Regulation Developing Countries - 1

7/31/2019 Regulation Developing Countries - 1

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(Off-Grid) Rural Electrification

with Renewable Energies in Developing Countries

Leonardo Webinar 1st December 2011

Dr Xavier LEMAIRE, Research AssociateSustainable Energy Regulation Network - REEEPUniversity College London Energy Institute


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Summary

1. Status of rural electrification in developingcountries

2. Various RE technologies for rural

electrification 3. Emerging forms of rural decentralised

electrification

4. Main features of an off-grid framework


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Part 1. Current status


2. RE technologies for rural electrification

3. Emerging forms of rural decentralisedelectrification



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High disparity of non-electrification rate (2008)

Source: UNDP/WHO, 2009


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Large part of the world in the dark

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


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Number of people without electricity will remain high

Source: IEA/OCDE,2009


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Why rural electrification is lagging in some part of the

world?

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

(2) Demographic impact

(3) Lack of financial resources (4) Lack of political commitment

Rural inhabitants far from decision-makers!

Bias in favour of limited extension of the grid

Priority to urban areas

Remote areas with low density: too costly/uncertain benefits


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Vicious circle linked to financial situation of utilities

5. Lack of investmentin network and rural areas

Poor maintenance

1. Poor quality of service/pricingLack of control

2. UnauthorisedConnection

/Low energy tariff

=Non efficient energy appliances

3. Lack of financial return for electric companiesIncrease of consumption = increase of financial gap

4. Prioritypower generation in urban areas

Consumption subsidised


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Self-perpetuating logic

Utilities tend naturally to focus on electrification of areas with highdensity/high income where they can sale electricity produced withconventional energy sources

Utilities tend to ignore areas difficult to reach, where income can be very lowand electricity has to be produced by decentralised systems

High operating costs / logistic difficulties Systems with RET out of their field of knowledge

(Poor) regulation/ (weak) institutions and policies for centralised systemignore small decentralised generation anyway

Rural inhabitants in the dark OR unregulated electrification of remote areas by small private investors

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


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Rural electrification?

Necessity: of a rural electrification policy !

of a central institution to promote this policy & channelfunding

of an (adapted) regulatory framework

No fatalism

Some countries have made spectacular progress in few

decades Mexico, Thailand, Bangladesh, Tunisia, China, South

Africa,


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Part 2. RE technologies in rural areas



3. Emerging forms of rural decentralisedelectrification & case studies



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Hydro Power

The technically feasible potential of hydro-electricity developingpart of the world: less than 7% in Africa exploited Around 22% in Asia exploited and 33% in Latin America exploited

(World Atlas of Hydropower and Dams, 2002).

Furthermore, funding for hydro-electricity goes mainly, if notexclusively, for large hydro-electricity.

Class Station Capacity

Micro Hydro Up to 100 KW Mini Hydro From 100 KW to 2 MW Small Hydro From 2 MW to 25 MW


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Small hydro power (SHP)


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Micro Hydro (100 kW Manali District - Himachal Pradesh)


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Wind power

Large generators (0.750 MW to 5 MW) Big players emerging countries

India: 14,5 GW installed in March 2011

China: 40+ GW installed end 2010

Small players in emerging/developing world

Turkey, Brazil, Mexico, Egypt, Morocco, South Africa,

Small generators (0.5 kW to 300 KW) Electricity with hybrid system (wind + hydro, wind + diesel)

Or wind pump for water


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30 MW wind farm in India


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Small wind generator in developing countries

200kW in Sri Lanka Wind pump in Guatemala


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Biogas generation

Produces gas

Cooking/Heating China, India, Nepal,

+ Generator = Electricity 0.4 kW to 700 KW

Help to remove waste Reduce Green House Gas emissions


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Biogas system


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Big photovoltaic system 200 Wp


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Pico-photovoltaic?

Source: Lighting Africa


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Solar generation

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

Typical Solar Home System in Europe 1 kW peak to several kW peak for households

With 2kWp = 50% of electricity of an household in the UK (10+ K)

In a developing country : 10 Watt peak to 150 Watt peak light / TV Around 200 W peak solar fridge

Water pump one to several kW peak


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PVGIS copyright European Commission 2001-2008 and HelioClim-1copyright Mines ParisTech / Armines 2001-2008. Source:

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Huge decrease of PV cost


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Particular interest of solar

Reduction of the cost / Wp of more than 80% since early 1980s of the solar

panels from the manufacturers to 2004, stable for few years then since2008 another 60%.

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

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

Solar interesting in remote areas/scattered houses for low loads comparedto: Candles, paraffin - quality of light with PV is superior Diesel generators - mechanical parts and cost of fuel Connection to the grid - high costs of substation
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How rural areas could benefit from new technologies?

Paradox of solar energy: in rural areas of developing countrieswhere it could be useful solar remains expensive

Source: REN 21
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Part 3. Emerging forms of decentralised

electrification




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Main barriers for rural electrification with RET?

Diffusion of a new but now mature technology Technology-driven not sufficient Needs a context

Institutions and people

Financing scheme

Companies

End-users

Training / Knowledge scheme

Companies / Utilities / Decision-makers

End-users

Financial institutions

Sustainable market Market-driven Stable & adapted regulatory framework
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Toward a new generation of RET projects?

1) First generation of projects funded by aid

transfer of technology passivity of receptors Renewable systems were given Not maintained by local beneficiaries of aid

2) New generation of projectsEnergy just a technical problem? Social needs (not just kWh!) To provide a service (not just to sell & install a product)

Maintenance of systems even if the cost is low has to be borne by theend-users Clients selected according to their purchasing power Selection of local entrepreneurs

Market-driven (and not just donor or technology-driven) Far larger scale than previous projects

Economies of scale and density
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How to design a rural electrification scheme

New actors for public-private partnership, private entrepreneurs, NGOs, cooperatives,

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

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

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

Long-term commitment of public authorities Stable regulatory framework
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Source: World Bank/ESMAP, 2008.


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Part 4. Main features of an off-grid framework




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A robust institutional framework

Rural electrificationagency / fund

Function ofindependentregulator

ESCOs ESCOs

FUNCTIONS

Defines rules forcompetition: tariff for RE;(integrated planning);standards

Operational measures(energy surveys) andfunding/bundling (loans,grants) notably CDM

Install, collect fees ANDguarantee functioning ofsustainable energysystems

Variety of approach possible

for institutional design. But allfunctions needs to becovered and clear definitionof who is responsible of what

Delegation / sub-contracting

ESCOs

Control

standardsand tariffs Control standards and

tariffs

x x x x xxx x x xx x x x x xx xxx xx x xxx x xx end-users

Same entity (or linked entities)responsible for installation ANDmaintenance of a system

Regulation by the national electricityregulator with a specialised

departmentOR

Regulation by the government entitythat provides installation subsidies

complaints
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Clear repartition of roles

Functions/roles to be fulfilled

creation of new departments not always needed.

Reduction of costs for end-users and funding agencies

Off-grid regulation Regulation can be sub-contracted to rural electrification agency

(expertise)

Rural electrification plan and strategy Organisations capable of evaluating local needs

Sub-contracted to NGOs/close supervision of rural electrificationagency

Evaluation & feed-back Need to monitor and evaluate the scheme ex-post Delegated/subcontracted to consultants

End-users can nominate a delegate
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Appropriate regulation for off-grid

Light-handed approach

Protection of consumer

Adapted standards

Importance of correct tariff setting
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Light-handed regulation?

Regulation often adapted first and foremost toconventional utilities

Avoid over-regulation: Regulation of small utilities large utilities

Licensing procedures & control shall be adapted to smalloperators

Over-regulation = no regulation (illegality)

Protect small operators against encroachment/expansion of grid by large utilities or give themfinancial compensation
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Case of Bolivia: Recognition of the impossibility of

implementing conventional regulation*

Before 2000, all operators of isolated village mini-grids above 300kW installed generating capacitywere required to acquire concessions

BUT

Concessions could only be granted to entities that were shareholder companies /2/3 of mini-grids operated by cooperatives

The reporting requirement and technical standards were too costly to satisfy by smallcooperatives

Better to have light regulation than to have multiple unlicensed operators (safety,)

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

Proposed final regulation Systems above 1 MW

Regulated as before Systems between 300kW and 1 MW

Fewer reporting requirement and less stringent service standards Systems under 300 kW

No obligation for operators except to register themselves and provide a yearly update of basic information

* Working paper from ESMAP/World Bank, 2006.
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Role of regulator protection of consumer

Communication / public awareness Control of level of expectations of end-users

What RE can do and cannot do

Energy efficiency measures RE implies energy efficiency

Complaints of end-users In rural areas, end-users are isolated

Channel of information? Rural companies can abuse their power

Revoke license?
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Role of regulators - standards

Standards have a cost

High standards = high costs Compromise - what is really needed

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

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

Important to monitor / regulate effectively the market Periodic control Staff specialised on rural electrification

Specialised department of the regulatory body Or can be left to the rural electrification agency Or subcontracted (regulation by contract)

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


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Role of regulator: tariff setting

Kind of tariff

Flat tariff for individual systems Metering systems when connected to collective central system

Offer: importance of cost recovery for sustainability of business Operating costs of utilities

Needs to be covered ! public subsidies for investment costs only ! Importance of creation of provision/batteries fund for solar

Part of capital costs? If tariff covers part of capital cost, utilities can expand to new customers If not, continuous public subsidies are needed for expansion

Subsidies = the ones given for grid-connection

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

Procedure for annual revision High inflation rate in some countries

Rate of exchange / US dollar (imported components) Capacity of payment of end-users


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Central role of rural electrification agency

Integrated planning Energy surveys Socio-economic comparisons

(Regulation) Tariff Standards and codes of practices

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

Monitoring and evaluation

Rural agencies

Central interlocutor of local utilities (and end-users) Importance of permanent trained and dedicated staff Importance of financial resources own budget Operating autonomy with rural electrification as primary objective
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Appropriate planning & design system

Design local generation and distribution system Comparisons

Cost RE technology Cost hybrid system Cost connection to the grid

Least cost planning (not just energy supply)

Energy efficiency and demand-side management

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

Increase of the demand Demography

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


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Technology neutral:

combination of various technologies

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

energies

* Electricity

When available: small hydro / wind / biomass / geothermalOtherwise solar photovoltaic Intensity of solar radiation (5-6 kWh/m2) Low density of population in some areas Flexibility of the investment

+ diesel generation as a complement (for productive use) and not necessarily main source: High operational costs / difficulty of supply of fuel and repair mechanical parts in remote areas Rising costs of energy & risk

* Heat / cooking LPG, biomass, SWH, solar cooking,

Individual needs / productive use precise evaluation of energy needs fees and income generated locally, spatial location of energy needs

SHS ideal for basic needs: light, radio, TV, mobile phone Solar for use with low loads: solar pump, schools, health centres Other energies / small grid for productive use
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Combination of mini-grid & individual systems

Minimum costs

= mini grid for78 HH andindividual solarhome systemsfor 22 HH

Source: WordPower, 2000
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Long term comparison of total costs (case PV)

High operating costs

Diesel systems Solar Home Systems

Highinvestment

costs

Low operating costs

Low investmentcosts = genset

N+20 or even N+30 N+20 or even N+30

$

$

batteries

Long-term integrated comparisons

Life cycle costing
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Implement institutions to solve the questions of high

investment costs in rural areas and long-term maintenance

N+20

$

Reduction of up frontcosts of RET

1. Support mechanisms to reduceup-front costs / creation of ruralfunding agencies (subsidies,

integrated planning)

Spread RET up frontcosts

2. Creation of organisations tospread the up-front costs andmaintain systems

- Banks: Micro-credit / revolving

credit / loan- Utilities: Fee for service / ESCOs,
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Rural energy service companies

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

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

Existing structure or new enterprises? Add activities to consolidate electrification business

Synergies: LPG, Solar water heaters,

Specialisation on core activities

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


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Elements of conclusion

New institutions / new way of thinking

Market-driven (and not just donor-driven)

Training is crucial (at every level)

Focusing on sustainability in the long term of delivery of energy services (and not just kWh) Appropriate level of financing of the operators Maintenance of the energy systems

Long-term homogenous & stable regulatory framework

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

framed by a real energy strategy/policy

Long-term commitment of the government Energy + industrial policy + local development

Nurse a market = create jobs locally and nationally + local expertise
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References to go further

Electrification and Regulation: Principles and a Model Law DiscussionPaper No. 18 by Kilian Reiche, Bernard Tenenbaum, and Clemencia Torresde Mstle. World Bank, Energy and Mining Sector Board, July 2006. WorldBankhttp://siteresources.worldbank.org/INTENERGY/Resources/EnergyPaper18.pdf

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

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

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

University College London -Energy Institute. Central House - 14Upper Woburn Place London WC1H 0NN United Kingdom

[email protected]

REEEP - Sustainable Energy Regulation Network http://www.reeep.org/830/sern.htm
mailto:[email protected]://www.reeep.org/830/sern.htmhttp://www.reeep.org/830/sern.htmmailto:[email protected]

Documents

Regulation Developing Countries - 1