module iii - technical and financial options for re
TRANSCRIPT
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8/4/2019 Module III - Technical and Financial Options for RE
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South Asia Regional Initiative/Energy(SARI/ENERGY)
U.S. Agency for International Development
Course Prepared and Provided By
CORE International, Inc., Washington, D.C.
September 14-16, 2003Kathmandu, Nepal
Course on Organizational and StaffDevelopment Training Rural Electric
Cooperatives, Nepal
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Module III: Technical andFinancial Optionsfor RuralElectrification
Course on Organizational and StaffDevelopment Training Rural Electric
Cooperatives, Nepal
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I. Technical Options for Rural ElectricCooperatives (RECs)
II. Advantages and Disadvantages of Grid andNon-Grid Rural Electrification
III. Financing Options for Rural ElectricCooperatives (RECs)
IV. Type and Role of Subsidy for RECs
V. Methods of gradual withdrawal of subsidy
Module III: Technical and FinancialOptions for Rural Electrification
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I. Technical Options for Rural ElectricCooperatives (RECs)
Grid extension
Distributed power generation and micro-grids
Isolated off-grid systems, which include:
Micro hydro
Photovoltaic Biomass
Wind energy
Module III: Technical and FinancialOptions for Rural Electrification
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I. Technical Options for RECs - cont'd
Grid Extension
Infrastructure required to transmit power from
the source national grid to demand centersand make it available to consumers
Includes both the HV/MV transformer andconnection line from the main supply pointnational grid and distribution network andtransformers at the load center
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I. Technical Options for RECs - cont'd
Distributed Power Generation and Micro-Grids
Distributed generation is small scale, near the loadthat provides more economic, and/or less pollutingpower supply and management options for energyconsumers and utilities than conventional centralgeneration
Unit cost of delivered electricity is the main factorthat dictates their acceptability
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I. Technical Options for RECs - cont'd
Distributed Power Generation and Micro-Grids - cont'd
Micro-grids are small electrical distribution
systems that connect multiple customers tomultiple sources of generation
Typically, micro-grids are characterized bymultipurpose electrical power service tocommunities with populations up to about 500households with overall energy demand up toseveral thousand kWh per day
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I. Technical Options for RECs - cont'd
Isolated Off-Grid Systems
Typically isolated and meet the RE demand ofhouseholds or at the village level, which mayinvolve small IPPs
Village systems are often micro hydro, wind, etc.
Household systems are often solar poweredsystems and biomass based systems
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II.Advantages and Disadvantages of Grid andNon-Grid Rural Electrification (RE)
Grid Extension - Advantages
Traditionally RE has been provided as extension ofthe national grid and perceived positively by therural populations
Experience shows that grid-extension-based REsystems are economical when:
demand density is reasonably high, and
level of collections is high
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II.Advantages and Disadvantages of Grid and Non-GridRural Electrification - cont'd
Grid Extension Advantages - cont'd
It is the most suitable and economical model forproviding electricity service to high density rural loads inthe vicinity of the grid
Even those who cannot afford electricity in their homes
can enjoy the benefits such as pumped water, improvededucation, and better health care facilities
Often perceived as a permanent community investmentand creates a national infrastructure on which to base
future socioeconomic development
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II. Advantages and Disadvantages of Grid and Non-GridRural Electrification - cont'd
Grid Extension Disadvantages
Low demand of electricity in remote rural areasincreases the cost of supply to uneconomical levels
Possibility of lack of local technical and managementpersonnel
Generally, high technical losses
Generally, high administrative costs
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II. Advantages and Disadvantages of Grid and Non-GridRural Electrification - cont'd
Non-Grid Rural Electrification Advantages
Increased reliability and availability in the case ofmini-grid systems
Lower to zero power transmission losses
Increase potential for consumer participation (in thecase of RECs consumers own the system)
Potentials for utilizing local energy resources togenerate power, which otherwise are considered
uneconomical
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II. Advantages and Disadvantages of Grid and Non-GridRural Electrification - cont'd
Non-Grid Rural Electrification Disadvantages
High capital costs for similar design standards asurban areas
Lack of capacity to implement and maintain
operations Difficulty to raise private capital in rural areas
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III. Financing Options for Rural ElectricCooperatives (RECs)
Concessional
Commercial
Member contribution
Sweat equity
Supplier credits
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III. Financing Options for RECs - cont'd
Concessional Finance
Government budget Multilateral development institutions (IBRD/IDA,
AfDB etc.) soft loans and credits
Bilateral donors under bilateral agreements
Specialized rural development funds
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III. Financing Options for RECs - cont'd
Commercial Finance Private Banks
Operate in open market
Generally offer no project financing
Loans mostly short term
High collateral and high interest rates
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III. Financing Options for RECs - cont'd
REC Member Contribution
REC member up front contribution is a type ofequity participation
REC members pay for service drop and house-wiring
This type of financing in free of interest
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III. Financing Options for RECs - cont'd
Sweat Equity
The member/consumer takes on a broader rolethan just being a buyer of a product or service
Consumers participate in the implementation of REby contributing time and human resources,thereby:
reducing costs of RE, and
increasing consumer participation andacceptance in the REC
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III. Financing Options for RECs - cont'd
Suppliers Credit
Widely practiced in financing technologies and inputs
Financing at competitive rates
Primarily used for introducing new technologies andproducts to an otherwise un-served market
For example, the manufacturers, say of mini-turbines, mini-diesel gensets, and PV systems, mayoffer suppliers credit in order to make a marketentry and/or enhance their competitiveness
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IV. Type and Role of Subsidy for RECs
Role of Subsidy
To lower cost of providing electric service to ruralareas and make it affordable
To promote use of electricity income generatingactivities in rural areas
To support rural social development by providingincentives for using electricity in education,health, and other community rural institutions
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IV. Type and Role of Subsidy for RECs - cont'd
Type of Subsidy
Grants received from the Government budget
Low interest and moratorium on interest for someperiod by domestic development institutions on loans
Subsidy by multilateral, bilateral, and other donors inthe form of grants and low interest funds
Tax exemptions on equipment used for providingelectric service
Caps on price of goods
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IV. Type and Role of Subsidy for RECs - cont'd
Apply subsidy appropriately through ensuring
Support for access to energy but not financing
consumption
Creation of a market without distorting marketrules
Equitable use without creating or reinforcing amonopoly
Neutrality in terms of technological choices
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V. Methods of gradual withdrawal of subsidy
Why withdrawal of subsidy
Only the government would wish to providesubsidy as its policy
The government can not afford to provide subsidyfor ever, otherwise it would face serious financial
problems
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V. Methods of gradual withdrawal of subsidy - cont'd
Why withdrawal of subsidy - cont'd
Other donors would never provide subsidy as agrant on a regular basis
Rural utility (electricity, drinking water, primaryhealth, etc.) service providers can not remaincommercially viable if they provide subsidized
services. Also, the service would deteriorateover time
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V. Methods of gradual withdrawal of subsidy - cont'd
Approaches for withdrawal of subsidy
Integrate rural energy and rural developmentprograms for poverty alleviation of ruralpopulation
Train and employ rural population in the activitiesof rural service providers
Create an environment for rural industries whichcan employ rural population thereby increasingrural buying power
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V. Methods of gradual withdrawal of subsidy - cont'd
Approaches for withdrawal of subsidy - cont'd
Encourage rural cottage industries Improve educational and health care facilities in
rural areas
Involve local NGOs in all aspects and activities for
poverty alleviation programs Involve local rural population in decision making
for developing and implementing integrated ruralprograms
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V. Methods of gradual withdrawal of subsidy
Approaches for withdrawal of subsidycontd
Educate the rural population that electricity and other rural services cannot be
provided to them on subsidized rates for ever
that the subsidy would be withdrawn over a period
in a gradual manner that they have to increase their economic condition
to afford rural services after the subsidy iscompletely withdrawn
Module III: Technical and FinancialOptions for Rural Electrification