ANNEX 1. IDENTIFICATION

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1 ANNEX 1. IDENTIFICATION Country/Title/Numb Kiribati/Solar Energy for Outer Islands er CRIS No. FED/2009/ Total cost EC contribution : Euros 4,100,000 Aid method / Project approach: Partially decentralised management Method of implementation DAC-code Sector Solar Energy 2. RATIONALE 2.1. Sector context As a small Pacific Island Country with no proven reserves of conventional energy, Kiribati is highly dependent on imported fuels for electricity generation, transport and cooking. Energy use is dominated by the main urban centres at Tarawa and Kiritimati. Biomass is estimated to constitute around 25% of the gross national energy supply and is used for household cooking and copra drying in rural areas. Solar PV is an important source of energy in outer islands, but only accounts for less than 1% of national energy consumption. On the outer islands the per capita energy use is very low, and energy is often solely used for lighting and cooking with solar and biomass the main sources of energy. Electricity in rural areas comes from solar home systems with the exception of small generator use for government housing around the island council offices. Petroleum use is mainly kerosene used for lighting or cooking and to operate a few motorcycles and outboard powered boats. The Government of Kiribati struggles with the high cost of importing fossil fuels, in particular to the outer islands. In order to keep the import of fossil fuels at a minimum, the Government has long had a policy of utilizing renewable energy and local resource for outer island electrification and associated development. Due to the better standard of living and economic opportunities that electricity brings, migration to the capital is reduced.to date roughly 34% of outer island homes have solar lighting services installed with an additional 15% indicating a desire for electrification. Typical systems include a 100 Wp panel and 100 Ah battery. Previously there have been minimal efforts to develop electricity beyond basic lighting, however there is a clear demand and need for electricity for small business development and for supporting modern education. This will be a key component in the effort to improve outer island socio-economic conditions. The Kiribati Solar Company has been installing solar energy systems since In 1992 the structure of the company was changed to a solar utility company whereby solar installations would be made and maintained by the company, with ownership retained by KSEC and electricity services sold to users for a fee. As a Renewable Energy Service Company (RESCO) KSEC is responsible for providing all technical and maintenance support and ensuring that the solar installations remain operational, providing reliable power. In 1992 KSEC completed a JICA trial project electrifying 56 households on North Tarawa managed under the solar utility concept. In 1994 this was supplemented by an EU project electrifying 250 households using solar energy. Under the 8 th EDF the number of households, maneabas, schools and clinics electrified by solar under the management of KSEC rose to Lessons learnt Issues identified by the Kiribati National Energy Policy, the Pacific Renewable Energy Assessment 2004 and Pacific Islands Energy Policy and Strategic Planning Project 2008 were 1

2 taken into consideration when planning activities for EDF-10. This was combined with lessons learnt by KSEC over the last 20 years to ensure implementation of the most effective activities and programmes. The project needs to address the following key areas: Improved management required at KSEC: improved management tools will be essential to efficiently manage the increasing number of solar installations. Inconsistent duties and taxes applicable to renewable energy systems and limited financial capacity at the major energy bodies were identified as issues in the sector assessments. Whilst these issues are not solely attributable to KSEC, KSEC can play an important role in working with the other energy bodies to address these issues. In addition the National Energy Policy states the need for improved documentation on the impact of solar electricity on the development of the outer islands; improved management and record keeping at KSEC would work towards this aim. Improved communications between KSEC island technicians and the Tarawa based management is also required. Further training for outer island technicians required: the poor maintenance of solar systems is most likely due to a shortage of properly trained technicians on the outer islands. KSEC needs to increase its number of technicians and ensure that they all have sufficient technical knowledge and experience. Training should also cover business management and customer service, which have been identified as weaknesses. Larger sized systems required: the need for electricity for productive use in addition to electricity for lighting has been identified. Professionals, including teachers, often require basic office equipment. Small businesses can use electricity to increase or diversify business; for example increased opening hours through lighting provision, community entertainment services through the use of video equipment, and the ability to keep food longer by refrigeration Complementary actions Recent projects with a similar focus or complementary actions in Kiribati include; OLPC Oceania: The One Laptop Per Child project aims at distributing 5,000 small specially designed laptops called OLPCs in the Pacific Islands, to improve education through computer literacy. PIGGAREP: The Pacific Islands Greenhouse Gas Abatement through Renewable Energy Project (PIGGAREP) project, funded by the GEF and co-financing partners, commenced in It will fund, among others, a climate change mitigation plan and RE awareness campaigns. EC Solar Energy Projects: The first EC-funded pilot project electrified 250 households in the islands of North Tarawa, Nonouti and Marakei. The second EC-funded project under EDF-8 (8 ACP KI 02) expanded the electrification to all 18 islands of the Gilbert Group of Atolls, by providing the solar home systems to an extra 1,700 households, and electrifying almost 100 community halls (maneabas). UNDP: Will be funding the USD 35,000 Maintaining Renewable Energy Systems in Kiribati through Technical Training project for upgrading KSEC s information management software. Italian Government: Several projects including PV water pumping, PV/diesel hybrid system, wind monitoring, coconut oil refinery for biofuels. Total amount: USD 761,000. Japanese Government: Application for 400 kwp grid-connected PV system on South Tarawa has been made to Japanese Embassy in June Approval pending. Estimated cost: USD 5 million. 2

3 2.4. Donor coordination Donor coordination in Kiribati is carried out by the Ministry of Finance and Economic Planning. In regard to renewable/solar energy sector it will be carried out by the KSEC Ltd. in close coordination with the Government, in particular Ministry of Finance and Economic Planning and the Ministry of Public Works and Utilities. The company will continue to seek funding for expanding and improving services while ensuring that there is no duplication of efforts arising from donor funding proposed by other agencies or organizations in Kiribati. 3. DESCRIPTION 3.1. Objectives The overall objective of the project is to address the current socio-economic imbalance between the urban and rural areas by achieving a more equitable distribution of resources to the outer islands, as agreed in the Country Strategy Paper for 10th EDF signed between the Republic of Kiribati and the European Commission. The project purpose is to foster social development by improving living conditions through electric lighting and small appliance power and by electrifying public facilities. Solar electrification will be introduced at households, maneabas, small businesses and schools Expected results and main activities The expected results and activities required to achieve them are as follows; 1. To increase the provision of rural electricity to communities on the outer islands A1: Electrification of 600 homes on the outer islands with basic lighting systems equipment. A2: Providing electricity for approximately 120 teacher s residences on the islands where the electrified schools are located. Sufficient capacity will be installed to operate office equipment. Systems of approximately 300 Wp per household will be installed with a small inverter. A3: Electrify 30 community halls (maneabas) for lighting and basic services. 2. To build KSEC capacity to ensure solar systems are properly installed and maintained and continue to supply electricity reliably without subsequent failures (supporting Backbone strategy) A4: Training to PV users and field technicians to support new management tools and ensure sufficient knowledge for installation and use of larger PV systems. A5: Installing a PV system sufficient in size to power a solar workshop and battery charging station for each of the current 20 island technicians. A6: Initiate KSEC operations in the Line Islands by establishing a solar service centre. The first project is to power the village of Poland on Kritimati Island with 24 hour power using solar generation and remove the inefficient diesel generator. A7: Install an 8kWp demonstration grid-connected solar array at the Tarawa KSEC headquarters to encourage the power utility in developing renewable energy sources on Tarawa. 3. To improve education facilities for school children through introduction of computers and media made possible by solar electrification A8: Electrification of 6 schools to a level to support a fully equipped computer lab, dormitory lighting, refrigerator/freezers, office equipment and audio-visual equipment. 3

4 4. To improve small business prospects through electrification A9: Support for electrification of at least 100 small businesses that demonstrate they need electricity to operate. They will be provided with a system sized to fit the business requirement, typically Wp with 300Wp expected as an average Risks and assumptions The EDF-10 intervention is based on several assumptions listed below, together with mitigating measures should the assumptions not hold true: 600 households want a Solar system and prepared to pay KSEC s service fee. Should this assumption not hold true KSEC will need to improve their marketing and sales process and general perception of solar home systems to increase demand. Funding will be provided by the Italian government for the electrification of 1 school and from OLPC for the supply of 500 laptops and co-ordination and distribution. If this assumption does not hold true only 5 schools will be electrified and the number of laptops supplied to school children within the project will be reduced. Funding will come through PIGGAREP for a refresher technical training course, training of trainers course and business development training. Without this funding a more comprehensive training programme from KSEC might be required. At least 100 small businesses exist with the need for electricity or there are people wishing to establish new businesses with electricity requirement. Should this assumption not hold true KSEC will need to improve their marketing and sales process and could offer information sessions on business opportunities which are possible with an electricity supply Crosscutting Issues The project will have a positive impact on the environment as the provision of electricity through solar power will reduce the use of fossil fuels for energy. By operating as a RESCO, KSEC is responsible for the proper disposal of failed/obsolete equipment. In accordance with the provisions of the Environmental Act, KSEC sells this waste to the Kaoki Mange Waste Recycling Facility (an NGO/private sector-run operation set up with the support of UNDP) which in turn sells them to overseas recycling companies in New Zealand and Australia. Female technicians will be trained by KSEC for maintenance of the systems. Furthermore, women will benefit from better lighting services as they are generally responsible for domestic chores. Children will also benefit by being able to study in the evenings with good lighting. By improving record keeping at KSEC, its managers will be made more accountable to the public and can make better-informed decisions. Finally, the monthly household expenditure on lighting is expected to decrease as a result of the project. Small cottage industries are also expected to be created as a result of larger-sized systems Stakeholders Key stakeholders for the Project include the Solar Energy Company Ltd (KSEC), Ministry of Public Works and Utilities (MPWU), Ministry of Education, Science and Technology (MEST), Ministry for the Environment, Lands and Agricultural Development (MELAD), Rural Planning Unit, Ministry of Internal and Social Affairs (MISA), Energy Planning Unit (EPU), Island Councils (IC), Local communities (LC), OLPC Oceania for the distribution of the OLPCs and the project beneficiaries. The stakeholders have been informed about the project and a copy of the draft Action Fiche has been delivered to them. KSEC LTD advised all stakeholders to submit their comments. All comments have been received and incorporated. 4

5 4. IMPLEMENTATION ISSUES 4.1. Method of implementation Partially decentralised management through the signature of a financing agreement with the Republic of Kiribati. The project shall be implemented by programme estimates (indirect public decentralised operations). The Commission controls ex ante all the procurement procedures except in cases where programmes estimates are applied, under which the Commission applies ex ante control for procurement contracts > EUR and may apply ex post for procurement contracts EUR. The Commission controls ex ante the contracting procedures for all grant contracts. Programme Estimates will be implemented through direct decentralised operations. Payments remain centralised except in cases where programmes estimates are applied, under which payments are decentralised for operating costs and contracts up to the ceilings indicated in the table below. The Authorising Officer ensures that, by using the model of financing agreement for decentralised management, the segregation of duties between the authorising officer and the accounting officer or of the equivalent functions within the delegated entity will be effective, so that the decentralisation of the payments can be carried out for contracts up to the ceilings specified below. Works Supplies Services Grants < EUR < EUR < EUR EUR 4.2. Procurement procedures and programme estimates All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the 10 th EDF. On the basis of (i) technology suiting local conditions, (ii) increase of competitiveness and (iii) to avoid excessive increase of the cost of the project, derogation from the rules of origin and nationality established and published by the EC regarding the award of contracts in the context of cooperation with third countries is requested, in accordance with the Art 22 of Annex IV of Cotonou on basis of point 1 of Annex I of the note D(2008)9406. For any other derogation the Contracting Authority must receive the prior written approval of the EC. All programme estimates must respect the procedures and standard documents laid down by the Commission, in force at the time of the adoption of the programme estimates in question Budget and calendar The total resource is Euros 4,100,000, funded entirely from the 10 th EDF contribution. This amount is proposed to be distributed as follows: Budget Line No. Item Amount in Euros 1. Equipment 2,835, Training, installation and technical assistance 769, Communication/Visibility 41, External Audit and Evaluation 250,000 5

6 5 Contingencies (5%) 205,000 Total 4,100,000 Budget line no. 1 shall be procured by international open tender (supply contract). The budget lines no. 2-3 shall be procured within the programme estimates. Operational implementation phase that starts from the entry into force of the financing agreement and will have duration of 48 months. The indicative implementation timetable is given below: Activities Activity 1 Activity 2 Activity 3 Activity 4 Activity 5 Activity 6 Activity 7 Activity 8 Activity 9 Closure phase Year 1 Year 2 Year 3 Year 4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Years 5 and Performance monitoring The performance monitoring shall be established by use of EuropeAid Standard Indicators. Values to be provided are baseline values taken before the action, and target values (for the overall project). Potential indicators are: ;, population with access to basic electricity supply (breakdown urban/rural) increased by 10%, number of schools with access to basic electricity supply,, reduction of CO 2 emissions from renewable energy projects. Where these statistics are not currently recorded work will be conducted with the national statistics office to identify current baselines Evaluation and audit Progress of the project will be monitored by the NAO and the EC. An evaluation of the Project will be conducted at the midterm and end of the programme. A provision for Audit is included in the budget. Under the 10th EDF Financial Regulation, the EC can use this provision to organise an independent audit of expenditure under this Agreement Communication and visibility The visibility activities will mostly be limited to placards, stickers, and radio interviews. All studies, reports, installations, workshops and seminars supported under the initiative will highlight the EU s financial support via logos and banners. Press releases with information on the EU s funding support to Kiribati will be issued to coincide with significant events in the programme cycling, such as the completion of solar PV system installations at the 5 schools or of training sessions for technical operatives. 6