April 21, 2014 Dar es Salaam, Tanzania Richard Hosier World Bank

Transcription

1 April 21, 2014 Dar es Salaam, Tanzania Richard Hosier World Bank

2 To provide an update on efforts to move the RERE project toward implementation As RERE builds upon the foundation of TEDAP, provide update on TEDAP off-grid component Apprise EDP s group about challenges, both intellectual and operational to moving this forward to share ideas and to get feedback To share ideas & obtain guidance with respect to both: Building upon the Prospectus moving forward Solving the intellectual & operational challenges being in remote, off-grid rural electrification

3 Approved as part of Tanzania SREP Investment Plan by SREP Investment Committee in September 2013 Objectives: 1. To build an efficient and responsive development infrastructure for REbased rural electrification 2. To demonstrate its effectiveness by supporting a time-slice of privatesector investments in off-grid electricity enterprises To utilize three approaches to electrification in off-grid areas: 1. Mini grids of several hundred kilowatts and up to 10 MW serving a group of villages, as well as larger customers 2. Micro grids powered by a small, centralised PV array and battery bank, biomass gasifier, biogas, or other renewable technology 3. Sustainable Solar Market Packages (SSMPs) supplying electricity services to essential public-service and community facilities (e.g. schools and health clinics), plus sale to private customers using stand-alone solar PV systems Financial Proposal: SREP $25m; IDA $50m: Other DP s $46m; Private Sector $58 m; TOTAL: ~$180m Processing Timing: To SREP Committee for Decision-meeting review May 2014 (not met) To WB Board after July 2014 (will be met)

4 TEDAP began in 2008: Development Objectives 1. On-Grid: To improve the quality and efficiency of the electricity service provision in the three main growth centers of DSM, Arusha, Kilimanjaro and 2. Off-Grid: To establish a sustainable basis for energy access expansion [and renewable energy development in Tanzania.]* Total Value> $50m, including GEF grant IDA initial financing IDA additional financing (Credit Line) Co-financing contributions SIDA support Russian (ESME TF) Support Carbon Finance Support *added with Additional Financing in 2010, which also changed the name of the component to Small Power Project Component

5 Selected indicators Standardized Power Purchase Agreements Signed (MW) Number of Participating Financial Institutions loans approved for rural/re subprojects Target Progress to date % % % of Target Total installed RE capacity (MW) % Pipeline of new rural household connections 50,000 80, % Direct beneficiaries, of which number of women (52%) 114,000, of whom 57,000 are women 177,039, of whom 92,060 are women 155% Number of community (public facilities) connections Number of (subproject) transactions completed by REA 1, % %

6 First Question: SPP Sector appears to have been jumpstarted Allowing for growth pains and lumpy nature of investments, SPP sector has taken off To date, 25.4 MW are in operation Another 25 MW of SPPA s have been signed with developers by TANESCO; 40 MW of SPPA LoIs also signed As many as 32 SPP projects under development/preparation At present, 3 project totaling 27 MW are near to financial closure When they move ahead, they will exhaust existing SPP Credit Line Risk is that break in support to sector will undermine growth Luckily, some EDP s have expressed interest in providing further CL support necessary to ensure continuity of support Uganda Analogue: Uganda, at end of ERT I (2008), 16 MW were financially closed, but not generating Under ERT II, total SPPs has reached >80 MW We believe that there exists further depth in the SPP market

7 Second Question: Answer is SSMP MEM is implementing as legacy Contractor has under-performed, not met obligations, misrepresented products, and not made any effort for private sales Is this a contractor problem or a systematic problem with SSMP approach? No clear answer yet but SSMP seems to be a compromise approach that serve neither public (clinic, schools) or private (households, businesses) well Whole may equal less than sum of parts.

8 1) Evaluation of SSMP to consider what has happened recently initiated Examination of SSMP experience in Tanzania compared to other countries (Philippines, Zambia, Honduras, Nicaragua) Are both public & private markets served well? Is there a missing element? (micro-finance?) How does technological advance such as LED s (Lighting Africa) shape present and future support to PV? Is SSMP worth continuing or should it be abandoned leading to separate public vs private approaches?

9 Nature of SPP sector and role of grant instruments to accelerate growth of sector Matching Grants for Feasibility Studies Performance Grants for Connection subsidies Green Generation Performance Grants to front-end load carbon payments at financial closing Credit Line support to increase liquidity and therefore willingness of local private banks to extend loans for SPP s from 5 to 15 years Need to assess depth, breadth of SPP sector in TZ Initial pipeline built around small hydro Some biomass projects were shovel-ready, regulations pushed them over the top How can experience with SPPs inform future work with mini and micro grids?

10 BUT, TEDAP includes no explicit support to mini or micro-grids rather focus is on SPPs for SPPs, it is a bottom-up approach focusing on low-hanging fruit initiated by private sector Link to m-grids (mini or micro) requires an understanding of nature of SPP sector Growth has included 3 types of SPPs 1. SPPs generating for sale to TANESCO only (main or isolated grid--small IPPs) (example: EA Power, Ngombeni) and perhaps own use (Tanwat or TPC) 2. SPP/SPDs generating for sale to TANESCO as anchor customer and connecting to households in immediate vicinity (eg., Mwenga, Tulila) 3. SPP/SPDs generating for sale to only households/businesses in immediate vicinity (Mawengi)

11 Experience to date provides some insight into mini or micro grids Do have experience with one isolated mini-grid selling only to customers and not to TANESCO Have more experience with mixed mini-grids, selling both to TANESCO as off-taker and to customers Experience to date includes only small hydro and biomass projects Both are resource-based can take place only where resources are plentiful, at sites on rivers or at biomass processing facilities This does not correspond to model of mini-grid which is focused on population centers of a given size Shift from resource-focused SPPs maybe with SPD qualities to population-focused SPPs using a more footloose technology mix

12 Q: What are the 3 delivery mechanisms under RERE? 1. Mini-grids 2. Micro-grids 3. SSMP Q: So, what is the basis for building upon TEDAP? At Core, building out from the success of the SPP sector Continuing to support SPPs through financial closure, including Credit Line Maybe tweaking support to give some advantage to those which are more population-based and less-resource based Begin to expand for more footloose technologies (solar, wind, etc.)

13 Q: What about SSMP or stand-alone solar? Current SSMP challenges have drawn attention from positive case for public PV provision Case for continued support to institutional PV electrification is strong (clinics, schools) Number of different configurations depending specific needs (different sizes, levels of clinic) and technology use (lantern library, ICT connection) Enormous challenge is to find appropriate business model or approach for private sales of PV Performance grants for met business plan targets Supporting only Lighting Africa certified plug n play Want to move household PV s for being a project to a product Without micro-financing link, consumer ability to pay is limited Without trade finance & working capital, growing small, locally-based supply networks is extremely difficult Any public subsidy could be justified on grounds of getting products upcountry to jump-start market How to stimulate growth in this particular market segment?

14 Distinction between two are not clear How to distinguish? UNF Micro-Grid report not terribly helpful (capacity < 500 kw) Characteristic Mini-Grid Micro-Grid Capacity MW (>1MW) kw (< 500 kw) Nature of Grid Network Number of connections Good being sold Built to standard; Public Good, assumable asset Thousands kwh, AC only Not necessarily built to standard; may not be assumable asset Hundreds Tier or bundle, AC or DC

15 Willingness to Pay & Consumer Surplus in Electrification Micro-grid Mini-grid

16 Only existing mini-grids are those owned by TANESCO: Can SREP support the survivors (not incorporated immediately into grid?) Very costly to operate Relatively little info From EWURA s files, cost of service > $0.487/kWh Opportunity to examine potential hybridization with PV & batteries (which is more useful?) Any work done with isolated mini-grids must include focus on energy efficiency improvement and load mgt Micro-grids in TZ still at pilot stage can count on one hand

17 Mini-grids: TANESCO units might be packaged for concession agreements to large industrial player (Caterpillar, Cummins, GE, etc.) Or TANESCO, with support, could improve thru useful lifetimes until grid-connected Any mini-grid work must include EE & Load Mgt New mini-grids, if population centers identified, could be bid out en masse In region X, identify 20 population centers > 500 hh, need to bid out for M-grid to serve Might include public payment for grid (public good); support for prepayment meters; and public leverage for hybrid generation Approach makes sense for a grid that is assumable when main grid reaches Need to know honest length of time until grid reaches BOT or BOO concession

18 Micro-grids that have assumable asset of network can be treated as mini-grids Micro-grids with non-assumable networks (not built to standards) will require different approach Perhaps bottom-up driven by opportunistic selection of locations by private sector Possibly bid out concessions by district or region requiring village coverage with W<population < Y Still need for population threshold & location

19 Not necessarily a Master Plan (avoid dusty volume production) action focus Need to start being concrete, focusing on regions/districts not universal (resource constraints) Need to use GIS (Prospectus), particularly if we are to design bids targeting specific electrification instruments and needs Build off of experience with SPPs to develop minigrids/micro-grids are more population focus If we are really pushing for scale, need to Plan realistically for what can be done using all tools Avoid magical thinking M-grids bring no new analytical or economic tools Cannot wave a wand and have them appear to supply power to those without at costs competitive to grid prices

20 Build from SPP success in resource-focused to population-based SSPs and SPP-m-grids Utilize range of mini, micro, stand-alone PV, pico-pv and SPPs to increase access EWURA remains strong asset from regulatory perspective REA has taken on off-grid responsibilities and executed TEDAP well First-cut RERE proposal will take serious intellectual and operational work Need to solve business & delivery model questions interest & resources to solve in TZ

21 Thanks for your attention and guidance Look forward to working with you and keeping you informed Richard Hosier World Bank