MINIGRID POLICY TOOLKIT

Transcription

1 Mini-Grids Opportunities for Rural Development in Africa AEI Workshop Arusha 5 September 2013 This project is supported by the European Union

2 MINIGRID TOOLKIT FOR POLICY-MAKERS PRESENTATION OUTLINE WHY A MINI-GRID POLICY TOOLKIT? MINI-GRID EXPERIENCES MINI-GRID BUSINESS MODELS THE POLICY DIMENSION OF MINI-GRIDS TO THE TOOLS 2

3 WHY A MINIGRID POLICY TOOLKIT? IEA estimate: To achieve universal electricity access, mini-grids needed for 40% of new capacity by 2030, the largest portion in sub-saharan Africa (WEO, 2010). The technology is there Green Mini-Grids can also stimulate rural productivity and renewable energy development BUT green mini-grid options have struggled to expand beyond pilot projects and are off-track to make a meaningful contribution to Sustainable Energy for All targets. So what is the problem? 3

4 MINIGRID POLICY TOOLKIT BUSINESS MODELS POLICY FRAMEWORK TOOLKIT WAY FORWARD Mini-Grids: The Missing Middle Policy and regulatory frameworks support grid extension Policy doesn t readily consider mini-grids Mini-grids not profitable in absence of conducive regulatory environment so no investment Lack of experience with mini-grids deters policy makers and investors GRID EXTENSION MINIGRIDS STAND-ALONE 4

5 OBJECTIVES Tool-kit Objectives Increase awareness of MG potential among targeted practitioner & policy making stakeholders Present lessons learnt Provide recommendations for senior policy-makers and advisors Inter-related activities presented via a designed web portal that presents and helps coordinate specific activities TOOLKIT COMPONENTS Website Central policy document Case Studies Webinairs Workshops Learning Platform Exchange of experience (group of experts) 5

6 DIESEL HYDRO BIOMASS-FIRED HYBRIDS Types of mini-grid technology 6

7 MINIGRID POLICY TOOLKIT DIESEL BUSINESS MODELS HYDRO DIESEL MINIGRIDS powered by diesel or fuel-oil Remote towns, tourism resorts and business centres. Distribution grid. Operation times depend on load requirements and ability to pay. POLICY FRAMEWORK BIOMASS-FIRED TOOLKIT WAY FORWARD HYBRIDS TYPICAL SIZE & USES EXPERIENCE AND LEVEL OF MATURITY 10 kw to 1MW Village electrification off-grid & back-up power Utility-provided. Rural electrification agencies subsidize connections --consumers reduced prices (Africa-wide practice). Commercial-model: Operate on private basis --- consumers pay fee based on number of appliances NUMBERS IN AFRICA PROS CONS Thousands in use all over Africa Low CAPEX High OPEX (fuel expense & delivery) Carbon emissions Fuel theft Intermittent use times Case studies: Somalia Kenya Mature technology Solar PV & wind can be added to lower cost, Commercial models established Potential for biodiesel fuels 7

8 DIESEL HYDRO BIOMASS-FIRED HYBRIDS TYPICAL SIZE & USES EXPERIENCE AND LEVEL OF MATURITY HYDRO MINIGRIDS Powered by hydro plant (whether micro- or mini-) utilize cascading water to power electric turbines. 438 kw micro-hydro project Musarara, Rwanda Up to 1MW; village electrification, plantations, tea sector, religious missions. Traditionally in remote settlements and religious missions in mountainous areas. Asia: more active hydro market In past: many mission settlements used hydro mini-grids. Renewed interest in small hydro mini-grids tea sector & RE NUMBERS IN AFRICA PROS CONS Hundreds (?!) Cameroon, DRC, Ethiopia, Kenya, Rwanda, Tanzania, Uganda. Case study: Rwanda Mature technology Low cost power No fuel needs Requires constant hydro resource Locationspecific Many locations already near grid power 8

9 MINIGRID POLICY TOOLKIT DIESEL BUSINESS MODELS HYDRO POLICY FRAMEWORK BIOMASS-FIRED TOOLKIT WAY FORWARD HYBRIDS TYPICAL SIZE & USES EXPERIENCE AND LEVEL OF MATURITY BIOMASS-FIRED Bio-waste, residues or biogas fueled generators. Power is distributed as with other types of minigrids. Up to 1MW Sugar/wood plantations, sawmills, agroindustry. Mature technology employed in plantations to reduce power expenditures. Sugar plantations: bagasse. Potential utility feed-in tariffs. Interesting Asian experiences (see India Husk Power case study). NUMBERS IN AFRICA PROS CONS 100 s of sites. Relatively low cost power Plentiful, lowcost fuel Limited African experience in rural electrification Locationspecific Cameroon, Ghana, Kenya, Malawi, Mozambique, Swaziland, Uganda, Tanzania. Case studies: India Husk Power Systems, India Xx MW in village xx Tanzania 9

10 DIESEL HYDRO BIOMASS-FIRED HYBRIDS TYPICAL SIZE & USES EXPERIENCE AND LEVEL OF MATURITY AC-COUPLED INVERTER HYBRID MINIGRIDS Systems manage solar, wind, battery and generator combinations for supply to small distribution networks. Hybrid minigrid in Tsumkwe, Namibia 201 kw solar array 2kW to 300 kw Recent technical improvements. Advanced inverter, power management & metering --- increased opportunities. Greatest near-term potential -- size adaptability & combination with diesel generators. NUMBERS IN AFRICA PROS CONS Scores of projects. Rural energy agency NGO, private sector. Case studies: Cape Verde Egypt Namibia Senegal Extremely flexible systems Falling PV prices Lower fuel consumption High investment, especially when battery storage is used Batteries Spare parts & maintenance 10

11 Its more than just technology 11

12 The parts need to work together 12

13 Rural people are obviously willing to pay! Why don t companies, NGOs or communities invest in minigrids? Mini-grid business: investment in technology & power distribution over long term. Investors deterred by: Ø extremely high up-front costs, Ø relatively low rate of return Ø high risk that the investment will not cover costs. Investment viability: Ø Businesses, grinding mills or agricultural pumps: stable anchor customers, BUT Ø Rural households simply not financially attractive to commercial utilities. Most mini-grid business models not viable without subsidies. Case studies: virtually all business models require subsidy to commence, or to sustain operation over the long term. 13

14 Mini-grid business models There is no one-size-fits-all business model for minigrids. This section presents a number of common models that have emerged which virtually all minigrids fit into. All of these models have positive and negative aspects that are discussed in the case studies. Business models primarily differ based on who owns power generation and power distribution infrastructure as well as the presence of other key situational elements such as specific regulation (or lack thereof) or strong involvement of private sector or NGOs/donors. 14

15 MINIGRID POLICY TOOLKIT BUSINESS MODELS POLICY FRAMEWORK TOOLKIT WAY FORWARD No best mini-grid business model! Context is key. There is no one-size-fits-all business model for minigrids. Donor/Community led This section presents a number of common models that e.g.fitcape have emerged which virtually all minigrids into. Verde All of Hybrid concessions these models have positive and negative aspects that are e.g. Senegal discussed in the case studies. Business models primarily differ based on who owns power generation and power distribution infrastructure as well as the presence of other key situational elements such as specific regulation (or lack thereof) or strong led e.g. Kenya involvement of private sector orutility NGOs/donors. Private models based on anchor clients e.g. Tanzania Wattle Hybrids, e.g. PPP in Rwanda Private sector led e.g. Somalia 15

16 Mini-grid business models MODEL POWER GENERATION POWER DISTRIBUTION MAIN SITUATIONAL ELEMENTS LEVEL OF SUBSIDIES EXAMPLE 1A Private sectorled (Anchor load based) Private Private Firms with power demand/ supply available (agroindustry, telecom or service company) Moderate Tanzania wattle 1B Private sectorled (Free market) Private Private Absence of regulation (free price setting) Financially Viable Somali diesel grid Tourism/telecomm?? 1C Private sector led (with regulatory framework) 2 Utility-led minigrids Private Utility Private Utility Political preference for option Enabling policy environment Political preference for option Political will to pursue this Extremely high up front Extremely high Mali concessions Senegal concessions Kenya Tanzania 3 Community-led Community Community Donor/NGO technical and financial assistance Extremely high Cape Verde Namibia 4 Hybrids (e.g. Public Private Partnerships) Private Utility Political preference for option Enabling policy environment Moderate Rwanda 16

17 POLICY & REGULATORY FRAMEWORK Purpose Actors Regulatory environment & business models Senegal example Mini-grids overtaken by grids 17

18 The Purpose of Positive GMG Policy Set up the Rules of the Road for Mini-Grid Implementation Ensure the Public Good Instill Confidence Provide Incentives and support instruments for Project Development Beneficiary concerns Local & national government concerns Investor concerns Grid operator concerns 18

19 Policy & Regulatory Framework Actors in Mini-Grid Policy Government Government Energy Regulator Regulation Ministry Government Political guidance Rural Electrification Authority Coordination & implementation of rural electif. Private / community Mini-Grid Operators Role depends on model Parastatal Utility Role depends on model Consumers 19

20 Regulatory Environment for MG Business Models Model Utility Hybrid Private Community Strategy-level National electricity / electrification strategy: global decision about which business / operator model to apply in the country Act of parliament Acts, laws, policies etc., operationalizing above & delegating authority for specific regulation to government bodies (e.g. rural electrification agency, regulator) Specific regulation Public procurement IPP / PPA Concessions; Tariffs Future grid connection Concessions; Tariffs; Ownership model (?) Future grid connection Incen0ves / support interv. Policy decisions on: CAPEX subsidy (financed through donors, taxes, or consumers); tax breaks; connection subsidies, direct support interventions; etc. General regula0on Permits, licences, EIA s etc. Import regulations: duties, taxes, tarriffs Technical standards (products and services) Taxiation: e.g. VAT 20

21 Supportive Policy Tools & Instruments Degree of Need Must have FOUNDATION Should have FRAMEWORK Policy Element Examples Clear private sector development policy Clear energy policy, in favor of rural electrification Clear policy support and regulatory framework for desired MG business model(s) Rural electrification policy & sector development plan Regulatory agency in place, clear regulatory rules Rural electrification targets Rural electrification agency in place, clear ideas about the public support program Common PPA guidelines in place with favorable tariff for renewable energy Tariff guidelines for off-grid use, allow cost-reflective tariffs, and national grid tariffs are also cost-reflective Clear fiscal rules for private businesses Will help if Share information about grid expansion plans & means Import duty relief for RE equipment Tax incentives for operating RE in rural areas Financial support mechanism in place promoting investments in RE Ø Subsidies Ø Access to concessional finance TA support mechanism in place promoting investments in RE Indications which business models are supported under public program and how 21

22 Supportive Policy Tools & Instruments Senegal Example Must Have Government commitment to electrify rural areas Acceptance of mini-grid model Support for private-sector led concession approach Should Have Rural Electrification Agency (ASER) and Fund Tariffs in place Rules for concession players Long term contracts Helpful Financial support from donors and Government Standard designs for mini-grids TA and capacity building 22

23 What happens when utility grids enter minigrid geographic areas? New power generation costs change the business model Ø decrease end-user prices Ø threaten return on investment for the operator Ø Remove further incentives for operators Such risks need to be governed in the policy framework and fair compensation for the investor should be guaranteed. This is a common occurrence in rural electrification Rwanda case study 23

24 INTRO TO THE PORTAL 24

25 This minigrid policy toolkit is arranged in six sections to help readers quickly learn about various aspects of minigrids. Below, find links to discussions on technology, business models and policy frameworks of minigrid projects. Also find links to sections about case studies and important policy lessons that have been learnt in Africa and elsewhere. BUSINESS MODELS POLICY FRAMEWORK CASE STUDIES WAY FORWARD Feel free to explore our web-site ( for more information and discussions. This minigrid policy toolkit is an initiative of: HOME

26 Main Tool Kit Elements Central Policy Document Web Site Case Studies 26

27 KENYA RE Technology: Business model: Utility-led (Kenya Power) Diesel mini- grids as examples of the most prevalent type of mini- grids in Africa. Diesel generators are simple to operate and have relatively low investment costs; they can be repaired locally, and have shown to be reliable. Case study explores how addition of PV to a diesel system can improve performance (on-going Kenya Power projects). GO TO CASE STUDY 27

28 INDIA RE Technology: Business model: Hybrid (PPP) Indian experience with Biomass- PV minigrids and a subsidized private sector model (reduced subsidies). Model and technology applied in hundreds of communities in India. Special relevance to Africa. GO TO CASE STUDY 28

29 EGYPT RE Technology: Business Model: NGO/Community-led Demonstration project in the desert that uses wind/solar for desalinization of brackish water. Supplies water for irrigation of tree plantations and agriculture. GO TO CASE STUDY 29

30 NAMIBIA RE Technology: Business model: Hybrid (Community and Utility) Hybrid diesel PV mini grid as an example of the importance of project design, whereby ideological considerations are proven to be not very practical. GO TO CASE STUDY 30

31 RWANDA RE Technology: Business model: Hybrid (PPP) Mini grids that are subsequently connected to the main grid. Privately created micro hydro plants and mini grids showing that local organizations can be strong enough to develop, finance and operate micro hydro plants; the initial systematic assistance pays off as these project developers are now technically and financially capable of replicating their experiences. The regulatory framework is very important, as in this case the minigrid was not built for that reason. GO TO CASE STUDY 31

32 SENEGAL RE Technology: Business model: Concession Mini- grids as a representative case study for the West African experience of government subsidized PV/diesel hybrid minigrids to fill in areas of nonservice for the national grid. GO TO CASE STUDY 32

33 TANZANIA RE Technology: Business model: based on anchor client Tanzania experience of Tanzania Wattle and their biomass based the minigrid has been incorporated into the Tanzania national grid. GO TO CASE STUDY 33

34 CAPE VERDE RE Technology: Business Model: Donor/ Community-led Solar/wind diesel hybrid applied in a remote island for rural electrification. Relatively expensive donor-provided demonstration program. GO TO CASE STUDY 34

35 Way Forward Website Operational Public Announcement Content Available Online Ø Main document Ø Case studies Ø Training materials Next Workshops Training Webinair Long term handover of website 35

36 AFRICAN Solar Designs Ltd. Mark Hankins Tel: Thank You 36