Date post: | 10-Apr-2018 |
Category: |
Documents |
Upload: | innocentshah |
View: | 223 times |
Download: | 0 times |
of 17
8/8/2019 Salman Zaheer
1/17
ENERGY & SUSTAINABLEDEVELOPMENT
Salman Zaheer
The World Bank
IRADe Energy Conclave 2006
Rural Electricity Services:Institutional Arrangements for
Sustainability
New DelhiJuly 28, 2006
8/8/2019 Salman Zaheer
2/17
Structure of Presentation
Three Major Challenges of RuralElectrification and how some
countries have addressed themHigh Cost of ElectrificationPolicy & RegulationSupervision & Service Quality
Indias approachEvolving World Bank Engagement
8/8/2019 Salman Zaheer
3/17
Rural ElectrificationChallenges and Impacts
Challenges Impact
High Cost of ElectrificationDispersed Load - Low load factor Low incomes & household demand
Uncertain commercial demand
G ood economics Risky financials ??Opportunity for economic & social betterment, but:
Cost recovery uncertain => Subsidy dependence
Asymmetrical power of suppliers & consumersPolicy & Regulation
Socio-political factors vs economicFarm supply vs income diversification
Low domestic tariff (often flat rates)Supply rationing as primary
instrument of demand managementHigh politicization => strongconsumers resist metering & tariffs
G ood economics G ood Politics??Constraint to commercialization - financial viability
60% labor force in farm-related jobsLoss-making consumers w/o voice => poor serviceSupply decisions get further politicized
Misreporting of subsidized power supply
Supervision & Service QualityFrontline has limited say in networkdesign or flexibility to match bulksupply with demand
U ncertain Responsibility & AccountabilityUncertain quality and suitability of rural networkOperator-Builder blame each other for poor O&M
8/8/2019 Salman Zaheer
4/17
Rural ElectrificationChilean Experience
Challenges Action(s)
High Cost of Electrification
Private discoms bid for O ne time capital subsidySubsequent operations on commercial basis (no revenue subsidy)
L ower tech standards possible - to reduce capital costN on-exclusive concessions - to increase competitionD emand driven approach to enhance financial sustainability
Community participation in project identification10% of project cost from consumers (wiring/metering/service line)
Policy andRegulation
Household access/consumptionCommercial/industrial off-takeCost-recovery rural tariff set by regulator = Generation cost +Distribution margin. Rural tariff higher than urban tariff
Supervisionand servicequality
D iscoms have commercial incentives for access & reliable supplyL ocal G overnment (LG) approves & monitors projectsCentral Electricity Regulator provides capacity support to LG
Central Electricity Regulator monitors overall program performance
8/8/2019 Salman Zaheer
5/17
Rural ElectrificationChilean Experience
Results and L essonsCoverage: 53% => 76 % in 7 years with private financing
Service quality and financial sustainability achievedCost of expansion 30% lesser than program estimatesInstilling commercial incentive for improving access andservice was the key feature of the program ;Demand driven nature supports future financial viability
Competition for viable rural businesses kept costs down, reducedfiscal burden, attracted private financing
8/8/2019 Salman Zaheer
6/17
Rural ElectrificationBangladesh Experience
Challenges Action(s)High Cost of Electrification
Rural Electrification Board sets standards, aggregates design &construction, facilitates formation of rural electric coops (PBS);Lower tech stds allowed
Concessional long term loansSlightly subsidized bulk power / limited revenue subsidy for 5 yearsD emand driven approach supports financial sustainability
Selection/prioritization of schemes based on economic criteriaPBS responsible for construction supervision, O&M, managementConsumer membership and contribution to project cost
Policy andRegulationIncrease household access and improve social indicatorsIncrease commercial activityTariffs - set by REB in consultation with PBS - 40% higher than urban
Supervisionand servicequality
Coops governed by community - good quality and commercial stdsREB reviews performance against Performance Target AgreementsEmployee Bonus & capital funding (expansion) linked to performance
8/8/2019 Salman Zaheer
7/17
Rural ElectrificationBangladesh Experience
Results and lessonsSince 1980 67 PBSs serving 3.5 million customers established
Connections increased from 0.7 million in 1992 with over 0.5million new connections being added now (vs 0.2 m in 1990s)
Sound technical and commercial performance achieved dueto community involvement and despite higher than urban tariff Other than the larger PBS, most PBSs operate at a loss anddepend on operating cross-subsidy from REBIn recent years increasing politicization and pressure todilute economic criteria
REB-PBS model needs updatingGrowing gap between demand and supply an additional problem
8/8/2019 Salman Zaheer
8/17
Rural ElectrificationThailand Experience
Challenges Action(s)High Cost of Electrification
O ffice of Rural Electrification ( O RE) formed within ProvincialElectricity Authority (PEA) for grid extension, studies and load promotionTech stds set by PEA construction by OREConcessional long term loans / slightly subsidized bulk power (cross-subsidy from urban consumers)Villages identified in National Plan - PEA:
Prioritizes villages based on economic/financial returnsFurther prioritization based on extent of consumer contribution ;
Policy andRegulation
Increase in household access and productive use extensiveproductive use promotion by PEATariff set by National Government on advice from rate committee in
consultation with PEA. Higher than urban tariff Tariff set to cover PEA cost and raise self-financing for investment.Cross-subsidy from urban/industrial/commercial to rural households
Supervisionand servicequality
Monitoring by PEA which in turn is monitored at national level
8/8/2019 Salman Zaheer
9/17
Rural ElectrificationThailand Experience
Results and lessonsAccess: 1 0% in 1972 => 8 0% in 1992; 97% villages electrifiedV illages contributed substantially to capital cost (based onpaying capacity) to ensure rapid electrification
25% villages contributed 30% of project cost, including fromindividuals and local development funds
PEA financed a major part of the program through internalresources (in some years 40 70%) and raised commercial
loans for some schemesStrict use of financial criteria in prioritizing schemes helped makethe program sustainableSound technical, commercial and financial performanceachieved
8/8/2019 Salman Zaheer
10/17
Rural Electrification
Guatemala ExperienceChallenges Action(s)High Cost of Electrification
Rural discoms have service obligation within 200mt of existing grid.Non-exclusive concession for other areasNational regulator sets tech stds low-cost technology allowed
O utput based capital subsidy scheme - $650 paid to discoms for each eligible household connection 20% up-front; 80% after independent verificationSelection of villages for electrification by discoms with Governmentencourages financial viability
Policy and
Regulation
Increasing household access
Tariff set by national regulator allows recovery of full generation costplus a distribution margin set as price capConsumer tariff varies according to cost of supplyConsumption < 300 kWh per month subsidized through a social tariff for which discoms get revenue subsidy from Government.
Supervision
and servicequality
Public-owned company I ND E, responsible for electricity supply
outside Guatemala City, responsible for oversightIndependent verification of all aspects of rural program
8/8/2019 Salman Zaheer
11/17
Rural ElectrificationGuatemala Experience
Results and lessons122,000 new rural connections made between May
1999 and May 2002Commercial incentive to serve rural consumer ensured;Output based aid helped ensure utility performancebefore receiving subsidy;
A criticism against the program has been that subsidywas made available only to existing discoms therebyrestricting alternate supply providers
8/8/2019 Salman Zaheer
12/17
Rural ElectrificationIndia : RGGVY
Challenges Action(s)High Cost of Electrification
90% grant for program costs; 100% grant for connecting BPL familiesREC as nodal financing agency to channel GoI fundsREC defines program design & implementation parametersCPS U services available for project formulation and implementation
Enabling provision in N ational Electricity Act 2 003 allows alternateservice providers Panchayats, User associations, NGOs, franchisees
Policy andRegulation
Increase household access, productive use and social indicators(modified from earlier limited farm supply focus)Tariff setting by SERCs may be deregulated for off-grid compositegeneration & supply systems
Responsibility for financial sustainability - through tariff & revenuesubsidy as required - remains with SERCs
Supervisionand servicequality
O verall supervision by REC (reporting to MoP, GoI)D istribution licensee responsible for quality of service
Act provides for D istrict Committees to clear projects & monitor quality of supply/service
8/8/2019 Salman Zaheer
13/17
8/8/2019 Salman Zaheer
14/17
RE Challenge - Transitioning fromvicious cycle, where customer is aliability .
Supply rationingInadequate O &MPoor supply & service quality
Rising Incentive for theft & collusion
FU RTHER D ETERI O RATI ON IN :Tariff collectionFinancial conditionAbility to contract additionalpower
More electricityneeded to meetincreasing demand
BU
TL ow cost recoveryD eclining ability tocontract new power
8/8/2019 Salman Zaheer
15/17
to a virtuous cycle, where customersprogressively become assets .
Enhanced prospects for attractingcredible service providers/franchiseesAssured supply to full cost paying
customersRationing for subsidized customers or mechanisms for targeted subsidiesIncreased economic activity, employment& local incomes
Increased prospects for contracting additional power from grid and local sourcesMaintain service quality andfinancial viability
At least self-sustaining O &Mcosts recoveredfrom customersMechanisms for self-regulation benchmarking, etc .
8/8/2019 Salman Zaheer
16/17
World Bank Program beingidentified selective & strategic
State-level power reform k ey bottlenec k in sustainablesector development
C apacity building for governance & regulatory effectivenessRural energy services for inclusive growth
Village Energy Security Program - cooking & lighting optionsDistributed Generation to improve last mile electricity services
P ower Transmission System DevelopmentLink power generation (including clean hydro) with load centers
Promote competition - attract investment into generationG eneration expansion and emission reduction1,500 MW of hydropower (out of plan 16,000 MW) and 1,000 MW of thermal plant R&M (out of potential 2 0,000 MW)Strengthen institutional capacity and show case good practices
8/8/2019 Salman Zaheer
17/17
THANK YOU!