Clemencia Torres de MästleClemencia Torres de MästleThe World BankThe World Bank

Washington, D.C.Washington, D.C.February 15, 2006February 15, 2006

Access to Electricity servicesAccess to Electricity services

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Outline of the Presentation

1. Introduction2. Why does access matter?3. Main challenges4. Solutions for expanding access5. Bank’s role: some examples

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1. Introduction1. Introduction Multiple Dimensions of Electricity Multiple Dimensions of Electricity

ServicesServices• Access• Quality of service• Efficient use• Environmental impact

The Presentation will focus on AccessThe Presentation will focus on Access

44http://antwrp.gsfc.nasa.gov/apod/ap001127.html

Access to electricity is low…

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Country or regionCountry or regionPopulation without Population without

Electricity Electricity (million)(million)

% Population % Population with with

ElectricityElectricity

% Urban % Urban Population Population

with with ElectricityElectricity

% Rural % Rural Population Population

with with ElectricityElectricity

South AsiaSouth Asia 814814 4040 6969 3333

Sub-Saharan AfricaSub-Saharan Africa 531531 1717 5252 88

North Africa & MENorth Africa & ME 3939 8787 9999 8888

East AsiaEast Asia 216216 8888 9696 8383

Latin AmericaLatin America 4747 8888 9898 6161

Developing CountriesDeveloping Countries 1,6201,620 7070 8585 7272

Sources: World Bank, 2000, IEA 2002.12,5

37,4

……especially in rural areasespecially in rural areas

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2. Why does access to 2. Why does access to electricity matter?electricity matter?

Key input for economic development and improved living standards

• Growth and poverty reduction• Education• Gender equality• Health• Environmental sustainability

Source: “Energy Poverty Issues and G8 Actions”, The World Bank, Moscow/Washington DC, February 2, 2006

77MillenniumMillennium Development GoalsDevelopment Goals

Electricity mattersElectricity matters

Source: Source: Barnes, Douglas (2000) World Bank. "Social Infrastructure and Poverty Studies"

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3.Challenges to Expand Access to 3.Challenges to Expand Access to Electricity (1/2)Electricity (1/2)

General:General:• Lower Income DwellersLower Income Dwellers• Low consumption of Energy Low consumption of Energy • High Cost-Low ReturnHigh Cost-Low Return

Rural: (Even more costly)Rural: (Even more costly)• Remote AreasRemote Areas• Low density of populationLow density of population

Urban: (additional issues)Urban: (additional issues)• Illegal SettlementsIllegal Settlements

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BAHIABAHIA Grid extensionGrid extension costs per consumer in US$costs per consumer in US$

Columns: Distance from existing grid in kmColumns: Distance from existing grid in km

Posts per Posts per consumerconsumer

0-10-1 >1 – 5>1 – 5 > 5 – > 5 – 1010

> 10 > 10 – 20– 20

> 20- > 20- 5050

> 50> 50

≤ ≤ 0.50.5

105 105

145 145

202 202

> > 0.5 – 10.5 – 1

322 322

324 324

357 357

373 373

> > 1.1 – 21.1 – 2

632 632

642 642

646 646

711 711

> > 2.1 – 42.1 – 4

1.179 1.179

1.184 1.184

1.208 1.208

1.325 1.325

> > 44

4.166 4.166

4.343 4.343

4.763 4.763

6.530 6.530

6.818 6.818

28.21928.219

The low hanging fruit has been picked The low hanging fruit has been picked difficult users remain, costs go updifficult users remain, costs go up

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Challenges to Expand Access to Electricity Challenges to Expand Access to Electricity (2/2)(2/2)

• Free-Market Reforms initially brought more investment, but with scant trickle down effect Free-Market Reforms initially brought more investment, but with scant trickle down effect towards the poorest.towards the poorest.

• Obligation to serve of Utilities limited to a given area.Obligation to serve of Utilities limited to a given area.

• National uniform tariff and badly targeted subsidies hinder cost-recovery and lead to poor National uniform tariff and badly targeted subsidies hinder cost-recovery and lead to poor service.service.

• Unrealistic standards of service and equipment quality in rural areas.Unrealistic standards of service and equipment quality in rural areas.

• Difficulty to monitor and enforce compliance in distant and disperse communities. Difficulty to monitor and enforce compliance in distant and disperse communities.

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4. Solutions for expanding access4. Solutions for expanding access(1) in Urban and peri-urban areas(1) in Urban and peri-urban areas

Problems SolutionsProblems Solutions

Volatile income of poor Volatile income of poor dwellers discourages dwellers discourages connectionconnection

Illegal settlementsIllegal settlements

Financial & regulatory Financial & regulatory hurdles to extend hurdles to extend distribution lines beyond distribution lines beyond area of mandatory area of mandatory coverage.coverage.

Pre-paid smart meters; Pre-paid smart meters; subsidies to connection; subsidies to connection; social tariffssocial tariffs

Land titularization; urban Land titularization; urban planning with basic planning with basic infrastructureinfrastructure

Fine tuning laws and Fine tuning laws and regulations with respect to regulations with respect to property rights and property rights and financing of the financing of the distribution lines.distribution lines.

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4. Solutions for expanding access4. Solutions for expanding access(2) in rural areas(2) in rural areas

4. Solutions for expanding access4. Solutions for expanding access(2) in Rural Areas(2) in Rural Areas

High Cost/Low returns: users in remote and disperse areas, more High Cost/Low returns: users in remote and disperse areas, more expensive to serve, particularly with traditional grid expansion…expensive to serve, particularly with traditional grid expansion…

Better Subsidies: Investment rather than useBetter Subsidies: Investment rather than use

Alternative technologies: Solar, Wind, Hydro, MinigridsAlternative technologies: Solar, Wind, Hydro, Minigrids

Integral solutions to maximize development impact of electricityIntegral solutions to maximize development impact of electricity

Light handed regulation suited to rural characteristicsLight handed regulation suited to rural characteristics

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5. Bank’s Role in Increasing Access 5. Bank’s Role in Increasing Access to Electricity: Some Examplesto Electricity: Some Examples

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Analytical Work (1): Analytical Work (1): Regulatory PrinciplesRegulatory Principles for Electrification (ESMAP, 2006)for Electrification (ESMAP, 2006)

Defining more efficient, light handed regulations for RE, in light of the peculiar characteristics of rural areas:

• Difficulty of enforcement due to the distance and the dispersion of population.

• Diversity of technologies with different regulatory requirements.

Source: Reiche/Tenenbaum/Torres. “Promoting Electrification: Regulatory Principles and a Model Law.” ESMAP and EWDEN - Washington DC - 2006

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Analytical Work (2): Analytical Work (2): Subsidy Design Subsidy Design for Electrificationfor Electrification

• Electricity subsidies are ubiquitous! (1), (2)

• Quantity-based subsidies perform poorly! (1) subsidize connections, not tariff self selection and geographic targeting

• Pay attention to practical success factors! (2) secure funding disburse performance-based fit competition type to market stage fit risk allocation and financing to provider size

Sources: - (1) Komives/Foster/Halpern/Wodon. “WHO BENEFITS FROM UTILITY SUBSIDIES? WATER, ELECTRICITY, AND THE

POOR.” World Bank - Washington DC – 2005- (2) Reiche/Rysankova/Goldmark. “OBA Subsidies for Electricity Access in Latin America.”

World Bank - Washington DC – forthcoming

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Argentina - PERMERArgentina - PERMERRenewable Energy for Rural Renewable Energy for Rural

Markets ProjectMarkets Project

Project: • 30,000 rural households + schools

• off-grid concessionaires or coops

• providers chose technology

• users choose service level

• part of subsidy paid against installations

Financing: $10 GEF $30 IBRD $44 Concessionaires $26.5 FEDEI (Gov. Fund) $10 Users $120.5 million Total

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Argentina - PERMERArgentina - PERMERRenewable Energy for Rural Renewable Energy for Rural

Markets ProjectMarkets Project

Technology neutral supply for remote rural users…

• Solar Home Systems• Wind Home Systems• PV-diesel-battery village grids• hydro village grids• wind-diesel village grids• diesel village grid clusters

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Nicaragua PERZANicaragua PERZA

A US$ 22 million IDA/GEF/GoN project to service isolated areas with private providers over 5 years.

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Nicaragua PERZANicaragua PERZA Key Elements Key Elements

Integrated provision of services Integrated provision of services to rural areas: Electricity, micro-to rural areas: Electricity, micro-finances and BDS.finances and BDS.

Output-Based Subsidies for Output-Based Subsidies for Electricity and for BDSElectricity and for BDS

Support to RE policies, Support to RE policies, institutional strengthening and institutional strengthening and investment in actual projects investment in actual projects

Civil Society Participation: Civil Society Participation: Politicians, IFIs, communities, Politicians, IFIs, communities, Private Sector and NGOs.Private Sector and NGOs.

maximizes developmentmaximizes developmentimpact & ensure business impact & ensure business sustainability sustainability

maximizes efficient use of maximizes efficient use of scarce resources scarce resources

support long term impact, support long term impact, replicability replicability && sustainabilitysustainabilitydemonstration effects & demonstration effects & learning by doinglearning by doing

make it possible, efficient make it possible, efficient && sustainable in remote sustainable in remote areasareas

2020

Thank youThank you