Integrated Rural Energy Utilities and some other issues

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Integrated Rural Energy Utilities and some other
issues

• Introduction and invitation to comment/contribute
• Douglas Banks,
• Restio Energy
• www.restio.co.za
• A REEEP funded project
• www.reeep.org

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Current Situation

• Vast majority of rural households un-electrified
  (gt90)
• About 30 to 40 of rural hh in South Africa
  unelectrified
• Wood and charcoal main energy resource
• Kerosene, dry cells, car batteries, candles,
  gensets

Grid is first choice, but people still use other
fuels, and wood SHS is a significant off-grid
technology Significant interest in mini-grid
(SA, Zambia, Uganda..)
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Existing frameworks for delivery

• PREPS and LIREPs
• Grid distribution (fed from national grid)
• Independent grid power based distribution
• Private sector led PV sales
• Micro-credit/Village Banks
• Cash
• Supported by ERT (UG), UNDP, SIDA, SSMP
• Institutional Electrification
• Ministry of Health, Education and others (often
  using PV)
• Thermal energy delivery
• Fuel wood collection/use
• Charcoal production and sales
• Improved stove programmes
• Biogas programmes
• LPG distribution private sector
• Productive use
• MFPs/PURE/PUCs etc

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Key challenges of rural energy delivery

• Affordability
• Location/Logistics
• Scale of enterprises delivering services
• Scalability/replicability of operations
• Access to government/international resources
• Efficiency of the overall delivery framework
• Skilled personnel
• Sustainable business model that
• Ensures delivery
• Ensures long term presence, maintenance, advice,
  support
• Financial sustainability

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The IREU Roadmap

• To build a case for rural integrated energy
  service utilities, serving grid and off-grid
  households, thermal energy needs, social sector
  energy needs (education, health, water, ICT) and
  business needs, and raising awareness of energy
  options and efficiency
• To develop best practice guidelines for these
  utilities, including business models and
  implementation and regulatory frameworks
• REEEP funded project, implemented by Restio
  Energy

• Integrates planning, and manages planning risks
• Simpler funding and implementation management?
• Improves scale / viability, especially for
  management
• Manages grid/off-grid tension
• Focus on best technology for service in given
  application
• Solid infrastructure, potential to service other
  development needs
• Operate in a service territory

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Partially achieved already?

• Many elements of the vision presented above have
  been tested
• In concession models
• South Africa and elsewhere.
• Senegal SHS, mini-grid and grid as part of
  single bid
• Priority Rural Electrification Projects (Uganda,
  several other countries)
• Exclude thermal, do not deal fully with SHS
• Sustainable Solar Market Packages (Tanzania,
  Uganda)
• exclude grid/thermal
• Integrated Energy Centres (SA)
• but these are single entities, exclude grid and
  SHS at present
• Utilities such as EDF, and even Eskom have
  included grid and off-grid
• Seldom specific thermal attention
• (e.g. SA concessions, but these exclude grid)
• Seldom specific regional focus
• (development of a implementation organization
  with robust capacity at a district or multi
  district level)

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Non-grid energy service delivery is a working
reality (SA concessions as an example)

• 33 400 installations done and being maintained
• 6 operating companies, some 6 years old, 4 of
  which have significant BEE shareholding
• Attracted gt R50 million (estimated) private
  sector investment
• DME capital of R3500/connection (No generation,
  bulk supply etc required) (About R118 million)
• Some munics have provided operational (FBE)
  subsidy (approx R600 000/month)
• 142 Employees, 54 subcontractors during routine
  operations, 100 more during installations
• Significant LPG sales
• (e.g. NuRa 60 000kg/month)
• Reach close to customers (Energy Stores)
• International funding for additional concession
  attracted (approx R100 million)
• 1.67 MW of renewable capacity
• 2 GWh/annum of RE generation
• CO2 TREC benefits not yet being realised

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Energy Stores The heart of the operation

• Is the heart of the Utility
• Staffed by people from the area
• Customer liaison and development (marketing,
  education)
• Installations (currently use centrally managed
  team and contractors)
• Maintenance, revenue collection
• Stocks spares, some non-grid appliances
• LPG sales and appliances
• Resource for energy and development in the
  community (e.g. workshops with schools and
  clinics)
• Information and sales of energy efficient globes
  (for grid)
• Over time will become independent business unit,
  franchised to Utility and owned by store
  manager/staff/local entrepreneur
• Will support local service points/agencies

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Business model options

• PPP Utility
• purchase in bulk from national or other bulk
  supplier
• Distribute to customers in territory
• Supply and maintain off-grid
• Where appropriate, mini-grid using renewable and
  other
• Incorporate distributed generation
• Facilitate or supply thermal energy services
  (biomass, biogas, LPG)
• Energy stores operating as part of a utility
  (possibly as separate businesses)
• Smaller operators (working under a franchise or
  similar agreement, supported by a regional
  management services company)
• Public sector utilities with a widened mandate
• Rural Energy co-operative associations with
  robust association
• Two or more entities working in a structured
  collaboration (e.g. biogas dissemination, and
  off-grid electrification)

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Which energy services to include?

• Grid
• Distributed generation
• Micro-grids
• Off-grid
• LPG?
• Biomass?
• Biogas?
• Bio-fuels?
• Appropriate choices will depend on
• Consumer needs
• National policies
• Status in operational regions
• Operational capabilities

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Grid costs / connection

• Usually within reasonable limits, but costs
  increase under certain conditions
• Distance from supply lines with sufficient
  capacity
• Cost of bulk supply
• Small settlement size
• Low household density/low take up rate
• Domestic connections also have impact on
  generation capex/peak loads

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Key challenges

• Overcoming regulatory and institutional hurdles
  to integration of grid and off-grid
• Permission for PPP to distribute grid
• Addressing concerns regarding the establishment
  of monopolies for energy service (regulation)
• Achieving the breadth of vision need from
  funders, investors, authorities, implementers and
  employees
• (people tend to pay lip service to integration
  but feel more comfortable with focus)
• Staff training at range of levels
• Finding way to ensure that less commercial
  activities (e.g. biomass energy, energy
  education) can be accommodated, sustained within
  a framework that retains business viability
• Fee-for-service or other model for Solar home
  system delivery?

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Where next?

• Significant interest when I have talked to people
• But- is it realizable? Does it really make sense?
• REEEP IREU project allows us to explore the
  issues
• Focus on
• South Africa
• Tanzania, Uganda

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Project team

• Doug Banks, Robert Aitken, Alix Clark and
  Katherine Steel (MIT) will work on this project
  from Restio Energy.
• Partners for this project include
• Chris Purcell of the Energy Development Group
• South African and East African rural energy
  planning, experience with grid, off-grid
  technologies and thermal technologies
• Sifiso Dlamini , (General Manager of NuRa)
• will contribute his experience of off-grid PV and
  LPG delivery. (D Banks of Restio Energy is also a
  Director of NuRa)
• External review will be provided by
• Xavier Lemaire (SERN) and Dr Ekkehart Naumann,
  AEDB (Pakistan)
• Stakeholder involvement is structured into the
  project
• REA (Uganda), DME (RSA), others

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Project Activities

• Review based on experience, literature on rural
  energy entities Document outcomes, problems,
  lessons learned in context of IREU. In this
  process identify most suitable project as
  reference/test case for development of best
  practice IEU business case rationale.
  Candidates include NuRa, East African Priority
  Rural Electrification Projects (PREPs) or
  similar.
• Includes meetings in RSA, UG, TZ
• Develop guidelines and reference material
• IEU partnership and investor criteria
• Regulatory models, institutional framework
• Finance mechanisms
• Capacity requirements particularly for rural
  implementation
• Costing of fuel and service options
• Business models for IEUs including path from
  current to proposed
• Financial/economic models for investors
  (including governments)
• Documentation and dissemination
• Linking of stakeholders around identified case
• Includes planned workshop late 2008 (RSA, UG, TZ)
• Targeted dissemination to key stakeholders

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Grid planning issues (in a country with 4 rural
electrification!)
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Decision tools are available

• Master planning
• Network Development Plans
• Energy Service Development Pans

• Electrification modelling tool
• Cost benefit analysis (simplified)
• Detailed economic analysis

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Option three Mduda mini-grid
Mduda south
Mduda north
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Option five Mduda mini-grid
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Cost and benefits of different options
Extract from a draft final report prepared for
the DME on mini-grid CBA
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Summary of key advantages

• Large enough, and dense enough to justify
  significant district based energy service
  provider
• Connection specific technology decisions
• Grid growth risk management
• More flexible accommodation of distributed
  generation
• Shared management and field resources
• Higher utilization of customer service points
• Integrated funding/implementation framework
• Lower cost access to capital (compared to
  consumer finance)
• Procurement efficiency
• Development infrastructure in rural areas

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Key issues for Debate

• Can you see potential for IREUs?
• Main barriers/opportunities
• Who can we engage with?
• Are there particular areas where
• You are aware of current compatible work?
• You feel we should place more emphasis?
• Planned developments that could accommodate
  IREUs

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Thank you for your participation and contribution!
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Productive use of Renewable Energy

• Key concern is that off-grid limits productive
  activity
• Note economic activity does not automatically
  follow grid electrification
• Access to markets, finance, skills,
  entrepreneurship development, logistics, business
  support
• Productive use with renewable energy is being
  demonstrated
• Concessions shops, cell-phone charging, sewing,
  extended work hours
• Tourist facilities
• Productive use container project
  micro-enterprises established in rural
  communities, bring a range of services and
  enabling livelihoods sewing, ICT, retail,
  refrigeration, shoe repair, hair salons
• Renewable and Hybrid Energy Access for Productive
  Use (CEF/SANERI funded work on frameworks/
  strategies for Prod Use of Renewable Energy (see
  www.restio.co.za productive use projects)

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• Productive Use Containers
• Nuon/DGIS/Novib
• RESTIO Energy/Rural Wealth Creation Project
• 6 PUCs in northern KZN
• www.restio.co.za for more info