Institutional Structures and Processes for High-Quality, Scaled Implementation Mini-hydro power for energy access Oliver J. Haas

Contents The next step is to establish institutional structures and processes that route support to project developers and communities, and mechanisms for the government to monitor and assure high-quality implementation. Interpretation of status quo (energy sector) The desirable situation The role of pilot projects Next possible steps 2 © INTEGRATION

Background Small and mini-hydro power sector exists, characterized by –A large number of MiHPs –A large number of mini-grids (Diesel or bio-gas gen-sets) –Well-equipped fabrication shops  Sense of entrepreneurship  Reliable community-based governance structures  High uncertainty for project developers and operators  Large-scale role out of grids, and large hydro- and gas-power 3 © INTEGRATION

Requirements for S/MiHP Sector Development Operating a S/MiHP must be legal Different operation models should be eligible Tariffs need to allow risk equivalent margins –Adjustment to changing cost structures must be possible. –This must also hold true for systems with capital subsidies. Operating a S/MiHP must be secure for 20, or even better, 25 years –A clear, reliable and long-term scheme for the time when the national grid arrives must be available´. Hydrological resource assessment should be accessible Consumer/village (cluster) must be large enough to break-even Technical support and quality assurance need to be in place Capital subsidies for distribution networks and other fixed assets Provision of long-term loans to enhance the IRR Community involvement needs to be well organized 4 © INTEGRATION

Local Co-governance of Mini- grids (community level) 5 © INTEGRATION 2007 Grid coverage is defined by transparent criteria Code of conduct allows demand management at different times and regulated payments Operators and community can change the code of conduct The community understands the cost of electricity and the impacts of non-payment (free-riding) Sanctions range from individual warning to disconnection Local governance mechanisms assume responsibility for a quick response to problems or conflicts The operator and the community are the owners of the mini- grid Micro-utilities are at least partly community-owned/-governed

Challenges Ahead DRD has interest in promoting MiHPs for rural development –However, is a relatively new department with various rural infrastructure activities. No independent regulator and mixed regulatory responsibility –States are eligible to issue licenses for off-grid MiHPs –Regulatory processes on national / sub-national level are not yet clearly defined  Private project developers are uncertain about the future. Underinvestment in MiHP (no access to capital/finance)  “Everyone wants to be connected to the grid.”  Important to act carefully when regulating an existing sector. 6 © INTEGRATION

From ‘Pilot Project’ to ‘Project Pilots’ What can be the benefit of pilot projects? How to create confidence of SPP/project developers while -enhancing the capacities of public institutions, and -preparing a regulatory framework (templates, tariff schemes, PPAs, licenses etc.)? Conduct an EoI/tendering for pilot projects assuming it would be regulated, wherein -Mobilize the private sector with clear incentives and a competition for new projects (project pipeline of XY MiHPs). -Create standards (grid connectivity, power availability), templates, calculation schemes (tariffs), etc. 7 © INTEGRATION 2007

Assumptions for Program-Pilots A large-scale implementation of decentralized mini-hydro power systems can be best realized by private sector stakeholders. The highest long-term impact will be created if the pilot projects are embedded in a long-term approach and involve private operators from the beginning. Private operators shall be part of the entire process of site evaluation, project development, and system installation and operation during the pilot project phases. 8 © INTEGRATION

The Technical and Business Support Unit/Program The process is aimed to prepare SPP to roll out its individual business models. –Pipeline with clear capital grant (and access to debt finance) –Technical support unit to support and monitor project developers OPTION 1: TENDERING PROCEDURE Call for Proposals for selected sites OPTION 2: THE PROJECT DEVELOPER’S APPROACH Unsolicited proposals for different sites In both cases, projects should be developed for grid integration (later) on and with high quality standards. Sizes/capacities, technologies, target groups and investment costs as well as to the question whether “embedded generation” Quantification of site selection criteria. Villages/settlements must meet the criteria to be suitable for mini-hydro electrification. 9 © INTEGRATION 2007

The Technical and Business Support Unit/Program (II) Selection and Coaching of Private Operators MiHP Development Workshop -Create awareness and mobilize private sector participants -Develop sufficient capacities for those companies that decide to participate in the Guided Site Competition The Guided Site Competition (GSC) -Business plan with financial model, a MiHP/mini-grid implementation and operation strategy. -Up to 5 winners of the GSC and up to 5 additional candidates will receive comprehensive technical assistance to develop their mini-hydro projects to the implementation stage. 10 © INTEGRATION

Guided Site Competition First component –(Site selection and) demand assessment –Technical system design and financial model development –Obtaining of permits and preparation of licenses –Training/support in system installation, commissioning, and O&M Second component –Support in community awareness and PURE promotion –Support to design, installation and commissioning of a distribution grid according to national grid standard (The ownership of the grid will be transferred to the village community while the operator will get the exclusive usage right for the distribution grid. 11 © INTEGRATION

The TBSU Internal Development Process Preparation of the required documents and licenses Provision of capital grants Development of the medium and low voltage network at chosen sites (Support to access debt finance)  The goal is to mobilize the required financing for at least 10 pilot projects until the end of 201?.  The development and implementation of the required frameworks shall be facilitated parallel to the Technical and Business Support Unit/Program (II).  Further tender processes can be launched as part of the program in future. 12 © INTEGRATION 2007

Thank you 13 © INTEGRATION 2007