Rural Electrification and Public Policy in Developing Countries - PowerPoint PPT Presentation

1 / 30
About This Presentation
Title:

Rural Electrification and Public Policy in Developing Countries

Description:

People think of energy as wires, poles, and power plants, oil wells, and pipelines ... of bill payment versus cutting off non-paying households creating ill will) ... – PowerPoint PPT presentation

Number of Views:187
Avg rating:3.0/5.0
Slides: 31
Provided by: wb330903
Category:

less

Transcript and Presenter's Notes

Title: Rural Electrification and Public Policy in Developing Countries


1
Rural Electrification and Public Policy in
Developing Countries
  • Douglas Barnes
  • Energy Transport and Water Dept.
  • The World Bank
  • October 26, 2007

2
Organization
  • The Problem
  • Benefits of Rural Electrification
  • The Challenge of Rural Electrification
  • Case Study Examples
  • Principles for Success

3
Introduction
  • People think of energy as wires, poles, and power
    plants, oil wells, and pipelines
  • But we forget the demand side the nexus between
    poverty, energy, health, education and gender
    empowerment. For instance lighting, electronics
    motive power, cooking fuels, and heat by
    households, home enterprises, and small
    businesses.

4
Electricity Production to Distribution
5
Two Distinct Rural Electrification Markets
  • Near the Network..?Grid Extension
  • Far from Network..?Off-Grid
  • Isolated Grids Diesel, Micro Hydro Hybrids
  • Individual Systems Solar Home Systems, Pico
    Hydro, Battery Charging

6
The Challenge
  • 1.6 billion people do not have electricity access
  • Average cost per connection is say 1k
  • 2.6 billion people depend on biomass fuels for
    heating and cooking
  • Average use is 1 kg of biomass per person per
    month

7
Electricity Access by Region
1 out of 12 people in rural Sub-Saharan Africa
have access to electricity
8
When the Lights Go Out in Guinea
  • Source AP Images
  • Energy Access helps achieve literacy outcomes
  • Electricity for clinics and government offices
    help achieve health outcomes

9
Government Intervention Rationale Benefits of RE
  • Homes with grid electricity have about 50 to 100
    times more light than households without
    electricity.
  • Energy Access helps achieve Literacy outcomes
  • School attendance is higher in households with
    electricity
  • Telecommunications easier
  • Greater economic productivity

10
Rural Electrification Benefits The Price of
Electric Lighting is LowIndia Kerosene and
Electricity Prices
11
Benefits of ElectricityPhilippines Rural HH
Spending on Lighting
People Spend a bit more on electricity than
kerosene, but get much more light.
12
Tempering Optimism The Electricity Myths
  • Economic development will follow electrification
  • Electrification will reduce rural to urban
    migration
  • Subsidies will surely help the poorest
  • Electrification will help conserve fuelwood

Be realistic in expectations Electricity is
necessary but not sufficient conditions for
development and thus complimentary conditions
need to be in place
13
Rural Electrification Challenges
  • Dispersed populations and difficult terrain mean
    High capital costs and high operating costs
  • Often connection cost greater than 1,000 USD per
    HH
  • For urban areas it is about 250 USD
  • Customers are often poor Annual Income of about
    USD 1,000 per year
  • Cannot afford full upfront lump sum connection
    costs
  • Load profile is poor, meaning electricity used
    mainly in evening so sunk investment costs are
    not used during the day leading to low cost
    recovery

14
Rural Electrification Challenges
  • Main power companies have institutional
    difficulty meeting special demands of rural
    distribution
  • Already dealing with generation, transmission and
    distribution issues
  • Orientation towards larger users such as business
    and industry.
  • Local community level problems often are not
    addressed
  • Who provides or pays for rights of way
  • How to promote electricity use beyond lighting
  • How to deal with rural perception that they are
    they are a low priority

15
Rural Electrification Challenges
  • Political interference in operation of rural
    distribution company reduces financial viability
  • Subsidies are involved in rural electrification
    so politicians feel they have a right to deliver
    electricity to their constituents
  • This often distorts electrification extension
    plans and interferes with pricing, bill
    collection, disconnection policy resulting in low
    revenues
  • Power sector reform does not mean we can walk
    away from electricity access issues.

16
Power Sector Reform Issues and RE
  • Optimism that sector reform will lift the subsidy
    burden of RE from the government is unfounded
    i.e.. Government of Peru has had franchises
    returned to it for 1.
  • Limits coverage to regions that will be
    profitable. After privatization without further
    incentives rural electrification tends to stop or
    slow down.
  • Old Subsidy Mechanisms do not work
  • Cross-subsidies may not be possible
  • Re funds created often go unfunded
  • Equity issuesMost well off households have
    electricity at time of reform.. What about the
    rest?

17
RE Countries in Study
18
Grid Example ChilePrivate Companies
Cooperatives
  • After privatization, investments in new grid
    extension ceasedElectricity connection rate
    stuck at 50 percent
  • Found general social funds not oriented to the
    unique financing requirements of power utilities.
  • 1990 Government developed electricity subsidy
    fund (PER) to promote expansion. Subsidy
    dimensioned to be
  • Promote financial viability of investment for
    the utility
  • Be economical attractive investment for the
    country (as measured by consumer surplus)

19
ChileExample of Private Companies and
Cooperatives
  • How does the Electricity Subsidy Fund (PER) Work
  • Communities request Private Utility Co or
    cooperatives to develop rural electrification
    plans for their community
  • PUCs develop plans and apply to PER for
    construction funds
  • PER reviews proposals for financial and economic
    viability and also whether costs of plans are
    reasonable
  • Funds also are reviewed by regional political
    agencies and are allocated regionally to enhance
    regional equity.
  • Subsidies cover about 75 to 80 percent of
    construction costs

20
Costa Rica--Cooperatives
  • Initial loans from USAID40 years with grace
    period of 10 years, then annual interest of
    1-2.5
  • Communities required to come up with part of
    capital costs if too far from networkdifference
    between rate of return (cash flow) allowed by
    regulatory agency
  • No national rates--Cost covering tariffs with
    break-even after 5 years (4 cent energy charge,
    lifeline rates, increasing block rates for
    households)

21
Thailands PEA--Public
  • Initial grants for feasibility study
  • Soft loans from WB, Japan, Saudi Arabia, and ADB
  • Lower bulk (one-third) supply from EGAT, but all
    electricity companies are financially viable
  • Contributions from rural communities-- mainly
    from social fundsto be put on priority list for
    being connected to the grid system
  • Pricing carefully base on the system load
    characteristics, and bills are collected

22
Political Interference Resist Distortion of
Electricity Connection Plan
  • Thailand--Developed objective selection criteria
    to rank villages, allowed communities to jump to
    higher rank if they paid for part of village
    connection charges, village selection plan was
    included in national economic development plan
  • Costa Rica--Standard procedures for least cost
    expansion overseen by regulatory agency,
    customers have to pay for extension cost if too
    far away from system

23
Community Level ProblemsRights of Way, Theft,
Vandalism, Low Load
  • Thailand--Community meetings concerning
    electricity plan well before electricity came to
    community, local leaders to collect bills and
    report problems, had community agree to provide
    right of way and settle disputes internally
  • Costa Rica--Cooperatives used rural
    electrification committees for community liaison.
    People are automatically members of the
    cooperative when they pay for their service
    initiation. Programs to explain service options,
    meeting on time schedule, construction issues,
    etc.

24
Summary Rural Electrification Surprising
Findings
  • No one kind of institution works best (or assures
    success)
  • Greater local involvement than anticipated
  • Rural electrification master plan or planning
    capability quite common
  • Most programs had ways to deal with political
    interference
  • Subsidies and financing also quite varied.
  • Pricing structures differ greatly
  • Financial viability a key

25
Public Policies--Guiding Principles
  • Set up effective institutional structures
    mandated to deal with rural electrification
    (cooperatives, agencies, institutions to extend
    the grid)
  • Address political temptation to pork barrel and
    impact utility financial viability (Thailand
    example of use of social funds)
  • Have a rational expansion plan based on revenue
    growth and expansion costs (Build load and
    revenue to support expansion)

26
Public Policies--Guiding Principles
  • Importance of cost recovery subsidies should
    encourage not destroy business incentives (To
    serve consumer rather than government)
  • Charge a cost recovering price for electricity
    after the subsidy, but help with service
    connection costs (delicate balance)
  • Foster community involvement (Increase the
    likelihood of bill payment versus cutting off
    non-paying households creating ill will)
  • Reducing construction and operating costs (Single
    Phase in Tunisia reduces 30 of distribution
    capital cost)

27
Recipe for Rural Electrification
Cookie Cutter
Rural Electrification Stew
28
Diverse Ways of Making Stew Country Economic,
Political and Cultural Context
  • Buy a low cost pot (most programs have rural
    standards lower than urban ones)
  • Subsidies generally are necessary to make the pot
    affordable
  • For broth cook up a rich stock of financial
    viability to provide the base for the stew
  • Add a pinch of long term financing. Two to five
    years just is not enough

29
Recipe for Rural Electrification
  • Put in a handful of local cooperation and
    sometimes you can mix this with a bit of bill
    collection
  • Simmer for 20 years or more, as patience is
    necessary
  • Taste often and make adjustments
  • For selling this stew, make sure to get your
    prices right
  • The sustenance from the stew will make you strong
    and healthy

30
Thank You
  • Douglas Barnes
  • Energy Strategy Management Assistance Program
  • The World Bank
  • 1818 H Street NW
  • Washington DC 20016
  • dbarnes_at_worldbank.org
  • (www.esmap.org)
Write a Comment
User Comments (0)
About PowerShow.com