DAC-codes Sectors Energy policy and administrative management; power generation / renewable sources

Transcription

1 Annex 1 1. IDENTIFICATION Title/Number Renewable energy development and energy efficiency improvements in Indian Ocean Commission Member States CRIS No RSO/FED/ Total cost EUR (EDF contribution: EUR ) Aid method / Method of Project approach partially decentralised management implementation DAC-codes Sectors Energy policy and administrative management; power generation / renewable sources 2. RATIONALE 2.1. Sector context Indian Ocean Commission (IOC) Member States have very heterogeneous economies and energy sectors; trade among these countries is also negligible compared to trade with other regions of the world. Their energy sectors face major, but common challenges. They are vulnerable to climate change and external shocks such as rising prices for imported fuels with resulting impacts on the economy and the population. Countries in the region are very dependent on imported fossil fuels: at least 81% of primary energy is imported (petroleum and coal), and 90% of commercial energy is imported in Comoros and Madagascar, the two countries which widely rely on wood fuels for household energy supply; oil products account for 52% of energy supply in Mauritius and more than 95% in Seychelles. This has serious impacts on the cost of energy (particularly electricity), the balance of payments, the financial situation of electric power companies and State budgets. Access to electricity needs to be increased in Comoros (70-80% access rate) and in Madagascar, especially in rural areas where the access rate is as low as 5%. At the same time, countries of the IOC have a potential for the development of renewable energies. As a result of past investments in Madagascar and developments since the late 90s in Mauritius and in La Réunion, renewable energy (RE) sources provide a significant contribution to electricity generation, from 10-15% in Comoros to 23% in Mauritius, 36% in Reunion and 60% in Madagascar (less than 5% in Seychelles). But the share of RE tends to remain stable in Mauritius and La Réunion, and has decreased in Madagascar: diesel engines still remain the cheapest investment to guarantee electricity supply. Exception for La Réunion, no country has developed energy efficiency standards for buildings, appliances and equipment or RE/energy efficiency (EE) agencies. The region has large potential for renewable energy, including bio-fuel, at the same time, there is also big potential for improving energy efficiency. There have been some initiatives for Renewable Energy/Energy Efficiency, at various levels in the IOC States; however, in several countries of the region, the sector is still marked by a lack of awareness of opportunities, a business environment that needs to be improved, a lack of regulatory capacity, limited competence and resources, insufficient technical know-how and skills and Research and Development. The heterogeneous situation of the Member States should be harmonised by a regional approach that will complement the national initiatives. There is substantial expertise in La Réunion, private capital and entrepreneurship in Mauritius, and large potential in terms of resources in Madagascar and Comoros. Individually the countries are small, but, the region can collectively develop an internal market for infant industry in this area and then aim at exportation. Pooling of scarce expertise in this area, addressing human resources requirements collectively, building of experiences and lessons from each other and developing tools for transfer of know-how and technology in this area are some of the key aspects of regional value-addition that justifies a regional approach. This can also become a 1

2 key marketing strategy for the IOC region in order to attract investment in an area which has large potential for economic growth, employment and poverty reduction. A larger reliance on renewable energy will help to develop resilience, promote competitiveness and sustainability. A major shift from the current situation to one where the region can rely mostly on renewable energy cannot be entertained by individual Member States alone. Public finance and initiatives will not be enough to bring about the shift, it also needs the full involvement of the private sector. A shift to another development paradigm is needed to attract local and foreign investment, set up the right environment, access adequate human and financial resources, and attract the right technical know-how and skills and specialised expertise. Given the importance of renewable energy/energy efficiency in the pursuit of sustainable development, the 10 th EDF Regional Strategy Paper/Regional Indicative Programme for the Eastern and Southern Africa and Indian Ocean region makes specific reference to it especially as the region s priority for the development of an energy policy which takes account of the new and renewable technology advances. The 2008 IOC Council requested the Secretariat to develop a regional programme to promote RE&EE. Renewable energy was also identified as a key area for regional cooperation and integration in a high-level workshop of the IOC which also included private sector representations from all countries in February Lessons learnt Energy is a social need which has major implications for the well-being of a population. The global trends in fossil fuel prices can only be to the detriment of the welfare of the Indian Ocean Commission population. The IOC region cannot afford to be passive in a circumstance where fossil fuel can become a key barrier for its economic transition, already affected by all sorts of external crisis. Due to high investments, Renewable Energy/Energy Efficiency (RE/EE) projects cannot solely be viable based on public investment. Private sector participation should also be envisaged at the same time. Past approaches in major development processes for developing economies have been characterised by either donordriven technology demonstration projects or reliance on developed economies technologies. There is a need to move towards more indigenous and user-oriented approaches focusing on building business environments and more sustainable markets for renewable energy technologies and services. Worldwide experience tells that promotion of RE and EE cannot be simply left to market forces: a government should implement a combination of policy instruments to induce changes in behaviours of energy consumers and encourage investments: regulations and standards, energy audits and project feasibility studies, information and training, fiscal and financial incentives. Dedicated agencies, albeit small, need to be created. National and local authorities also need to be empowered, for instance to secure the proper operations of decentralised systems or control the application of building standards. Valuable initiatives from governments in the region also led to incomplete results for lack of technical expertise and external references. This four-year regional programme is geared to provide adequate support to such institutional strengthening and setting up sustainable policy instruments. However, unless there is a good appropriation of the key stakeholders and strong commitments from Governments, this programme will not yield the expected results Complementary actions The programme will ensure full complementarity, where relevant, with other activities at national and regional levels. Indian Ocean Commission Member States receive individually and/or are likely to receive support from the European Union (EU), donor organisations of the EU Member States and International Finance Institutions, in different areas: 2

3 Elaboration of a national long-term energy strategy and the related action plan in Comoros with EU support; EU support to the preparation of the Seychelles Energy Bill approved in 2011 and of the Seychelles Sustainable Development Strategy which encompasses a programme for energy efficiency, renewable energy and capacity building; Training and exchanges with related European Regional Development Fund projects in La Réunion will constitute another opportunity for the IOC African, Caribbean and Pacific countries; especially on the project Stratégie pour l Autonomie, la Redynamisation de l Economie de La Réunion STARTER ; Support to the preparation of renewable energy and energy efficiency strategies, action plans and legislation (with the support of the World Bank and Agence Française de Développement (AFD) in Mauritius, the EU in Seychelles, and the United Nations Development Programme (UNDP) in Comoros); Reforestation and development of the efficient use of wood fuels and charcoal: the ethanol project of the World Bank in Madagascar; the Global Environment Fund (GEF) contribution in Comoros; Consolidation and development of electric power networks: in Madagascar, electricity sector master plan and management contract (with World Bank support), guarantees to private investors (AFD) and framework to attract investors (International Finance Corporation); financing of wind turbines in Seychelles by the United Arab Emirates; Rural electrification, through network extension and decentralised systems: in Madagascar, via the EU Energy Facility I, finances a few small networks (three hydro, one wind, one solar, and a technology transfer project); the Energy Facility II would finance similar ones; studies to be financed by the AFD (however, these projects would provide only a minor contribution to rural electrification requirements). In Comoros, the UNDP has implemented a GEF small grant programme to improve access to energy in villages; in Seychelles, the UNDP has funded a 250 kilowatt-peak solar photovoltaic (PV) project; Introduction of energy efficiency standards in new construction and subsequently for equipment, starting with household appliances: UNDP-GEF-AFD programme in Mauritius; Financing of energy efficiency investment in industry and commercial enterprises, and rehabilitation of public buildings: the AFD EUR credit line through banks in Mauritius; East African Community Strategy on Scaling-up Access to Modern Energy Services; Cogeneration for Africa; Biogas for a better life; Capacity Building for Renewable Energy small and medium-sized enterprises (SMEs) in Africa - CABURESA; Solar and Wind Energy resource assessment - SWERA) in the region, which though they do not address the IOC region, can nevertheless call for sharing of experiences. There is a Joint Research Centre (JRC) project which aims at the development of renewable energy maps and potential for specific regions in Africa. Potential longterm Research and Development collaboration with JRC will be explored. This programme is fully consistent with the scope of the Africa-EU Energy Partnership, and would fully contribute to the actions envisaged in the Africa EU Renewable Energy Cooperation Programme, which aims at mobilising the technology expertise and innovation capacity of Europe in order to build knowledge and capacity in Africa, and to support the growth of a new industrial sector in Africa over the coming years. Some visibility tools will be developed in the programme to disseminate information on AU-EU renewable energy programme; a link will be made by involving its concerned officials in the implementation of the IOC Programme. 3

4 2.4. Donor coordination In each country, International Finance Institutions and donors, which apart from the EU include the World Bank/ International Finance Corporation, Global Environment Fund, UNDP, European Investment Bank, Agence Française de Développement, German financial and technical cooperation KFW/GIZ, and the United States AID, exchange information and collaborate; donor-government working groups are usually chaired by a Government Ministry. Consensus also exists among different government institutions and donor organisations about RE/EE related strategies, reforms and investment priorities. Coordination also takes place between IOC Member States through permanent liaison officers, who are aware of the activities in each sector of the economy. Financing and technical support required for the development of renewable energy and energy efficiency exceed contributions planned by different International Finance Institutions and donors, but with the probable expansion of RE/EE activities, there will be a need to enhance coordination in this field. 3. DESCRIPTION 3.1 Objectives General objective: to increase access to modern, reliable and sustainable energy services at acceptable cost for the consumers in the Indian Ocean Commission (IOC) region, and thereby contribute to the countries sustainable development. Specific objective: to establish the conditions for the development, investment and sustainable management of renewable energy and improvements in the efficiency of energy use in the IOC region. 3.2 Expected results and main activities Result 1: A regional IOC strategy focussed on human resources development and institutional building is agreed and implementation started. o Develop and agree on an IOC Regional Strategy on renewable energy and energy efficiency (RE&EE) on the basis of individual countries medium and long-term goals for human resources development and institutional building adapted to each form of energy, including bio-fuel, and economic sector. o Design detailed action plans linking Government budgeted initiatives with resulting impacts on different market segments. o Each country has developed RE and EE strategies. o A RE/EE centre/agency has been established in each of the IOC States, to take the responsibility for the implementation of action plans 1 ; its duties include awareness raising, delivering information about technologies, regulations, standards and financial incentives, support to project promoters, demonstration projects and training. o Stakeholders which may play a role in the implementation of policies, like municipal authorities, have been empowered. o Financing schemes, consistent with the country s financing capabilities, are in place, possibly with support from donor organisations. o A RE-EE National Policy Working Group bringing together the main decision makers of each country is set to undertake the following: a working group dedicated to the duties of RE/EE ministerial departments; assistance to these departments and to RE/EE centres/agencies in their daily tasks, study tours / visits of specialised technical centres, traineeship in Europe; advice on incentives, 1 The project will assist each country to find the most appropriate and flexible institutional set up, with adequate representation of the Government and other stakeholders on the board, but minimal impact on State budget. 4

5 financing mechanisms and procedures; preparation of guidebooks; development of web sites; training curriculum; support on monitoring and evaluation methods and software. An exit strategy for the programme will be developed which will provide for sustainability of actions. The IOC and its Member States are committed to take over the implementation of the project after the end of the project period in order to ensure continuity. A monitoring system will be developed for Governments commitments on relating financial and human resources in order to maximise benefits from the Programme as well as ensure sustainability. The IOC will ensure that there is full ownership of the Programme by the beneficiary countries. Result 2: A Renewable Energy and Energy Efficiency promotional campaign and advocacy plan is developed, agreed and implemented. o A Renewable Energy and Energy Efficiency Regional Promotional Strategy and Plan of Action is developed; o High level meetings organised for sensitisation, for advocacy and for approval of the Renewable Energy and Energy Efficiency Regional Promotional Strategy and Plan of Action; o The Renewable Energy and Energy Efficiency Regional Promotional Strategy and Plan of Action are implemented. This component is a cross-cutting component that will be implemented across all result areas. Experience-sharing with key partners for e.g. Global Environment Fund (GEF) funded projects will constitute a key aspect of the programme. Result 3: The regulatory and business environment for Renewable Energy-based grid-connected electricity generation has been improved; wind and solar resource data bases have been further developed. o Increase capabilities of Ministries, regulating agencies and electric power utilities about the integration of Renewable Energy-based power plants in the systems, regarding: technical feasibility, connection contracts, power purchase agreements and tariffs; o Development of clear, transparent and fair rules for application to the connection of each type of Renewable Energy-based generation, as well as other possible forms of cogeneration, thereby facilitating RE investments for all capacity levels; o Active engagement of the private sector stakeholders in the development of a regulatory framework; o Improvement and development of wind and solar resource data bases to a level which appears appropriate for preselecting zones and for potential investors to start their own development and implementation activities; o The senior staff of ministries, regulating agencies and electric power utilities meet regularly and discuss in detail the case of one or two of the five countries; o Information-sharing on lessons from abroad including a diagnosis of the existing wind and solar data bases in each country, recommendations for a detailed measurement plan, and financing of part of this plan; o Review the current knowledge on geothermal energy and bio-fuel, assess the cost of further investigations, research and exploration, and conclude on priority actions. 5

6 Result 4: Government agencies and private investors have developed their capabilities to design, engineer, construct and operate decentralised electric power / energy systems based on renewable energy. o The beneficiaries include public or parastatal bodies, local authorities, public sector operators, rural electrification agencies, utilities, developers and operators, higher education and research institutions, SMEs and other operators able to participate in business incubator projects and provide maintenance services. The electric capacities of this market segment range from a few 10kW to about 10MW; technical options may include hydro, biomass (e.g. agriculture wastes and biogas), wind, and solar PV for small capacities, as well as wind and solar water pumping. o Call for proposals will be invited for one or several demonstration projects to be implemented in each beneficiary country, involving investment from the abovenamed beneficiaries under a sustainable contractual arrangement, financing contribution from the programme (maximum subsidy to the tune of 50% of the total investment), installation and operation including building business partnerships, including Public Private Partnerships (PPPs), between local private sector and those from outside the region such as the EU. Investors and contractors will be supported by specialised experts for engineering and construction phases. Lessons learned from each case will be discussed at working sessions with all parties involved, with the aim of validating technical solutions and contractual arrangements. Expertise will be provided on small and micro hydro power plants. Only countries having set-up a National Policy Working Group on renewable energy and energy efficiency will be eligible under this Call for Proposals scheme. Result 5: Energy efficiency standards and labels have been developed in most Indian Ocean Commission Member States a) for all categories of buildings and b) for household appliances and equipment with major impact on electricity consumption and peak load. o A draft code on the energy performance of buildings is developed, accepted and understood by professionals and authorities involved in the region. The technical and economic feasibility of RE and EE solutions has been demonstrated to construction sector professionals. Institutions and enterprises responsible for public and commercial services, and some industries, are encouraged to carry out measures and investments to improve the efficiency of existing energy equipment, processes and buildings, and introduce RE solutions, e.g. solar heating / preheating of water. o Equipment manufacturers, importers and suppliers can understand and explain equipment performance and labels. The public is aware of the impact of energy performance in the choice of appliances. Laboratories responsible for equipment testing have increased their capacities and equipment. o For the thermal building codes, scientific work on draft standards could be initiated by a group of architects, engineers and representatives from specialised research centres. 6

7 Working groups would be gradually established in each country to adapt the draft code on the energy performance of buildings to be developed under the programme. Demonstration projects will be supported if finance can be made available from other sources. o For appliances, gradual application by an appropriate organisation of the standards to priority equipment is encouraged, using the resources of existing testing laboratories and standards institutes. Support to the preparation of regulations with ministries of industry and commerce, and standards institutes. Organisation of campaigns in each country to inform importers, distributors, custom authorities and the general public. 3.3 Risks and assumptions Key risks are as follows: Weather-related volume risk: risk of a fall in volume of electricity produced owing to lack of wind or sunshine. Environmental risk: risk of damage to the environment caused by the power plant, and the liability arising from such damage. Political/regulatory risk: risk of a change in public policy, for example subsidies policy, affecting plant profitability. There is high-level commitment from governments to proceed with Renewable Energy (RE) and Energy efficiency (EE) strategies; Financial risk: risk of insufficient access to capital. Market risk: risk of an increase in the price of commodities and other inputs, or decrease in the price of the electricity sold. Operational risk: risk of unplanned plant closure, for example owing to unavailability of resources, plant damage or component failure. Risk of competition between biofuel production and food security. Biofuel production that uses scarce resources such as arable land and potable water can hamper agricultural production. These risks will be mitigated through policy dialogue of the IOC with its Member States, improved visibility of the IOC region potential for RE/EE development and improvement, as well as capacity building for operators of RE-based electricity generation systems, environmental and food security risk assessments. Assumptions are: i) There is follow-on action by other stakeholders; ii) There is a clear responsibility of implementing agencies for implementing their activities; and iii) Each country establishes a RE/EE centre or agency. 3.4 Crosscutting Issues The activities of the Programme will be implemented according to the following principles: i) Improvement of trade issues; ii) Environment friendly processes, impacts on climate change; iii) Participatory approach with clear and transparent rules for civil society and the private sector; and iv) Promotion of good governance issues, gender equality and benefit to the most vulnerable; 3.5 Stakeholders Overall, the project s impact and sustainability cannot be attained without active involvement of the national and regional authorities in the implementation stages of the programme. Provision will be made for national level representation in the Steering Committee of the Programme for a stronger appropriation of the related activities. A Monitoring system will be 7

8 developed for Governments commitments on financial and human resources in order to maximise benefits from the Programme. In order to ensure sustainability of the Programme, institutional capacity building activities will be undertaken. It is crucial during the implementation phase to: (i) fully involve as large a number of stakeholders as possible, including the private sector and the civil society, (ii) identify shared and concerted visions as regards the regional approach to sustainable energy issues (iii) monitor on-the-field project activities to ensure their timely implementation and (iv) the need for strengthening national institutional structures in particular human resources. The key stakeholders of the programme are the following: Countries Institutions Comoros Ministère de l Agriculture, de la Pêche, de l Environnement et de l Énergie / Direction Générale de l Énergie, des Mines et de l Eau. Ministère de l Aménagement du Territoire/Direction de l Urbanisme et de l Habitat. Ma-Mwé (Gestion de l Eau et de l Electricité aux Comores), the state-owned utility company. Madagascar Ministère de l Énergie. Agence de Développement de l Électrification Rurale (ADER). Ministère de l Aménagement du Territoire. Office de Régulation de l Électricité. Bureau des Normes. JIRAMA, the national power and water utility company. Mauritius Ministry of Renewable Energy and Public Utilities, Ministry of Public Utilities, Central Electricity Board, the national power utility company. La Réunion L Agence Régionale de l'energie de la Réunion (ARER), La Préfecture, Electricité de France, la Direction Régionale de l'environnement (DIREN), le Conseil Régional et sa Direction Energie. Seychelles Ministry of Home Affairs, Environment and Transport / Department of Environment. Seychelles Energy Commission. Ministry of Land Use and Housing. Public Utilities Commission (PUC), the national power and water utility company. The Renewable Energy and Energy efficiency (RE/EE) units within the ministries responsible for energy would be involved in defining RE/EE action plans consistent with budgets, prepare legislation, coordinate with other ministries and stakeholders, monitor the enforcement of legislation and standards, and follow up results. In La Réunion, the Agence Régionale de l'energie de la Réunion (ARER), on behalf of the Regional Authority, is responsible for promoting and developing actions to save energy and develop RE. In addition, the targeted groups are potential RE / EE investors, including local and village communities; professionals involved in the design, engineering, manufacturing, imports, distribution and installation of equipment related to RE/EE, and their associations; universities, vocational schools, technical and research centres. These target groups will benefit from a more favourable business environment, as well as from regulations and incentives which will boost their markets and support their activities. The population, industrial and commercial enterprises, including the smallest and most vulnerable ones, local communities, and public institutions like schools, colleges and hospitals, will ultimately benefit from a better access to modern, reliable and affordable energy services. 8

9 4. IMPLEMENTATION ISSUES 4.1. Method of implementation The method of implementation is partial decentralisation through the signature of a Financing Agreement with the Indian Ocean Commission (IOC) in accordance with Articles 21 to 23 of the Financial Regulation applicable to the 10 th EDF. The Commission controls ex ante all the procurement procedures except in cases where programme estimates are applied, under which the Commission applies ex ante control for procurement contracts > EUR and may apply ex post for procurement contracts EUR The Commission controls ex ante the contracting procedures for all grant contracts. Payments are executed by the Commission except in cases where programmes estimates are applied, under which payments are executed by the beneficiary country for operating costs and contracts up to the ceilings indicated in the table below. The responsible Authorising Officer ensures that, by using the model of financing agreement for decentralised management, the segregation of duties between the authorising officer and the accounting officer or of the equivalent functions within the delegated entity will be effective, so that the decentralisation of the payments can be carried out for contracts up to the ceilings specified below. Works Supplies Services Grants < EUR < EUR < EUR EUR The Contracting Authority is the Indian Ocean Commission which is also the 10 th EDF Regional Authorising Officer (RAO) for this project on behalf of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Intergovernmental Authority on Development (IGAD). The IOC shall also act as Supervisor of the programme. The EU Delegation, responsible for the follow-up of the programme is the EU Delegation to the Republic of Mauritius, which is also responsible for the Seychelles and the Comoros. A technical assistance with resources of the Programme will be provided to the IOC and will be based at the IOC Secretariat. Part of the programme activities will be implemented through annual programme estimates, to be managed by the Programme Management Unit, through private indirect decentralised management. The Technical assistance will be recruited following only one Restricted International Tender which will be launched with a suspensive clause in conformity to the 10 th EDF contractual and financial procedures. The RAO shall be responsible for the selection of this technical assistance. The Technical Assistance Team will consist of 48 man-months for each of three long-term experts: an Energy economist and team leader, an Energy specialist, and a Financial and Administrative Manager. The activities related to Result 4 will be implemented through grant contracts, awarded following a Call for Proposals Scheme, managed by the Programme Management Unit in line with 10 th EDF rules and procedures, and on priority areas where intervention is deemed important. The technical assistance team will also be responsible for the follow-up of their execution. The grant contracts will be committed either through the programme estimates or specific (individual) commitments. A Steering Committee shall be responsible for the overall guidance and technical orientation of the programme. This Committee shall meet at least on a six-monthly basis and shall be 9

10 chaired and convened by the IOC Secretariat. The Steering Committee will, amongst others, discuss, amend and approve the programme estimates proposals as well as the «Call for Proposals Scheme», presented by the Programme Management Unit. It shall be constituted of the following members: IOC (Chairperson); representatives of the parent ministries from focus countries (Core members) and representatives of IGAD, EAC and COMESA or the Interregional Coordination Committee (IRCC) Secretariat (observers), National Focal Points (Observers); Programme Management Unit (observers) and the EU Delegation to the Republic of Mauritius (Observers). The EU Delegation in Madagascar, specific resource persons and other donor representatives can also be convened to the Steering Committees as observers. A representative from the AU-EU Renewable Energy (RE) Programme will be invited as observer in order to ensure full coordination between the two Programmes. The change of management mode constitutes a substantial change except where the Commission "re-centralises" or reduces the level of tasks previously delegated to the beneficiary country, international organisation or delegated body under, respectively, decentralised, joint or indirect centralised management Procurement and grant award procedures/ programme estimates 1) Contracts: All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the Financial Regulation applicable to the 10 th EDF. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in Article 20 of Annex IV of the Cotonou Agreement. 2) Specific rules for grants: The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. They are established in accordance with the principles set out in Title VII 'Grants' of the Financial Regulation applicable to the 10th European Development Fund. When derogations to these principles are applied, they shall be justified, in particular in the following cases: - Financing in full (derogation to the principle of co-financing): the maximum possible rate of co-financing for grants is 50% of total eligible costs for Actions. Full financing may only be applied in the cases provided for in Article 109 of the Council Regulation on the Financial Regulation applicable to the 10th European Development Fund. - Derogation to the principle of non-retroactivity: a grant may be awarded for an action which has already begun only if the applicant can demonstrate the need to start the action before the grant is awarded, in accordance with Article 108 of the Financial Regulation applicable to the 10th EDF. 3) Specific rules on programme estimates: All programme estimates must respect the procedures and standard documents laid down by the Commission, in force at the time of the adoption of the programme estimates in question (i. e. the Practical Guide to procedures for programme estimates). 10

11 The EDF financial contribution covers the ordinary operating costs deriving from the programme-estimates Budget and calendar The total budget of the project is estimated at EUR from the resources of the ESA-IO 10 th EDF Regional Indicative Programme for the Eastern and Southern Africa and Indian Ocean region (indicative budget/expenditure is presented below): Description EUR % Type of procurement Activities for Result % Programme estimates or specific commitment Activities for Result % Programme estimates (including visibility and communication) Activities for Result % Programme estimates Activities for Result 4 (grants) % Programme estimates or specific commitments Activities for Result % Programme estimates or specific commitment (for supplies) Technical Assistance % Specific commitment Equipment % Programme estimates or specific commitments Operating Costs % Programme estimates Communication and Visibility % Programme estimates External evaluation % Framework contract Audit % Framework contract Contingencies % - TOTAL % - Operating costs include in particular local staff, workshops, administrative costs, missions of local staff and secretariat (related to the project), training, equipment and other investments related to objectives of the project. Although La Réunion, an overseas department of France, will not be a financial beneficiary of the Programme, it will be closely involved in the programme as a member of the IOC. The participation of France/Réunion and its institutions, such as the Agence Régionale de l'energie de la Réunion in the Programme's activities, will be subject to European Regional Development Fund financing and its own resources. The operational implementation phase starts from the entry into force of the financing agreement and will have duration of 48 months. The closure phase has a duration of 24 months that starts from the expiry date of the operational implementation phase Performance monitoring The quantification of indicators of process and outcomes for the internal monitoring of the project will be established at the start of the project along the lines defined in the logical framework and on EuropeAid Standard Indicators and monitoring systems adopted accordingly. The Interregional Coordination Committee members will be kept regularly 11

12 informed of the project s achievements and will be invited to attend the regional Steering Committee meetings Evaluation and audit A budgetary provision is made for regular audits on Programme Estimates; an external audit will be undertaken at the end of each Programme Estimates. The programme results will be evaluated on the basis of the following criteria: Relevance, Efficiency, Effectiveness, Impact and Sustainability. Independent consultants recruited directly by the Commission on specifically established terms of reference will carry out a mid-term evaluation and a final external evaluation at the beginning of the closing phase. These exercises will be performed by teams of experts, independent from both the Contractor and the Beneficiary Communication and visibility The budget makes due allowance for Information, Communications, and Visibility activities. These will be aligned with the requirements for visibility of EU aid while demonstrating the regional ownership of this project's outputs. The Interregional Coordination Committee (IRCC) and ESA-IO Regional Organisations websites including the dedicated website for Programme shall be the main tool to ensure communication, visibility and dissemination of the project s achievements and of its current and forthcoming events. The project will, in addition, work out its own communication strategy and develop specific awareness-raising, information and dissemination activities (also giving due consideration to Non-State Actors) in order to inform partner countries, regional and national research centres and other potential stakeholders of the opportunities that it provides. Due regard will be given to the linguistic necessities in the region. 12

13 Annex 2 1. IDENTIFICATION Title/Number Burundi component of the Rwanda-Burundi (Buco-Pirubu) power interconnector CRIS Number: RSO/FED/ Total cost: EUR EDF contribution: EUR Other contributions: EUR Kreditanstalt für Wiederaufbau (KfW) EUR (Government of Burundi) Aid method / Method of Project approach Indirect centralized management with implementation Kreditanstalt für Wiederaufbau DAC-code Sector Energy (transmission) 2. RATIONALE 2.1. Sector context Chronic power problems impede growth and productivity in more than 30 African countries. Inadequate generation capacity, limited electrification, low demand for power, unreliable service, and skyrocketing prices cause serious bottlenecks in the sector. A sound regional system for trading power is the key to harnessing the continent s hydropower potential and expanding the use of other efficient generating technologies. The multi donor Africa Infrastructure Country Diagnostic, completed in 2008, estimated that development of a power pool in East Africa and regional electricity markets could: reduce annualized power costs by 7-8%; increase hydropower share of energy sources from 28 to 48%; drop CO 2 emissions by 20 million tons while increasing power production rose by 2.4 TWh. The development of a regional power network has thus become a priority for Governments in the region and for regional organizations. The five-year Development Strategy of the East African Community (EAC) and the development plans of EAC Partner States highlight the need to upgrade power infrastructure as a priority. The East African Community-Common Market of Eastern and Southern Africa-Southern African Development Community (EAC- COMESA-SADC) Tripartite has also identified energy as one of the priority pillars for cooperation. This is consistent with the objectives of the European Commission aiming at enhancing inter-regional connectivity through infrastructure development and its focus of supporting investments in transboundary and regional infrastructure. Other donors are also playing a role in the regional energy sector. The Eastern Africa Power Pool and the East African Community completed in 2011 a regional Power System Master Plan. The study has identified investment needs in the region up to 2038 in generation, transmission and the establishment of a Regional Market Operator. The Multinational Project for the Interconnection of the Grids of the Equatorial Lakes Countries, led by the African Development Bank, supports the development of a regional grid. It consists on the construction and upgrading of 769 km of 220 kv and 110 kv power lines and 17 transformer stations to interconnect the electric grids of the following Nile Equatorial Lakes (NBI) countries: Burundi, Kenya, Uganda, Democratic Republic of Congo and Rwanda. 13

14 The Buco-Pirubu Project (Burundi component of the Rwanda Burundi power interconnector), object of this project, aims at financing one of the components of the grid network of the Equatorial Lakes Countries. The project will lead to the construction of 220 kv transmission lines from Kigoma via Butare and Ngozi to Gitega first operated at 110 kv, as well as the construction and extension of the associated substations. The project will increase cross-border trade of electricity and help deal with problems of imbalance between supply and demand, network saturation, power outages and blackouts, voltage drop, and energy losses. The project will strengthen the transport network between Burundi and Rwanda and provide a N-1 position, guaranteeing operation of the rest of the lines in a network even if an element is defective. The project should be seen within the context of the expanding power generation capacity in the region. Planned hydro power plants inside Burundi include: Mpanda (10 MW, in implementation), Kabu 16 (20 MW, construction contract in negotiation), Kagunuzi (12 MW, feasibility studies ongoing), Jiji and Mulembwe (50 MW) and Ruzibazi (15 MW). Regional hydro power generation projects to be completed in the medium term include Rusumo Falls and Ruzizi III. Addressing these supply side constraints will support the EAC to face future challenges in the implementation of a European Partnership Agreement. Burundi s recurring conflict over the last 20 years has largely destroyed infrastructure assets, especially the country s energy generation, transmission and distribution systems. The country s installed generation capacity is very limited (50 MW in 2011) and the national electricity access rate is among the lowest in the world (4% in 2012). Electricity demand has continued to grow and will reach 100 MW by the end of In order to address this situation, a strategy for this sector needs to be developed and implemented. The interconnection between Burundi and Rwanda will support implementation of this strategy and enhance the availability of energy within Burundi and the region. As 90% of electricity is generated through domestic or regional hydro power resources, the country is very vulnerable to droughts. Major energy supply crises affected Burundi during the 2009 and 2010 dry-seasons, resulting in severe electricity shortages for all basic services (e.g. water supply, hospitals) and households in Bujumbura. The government aims to immediately reduce the severe energy supply deficit and to enable a sustainable, long term expansion of access to electricity. With support from the EU, an energy strategy policy was adopted in January Among the priorities, whose implementation is supported by the World Bank, are: (i) development of national and regional hydro power (and other renewable energy) assets in the next 3 6 years; (ii) rehabilitation and new investments in energy transmission and distribution systems; (iii) cautious increase in high cost emergency thermal generation capacity; and (iv) strengthening of the Water and Electric Authority (REGIDESO) performance. The World Bank and the African Development Bank are funding the rehabilitation of the country's network. These projects have capacity building components aimed at accelerating institutional reforms. One aims to increase the performance and financial viability of the national utility REGIDESO by implementing an electricity tariff mechanism that reflects costs. The need to continue to rehabilitate, upgrade and expand the country s 750 km transmission and distribution lines, with a view to integrating future domestic and regional hydro power projects and to expand access to rural electrification, translates into an immediate need for an investment of USD in transmission and distribution (REGIDESO estimate, June 2011). In 2000 Burundi voted the Water and Energy Act aimed at liberalizing these sectors and to make them attractive for private investment. From 2008 to date, a "Contrat-Plan" between 14

15 REGIDESO and the Government of Burundi has been regularly audited and evaluated by an external expert setting targets and milestones for both parties to achieve certain performance levels. Today, more than half of the 38 indicators are being met by REGIDESO. Other energy efficiency measures are also being implemented (prepayment, low energy consumption bulbs and lamps distribution) to reduce the peak demand. The lack of adequate energy supply at a competitive price continues to be the number one obstacle to economic growth. Burundi relies mainly on biomass and imports all of its hydrocarbon needs. The electricity subsector is under-developed and does not meet the ever-increasing demand, a situation which creates harmful outcomes for the economy. Renewable energy sources (solar, wind, peat and geothermal) are undeveloped due to lack of returns and, above all, due to the high cost of initial investment. Burundi has set out to modernize the regulatory and institutional framework of the energy sector by opening the door for the intervention of the private sector and by streamlining the driving of the sector henceforth entrusted wholly to the Ministry of Energy and Mines. Kreditanstalt für Wiederaufbau (KfW) has been involved in the preparation of various power projects in the region, notably the Ruzizi III HPP, the Burundi-Democratic Republic of Congo Interconnector and the Burundi-Rwanda interconnector. KfW has made EUR available for the implementation of this project in Burundi and will finance fully the implementation of the Rwandan component. The feasibility study included financial and economic analysis for this project. The transmission line project yields a Financial Internal Rate of Return of 8% for the Burundi part. The economic analysis yields an Economic Internal Rate of Return for Burundi of 40%. The limited access of REGIDESO to financial markets and the relatively small investment required, justify supporting this project through a grant contribution Lessons learnt Recent studies, such as the Africa Infrastructure Country Diagnostic 2008, highlight the extraordinary gains that may be made in East Africa by developing a regional power pool. This and other studies highlight as well the importance of addressing institutional issues and defining appropriate contractual arrangements between parties in transnational power transmission projects. The feasibility study has reviewed the institutional and legal arrangements governing electricity exchanges in various African regions. Amongst these: Société International d Énergie des Grands Lacs (Sinelac), Senegal River Development Authority (SRDA), Gambia River Basin Development Organisation (GRBDO), Southern African Power Pool, Western African Power Pool, Eastern Africa Power Pool, Central African Power Pool. The study highlights the need to develop and respect power exchange contracts between the parties and the problems in this regards affecting Sinelac, of which both Burundi and Rwanda are parties, together with the Democratic Republic of Congo. The project will thus work with the local utilities, REGIDESO in Burundi and EWSA in Rwanda, to address these issues. Within Burundi, a review of past projects identifies the following as the most recurrent problems: projects are derailed from the original framework due to too ambitious objectives and too big a number of stakeholders involved; non compliance with the project implementation plan; failure to respect the roles of various stakeholders as predetermined; inadequate monitoring and evaluation due to weakness in institutional set up; overrun of the budget reserved for the project. In order to avoid these risks the necessary preparatory studies have been completed, including the feasibility study, the economic and financial analysis and 15

16 the environmental impact. Different alternative routes for the transmission line were identified in the pre-feasibility study and further analyzed. A concrete set of results and activities has been defined for the construction of power lines and sub-stations, and responsibilities assigned Complementary actions The Eastern Africa Power Pool (EAPP) is a regional inter-governmental body based in Addis Ababa with the mission to coordinate the pooling of power resources in East Africa, and aims at commencing market operations in the coming years. The EU has been financing the technical assistance which has been supporting the Eastern Africa Power Pool and regulators in the EAPP Member States to create critical documents such as Commercial Arrangements and Treaties to support cross-border power exchanges. The East African Community completed in 2011 a regional power master plan in coordination with the EAPP, and launched in 2010 the establishment of the East African Community (EAC) Common Market that should facilitate in the years to come the development of a regional market for electricity. Within the EAC region both the Rusumo HPP (90 MW) and the Ruzizi III (147 MW) hydro-power generation projects are expected to be implemented in the next few years. Critical support to develop a regional grid is being provided by the multi-national Project for the Interconnection of the Grids of the Equatorial Lakes Countries. The project, led by the African Development Bank, consists in the construction and upgrading of 769 km of 220 kv and 110 kv power lines and 17 transformer stations to interconnect the electric grids of the following Nile Equatorial Lakes (NBI) countries: Burundi, Kenya, Uganda, DR Congo and Rwanda. Burundi is developing the 10 MW Mpanda hydro-electrical dam (the contract has just been signed); it will soon start the 20 MW Kaburantwa hydro-electric power plant (construction contract negotiations are underway); it has short-term plans to develop Kagunuzi (12 MW, feasibility studies are underway), Jiji and Mulembwe (50 MW, studies completed, European Investment Bank (EIB) and the World Bank (WB) are evaluating bankability) and Ruzibazi (15 MW, to be developed by China). The World Bank is the main energy sector donor and co-leads the energy working group with the Ministry of Energy. There is a constructive dialogue between stakeholders and the country s second Vice Presidency (responsible for coordinating economic and social sector policies). Through the International Development Association (IDA)-financed energy and water projects under implementation, the World Bank energy team is providing continuous technical assistance to the Government in the development of a comprehensive vision to reform the structures of the water and energy sector. In particular, the WB team continues to support the Government s efforts to restore reliable and sustainable energy supply, targeting high-impact investments and urgent rehabilitation needs to address the energy supply deficit. The Buco-Pirubu Project will be complemented by the Rwandan component, funded by the Kreditanstalt für Wiederaufbau with a contribution of EUR KfW has been involved in the preparation of various power projects in the region, notably the Ruzizi III Hydro Power Project (HPP), the Burundi-Democratic Republic of Congo Interconnector. KfW provides technical assistance to REGIDESO within the framework of its assistance to the Government of Burundi. 16