CHAPTER 10 PREPARATION

Transcription

1 CHAPTER 10 PREPARATION OF THE DRAFT GUIDELINES

2 CHAPTER 10 PREPARATION OF THE DRAFT GUIDELINES 10.1 GENERAL The Guidelines for Rural Energy Supply with Utilization of Renewable Energy on Rural Areas in the Republic of Indonesia (hereinafter referred to as "the Guideline") serves for dissemination for rural electrification utilizing renewable energies to facilitate the electrification of the remote areas in Indonesia as well as the vitalization of the said areas. The Guidelines discuss following items that covers whole country: Proper institutional and organization set-up for rural electrification utilizing the renewable energy including a coordination mechanism among central and local governments/organizations Necessary laws and regulations for the promotion of the rural electrification utilizing renewable energy Proper financial structure for rural electrification utilizing renewable energy including a financial procurement plan of necessary fund Proper tariff structure for rural electrification utilizing renewable energy Proper operation and maintenance system for generation systems utilizing renewable energy System for the capacity building of human resources Criteria for proper selection of sites to be electrified and its energy resources Criteria for prioritization of possible electrification projects Technical standard in consideration of cost reduction Possible application alternatives of electricity Socialization of all of the above-mentioned items PREPARATION OF THE DRAFT GUIDELINES In accordance with the policy of the Guidelines Formulation agreed with Indonesian side during the field investigations conducted before, the draft Guidelines was prepared in full consideration of the results of the surveys. The draft Guidelines were explained and discussed at the Workshop in Jakarta held in January 2002 with the participation of the counterpart personnel, Steering Committee member, provincial government officers of targeted three (3) provinces, local NGOs, etc. Based on the results of discussion at the Workshop, the Guidelines (Ver. March 2002) were compiled and submitted together with Summary of the Guidelines. The pilot plant project was started in Tana Toraja of South Sulawesi Province. The formal operation was commenced in January 2003 to provide all the consumers with electricity. Based on the knowledge obtained through the implementation process of this project and opinions received from the persons concerned to rural electrification, the Guidelines were revised to finalize them CONTENTS AND POINT OF GUIDELINES The contents of the Guidelines document have been structured to address all the issues 10-1

3 raised by These have been subdivided into three distinct parts, to give the reader a clear understanding about the use of different components of the Guidelines document: Part A - Framework for Development of Renewable Energy Supplies Part B - Project Preparation and Justification Part C - Project Implementation and Local Capacity Building The chaptering of above-mentioned part and main points are as follows; Framework for Development of Renewable Energy Supplies This part is composed of the following seven chapters: CHAPTER 1 Introduction CHAPTER 2 Objectives of the Guidelines CHAPTER 3 Rationale for Use of Renewable Energy CHAPTER 4 Legislative Framework CHAPTER 5 Institutional Structure CHAPTER 6 Evaluation of Renewable Energy Source CHAPTER 7 Sequence of Rural Electrification The main points of each chapter are shown as follows; [CHAPTER 1 INTORODUCTION] The background and contents of the Guidelines are introduced. [CHAPTER 2 OBJECTIVES OF THE GUIDEKINES] In addition to the objectives, the scope of the Guidelines is stipulated as follows; (1) Targeted energy resources: micro hydropower, solar power, wind power, biomass power and geothermal power (2) Targeted rural electrification projects: rural electrification projects with decentralized power source (off-grid system) Rural electrification is sub-divided into electrification by extending distribution line and that by installing independent power source. The Guidelines focus on the electrification in remote areas which are not expected to be electrified by general utility such as PLN. (3) Expected readers: staff of central and regional governments and staff of non-government organizations Some NGOs have been functioned as important facilitators in rural electrification for a long time and have a great deal of experience in it. On the other hand, staff of the government, especially staff of district governments have not sufficient experience in rural electrification. Therefore, it is advisable that some part of their works, which need expertise, is conducted under close cooperation with such NGOs. Moreover, the following main fundamentals for preparing these Guidelines are described in this chapter in order to facilitate the readers to easily understand the 10-2

4 contents of the Guidelines. - Points of the Guidelines In fact, PLN has abolished its division for rural electrification because of lack of resources to continue with the rural electrification program. Instead, the regional governments are now in charge for rural electrification as stipulated in the New Electricity Law issued in September According to the Case Studies made by the Study Team, a key to the project life must be a capability for the maintenance to the project, especially when something unexpected happens to the project. Some of the projects can survive, if the project operators can repair a wind generator hit by a lightning. Some of them die, if the project operators cannot replace old batteries with new ones in a solar system. The capability for maintenance is mainly attributable to (a) technical issues and (b) human issues, and both are tightly linked each other. TECHNICAL ISSUES The Case Studies warn that rural electrification projects will die quickly, if imported facilities are installed, because such imported items can be no way maintained well after commissioning by the project operators, normally the villagers. Therefore, what one should look for is project facilities fully made in Indonesia, or those procured within Indonesia. Because of no domestic technology so far, biomass generation, wind power generation and geothermal generation are classified not suitable for the rural electrification projects. Because of available domestic merchandise, micro hydropowers and solar home systems (SHS) can fit the rural electrification projects in the country. HUMAN ISSUES A rural electrification project is often not affordable enough for typical villagers to self-finance. That is why, in the past, most of or all of the initial cost of the project was often borne by a public sector; a grant from the government or ODA. And then, the villagers became the project owner and the project operator as well, suddenly after construction of the project has been complete and the project facilities were transferred to the community. In some other cases, a rural electrification project was potential-oriented or natural resource oriented independently of villagers readiness to be an owner of a rural electrification project. It was often promoted as part of the public sector operations. In this former sequence for project promotion, the villagers might have little confusion of a project owner with a gift taker. In fact, the villagers could receive electricity without their own large effort; they were allowed to be passive and allowed just to wait for the gift from the government, the rural electrification project. The Case Studies made by the Study Team tell us that all of the long-living rural electrification projects have their institutions good enough to maintain the project facilities and project cashflows. One can conclude that (b) the human issues are villagers value to the rural electrification projects and originated from very mental and emotional aspects. Because it is of human sense, it is difficult to guide to a desired way 10-3

5 after the project has been commissioned. However, a different approach of rural electrification may overcome such human issues. These Guidelines assume that the villagers strong will and desire are essential part of successful rural electrification. In other words, upon rural electrification the district officers in charge should firstly select only villagers who have strong will and desire for electrification. STAKEHOLDERS IN RURAL ELECTRIFICATION PROJECTS There are four important stakeholder groups for the rural electrification; non-electrified villagers, the district governments, the GOI, and the donors. The group of non-electrified villagers is the main stakeholder. The district governments should play the most important role as a facilitator to prioritize villages or areas to be electrified. As the coordinator, the GOI should play the nation-wide roles for the rural electrification projects. The roles may include general guides for energy resources to be developed. The donors in the Guidelines should have a broad meaning. They can be of any bodies that financially donate or invest in the rural electrification projects mainly at the project implementation stage. Therefore, an International Funding Agency (IFA), a district government itself, a provincial government, GOI, and a private investor may all be one of the donors, as far as those bodies provide part of the project implementation cost. Project Operation Daily O&M Support and Monitoring Project Implementation Implementation of Project Project Development Community Preparation Project Development Project Initiation/ Planning Prioritization Planning Reconnaissance Coordination and Advice based on Five-year Rolling Plan Expression of Interest Potential Survey & Campaign Village District GOI Figure Main Stakeholders in Sustainable Rural Electrification Projects SEQUENCE OF RURAL ELECTRIFICATION PROJECTS Accordingly, the rural electrification under the Guidelines is not government oriented, 10-4

6 but on villagers incentive basis. Those villagers who have strong desire for electrification need an expression of their desire (or interest) and initiative for electrification made to the district government or the regional institution, which is appointed for rural electrification by the district government. It is recommended that the following steps be taken: Step 1: Potential Survey and Campaign for Rural Electrification by District Government,, Step 2: Expression of Desire (or Interest) and Initiative by Villagers for Rural Electrification, Step 3: Step 4: Step 5: Step 6: Field Reconnaissance by District Government for potential energy source, Electrification Plan by District Government based on results of the Field Reconnaissance and the Villagers expression as well, Prioritization of the Electrification Candidates by District Government, Development of Rural Electrification Projects, Step 7: Community Preparation in O&M, Management, Training, and Education Campaign, Step 8: Step 9: Implementation of Rural Electrification Projects, Operation and Daily Maintenance of the Projects by Village Communities, and Step 10: Support, Monitoring and Evaluation of the Projects. Steps 1 to 5 are activities that can be recognized as the Initiation or regional electrification planning targeting several numbers of non-electrified villages. Steps 6 and 7 are in the Development for a specific village, which has been higher ranked at the end of the Initiation. The Step 8 is literally referred to as Implementation for a village that has successfully been qualified at the end of the Development. The last steps, Steps 9 and 10, can be referred to as the Operation. [CHAPTER 3 RATIONALE FOR USE OF RENEWABLE] Renewable energy solutions offer many advantages: Since they use indigenous energy sources, they contribute to supply security by reducing reliance on energy imports. There are a variety of regional situations in terms of needs and resources, but renewable resources are largely available in Indonesia. Creating an enabling environment which contributes directly to local economic development. Renewable energy installations bring jobs, capital, and sources of revenue to local communities, often to rural areas where these benefits are needed most. 10-5

7 In certain remote locations, where the electricity and/or fossil fuel infrastructure does not reach, renewable energy systems can be the only cost effective option. In addition, modern renewable energy systems generate far less air pollution and greenhouse gas emissions than fossil energy systems thus reducing the threat of climate change and health risks. Depending on the installation, renewable energy projects may be smaller in scale and not as technically complex to operate and maintain as conventional energy projects. For all of these reasons, renewable energy is a valuable resource in addressing Indonesia's growing energy needs. [CHAPTER 4 LEGISLATIVE FRAMEWORK] In this chapter, key legislation for energy sector and laws and regulations for use of renewable energy are reviewed briefly, and it is recommended that, taking into consideration the decline of PLN s role in rural electrification, the central government and regional governments will formulate Rolling Five Year Plan for Rural Electrification reflecting the following: An assessment of the capacity at national and local government levels to adequately co-ordinate and implement the projects planned for each year. It is critical to ensure that sufficient capacity exists to match the expectations of the Plan. A mechanism for flexibility in the Plan that accommodates any unexpected delays in project planning and implementation so that uncompleted or projects not started can be "rolled forward" into the next year without having to adjust the overall targets of the Plan. A flexible framework for funding from government and external donors that allows the projects developments to be supported in the event of delays and other constraints in meeting the Plan targets. A formal institutional arrangement with the rural electrification fund for coordinating the activities and targets of the Plan those of the fund particularly with regard to attracting donor funding to avoid duplication and efforts and conflicts of responsibilities An annual update of the Plan to ensure that the requirement for rolling forward targets, activities and financing is kept up to date to accommodate delays and other difficulties encountered in the previous year. An annual presentation of the Plan at the donors meetings and other gatherings concerned with energy sector in the country to highlight the desire and the requirements for significant progress in rural electrification as one of the key development goals for the country. [CHAPTER 5 INSTITUTIONAL STRUCTURE] More recently, the effort aimed at decentralization has led to an increased role of provincial government and district authorities. The activities of regional and local institutions are examined under this new local government power. The contributions of 10-6

8 non-government organizations and the private sector, which play an important role in the energy sector of the country, are also discussed. The key issues relating to inter-ministry co-ordination and co-ordination between the central and local government co-ordination are highlighted. The discussion also takes up the issue of capacity constraints of human resources at the local government levels and comments on the potential options available to them to overcome these constraints. The chapter is concluded by a brief discussion of conclusions and recommendations. In future a bottom up approach to planning and development of rural electrification is likely to emerge based on the following: Village initiative - demand driven approach to rural electrification Local government involvement - at district / provisional levels Central government assistance - MEMR to limit its role to being a facilitator and focal point of contact for Government and donors The conclusions and recommendations in this chapter are as follows: The existing institutional responsibilities promote the "top down" approach where the central government institutions identify and develop projects and implements them through their local branches. While there are areas, which can arguably be viewed as duplication of responsibilities between different government ministries given so many players involved in the energy sector, the efforts to co-ordinate, reduce duplication of efforts and avoid potential conflicts of interest, are largely successful. In practice, there has been little need for co-ordination between central and local government institutions. The method adopted for implementing central government policies has not warranted this. The sector of rural electrification has been no exception to this rule. It is generally agreed that pace of rural electrification has not matched the expectations or the potential of renewable energy resources of the country. There are host of factors that could be attributed to this deficiency but the most critical impact on rural electrification has been the demise of PLN which had previously been the driving force behind electrification of rural areas. It is not likely, nor it is recommended that creating more institutions or changing the existing structure would necessarily induce greater efficiency in the process of utilization of renewable energy or greater impetus for rural electrification programs. Many of the leading government ministries and departments are already in the process of streamlining their responsibilities and functions. These measures are likely to contribute to much greater efficiency of operations. Local government institutions have been in place for quite sometime but without effective power. The Governments efforts at decentralization make fundamental changes to the role of local government in the country and gives it sweeping powers to mange its own affairs. In principle, local government institutions in 27 provinces could get involved at every level in the drive for rural electrification. Compared with the influence and the resources of the main central government institutions such as MEMR, this would represent a considerable boost to the resources driving the process of rural electrification. 10-7

9 It is envisaged that in the future a more "bottom up" approach to planning and development of rural electrification is likely to emerge. This will be consistent with both the government's policy of decentralization and the wider criteria for sustainability of rural electrification program. This "demand driven" approach to rural electrification is recommended as the most appropriate mechanism for triggering the process of project initiative. There are examples of highly motivated villager communities successfully promoting their need for electricity and ultimately achieving their goal of supply of electricity. Instead of seeking assistance from remote sources such as central government or regional offices, the villagers would be able to approach their own district / provincial authorities that are directly responsible for their welfare. The most immediate constraint facing the local government administrations are the lack of adequately qualified personnel able to take up multitude of responsibilities potential thrust upon them following the local autonomy legislation. The district / provisional governments will need to create a pool of basic expertise which can advise and assist with the process of local electrification. In practice the regional / district offices of MEMR and SMOC&SMEs, which were actively engaged in identification and development of rural electricity programs, have been transferred to the jurisdiction of local government. They can in future become directly involved with the initiatives for rural electrification. The challenge facing the local governments lies in having the financial resources and the hindsight to fully assimilate this professional expertise. In addition to the above-mentioned conclusions and recommendations, it is recommended that one of the first components of the study should address the issues of capacity building for local governments to become more effective in the development of rural electrification. The scope of the study should include: Evaluation and capacity building measures for skills of staff resources in local government establishments to assess the desire of rural communities for electrification and carry out initial investigations to determine priority projects in their provinces and districts. Potential for successfully assimilating the provincial and district offices of MEMR, which now come under the jurisdiction of the local governments, to work effectively in supporting the local government establishments in development of rural electrification. Development of capacity for local government establishments to take on the role of implementation agencies for new rural electrification projects and undertake the responsibility for providing technical support to the villages in operations of the management of their projects. Formulation of mechanisms for local governments to establish Electricity Development Funds at provincial or district levels to support the rural electrification projects, specifically in remote areas where income levels are very low and the communities find it difficult to even to pay for full operations and maintenance costs. Capacity building measures for collecting data on all existing rural electrification projects in their areas concerning their operating characteristics including type of energy resources used, quality of maintenance, village management capabilities, charging structures, and all other relevant parameters which may determine the successes or failure of the projects 10-8

10 Strengthening the skills of local government establishments to formulate Five Year Plans for Rural Electrification Plans with broad based estimates for annual capital investment requirements and types of renewable energy to be utilized. Setting up a formal structure for co-ordination between local government establishments and MEMR to transfer all relevant information to enable MEMR to develop a national Rolling Five Year Plan for Rural Electrification and seek funding from government and external donors. [CHAPTER 6 EVALUATION OF RENEWABLE ENERGY SOURCE] This chapter is composed of: Target Renewable Energies Factors for Evaluation Evaluation of Renewable Energies Conclusions and Recommendations and discusses how to evaluate five renewable energy resources. The five renewable energies to be focused on are: Hydro Solar Wind Biomass, and Geothermal All these energies have been already utilized to generate electricity in Indonesia. The features of targeted five renewable energies (Micro hydro, solar, wind, biomass and geothermal) were evaluated and then the advantages and disadvantages of five renewable energies are summarized as shown Table Based on these results, the applicability of each renewable energy is summarized in Table In conclusion, at present and in the near future, only micro hydro and solar (SHS) are recommendable as renewable energies that are applicable to rural electrification (off-grid base) in Indonesia. In addition, it is appended at the end of conclusion that where a micro hydro potential is identified, normally micro hydro is the most suitable energy option. 10-9

11 Table 6-1 Advantages and Disadvantages of Renewable Energies Advantages Disadvantages Micro hydro Abundant records of applications with utilization of Indonesia s own technologies and skills. 24 hours service Inexpensive capital cost per kilo watts Almost the same service as grid-based supply and possible to be used for income generation in the daytime. Cheapest running cost (few expensive parts that need periodical replacement) Easy O&M, possible by only local populations. Solar Abundant records of applications (SHS) with utilization of Indonesia s own technologies and skills. Possible anywhere over the country Individual household installation Easy installation and O&M possible by only local populations. Possible to procure all the components in the country Wind Individual household installation More economic than solar power Biomass Regardless of geographical and weather conditions, possible to generate, as long as there are agricultural residues. Easier to get higher power because of utilization of internal combustion engines or steam turbines Micro hydros are applicable at only locations where its potential is identified. Need of qualified engineers for planning and design. Micro hydros may be unable to fully meet demand of all the households in the target area depending on hydro potential on the site. Lower density of households is, higher construction (distribution) cost is. Most expensive cost per unit output Unstable output varying greatly according to climate and day-to-day weather conditions Limited service (capacity and energy of supply, serve time) Limited productive use Need of replacement at 2 3 years interval of storage batteries that account for nearly 10 % of total cost. Need of appropriate battery disposal Applicable locations are limited to only windy parts of coastal areas and islands. Unstable output varying greatly according to climate and day-to-day weather conditions. Limited service (capacity and energy of supply, serve time) Limited productive use Need of replacement at 2 3 years interval of storage batteries Procurement of major components relies on import. (Indonesia s own technology for practical use has not been established) Few records of applications in the country As for bio-gas engines, Indonesia s own technology for practical use has not been established. Need of appropriate arrangement for biomass fuel such as agricultural and wood industry residues Geothermal Possible to generate stable electricity continuously not depending on climate and weather conditions. Same inexpensive generating cost as that of thermal power plants depending the conditions. of long-term and large-scale surveys for verifying the presence of promising geothermal reservoirs. Need Few existing small-scale plants for village level electrification Need of O&M by professionals

12 Table 6-2 Summary of Applicability to Rural Electrification Renewable Energies Solar Grid base Hydro AA Applicability by scale Rural electrification (off-grid) Mini grid AA (US$ 2,000-7,000 / kw)* 1 SHS C C Centralized Individual Households A AA (US$ 8,000-9,00 0 / kwp)* 2 A A C Conclusions on Applicability to Rural Electrification Most applicable energy where available potential exits Applicable as the next best energy where micro hydro is not applicable. (Remarkable restriction: Impossible full time service) Wind B B B Biomass B B C Geothermal AA B C Not applicable because it is fatal disadvantage as rural energy that should provide reliable electricity to consumers that at present procurement of major components relies on import. Not applicable because it is fatal disadvantage as rural energy that should provide reliable electricity to consumers that Indonesia s own technology for practical use has not been established Very little possibility of its application because of few existing small-scale plants for village level electrification Legend AA: Preferable and proven as practical use A : Applicable, but costly B : Not applicable at present (necessary for tests, demonstration step, establishment of domestic equipment supply system, etc.) C : Not applicable even in the future (from technical point of view) Note *1:Capital cost per kw *2:Capital cost per PV Module Peak Output (kwp)

13 [CHAPTER 7 SEQUENCE OF RUAL ELECTRIFICATION] The rural electrification under the Guidelines is not government oriented, but on villagers initiative basis. Those villagers who have strong desire for electrification need an expression of their desire (or interest) and initiative for electrification made to the district government or the regional institution, which is appointed for rural electrification by the district government. It is recommended that the following steps be taken: Step 1: Potential Survey and Campaign for Rural Electrification by District Government,, Step 2: Expression of Interest and Initiative by Villagers for Rural Electrification, Step 3: Field Reconnaissance by District Government for potential energy source, Step 4: Feasibility Assessment by District Government based on results of the Field Reconnaissance and the Villagers expression as well, Step 5: Prioritization of the Electrification Candidates by District Government, Step 6: Development of Rural Electrification Projects, Step 7: Community Preparation in O&M, Management, Training, and Education Campaign, Step 8: Implementation of Rural Electrification Projects, Step 9: Operation and Daily Maintenance of the Projects by Village Communities, and Step 10: Support, Monitoring and Evaluation of the Projects. The rural electrification should be promoted with a bottom-up approach. Its sequence and stakeholders need to be as illustrated in Figure Roles of the main stakeholders will be as given in Table

14 Table Main Roles of Village, District and GOI (RE Subsidized by District) Stage Village District GOI Keywords Potential Survey & RE Campaign Understands concept of RE projects including villagers' obligation, responsibility and expectation of RE outcome. Conducts potential surveys and campaign for rural electrification. Potential survey shall focus on Villagers' capacity to pay, institutional strength and possible energy resource. Supports District in budgeting and methodology. Provides District with general energy info. Potential Survey RE Campaign Reports to GOI on the Potential Survey results. Keeps track of Potential Survey results. Expression of Interest Submits Expression of Interest (EoI) to District. EoI shall include basic info on the Village, Villagers understanding to cost and other needs for power generation, reasoning why electrification is strongly sought, institutional strength of Village, how much Villagers are willing to pay for electricity. Advises on how to prepare EoI. If EoI is considered not appropriate for the next Reconnaissance stage, advices on how to complete EoI. EoI for RE Reconnaissance Provides District officers with all necessary info required for the Reconnaissance. Signs on MOU for FA Upon receipt of a complete EoI, dispatch officers to Village and collects basic info on possible RE together with energy resource. Supports District in methodology. Makes MOU for FA with Village to ensure obligation, responsibility and right of each party. The MOU is recommended to include Villagers' offer for future electricity tariff. Reports to GOI on the Reconnaissance results and MOU for FA. If fund support is demanded, District may so request GOI. Keeps track of Reconnaissance results and MOU. MOU for FA Initiation Feasibility Assessment Provides District with all necessary info required for RE implementation, such as capability for participatory construction, possible institution for operation. Upon MOU for FA signed, District builds up an Electrification Plan for the Village. The Plan shall include most probable energy resource type and Feasibility Design together with preliminary estimation of project cost and subsidy required. Upon completion, the Plan shall be disclosed to Villagers. Supports District in professional planning. Feasibility Assessment Electrification Plan In MOU updating, the Villagers' offer for the future electricity tariff shall be confirmed. Upon disclosure of the Electrification Plan, the MOU for FA shall be updated with results and findings of the Electrification Plan. Updated MOU for FA Reports to GOI on the Electrification Plan and updated MOU. Keeps track of Electrification Plan and updated MOU. Prioritization After some number of Electrification Plans complete, RE Prioritization shall be made, followed by budget allocation. RE Prioritization shall take account of effectiveness of RE and subsidy required. Upon completion, the RE Prioritization results shall be disclosed to all of Villages. Supports District in methodology and technique. Keeps track of RE Prioritization results. RE Prioritization Project Development Well understands RE characteristics and signs on MOU for PD. After all of clarification on RE characteristics, obligation, responsibility, and preliminary tariff structure, an MOU for PD shall be signed between Villagers and District. The MOU for PD shall include responsibilities, obligations and rights of each stakeholder, plus main mile stones up to RE operations. Upon MOU for PD signed, Detailed Design together with detailed estimation of project cost and subsidy required. Upon completion, the Detailed Design shall be disclosed to Villagers. Supports District in Detailed Design. Keeps track of Detailed Design. MOU for PD Development Community Preparation Tariff System and Community Management and Operation Plan shall be finalized through discussions by all of the community members. Notifies/educate Villagers on expected management, operation, maintenance and other RE related activities required. Based on the final tariff system offered by Villagers, the MOU for PD shall be updated. Updated MOU for PD Implementation of Project Upon the updated MOU for PD incorporated with the final offer of the electricity tariff system by the Villagers, implementation of RE may commence. All of necessary technical staff required for engineering and supervision is expected to be provided under District's responsibility. Participates in RE Construction. Technical specification, procurement of contractor, and Construction Supervision shall be made under District's responsibility. Contract with the contractor shall include stipulation on Participatory Construction, Training of Villagers, and at least one year guarantee and technical support on RE facilities after commissioning. Supports District in engineering and supervision plus budget subsidy. Supports District in preparing Technical Specification and Contract Documents for RE. Keeps track of Technical Specification and Contract Documents. Participatory Construction Implementation Daily O&M Manages, operates, and maintains the RE facilities. Whenever any troubles beyond Villagers capacity happen, requests District for Unscheduled Check-up. Respond timely to Unscheduled Check-up requests. If necessary, provides further support, maintenance, and/or repair with District's initiative. Cost incurred for such further support, maintenance and/or repair is recommended to be covered by RE loan from District and/or by so-called Micro Finance to be established under GOI. When unexpected fund is requested through District, provides Village with a Micro Finance. Unscheduled Check-up Micro Finance Operation Support and Monitoring Submits O&M Reports to District. Supports Villagers in Daily O&M by providing periodical At-Site Advice on technical, managerial and institutional matters at site. Keeps track of O&M Reports. Keeps track of O&M Reports. At-Site Advice 10-13

15 Potential Survey RE Campaign EoI for RE MOU for FA Feasibility Assessment Electrification Plan Updated MOU for FA RE Prioritization MOU for PD Updated MOU for PD Participatory Construction Unscheduled Check-up Micro Finance At-Site Advice Explanation of Keywords The district government should collect basic information on all of non-electrified villages and potential sites/areas. The potential surveys should include investigations on possible energy resource. However, it should not be too energy-oriented but be demand-oriented and shall focus on villagers' capacity to pay and institutional strength. When the potential surveys are conducted, district governments should undertake an advertising campaign at the same time for the Rural Electrification Program. The campaign probably becomes effective with distribution of copies of forms of EoI. In such advertising campaign, non-electrified villagers are expected to learn sequences of rural electrification, main stakeholders, and requirement of agreement between the village and district. All of non-electrified villagers are encouraged to prepare EoI for electrification to the respective district administrations. If the villagers desire, the EoI forms may be used for the expression purpose. Such EoI forms should be prepared by respective district. MOU for FA is a key outcome of the Field Reconnaissance. If the district evaluates the villagers EOI reasonable, the district and the village will make such MOU for FA. Where, obligations and responsibilities of each parties and expected future mile stones shall be agreed. Upon an MOU for FA is signed, the district should conduct the Feasibility Assessment for the village concerned. Following items are to be obtained and/or worked in the Feasibility Assessment: 1) To review and clarify the Field Reconnaissance results 2) Selection of the potential energy source. 3) Preliminary discussion on electricity demand and development scale. 4) Preliminary electrification design. 5) Estimation of designers conducting future engineering, and their fees. 6) Preliminary cost estimation for the electrification. 7) Preliminary subsidy requirement based on the tariff system given in MOU for FA. 8) Updating of MOU for FA. The Electrification Plan is one of outcomes from the Feasibility Assessment. It is a tailor-made blue print illustrating how the village concerned can be electrified. When the Electrification Plan is made, the village and district should agree to the plan by updating the MOU for FA. After a number of Feasibility Assessments complete, the district will have a number of candidates to be electrified. Then, the district government shall establish a Regional Electrification Plan for the district by prioritizing such Feasibility Assessments so far done. The Project Prioritization should be carried out by the district considering i) Subsidy Amount and ii) Expected Annual Energy. MOU for PD should be signed between the village concerned and district, before the rural electrification project has gone into the development stage. The MOU for PD should be updated based on results of the detailed design. The "Participatory Construction" is one of the construction methods in which inhabitants participate. It is effective to let inhabitants more farmiliar with the project facilities. The "Unscheduled Check-up" is facility checking to be made by the district on a request basis, when a rural electrification project is found beyond the control by the villagers. Small scale financing facility desired for the rural electrification. A series of advice to be made by the district

16 Project Preparation and Justification This part is composed of the following four chapters: Chapter 8 Rural Electrification Planning Chapter 9 Project Development Chapter 10 Environmental Assessment Chapter 11 Financial Sustainability Chapter 12 Economic Justification The main points of each chapter are shown as follows; [CHAPTER 8 RURAL ELECTRIFICATION PLANNING] As mentioned in the Part A, the Guidelines expect that bottom up approach to planning and development of rural electrification is likely to emerge based on village initiative. This chapter discusses the planning stage for rural electrification in which district governments should play a key role. The items to be noted in Rural Electrification Planning are shown as follows; Villagers Potential The ultimate purpose of rural electrification is, however, to electrify non-electrified villages, not to develop energy potential sites. When planning rural electrification in which villagers play main roles such as operation and maintenance, villagers potential/capacities, should be treated as essential information/data for planning rural electrification. When investigating villagers potential, it is important to give villagers proper understanding including responsibility of electricity consumer at the begging for leading correct results of the investigations because the villagers do not have experience to have access to electricity. Taking into consideration the fact that the ultimate purpose is to electrify all the non-villages, the purpose of the investigation should not be to disqualify villages not satisfying the requirements for electrification. Therefore, it is necessary to give such villagers instructions that improve their capacity/potential at the same time when conducting investigation and planning. In this respect, it can be said that the social preparation for the villagers starts at this stage. Villagers Involvement in Energy Potential Study Energy potential satisfying village-level electrification is generally very small in scale compared with that of general power sources. In the case of micro hydropower, since it is difficult to identify its potential by only map study, information obtained from villagers at sites is valuable clue at the early stage of potential survey. Therefore, in this stage, it is necessary to encourage villagers to give their information on energy potential in and around their village and to utilize such information for effective identification of energy potential

17 Necessity for Updating and Upgrading of Plan It is necessary to understand that perfect planning takes a long time and the information on the villagers is changing day by day because of human factor. Therefore, it is necessary to repeatedly conduct surveys to update the information of planning. The plan is requires to be updated and upgraded and to cover wider area with passing time. Responsibility for Planning In accordance with the article 7 of Electricity Law No.20/2002, the district government is responsible for rural electrification in its jurisdiction. Since it is difficult to recover the cost related to making regional rural electrification plan from each individual project cost, the district government should prepare the budget for the planning apart from budget for project development. The central government should give financial and technical assistance to districts and obtain information/data and results of planning conducted by districts and to utilize them for planning of national-revel rural electrification and its updating. Provincial governments are expected to serve to bridge the gap between the central government and district governments as branch offices of central government. Furthermore, they are required to function as inter-local coordinators among districts in their jurisdictions by Procedure of Planning It is desirable to standardize the procedure for formulating a prioritized rural electrification plan throughout of the country. However, since it is supposed that the situations on electrification vary from district to district, these Guidelines do not necessarily persist in following the procedure introduced in this chapter. The important thing is for each district government to fully understand the purpose of electrification and key points in planning which are discussed in these Guidelines and to formulate a prioritized rural electrification plan by the most appropriate procedure for the district. (1) Potential Survey and Advertising Campaign by District Government The potential survey should be carried out for getting the basic village information and preliminary electrification potential. These may be composed of items given in Table for example. When the potential surveys are conducted, district governments should undertake an advertising campaign at the same time for the Rural Electrification Program. (2) Expression of Interest and Initiative by Villagers (EOI) All of non-electrified villagers are encouraged to express their desire/interest and initiative (EOI) for electrification to the respective district administrations. If the villagers desire, the EOI forms may be used for the expression purpose. Such EOI forms should be prepared by respective district and may have the following contents for example shown in Table

18 Table Recommended Items to be Examined in Potential Surveys 1) General information on the village (name, person to contact, location, total population, number of sub-villages, village status based on BPS/PLN database). 2) Governmental and political status of the village (whether or not it is the capital of a district). 3) Access and road conditions (how many hours to come to the village from the nearest large town). 4) Population to be electrified and numerical area measure for electrification. 5) Distance to the nearest PLN grid measured from the center of electrification area. 6) PLN s electrification plan for the village (in which year PLN plans to electrify the village). 7) Possible energy type for electrification (tentatively either micro-hydro or solar). If its possible energy type is recognized to be micro-hydro, the following information shall additionally be collected: 8) Specific point of water resource (river point, existing irrigation facility, etc.). 9) Estimation of head and available discharge. 10) Identification of data collection point for future meteorological/hydrological investigations (at least one nearest rainfall station and gauging station). Table Example of Contents of EOI Form Basic information on the community/village/area to be electrified (name, location, etc.), Number of total households and population, Number and type of public facilities that may be electrified, Number of households, facilities and population that the villagers desire to be electrified, Economic conditions (income, expenditure, etc. for capacity pay), Existing communities (KUD,LKMD, etc.), Reasons why the village looks for electrification, and Specific plans after electrification. (3) Field Reconnaissance by District Government Once the district government receives the villagers EOI for electrification, they shall conduct the Field Reconnaissance to confirm items already given in the potential survey and to examine the EOI submitted by the villagers in terms mainly of willingness and capacity to pay for electricity and institutional strength. Items to be examined are given in Table The key outcome of the Field Reconnaissance is a Memorandum of Understanding for Feasibility Assessment (MOU for FA). If the district reconfirms all of items listed in the above table, and evaluates the villagers EOI reasonable, the district and the village will make such MOU for FA. Where, obligations and responsibilities of each parties and expected future milestones shall be agreed. Recommendation on the MOU contents is given in Table

19 Table Recommended Items to be Examined in Field Reconnaissance 1) Review and clarification of EOI contents. 2) Review and clarification of the Potential Survey results. 3) Preliminary decision on number and type of facilities to be electrified (how many houses, offices, schools, hospitals, institutions, factories, etc.). 4) Grasping the economic conditions (income, expenditure, etc. for capacity pay). 5) Grasping the existing institutions, if any (organization, rules, accounting, reporting). 6) Computation of the villagers capacity to pay for electricity from average income and actual expenditure patterns. 7) Obtaining the villagers willingness to pay for electricity through interviews. 8) Preliminary selection of potential energy resource type. 9) Rough estimation of the facility cost. 10) Preliminary discussion on environmental and social impact. 11) Explanation to villagers on MOU for FA and further steps for electrification

20 Table Recommended Contents of MOU for FA Statements on the villagers understanding such as: The villagers have well understood the Rural Electrification Program, which is not free of charge. The villagers have well understood meanings of this MOU. This MOU is signed on behalf of all members of the village. Only if the villagers all satisfy their responsibilities and obligations, the district facilitates the Rural Electrification Program for the village. If the villagers have less capacity to pay for electricity, or if natural conditions do not allow, rural electrification might not be successful. District s obligations and responsibilities such as: to conduct Field Reconnaissance after successful submission of EOI from the villagers, and to make up a preliminary electrification plan by taking the villagers desire into account and by selecting possible energy resource type. Villagers obligations and responsibilities such as: to be sincere in keeping all of agreements to be made between the village and the district, to be sincere in taking professional advices to be given through the district, to build up strong institution for electricity in the future (concrete organization, strict regulations including penalties to institution members, precise accounting with reporting obligation, financial burden to institutional members, participatory obligations to electricity generation, etc.), to agree that the electrification plan will be made up through professional work, not directly by the villagers desire, not to change the electrification plan once it has been established, even if it brings about inequality among the village, and to settle all of possible frictions within the village. Villagers specific proposal of a tariff for electricity in terms of Rp. per connection per household plus Rp. per household per month. Statements or charts on expected mile stones in the future; MOU update after Feasibility Assessment, Notification of Prioritization Results, MOU for PD, Notification of PD results, MOU for PI

21 (4) Feasibility Assessment by District Government Upon an MOU for FA is signed, the district should conduct the Feasibility Assessment for the village concerned. Table shows items to be obtained and/or worked in the Feasibility Assessment. Table Recommended Items to be Examined in Feasibility Assessment 1) To review and clarify the Field Reconnaissance results, especially on following information and data: Number and types of facilities to be electrified, Capacity to pay for electricity, Willingness to pay (villagers specific offer recommended), Accessibility for future construction, and Strength of existing communities (KUD,LKMD, etc.). 2) Selection of the potential energy source. 3) Preliminary discussion on electricity demand and development scale. 4) Preliminary electrification design. 5) Estimation of designers conducting future engineering, and their fees. 6) Preliminary cost estimation for the electrification. 7) Preliminary subsidy requirement based on the tariff system given in MOU for FA. 8) Updating MOU for FA with the villagers with prior notification of the total energy cost per household per month, expected payment by the villagers per household per month, and required subsidy per household per month. (5) Project Prioritization For the Project Prioritization, these Guidelines pay special attention to two key factors. They are i) Subsidy Amount and ii) Expected Annual Energy. Because 100% cost recovery can hardly be expected as discussed later in Chapter 10, some public money as subsidy needs to be granted to typical non-electrified villagers. This fact suggests that amount of subsidy be one of important factors to value rural electrification projects. These Guidelines introduce the Subsidy Efficiency taking the serviceable hours into account. It can be express by the following formula: p αe 0 = (Equation 8.7-1) S0 Where, p: subsidy efficiency, 10-20