroup April 2004
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Table 3.1: Project financing and RE sector Parallel co-financing
’ EC I Dutch/ I Belgium GoR Private Total IDA/ UERP AFREA-
TF
-
lGTZ I component
1.8 1 0.3 5.18 0.38
5.2 4.2 19.46
strate + 0.5 2.3 0.25 3.95 F i Z q E - hvdro
0.3 16.9
2.0
1.3
0.2
48.26
11.95 I I
6.3 1.9 1.2
0.8 0.27
21.77 ~ o*2 1 1.95
1.92
71.26 3.8 1.8
Source: World Bank Data
4. Lessons learned and reflected in the project design
38. Key lessons from the previous energy projects in Rwanda and elsewhere focused on the readiness o f stakeholders for the project as wel l as design and implementation simplicity. They can be summarized as follows:
(a) Ensure commitment of Government, Donors and other stakeholders. The GEF project will be supporting the jo int Government and Donor SWAP, monitored by the Sector Working group as per a signed M O U between the main stakeholders. The project will be complementary to the grid extension investments funded within the national electricity access program (NEAP) and assisting to streamline and harmonize the many dispersed renewable energy activities currently ongoing thus further leveraging the government’s available funding for RE.
(6) Simplia design and implementation arrangements to ease implementation and enhance sustainability. This lesson i s especially important in countries such as Rwanda with limited implementation capacities. The project will therefore draw on the experience and implementation capacity already built within the UERP PCU and will be co-implemented together with the IDA energy portfolio.
(c) Advance preparatory activities to minimize delays. The project preparations have benefited f rom a number o f upstream studies within the IDA UERP as wel l as by other donors such as the U S A I D financed study to design a program for the promotion o f efficient cook stoves, the Belgian cooperation’s work on health facility service delivery, the GTZ Micro Hydro project and the recent work on the National biomass strategy (BEST, 2008). It is expected that a significant part o f the technical assistance could be launched already during the first year o f implementation,
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wel l in sync with the timeline for the national electricity roll-out program planed for within the SWAP.
(d) Integrating experiences @om other projects. To the maximum practical extent, project design will build on best practices o f other projects in Rwanda and internationally, such as GEF- supported projects in Uganda and Sri Lanka, the Global Village Energy Partnership, and lessons gathered from the recently issued Renewable Energy Toolkit (www.worldbank.org/retoolkit). Several o f the proposed project components have been designed taking onto account the regional experience, most notably:
Solar PV experience in the region - The experience in the region manifests the important role o f the private sector to drive development. In Kenya the private sector has been the forerunner for the last two decades and the P V growth has been heralded as a success ‘story for market-driven development. The market was initially dominated by donor projects but when donors increasingly left the sector, the only option remaining was the involvement o f the private sector. The growth was slow in the beginning but has proven to be sustainable as solar products, including spares, can be found in most rural towns. The Tanzanian case i s a mixed picture where donors, government and private sector initiatives have co-existed for a number o f years. The dominance o f the project- driven model has lately surrendered to market-driven development. Ongoing projects are therefore designed to support the P V market with minimal distortions. Some o f the lessons learned from these early projects include need to (i) increase focus on policy setting and dialogue with stakeholders and (ii) use flexible marked driven approaches to work with the private sector. The projects had a tendency to prioritize short term implementation results rather than ‘waiting’ for the private sector’s response.
0 Biomass experience in the region - The case o f promotion o f improved charcoal stoves points to the cumbersome process to induce innovations through a top-down project approach. In Tanzania, the improved stoves were introduced almost two decades ago but s t i l l diffusion has reached a mere 4 percent. The route chosen was to train art isans operating in the informal sector. The bottlenecks identified for further market uptake are related to volumes and quality o f production. The artisans were incapable and uninterested to invest in modern production methods allowing for quality control and up- scaling. Hence from a j o b creation perspective the project was fairly successful but from the consumer’s point o f view to access fairly cheap stoves o f high quality, the experience tel ls us that the model for diffusion i s critical to reach a sustainable market.
5. Alternatives considered and reasons for rejection
39. The two main alternatives considered for project design were to:
(a) Focus on additional Investment Jinancing for renewable energy. With the considerable bilateral financing being allocated to investments in the Solar and micro-hydro fields the highest value leveraging effect o f additional GEF financing would comprise towards building frameworks and regulations to assist the government in assuring sustainability o f this infrastructure.
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(b) Focus resources on the gr id electrijkation roll-out program. Due to the low level o f access in rural areas in Rwanda, many rural centers will not be reached by the national grid for the foreseeable fbture. In the interest to distribute the benefits o f development and underpin government’s decentralization strategy, off-grid renewables have an important role to play to minimize the rural-urban divide and improve service delivery and quality o f l i fe for Rwanda’s rural population.
C. IMPLEMENTATION
1. Partnership arrangements 40. After having suffered from very limited investment resources during many years, the energy sector in Rwanda i s experiencing a revival. During the last couple o f years there has been a marked increase in budget allocations and donor support. To manage this surge in sector financing and number o f activities, GoR has initiated a process to harmonize sector investment planning through an Energy Sector Wide Approach (SWAP). The effort i s steered by a Sector Working group chaired by MININFRA and co-chaired by the World Bank as lead donor for the ,
Energy sub-sector. The guiding principles o f the SWAP i s defined in a M O U signed by GORY World Bank and key sector donors such as AfDB, EC, Belgium and the Netherlands. The approach wi l l ensure transparent information sharing and close coordination between the SED project and complementary RE activities under implementation by GOR and the SWAP group o f donors
Ongoing projects in renewable energy in Rwanda: Summary
0 European Commission (EC) - The European Commission i s a relatively new donor in the renewable energy field in Rwanda. The EC aims to “[...enact] an innovative mechanism to create new markets for energy services in Rwanda and maximizing the inputs o f the private sector in developing, realizing, and financing o f the energy services.” The EC supports in particular two areas: i) energy solutions for off-grid public institutions such as health centers, schools, ii) micro-hydro plants.
0 Belgian Technical Cooperation (BTC) - The BTC has agreed to actively cooperate in the rural electrification area mainly through the implementation o f the Electrification Project for the Rural Population through Renewable Energy (EPRER). One o f the selected activities to be financed in the framework o f this project i s the provision o f electric and solar thermal energy to Health Centers and rural Hospitals.
0 Gesellschaft fur Technische Zusammenarbeit (GTZ) - GTZ i s primarily active in micro-hydro and biogas development, GTZ will finance the Private Sector Micro-hydro Power Supply (PSP Hydro) for Rural Development with € 3 mill ion whereas support to biogas amounts to € 5 3 million. The PSP Hydro builds local capacity in the private sector to commission micro-hydro plants by giving responsibility to Rwandan private companies to do the design work, procure the equipment and services, and install the plant. The same companies will then construct and operate local electricity grids that deliver electricity to nearby rural areas. The f i rs t 3 become operational in mid - late
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2009, and this comes after a short 2.5 - 3 year gestation period only. GTZ also supports the National Domestic Biogas Program (NDBP).
United Nations Industrial Development Organization (UNIDO) - In collaboration with UNIDO, the GoR are executing three micro hydro power plants; Nyamyotsi 11, Mutobo and Agatobwe. The plants were expected to be commissioned by 2009. One o f the projects: Nyamyotsi I, a 100 K W micro hydro power plant has already been inaugurated and i s now operational.
0 United States Agency for International Development (USAID)-USAID manages the Presidents Emergency Project For Aids Relief (PEPFAR) program, which identified energy supply to health centers as a major bottleneck for delivering quality health services and HIV testing facilities. A recent study commissioned by PEPFAR recommends four actions for going forward: i) to specify energy systems suitable for Rwandan health facilities, ii) to assist partners to develop a clear design, installation and after-service process, iii) to help develop the quality chain through provision o f capacity building activities and enforcement o f standards and practices within the PEPFAR program, iv) to coordinate regular meetings between key players (Le., PEPFAR partners).
2. Institutional and implementation arrangements
41. The SED project will benefit from the experience built within the existing Project Coordination Unit (PCU) created for the IDA UERP. The unit has an established track record in project implementation and fiduciary oversight. It i s expected, as part o f the implementation o f the NEAP and SWAP, that the UERP PCU will be integrated into a new RECO Projects Management Department (PMD) that will consolidate within the company all existing project- specific PCUs and that will also manage and oversee the national grid rollout and connections program. The capacities o f the UERP PCU will be fully transferred and further improved by additional capacity building and TA support included in the NEAP and proposed IDA Electricity Access Scale-up and SWAP Development Project (P111567). The PMD will bear implementation oversight responsibility for the full project with component level execution done by the MinInfra, RECO and EWA. The unit organization includes a manager, a dedicated procurement specialist, a financial management specialist, and an M&E specialist. The project will support incremental operating costs o f the PCU, including additional costs arising from the added workload stemming from the GEF project.
3. Monitoring and evaluation of outcomeshesults
42. Project reporting, monitoring, and evaluation will be the responsibility o f the PMD under the oversight o f the SWAP secretariat at MinInfra. The primary reporting mechanism will be the Financial Report (FR) that covers the previous four-month period and forecasts into the next two four-month period, and includes sections on procurement, financial management, and project progress toward development objectives. The FR format may be revised from time to time as mutually agreed between, the Bank and the Borrower. Monitoring and evaluation o f results will be based on the results framework and monitoring arrangements as given in Annex 3.
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4. Sustainability and Replicability
43. GEF funds are sought primarily for technical assistance and capacity building activities. The primary rationale for these i s the sustainability o f public and private investments in renewable energy and energy efficiency that can be facilitated.
44. Government o f Rwanda budgetary support will be sought as complementary finance o f both investments as well as capacity building activates. This will enhance sustainability in a couple o f critical respects: (a) for investments made by the Government for i t s own use (e.g., solar PV systems or electricity end-use efficiency improvements), budgetary programming wi l l have to provide for both the capital as well recurrent costs; (b) reliable operation o f those investments, and the outcomes they help generate, provide the rationale for subsequent financing under the budget. Such a process helps to ensure sustainability but at the same time also focuses the clean energy programs on the desired end results.
45. For the private sector investments - e.g., in electricity or wood fuels efficiency improvements, or micro-hydro independent grids - to be sustainable, the GoR needs to establish and maintain an appropriate and predictable pricing and regulatory framework as part o f the overall sector reform and decentralization agenda. This ‘policy platform’ will be detailed during the ongoing annual PRSG cycle and further discussed as part o f the SWAP sector monitoring. Since the proposed project will run in close connection with the ongoing UERP, and the proposed Rwanda Electricity Access scale-up project which involves all three sectoral institutions (RECO, MinInfra, and RUM), there are good prospects that successful activities will be mainstreamed in the regular planning and budgeting exercises o f the GoR, the future Energy and Water Authority(EWA) and RECO.
5. Critical risks and possible controversial aspects
46. The SED project i s primarily focused on providing technical assistance and capacity building to make the renewable energy sector in Rwanda long term sustainable. The overall risk o f failing to accomplish the development objectives i s considered moderate following the mitigation measures built in to the project design. The main r isks are described as follows:
47. Slow implementation due to weak sector institutions and large investment program within the access SWAp: The support provided in the SEDP will be complementary to already ongoing activities where implementation capacity has been built in the Ministry and RECO. To further accelerate project implementation, a resident advisor will be hired for MinInfraEWA to help supervise the T A components and ensure progress towards the development objectives.
48. Over-lap with existing RE portfolio and ongoing donor funded activities: The RE portfolio i s largely focused on investments and installations in the field. The SEDP will therefore be naturally complementary to these activities. The SWAP secretariat in MinInfra and EWA, when established will add further oversight to ensure that potential over-laps are identified early.
49. Slow growth o f the renewable energy market due to weak private sector: The SEDP i s designed to, support the growth o f a local RE SME’s by (i) the cooperation with the Kigali Institute o f Science and Technology (KIST) Technology & Business Incubation Facility (TBIF)
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to support RE enterprises to develop bankable business plans and develop quality product offerings; (ii) direct support to Solar PV SME’s to grown their maintenance network outside the capital; and (iii) a Micro-Hydro help desk in RECO where SME’s can draw on the utilities resources to address operational problems etc.
6. Loadcredit conditions and covenants
50. The fol lowing are the required actions and conditions to be completed during effectiveness:
(a) The Subsidiary Agreement has been executed on behalf o f the Recipient and the Project Implementing Entity.
(b) The Clean Energy Investment Framework Trust Fund Grant Agreement has been executed and delivered and al l conditions precedent to i t s effectiveness or to the right o f the Recipient to make withdrawals under it (other than the effectiveness o f this Agreement) have been fulfilled.
(c) The Program Management Directorate has been established by the Project Implementing Entity.
(d) The Project Implementation Manual has been adopted by the Project Implementing Entity.
(e) The Project Implementing Entity to second an accountant to the Program Management Directorate.
5 1. financing effectiveness.
Appointment by RECO o f satisfactory external financial auditors within a month o f
52. Section I1 (B) o n Financial Management, Financial Reports and Audits and Section 4.09 o f the General Conditions. PMD o f RECO will prepare IFRs covering 4 months’ period.
Other standard financial conditions are as stated in the Financing Agreement Schedule 2,
D. APPRAISAL SUMMARY
1. Economic and financial analyses - Incremental cost analysis
53. An Incremental Cost Annex (see Annex 9) has been prepared to show the “with and without” GEF Project case, and to demonstrate how barriers to renewable energy use would be removed using GEF funds. By fully integrating renewable energy into a l l project activities, it i s expected that the project would result in a considerable expansion o f the solar, micro-hydro, and improved stoves markets. In total, use o f renewable energy sources would reduce C02 emissions by an estimated 0.63 mi l l ion tones over the lifetime o f the equipment installed. However overall the project would reduce C02 emissions by an estimated 0.646 mi l l ion tones. The GEF benefits are indirect and mainly as a result o f guaranteeing the operations o f already installed capacity.
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2. Technical
54. sector objectives, viz.:
The investments under the SED project have been designed to meet Rwanda’s electricity
0 Encourage development o f the cost effective renewable energy sources, e.g. small micro hydro or solar photovoltaics. Reduce energy losses in the system through a range o f measures including utility Demand Side Management (DSM); Provide the foundation for renewable energy services to complement the national Electricity grid Roll-out program to ensure an equitable distribution o f benefits and improved service delivery for non-connected health, education and local administrative facilities.
0
55. The renewable energy technologies being considered under the project mainly include micro/mini-hydro systems, efficient charcoaling and stove technologies and Solar energy from Thermal (Le. Water Heating) and photovoltaics. These technologies are well proven globally and do not pose any technical concerns.
3. Fiduciary
56. Financial management: The Rwandan Government has made tremendous strides towards improving accountability under the PFM reforms. Most notable includes the setting up o f PFM institutions l ike the Office o f the accountant General, the Office o f the Chief Internal Auditor, the adoption o f the Organic Budget Law (OBL) and o f accompanying financial instructions and continuing efforts to adapt Government’s institutional arrangements, the strengthening o f budget preparation process with the introduction o f the MTEF, the establishment o f Treasury Management Committee all o f which have culminated with preparation o f the f i rs t set o f consolidated financial statements for the year ended 2006 and subsequently those o f 2007. These have lead to a comprehensive review by the Office o f the Auditor General o f the consolidated financial statements for the year ended 2006 which revealed inadequate support o f expenditure as a significant shortcoming and hence the underlying weaknesses in PFM. Despite key strides made two key areas that underpin the success, or not, o f the PFM reform s t i l l pose important challenges and include the PFM systems (IFMIS) and organizational capacities.
57. Procurement: The Rwandan Government has recently made substantial progress towards improving the national procurement system. For the proposed project, procurement will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits,” dated May 2004 and revised October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers,” dated May 2004 and revised October 2006, and the provisions stipulated in the Legal Agreement.
58. Goods will include Solar Water Heaters (SWH), to be procured through a combination o f international competitive bidding (ICB) for contracts estimated to cost more than US$300,000 equivalent, and national competitive bidding (NCB) for contracts valued at more than US$25,000, and shopping for contracts estimated to cost less than US$25,000 equivalent. In situations and circumstances that are in compliance with the provisions o f paragraph 3.6 o f the
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Guidelines for procurement, direct contracting may be used with Bank prior review. N o civil works i s considered for this program.
59. Consultant services to be procured under this grant would include technical studies and assistance, and monitoring and evaluation activities performed by f i r m s and individual consultants. Contracts estimated to cost US$200,000 equivalent or more would be procured through Quality and Cost Based Selection (QCBS), and contracts estimated to cost less than US$ 100,000 equivalent per contract may be procured under contracts based on Consultants Qualifications (CQS). Single source selection may be used exceptionally in accordance with paragraph 3.9 to 3.12 o f the Consultant Guidelines for: (i) training; (ii) consulting assignment provided by NGOs or local other organizations.
60. Risk Assessment. A capacity assessment reviewed MinInfra and the RECO Project Management Department (PMD) which will provide procurement support to all project entities to ensure that procurement conforms to IDA requirements. The assessment recommended putting in place a procurement procedure manual, capacities in procurement planning, contract management and filing systems. Staff o f MinInfra procurement unit need to work with more experienced staff, before being familiar with international procurement procedures and being able to handle SEDP procurement. To avoid delays in preparing technical specifications, technical required ski l ls will be mobilized as needed. RECO Program Management Directorate (PMD) will be responsible for day-to-day management o f the grid rollout component -- ensuring that procurement i s conforming to IDA requirements. In addition, the national access program will be supervised by the SWAP Secretariat (see description in Annex 6). The action plan to bring improvements was agreed during negotiations. On that basis, the risk assessment i s considered as “ moderate”
61. Readiness for Implementation: As shown in the procurement plan, advance procurement was conducted during project preparation, helping to reach a good level o f readiness for implementation - see Annex No 8.
4. Social
62. The project will support investments in micro/mini-hydro systems, efficient charcoaling and stove technologies and solar energy from Thermal (Le. Water Heating) and photovoltaics. These investments are expected to have overall positive social impacts, simply because increased access to reliable power services facilitate improvements in health and education facilities, agricultural processing, employment creation opportunities, etc. Potential negative social impacts are expected to be small, but will not be ignored. These are primarily associated with temporary and permanent use o f small areas o f land for the investments the project will support, for which land acquisition or resettlement o f Project Affected Persons or relocation o f their places o f livelihood may be necessary. For this reason, Bank O.P. 4.12 - Involuntary Resettlement, may be triggered. Owing to the nature o f the project, the exact location, nature and magnitude o f sub- projects to be financed as a result o f the project cannot be determined prior to project design. Consequently it i s not yet possible to prepare detailed Resettlement Action Plans, which would specify the detailed mitigation measures and develop strategies to provide for livelihood restoration in line with international standards. A Resettlement Policy Framework has been developed for the UERP to provide guidelines on how to avoid, manage or mitigate potential
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risks and the process by which Resettlement Action Plans will be prepared and implemented during the project implementation period. The preparation o f Resettlement Action Plans will be required for this Project if it i s determined that land acquisition i s a consequence o f the investments resulting from the project, and once the location and scope o f these investments i s known.
5. Environment
63. Although the project does not include investment components, the technical assistance and guidance provided under the project may incur certain downstream risks. For instance, in the case o f the sustainable development o f micro-hydro plants the Project wi l l provide a national operational framework for investments made by small Independent Power Producers (IPPs), and such investments may have environmental and social implications. Also, the “industrialization” o f efficient stoves and kilns could have some adverse environmental implications if not sustainably implemented. It i s to address these potential downstream risks that the project has been rated Category B under the World Bank Policy on Environmental Assessment (OP4.01), requiring a partial Environmental Assessment (EA). A World Bank Category B project i s equivalent to the Government o f Rwanda’s Schedule 2 projects.
64. The recipient plans to utilize the’ Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) which have already been adopted for the Urgent Electricity Rehabilitation Project (UERP).
65. The Government o f Rwanda’s laws and the World Bank’s Operational and Procedural Policies, specifically OP 4.01, requires the government to prepare a Environment and Social Management Framework , ESMF, which establishes a mechanism to determine and assess future potential environmental and social impacts o f RECO’s planned investments/activities under the proposed SEDP, and then to set out mitigation, monitoring and institutional measures to be taken during design, implementation and operation o f these activities to eliminate adverse environmental and social impacts, offset them , or reduce them to acceptable levels.
66. The project investments are expected to have modest impact on the environment with significant positive effects as the Technical Assistance provided by the SED project will increase the use and sustainability o f renewable energy technologies in Rwanda and improve Energy efficiency o f both biomass and electricity. The Environmental and Social Management Framework (ESMF), described above, i s designed to ensure that the environmental and social issues associated with this program are adequately analyzed and understood, and that all associated adverse impacts are identified through screening, and are also effectively mitigated and monitored. Each investment supported by the project must comply with the applicable provisions o f both the RPF and ESMF.
6. Safeguard policies
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.0 1) [XI [I Natural Habitats (OP/BP 4.04) [I 1x1 Pest Management (OP 4.09) [I [XI
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Physical Cultural Resources (OPBP 4.1 1) 11 [XI Involuntary Resettlement (OPBP 4.12) [XI [I Indigenous Peoples (OPBP 4.10) [I [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) [I [XI Projects in Disputed Areas (OPBP 7.60) [I [XI Projects on International Waterways (OPBP 7.50) [I [XI
Source: World Bank assessment
7. Policy Exceptions and Readiness
67. N o exceptions to Bank policy are requested.
68. The PMD manager and core staffing for management o f the SED componentlproject i s in place. The PCU will also draw on resources and ski l ls available from Government Ministries and agencies as well as ongoing RE projects supported by other donors. For this purpose a focal point in MinInfra has been appointed to coordinate these activities. Project indicators as well as M&E arrangements have been confirmed with the Government at negotiations.
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Annex 1: Country and Sector Background RWANDA: Sustainable Energy Development Project
A. Country Background:
1. Rwanda i s a small, landlocked country in the Great Lakes region o f Africa, bordered by the Democratic Republic o f the Congo (DRC), Burundi, Tanzania and Uganda. Total land area i s about 24,950 sq. km., and inland lakes cover about 1,390 sq. km. The terrain i s mostly hil ly and mountainous, with grassy uplands.
2. Rwanda was ravaged by civil war and genocide in the early 1 9 9 0 ~ ~ followed by border wars that finally ended in 2002-3. The domestic population has fluctuated considerably due to genocide and migrations associated with conflict. I t i s currently estimated to be about 9.7 million (2007). Habitation patterns have also changed considerably - over the last decade Kigali, the capital city, has grown from around 300,000 to close to 1 million, and new rural agglomerations known as “Imidugudus” are emerging. At more than 320 people per square kilometer, the aggregate population density i s among the highest in the world. Natural population growth rate - Le., apart from return o f the refugees - i s high at 3 percent p.a., and l i fe expectancy at birth i s s t i l l only about 40 years.
3. Rwanda has largely an agricultural economy with small-holder farming and some commercial agriculture (tea, coffee, being privatized). Agriculture accounts for about 35 percent o f GDP, though up to 50 percent o f the farmers do not effectively participate in the exchange (formal market) economy. The manufacturing sector comprises o f a few enterprises in small industry - agro-processing, brewery, textiles, mining, sugar, and cement.
4. Overall, the business environment i s s t i l l weak, and specialized institutions to support private sector development - e.g., Investment Promotion Agency, Arbitration Center, Private Sector Federation, SME Promotion Center, and the Utility Regulatory Agency - are s t i l l in early stages o f development. The pace o f reform has increased during 2007-08 and i s reflected in the improvement in overall ranking for Rwanda from 148 in 2007 to 139 in 2008 on the Doing Business ranking carried out by the World Bank’. Rwanda was also deemed to be among the 10 fastest reforming countries among the 18 1 nations scrutinized in the report.
5. During the last year Rwanda has made considerable gains in a number o f focus areas. Access to health insurance was scaled up from 7 to 75 percent o f the population between 2003 and 2008, leading to increased use o f health services (e.g., assisted deliveries have increased, and under five mortality decreased, bringing rates back to pre-genocide levels). The general economy grew by 8.5 percent in 2008, fueled, in large part, by a strong recovery in agriculture, which grew by nearly 15 percent, with the ongoing expansion o f the crop intensification program (CIP). This contrasts with the 7.9 percent growth that occurred in 2007 which was driven by growth in the services and manufacturing sectors; agricultural output expanded by just less than 1 percent in 2007 due mainly to poor weather conditions which also contributed to a 50 percent decline in coffee output.
See http://www.doingbusiness.org/economyrankings/ 8
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6. In the aftermath o f the genocide and associated conflicts (1996-2000), real GDP grew at over 10 percent per year as the economy recovered from a low base. After a decade o f economic and political stability, the post-conflict economic growth recovery effect i s wearing of f and Rwanda will have to find domestic drivers to underpin a future growth trajectory. Part o f the explanation to the slowing trend i s the increasingly constrained infrastructure services. Infrastructure bottlenecks in the urban areas and limited access in the rural areas have emerged as a significant constraint to continuing economic growth and human capital development. In the recently completed Investment Climate Assessment survey carried out by the World Bank o f 340 Rwandan private enterprises, Infrastructure, or the lack o f it, was identified as the primary barrier growths with the quality o f Electricity, Transportation and Telecom services all coming in among the top 10 constraints. In 2008, the higher cost o f fuel which translated to higher transport costs had a significant impact on domestic food and fertilizer prices. The higher fertilizer prices posed a risk to the Government’s program to strengthen agricultural productivity, which was mitigated through the Supplemental Financing to PRSG-4.
B. Overa l l Energy Sector:
7. Rwanda’s modern energy sector i s small and covers a very limited portion o f the population, mostly in the urban areas. At about 20-25 kWh/year/capita, consumption o f electricity i s among the lowest in the world. Rwanda has no known resources o f oi l or coal. Only a small portion o f the regional hydroelectricity potential -shared with i ts neighbors Burundi, Tanzania and the Democratic Republic o f Congo (DRC) - has been exploited. Wood and charcoal remain the most significant - and often the only - fuels available to households and productive sectors o f the economy. Electricity service extends to app. 110,000 customers or about 6 percent o f the households (nearly two-thirds o f them in Kigali alone), and the peak electricity capacity i s about 55 M W . In rural areas access to electricity i s a mere 1 percent.
8. Power Sector: In 2003-05 a combination o f lower rainfall and over-utilization o f the existing hydro generation resources created a severe power supply shortage, not dissimilar to what has been experienced in other east African countries (e.g., Tanzania, Kenya, Uganda and Malawi) in recent years. Part o f the reason why Rwanda was so severely affected i s that 80 percent o f power generation capacity i s hydro based. Domestic capacity consists o f four hydroelectric plants totaling about 27 MW, o f which the largest two (combined capacity o f about 24 MW) are based on interconnected lakes whose levels declined precipitously during the drought. The lake levels have now recovered following concerted efforts from RECO to run the plants sparingly and reestablish the protecting vegetation in the catchment areas. Rwanda also operates a domestic diesel plant in Jabana (7.8 MW) as well as two plants in Gatsata that are not operational and highly dilapidated. Recently the f i rst pilot plant operating on methane gas was brought on service as well as a small grid connected Solar IPP built in cooperation with the German state o f German state o f Rheinland-Palatinate.
9. In addition, RECO purchases power from the Rusizi I plant (total capacity 39.6 MW) o f SNEL o f DRC, and Rusizi I1 (total capacity 44 MW), owned by Sinelac, with equal joint participation o f Rwanda, DRC, and Burundi. Lit t le or no maintenance and rehabilitation work has been undertaken on any o f the domestic hydro plants or Sinelac plants. Recently initiatives to mobilize funding for rehabilitation o f the two plants have been yielding some results and the
21
Board o f Sinelac i s considering a proposal from Dutch FMO to fund the rehabilitation on concessional terms putting the plant under management contract.
10. Looking forward, a number o f new generation projects are under various stages o f development, many utilizing lower cost indigenous energy sources. These include the IDA financed Jabana HFO Power Station (20MW, on line March 2009), Rukarara Hydro Power station (9.5 MW, early 2010), and Nyabarongo Hydro Power station (27.5 MW, 2012). Together, these projects account for a more than 70 percent increase in national generation capacity installed, and are adequate to supply the incremental demand from NEAP and other load growth through the medium term. In addition, following development o f the Lake Kivu Methane Gas resource Pilot plant producing 1.8 M W since October 2008, the GoR recently signed a power purchase agreement with a private sponsor, Contour Global, to develop 100 M W o f electricity generation in two phases. The first 25 M W plant may be in operation by early 201 1.
1 1. Enerw Imports: Rwanda i s critically dependent on imports o f modern energy sources. Petroleum products are transported from Mombasa in Kenya via pipelines to Eldoret in Kenya, then by road to Kigali and elsewhere in the country. In addition to high inland transport costs from Mombasa, o i l products imports are also subject to various duties and taxes, so that on average, retail prices o f petroleum products are about 100 percent higher than acquisition costs f.0.b. main supply sources (e.g., Arab Gulf markets). Rapid increases in the world o i l prices, combined with ad valorem duties and taxes, have thus had a significant negative impact on the country’s growth prospects. The requirements o f petroleum products imports for additional power generation (see below) thus impose a further unavoidable burden on the macro economy, since no other more economical sources o f power generation’can be brought into service as quickly. During 2007-08, the Eldoret pipeline capacity have been under stress due to increased consumption by the users combined with technical problems necessitating a major overhaul o f pump capacity. The post election violence erupting in Kenya in January 2008 temporarily stopped supply completely. This further emphasizes the vulnerable position o f a landlocked country as Rwanda and has prompted the government to schedule an overview and expansion plan o f i t s current hydrocarbon storage capacity. A study o f the possibilities to extend the Eldoret pipeline through Uganda to Kigali has been completed, financed by USTDA, and points towards viable returns for the project from 2016 and onwards if economic growth in the region i s sustained.
12. Apart from shares in the regional hydro power plants Sinelac and Ruzizi I (SNEL), Rwanda i s not connected to any regional transmission network. The relative isolation o f such a small power sector creates challenges as larger, more financially attractive generation options, might not be feasible due to limited demand. The governments o f Rwanda and Uganda recently reached an agreement with AfDB and Japan (JICA), as part o f the N i l e Equatorial Lakes Subsidiary Action Plan (NELSAP), to develop the Mbarara (Uganda) - Birembo (Rwanda) 220 kV transmission Line. The 172 km line would form part o f the East African Power Pool (EAPP) permitting the countries in the region to trade power and reap benefits from development o f the regionally most competitive power generations candidates. The project i s estimated to cost approximately US$ 56 million and i s due to be completed in 2012.
13. Rural Electrification: Rwanda i s the most densely populated country on the continent but s t i l l have some o f the lowest access rates in all o f Africa. In recent years population clusters
22
have tended to get larger even outside o f main towns as new villages or Imudugudus are created in districts. Revival and expansion o f rural productive enterprises - in tea and coffee processing, in particular - also constitute ‘pockets o f demand’ easily serviceable on a commercial basis. Apart from the main national grid, Rwanda had about 20 micro hydro based independent grids o f various sizes prior to 1994. Some o f these are s t i l l functional, and some are being rehabilitated. Recently GoR and the main sector donors have agreed to develop a national access expansion plan as part o f the Energy SWAP with the goal o f connecting an additional 240,000 households by end 2012. The connections will use both conventional grid extension and micro-grids to extend service provision across the country.
C. Renewable Energy resources
14. Rwanda i s well-endowed in renewable energy resources but most s t i l l remains an untapped potential. Micro hydro-power in particular constitutes a significant potential for rural power supply with many areas having ample rainfall and most streams and rivers unexploited. Solar irradiation i s high - between 4-5 kWh/m2/day - but diffusion i s hampered by high initial cost and limitations on high load usage. Biogas i s promising for thermal energy needs for farm and small institutions, especially considering the large number o f households that own cows and other livestock.
15. Rwanda Photovoltaic Market: Rwanda’s PV market i s s t i l l nascent and primarily dominated by the institutional market driven by the needs o f rural health and education service providers. Much o f the installations have been fully grant financed by donors with limited government coordination at the national level. Th is has resulted in a broad range o f different technologies and standards being applied by different projects and limited involvement o f local companies in procurement and installation. Lack o f funds and knowledge about proper maintenance have led to an array o f technical problems including malfunctioning batteries, faulty wiring, broken DC-appliances. A recent study commissioned by one o f the largest donors in the institutional health PV market, PEPFAR, makes four recommendations to improve the perfonnance o f institutional PV systems: 1) to specify energy systems suitable for Rwandan health facilities, 2) to assist partners to develop a clear design, installation and after-service process, 3) to help develop the quality chain through provision o f capacity building activities and enforcement o f standards and practices, 4) to coordinate regular meetings between key stakeholders.
16. The GoR EDPRS has identified as a key objective to equip 100 percent o f the health centers and 50 percent o f primary and secondary schools with energy supply by 2012. This i s a commendable target that will warrant significant investments in off-grid RE technology during the coming 5 year period. A number o f donors are joining this effort including EU, BTC, Global Fund, USAID, ICAP, PEPFAR. With the local PV sector s t i l l weak a large portion o f these large investments risks slipping beyond reach o f local companies as they seldom have the capacity to submit competitive proposals and may even fail to meet the requirements for bidding.
17. Issues to address: The significant investment funding made available by GoR and donors in the institutional PV sector further emphasizes the need to establish a cohesive national strategy and implementation blueprint. PV technology needs to be carefully selected and applied in areas where it i s the most suitable and least cost technology for health clinics, schools and
23
local administration. This requires a detailed needs assessment and energy audits of the institutions before investment. This has been recognized by GoR and the sector donors and the process i s now underway for part o f the health sector; financed by BTC and PEPFAR but will need to be continued for all health and education institutions. Coordination across line ministries - particularly between MININFRA and MINISANTE/MINEDUC/MINALOC needs to be further strengthened. Support to the local PV sector i s o f outmost importance for long-term sustainability o f the market since it i s only through local competence and resources that maintenance, after-sales service, spare parts, etc can be guaranteed.
18. Rwanda Micro Hydro: Hydropower has generated the bulk o f electricity in Rwanda for half a century and will remain a key source. The f i rst site was built by the Belgians in 1959. Over 20 micro-hydro stations were installed in the 1980s; unfortunately most were destroyed during the 1990-94 war. The currently utilized hydro capacity i s 42 MW. However, the strong dependence on hydro power represents a risk which became evident in the 2004 energy crisis when a combination o f drought and over-utilization led to a rapid draw down o f the dam water levels leading to acute supply shortages. Although diversification o f energy sources i s a high priority, the Government o f Rwanda continues to develop hydro power as the least cost generation resource. Rwanda’s elevation provides abundant opportunities for hydroelectricity production. MININFRA has recently developed a Hydro Atlas that has identified 333 potential sites for small hydro power plants with a capacity between 50 K W and 1 M W each.
19. To address the low rural electricity access level and the relatively high cost o f existing generation alternatives, the government has recently embarked upon a sizable Micro-hydro development program to provide power to rural villages and towns. The projects are implemented in cooperation with a large number o f Donor partners and often focused primarily on the construction phase. There are in total 21 Government initiated projects that aim to deliver a total o f 11MW for 2012. Some are co-funded such as:
1) three UNIDO sites comprising micro hydro power plants o f 600 KW that are expected to start operating in 2008;
2) five under the BTC (Belgian Technical Cooperation) with a total capacity o f 5.15 MW, construction i s expected to start in 2008;
3) six by DutcWGTZ, developed under a Public Private Partnership scheme, financed by the Dutch government and with assistance o f GTZ, that are going to produce 1,6 MW in total and will be finalized in 2009-10 (3 will be fully operational in 2009);
4) and an additional set o f projects by the EU that will construct between 5-10 sites with a total capacity o f 3 MW, construction will start in 2009.
20. Issues to address: The sustainability o f the current and future micro Hydro investments in Rwanda wi l l rely on solutions to two core challenges; (i) ensuring that the government financed micro-hydro plants currently under construction will be properly operated and maintained; and (ii) supporting the transition from Government and donor driven projects towards a private-sector led model. To safeguard the operations, one feasible model could be to “privatize” or lease the Government-financed projects once. they are commissioned. The long- term goal towards transition to a fully private-sector driven model i s likely to be slow, as the
24
capacity o f the local project developers must be built along the way. The GTZ project has spearheaded the development o f a private sector driven approach relying on local investors. The schemes are initially relying on a 50 percent investment subsidy with significant technical backup and coordination by the GTZ office. The plans are that future projects should rely less on subsidy and instead use an increasing amount o f commercial financing through the local banking sector. This model might initially be more suitable for smaller micro-hydro sites (e 300 KW) due to increasing technical and operational complexity and upfiont financial resources needed in larger site development.
21. Rwanda Biomass' sector: As in other low-income African countries, wood fuels dominate the energy balance in Rwanda, with an estimated 95 percent o f the total primary energy supply made up o f firewood, charcoal, and agricultural residues. Even in the urban areas such as Kigali with access to petroleum fuels and electricity, all but the richest 5 percent or so o f the households rely on charcoal for their thermal energy needs. Rapid urbanization has expanded the charcoal market in recent years, now estimated at about $30 million per year (or roughly twice that o f the current electricity market). It i s primarily the charcoal demand in urban areas and some pockets o f wood demand by small/medium industrial users - in addition to charcoal- making, brick and tile-making and some agro-industry - that have elevated concerns about accelerating deforestation. Charcoaling efficiencies are also typically very low - about 9 k g o f wood for 1 k g o f charcoal - so that an average household annual use o f 1.8 tons o f fuel wood, if substituted by charcoal would imply equivalent wood fuel use o f about 3.5 tons (adjusting for efficiency in charcoaling as well as end-use). Substantial real increases in the price o f charcoal, in the transport distances, and in the use o f substitute or inferior biomass fuels - e.g. sawdust, coffee husks, and other residues in peri-urban areas - indicate that urban charcoal supplies are not met by sustainable exploitation o f wood fuels in rural areas.
22. Rwanda depends on biomass for around 85 percent" o f i ts energy, which i s derived from wood fuel (rural areas use firewood) and charcoal (urban areas) and i s used primarily for cooking. This dependency on biomass has dropped fiom 95 percent 20 years ago but i s s t i l l too high and a rapidly growing population has placed enormous pressure on Rwanda's natural resource base, leading to a significant wood fuel deficit. With the high rate o f wood consumption (1.2 kg/person/day in rural areas in early 2 0 0 0 ' ~ ~ there i s a big pressure on the forest resources in Rwanda. Deforestation not only leads to wood energy shortage but also to erosion. Rwanda's target i s to reduce the consumption o f biomass energy from the current 85 percent to 50 percent o f national energy consumption by 2020.
23. Rwanda has a long history o f activities to mitigate the environmental impacts o f wood fuel use. A program o f forest plantations - many on marginal lands, some as buffer zones around the protected natural forests - began soon after independence. It i s estimated that between 1960 and 1990, area under forest plantations grew from around 24,500 hectares to 247,500 hectares. During the same period, the protected national forests - in particular the Akagera National Park - suffered small (about 10 percent) loss o f their resource base, while lands designated as hunting areas and forest galleries suffered a very heavy loss (about 75 percent). The population was also
Biomass includes wood fuels such as firewood and charcoal, but also biogas and other biofuels. lo BEST (Biomass Energy Strategy) i s a joint initiative o f the EUEI Partnership Dialogue Facility (PDF), GTZ's Energising Af i ica programme and the Household Energy for Sustainable Development (HEM) programme.
25
encouraged to plant trees wherever and whenever possible, at the community as well as individual levels. However, large areas were lost during the war and genocide - primarily for fuel needs o f armies and displaced persons - and since then for agriculture and resettlement (as well as for fuel).
24. Institutional (schools, hospitals, prisons) and commercial (restaurants and other food processing enterprises) customers account for relatively small but concentrated demand for charcoal, Lately GoR have launched a program to pilot more efficient institutional-size cooking devices and technologies. Researchers at the Kigali Institute o f Science and Technology (KIST) have developed and used improved ovens for bread-baking. Biodigesters are in use at some prisons. The Government o f Netherlands has recently launched a program to expand the use o f biodigesters for broader market development focusing on households with livestock.
25. The GoR has set ambitious targets for lessen the dependence on wood fue l and charcoal. There are two measures undertaken: (i) disseminate efficient stoves, (ii) improve the charcoal making techniques. The goal i s that at least 80 percent o f all Kigali households should use an efficient stove by 20 1 1. A draft biomass strategy (BEST) was recently presented (August 2008) building on two recent sector reviews by international consultants. The strategy focus on the complete value chain including forest management and in particular Government and community plantations.
26. Past and Current initiatives: In the early 1990s, a small ESMAP-funded Improved Stoves and Carbonization program was undertaken”. More than 300,000 improved cook stoves were sold and used and more than 600 professional charcoalers’2 were trained and engaged operationally. Much o f the human and institutional capital built in this program was destroyed during the 94 Genocide, however, knowledge o f the improved stove designs survived; these stoves continue to be produced and used, and have spread from Kigali and other cities to other locations. These stove designs achieve about 25-35 percent reduction in specific charcoal use on individual basis. The rapid increase in charcoal prices - e.g. in Kigali, rising from around US$60/ton in around 2000 to US$17O/t currently - continues to provide ample economic justification to the customers. The former “trade association” o f charcoalers has not yet been revived, though some charcoalers were provided training by the MinInfra and KIST in the late 1990s.
27. This and other past programs have led to a variety o f stove models with efficiencies greater than traditional cook stoves are being currently produced, sold, and used in Kigali. These include all-metal models such as the DUB 10, all-ceramic models hand-made by local potters, and the combination metal/ceramic stove known locally as the “canamakd,” which originated from the Kenya Ceramic Jiko (USAID, 2007).
“ See “Why Better Biomass Stoves Sold in Rwanda”, World Development Report 1998-99, p. 39, and Barnes et. al. What Makes People Cook with Improved Biomass Stoves? A Comparative International Review of Stove Programs. World Bank Technical Paper Number 242, p. 22, 1994. l2 In Rwanda, much o f the urban charcoal market i s semi-organized and charcoaling i s carried out in smalVmedium rural enterprises. Charcoalers are usually employed as laborers; i.e., they are paid for the carbonization job by the owner o f woodcharcoal.
26
28. More recently CARE-Rwanda has launched an initiative funded by the EU ACP-Energy Facility to carry out an improved stoves and carbonization program in the Southern Districts o f Rwanda. The GoR BEST recommendations to professionalize the entire charcoal chain will be first tested in the Nyaruguru District. In Forestry, the Royal Netherlands Embassy financed the Forest Inventory that was completed in 2007 and published in 2008. The Belgium Government funds the Reforestation Support Program aiming at implementing efficiently the National Forest Policy to the benefit o f rural population.
29. Issues to address: Most stoves in the market today comprise o f either charcoal stoves for urban markets or firewood stoves for rural areas (most rural households do not use “stoves” as such but three stones laid out in a triangle) which are not very energy efficient. The key challenge i s to design the most sustainable way o f increasing the use o f improved stoves. Recent studies have identified the root o f the slow uptake stemming from a poorly organized and low capability production sector combined with low levels o f awareness among users. I t i s clear that the private sector must be in the lead for transforming the market towards more efficient stoves. However, the f irst issue i s why the market does not supply the “best” stoves already? Or i s the answer simply that poor households only value price as a purchase criterion? A second issue concerns the actual use as owning an improved stove does not necessarily mean that households actually use stoves on regular basis. Recent surveys highlights that this i s a critical issue in rural areas, in particular.
30. Although most charcoal makers apply simple and old technologies some know about improved methods and have adapted these; rather than use chimneys that are expensive, they have invented an alternative that apparently also works (BEST, 2008). These producers have adopted better stacking techniques and apply better supervision during the carbonization phase. The average carbonization efficiency increa~e’~ by almost 50 percent but it seems as these locally adapted methods have yet to be diffused throughout Rwanda.
31. In conclusion, three complementary actions are needed to reverse unsustainable wood fue l exploitation and reduce the costs o f charcoal use in the urban areas: (i) Sustainable supply management: e.g., planting o f more trees and better managing o f existing private & communal woodlots; (ii) Conversion and end-use efficiency improvements: reducing the demand for wood fuels in households, institutions, and small industries, via adoption o f improved stoves and other devices, including higher-efficiency kilns for charcoaling and bricwtile-making; and, (iii) Lowering the price and non-price barriers to access to substitute fuels - e.g., LPG and electricity, both o f which need to be imported, and also Lake Kivu gas, peat, papyrus, which are domestic resources.
D. Ongoing projects in renewable energy in Rwanda
32. advance stage o f preparation in Rwanda and the EAC region:
Below follows a summary o f the main RE programs currently being implemented or in
l3 Efficiency has increased only slightly from 10% to 13% over 20 years,
27
Belgian Technical Cooperation (BTC) 33. The BTC supports investments in the rural electrification area mainly through the “Electrification Project for the Rural Population through Renewable Energy” (EPRER). One o f the selected activities to be financed by this project i s the provision o f electric and solar thermal energy to Health Centers and rural Hospitals.
European Commission (EC) 34. The European Commission i s a relatively new donor in the renewable energy field in Rwanda. The EC funded project aims to “ ... enacting an innovative mechanism to create new markets for energy services in Rwanda and maximizing the inputs o f the private sector in developing, realizing, and financing o f the energy services.” The EC supports in particular two areas: i) energy solutions for off-grid public institutions such as health centers, schools, 2) micro- hydro plants. (total budget i s € 50 million )
35. The aim o f electrifying public institutions i s to equip around 350 schools, hospitals, and district offices with PV systems. For micro-hydro the objective i s to develop through private sector intervention about 3 MW capacity o f micro-hydro electricity plants in 3 to 15 sites serving up to 70 villages. The idea i s to build on the current GTZ initiative.
GTZ 36. Rwanda has since 2000 been a priority country for German bilateral cooperation, which focuses on the following sectors: good governance, health, and sustainable economic development. Energy has received support from the German Corporation for Technical Cooperation (GTZ) to sub-Saharan Africa’s largest grid connect PV system by promoting the training o f Rwandan solar technicians for the 250 kWp (kilowatt peak) plant Kigali Solaire. GTZ i s also involved in micro-hydro and biogas. The funding for Private Sector Micro-hydro Power Supply (PSP Hydro) for Rural Development i s € 3 million whereas support to biogas amounts € 5 3 million. The PSP Hydro builds local capacity to commission micro-hydro plants by contracting out to Rwandan companies. In total, six Rwandan companies have been awarded contracts having a 50 percent subsidy to build and operate six micro-hydro plants with capacities o f 100 to 500 kW. The same companies will then construct and operate local electricity grids that deliver electricity to nearby rural areas. For Biogas GTZ supports the National Domestic Biogas Program (NDBP); for more info see below.
UNIDO 37. In collaboration with UNIDO, the GoR are executing three micro hydro power plants namely: Nyamyotsi 11, Mutobo and Agatobwe. These will be commissioned by the end o f this year. One o f the projects: Nyamyotsi I, a 100 K W micro hydro power plant has already been inaugurated and i s now operational. About 250 households have been connected to the grid there and small and medium enterprises are developing their businesses using the new power.
USAID 38. Much o f USAID support to the energy sector i s indirect by financing health sector infrastructure as part o f the PEPFAR program. PEPFAR has identified energy supply to health centers as a major bottleneck for delivering quality health services.
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Government o f Rwanda National policies and programs
39. National Domestic Biogas Program (NDBP) - The objective o f NDBP i s to establish a sustainable and commercial market for the installation and maintenance o f domestic biogas digesters for those households in Rwanda who have access to sufficient cow dung available (minimum o f 2-3 cows) for the production o f biogas for domestic cooking and lighting purposes. Through the program 15,000 domestic digesters will be sold and constructed by private enterprises between 2007 - 201 1 in about 10 districts. The benefits include the availability o f improved organic fertilizer, the reduction o f workload especially for women and children and sharp drop in smoke related diseases caused by the traditional cook stoves.
40. The Government will provide a subsidy o f $300 for each digester which will typically costs $800-900 (6mtr3 model). The rest o f the investment costs will be provided by the farming household and credit support will be available through a commercial bank. The systems will be constructed by local entrepreneurs in the districts and their craftsmen trained under the NDBP. The program will in the initial stages be implemented through MININFRA while EWA i s being established. SNV provides technical assistance while GTZ i s responsible for the institutional aspects and will channel the DGIS contribution for the program costs and 75 percent o f the subsidy made available under the “Energizing Development” initiative.
Renewable Energy programs in the EAC region
41. Solar PV experience in the region - The experience in the region manifests the important role o f the private sector to drive development. In Kenya the private sector has been the forerunner for the last two decades and the PV growth has been heralded as a success story for market-driven development. The market was initially dominated by donor projects but when donors increasingly le f t the sector, the only option remaining was the involvement o f the private sector. The growth was slow in the beginning but has proven to be sustainable as solar products, including spares, can be found in most rural towns.
42. The Tanzanian case i s a more blended experience in which donors, government and private sector initiatives have co-existed for a number o f years. The dominance o f the project- driven model has lately surrendered to market-driven development. Ongoing projects are in fact designed to support the PV market with minimal distortions. Some o f features o f these projects have been: i) to affect policy and policy setting was seen as complicated and was limited to waiver o f VAT& Duties., ii) ii) project success and market growth are not easily distinguished and the project teams could not verify whether growth drew on the activities launched or by external factors but claimed it was “highly plausible.” iii) the modality for working with the private sector was not straightforward and was referred to as an “implementation framework” that had ring o f rigidity to it as the private sector must be approach in a flexible way. iv) the project had a tendency to be too pro-active rather than ‘waiting’ for the private sector response in several regions. Hence, the project took the lead sidestepping the private sector which will most probably result in an unsustainable market situation.
43. Biomass experience in the region - The case o f improved stoves for charcoal stoves point to the cumbersome process to induce innovations through top down projects. In Tanzania,
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the improved stoves were introduced almost two decades ago but s t i l l diffusion has reached a mere 4 per cent. The route chosen was to train artisans operating in the informal sector. The bottlenecks identified for further market uptake are related to volumes and quality o f production. The artisans were incapable and uninterested to invest in modern production methods allowing for quality control and up-scaling. Hence from a job creation perspective the project was fairly successful but f iom the consumer’s point o f view to access fairly cheap stoves o f high quality, the experience tells us that the model for diffusion i s critical to reach a sustainable market.
,
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
RWANDA: Sustainable Energy Development Project
Project Name
Table A2.1: Major Related Projects Financed by the Bank and/or Other Agencies Bank Projects:
ID Rating Sector Issues
Electricity Access Scale-up and S WAp Development project Urgent Energy Development Project (UERP)
Poverty Reduction Support Grant (PRSG)V
Urban Infrastructure Project
P111567
PO90 194
P106083
'060005
-
:BRD/ :DA millions If US$ 70 -Low access
household have access)
(43% o f
10.8
S
S
IO
Major supply deficit f rom drought and increased demand Includes energy as a priority sector along with education and water
Produc t Line
S
S
IBRDI IDA
Improving the business environment by reducing cost and improving efficiency in Rwandan uti l i t ies Improving urban management practices in Kigal i and 5 secondary cities in order to better deliver urban infrastructure and services to the population
IBRDI IDA
and Enterprise Development Project
IBRDI IDA
IBRDI IDA
IBRDI IDA
itatus
Jnder rep- ration
ict ive
ict ive
ict ive
ict ive
Approval Date
0 1/27/05
0311 71200 9
0411 9/200 1
31
Donor Belgian Technical Cooperation
Project Title Value Electrification Project MUSD 21.4
European Union
UNIDO
GTZ
Small Scale MUSD 1.8 Hydropower (SHP) .
OFID/B ADEA
for the Rural Population through Renewable Energy” (EPRER) Increase Rural Energy Access in Rwanda through Public Private Partnerships - IREARPPP Private Sector Micro- hydro Power Supply (PSP Hydro) Rehabilitation o f three hydroelectric power plants in Mukungwa, Gihira and Gisenyi
MUSD 9
MEuro 3
MUSD 10
Status 4ctive
Active
Active
Active
Active
Source: World Bank Data
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Annex 3: Results Framework and Monitoring
RWANDA: Sustainable Energy Development Project
nt
Project Development Objective: The PDO for SEDP is:
Improve policy and institutional framework o f the Renewable Energy and Energy efficiency sub-sectors
Increase Private sector Participation in the Renewable Energy Sector
To achieve greenhouse gas reductions through use o f renewable energy technologies as well as through increased end- efficiency in the energy sector.
COMPONENT A Policy, Strategy and Management
Efficient Biomass utilization
1. Renewable energy and Energy
2. Micro-Hydro Feed-in and Bulk- efficiency Strategy Study adopted
purchase tariffs agreed with RECO and approved by R U M
3. Number o f s ta f f employed in RE f m s
4. # o f Local Solar PV Dealers with field presence in at least one province outside Kigal i offering sales and maintenance services
5. C02 Emissions avoided
Outcome Indicators for Components
6. M&E framework for al l RE activities in place with regular (quarterly) progress reports # o f enterprises graduating the incubator program with a business plan in place that i s approved by TBIF
7.
8. % o f households using improved stoves in the Kigal i area
To assess the impact o f the TA and capacity building activities on the Sustainability o f sector investments and the growth o f private sector.
To assess the ‘totality’ o f incentives and opportunities for the private sector through the proxy No o f s ta f f
Use of Intermediate Outcome Monitoring
YR1-YR3: Assess impact o f policy and strategy support, and quality o f private sector capacity building.
YR4: Review results and draw lessons for mainstreaming in Government programs.
Monitor the uptake o f improved stoves in the Kigal i area and adapt the promotion and capacity building components accordingly.
33
COMPONENT C Micro Hydro Plants 9. Business Plans for public micro-
hydro under implementation. 10. % of Micro Hydro Plants complying
with the new O&M guidelines
COMPONENT D Solar Energy
1 1. Installation and user guidelines for Solar PVs in public institutions approved.
COMPONENT E Energy Efficiency
12. Approved investment plan based on the national grid energy audit
13. National building code integrates energy efficiency elements
I
Assess the impact of TA support in facilitating private sector participation in Renewable energy investments.
Review uptake of PV guidelines and impact on sustainability .
Review the impact of EE recommendations provided to the Utility and public institutions.
34
E z M *
a * M * 0 VI m
m
;-” 0 Z In
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Annex 4: Detailed Project Description RWANDA: Sustainable Energy Development Project
1. An overall objective o f the proposed GEF Rwanda (SEDP) i s to strengthen the Rwanda Renewable Energy sector by building capacity in MININFRA and local private sector to design, launch, and monitor sustainable energy projects drawing on renewable energy technologies/resources that can be developed in Rwanda. More specifically, the project will support MININFRA's renewable energy activities in three selected areas; biomass, solar energy, and 'Micro-hydro with special emphasis on establishing national policies, technical standards and operational fiameworks needed to make the investments long term sustainable. I t wi l l also assist RECO to carry out energy efficiency programs through DSM activities such as efficient use o f energy in public and commercial buildings. There are five project components; policy and strategy, efficient utilization o f biomass resources, micro-hydro plants & grids, solar energy (PV and solar water heater), and energy efficiency/DSM in public and private institutions.
2. The total investment in project-related activities i s estimated to US$ 71 million (Le. earmarked for activities within the scope o f Sustainable Energy Development Project.) The direct SEDP funding comprises in total US$ 8.3 million consisting of: 1) US$ 4.5 million from the GEF project, 2) an additional 3.8 million joint funded through Dutch investment support managed through the Bank's AFREA CEIF MDTF access window. The rest o f the funding (USD 71.26-8.3 million) comprises parallel funding from EU, GTZ, GoR, etc.
Table A4.1: Project financing and RE sector Parallel co-financing
Project component UERF' IDA/ I E U Dutch/
GTZ Private Belgium GoR Total
A Policy strategy I 0.3 5*18 I 1.7 1.8
0.9 0.5
0.9 0.3
0.35 1.2
B Biomass I 2.3 0.25
1.3 19.46 1169 48.26 1 4.2 C Micro- hydro D Solar Energy T 11.95 1 0.2
E Energy Efficiency + 11.88
I 0*27 0.2
1*92 I 71.26 I Total project
costs 4.2 1.95
Source: World Bz k Data
39
Component A Policy, Strategy and Management
Sub-component A1 : Policy and strategy development (MININFRA) 3. The sub-component will foremost support Policy/Program development and institutional strengthening o f Department o f Energy in the Ministry o f Infrastructure (MININFRA) and the proposed Energy and Water Board but also assist the regulator and renewable energy organizations, finance institutions and private sector organizations. The focus o f the M I N I N F M W A subcomponent i s to strengthen strategy formulation using the energy policy as platform. Hence, the focus i s not on the policy per se but on how to translate it into action by formulation o f strategies and programs to streamline the use o f renewable energy resources in the Rwanda Energy sector. To this end, capacity building i s necessary not only for MININFRA staff but also for EWA and other energy institutions.
Sub-component A2: Strategy study
4. A renewable Energy strategy study will be commissioned to assist the government in drawing up a blueprint for renewable energy technologies suitable for different applications and what modalities could be adopted for service delivery, management and maintenance o f plants and installations and to increase the accessibility o f local financing. The strategy study and analysis constitute a key input for designing the strategy/program development. The focus i s on micro-hydro and solar energy.
Subcomponent A3: Monitoring and Evaluation, support for project implementation
5. The project will support the design and implementation o f a comprehensive M&E framework to be developed within MININFRA for all Renewable Energy projects currently implemented by the Government (totaling over USD 40 million). The M&E framework will form an integral part o f the access SWAP and will together with the monitoring o f the grid roll- out program provide a complete view o f the progress towards the GoR Energy objectives as articulated in the EDPRS. The framework will further facilitate comparison o f outcomes and evaluation o f impacts to display effectiveness and best practice in meeting development and project objectives.
6. The project will further support the start-up cost o f the Lake Kivu monitoring unit. The new entity will be responsible for scientific and environmental monitoring o f the Gas extraction activities on Lake Kivu including measurements o f the lake density gradients. Funding will include laboratory equipment, technical assistance, capacity building and funding to arrange stakeholder workshops.
7. The, project will also support incremental operating costs o f the PCU, including additional costs arising from the added workload stemming from the GEF project. It i s expected, as part o f the implementation o f the NEAP and SWAp, that the UERP PCU will be integrated into a new RECO Projects Department that will consolidate within the company all existing project-specific PCUs to manage and oversee the national grid rollout and connections program. The capacities o f the UERP PCU will be fully transferred and further improved by additional capacity building and TA support included in the NEAP and proposed IDA Electricity Access scale-up project.
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Subcomponent A4: Incubation program
8. The subcomponent comprises Private Sector support through an Energy Entrepreneurship Incubation programme in Cooperation with KIST’S Technology & Business Incubation Facility (TBIF). The entrepreneurs must be linked to one o f the four core activities; biomass, Solar Energy, micro-hydro, and energy efficiency. The training will be a combination o f theory and hands-on ski l ls to learn how to run a business in reality. Each entrepreneur will be allocated a support team that acts as a mentor. The team will have access to expertise from KISTRECO, experts in business management, financing, etc tailor-made for each type business venture.
Component B Biomass
Subcomponent B l : Improved Cook stoves
9. The project’s objective i s to promote the use o f improved stoves and develop a sustainable market for efficient stove designs that lower charcoal use with 30-4014 per cent compared to traditional stoves. Stoves with such efficiency rates already exist in the market so the focus i s not on innovation per se but how to speed up diffusion. I t i s clear that the private sector must be in the lead for transforming the market towards more efficient stoves. Training o f producers, improving stove technology and production, enhance the knowledge o f new technology options (such as 3‘d generation stoves) as well as awareness campaigns are the key elements to boost the market. As the current stove production in Rwanda i s using very rudimentary art isan methods with limited potential for lasting quality improvement, the SED project aims to support the process o f “industrialization” o f the stove production. Existing producers will be approached to transform production from small-scale and low-technology to a semi-industrialized stage. The definition o f semi-industrial implies production methods that are planned and carried out in a location suited for small-scale operations such as a workshop. This sub-component will partly be coordinated with subcomponent A4 in order to identify entrepreneurs willing to invest in new technology. As the use o f improved cook stoves (mainly for firewood) i s s t i l l limited in rural areas the project will commission studies on appropriate stove technology but more importantly identify barriers and mechanisms to diffuse such stoves.
Subcomponent B2: value chain analysis and transformation
10. The GEF intervention will build upon the experiences o f the improved charcoal cook stove program described above but with a different and complementary emphasis. The charcoal value-chain stretches beyond improved stoves and includes sustainable forestry, trees as a commodity, kiln (charcoal making) efficiency, handling, transport, etc. The SEDP focus i s charcoal making. Charcoal production technology currently in use has extremely low yields. The efficiency o f the production kilns used in many parts o f Rwanda i s a mere 11 - 15 % on a weight basis and adoption o f more efficient methods i s often very lowl5. Adopting better kiln preparation methods could rapidly increase efficiency to a total o f 20-23 percent; if retorts are introduced then the weight efficiency could go up to 25-28 percent.(Van der Plas, 2009). The SEDP will coordinate with on-going activities such as CARE to develop a more professional value chain but also build on the lessons captured in the Biomass Strategy (BEST, 2008). Outreach to rural areas i s ensured by various marketing and awareness raising activities. Road
l4 These are the savings for charcoal stove whereas savings for improved firewood stoves can be higher. l5 Average efficiency in energy conversion fiom wood to charcoal can in some cases be even lower, merely 8-20% (www. worldbank.org/htmUfpdenergy/energynotes/energyO 1 .html#end)
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shows using mobile un i t s to directly meet with groups o f charcoal makers, traders, forest owners have proven effective elsewhere and wi l l be used, The organization o f the value chain will be addressed by supporting the formation o f an association for charcoaling f i rms. Certain issues requiring changes in the regulatory framework will be subject to study as well.
Component C Micro-hydro
Subcomponent CI : Private-sector led micro-hydro expansion
11. This subcomponent addresses a number o f issues for speeding up the private sector’s investment in micro-hydro. The project wi l l capitalize on the lessons learned from earlier pilot projects in Rwanda such as GTZ PSP Hydro project and will assist to develop a national operational framework for small private IPPs. The focus i s to establish the necessary contractual relations and conditions governing the relationship between clients and service operators but also assist in setting transparent rules for grid feed-in and bulk purchase tar i f fs for independent operators dealing with RECO. The component will finance advisory services to strengthen the role o f traditional banks in extending long-term credit l ines for independent power producers and distributors to increase the availability o f commercial credit l ines to complement and eventually replace donor grants as investment support. Possible cooperation with IFC will be explored to increase the access to venture capital by e.g. setting up a credit facility with local MFIs and banks to share some o f the risk exposure and enable long-term credit to be availed to developers.
12. An important prerequisite for private investment in micro-hydro i s MININFRA’s capacity to prepare detailed plans on access expansion such as time lines for the grid roll-out program in various part o f Rwanda, expected Watt capacity o f each plant, rough estimates o f level o f investment, contractual agreements between IPPs and RECO, tender procedures or other principles for identifying and selecting investors.
Subcomponent C2: Sustainable micro-hydro
13. This subcomponent intends to improve the sustainability o f the government-owned micro-hydro schemes beyond the construction phase. The sub-component intends to leverage these investments by providing technical assistance to prepare business plans, Maintenance and operational arrangements to ensure a long-term sustainable operation o f these facilities on a private or Public-Private basis. The program will also include training o f developers and project promoters to increase the domestic capacity to develop, construct, operate and maintain rural hydro schemes.
Subcomponent C3: micro-hydro helpdesk 14. The number o f commissioned micro-hydro plants has increased rapidly and will continue to grow. Private sector involvement and the phasing out o f foreign contractors will lead to a need for technical support to sustain the level o f maintenance. Preventive and breakdown maintenance requires among others access to spare parts. There i s already a substantial stock o f competence in the field o f commissioning and running micro-hydro plants in Rwanda, but the knowledge base i s not well structured and finding the right person to answer specific technical questions i s often a time-consuming task. The helpdesk will be established in cooperation with the Energy Development Division (EWA) and RECO.
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Component D: Solar Energy
Subcomponent Dl : Solar PV through institutions
15. The GEF sub-component will address the rapid scale up o f donor investment in the sector by supporting the newly formed task force with delegates from MININFRA and MINISANTE. Sub-committees will be formed for 3 areas: i) Application (installation & user) guidelines, ii) system sizing guidelines (what should a system look like for a health centre, school, etc.) and iii) improving the tender process to allow for clustering o f smaller procurement and maintenance contracts bearing in mind the trade-off between economies o f scale and allocating lot sizes that can easily be coordinated and monitored. External expertise will be used to support the work in the committees. The ongoing decentralization o f government functions will also be considered in the project design. It i s expected that there will be more autonomy and budget responsibility for e.g. rural schools and health centers that requires a different approach to PV electrification.
Subcomponent 0 2 Private-led PV for rural electrijkation
16. The objective o f this component i s to promote the private sector to engage in rural markets for PV systems. The modality i s to work with existing companies to enable them to build rural distribution channels and outlets. At least four dimensions need to be addressed for triggering the process leading to the growth o f the PV market in rural areas: Awareness, Acceptance, Access, and Affordability16 (the 4A model). The support will focus on four different market segments:
1. Rural households with a certain ability to pay 2. Small, medium and micro enterprises (SMMEs) 3. Small Energy Service Companies (Mini ESCOs) 4. Rural schools, town halls, village centres, etc (such that are not covered by the
institutional support)
17. The 4 As will be addressed by the following project components: awareness raising by enhancing and alerting the PV sector on the role o f marketing in creating a demand for PV systems. The project will market PV in various parts o f Rwanda in collaboration with the private sector on cost - sharing basis. Acceptance i s about a deeper understanding o f technology and how PV can contribute to livelihood in rural areas. This will be achieved by setting up a limited number o f demonstration un i t s sold at a subsidized rate mainly for communal usage such as street lighting or community centre lighting, A second track comprises the support o f sales to a productive use o f PV such as street vendors, barber shops, cold drinks, etc. Access remains a key bottleneck in rural areas and involves the development o f rural distribution channels. The project will assist urban based P V companies to link up with potential rural agents. The match-making process i s initially concerned about linking f i rms but in the long run about protecting customers’ interest. Hence, it also involves customer advocacy and quality issues such as warranty and customer complaints. Affordability i s addressed in two ways: by working with the PV sector on cost issues and the effect o f market growth - implying increased competition - prices will fall.
l6 The model has applied successfully in South Africa by IEA and by Sida in Tanzania. The rationale i s that affordability i s an issue only after there i s awareness, acceptance o f the technology, and access by a developed distribution network.
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Subcomponent 0 3 : Solar Water Heater (SWH)
18. The solar water heater market is not well developed in Rwanda. Preliminary observations point to relatively high prices and few dealers. In order to kickstart the market a voucher scheme will be introduced. The incentive scheme would provide partial subsidies for users with moderate need o f heated water such as households, small institutions, SMEs. The design o f the voucher system draws on earlier experience o f voucher schemes but rests on the fol lowing principles: 1) base line study o f the S H W market in Rwanda, including the number and capability o f existing SWH dealers, 2) a voucher, de facto, a subsidy and must be wel l targeted to reach the "right" users, 3) transparency for buyers and sellers to disclose the true costs, 4) provide choice o f supplier for the buyer, 5) avoid distorting price setting (in the long term), 6) guarantee quality by screening o f dealers using eligibility criteria and establishment o f technical criteria.
19. A base l ine study will be conducted to detail the voucher scheme by exploring the above principles. I t will also determine purchasing power among potential buyers which will form the basis for actual subsidy granted.to the buyer. The project subsidies will be disbursed only after independent verifications o f sales, installations and technical compliance. The verifications and the strict application o f technical and other requirements provide a layer o f quality assurance that is expected to increase market confidence in the technology and the supplying companies.
20. The SEDP will in particular draw on lesson learned in Tunisia that has successfully developed a S W H market through a voucher scheme. Contributions f rom other projects using similar subsidy schemes in GEF projects will be added (such as South Afr ica REMT) and in similar "per watt peak" subsidy schemes for solar P V panels (such as the Zambia "Increased Access to Electricity Services Project").
2 1. The scheme will be offered for new and existing electricity customers willing to invest in Solar Water heating equipment to replace the electric water heaters currently in use in Rwanda. The proposed project would provide for catalytic investment subsidies necessary to get the hot water program o f f the ground and reach the required mass for market scale-up. The lesson learned in the GEF pilot will be further applied in the ro l l out o f the Rwanda Electricity Access Scale-up and Sector-wide Approach (SWAP) Development Project.
22. The sub-component comprises the fol lowing activities: i) Promotion and awareness campaigns; ii) capacity building o f the private sector (traders, installers); iii) Introduction o f improved products to local dealers by financing batch ordering o f app. 100 smaller S W H systems (tentatively 3-6 m2 collector, 100-3001 tank).
Component E: Energy Efficiency
Subcomponent E l : Energy eflciency Strategy Development
23. The key activity is to fund an Energy efficiency study o f larger Residential, Commercial/institutional and Industrial buildings but would also include Transport and industrial processes. There are not many o f such buildings and processes but their electricity consumption is high in a relative sense. Energy efficiency/performance studies will be carried out for three main purposes; i) increase awareness and knowledge o f actual spending and how electricity use can be minimized, ii) policy implications; how buildings and industrial processes can be better designed in the future to include established EE lessons and best practice in national building code, iii) and how to design efficient public lighting in urban areas. In order to improve the
44
quality o f services in Energy Efficiency to Institutional and private customers, the project will finance training and capacity building o f local Energy efficiency auditors at EWA. The sub- project o n energy efficiency in buildings will be coordinated with the proposed regional UN- Habitat on EE that aims to lower energy use and cost. In short, the emphasis i s to lay a foundation for strategy development by conducting strategy studies.
Subcomponent E2: Gr id Transmission Losses
24. This sub-component will provide technical assistance to RECO for efficiency improvements based on a comprehensive energy Audit to identify potential for efficiency improvements. (Efficiency i s measured by proxy losses defined as the difference between generated electricity and electricity billedconsumed by users.) RECO will finance the implementation o f the recommended investments using,own and donor/GoR financing as part o f the SWAp. The energy audit at RECO will specifically focus on (i) Technical loss reduction in the electricity grid with special emphasis on load f low analysis and measurements to identify overloaded transformers and lines; (ii) measurement o f power factor in various parts o f the grid; and iii) the primary, secondary and tertiary pumping systems within the utility. The utility studies will build on earlier work by done by GTZ in 6 pi lot stations and the 2004 “Energy Loss Reduction Assessment and Loss reduction ~trategy” ’~.
” LahmeyerNETGroup April 2004
45
Annex 5: Project Costs
RWANDA: Sustainable Energy Development Project
Category
Table A5.1: Estimated project cost and financing plan
GEF AFREA-CEIF AFREA-CEIF Total GEF Local
us US $million US $million US $million $million $million
Foreign Local Foreign us Project Cost By Component and/or Activity
B Biomass 0.1 0.8 0.1 0.4 1.4
D Solar Energy 0.1 0.25 0.2 1 .o 1.55 E Energy 0.1 0.55 0.65 Efficiency Total Baseline Cost 0.8 3.7 0.7 3.1 8.3
Total Project 0.8 3.7 0.7 3.1 8.3
A Policy strategy 0.3 1.4 0.3 1.5 3.5
C Micro-hydro 0.2 0.7 0.1 0.2 1.2
costs
Amount of the Percentage of Grant Allocated Expenditures to be
(expressed in Financed USD) (inclusive of Taxes)
Total Financing 0.8 3.7 0.7 3.1 8.3 Required
(1) Goods, works, non-consulting services, consultants’ services (including for audits), Training, and Operating Costs under Parts 1,2,3, and 4 ofthe Project”
3,850,000
(2) Goods, non-consulting services, consultants’ services (including for audits) and Training, under Part 5 o f the Project
TOTAL AMOUNT - GEF TF
50
650,000 100
4,500,000”
Disbursement Table SEDP CEIF Grant (1) Goods, works, non-consulting services, consultants’ services (including for audits), Training, and Operating Costs under Parts 1, 2, 3, and 4 of the Project”
3800,000 50
l8 For disbursement purposes and simplicity in financial management the allocated trust fund financing displayed in Table A5.1 has been combined for components A-D (parts 1-4 o f the project) into one disbursement category with the expenditures split 50% for the GEF TF grant and 50% for the AFFEA-TF CEIF grant.
TOTAL AMOUNT - CEIF TF
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3,800,000”
Annex 6: Implementation Arrangements RWANDA: Sustainable Energy Development Project
Intra-Ministerial Task Force
1. A Project management directorate (PMD) will be established as part o f the existing un i t s in RECO to facilitate project implementation. The new department integrates the activities and staff o f existing project PCUs in RECO and will bear implementation oversight responsibility for the full project as part o f i t s over-all responsibilities for the access SWAP and roll-out program. The planned capacity o f the PMD has been assessed and will meet the requirements for implementing the SEDP. It will report to the Sector Working group (SWG) with members o f core ministry, participating donors and sector stakeholders and will draw on specific technical sk i l ls as required from the Ministry o f Infrastructure and the future Energy development department under the Energy and Water Board for identification and supervision o f tasks o n sub- component level. The department will be an integral part o f RECO organization and will include a core team including a manager and deputy, a procurement specialist, a financial management specialist, an M&E specialist, two safeguards specialists (environment and social safeguards) and supervision engineers working full or part time on the project. In addition to its implementation oversight role, the department will also: i) undertake/assist al l project entities in procurement; ii) maintain complete files for a l l procurements; iii) operate the project accounts; iv) prepare project reports including the Un-audited Interim Financial Reports (IFRs) and mid- term review report; v) undertake supervision o n project funded activities; and vi) undertake additional short-term consulting assignments as directed by the Steering Committee.
Figure A6.1: Programmatic Access SWAP management hierarchy for implementation and program oversight
Rwanda Donor Cluster Energy Sector
Project Management 2%-
Local Installation Contractors
Board (EWB)
Solar PV Micro-H ydro
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2. The project will support the incremental operating costs o f the department, including technical assistance such as consultants and resident advisors as wel l as costs arising under the project on account o f maintenance o f vehicles, fuel, equipment, offices supplies, utilities, consumables, travel and accommodation, auxiliary project staff salaries for the department but excluding salaries o f the Utility staff and Government’s c iv i l servants. It i s expected that the SEDP portion o f these costs will be minor in comparison with the costs born by the proposed Electricity Access Scale-up project and other donor and government funded initiatives within the S WAp and roll-out program.
3. The Project management department will have primary responsibility for facilitating, monitoring, evaluating and reporting on project activities and progress. The department staffing and responsibilities will include:
manager who will have primary responsibility for the running o f the unit. The manager will be responsible for:
0
interacting with the Sector Working group (SWG) preparing and implementing the SED work program updating the work program as needed, but not less than annually managing the activities o f staff day-to-day interaction with project stakeholders maintaining project schedules preparation o f the Mid Term Review report and other reports as required by the project legal agreements or requested by the Steering Committee monitoring compliance o f al l UER and SED activities with environmental, social, and fiduciary safeguards as required by the Government and the World Bank
0 procurement specialist will advise and assist project stakeholders in preparing the necessary documentation (e.g. call for expressions o f interest, bid packages, evaluation reports, etc.). Based on the prepared documentation, the procurement specialist will take responsibility for the procurement processes, ensuring that al l steps are properly undertaken, and that procurement f i les are maintained in accordance with Government and World Bank requirements. The procurement specialist will track al l project procurements, and will identify issues - especially deviations f rom agreed procurement schedules - and seek to resolve issues in a timely manner.
0 financial manager who will have primary responsibility for maintaining SED project finances, including management o f project accounts (Special Account, local currency account), preparation o f quarterly reports in the Financial Management Reporting (FMR) format, tracking of: project commitments (i.e. signed contracts); disbursement estimates; allocations to various project activities; etc.
4. Implementation o f specific project activities will be undertaken by a specialist designated for the Task within RECO, MinInfra and EWA, the procurement plan will identify responsibility for task management per component and will be updated continuously as the staffing o f the energy agency is recruited.
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Annex 7: Financial Management and Disbursement Arrangements
RWANDA: Sustainable Energy Development Project
Executive Summary
1. This annex i s a record o f the results o f the assessment o f the existing financial management arrangements for the Sustainable Energy Development Project (SED) under the utility service company RECO. The objective o f the assessment is to determine: (a) whether the P M D to be established through the integration o f the activities and staff o f the existing UERP PCU with the existing un i t s in RECO has adequate financial management arrangements to ensure funds will be used for purposes intended in an efficient and economical way; (b) PMD's financial reports will be prepared in an accurate, reliable and timely manner; and (c) RECO' assets will be safeguarded. The revised financial management (FM) assessment was conducted in accordance with the Financial Management Practices Manual issued by the Financial Management Sector Board on January 16,2009.
Country Issues
2. The Country Financial Accountability Assessment (CFAA) prepared in 2005 documented the evaluation o f the Public Financial Management (PFM) environment in Rwanda. I t revealed that despite continuing weaknesses in the P F M system, the Government has made tremendous strides towards improving accountability. The adoption o f the Organic Budget L a w (OBL) and o f accompanying financial instructions and continuing efforts to adapt Government's institutional arrangements are some o f the tokens o f government resolve to strengthen P F M in the country. There i s evidence o f government action to address issues identified in previous reports. The budget preparation process has been stfengthened with the introduction o f the MTEF. The process is much more structured, with increased levels o f stakeholder participation, particularly o f c iv i l society and development partners. The achievements culminated to the preparation o f the first set o f consolidated financial statements for the year ended 2006 and subsequently those o f 2007 which lead to a comprehensive review by the Office o f the Auditor General o f the consolidated financial statements for the year ended 2006 revealing inadequate support o f expenditure s t i l l remained a significant shortcoming and hence the underlying weaknesses in PFM,
3. Despite the recent progress, continuing weaknesses in the financial accounting and auditing systems pose a major fiduciary risk. The biggest challenge facing Government i s the severe human resource capacity constraint. The ability to attract and retain technically trained and qualified financial management personnel i s central to the sustainability o f PFM reforms.
4. The Government has adopted a number of measures to address the shortcomings indicated above. These mainly center on the creation o f suitable capacity to implement the provisions o f the new legal and regulatory framework, ensuring the availability o f sufficient guidance to PFM personnel, and commencing the regular preparation o f financial statements. The Government has taken measures to enhance the procedures for budget preparation (strengthening the alignment o f budgets with strategies) and the control over its treasury resources. The Government carried out a needs assessment that identified the financial management skills required in government, including accountants and internal auditors. The
49
Government has embarked on a recruitment exercise to f i l l the vacancies in this area. Workshops have been conducted for the existing personnel and programs for refresher annual refresher courses have been suggested in the P F M reforms. The roles o f the audit institutions have been clarified to remove previously existing redundancies. The Government has adopted International Public Sector Accounting Standards for accounting and financial reporting.
Risk Assessment and Mitigation
5. The following are necessary features o f a strong financial management system:
The Financial Management Unit o f the PMD should have an adequate number and mix o f skilled and experienced staff;
The internal control system should ensure the conduct o f an orderly and efficient payment and procurement process, and proper recording and safeguarding o f assets and resources;
’ The integrated information system should support the Project’s requests for funding and meet i t s reporting obligations to fund providers including Government o f Rwanda, GEF, other donors, and local communities;
The system should be capable o f providing financial data to measure performance when linked to the output o f the project; and
0 An independent, qualified auditor should regularly review the Project’s financial statements and internal controls.
6. The Risk Assessment and Mit igation table below shows the results o f the risk assessment f i o m the Risk Rating Summary. This identifies the key risks the P M D management may face in achieving Grant objectives and provides a basis for determining h o w management should address these risks.
50
Table A7.1: Risk Assessment and Mitigation
Inherent Risk
Country Level
Entity Level
Project Level
M
L
L
~~
Rwanda’s weak capacity and monitoring systems continue to hinder governance. CPIA assessment of Q. 13 and 416 show a moderate FM risk.
RECORECO has in the past shown weak performance on core aspects of financial reporting, accounting, and auditing.
l e PMD will execute the hergy SWAP that has been greed upon in the MOU; ence the possibility of a iultiple and complex roject.
_ _ _ _ _ _ _ ~ ~ ~ ~ ~~
A system of checks and balance has been established and i s operating through institutions such as the National Tender Board, Office of the Ombudsman, and the Office of the Auditor General.
N
Recommendations of 2005-2007 are being implemented while a follow-up audit for 2008 has been commissioned. A qualified CFO’was hired to oversee the Financial Management of RECO. The new PMD will also benefit from the extensive experience of the UERP PCU that will transfer i t s existing capacity to the department. Further, the policy & regulatory and private sector initiatives of the GoR in the energy sector remain on course with the formation of its Sector Working Group (SWG).
N
The capacity being transferred from the UERP, coupled with strengthening from RECO, should provide adequate mitigation. N
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Control Risk
Satisfactory budgetary systems are in place, and an adequate budgeting arrangement exists.
iudget procedures documented 1 UERP’s procedures manual r i l l be adopted by RECORECO MD to complement the existing ECORECO procedures.
Budgeting L N
‘he PMD will integrate Kperienced UERP staff )llowing the integration of the roject into RECORECO. ECORECO will second an ccountant to complement ERP’s capacity in the PMD. ,dequate accounting policies, rocedures, and standards in the resent UERP will be used for ccounting purposes.
ECORECO has in the past hown weak performance on ore aspects of financial :porting, accounting, and uditing. Similarly, UERP’s M arrangements following thc :signation o f the FMS reakened i t s capacity.
Accounting M Y Effectiveness
A weak internal audit function exists in RECO. Internal audit reports reviewed are not robust in content and not focused on risk.
Capacity-building initiatives have begun with the development of an Internal Audit Charter by PWC. The internal audit will seek collaboration with the government’s Chief Internal Audit Office to enhance its capacity to conduct ex-post verification of expenditure eligibility, as well as physical inspection of works and goods ,
acquired during i ts implementation.
Simple and Functioning Funds flow arrangements will be maintained under PMD based on the experience of UERP . A designated account (DA) held at BNR will be opened to expedite the implementation of the finding.
Internal Control M N
und flow arrangements under ERP are working well.
Funds Flow L N
PMD will need to customize, for reporting purposes, Interim Financial Reports complying with formats prescribed in the World Bank guidelines.
UERP i s currently producing IF& in compliance with formats prescribed in the World Bank guidelines. PMD will prepare IF& every 4 months and agree on their formats and contents with IDA.
inancial eporting Agreed
Negotiations M
‘uditing. Capacity constraints at the Office o f the Auditor General led to Audit
Several capacity-building initiatives supported by the PSCBP are being undertaken to
S N
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Overall Risk Rating
H - High
M
noncompliance.
A weak audit environment i s prevalent in Rwanda, as noted in the recently published ROSC A&A, and may affect the quality of audits received, and thus their acceptability to the Bank.
An Independent External Audit commissioned by RECO for the years 2005- 2007 gave a disclaimer opinion for a l l three years.
S - Substantial M - Modest
support the OAG.
The Rwandan government has completed the legal framework and launched the Institute of Certified Accountants of Rwanda, with a view to strengthening the accounting and auditing infrastructure.
RECO i s currently implementing the recommendation of the auditor and preparing the audit for 2008.
Newly updated Terms of Reference shared with UERP will be adopted.
PMD will seek to obtain a consent letter o f audit from OAG to conduct the audit or outsource the exercise under the oversight of the OAG.
L - Low
N
N
N
month into Tectiveness
Source: World Bank Assessment
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Strengths and weaknesses of the Financial Management System
2
7. The project financial management i s strengthened by the following salient features:-
Ph4D will seek to obtain a consent letter o f audit 1 month after PMD from OAG to conduct the audit or outsource the effectiveness exercise under the oversight o f the OAG .
a) Endorsement o f the Paris Declaration through the integration o f the activities and staff o f the existing PCU with the existing un i t s in RECO structure and the collaboration o f the Sector Working Group drawing on GOR systems through the parent Ministry MININFW;
b) The existence o f Financial Management Manual in UER Project, cleared by IDA and adopted and updated by PMD together with the existing experience from UER Project;
8. The project financial management may be weakened by the following: . . The past had a weak performance on core aspects o f financial reporting, accounting and
auditing by RECO Capacity constraints o f the Office o f the Auditor General and the prevalent weak audit environment in Rwanda may affect the PMD’s audit compliance and quality o f the audit reports. These are being addressed through the Swedish support Netherlands court Office and the recently launched the Institute o f Certified Accountants o f Rwanda with a view to strengthen the Accounting and Auditing infrastructure.
Financial Management Action Plan
9. financial management arrangement and the dates that they are due to be completed by.
The action plan below indicates the actions to be taken for the PMD to strengthen i t s
RECO will second an accountant to compliment Grant Effectiveness PMD UERP’s capacity in the PMD.
Institutional and Implementing arrangements
10. The overall responsibility over the PMD financial matters and will remain with RECO Chief Financial Officer assisted by the UER Project accountant. RECO will second an accountant to compliment UERP’s capacity in the PMD to be established through the integration o f the activities and s ta f f o f the existing PCU with the existing un i t s in RECO and will provide an oversight responsibility for the entire project as part o f i t s over-all responsibilities for the Access SWAP and roll-out program. It will report to the Sector Working group (SWG) with members o f core ministry, participating donors and sector stakeholders. The department will be an integral part o f RECO organization and will include a core team including a manager and deputy, a procurement specialist, a financial management team o f two accountants reinforced by RECO CFO, a M&E specialist, two safeguards specialists (environment and social safeguards)
54
and supervision engineers working full or part time on the project. In addition to i t s implementation oversight role, the department will also: i) undertake/assist all project entities in procurement; ii) maintain complete f i les for all procurements; iii) operate the project accounts; iv) prepare project reports including the unaudited Interim Financial Reports (IFRs) v) undertake supervision on project funded activities
Accounting Arrangements
11. Books of Accounts. A Financial management team composed o f two accountants reinforced by RECO CFO will maintain adequate books o f accounts for PMD which shall included ledgers, journals and the various registers with the help o f an Integrated Financial Management Information system at the disposal o f UER Project. The accounting system will be used to track, record, analyze and summarize i ts financial transactions. The PMD accounts will be prepared on a cash basis in accordance international Public Sector Standards (IPSAS) and the provision grant agreement, the laws and regulations in Rwanda. The accounting system will allow for the proper recording o f the PMD financial transactions, including the allocation o f expenditures in accordance with i ts components, disbursement categories, and sources o f funds. Appropriate controls over the preparation and approval o f transactions already in place UER Project are being strengthened to ensure that all transactions are correctly made, recorded, and reported upon. These will be adapted in the PMD to ensure proper books o f account have been maintained, an appropriate chart o f accounts has been adopted, and appropriate accounting software i s in place.
12. Staffing arrangements. The overall responsibility over the PMD financial matters and will remain with RECO Chief Financial Officer assisted by the UER Project accountant and an accountant seconded by RECO. The accountant will be responsible for the preparation o f payments to be reviewed by the UER Project accountant and approved by the CFO. The CFO will oversee the consolidation and submission o f Interim Financial Reporting and audited financial statements to IDA.
13. Information systems. PMD will adopt the software which has been successfully implemented by UER Project. Refresher training will be conducted for PMD to bring them to speed with new developments updates. However RECO i s in the process o f procuring a modern Enterprise Resource Planning software which will be implemented in future for the PMD.
Financial Reporting and Monitoring
14. Acceptable Interim Financial Reports are currently being prepared under UER Project an IDA funded project under MININFRA in the format complying with World Bank guidelines on the preparation o f IFRs for borrowers and submitted on a quarterly basis to the World Bank for review. PMD will prepare IFRs covering 4 months period and ensure that they provide quality and timely information to the RECO, other implementing agencies and various stakeholders monitoring the PMD performance. The IFR for PMD wi l l be submitted to the World Bank within 45 days after the end o f the 4 months period being reported wi l l comprise of:
A Designated Account Activity statement;
A Sources and uses o f funds statement;
0 A Statement o f uses o f funds by project activity/component; and
55
0 The accounting policies and procedures adopted and notes to the financial statements will be disclosed in the report.
15. Audit Arrangements: RECO’s Independent external audit for the years ended 2005- 2007 was concluded in December 2008 giving disclaimer opinion for all the three years citing inadequacy o f books o f accounts while UER Project duly complied in i ts audit reporting requirements for the year ended December 2007 and has an ongoing contract to conduct the audit for the year ended 2008. PMD wi l l seek to obtain a consent letter o f audit from Office o f the Auditor General to conduct the audit or outsource the exercise under the oversight o f the OAG within a month into effectiveness. Annual audit report including a management report will be submitted to IDA within six months following the end o f each financial year. The auditors will provide a single opinion on the project financial statements, the designated accounts and statements o f expenditures. They will be required to carry out a comprehensive review o f the internal control procedures and provide a management report outlining any recommendations for their improvement. Terms o f Reference will contain the audit scope to ensure the efficient use o f funds for intended purpose and state whether the audit has been conducted in accordance with International Standards in Auditing.
Internal Control and Internal Audit
16. Internal Control: PMD internal controls will be documented in the Implementation Manual to be adopted from UER Project and updated. The accounting systems, policies and procedures to be employed by the PMD in accounting for and managing the funds will thus be documented in the i t s updated P IM and FMM adapted from UER Project while taking into consideration the Financial instructions issued by GOR. The accounting policies will specify the accounting treatment for the PMD financial transactions and will constitute basic principles designed to ensure that the accounting records are complete, relevant and reliable and that accounting practices are followed consistently. The revised P IM and FMM will be used by: (i) IDNGEF to assess the acceptability o f the PMD’s accounting, reporting and Internal Control Systems; (ii) staff as a reference manual; and (iii) by the auditors to assess i ts accounting systems and controls and in designing specific project audit procedures.
17. Specific procedures wi l l be documented for budgeting, accounting systems, internal controls, funds flow, Reporting and Auditing, depicting document and transaction flows, the appropriate filing o f project documents, management approvals and organizational duties and responsibilities. The accounting system will consist o f the methods and records established to identify, assemble analyze, classify, record and report the transactions o f a project, and to maintain accountability for the related assets and liabilities. The aspects to be covered in the newly developedupdated manuals wi l l include: (i) flow o f funds; (ii) financial and accounting policies; (iii) accounting system (including centers for maintenance o f accounting records, Chart o f Accounts, formats o f books and records, accounting and financial procedures); (iv) procedures for authorization o f transactions, budgeting, and financial forecasting; (v) financial reporting (including formats o f reports, linkages with Chart o f Accounts and procedures for reviewing financial information); (vi) auditing arrangements; and (vii) aspects o f human resources.
18. Internal Audit: A weak Internal Audit function exist in RECO while non in UER Project to exercise an oversight function, review the financial monitoring reports and carry out regular internal audit reviews. Capacity building initiatives have begun with the development o f an Internal Audit Charter by PWC to strengthen the Internal audit within RECO.. The internal audit unit will also seek collaboration with the Government’s Chief Internal Audit office to
56
enhance its capacity to conduct reviews which will include ex post verification o f expenditure eligibility, as wel l as physical inspection o f works and goods acquired during its implementation. The findings and recommendations o f the Internal Auditor will be used by the PMD to improve its implementation in areas related to financial management and procurement.
Funds Flow
19. Disbursements arrangements and methods. P M D will receive disbursements from GEF Fund on the basis o f incurred eligible expenditures (transaction-based disbursements). Upon Grant effectiveness, an init ial advance (“Advance” method) will be disbursed from the proceeds o f the GEF grant and will be deposited into a PMD operated Designated Account (DA) to expedite i t s implementation. Actual expenditures will be reimbursed (“Reimbursement” method) through submission o f Withdrawal Applications (at least monthly) supported by Statements o f Expenditures (SOE). P M D will also use the Direct Payment method, whereby payments may be made directly to third parties (e.g. a supplier, contractor, and consultant) at the Recipient’s request. .. Another acceptable method o f withdrawing from the proceeds o f the GEF grant i s the Special Commitment method. Under this method, payments may be made third parties for eligible expenditures under special commitment entered into, in writing, at the Recipient’s request and o n terms and conditions agreed between IDA and the Recipient.
20. Types of Supporting Documentation: Disbursements will be supported with (i) Statement o f Expenditures (SOE) summarizing eligible expenditures paid during a stated period for amounts below the SOE documentation threshold specified in the Disbursement Letter and (ii) records evidencing eligible expenditures (e.g., copies o f receipts, supplier invoices) for al l other amounts. In al l cases, RECO PMD will be responsible for retaining the original documents evidencing eligible expenditures and making them available for audit or inspection.
21. The Designated Account ceiling i s set at US$ 1 million, calculated to represent approximately 4 months o f eligible local project expenditures as large contracts will be paid using the direct payment method. Monthly bank reconciliations will be prepared by the UERP accountant, reviewed by the CFO. P M D payments o f project transactions regardless o f the currency will be done through the bank and converted at the day’s mean exchange rate. PMD will also receive disbursements f rom the AFREA “CEIF”, and Government o f Rwanda funds and will maintain other P M D accounts held in Banque Nationale du Rwanda and denominated in U S dollars.
22. P M D account signatories will be updated as necessary in the Accounting and Financial Management Procedures Manual. Authorized signatories will be designated in accordance with their positions. The current signatories include:
0 The PMD Project Manager
0 RECO’sCFO and
0 The UERP accountant
57
Fund Flow chart
1 Designated account in BNR denominated in USD
, Suppliers o f Goods, Works and Services
23. Budgeting Arrangements: The budgeting arrangements will be wel l documented in the updated procedures manual. PMD budgeting arrangements will be undertaken benefit from the experience o f UER Project to ensure a smooth budgeting process. Budget analysis will be conducted to ensure budget variances are addressed o n an adequate and timely manner.
24. Conclusion of the Assessment: The Financial Management arrangement above indicates that they satisfy the bank’s minimum requirements under O P B P 10.02. P M D will agree with IDA by negotiations o n the adoption o f the customized reporting formats, have seconded from RECO an accountant by effectiveness as part o f strengthening i t s financial arrangements to provide with reasonable assurance that the funds will be used for the intended purpose.
25. Supervision plan: One supervision mission will be conducted once every year given the modest risk rating anticipated following the mitigation factors in the design o f the revised Financial Management Assessment (FMA), The mission’s objectives will include that ensuring that strong financial management systems are maintained for the grant through its life. A review will be carried out regularly to ensure that expenditures incurred by PMD remain eligible for IDA funding. The implementation Status Report (ISR) will include a financial Management rating for the FM component and will be arrived at by the Financial Management Specialist after an appropriate review.
58
Annex 8: Procurement Arrangements RWANDA: Sustainable Energy Development Project
A. General
Procurement Environment
1. A Country Procurement Issues Paper (CPIP) was prepared for Rwanda in June 2004. The main recommendations made in the CPIP were incorporated in an action plan for procurement reform, which was discussed with and adopted by Government. Although Rwanda has followed pragmatic procurement practices under the National Tender Board (NTB), the legal, regulatory, and institutional frameworks need to be modernized to bring the national procurement system up to international standards as developed by OECD-DAC. Some actions have been undertaken to this end. For example, a new procurement code was adopted in April 2007. The legal text establishing the Rwanda Public Procurement Authority (RPPA) has been adopted and was published in March 2008. Templates for standard bidding documents were adopted and published on NTB website. However implementation o f the procurement code i s not yet complete. Some institutions created by the procurement code have not yet been established, and audit s t i l l need to be implemented to ensure better control o f the procurement system. Appeals mechanisms members s t i l l need as well to be trained in procurement, Procurement guides and manuals s t i l l have to be developed and disseminated. However, since these reforms are s t i l l at an early stage, public procurement by implementing agencies i s s t i l l subject to high risk.
2. Procurement for the proposed project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” published in May 2004 revised in October lSf 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” published in May 2004 revised in October 1’‘ 2006, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure categories are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
3. Procurement o f Works: N /A
4. Procurement o f Goods: Goods to be procured under Component 5 will include Solar Water Heaters (SWH). The above mentioned goods will be procured through a combination o f the following procurement methods: (a) international competitive bidding for contracts estimated to cost more than US$300,000 equivalent; (b) national competitive bidding for contracts o f valued at more than US$25,000 equivalent but less than US$300,000 equivalent; and (c) shopping for contracts estimated to cost less than US$25,000 equivalent. In situations and circumstances that are in compliance with the provisions o f paragraph 3.6 o f the Guidelines for procurement, direct contracting may be used with Bank prior review.
59
5. Procurement o f non-consulting services: Non-consulting services to be financed under the Grant will include office and equipment maintenance, rental expenses, communication costs, transport and insurance. Regarding the size and nature o f these types o f contracts, the procurement process will be conducted under procedures acceptable to IDA and that would be described in the project implementation manual and in the project financial and administrative manual. Both manuals will have to be reviewed and found acceptable to IDA
6. Selection o f consultants: Consultant services to be procured under this grant would include technical studies and assistance, and monitoring and evaluation activities performed by f i r m s and individual consultants.
7. As a rule, contracts estimated to cost US$200,000 equivalent or more would be procured through Quality and Cost Based Selection (QCBS). However, contracts for services estimated to cost less than US$ 100,000 equivalent per contract may be procured under contracts based on Consultants Qualifications (CQS) in accordance with the provisions o f paragraphs 3.1 and 3.7 o f the Consultant Guidelines.
8. Financial and technical audits estimated to cost less than US$lOO,OOO equivalent may be procured under Least Cost Selection (LCS) in accordance with the provisions o f 3.1 and 3.6 o f the Consultant Guidelines Consultant for services meeting the requirements o f Section V o f the Consultant Guidelines may be selected under the provisions for the Selection o f Individual Consultants (IC).
9. Single source selection may be used exceptionally in accordance with paragraph 3.9 to 3.12 o f the Consultant Guidelines for: (i) training; (ii) consulting assignment provided by NGOs or local other organizations;
10. To ensure that priority i s given to the identification o f suitable and qualified national consultants, short-lists for contracts estimated under US$ 100,000 equivalent may be comprised entirely o f national consultants (in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines), provided that a sufficient number o f qualified individuals or f i r m s (at least three) are available at competitive costs.
11. Training, workshops, conference attendance and study tours would be carried out on the basis of approved annual work programs that would identify the general framework o f training or similar activities for the year, including the nature o f traininghtudy tours/workshops, number o f participants, and estimated cost.
12. Operating costs to be financed under the Grant include the non- consulting services mentioned above plus per diem, supervision cost, and salaries o f locally recruited staff. These costs shall exclude salaries, bonuses, and fees for government civil servants. These expenses would be procured using procedures acceptable to IDA and would be described in the P IM and in the project financial and administrative manual.
Operating costs:
B. Assessment of the agency’s capacity to implement procurement
13. The RECO Project Management department (PMD) will be responsible for ensuring that procurement conforms to IDA requirements. To this end the department wi l l provide procurement support to all project entities. The assessment reviewed the organizational structure
60
o f implementing agencies, RECO and MININFRA, and found that improvement i s needed in the following areas: put in place a procurement procedure manual, Procurement plan need to be effectively implemented, contract management and filing systems need as wel l to be strengthened.
14. The assessment noticed that MinInfra procurement unit is staffed with two procurement staffs; from their education background these staffs were found with potential in terms of developing procurement skills. They need more exposure and experience in terms o f handling international procurement procedures. For that, PMD will need to involve these staffs during the first period so that they can get familiar with procedures without causing delays in project implementation. Then after having conducted l ike three procurement operations joint ly with more experienced persons, MININFRA staff will be able to handle SEDP procurement. In both cases P M D and MININFRA taking care o f record keeping will be very important.
15. In addition to these weaknesses the previous project in which MININFRA and RECO were part o beneficiaries experienced delays in receiving technical specifications which were necessary to launch the procurement process. As an example it was noticed that the choice o f technical option changed several time for one o f important activity the power plant o f actual 20 MW. These technical factors contributed a lot to delay the project.
16. To mitigate these risks, the mission i s suggesting that the project document define Cleary the role and responsibility o f implementing agencies for each component. I t will be as wel l necessary to ensure that technical required skills are in place to implement al l components o f this project.
Table A8.1: Schedule o f actions to be carried out
Setting up a procurement contract management system
Involve MinInfra Procurement Staff in Procurement Process of SEDP
Setting up a procurement record- keeping and filing system
Procurement training session program focused on procurement planning and contract management issues
Participation o f key actors in procurement process o f Rwanda Sustainable Energy Development Project in World Bank workshops and/or training events
nsi
RECOMinInfra
RECOMinInfra
RECOMinInfra
WB/RECOMinInfra
WB/RECO/MinInfra
im
During the f i rst six months o f project effectiveness
During the first six months of project effectiveness
During the f i rst six months o f project effectiveness
Project launching workshop
Prior to effectiveness and as needed during the l i fe o f the Program, in accordance with an approved annual training
program
C. Procurement Plan
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17. At appraisal, the Borrower prepared a procurement plan which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on April 29th, 2009 and i s available at RECO headquarters in Kigali. It wi l l also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team at least semi-annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Ref. No. Contract (Description)
A1 Supply of laboratory and monitoring equipment
A2 Specialized boat for lake monitoring
A3 Procurement of Vehicle for Kivu Monitoring unit (Pick- up or equivalent)
D 1 Procurement of 100 Solar Water Heater Sys tems.
D. Bank Prior Review Threshold
Estimated Procurement P-Q Domestic Review cost Method Preference by Bank
(US% thousand) (yes/no) (Prior / Post)
0.42 ICB N o N o Prior
0.3 ICB N o N o Prior
0.03 NCB N o N o Prior
0.4 ICB N o N o Prior
18. Goods contracts estimated to cost the equivalent o f US$300,000 or more will be subject to prior review procedures. In addition, the first three contracts for goods through national competitive bidding and shopping will be subject to prior review procedures to ensure their consistency with the Bank’s Guidelines and the PIM. All other contracts will be subject to post review by IDA during supervision missions and by auditors.
19. Consultant services (i) All terms o f references, (ii) All single-source selection, regardless o f contract cost, wi l l be subject to prior review, (iii) Contracts estimated to cost the equivalent o f US$lOO,OOO or more for individuals and (iv) the equivalent o f US$200,000 or more for f i r m s will be subject to prior review procedures. All other contracts will be subject to post review by IDA during supervision missions and by auditors during technical audits.
E. Frequency o f Procurement Supervision
20. In addition to the prior review supervision to be carried out from the Bank office, the capacity assessment o f the implementing agencies has recommended at least two supervision missions to carry out post review o f procurement actions and yearly procurement audits.
Details o f the Procurement Arrangement involving international competition
1. Goods and Works and Non-Consulting Services.
(a) L i s t o f contract Packages which wi l l be procured following ICB and direct
Bid-Opening
15/10/2009
62
Ref. No.
(b) ICB Contracts estimated to cost above US$ 300,000 equivalent for goods and all direct contracting will be subject to prior review by the Bank.
2. Consulting Services.
(a) L i s t o f Consulting Assignments with short-list o f international f i rms.
Consultancy Assignments with Selection Methods and Time Schedule
Contract Estimated Procurement P-Q Domestic Review Expected Comments
(US% thousand) (yeslno) (Prior I Date (Description) cost Method Preference by Bank Bid-Opening
Post)
Ref. YO.
Selection Method
Description of Assignment Estimated
cost ixpected 'roposals ubmission
0.75
Comments
QCBS 44
IIC 45 IResident Advisor EWA 10.3
i) National Renewable Energy Strategy Study, ii) Design of M&E Framework for Renewable Energy activities and Investments.
Project Management department for elaboration of terms o f references
47
98
Recruitment of a 0.07 I C consultant to develop technical specifications for the laboratory and monitoring equipment, provide capacity building
setting up an Incubator model for RE entrepreneurs
KIST: developing and 0.2 sss
Review by Bank prior I Post)
1 /07/2009
5/10/2009
Prior
Prior
Prior
KIST i s an existing unique governmental institution that has considerable track record o f managing an Incubator program that
Prior
Prior
511 0/2009
5/09/2009 t 5/09/2009
63
31 i) Capacity Building of Private sector partners in Improved cook stove technologies and production ii) Sector strengthening, iii) Technical assistance, promotion, and training in Efficient charcoaling techniques
21 i) Study to develop regulations for Micro Hydro development including standard agreements for Bulk purchase and feed-in tariffs., ii) Advisory services for Post construction Management schemes including sustainable Micro-hydro based on PPPs
12
especially focused on Efficiency improvements
Technical assistance to elaborate procurement modalities by specifying installation and sizing guidelines for PV systems.
.6
13
1.5
Technical assistance and advisory services for Solar PV dealers to establish rural O&M networks.
8-35
;1
.15
Promotion Campaigns for Solar Water Heaters, Improved Cook stoves in Urban Areas, PV systems.
.4
.4
)CBS
2CBS
)CBS
)CBS
)CBS
)CBS
64
'rior
'rior
'rior
'rior
'rior
'rior
5/09/2009
I/ 1 oI2009
1 IO 812009
111 112009
1 /02/20 10
1 /07/2009
he GEF project wi l l lraw on. There are no rivate sector Incubator roaams in Rwanda.
Training of Energy Efficiency Advisors)
E3 Study of Energy efficient 0.2 Public Lighting for Urban areas and EE in public & commercial buildings
QCQS
(b) Short lists composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than U S $ 100,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
Prior 0 1/08/20 10
65
Annex 9: Incremental Cost Analysis
RWANDA: Sustainable Energy Development Project
INTRODUCTION 1. GEF’s mandate i s to provide “new and additional grant and concessional funding to meet the agreed incremental costs o f measures to achieve agreed global environmental benefits in the GEF focal areas.” This annex provides the details o f the various subcomponents for the Rwanda SEDP. The analysis is divided into respective GEF subcomponent; Biomass, Micro- Hydro, Solar energy, and Energy Efficiency.
Barriers to accelerated renewable energy market growth
2. O f the four development phases (introduction, growth, .maturity and decline) o f a sustainable energy industry, the industry in Rwanda i s in its introduction phase. In general terms, during this phase the goal is to create sustainable energy product awareness and develop the markets, in particular the commercial markets. This includes: establishing recognition and a minimum quality level o f the sustainable energy solutions; developing appropriate (affordable) pricing for market penetration; allowing selective distribution till acceptance o f the product by the end user; and, promoting sustainable energy systems at early innovators and early adopters. The barriers highlighted below confirm that the industry is in its introductory phase.
3. Lack o f awareness: W h i l e Rwanda has some experience with solar PV, very few potential customers are familiar with solar PV. Similarly, only some potential developers o f independent micro-hydro schemes are accustomed to the technology or the associated supply chains for equipment and services. For wood fuel based end-uses, there i s very limited technical knowledge o f design and operations, particularly outside o f Kigali. RECO has never pursued any energy conservatioddemand side management activities, with the exception o f the IDA financed CFL program, and most o f i t s current and prospective customers have had no particular incentive to examine higher efficiency alternatives.
4. Lack of access to investment finance: At this stage, the particular market being targeted for renewable energy and energy efficiency technology is: (a) the government ministries and RECO; (b) other relatively large commercial/industrial/institutional customers and (c) individual households particularly in peri-urban and rural areas. For al l these groups there i s limited access to investment finance. Several donor initiatives including the World Bank’s Poverty Reduction Supply grant (PRSG) i s targeting to selectively expand the ‘fiscal space’ and make investment finance available that would improve the public service delivery across al l sectors but in particular energy, water, health, education, and agriculture.
5. Lack o f technical and management emerience: As mentioned above, the war and genocide wiped out a large portion o f the human resource capacity in both public and private sectors. While the returnees have brought in substantial knowledge o f their own, the country s t i l l lacks experience in designing and executing government programs and private sector led initiatives.
6. Lack of equipment, technical and service standards: For the whole range o f renewable energy/energy efficiency technologies - from solar PV and micro-hydro systems to
66
improved ovens - there are no technical and service standards. Similarly, there are no guidelines or standards for after sales service in particular for end users in the remote rural areas.
7. Lack o f institutional frameworks for sumort, guidance, and regulation: The government has embarked upon a significant public sector and utility reform agenda, in the process setting up institutions and arrangements that are relatively young and untested. Even though renewable energy and energy efficiency is part o f this reform, specific implementation arrangements and human capacity remain limited.
8. energy technologies that remain to be addressed are described in the table 1 below.
Table A9.1 Specific barriers for expansion of use o f renewable energy technologies
In addition to the above common themes, specific barriers in respect o f renewable
Micro-hydro r D S M and Energy Efficiency
Achievements 0 Experience with
institutional size systems. 0 4-5 commercial suppliers
with a limited network
Some technical experience with installation and operation
Experience from CFL distribution program
0 Wood fuel supply management
0 Improved stoves have been introduced with some success in Kigal i
0 Improved ovens have been piloted by KIST
Barriers 0 Small and unsteady market
0 Absence o f technical and
0 Lack o f training and
growth
service standards
certification
0 Lack o f legalhegulatory framework for commercial approaches
0 Lack o f access to finance 0 Lack o f technical standards 0 Limited awareness 0 Inappropriate pr ic inghi l l ing
0 Small and fragmented market 0 Weak supply chains for
signals
eauiument and service 0 No market assessment and
marketing strategies 0 Lack o f standards and training
programs 0 Barriers for large-scale uptake
o f improved stoves include non-availability o f equipment and lack o f awareness regarding usage
0 Production dominated by the informal sector
Barrier removal strategy 9. The renewable energy program can be divided in three more or less distinct phases. The first phase i s to complete the preparation o f the renewable energy agenda with some initial trials
67
in cooperation with/or by the private sector. During the second phase the industry will grow out o f i t s infant stage through capacity building, business development and increasingly accelerating investments as a response to market growth. In the third phase proven success models are scaled up. This GEF project supports the second phase o f this program.
10. Phase 1- Preparing the agenda for action: To finalize the agenda for action, the fol lowing activities are completed or have been started: (i) several studies on the potential for isolated and grid-connected small hydro power systems; (ii) study o n design and plan to meet high-priority electricity needs o f rural public institutions with solar PV; (iii) plan for energy efficiency and demand side management by RECO; (iv) a biomass energy strategy (BEST), and (v) institutional support to MININFRA for the development o f renewable energy/energy efficiency policy.
11. Phase 2 - Capacity building, business development and init ial investment: During the second phase, the activities will be supported through a framework o f incentives rather than individual assignments. The Government would play a market enabling role, distancing itself from implementation o f activities and creating an environment in which private sector activities can develop. MININFRA and the proposed energy agency EWA will play key-facilitating roles during this stage. The proposed GEF assisted SED project supports this phase o f the program.
12. Phase 3 - UP scaling o f proven business models: Phase three falls outside the SEDP time period. Activities at this phase will focus on accelerating the success models that have evolved during the second phase o f the program. The successful models will be integrated and scaled-up as part o f the Energy SWAP program for access. Some models will take o f f on commercial basis.
Incremental cost analysis per project component
1. Component: A Policy and strategy development including an incubation program 13. The incremental cost analysis focuses on the incubation program since the outcome and impact o f pol icy and strategy is viewed as indirect and not easily measured but a necessary platform for other components.
THE BUSINESS AS USUAL SCENARIO
14. Rwanda’s renewable energy market is st i l l emerging and primarily dominated by the institutional market driven by the needs o f health and education service providers. Increasingly, the private sector i s becoming a key player in supplying renewable energy technologies (RETS) to public and private users in Rwanda.
15. With the focus on institutional users, l imited attention has been given to the household market and supply capacity o f local private sector companies. There are no current comprehensive projects that address to building o f a private PV market for either institutions or households. There are few formal private sector companies operating in Rwanda’s renewable energy markets currently and the situation will, by and large, remain the same without GEF intervention.
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GEB BENEFITS AND STRATEGIC FIT 16. The overall objective i s to remove the barriers to renewable energy technologies to help mitigate greenhouse gas emissions. However, the Global Environment Benefits (GEBs) comprise a number o f dimensions beyond greenhouse gas emissions such as conservation o f biodiversity, mitigation o f deforestation, avoiding land degradation, and other mitigating factors for climate change. The main objective i s to contribute to COz emissions reductions by safeguarding that installed capacities are maintained over the l i f e o f equipment.
The environmental benefits are indirect since the GEF alternative focuses on ‘soft’ technical issues. There are no direct investments to support RE entrepreneurs. Financing may be mediated and facilitated by the project thru bridging mechanisms to existing financial institutions.
INCREMENTAL REASONING THE ROLE OF GEF 17. The GEF Alternative Scenario would contribute to environmental benefits by supporting the emergence o f a sustainable energy market. A twofold approach i s applied: i) increasing the capacity o f the local RET sectors in supplying to Rwandan customers, ii) support the growth of the RE sector by an incubation program that targets renewable energy companies.
18. The incubation process would be characterized by the development o f SMMEs that initially will start with offices in urban areas, supported by capacity building programs and favorable policy and financial frameworks for the sale o f RETS to rural Rwanda. The awareness campaigns and other incentives packages provided in other components o f the GEF initiative as well as by other complementary projects currently under implementation will facilitate market introduction for the start-up companies. The GEF alternative aims to build a local stock o f knowledge in supporting the emergence o f RET entrepreneurs. The GEF i s the only initiative that focuses directly on the local RET sector per se and not on delivering a certain technology.
19. The role GEF activities should be viewed in the light o f the substantial investments in the RE sectors that wi l l boost the markets and facilitate for private sector entry. Since O&M guidelines, standards and quality regulations wi l l be overseen and established, there i s an urgent need to upgrade capacities o f local RE companies. The presence o f competent local f i rms will facilitate the introduction o f sustainable O&M schemes, in particular in rural areas.
RESULTS FRAMEWORKS 20. The effects o f the GEF alternative are cross-cutting as this specific subcomponent i s coordinated with other components such as private sector involvement in micro-hydro, SHS in rural areas, etc. Although the indicator focuses on the outcome o f this particular subcomponent for methodological considerations, the impact has far reaching effect on the role o f private sector in promoting renewable energy. Hence, the following indicator:
0 # o f enterprises graduating the incubator program with a business plan in place that i s approved by TBIF
For the anticipated number o f f i r m s graduating see Annex 3 on the arrangements for results monitoring.
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THE ROLE OF CO-FINANCING
21. Co-financing (parallel) will contribute to the success o f the GEF project but will not constitute conditionality for i t s implementation. That is, if the co-financing would not materialize for certain reasons, the GEF can stand on i ts own. There are several current co-financiers in the field o f renewable energy such as the Government o f Rwanda, EU, BTC, and GTZ. There are synergies and lessons to be learned fkom these initiatives that should be fed into the GEF micro- hydro component. There i s also a challenge to create a coherent fkamework for the supply o f RE technologies considering the number o f stakeholders involved.
22. Due to the role o f co-financing - complementary rather than financing a joint activity - the “conditionality” comprises the means and structure o f communication and cooperation between the various stakeholders engaged in the same sector. The SWAP i s crucial for coordinating the various projects in order to create synergistic outcomes.
Comuonen t B: Biomass
There are two subcomponents; improved stoves and the charcoal value chain.
THE BUSINESS AS USUAL SCENARIO
23. i ) Subcomponent BI Biomass: For improves stones, the business as usual scenario i s the current urban market for charcoal stoves that i s mainly Kigali. The end-user market comprises the 800 000 households that on average use 1-2 charcoal stoves and i s growing at around 8 percent per year, and 75 percent o f households cook primarily with charcoal. The diffusion o f improved stoves with ceramic liners i s about 45-50 percent according to recent studies. The most common stove, known as the canamake‘ - metal/ceramic stove - has been found to consume approximately 33 percent less charcoal than other commonly used unimproved stoves in Kigali (Winrock, 2007). There are other models in the market such as all-metal models l ike the DUB 10, all-ceramic models hand-made by local potters. Based on the existing data, in the BEST analysis an annual consumption o f 700 k g o f charcoal per household for the traditional stove and 540 kg for the improved stove.
24. The baseline scenario i s important as there are improved stoves in the market already, which has been growing over the last few years. Past programs have led to the variety o f stove models with efficiencies greater than traditional cookstoves now being currently produced, sold, and used in Kigali, mainly in the informal sector. However, most stoves, even the ones defined as “improved stoves” are designed and manufactured by low-skilled artisans operating in the informal sector who customarily are unwilling and lacking the resources to upgrade production capabilities and facilities. Thus keeping up quality consistently i s a challenge for th is group.
25. There are also other on-going efforts that with GEF support will speed-up diffusion. Current estimates point to a penetration o f 40 -50 percent in Kigali. The market i s growing (at least the potential) partly because o f high urbanization. We may assume that the current structure o f the market can push penetration to a maximum o f 50 percent to counterbalance the effect o f growing population. (1.e. the share remains almost the same but the overall market grows fast because o f rapid urbanization)
26. In the baseline scenario there will be a small number o f programs supporting the diffusion o f efficient stoves, e.g. by the Government o f Rwanda and CARE-Rwanda that have
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launched an initiative funded by the EU ACP-Energy Facility to carry out an improved stoves and carbonization program in the Southern Districts o f Rwanda.
27. The GoR has set ambitious targets for lessen the dependence on fuelwood and charcoal. There are two measures undertaken: i) disseminate efficient stoves, ii) improve the charcoal making techniques. The goal i s that at least 80 percent o f all Kigali households should use an efficient stove by 201 1. A draft biomass strategy (BEST) was recently presented (August 2008) building on two recent sector reviews by international consultants. The strategy focus on the complete value chain including forest management and in particular Government and community plantations.
ii) Subcomponent B2: value chain analysis and transformation
28. Charcoal i s the preferred fuel in most Kigali households and in a number o f urban households in other Rwandan towns. Charcoal for cooking i s rooted in the culture and the habit i s difficult to change. (BEST, 2008). Most domestic workers and maids prefer charcoal to LPG and electric cookers. Charcoalers currently operate under poor working conditions and waste much wood in the traditional charcoal making kilns. The biomass supply i s less than the biomass demand (1 5 percent gap) due to low productivity o f plantations, regulations that are outdated and that biomass perceived as cheaper than the alternatives. Sales o f charcoal are adapted to small batches which suit the cash flow o f most Rwandan households.
29. Charcoal production will be supported under the BEST (Biomass Energy Strategy) program. The goal i s that 50 percent o f charcoalers use efficient kilns, transport system improved, and a national average efficiency o f 13 percent in weight. This should have been reached by 2013. The GoR BEST recommendations to professionalize the entire charcoal chain, will be first tested in the Nyaruguru District.
30. In Forestry, the Royal Netherlands Embassy financed the Forest Inventory that was completed in 2007 and published in 2008. The Belgium Government funds the Reforestation Support Program aiming at implementing efficiently the National Forest Policy to the benefit o f rural population.
Assessment of the business as usual scenario:
3 1. The biomass “system” - forestry, charcoal production, transports, urban sales, usage o f stoves - has been in place for decades in the Rwandan society. The system has not gone through any radical changes such as a major shift in technology or usage patterns. The GoR acknowledges the challenges to substitute or lessen the use o f wood fuels as the main source o f household energy. In a foreseeable future, the biomass energy system will dominate and the way forward in a short-term perspective i s to make the system more efficient in the use o f natural resources rather than finding alternatives. The incremental innovations that have been introduced will continue to diffuse but at a slow pace without additional external interventions because o f the competencies and resources o f the small and informal companies operating in the sector.
32. Wood fuels feeding the biomass energy system are increasingly from private lots rather than from public land and governmental forest reserves. This i s partly a result o f dwindling forests but also originates from a stricter control o f tree harvesting for charcoal making. From a
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biodiversity viewpoint it. is important to increase the capacity o f the privately managed ‘pockets’ o f planted trees to avoid illegal and commercially-driven harvesting in larger forest areas.
GEBS AND STRATEGIC FIT 33. The overall objective is to remove the barriers to renewable energy technologies to help mitigate greenhouse gas emissions. However, the Global Environment Benefits (GEBs) comprise a number o f dimensions beyond greenhouse gas emissions such as conservation o f biodiversity, mitigation o f deforestation, avoiding land degradation, and other mitigating factors for climate change.
34. The main objective is to contribute to C02 emissions reductions by a more efficient biomass energy system. Hence, mitigating climate change by supporting the development of a sustainable energy system comprises the core instrument. There are though national and local environmental benefits such as mitigating deforestation and conserving biodiversity.
35. The environmental benefits are indirect since the GEF alternative focuses on ‘soft’ technical issues. There are no direct investments to support RE companies. Identified financing needs will be linked with other ongoing efforts in the RE sectors such as IFC funding.
INCREMENTAL REASONING THE ROLE OF GEF 36. Most stoves in the market today comprise o f either charcoal stoves for urban markets or firewood stoves for rural areas (most rural households do not use “stoves” as such but three stones laid out in a triangle) which are not very energy efficient. The key challenge is to support the most sustainable market structure o f increasing the use o f improved stoves. Recent studies have identified the root o f the slow uptake stemming from a poorly organized and l o w capability production sector combined with l o w levels o f awareness among users. It i s clear that the private sector must be in the lead for transforming the market towards more efficient stoves. In the GEF scenario, the use o f efficient stoves has increased by 20 percent as compared to the baseline; i.e. a shift from 50 to 70 per cent.
37. To reach this scenario, there are three sets o f activities for stoves that comprise (a) training o f producers, improving stove technology, (b) awareness campaigns (c) support to the process o f “semi-industrialization” o f the stove production, (d) value chain performance - distribution channels, (e) improving kiln technology.
38. The GEF’s role is crucial to spearhead the transformation o f the sector by taking a holistic approach to address a multitude o f barriers in the biomass value chain. Both capabilities and organization in the charcoal & improved stoves markets are addressed resulting in a professional and cost-efficient sector that can stimulate and create market growth in a sustainable way.
RESULTS FRAMEWORKS 39. The impact will be seen across the value chain. However, indicators focus on the downstream stove production. Before implementing additional baseline data will be collected using the BEST and USAID studies as the baseline.
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For the anticipated % growth see Annex 3 on the arrangements for results monitoring.
% o f improved stoves in use in the Kigali area
THE ROLE OF CO-FINANCING
40. Co-financing will contribute to the success o f the GEF project but will not constitute conditionality for i t s implementation. That is, if the co-financing would not materialize for certain reasons, the GEF can stand on i t s own. The two current co-financiers in the field o f biomass are the Government o f Rwanda and CARE-Rwanda. There are synergies and lessons to be learned from these two initiatives that should be fed into the GEF biomass component.
ComDonent C: Micro-Hvdro
THE BUSINESS AS USUAL SCENARIO
41. There are in total 21 Government initiated projects, backed by donor funding, that aim to deliver a total o f l l M W for 2012. MININFRA has developed a Micro Hydro Atlas that has identified potential sites for small hydro power plants. 333 potential sites have been identified in this atlas with a capacity between 50 K W and 1 M W each. The current portfolio o f donor funded projects and GoR will however not include a great share o f these potential sites. Given the existing situation facing micro-hydro energy development in Rwanda, it i s highly likely that market development (private sector based) will not occur in the short term without donor-based or Government and long-term financial support. Hence, these 333 sites will remain untapped.
42. The sustainability o f the current and future micro Hydro investments in Rwanda will rely on solutions to two core challenges; i) ensuring that the government financed micro-hydro plants currently under construction will be properly operated and maintained; and ii) supporting the transition from Government and donor driven projects towards a private-sector led model.
43. The marginal technology in the country i s thermal diesel generation (22.8 MW), and importing large-scale hydro power (15 MW). It i s most likely that thermal generation would be expanded in a scenario without donor and GEF support. A second scenario i s that un-electrified areas and villages will be electrified by stand-alone diesel generators through individual investment.
GEB BENEFITS AND STRATEGIC FIT 44. The overall objective i s to remove the barriers to renewable energy technologies to help mitigate greenhouse gas emissions. However, the Global Environment Benefits (GEBs) comprise a number o f dimensions beyond greenhouse gas emissions such as conservation o f biodiversity, mitigation o f deforestation, avoiding land degradation, and other mitigating factors for climate change.
45. The main objective i s to contribute to C02 emissions reductions by safeguarding that installed capacities are maintained over the l i fe o f equipment; i.e. breakdowns are avoided and capacity utilization i s kept at a reasonable level.
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INCREMENTAL REASONING THE ROLE OF GEF 46. The GEF support aims primarily to support the environment for the 11 MW micro-hydro power under way but also to develop capacity in Rwanda for private sector roll-out o f new plants. The main impact is to safeguard installed capacity to run at high capacity utilization levels. Breakdown o f equipment, poorly planned preventive maintenance schemes, and lack o f spares al l contribute to part or full down-time.
47. The second objective i s to support private sector-led micro-hydro development schemes. The effect o n private sector investment is indirect. The GEF activities addresses policy issues that form enabling conditions for private sector initiatives in micro-hydro. The link to private sector response is difficult to estimate as there are a number o f additional conditions that need to be met before projects are launched by private investors. More important, this component will accelerate the shift towards renewable energy than would have been the case without GEF involvement. An educated guess is that the time to develop rules and guidelines for private sector investment will be halved as a result o f GEF support. That is, we estimate that the baseline i s 6-7 years which will be shortened to 3 years under GEF.
RESULTS FRAMEWORKS Feed-in and Bulk-purchase tariffs agreed with RECO and approved by RUM.
0 O&M guidelines established and in place.
THE ROLE OF CO-FINANCING
48. Co-financing will contribute to the success o f the GEF project but will not constitute conditionality for its implementation. That is, if the co-financing would not materialize for certain reasons, the GEF can stand on i t s own. The three current co-financiers in the f ield o f micro-hydro are the Government o f Rwanda, EU and GTZ. There are synergies and lessons to be learned from these initiatives that should be fed into the GEF micro-hydro component.
49. The cofinanced projects comprise the platform for piloting and establishing O&M guidelines. The bulk o f cofunded projects are already in pipeline or under implementation, which there i s little risk that the projects will not be delivered as planned.
Comvonent D: Solar Enerm
THE BUSINESS AS USUAL SCENARIO
50. Rwanda’s PV market i s s t i l l emerging and primarily dominated by the institutional market-driven by the needs o f rural health and education service providers. M u c h o f the installations have been fully grant financed by donors with limited government coordination o n the national level. The GoR EDPRS has identified as a key objective is to equip 100 percent o f the health centers and 50 percent o f primary and secondary schools with energy supply by 2012. A great number o f these will meet their energy needs from solar PV due to locality far o f f from the grid. A number o f donors have joined GoR on this effort.
5 1. With the focus on institutional users, l imited attention has been given to the households market. There are no current comprehensive projects that address to building o f a private PV market for either institutions or households. The SHS market will remain the same without GEF intervention.
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52. , A challenge to the institutional PV market i s to establish sustainable O&M guidelines to ensure uninterrupted operation. To build the capacity o f the local private sector to carry out O&M will be an important part o f supporting the growth o f a sustainable PV market
GEB BENEFITS AND STRATEGIC FIT 53. The overall objective i s to remove the barriers to renewable energy technologies to help mitigate greenhouse gas emissions. However, the Global Environment Benefits (GEBs) comprise a number o f dimensions beyond greenhouse gas emissions such as conservation o f biodiversity, mitigation o f deforestation, avoiding land degradation, and other mitigating factors for climate change.
54. installed capacities are maintained over the l i fe o f equipment.
The main objective i s to contribute to C02 emissions reductions by safeguarding that
INCREMENTAL REASONING THE ROLE OF GEF 55. The GEF Alternative Scenario would lead to the emergence o f a sustainable PV market by a threefold approach: i) increasing the involvement o f the local PV sector in supplying to Rwandan institutions and carrying out maintenance, ii) support the growth o f the local PV sector by various incentive packages; but also introducing national O&M guidelines, primarily for the institutional market. The market would be characterized by the development o f SMMEs that initially will start with offices in urban areas, supported by capacity building programs and favorable policy and financial frameworks for the sale o f PV-generated electricity to rural Rwanda. Awareness campaigns will trigger demand and private sector involvement in providing PV services. The GEF alternative aims to build a local stock o f knowledge in procuring PV systems, sizing, maintenance, and marketing. The GEF i s the only initiative that focuses directly on the local solar PV sector per se and not on delivering a certain technology.
56. The GEF alternative i s a complementary and necessary dimension o f sustainable market creation. The institutional market in particular has seen an increased rate o f investment that need to be viewed in a long-term perspective such as building local problem-solving and maintenance skil ls. The GEF promotes private sector participation.
RESULTS FRAMEWORKS 57. The effects o f the GEF alternative are cross-cutting but for methodological considerations the indicator i s the following:
installation standards and O&M guidelines established for public institutions
THE ROLE OF CO-FINANCING
58. Co-financing will contribute to the success o f the GEF project but will not constitute conditionality for i t s implementation. That is, if the co-financing would not materialize for certain reasons, the GEF can stand on i ts own. The several current co-financiers in the field o f solar energy are the Government o f Rwanda, EU, BTC, and USAID. There are synergies and lessons to be learned from these initiatives that should be fed into the GEF micro-hydro component. There i s also a challenge to create a coherent framework for the supply o f solar PV systems considering the number o f stakeholders involved.
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59. The cofinanced projects comprise the platform for piloting and establishing standards for installation and O&M guidelines. The bulk o f cofunded projects are already in pipeline or under implementation, which there i s l i t t le risk that the projects will not be delivered as planned.
Component E: Enerm Efficiencv
THE BUSINESS AS USUAL SCENARIO
60. Energy Efficiency i s increasingly being focused attention as a tool for mitigating climate change and other negative effects o f using energy sources that are not clean. An additional rationale i s the need to minimize energy consumption while switching to clean renewable energy technologies because o f the relative lower capacity to generate high effect levels. Activities to improve energy efficiency has traditional not been prioritized in Rwanda, buildings and industrial processes are no exceptions. The GoR has identified energy efficiency as a means to achieve i ts energy and environmental goals. E.g. together with the World Bank, campaigns for diffusing energy saving bulbs have been conducted. The project on energy efficiency in buildings will be coordinated with the proposed regional UN-Habitat on EE that aims to lower energy use and cost. There i s no Energy Efficiency building code in place today. Hence, energy use and consumption i s not regulated neither at the stage o f building nor managing the energy consumption o f buildings.
GEB BENEFITS AND STRATEGIC FIT 61. The overall objective i s to remove the barriers to renewable energy technologies to help mitigate greenhouse gas emissions. However, the Global Environment Benefits (GEBs) comprise a number of dimensions beyond greenhouse gas emissions such as conservation o f biodiversity, mitigation o f deforestation, avoiding land degradation, and other mitigating factors for climate change.
62. The main objective i s to contribute to C02 emissions reductions by introducing energy efficiency management o f the grid by analyzing the scope for reducing losses in the RECO electric grid. Although the project commissions a study on high energy consuming buildings, industrial processes, and public street lighting, these will not be considered in the C02 calculations. The rationale i s that the studies will be integrated into an EE policy for buildings to be fed into a National Building code, only. There i s no actual implementation to enforce EE or further diffuse the EE polices further. Hence, there i s no justification to credit GEF any potential C 0 2 emissions reductions as these two sub-components comprise Technical Assistance, only (TA).
INCREMENTAL REASONING THE ROLE OF GEF 63. The GEF Alternative Scenario would lead to the a more structured approach to the losses in the RECO grid, which will be measured and addressed. This in turn will lower losses. The development o f new standards for buildings, industrial processes and street lighting may affect C02 emissions but will not be accounted for because o f the reasons mentioned in earlier paragraph.
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RESULTS FRAMEWORKS 64. The impact o f introducing energy efficiency management will indirectly enhance the awareness o f using energy in a more efficient way but the direct impact on Global Environment i s the reduced need for energy. The key indicator will be less loss in the RECO grid but also the number o f public and corporate buildings that have introduced such management schemes. For sustainability the following two indicators have been chosen:
Component B
0 Approved investment plan based on the national grid energy audit
0 National building code integrated to include energy efficient elements
THE ROLE OF CO-FINANCING
65. Co-financing will contribute to the success o f the GEF project but will not constitute conditionality for i t s implementation. That is, if the co-financing would not materialize for certain reasons, the GEF can stand on i t s own. The several current co-financiers in the f ield o f energy efficiency are the Government o f Rwanda and UN-Habitat. UN-Habitat
tones) Biomass 178,000
c02 EMISSIONS REDUCTION SUMMARY
Component C Component D Component E
Table A9.2: C02 emissions reduction profile by source
Micro-hydro 445,571 Solar 10,700 Energy Efficiency 12,268
I Project component I Sources I C O ~ equivalent (in 1
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Annex 10: Safeguard Policy Issues RWANDA: Sustainable Energy Development Project
Environmental Screening Category of the Project: B - Partial Assessment
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP 4.01) Applicable because the program wi l l support investments
location cannot be identiyed ex-ante, the safeguard instrument used is the ESMF.
with potential adverse environmental impacts. Since their [XI [I
Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Physical Cultural Resources (OP/BP 4.1 1) [I [XI
that could entail taking land or limiting access to other [I
Indigenous Peoples (OP/BP 4.10) 11 [XI Forests (OP/BP 4.36) [I [XI Safety o f Dams (OP/BP 4.37) 11 [XI Projects in Disputed Areas (OP/BP 7.60) * [I [XI Projects on International Waterways (OP/BP 7.50) [I [XI
Involuntary Resettlement (OP/BP 4.12) Applicable because the project may support interventions
natural resources. An RPF has been developed to address issues related to this policy.
[XI
i By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties'
claims on the disputed areas. Source: World Bank assessment
1. The Project seeks to promote sustainable use o f renewable energy resources, including biomass, hydro, and solar energy. Significant negative impacts are not anticipated. If successfully implemented, the project will have a substantial positive impact, especially in lowering the depletion o f biomass resources given that firewood and charcoal usage i s currently growing at unsustainable levels. The scope o f the Project consists o f five sub-components:
Component A: Strengthening o f Renewable Energy Policy, Strategy and Management- addresses the execution of policies into strategies and projects. The main objective i s to help the MININFRA streamline and coordinate activities by supporting the development o f operational guidelines for project design and implementation. An important sub- objective comprises the integration o f the private sector in the process. More specifically the GEF sub-component contains the four following parts: policy, strategy, M&E (Renewable Energy Sector M&E and Scientific monitoring for Lake Kivu), and an Incubation Program for RE SMEs.
0 Component B: Efficient utilization o f biomass resources - addresses the unsustainable use o f firewood and charcoal as demand i s outgrowing supply threatening scarce natural resources and biodiversity. The aim i s to increase the efficiency in the charcoal value chain by promoting more efficient stoves and charcoal production methods.
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0 Component C: Sustainable development o f micro hydro resources - addresses the issue o f private sector participation, which has only recently been introduced. The scope o f the component is to provide transparent market regulation ahd guidelines to facilitate small distributed power production and distribution services while building local private sector capacity that can plan, design, implement and operate the plants.
Component D: Solar Energy - focuses on promoting the current weak private sector. This will be accomplished three core measures: 1) Developing national standards for institutional PV applications, 2) Building capacity and conducive frameworks to allow local private f i r m s to participate in international tendering for the Rwandan market, 3) developing a commercial SHS (Solar Home System) market for rural areas. The project will also provide init ial support to develop the market for solar water heaters (SWH) in Rwanda.
0 Component E: Energy efficiency strategy development - Will focus o n reducing the technical losses in the RECO grid, and energy efficiency in larger buildings.
2. Although the project does not include investment components, the technical assistance and guidance provided under the project may incur certain downstream risks. For instance, in the case o f the sustainable development o f micro-hydro plants the Project will provide a national operational framework for investments made by small Independent Power Producers (IPPs), and such investments may have environmental and social implications. Also, the “industrialization” o f efficient stoves and ki lns could have some adverse environmental implications if not sustainable implemented. I t is to address these potential downstream risks that the project has been rated Category B under the World Bank Policy o n Environmental Assessment (OP4.01), requiring a partial Environmental Assessment (EA). A World Bank Category B project i s equivalent to the Government o f Rwanda’s Schedule 2 projects.
3. The borrower plans to utilize the Environmental and Social Management Framework (ESMF) and Resettlement Policy Framework (RPF) which have already been adopted for the Urgent Electricity Rehabilitation Project (UERP).
Environmental and Social Management Framework (ESMF)
4. The Government o f Rwanda’s laws and the World Bank’s Operational and Procedural Policies, specifically OP 4.0 1 , requires the government to prepare a Environment and Social Management Framework , ESMF, which establishes a mechanism to determine and assess future potential environmental and social impacts o f RECO’s planned investmentdactivities under the proposed SEDP, and then to set out mitigation, monitoring and institutional measures to be taken during design, implementation and operation o f these activities to eliminate adverse environmental and social impacts, offset them , or reduce them to acceptable levels.
5. The project investments are expected to have modest impact o n the environment with significant positive effects as the technical assistance provided by the SED project will increase the use and sustainability o f renewable energy technologies in Rwanda and improve Energy efficiency o f both biomass and electricity. The Environmental and Social Management Framework (ESMF) is designed to ensure that the environmental and social issues associated with this program are adequately analyzed and understood, and that al l associated adverse impacts are identified through screening, and are also effectively mitigated and monitored. Each
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investment supported by the project must comply with the applicable provisions o f both the RPF and ESMF.
6. The key highlights in the ESMF are as follows:
0 Detailed and comprehensive environmental and social baseline data which will provide the environmental and social management process with key baseline information when identifying adverse impacts. The information contains data on Rwanda’s bio-physical environmental features such as i t s ecosystems, geology, hydrology in terms o f ground and surface water resources, major and sensitive wetlands, flora and fauna. On social baselines the report discusses the main features o f Rwanda’s demographics, public health features and poverty.
0 A thorough review o f the World Banks Safeguards Policies i s made. The policies triggered are:
- OP 4.01 Environmental Assessment - OP 4.12 Involuntary Resettlement
7. Chapter 6.0 presents a summary o f the requirements to comply with these polices. The report states that other Bank policies may apply and includes a summary in Annex D o f all the Bank Safeguards Policies.
The administrative, policy, legislative and regulatory framework in Rwanda for Decentralization in particular and for environmental management in general i s presented in chapter 7.0.
Generic potential adverse environmental and social concerns and impacts from anticipated project activities with root and immediate causes i s presented in detail in Section 8.0
0 The Environmental and Social Management Process i s contained in Section 10.0 with the following key featuredsteps;
Resettlement Policy Framework (RPF)
8. The project will support investments in micro/mini-hydro systems, efficient charcoaling and stove technologies and solar energy from Thermal (i.e. Water Heating) and photovoltaics. These investments are expected to have overall positive social impacts, simply because increased access to reliable power services facilitate improvements in health and education facilities, agricultural processing, employment creation opportunities, etc. Potential negative social impacts are expected to be small, but will not be ignored. These are primarily associated with temporary and permanent use o f small areas o f land for the investments the project will support, for which land acquisition or resettlement o f Project Affected Persons or relocation o f their places o f livelihood may be necessary. For this reason, Bank O.P. 4.12 - Involuntary Resettlement, may be triggered. Owing to the nature o f the project, the exact location, nature and magnitude o f sub- projects to be financed as a result o f the project cannot be determined prior to project design.
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Consequently it is not yet possible to prepare detailed Resettlement Action Plans, which would specify the detailed mitigation measures and develop strategies to provide for livelihood restoration in line with international standards, A Resettlement Policy Framework has been developed for the UERP to provide guidelines o n how to avoid, manage or mitigate potential risks and the process by which Resettlement Action Plans will be prepared and implemented during the project implementation period. The preparation o f Resettlement Action Plans will be required for this Project if it i s determined that land acquisition i s a consequence o f the investments resulting from the project, and once the location and scope o f these investments is known.
9.
e
e
e
e
e
e
e
e
e e
e
e
10.
The RPF covers the following areas:
Principles and objectives governing resettlement preparation and implementation;
A description o f the process for preparing and approving resettlement plans;
Land acquisition and l ikely categories, o f impact;
Eligibility criteria for defining various categories o f project affected persons;
A legal Framework reviewing the fit between the laws o f Rwanda and regulations and Bank policy requirements and measures proposed to bridge any gaps between them;
Methods o f valuing affected assets;
Organizational procedures for the delivery o f entitlements, including, for projects involving private sector intermediaries, the responsibilities o f the financial intermediary, the government, and the private developer;
A description o f the implementation process, linking resettlement implementation to c iv i l works:
A description o f the grievance redress mechanisms; A description o f the arrangements for funding resettlement, including the preparation and review o f cost estimates, the f low o f funds, and contingency arrangements;
A description o f mechanisms for consultations with, and participation of, displaced persons in planning, implementation, and monitoring;
Arrangements for monitoring by the implementation agency and, if required, by independent monitors.
Borrower’s capacity to implement safeguards. RECO, under the TA and Capacity Building Component o f the Electricity Access Scale-up project (P1 1 1567) will hire an Environment Advisor (EA) and two dedicated safeguard specialists to assist it with carrying out the actions stipulated in th i s ESMF. The SED project will also benefit f rom the experience built within the existing Project Coordination Unit (PCU) created for the IDA UER project. The unit
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has an established track record in project implementation, safeguard mitigation and fiduciary oversight. I t i s expected, as part o f the implementation o f the NEAP and SWAP, that the UERP PCU will be integrated into a new RECO Projects Management Department (PMD) that will consolidate within the company all existing project-specific PCUs and that will also manage and oversee the national grid rollout and connections program. The capacities o f the UERP PCU wi l l be fully transferred and further improved by additional capacity building and TA support included in the NEAP and proposed IDA Electricity Access scale-up project (P111567). The project management department will bear implementation oversight responsibility for the full project with component level execution done by the MinInfra, RECO and EWA. The unit organization will include dedicated safeguard specialists for both Environmental and Social safeguards. The overall responsibility for management o f the bio-physical environment throughout Rwanda l ies with the Rwanda Environment Management Authority (REMA), which was legally established in November 2003,
11. Consultations. During the preparation o f the ESMF and the RPF for the UERP, visits were made to potential project areas. Project Affected Persons (PAPs) and intended beneficiaries o f the SEDP Project have not been engaged in in-depth consultations at th i s time, as the exact location o f sub-projects have yet to be ascertained. Consultations will be held with PAPs and beneficiaries once sites have been identified and prior to the start o f construction. At this stage, it i s uncertain whether land acquisition or any form o f resettlement as defined by OP4.12 will be necessary. This will be determined as Stakeholders and PAPs will be consulted on an ongoing and regular basis during project implementation. Consultation meetings involved national level institutions, representatives o f some communities, private sector, local elected leaders, and local government agencies.
12. Monitoring and evaluation. The monitoring and evaluation procedures delineated in the ESMF and the RPF for the UERP will be followed for the SEDP Project. In addition to the Project Reports and ESIA studies required under the Organic Law on Environment Protection and Management o f Rwandalg , an Annual Audit on ESMF Implementation will be prepared by the borrower, and delivered to REMA. Monitoring indicators, and roles and responsibilities, are detailed in the ESMF.
13. Safeguards disclosure. The RPF and the ESMF for the UERP, which will be used for the SEDP Project, were disclosed in the World Bank Info Shop on 11/13/2006, and in Rwanda on 11/06/2006. The ISDS was initially disclosed on 1/08/2007.
l 9 The Organic Law sets out the general legal fiamework for environment protection and management in Rwanda, and was passed by Parliament in 2003.
82
Annex 11: Project Preparation and Supervision
RWANDA: Sustainable Energy Development Project
Planned Actual PCN review 12/2 1 /2005 Initial PID to PIC 0 1/25/2007 Initial ISDS to PIC 01/25/2007 Appraisal 08/1 4/2006 03/16/2007 Negotiations 04/2 8/2009 05/29/2009 Board/RVP approval 09/01/2009 Planned date o f effectiveness 10/3 1/2009 Planned date o f mid-term review 10/31/2011 Planned closing date 12/3 1 /20 13
Key institutions responsible for preparation of the project: MinInfra MinEcoFin RECO
Bank staff and consultants who worked on preparing the project included:
Name Title Unit Erik Fernstrom Energy Specialist AFTEG Lennart Bangens Consultant AFTEG Sameena Dost Sr. Counsel LEGAF Mary C. K. Bitekerezo Sr. Social Development Specialist AFTCS Noreen Beg Sr. Environmental Specialist AFTEN Diego Garrido Monitoring & Evaluation Specialist AFTRL Aissatou Diallo Finance Officer LOAFC Chantal Kajangwe Procurement Analyst AFTPC Otieno Ayany Financial Management Specialist AFTFM Anta Loum L o Language Program Assistant AFTEG Bathilde Jyulij yesage Program Assistant AFMRW
Bank funds expended to date on project preparation: 1. Bank resources: $200,000 2. Trust funds: $35,000 3. Total: $235,000
Estimated Approval and Supervision costs: 1. Remaining costs to approval: $10,000 2. Estimated annual supervision cost: $100,000
83
Annex 12: Documents in the Project File RWANDA: Sustainable Energy Development Project
0 GEF project Energy Efficiency in Buildings, UN Habitat and Energy for Sustainable Development (paper copy only)
0 GTZ project documents (electronic versions) a) Project data sheet, PSP Hydro (Private Sector Participation in Micro-Hydro
Power Supply for Rural Development in Rwanda b) PSP Hydro Concept paper c) German Technical Cooperation in Rwanda GTZ - Partner for the Future.
Worldwide. 2008 (overview o f GTZ operations in Rwanda) d) Various docs downloaded from www.ntz.de on GTZ’s role in the National
Domestic Biogas Program (NDBP)
0 EU Documents (e-versions) a) Increase Rural Energy Access in Rwanda through Public Private Partnerships -
IREARPPP (project document describing technical and administrative aspects) b) annex ii to financing agreement n09 ACP for the IREARPPP
GoR Documents a) BEST (2008), BIOMASS ENERGY STRATEGY RWANDA, Volume 1 :
Background and Analysis b) BEST (2008), BIOMASS ENERGY STRATEGY RWANDA, Volume 2: The
Proposed Strategy c) ENERGY POLICY for RWANDA, FINAL, October 2004 d) Joint Budget Support Review, April 2008, Vincent Gatwabuyege, SG, Ministry
o f Infrastructure Energy e) EDPRS ENERGY SECTOR, PPT Presentation by Nacer Hammami, Expert
Rural Energy, MinInfra, June 6,2007
Other sources
RIEPA (2008), Rwanda Investment and Export Promotion Agency, Energy Sector Profile
TBIF (2008), newsletter 13
84
r in ?
0 r r
"! P
o c q o i n 0 u J r 0 i n 0 W W O N m r N N r P
0
0
0
0
0
0
0
0
0
0
0
0
0
0
w
0
0
0 0
0 0
0 0
O N
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0 0
0 0
O N
r-co 0 0 IC 0 0 N 0 8 8
Annex 14: Country at a Glance:
RWANDA: Sustainable Energy Development Project
lgg7 *Oo6 2007 flicdwt Rgriculture 37.7 46.0 41.3 35.6
Rwanda at a dance 9124108
Grovtk of capital and GDP [ X )
"1 I
POVERTY and SOCIAL
2007 Population, mid-YQar / e t 9.7 GNI per capita /W/a~mfW 1@? 320 GNl /At/asmfW IN-? 3.1 Autrage annual grovth. 2001-07 Population p;? 2.2 Labor force &? 2.8 Most recent estimate (latest gear available. 2001-071 Poverty p ? c d , t k @ ~ h h W n M h d p w u . h t Urban population p'cdt&d&a,!.? 18 Life expectancy at birth [#ea@ 46 Infant mortality //m/&W&Mf&t 98 Child malnutrition p?cdo!dWm&~? 18 ACCQSS tO an improved Water SOUlCQ f%'cd&a,!*t 65 Literacy &f;'cd,tk@Mh?6p&t Gross primary enrollment pf&-c&x&~&a,!.ka?? 140
Male 137 FQmalQ 142
Rvanda
KEY ECONOMIC RATIOS and LONO-TERM TRENDS 1987 1997
GDP /M$hibhq? 2.2 1.9 Gross capital formationfG0P 15.7 13.8 Exports of goods and SelViCQSfGDP 7.5 7.8 Gross domestic savingsfGDP 4.0 4.1 Gross national savingsfGDP 9.2 4.3
Interest paymQntSfG0P 0.3 0.4 Total debtfGDP 27.8 60.0 Total debt servicelexports 13.4 14.5 Present Value Of debtfGDP Present vaiue of dobtfexports
Current account balancefGOP -6.5 -9.4
1987-97 1997-07 2006 /aWw aWd-wow4t GDP -4.7 6.7 5.4 GDP pQr capita -2.5 2.7 2.9 Exports of goods and Services -12.1 14.4 23.6
Sub- Saharan Lov-
Africa income
800 952 762
2.5 2.6
36 51 94 27 58 59 9 1 99 88
2006 2.9
20.3 10.3 3.2
13.8 -6.7 0.3
14.6 10.6 5.6
55.3
1,296 578 749
2.2 2.7
32 57 85 29 68 61 94
100 89
2007 3.3
22.5 9.4 4.2
17.6 4 . 8
2007 2007-11
6.0 3.0 7.0
Development diamond'
GNI Gross per ptimary capita enrollment
ACCQSS to improved water source
Economic ratios'
Trade
Domestic Capital savings formation
Indebtedness
Industry Manufacturing
SQlViCQS
17.8 18.6 13.3 14.1 10.8 12.0 6.0 6.4 41.5 35.4 45.4
Household final consumption QMpenditUrQ 82.5 94.5 85.1 81.9 GQnerd gov't final consumption expenditure 13.5 9.6 11.7 10.9 Imports Of goods and Services 19.1 25.7 27.1 27.7
fww? W d - W W N 4griculture ndustry Manufacturing
SQlViCQS
-lousehold final consumption expenditure Zeneral gov't final consumption QxpenditUrl Zross capital formation mports of goods and services
1987-97 1997-07 2006
.1.8 5.6 11.0 -9.7 7.1 8.2
-10.5 5.1 13.1 -4.9 7.4 -0.8
-0.7 5.4 5.1 -1.0 5.1 2.8 -9.8 6.9 22.3 6.7 4,5 26.8
2007
-2.9 13.4 9.8
12.0 7.1
26.2 21.8
.1.5
20
0
-20
-0CF T G D P
Grovth of crports and imports [ X ) 30
20
i o
0
4 0
30
20
i o
0
4 0
- Exports -Imports
Uote 2007 data are preliminary estimates. This table was produced from the DQVQlOpmmt Economics LOB database 'The diamonds show four key indicators in the country [in bold] compared with its income-group average. if data are missing, the diamond will
be incomplete.
86
Rwanda
2007 PRICES and GOVERNMENT FINANCE
- S f k p k Q S Il::'&qpt Consumer prices Implicit GDP deflator
h Q r h s s r a ? & a C Q &dm h C - & d M ~ l e q ~ ~ ~ ~ l Current revenue Current budget balance Overall surplusfdeficit
TRADE
/LtV&K-#L:l Total exports [fob] Coffee
~ Tea i Manufactures !Total imports [cif]
i Fuel and energy ~ Capital goods
Export price index p ? X W : ~ l Import price index (2l?'W:flj
I Terms of trade l',r#R7;mj
Food
Inflation 1x1 3b .I I
1 BALANCE of PAYMENTS
170 34 32 71
571 ..
j /ItV&K-#L:!
! P ' Ex orts of goods and services i Imports of goods and services i ReSOUrCQ balance
101
'0°
200
0
:Net income 1 Net current transfers
i Current account balance financing items [net] Changes in net reserves
l Reserves including gold /ItV&h%?j j Conversion rate /ECkvMK$l
j MQmIz-
306 913
.607
-14 460 -161 276 -115
1987
4.1 0.7
1987
114 92 8 2
313 24 52 96
8+ 8+
100
1987
160 +12
-252 -14 126
-140
5 135
79.7
0
.z
-4
1
-t
/EXTERNAL DEBT and RESOURCE FLOVS
Total debt outstanding and disbursed
1987
598
1 IDA 251
flW&K-#L:! I IBRD 0
~ Total debt servlce ; IBRD i IDA
23 0 3
~ Composition of net resource flows ! Official grants 70 , Official creditors 92 i Private creditors .3 1 Foreign direct investment (net inflows] 18 ~ Portfolio equity (net inflows] 0
1 World Bank program ' Commitments
Disbursements Principal repayments Net flows Interest payments
) Net transfers I
38 39
1 39
2 37
1997
11.7 15.6
17.2 5.7
-2.5
1997
93 45 21 18
343 54 37 62
127 97 131
1997
14+ +7+
-330 -17 172
-175
204 -29
301.5
1397
1,111 0
558 22 0
10
124 62 0 3 0
50 53
5 48
4 43
2006
5.5 13.1
23.8 7.7
-0.4
2006
142 54 32 42
+38
75 120 63
2006
269 763
.494 -19
322 -191
273 -83
++0 551.7
2006
419 0
169 31 0
13
1,484 46
0 11 0
0 37
8 29
5 24
-GDP deflator -CPl 7.5 -0.4
2007 I Ezport and import Iruels [US$ mill.) I
89 1 b i b2 13 b4 b I 06 07 I Exportc lmportc 133
67
2007 I Current aecount balance to GDP [ X I 1 '
559 550.1
2007
0 204
0 2
0 28 0
28 2
26
Composition of 2006 debt [US$ mill.]
G 25
A . IBRD E . Bilateral B .IDA 0 . Other multilateral F . Private C . IMF G - Short-term
i Note This table was produced from the Developmrnt Economics LOB database. 9121108
87
N O R T H
P R O V I N C E
W E S TP R O V I N C E
S O U T H
P R O V I N C E
KIGALI CITY
E A S T
P R O V I N C E
N YA G ATA R E
G AT S I B O
K AY O N Z A
RWAMAGANA
K I R E H EN G O M A
B U G E S E R A
GASABO
KICUKIRO
B U R E R A
GICUMBI
R U L I N D OG A K E N K E
M U S A N Z A
RUBAVUN YA B I H U
NGOROREROR U T S I R O
K A R O N G I
N YA M A S H E K EN YA M A G A B E
N YA R U G U R U
R U S I Z I GISAGARA
H U Y E
N YA N Z A
R U H A N G O
MUHANGA
KAMONYI
NYARUGENGE
Bugarama
Rwumba Kitabi
Ruramba
KigembeMunini
Karama
Karaba
Gatagara
Masango
Rusatira
Shyorongi
Muhura
Kinyami
Mbogo
Kigarama
Sake
Rukara
Kiziguru
Gabiro
Gatunda
RilimaBugesera
Gikoro
Bicumbi
Gashora
Kanzi
Rwesero
Cyangugu
Bulinga
Ngaru
Mulindi
Muvumba
Kagitumba
Kirambo
Butaro
Nemba
Busogo
Muramba
Kagali
Nyondo
Kabaya
Mabanza
Murunda
GishyitaBwakira
Ngoma
Kidaho
Gikongoro
Gitarama
Butare
Kinihira
Burera
Rubavu Karago
Rutsiro
Gatsibo
Nyagatare
Kabarore
Mukarange
Kigabiro
Ndora
Gasaka
Ngoma
Kagano
RubengeraNyamabuye
Rukoma
Nyamata
Kicuro
RugengeNdera
Ruhango
Busasamana
Ngororero
MuhozaCyeru
Gakenke
Tare
Kamembe
Kibeho
Kibungo
Kirehe
Gisenyi
Mukamira
Gihingo
Nyanza
Kibuye
Rwamagana
Byumba
KIGALI
D E M . R E P .O F
C O N G O
B U R U N D I
T A N Z A N I A
U G A N D A
Lac Kivu
LacIhema
LacKivumba
LacHago
LacMikindi
LacRwanyakizinga
LacBurera
LacRuhondo
LacNasho
LacCywambwe
LacMpangaLac
Mugesera
LacRweru
LacCyohoha
Sud
Lac Muhazi
Kagera
Nyabarongo
Akany
aru
Kagi
tum
ba
Kagera
To Sake
To Rutshuru
To Kisoro
To Kabale
To Kikagati
To Kafunzo
To Bugene
To Lusahanga
To Kirundo
To Ngozi
To Kayanza
To Cibitoke
To Cibitoke
To Walangu
To Nyya-Ghezi
Virunga M
ts.
VolcanKarisimbi(4519 m)
30°00'E 31°00'E29°30'E 30°30'E
29°00'E
29°00'E
30°00'E29°30'E 30°30'E
2°00'S
2°30'S
2°00'S
1°00'S
1°30'S1°30'S
RWANDA
0 10 20 30
0 10 20 30 Miles
40 Kilometers
IBRD 33471R2
JUN
E 2008
RWANDA
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.
SELECTED CITIES AND TOWNS
AKARERE (DISTRICT) CAPITALS
INTARA (PROVINCE) CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
AKARERE (DISTRICT) BOUNDARIES
INTARA (PROVINCE) BOUNDARIES
INTERNATIONAL BOUNDARIES
