YEMEN: ENERGY EFFICIENCY INSTITUTIONAL FRAMEWORK & 3 YEAR DSM/EE ACTION PLAN

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized EnergySolve International (Pvt) Ltd YEMEN: ENERGY EFFICIENCY INSTITUTIONAL FRAMEWORK & 3 YEAR DSM/EE ACTION PLAN Prepared for The World Bank Prepared by EnergySolve International (Pvt) Ltd 165/55, Sri Saddharmarama Mawatha, Nawala Road, Narahenpita, Colombo 5, Sri Lanka. Tele: (+94) / Fax: (+94) March 30, 2009

2 Acknowledgements We wish to express our gratitute to Dr. Somin Mukherji, Senior Financial Analyst-TTL, Dr. Chandra Govindarajalu, Senior Energy Specialist and the World Bank for inviting EnergySolve International for this study. A number of individuals provided valuable assistance for this study: among the most notable was Eng. Aljanad Abdussalm Mansoor, Head of the Renewable Energy Department, Public Electricity Corporation. Other valuable contributions were from Eng. Abdalhah AL-Eryani of the Commercial Division and Eng. Tarek Ismail Taher of the Load Dispatch Centre of the Public Utility Corporation. We regret our inability to thank individually the numerous other stakeholders who contributed immensely to this study. 2

3 Acronyms A/C AFD B/C CDM CFL DSM EE ESCO ESCWA GDP GHG GEF Govt. GoY GTZ HVAC IEA kwh LFT LPG MENA MOE&E MW MWh M&V NGO PEC PF S&L TOU UNDP - Air Conditioning - Agence Française de Développement - Benefit/Cost Ratio - Clean Development Mechanism - Compact Flourescent Lamp Demand-side Management - Energy Efficiency - Energy Service Company - Economic and Social Commission for Western Asia - Gross Domestic Products - Green House Gases - Global Environment Fund - Government - Government of Yemen - German Agency for Technical Cooperation - Heating, Ventilation and Air Conditioning - International Energy Association - Kilo Watt Hour - Linear Flourescent Tube - Liquified Petroleum Gas - Middle East and North Africa Ministry of Electricity and Energy - Mega Watt - Mega Watt Hour - Measurement and Varification - Non Governmental Organization - Public Utility Corporation (PEC successor compnaies) - Power Factor - Standards and Labeling - Time of Use - United Nations Development Fund 3

4 Table of Contents Acknowledgements...2 Acronyms...3 List of Tables...7 List of Figures...8 Executive Summary... 9 Institutional structure...9 DSM/EE measures proposed...9 Impact of proposed measures...10 System impact...10 Load curve impact...11 Reduction of subsidy related revenue loss...11 Economic impact of DSM/EE measures...12 Proposed pilot projects...12 Proposed programs to kick start the DSM/EE initiatives...13 Final recommendations Introduction Electricity Sector in Yemen Rationale for DSM/EE in Yemen Stakeholder views Identified barriers Benefits from DSM/EE Ways to overcome barriers for DSM/EE Three Year DSM/EE Action Plan Summary of household survey Summary of walk-through audits DSM actions considered DSM/EE measures identified for sectors Potential DSM/EE programs CFL program for households and commercial establishments Linear fluorescent lamp program for mosques, government installations and commercial sector Solar water heater program with incentives Water heater improvements Power factor correction in government installations Industrial energy auditing and implementation program General measures for all consumer categories/sectors Introduction of TOU tariff to large consumers Summary DSM/EE measures

5 4.7 Impact on demand, energy and GHG emissions Proposed DSM/EE Institutional Structure Current sector structure Changes anticipated Proposed DSM/EE structure Proposed institutional arrangement for stage 1 (immediate) Proposed institutional arrangement for stage Proposed institutional structure for stage Stakeholders and steering committee High commission on energy Divisions within DSM authority Tasks under divisions: Public policy based program division Business based program division Awareness and publicity division Appliance standard & labeling division CDM managing unit DSM operation flow DSM unit within PEC Budgetary requirements for DSM/EE Department/Authority Strategic and operational objectives Linkages with key stakeholders Linkages with other institutions Staffing and TORs of key personnel Capacity building requirements Links to Other Ongoing and Planned Programs Renewable energy program Tariff review study Energy efficiency building code Proposed GEF initiative on EE improvements ESCWA initiative Year DSM/EE initiative for Yemen Measures to Sustain DSM/EE Initiative Development of a structured data bank for the sector Load research of the power sector Management Information System (MIS) DSM friendly tariffs Financial incentives Improved metering Energy auditor certification process Integrated resource planning of the sector

6 8. Proposed DSM/EE Pilot Projects Roadmap for Development of DSM/EE Initiatives Key steps Measures to kick start DSM/EE initiatives Final recommendations...61 References:...62 Annex 1: List of Stakeholder Meetings...63 Annex 2: Visit Report...64 Annex 3: Walk-through Audit Reports...71 Annex 4: DSM Options Considered for Yemen...80 Annex 5: Results of DSM/EE Analysis...81 Annex 6: Compact Fluorescent Lamp Standards Annex 7: Training on Energy Auditing Annex 8: Sample Audit Questionnaire Annex 9: Energy Audit Equipment Technical Specifications Annex 10: ESCO Project Implementing Concepts Annex 11: ESCO Project Financing Annex 12: A Typical ESCO Contract Annex 13: Awareness Development Guidelines Annex 14: International S&L Programs Annex 15: TORs of Key Staff Annex 16: Load Research Results Annex 17: A Guarantee Facility Annex 18: A DSM Success Story Annex 19: Prepaid Electronic Meters Annex 20: Electricity Tariff in Yemen

7 List of Tables Table 1: DSM/EE measures proposed, listed according to the implementation priority levels...10 Table 2: Pilot projects...12 Table 3: Initial DSM/EE initiatives...13 Table 4: Energy intensity in MENA, by country (Toe/ 000US$ 2005PPP)...15 Table 5: Survey results...23 Table 6: Walk-through audit findings...24 Table 7: DSM/EE measures proposed, listed according to the priority level for implementation 25 Table 8: Recommended replacements...26 Table 9: Program summary CFL program with a subsidy...26 Table 10: Program summary CFL with an interest free loan scheme...27 Table 11: Program summary Linear fluorescent lamp program...28 Table 12: Program summary Solar water heating...29 Table 13: Program summary Water heating improvements...29 Table 14: Program summary PF correction in Govt. installations...30 Table 15: Program summary Industrial energy auditing...31 Table 16: Program summary General measures...32 Table 17: Program summary TOU tariff...32 Table 18: DSM/EE program cost/benefit summary...33 Table 19: Consumption with and without DSM/EE measures...33 Table 20: Four year recurrent expenditure budget...45 Table 21: Terms of references for key staff...48 Table 22: Suggested DSM/EE initiatives for donors...51 Table 23: Suggested EE project financing mechanism in Yemen...53 Table 24: Proposed pilot projects...55 Table 25: Capacity building measures...57 Table 26: Programs to kick start DSM/EE initiatives in Yemen

8 List of Figures Figure 1: Impact of proposed measures MW, GWh and GHG...10 Figure 2: Load curve with and without DSM/EE measures...11 Figure 3: Reduction in revenue loss from subsidies...11 Figure 4: Economic analysis of a 10 year DSM/EE initiative...12 Figure 5: Demand and energy consumption predictions...16 Figure 6: Number of consumers by sector...17 Figure 7: Electricity consumption by sector...18 Figure 8: Demand shortfall...20 Figure 9: Recent tariff increases...20 Figure 10: Load curve with and without DSM/EE measures...34 Figure 11: Reduction in subsidy related revenue loss to PEC...34 Figure 12: Present electricity structure...35 Figure 13: Proposed DSM/EE institutional structure for stage 1 (immediate)...36 Figure 14: Proposed DSM/EE institutional structure for stage Figure 15: Proposed DSM/EE institutional structure for the unbundled industry structure...38 Figure 16: A proposed business based energy service model, supported the DSM/EE authority.41 Figure 17: CDM structure for Yemen...43 Figure 18: A framework for demand-side management...44 Figure 19: Linkages with key stakeholders...47 Figure 20: Load research flow chart - sample metering and market surveys...52 Figure 21: DSM/EE flow chart for program implementation in Yemen

9 Executive Summary Yemen has one of the lowest per capita incomes in the MENA region. However, the population is growing rapidly at an average rate of about 3% per annum with only about 40% of the population having access to electricity. The absence of a reliable and a continuous supply of electricity and low access to electricity in rural areas have been recognized as a severe constraint on the economic growth of Yemen. To meet the growing demand for electricity, the Government of Yemen is planning to develop gas based electricity generation; to utilize renewable energy resources wherever possible as well as to rehabilitate/replace the diesel and fuel oil based inefficient plants as soon as possible. In addition to above, GoY is also considering energy efficiency and Demand-side management (DSM) measures to overcome electricity peak and energy shortages and the financial constraints faced in quickly adding generation capacity to the system. This report gives an institutional structure for the effective implementation of DSM/EE measures in Yemen to meet the above objectives with a three year DSM/EE action plan. Institutional structure Considering the present status of electricity industry structure and the reform act enacted in February 2009, an institutional structure is presented in the report after extensive discussions with policymakers and stakeholders. The proposed structure is a DSM/EE authority under the Ministry of Electricity and Energy with a steering committee of key stakeholders to develop policy and monitor impact of programs, initiated by the proposed authority. However, the proposed authority is expected to be developed in three stages. Initially, it is proposed to establish a DSM/EE Department under the Renewable Energy General Department with only two divisions. Once the Renewable Energy becomes an Authority, DSM/EE Department is expected to be elevated to a sector with the number of divisions increased from two to five. With the unbundling of PEC, DSM/EE sector is expected to become an independent Authority directly under the Ministry of Electricity and Energy. It is to be headed by a Director General; a senior engineering officer, with five divisions under him; business based program division, public policy based program division, S&L program division, awareness and publicity division and CDM investment promotion division. DSM/EE measures proposed A three year DSM/EE action plan has been developed to lay the foundation for a sustainable DSM/EE program and build capacity required for future program implementation. Measures proposed, are based on a brief consumer survey and a few walk-through audits conducted during this study. 9

10 Table 1: DSM/EE measures proposed, listed according to the implementation priority levels Pr. Proposed program Focused sectors level 1 CFL program Household and small commercial sectors 2 LFT program Mosques, Commercial sector and Govt. Installations 3 SWH program Household sector 4 Water heating improvements Household sector 5 Pf correction Govt. Installations 6 Energy auditing Industrial, hotel and large commercial sectors 7 S&L and awareness All sectors 8 TOU tariffs Industrial and hotel sectors Impact of proposed measures System impact Impact on the electricity sector from demand, energy and GHG emission reductions are highlighted below. Figure 1: Impact of proposed measures MW, GWh and GHG Demand, energy & emission growth with & without DSM 2000 GWh / Emission Tons (1000s) MW / / / / /19 GHG emission without DSM (1000 Tons) GHG emission with DSM (1000 Tons) GWh without DSM GWh with DSM MW without DSM MW with DSM 0 Figure 1 projects the long-term benefits of DSM/EE initiatives, based on a three year DSM/EE analysis. 10

11 Load curve impact Generation costs are expected to reduce with DSM/EE related improvements to the load curve. 24hr load curves with and without DSM/EE initiatives are given below. Figure 2: Load curve with and without DSM/EE measures 1100 Demand with & without DSM after 3 years 1000 TOU TOU 1:00 2:00 3:00 4:00 CFL +WH + S&L 5:00 E Audit + LFT 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 Demand without DSM (MW) Load shifting and DSM/EE measures directed at reducing the peak load, contribute to a significant improvement of the load factor. This will assist PEC in reducing expensive peak generation capacity and system losses. Reduction of subsidy related revenue loss Financial impact from energy subsidies on both GoY and PEC is high. For PEC to be financially viable, it is extremely important to reduce subsidy related revenue loss. DSM/EE measures can contribute to a significant reduction of this revenue loss as indicated below. Figure 3: Reduction in revenue loss from subsidies 14:00 15:00 TOU + CFL + WH + S&L 16:00 17:00 18:00 19:00 19:30 20:00 21:00 Demand with DSM (MW) 22:00 23:00 0: PEC Subsidy related Loss with & without DSM US$ Mn Losses without DSM US$ Mn Years Losses with DSM US$ Mn 11

12 Economic impact of DSM/EE measures Economic impact of a 10 year DSM/EE program from all three perspectives; PEC, customer and National, is illustrated below. Figure 4: Economic analysis of a 10 year DSM/EE initiative Economic Analysis PEC Customer National US$ (Mn) Cost (US$ Mn) Benefit (US$ Mn) Figure 2 indicates the estimated economic benefits from a 10 year DSM/EE program with the benefits outweighing the costs by huge margins, demonstrating clearly viability of DSM/EE initiatives listed in the report. Proposed pilot projects Following pilot projects are proposed for implementation. Table 2: Pilot projects No: Program Sector Funding 1 CFL program Household Initially from PEC and Govt. funds, to be converted to a CDM investment later 2 Solar water heater program 3 EE Govt. installation demonstration 4 EE industry demonstration 5 S&L program for CFL 6 Awareness & publicity Household Govt. Industry All All Initially funded from micro financing under the National Social Fund, to be converted to a CDM investment later with a subsidy Partly funded by the DSM/EE authority Funded by the participating institution 7 CDM investment Household To be funded by a CDM investor Initial funding from DSM/EE authority and partly sponsored by lamp suppliers Funding from the Govt. and DSM/EE authority with assistance from donors 12

13 Proposed programs to kick start the DSM/EE initiatives DSM/EE initiatives to kick start the program, are listed below. These could be identified as essential tasks to lay a firm foundation for the successful implementation of all future DSM/EE tasks in Yemen. Table 3: Initial DSM/EE initiatives No. Measures Description Recommended start month 1 Awareness Sector brochures + media advertising 2 Energy Audit Training Classroom + practical Modules 3 Detailed Conduct detailed audits: Audits 4 Energy Audit Preparation of guide for energy auditing in Manual Yemen J Load Research City of Sana'a 6 S&L Labeling program to introduce S&L programs, based on international standards and testing May 09 May 09 Jun/Jul 09 Aug/Sep 09 Oct 09 Oct 09 Total Estimated cost US $ 162,660 Final recommendations Demand-side management and energy efficiency programs can bring several short 1 and longterm 2 benefits to all concerned. PEC will be in a position to ensure financial viability by reducing subsidy related revenue loss and deferring or avoiding capacity expansion investments. Consumers in Yemen will also gain significant savings of energy costs through better management and conservation of energy utilized. In general, DSM/EE programs are economically beneficial to Yemen as a whole, as it reduces often costly captive and hired generation, avoids or reduces load shedding and its associated economic costs and has numerous environmental benefits associated with reduced electricity generation. DSM/EE costs less than what it would cost to add generation capacity and strengthen the network to maintain an uninterrupted supply of electricity to all. Therefore, it is strongly recommended for GoY to implement measures listed in the report in stages with donor assistance years years 13

14 1. Introduction Yemen has one of the lowest per capita incomes in the Middle East and in the North African region (MENA) which is about $420. However, the population is growing rapidly at an average rate of about 3% per annum with a GDP growth rate of 3.3 %, recorded in Yemen discovered oil and gas in late 1980s and since then, oil exports have been the main source of Government revenue. However, the country also imports significant quantities of refined products such as diesel at international prices. The oil reserves are expected to reach near depletion by Yemen is also one of the least electrified countries in the MENA region with only about 40% of the population having access to electricity. The absence of a reliable and a continuous supply of electricity and low access to electricity in rural areas have been recognized as a severe constraint on the economic growth of Yemen. To meet the growing demand for electricity under above conditions, GoY is planning to develop gas based electricity generation; to utilize renewable energy resources wherever possible as well as to rehabilitate/replace the diesel and fuel oil based inefficient plants as soon as possible. In addition to above and the need to overcome peak and energy shortages faced by the electricity sector and the financial constraints faced in adding short-term generation capacity, Energy Efficiency and Demand-side Management (DSM) measures are being considered. The main objective of this assignment is to create suitable institutional arrangements within the Ministry of Electricity and Energy (MOE&E) and the Public Electricity Corporation (PEC) to support energy efficiency measures by consumers which includes an assessment of energy efficiency and demand side management opportunities, appliance labeling programs, energy auditor training and certification, building codes and demonstration projects. The study is structured as follows: Section 2 presents a brief overview of the electricity sector in Yemen Section 3 presents the rationale for DSM/EE in Yemen Section 4 presents the three year DSM/EE action plan Section 5 gives the proposed institutional structure for successful and sustainable DSM/EE implementation in Yemen Section 6 provides links to other ongoing and planned energy sector programs Section 7 gives measures to sustain DSM/EE initiatives Section 8 provides a summary of pilot projects recommended Section 9 gives a roadmap for DSM/EE initiative development and immediate projects and estimated costs 14

15 2. Electricity Sector in Yemen Yemen is the least electrified country in the MENA region with only about 40% of the population having access to electricity. In rural areas, access levels are much lower at about 20% of the rural population. The energy intensity of the economy remains high compared to other countries in the region. As compared to a regional average of 0.18 toe/1000 US$ (in 2005 $), Yemen has an energy intensity of 0.25 toe/1000 US$ which puts Yemen among the MENA regions more energy intensive countries (IEA, 2006). Table 4: Energy intensity in MENA, by country (Toe/ 000US$ 2005PPP) Region / country GDP ( billions of Total energy consumption Energy intensity 2005 US$, PPP) (ktoe, 2005) (toe/ 000US$2005PPP) MENA 2, , Algeria , Bahrain , Egypt , Islamic Rep. of Iran , Iraq , Jordan , Kuwait , Lebanon , Libya , Morocco , Oman , Qatar , Saudi Arabia , Syria , Tunisia , United Arab Emirates , Yemen , Source: International Energy Agency (IEA) Database and World Bank Global Development Indicators (GDI) database. The absence of a reliable and uninterrupted electricity supply and low access to electricity in rural areas has been recognized as a severe constraint on economic growth and to the achievement of the Government of Yemen s (GoY s) poverty alleviation objectives. In this context, GoY has started developing a comprehensive rural electrification strategy with support from the World Bank, Islamic Bank and AFD to help develop and implement a sustainable rural electrification program. GoY is also committed to developing renewable energy options particularly in remote areas to promote rural development Total available power generation capacity is currently about 852 megawatts (MW). GoY is gradually shifting towards gas-based power generation and has dedicated 5.2 tcf (trillion cubic feet) of natural gas for power generation. Implementation of the first gas-based power plant (341 MW) at Marib is in progress. Financing for the second phase of the Marib Power Plant (400 MW) has been secured and the bidding process has been initiated. Private-sector financing for 15

16 developing new generating capacity has so far not materialized, but the government has started a fresh initiative to develop the first private-sector power plants. Figure 5: Demand and energy consumption predictions Electricity Growth GWh MW 0 GWh MW Source: PEC demand and energy predictions On the institutional front, GoY has initiated a sector reform process which includes corporatization/commercialization of Public Electricity Corporation (PEC), setting up an appropriate regulatory mechanism, a Rural Electrification Authority and a pilot Rural Electric Service Provider. Based on its least cost investment program, GoY has a power sector investment plan of about US$1.2 billion 3 for the period FY08-10, which implies an average spending of about US$400 million for each of the next three years. In terms of financing, GoY does not have adequate external resources to rely on for its stated future needs and will have to provide most of the financing from its domestic resources which will not be feasible. Under these circumstances, effective utilization of available generation and effective demand management are critical. A 70% to 100% increase in the retail prices of petroleum products in 2005 led to civil unrest. Since the sharp rise in crude oil prices, petroleum consumption subsidies are now estimated to amount to US$3 billion in 2008, or about 11 percent of GDP 3. The ratio of these untargeted subsidies to other poverty reduction programs is ten to one in annual budget. Removing these 16

17 subsidies without adequate social protection, cost-cutting and energy efficiency measures would increase poverty in Yemen. Fuel switching from oil to gas in the power sector will play a very important role in subsidy reduction. A large part of electricity is consumed inefficiently by few sectors such as the household sector and the Government installations, which can be reduced by 30-40% from cost effective DSM/EE measures. However, no action has been so far taken to implement measures to obtain these benefits. Figure 6: Number of consumers by sector Large industry, 1,389, 0% Small Industry, 19,677, 1% Small Commercial, 156,743, 12% Number of Consumers Hotels, 1,869, 0% Govt, 12,474, 1% Artificial & Cement Industry, 4, 0% Water corporation, 509, 0% Others, 5,831, 0% Urban Mosques, 10,450, 1% Rural houses, 53,022, 4% Rural Mosques, 1,002, 0% Urban houses, 1,075,999, 81% Source: PEC commercial data 2007 Closer to 80% of the consumers are urban households with small commercial consumers and rural households becoming the next two large categories. These three categories are ideal candidates for large DSM programs. 3 Source: World Bank 17

18 Figure 7: Electricity consumption by sector Electricity Consumption Large industry 3% Small Industry 3% Small Commercial 11% Rural houses 1% Hotels 1% Govt 9% Artificial & Cement Industry, 3% Water corporation 3% Others 8% Urban Mosques 1% Large Commercial 0% Rural Mosques 0% Urban houses 58% Source: PEC commercial data 2007 The urban household sector records the highest electricity consumption. Small commercial sector and Government installations consume 11% and 9 % of electricity supplied by PEC. However, it is estimated that as much as 30% total electricity consumed in the country comes from self generation, mainly due the high cost of electricity to bulk consumers, poor power quality and regular power interruptions. Therefore, rural households, small commercial establishments and government installations become prime candidates for DSM/EE initiatives with huge saving potentials. In the above context of high energy intensity compared to the regional consumption, average and peak demand and energy shortages with the potential for saving energy ranging from 20-30% 4, an institutional framework for energy efficiency and Demand-side Management (DSM) has become necessary to implement and sustain measures to mitigate impact of electricity shortages. 4 Figures based on case studies 18

19 3. Rationale for DSM/EE in Yemen Demand-Side Management and Energy Efficiency programs bring several short and long-term benefits to all concerned. Utilities are in a position to reduce its financial commitments as a result of reduced capacity and energy requirements by either deferring or avoiding capacity expansion investments. Consumers also gain a significant saving of energy costs through better management and conservation of energy utilized. DSM/EE programs are economically beneficial to Yemen, a country as a whole, as it can reduce financial loss to both GoY and PEC from subsidized fuel prices and electricity tariffs, costly captive and hired generation, avoid or reduce load shedding and its associated economic costs. It has also numerous environmental benefits associated with reduced electricity generation with DSM/EE costs less than what it would cost to add generation capacity and strengthen network to maintain an uninterrupted supply of electricity to all. In the above sector context, rationale for DSM/EE in Yemen can be listed as follows: High energy intensity levels compared to regional and global standards mean that steps could be taken to improve this situation. Peak and energy shortages faced by the electricity sector. Financial impact on both GoY and PEC from energy subsidies. Financial constraints faced in quickly adding generation capacity has opened-up investment space for energy efficiency and Demand-side management (DSM) measures. Government is seriously considering energy subsidy reforms in view of the increasing fiscal stress. Energy efficiency measures and social protection mechanisms will need to be integrated as part of this effort to mitigate the impacts of higher prices. Increasing energy costs to consumers. 19

20 Figure 8: Demand shortfall Source: PEC load dispatch data Twenty four hour load curve has a night peak which is 1 ½ times the day peak. This is mainly due to the lighting load. Load shedding prevails through out the day and during peak hours. Figure 9: Recent tariff increases Tariff Yr / kwh kwh kwh kwh More than 700 kwh Urban Household/Mosque kwh More than 100 kwh Commercial (Small) Rural Household/Mosque Commercial (Large) Industrial (Small) Hotel Agriculture Industrial (Large) Cement Factories Water corporation Pumps Government Source: PEC commercial division 2008 Tariff for a number of consumer categories was increased by 88% from 17 Riyal/kWh to 30 Riyal/kWh recently. 20

21 3.1 Stakeholder views During the mission, the consultants met with key stakeholders to discuss issues related to the electricity sector, barriers for DSM/EE, ways to address these barriers and the institutional requirements for the effective implementation DSM/EE measures in Yemen. List of stakeholder meetings is given in annex 1. Key stakeholders included the Ministry of Electricity and Energy; Ministry of Planning; Ministry of Finance; Ministry of Industry; Ministry of Trade; Ministry of Water Resources; Public Utility Corporation; Hotel association; Three large electricity consumers; end-use appliance/equipment suppliers; major donors such as UNDP, GTZ and the World Bank; Standards Institution; and the University of Sana a. General views expressed by the stakeholders: Poor awareness of benefits from DSM/EE initiatives. Poor utility consumer relationships affecting sector development. Unscheduled electricity supply interruptions and poor power quality. Lack of utility initiatives to promote DSM/EE. Lack of Government policy and institutional structure for the implementation of effective and sustainable DSM/EE initiatives. Lack of financial incentives for DSM/EE programs. Unrealistic tariffs. Use of poor quality appliances mostly based on initial costs. Lack of codes and standards to guide end-users. Lack of incentives to reduce consumption in government installations. 3.2 Identified barriers Based on the detailed discussions with stakeholders, following were identified as barriers for introduction of DSM/EE programs in Yemen: Poor awareness of DSM/EE benefits among consumers. Lack of utility participation in the promotion of DSM/EE initiatives. Lack of Government policy and supporting institutional framework. No financial incentives and innovative financing for DSM/EE initiatives. Lack of end-use consumption data with PEC. Lack of DSM/EE friendly tariffs. Energy Efficiency Building Code not practiced. Appliance energy efficiency standard setting and labeling not practiced. Poor energy auditing skills and lack of equipment. Unaware of innovative concepts for EE project implementation and financing. CDM benefits and related financing not considered. Poor supply quality. Fixed budget for Govt. installation with lack of incentives reduce consumption. 21

22 Details of meetings with stakeholders are given in annex Benefits from DSM/EE Broadly, the following can be identified as benefits from DSM/EE initiatives to Yemen; Lower electricity bills to consumers. Reduced power deficits and improved power quality. Improved financial position of PEC due to reduced investment requirements and lower losses. Additional income from CDM initiatives. Increased market for Energy Efficient products. Improved productivity and quality of products from Industry. 3.4 Ways to overcome barriers for DSM/EE The following actions can be listed as ways to overcome above barriers and sustain DSM/EE initiatives: Establishment of an institutional structure to initiate effective and sustainable DSM/EE programs. Define Govt. Policy with a decree. Improve awareness of utility staff, consumers, appliance vendors, contractors, project financiers, etc Conduct a load research of the sector to plan and implement DSM measures. Review and revise tariffs to promote DSM/EE measures. Introduce innovative EE project implementation and financing mechanisms such as the ESCO concept. Design and implement incentives for DSM project funding. Introduce appliance standards and labeling, initially based on international and acceptable standards. Develop appliance testing facilities within the country. Develop an energy efficiency building code to incorporate major end-uses in large buildings. Train utility staff and end-users in energy auditing and introduce an energy auditor certification mechanism. Introduce better and effective metering. 22

23 4. Three Year DSM/EE Action Plan Major obstacle faced by the team of consultants in identifying DSM measures was lack of end-use data. However, the team conducted a brief survey of households to identify common end-uses and potential for savings in this sector. 4.1 Summary of household survey Table 5: Survey results END-USE/SURVEY Average Incandescent bulbs (100W) CFL lighting W LFT Electric water heaters Refrigerators Iron TV Washing machine Estimated units Key findings: 1) Most had incandescent lamps of 100 watts. Higher wattages are used to overcome supply problems such as voltage sags. 2) Consumers who use CFLs were not aware of the need to purchase quality lamps to benefit fully from savings. Many complained of premature fusing of CFLs, commonly available in the market. 3) Linear fluorescent lamps are also used but mostly with inefficient magnetic ballast. At certain locations 40W to 36W technology transfer has still not happened, mostly because of poor awareness. 4) Almost all had electric water heaters. Solar water heaters are not used mainly due to high initial investment. Improvements for existing electric water heaters are also possible with additional insulation and improved piping. 5) Refrigerator purchases are mainly based on initial costs. Most fell below acceptable efficiency levels. 6) Televisions are commonly used. 7) Average consumption per household was high.. 23

24 4.2 Summary of walk-through audits Three walk-through audits were also conducted to briefly identify the potential for saving in large consumer categories. Walk-through audit reports are given in annex 3. Table 6: Walk-through audit findings INSTALLATION/SAVING POTENTIAL Est. Saving Potential Ministry of Electricity and Energy and Public Electricity Corporation building 30% Movenpick Hotel 28% Yemen Textile Co. Ltd 31% Key findings: 1) Movenpick had the best energy management program with monthly monitoring of energy consumption against occupancy and implementation of cost effective EE measures such as lighting improvements. However, further improvements (25-30%) are possible. 2) No EE measures were installed at the ministry and the textile company. 3) All three installations recorded a saving potential of 30% from cost effective EE measures. 4) Major EE measures include improvements to lighting, air conditioning, better housekeeping and management. 5) Efficient lighting and controls can contribute to huge savings in Govt. buildings. 6) Both Movenpick Hotel and Yemen Textile Company expressed interest in investing in EE measures but needed energy auditing assistance. 7) Funds for EE project implementation was not identified as a major barrier. 8) Large private sector organizations use captive generation because of high tariff and poor power quality. 4.3 DSM actions considered Based on above and available billing data with PEC, the following DSM load profile objectives are considered for the electricity sector in Yemen. 1) Peak clipping 2) Strategic conservation 3) Load shifting Details given in annex 4. 24

25 4.4 DSM/EE measures identified for sectors To meet above load profile objectives, the following DSM measures were identified for sector based on surveys and billing data. Table 7: DSM/EE measures proposed, listed according to the priority level for implementation Imp. Leve l Urban houses Rural houses Small Commercial Large commercial Large industry Hotels Govt. Installations Artificial & Cement Industry 1 Awareness Awareness Awareness Awareness Awareness Awareness Awareness Awareness 2 CFL CFL CFL Energy Auditing Energy Auditing Energy Auditing PF correction Energy Auditing Solar water heating Fluorescent ballasts improvement A/C unit improvement * Refrigerator improvement * Solar water heating LFT LFT LFT Day-lighting Refrigerator Improvement * A/C unit Improvement * Building envelope Electronic Ballasts A/C unit improvement Building envelope PF correction Linear florescent improvement Electronic Ballasts PF correction AC improvement Solar water heating Day-lighting 7 TOU tariff TOU tariff LED lighting 8 Cogeneration Building envelope LFT system improvements Electronic Ballasts PF correction Efficient motors & drives Fuel switching Efficient Lighting Demand reduction Building envelope 9 TOU tariff TOU tariff 10 Cogeneration Cogeneration *Standards & labeling 4.5 Potential DSM/EE programs In order to evaluate benefits from proposed measures listed above, a spread sheet based DSM/EE evaluation model was developed and used. Results are summarized below: Results of evaluation model are given in annex CFL program for households and commercial establishments Household sector is the largest category with over 1.1 million consumers consuming 58% of the electricity sold. Therefore, measures directed towards this sector and small commercial establishments will have a substantial impact on the national grid. The survey done for the domestic sector indicates that a considerable number of incandescent lamps are used for long hours. Commonly used wattage is 100W, used to overcome voltage drop in the system. The potential for incandescent replacement is estimated to be 2.5 million. 25

26 Table 8: Recommended replacements Incandescent lamp wattage 60W 75W 100W Equivalent CFL wattage 14W 15W 20W a) Option 1: Program with a subsidy The following cost/benefit analysis considers the distribution of quality Compact Fluorescent Lamps (Recommended CFL specifications are given in annex 6) at a subsidized rate to promote the replacement of incandescent. 50% of the consumers in the household and small commercial categories are expected participate in replacing two 100W incandescent lamps with 20W CFLs under the proposed three year program and benefit from the subsidy. Table 9: Program summary CFL program with a subsidy Year 1 Year 2 Year 3 Estimated no. of units (1000s) Subsidy % 33% 16% 8% Amount (US$ Mn) Source CDM investment or Govt. Social fund MW saving GWh saving GHG Emission Reduction (1000 Tons) Simple Payback Yrs. Cost (US$ Mn) Cost/Benefit Analysis Economic Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) Cost (US$ Mn) Financial Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) PEC & Investor* Customer National * Costs include loss of revenue for PEC and investor participation through PEC b) Option 2: Interest free loan scheme with a revolving fund The following cost/benefit analysis considers the replacement of two incandescent lamps per household and small commercial sector unit with equal number of CFLs. An interest free loan scheme operated from a revolving fund is proposed. 26

27 Funding mechanism: 1) PEC is expected to operate a loan scheme with consumers paying lamp cost in fixed monthly installments with the electricity bill. Vendors supplying quality lamps (recommended specifications are given in annex 6) are expected to participate in the program in a competitive environment. Revolving loan interest rate is assumed to be 12% and the loan repayment period is one year. 2) Micro financing mechanisms presently used for rural electrification programs in Yemen are also recommended. Table 10: Program summary CFL with an interest free loan scheme Year 1 Year 2 Year 3 Estimated no. of units (1000s) Amount Revolving Fund (US$ Mn) Source CDM investment or Govt. Sources MW saving GWh saving GHG Emission Reduction (1000 Tons) Simple Payback Yrs. Cost (US$ Mn) Cost/Benefit Analysis Economic Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) Cost US$ Mn) Financial Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) PEC & Investor* Customer National * Costs include loss of revenue for PEC and investor participation through PEC Comments: Considering paybacks, IRR and NPV values of both economic and financial analyses for both these initiatives, it can be concluded that both projects are extremely viable. However, the success of the programs depend on the quality of lamps used the project. Hence, it is strongly recommended to follow standards specified in this report. 27

28 4.5.2 Linear fluorescent lamp program for mosques, government installations and commercial sector A substantial number of 40W fluorescent fittings are presently used in the government installations, mosques and commercial establishments with poor quality magnetic ballast. Most fittings are not properly placed with individual controls. Rectification of above is considered in the following cost/benefit with 36W lamps and electronic ballasts replacing 40W lamps and poor quality magnetic ballasts. Government sector has over 12,000 consumers (Source: PEC commercial data) and it is estimated that 50% of consumers will have over 30 fluorescent fittings, which can be replaced. Table 11: Program summary Linear fluorescent lamp program Year 1 Year 2 Year 3 Estimated no. of units (1000s) MW saving GWh saving GHG Emission Reduction (1000 Tons) Simple Payback Yrs. Cost (US$ Mn) Cost/Benefit Analysis Economic Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) Cost (US$ Mn) Financial Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) PEC Customer National Comments: Awareness campaign on transfer of technology and lighting controls can give substantial savings as indicated in the cost/benefit analysis. However, installation of electronic ballasts is only recommended in areas where there are no power fluctuations Solar water heater program with incentives The consumer survey also revealed that most households use electric water heaters especially during winter. On average, each household has at least one water heater, with an average capacity of 1500W, commonly installed in bathrooms and kitchens. The following cost/benefit analyses savings from replacing electric water heaters with solar water heaters at a subsidized price. Analysis assumes 45,000 units electric heaters get replaced at a subsidized price during the program period. 28

29 Table 12: Program summary Solar water heating Year 1 Year 2 Year 3 Estimated no. of units (1000s) Subsidy % 50% 50% 50% Amount (US$ Mn) Source CDM investment & Govt. Social fund MW saving GWh saving GHG Emission Reduction (1000 Tons) Cost /Benefit Analysis Economic Analysis Financial Analysis Simple Payback Cost Benefit NPV Cost Benefit IRR IRR Yrs. (US$ (US$ (US$ (US$ (US$ % % Mn) Mn) Mn) Mn) Mn) NPV US$ Mn) PEC Customer National Comments: Considering the paybacks, IRR and NPV values of both economic and financial analyses, it can be concluded that the program is extremely viable and it could be an ideal candidate for CDM investments Water heater improvements The following cost/benefit analysis considers improvements to the insulation of existing and commonly used electric heaters. The key savings are expected from improved storage tank insulation and proper piping. Refurbishment of 180,000 units is considered for the program. Table 13: Program summary Water heating improvements Year 1 Year 2 Year 3 Estimated no. of units (1000s) Subsidy % Amount (US$ Mn) MW saving GWh saving GHG Emission Reduction (1000 Tons)

30 Cost/Benefit Analysis Simple Payback Yrs. Cost (US$ Mn) Economic Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) Cost (US$ Mn) Financial Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) PEC Customer National Comments: A viable project, expected to be included in the awareness program with active participation service providers Power factor correction in government installations Government installations, although it is only 1% in number, account for 16% of the electricity sold in the country. Therefore, Energy efficiency measures for this sector will be easy to manage with substantial savings. The present tariff does not have a power factor penalty charge. Hence, consumers will have no incentive to invest in power factor correction. However, since the measure is beneficial to PEC, it is recommended for PEC to invest in PF correction at consumer end in order to reduce reactive power requirements and network losses. Based on the results of the walkthrough audit, a 40 MVA reduction from PF correction during the project is considered with a 16 GWh reduction in network losses. Table 14: Program summary PF correction in Govt. installations Year 1 Year 2 Year 3 Estimated MVA reduction GWh saving GHG Emission Reduction (1000 Tons) Cost/ Benefit Analysis Economic Analysis Financial Analysis Simple Payback Cost Benefit NPV Cost Benefit IRR IRR Yrs. (US$ (US$ (US$ (US$ (US$ % % Mn) Mn) Mn) Mn) Mn) PEC NPV (US$ Mn) Comments: Benefits to PEC from the program is relatively high. In view of the poor status of transmission and distribution networks, it is advisable to implement this project on a priority basis with funds made available to PEC from the Government.. 30

31 4.5.6 Industrial energy auditing and implementation program Both small and large industries identified for this program, consume approximately 200 GWh/yr. From the sector consumers, 5% is expected to participate in the program. A 20% saving from participating consumers is considered for this analysis, based on walk-through audits, conducted during the study. Table 15: Program summary Industrial energy auditing Year 1 Year 2 Year 3 Estimated % of saving MW saving GWh saving GHG Emission Reduction (1000 Tons) Cost/Benefit Analysis Economic Analysis Financial Analysis Simple Payback Cost Benefit NPV Cost Benefit NPV IRR IRR Yrs. (US$ (US$ (US$ (US$ (US$ (US$ % % Mn) Mn) Mn) Mn) Mn) Mn) PEC Customer National Comments: For this initiative to be successful, DSM/EE unit should provide technical assistance to customers. It is recommended for DSM/EE unit to encourage the private sector participation in energy services, based on ESCO models discussed in annex 10 of this report General measures for all consumer categories/sectors General measures include appliance standards and labeling, awareness, and mandatory implementation of a building code. 31

32 Table 16: Program summary General measures Year 1 Year 2 Year 3 Estimated % saving MW saving GWh saving GHG Emission Reduction (1000 Tons) Cost/Benefit Analysis Economic Analysis Financial Analysis Simple Payback Cost Benefit NPV Cost Benefit IRR IRR Yrs. (US$ (US$ (US$ US$ (US$ % % Mn) Mn) Mn) Mn) Mn) NPV (US$ Mn) PEC Customer National Comments: S&L and awareness are essential part of a DSM program. This initiative can give long term, sustainable benefits Introduction of TOU tariff to large consumers It is proposed to introduce a Time of Use tariff to shift load from peak hours to off peak hours, applicable to both industry and hotels with standby generation. Tariff considered for the following evaluation: Peak time is from 1800hrs to 33 Riyal/kWh. Off peak time is from 2100 hrs to 1800 hrs on the following 27 Riyal/kWh. However, a detailed study is required to determine the tariff rates and should be considered under the tariff review study initiated by the World Bank. Table 17: Program summary TOU tariff Year 1 Year 2 Year 3 Estimated % saving Peak MW saving Simple Payback Yrs. Cost (US$ Mn) Cost/Benefit Analysis Economic Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) Cost (US$ Mn) Financial Analysis Benefit (US$ Mn) IRR % NPV (US$ Mn) PEC Customer National

33 Comments: Shifting load from peak to off peak to be considered in the tariff revision as it is beneficial to all parties. 4.6 Summary DSM/EE measures Summary of above DSM/EE measures are listed below with total benefit and costs including benefits from GHG emission reductions. Table 18: DSM/EE program cost/benefit summary Year 1 Year 2 Year 3 MW saving GWh saving GHG Emission Reduction (1000 Tons) Cost/Benefit Analysis Economic Analysis Financial Analysis Cost (US$ Mn) Benefit (US$ Mn) B/C ratio IRR % NPV (US$ Mn) Cost US$ Mn) Benefit (US$ Mn) B/C ratio IRR % NPV (US$ Mn) PEC+ Investor* Customer National * Costs include loss of revenue for PEC and investor participation through PEC 4.7 Impact on demand, energy and GHG emissions Demand, energy and GHG emissions are listed below with and without DSM/EE measures. Table 19: Consumption with and without DSM/EE measures Year Demand (MW) Without DSM/EE With DSM/EE Energy (GWh) Without DSM/EE With DSM/EE GHG Emissions (1000 Tons) Without DSM/EE With DSM/EE 2010/ / /

34 Load curve impact after an initial period of three years is highlighted below. These include the improvements to load factor from TOU tariffs, morning and evening peak reductions from household and small commercial sector programs and midday demand reductions from industrial energy efficiency measures. Figure 10: Load curve with and without DSM/EE measures 1100 Demand with & without DSM after 3 years 1000 TOU TOU 1:00 2:00 3:00 4:00 CFL +WH + S&L 5:00 E Audit + LFT 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 Demand without DSM (MW) 14:00 15:00 Reduction in subsidy related revenue loss to PEC is also computed to demonstrate the viability of DSM/EE measures. Figure 11: Reduction in subsidy related revenue loss to PEC TOU + CFL + WH + S&L 16:00 17:00 18:00 19:00 19:30 20:00 21:00 Demand with DSM (MW) 22:00 23:00 0: PEC Subsidy related Loss with & without DSM US$ Mn Losses without DSM US$ Mn Years Losses with DSM US$ Mn 34

35 5. Proposed DSM/EE Institutional Structure 5.1 Current sector structure Presently, the Public Electricity Corporation is in charge of a large part of the generation, entire transmission network and most urban distribution of electricity in Yemen. A part of the generation comes from Independent Power Producers and some parts of rural distribution are handled by rural distribution entities. The Public Electricity Corporation comes directly under the Ministry of Electricity and Energy. Figure 12: Present electricity structure Minister Managing Director Region A Region B Diesel Stations Steam Stations DGM generation & transmission DGM finance & Administration DGM distribution & inspection 5.2 Changes anticipated On the institutional front, GoY has been studying various options for reforming the electricity sector, and an electricity law has been enacted by the parliament. In parallel, GoY is also addressing other issues related to sector reforms such as restructuring and corporatization/commercialization of Public Electricity Corporation (PEC), setting up an appropriate regulatory mechanism, a Rural Electrification Authority and a pilot Rural Electric Service Provider at Ibb which are expected to be completed in three years. Under the proposed corporatization/commercialization of the Public Electricity Corporation, key functions of the Corporation may get separated out into different entities and later become companies. A generation company, a transmission company and a distribution company will most probably be established with a rural electrification entity and another to handle support services to the Corporation. 35

36 5.3 Proposed DSM/EE structure Considering the recent industry developments, the proposed corporatization and/or commercialization of the Public Electricity Corporation and the need to introduce DSM/EE concepts immediately, the following DSM/EE institutional structures are proposed for staged implementation. The proposed institutional structures have been developed in close consultation with key policymakers and stakeholders and will be presented at a national seminar scheduled for April Proposed institutional arrangement for stage 1 (immediate) A Renewable Energy General Department has been established by the Ministry of Electricity and Energy to promote renewable energy development in Yemen. It is proposed to house the DSM/EE activities also under the Renewable Energy General Department and rename the department as Renewable Energy and DSM/EE General Department. Initial activities of the DSM/EE Department will be limited to two main divisions with awareness and S&L programs coming under the public policy based division in addition to its core functions; public policy based program design and implementation. The business based division is expected to handle CDM related investments in addition to business based activities. Figure 13: Proposed DSM/EE institutional structure for stage 1 (immediate) High Commission on Energy Stakeholders 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Standards Authority 6) Ministry of Oil and Mineral resources 7) Ministry of Industry and Trade 8) Ministry of Higher Education 9) Ministry of Public Works 10) Large Consumer Associations 11) Vendor Associations if listed Ministry of Electricity & Energy Renewable Energy & DSM/EE General Department Renewable Energy Department Business based DSM/EE program division DSM/EE Department Rural Electrification Authority Public policy based program division Public Electricity Corporation Department of Planning Department of Distribution & Inspection Commercial Division DSM Unit New divisors proposed for DSM/EE unit New divisions created within PEC 36

37 5.3.2 Proposed institutional arrangement for stage 2 The creation of the Renewable Energy General Department is only an interim measure. This department will become an authority in due course and it is recommended to name the Authority as the Renewable and DSM/EE authority with a DSM/EE department becoming a sector under the authority. Figure 14: Proposed DSM/EE institutional structure for stage 2 Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of Water and Environment 5) Standards Authority 6) Ministry of Oil and Mineral Resources 7) Ministry of Industry and Trade 8) Ministry of Higher Education 9) Ministry of Public Works 10) Large consumer associations 11) Vendor associations High Commission on Energy Ministry of Electricity & Energy Renewable Energy & DSM/EE Authority Renewable Energy Sector DSM/EE Sector Rural Electrification Authority Public Electricity Corporation Department of Planning Department of Distribution Commercial Division Business based DSM/EE program division Public policy based program division Awareness and program promotion Division Appliance Standard Setting and Labeling program division CDM managing unit DSM unit New divisions proposed for the DSM/EE authority New unit created within PEC Three additional divisions are proposed for the DSM/EE sector to handle increasing activities related to awareness, S&L program implementation and to manage CDM related activities. Activities of these units are discussed in detail later in the report Proposed institutional structure for stage 3 With the unbundling of PEC, it is proposed to convert the DSM/EE sector of the Renewable Energy & DSM/EE authority to an independent DSM/EE authority under MEE since the reform act enacted in February 2009, has provision (article 56) only for the establishment of commercial viable entities. 37

38 DSM/EE authority will require financial assistance to implement public policy based program in the national interest. Figure 15: Proposed DSM/EE institutional structure for the unbundled industry structure High Commission on Energy Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Standards Authority 6) Ministry of Oil and Mineral Resources 7) Ministry of Industry & & Trade 8) Ministry of Higher Education 9) Ministry of Public Works 10) Large Consumer Associations 11) Vendor associations Renewable Energy Authority Ministry of Electricity & Energy DSM/EE Authority Rural Electrification Authority ELECRICITY REGULATOR Gen. Co Trans. Co Dist. Co Business based DSM/EE program division Public policy based DSM/EE program division Awareness & Program promotion division Appliance Standard Setting and Labeling program division CDM managing entity 5.4 Stakeholders and steering committee During initial stages, DSM/EE department is expected work closely with key stakeholders. A steering committee of these key stakeholders is expected to be established later to assist the DSM/EE authority when established, in drafting policy, monitoring of program planning, implementation and impact evaluation. The proposed steering committee will include the following stakeholders: 1) Ministry of Electricity and Energy Chair 2) Public Electricity Corporation 3) Ministry of Finance 4) Ministry of Planning 5) Ministry of Water and Environment 6) Ministry of Industry and Trade 7) Standards Authority 38

39 8) Ministry of Oil and Mineral Resources 9) Ministry of Higher Education 10) Ministry of Public Works 11) Large consumer associations 12) Vendor associations if listed The under secretary to the Ministry of Electricity and Energy is expected to function as the Chairman of the steering committee with the head of DSM/EE authority as the secretary. The steering committee will function similar to a Board of Director of a company and will be mainly involved in the policy making process in addition to monitor impact of program implemented. 5.5 High commission on energy A high commission on Energy has been established to look after the energy sector developments in Yemen. Because of the importance of DSM/EE initiatives for Yemen, it is proposed to authorize the High Commission of Energy to oversee the affairs of the proposed DSM/EE authority and assist in the policy adoption. 5.6 Divisions within DSM authority Broadly, five divisions are proposed for the effective implementation of planned DSM/EE initiatives: 1) Public policy based program division 2) Business based program division 3) Program awareness and publicity division 4) Appliance standard and labeling division 5) CDM managing division 5.7 Tasks under divisions: Public policy based program division This division is expected to be responsible for all public policy based DSM/EE program design. It will promote activities to achieve public policy objectives, such as: Increase overall energy system efficiency Promote economic development Reduce environmental damage Address social objectives 39

40 Following activities are proposed as Public Policy-Based program delivery mechanisms: Information and Demonstration - Seek to educate consumers on electricity use and how to lower electricity bills through the use of efficient appliances and other products (energy audits, displays of efficient technologies, brochures, etc.) Product Labelling Identify and implement a product s energy efficiency rating and expected annual energy cost Codes and Standards such as building codes Financial Incentives - To increase the purchase of energy efficient equipment by providing tax benefits, low interest loans, accelerated depreciation, etc., listed later in the report. Programs designed by the DSM/EE authority could be implemented through the following organizations which can be identified as Public-policy-based Mechanism Implementing Organisations: Government Agencies Public Utility Corporation NGOs Community Groups & Industry Associations Public Policy-Based Mechanisms Funding Sources; An energy tax or a levy in the form of an additional charge on utility bills to fund DSM/EE initiatives (e.g.. x Riyal/kWh) A part of general tax revenues can be used to fund CDM income Business based program division The Business based program division is expected to promote energy businesses to achieve commercial corporate objectives by improving the profitability of existing businesses, improve market positioning, retain customers and increase profitability from new business areas Energy Efficiency as a Business Opportunity can be practised by: Public Utility Corporation - EE options will be cost-effective relative to generation, transmission and distribution system upgrades or expansions; improve power factor and distribution system efficiency; enhance customer relations Equipment manufacturers and suppliers Energy Service Companies (ESCOs) Financial institutions However, business activity to implement DSM/EE options will have to be facilitated by: Correct pricing signals Removal of disincentives to PEC DSM activities 40

41 Performance-based regulation Codes and standards Labelling and information/education programmes Availability of financing Figure 16: A proposed business based energy service model, supported the DSM/EE authority Energy Services Model Auditing Customer DSM/EE authority Services Technicalcal support ESCO Equipment suppliers Repaym ent Bank/Lending Institutions Finance Energy Service Company (ESCO): An ESCO is a performance contracting company which develops and implements Energy Efficiency projects on a turn-key basis, arranges financing & guarantees repayment and shares extra benefits with the customers. Energy Auditing and ESCO concept development details: Energy audit training requirements Annex 7 Energy audit questionnaire Annex 8 Energy auditing equipment list Annex 9 ESCO project implementing concepts Annex 10 ESCO financing mechanisms Annex 11 A typical ESCO contract Annex 12 However, saving guarantees and sharing of savings can lead disputes and project failures. Therefore, it is important to have a clear monitoring and verification mechanism in place prior to the commencement of ESCO activities. An interim stage; employing a consultant with an EE contractor/equipment vendor, is recommended to overcome some of the issues discussed above. 41

42 Funding Sources for Business-based EE programs/mechanisms Common funding sources for business-based EE programs/mechanism that can be applied to Yemen are listed below. PEC may invest own funds in developing, implementing and operating initiatives on a commercial basis Consumers using their own funds Loans and other financing arrangements provided by banks on normal commercial terms Co-funding by government entities, designed to initiate commercially viable DSM and energy efficiency activities Donor agencies may provide funds to contribute to global environmental or developmental goals Potential for Saving From the initial walk-through audits conducted by the consultants of three large consumer categories, the potential saving is estimated to be over 30% from cost effective measures. Further, PEC will benefit from purchase of power from large consumers with captive generation more than required for their own use. Captive generation would cost much less than the cost of power from plants hired by PEC Awareness and publicity division This unit will be responsible for all DSM/EE related awareness development and publicity programs. Tasks will include Programs to introduce the general concept Individual program publicity before and during implementation. Specific programs identified: a. Standards and labeling of end-use appliances b. Business-based EE activity development - ESCO concept c. Energy Efficiency lighting program Guidelines for awareness program design are given in annex Appliance standard & labeling division This unit will be responsible for the designing of all appliance standard & labeling programs in Yemen and it is expected to work closely with the Ministry of Trade and the Standard Setting Institution; Ministry of finance and customs department; consumer and vendor associations with the following objectives and tasks; 42

43 Transform the market to Energy Efficient appliance. Educate customers. Provide incentive for market transformations. Appliance selected: Lamps/control-gear, refrigerators, motors & pumps, air conditioners. Test facility requirements analyzed It will also function closely with the standard setting department to develop labels and promote the concept for effective implementation of an S&L program in Yemen. A brief on the S&L concept is given in annex 14 with CFL standards for a S&L program in annex CDM managing unit Many programs discussed in the three year DSM action plan can benefit from CDM investments. Therefore, a CDM managing unit is proposed to promote CDM investments for DSM/EE activities and assist investors in the coordination of pilot studies and program implementation. It will also guide investors through the CDM process currently in place in Yemen. Figure 17: CDM structure for Yemen Approval and Evaluation of Yemen CDM Project PROJECT DEVELOPER PIN* DNA SECRETARIST PROJECT REVIEW ASSESSMENT OF PIN* (WITHIN 5 WORKING DAYS) PROJECT NOT ACCEPTED PIN* ACCEPTED LETTER OF ENDORSEMENT PDD* ASSESSMENTS AND PUBLIC COMMENTS DNA BOARD (FINAL DECITION WITHIN MAX 30 WORKING DAYS) PROJECT NOT ACCEPTED PROJECT APPROVED APPROVAL LETTER PIN* - Project Idea Note PDD* - Project Design Documents Source: Clean Development Mechanism An Experience from Yemen, Dr. Lia Carol Sieghart 43

44 5.8 DSM operation flow Figure 18: A framework for demand-side management DSM OBJECTIVES Utility objectives Operational objectives Load shape objectives DSM ALTERNATIVES End use Technologies Implementation CUSTOMER CONSIDERATION Customer acceptance Customer response DSM EVALUATION AND SELECTION UTILITY CONSIDERATION Utility components generation, transmission, distribution and tariff impacts Other impacts - Society COST/BENEFIT ANALYSIS Detailed evaluation DSM PROGRAM MONITORING Pre-evaluation monitoring Evaluation design Implementation program feedback DSM PRPGRAM IMPLEMENTATION Pilot experiment Full-scale implement Key steps of a DSM operation flow chart are highlighted above. These include identification of requirements for DSM initiatives under DSM objectives, selection of DSM options to meet these objectives under DSM alternatives; screening of selected DSM options under DSM evaluation, in three stages utility consideration, customer consideration and cost/benefit analysis; designing and implementation of selected program - pilot and fullscale, under DSM program implementation; and program evaluation under DSM program monitoring. 5.9 DSM unit within PEC It is also recommended to establish a DSM unit within the Commercial Division of the Distribution Department of PEC for programs requiring PEC interventions in the implementation and those cost effective and beneficial to PEC. These include the proposed CFL program with an interest free loan, power factor correction initiative, etc. This DSM unit can also undertake business based programs such an ESCO initiative for the Government buildings. 44

45 Close coordination of activities between DSM/EE Department/Sector/Authority and DSM unit of PEC is essential. The authority is also expected to identify skill levels required for the DSM unit to implement projects and build capacity of the unit Budgetary requirements for DSM/EE Department/Authority A four year recurrent expenditure budget for DSM/EE Department/Authority is given below. However, this does not include specific task related expenditure which has to be met from task related funding sources. Table 20: Four year recurrent expenditure budget Year Year 1 Year 2 Year 3 Year 4 Status Department Department Sector Authority Annual Budget US $ Funding sources 57,500 65, , ,000 1) Government contributions 2) Donor assistance 3) CDM benefits 4) Funds generated from business based programs 1) Energy levy or tax 2) CDM investment 3) Annual contributions from utilities 4) Funds generated from business based programs 5.11 Strategic and operational objectives The strategic and operational objectives of the DSM/EE authority should be to assist PEC in providing an affordable, reliable, environmentally friendly and sustainable electricity service by encouraging efficient use of energy among all electricity consumers. Strategic objectives: Assist consumers to reduce energy costs Develop a competent and motivated workforce Provide value-added services to customers Forge strategic alliances with stakeholders Assist PEC in developing an integrated resource plan Promote the use of energy efficient equipment and appliances Assist the Government and PEC in meeting the national and global environmental objectives Operational objectives: Design and develop DSM and EE initiatives Develop and implement energy efficiency building codes Develop and maintain a database of load and market research data and energy efficient technologies 45

46 Develop DSM/EE monitoring and evaluation protocols Assist PEC in improving the quality and reliability of electricity supply Introduce measures to reduce distribution losses Provide incentives and other assistance to customers in implementing DSM/EE measures Assist and advise PEC in developing innovative tariffs Promote DSM/EE through workshops, seminars, newsletters, websites, etc. Key Tasks to meet strategic and operational objectives Key tasks to meet strategic and operational objectives will fall into two categories; Shortterm and Long-term. Short-term tasks Develop awareness campaigns for consumers in different sectors Provide energy auditing services to large consumers and PEC Spearhead a load research program Develop priority DSM measures listed in the DSM action plan Introduce the ESCO concept Set-up a technology database by gathering information on energy-efficient equipment, appliances and processes presently available in the country and technology that can be introduced from other countries Study the feasibility of CDM investments for CFL programs Study the feasibility of CDM investments for SWH programs Long-term tasks Develop all cost effective measures listed in the action plan Expand load research and further refine DSM options Develop a comprehensive technology databank Develop of S&L programs for lamps, refrigerators, A/C, and other important appliances Provide training in important fields such as energy auditing Assist private sector in the establishment of ESCO companies Liaison with equipment/appliance vendors to encourage them to supply energy efficient equipment and appliances and contribute to market transformation Promote CDM investments to long term DSM/EE initiatives 5.12 Linkages with key stakeholders The proposed linkages between the DSM/EE authority and other key stakeholders are shown below. These linkages are necessary to facilitate information exchange and make DSM and energy efficiency a mainstream activity and part of the national agenda. A buy-in from all stakeholders is required to support the policy interventions and changes that may be necessary to promote DSM and EE. Thus, the linkages proposed below should not be viewed 46

47 as an exhaustive list, and more linkages may need to be forged as the DSM programs progress. Figure 19: Linkages with key stakeholders Ministry of Public Works Public Utility Corporation Financial institutions NGOs Standards Authority DSM/EE authority Donors Consumer Associations Vendors/Cont ractors/consul tants Ministry of Industry and Trade Universities Industry Associations 5.13 Linkages with other institutions In addition to the linkages within Yemen, it is also recommended that the DSM/EE authority forge formal or informal links with several international institutions and agencies that are active in the energy efficiency field. The proposed international linkages are listed below: Membership of professional societies Association of Energy Engineers (AEE) Association of Energy Services Professionals (AESP) International Association of Energy Economics (IAEE) Energy Efficient Buildings Association (EEBA) European Council for an Energy-Efficient Economy (ECEEE) Other linkages: Electric Power Research Institute (EPRI) American Council for and Energy-Efficient Economy (ACEEE) Alliance to Save Energy (ASE) American Society of Heating, Refrigerating and Air-conditioning Engineers (ASHRAE) World Energy Efficiency Organization (WEEA) 47

48 Lawrence Berkeley Laboratory Lightsearch Global Efficiency Institute Building Codes Assistance Project EPA Energy Star Program CLASP Efficient Lighting Initiative Staffing and TORs of key personnel The staffing of the DSM/EE authority is critical. All staff must be permanent so as to develop an effective working relationship with each other and to master new skill sets. Technical expertise is important in selecting staff and must be encouraged. However, teamwork and dedication to achieving the goals of the DSM/EE authority is more important than all other requirements. It is not the number of staff that will determine the success or failure of the DSM/EE authority, but rather the effective establishment of goals and the coordination of efforts among staff. It is also important to have some overlap of functions so that no function is dependant purely on an individual. A summary of terms of reference of the various proposed DSM/EE authority staff positions are provided below with details in Annex 15. Table 21: Terms of references for key staff No Position Qualification Brief tasks & responsibilities 1 Director Senior engineering & Responsible for administration of the General/Director managerial DSM/EE authority and all DSM/EE 2 Manger business based DSM/EE division 3 Manager public policy based DSM/EE division 4 Manager S&L program division 5 Manager program marketing 6 Manager CDM program managing division Senior or midlevel Engineering Junior Engineering Junior Engineering Senior marketing Junior Engineering with CDM knowledge implemented in Yemen Design and promote the implementation of all business-based DSM/EE programs Design and coordinate implementation of all public policy based DSM/EE programs including load research program Design and coordinate S&L program implementation with relevant Govt. agencies and equipment/appliance vendors Responsible to design and implementation of all DSM/EE awareness programs Responsible for promoting CDM benefits for DSM/EE initiatives and assist investors in implementing such programs 48

49 5.15 Capacity building requirements In order for the DSM/EE authority function effectively, a series of capacity building tasks have been identified: 1) DSM program design, implementation and impact evaluation 2) Energy Auditing 3) EE project financing 4) Monitoring and verification of saving from EE projects 5) Common EE technology applications 6) Awareness and publicity mechanisms 7) Best practices and success stories 8) CDM investments and mechanisms 49

50 6. Links to Other Ongoing and Planned Programs 6.1 Renewable energy program Strategies for use of renewable energy to meet off grid energy needs has been developed and implemented under a pilot phase, mainly to test proposed mechanisms including project financing. Some of these implementing mechanisms can be used for DSM/EE initiatives. 6.2 Tariff review study It is strongly recommended to review the present tariff structure and revise same to include some of the DSM friendly measures. Proposed tariff components under stage 1 revision: 1) Reclassification of consumer categories 2) Introduction of a maximum demand charge for all large consumers 3) Introduction of time of use tariff (TOU) for large industry and hotels 4) Revision of block system of tariff 5) Interruptible tariffs for large industry and hotel 6.3 Energy efficiency building code It is proposed to develop an Energy Efficiency Building Code for Yemen to reduce operating costs of new constructions by 30-35% 5 when compared with a basic construction. However, no action has been taken to develop a code yet. It is strongly recommended to initiate a program to develop a code for commercial buildings and Government instillations. Key areas to be considered for a building code for Yemen: 1) Building envelope 2) HVAC 3) Lighting 4) Electrical network, motors and pumps 5) Water supply and heating 6.4 Proposed GEF initiative on EE improvements A GEF funded 4 year EE initiative is planned for Yemen. It is proposed to conduct the following under this initiative in order to support GEF initiative when implemented. 1) Establishment of an institutional structure 2) Preparation of a three year DSM/EE action plan 3) Initial awareness 4) Energy Audit training 5) Load research 6) ESCO concept development Pilot 5 Savings based on codes implemented in other countries 50

51 With these, GEF initiative will be able to concentrate on following key implementation tasks: 1) Detailed audits of government buildings and large consumers 2) S&L program implementation including to set up of testing facilities in Yemen 3) Introduce integrated resource planning process after unbundling 4) Further strengthening of DSM/EE authority activities 5) Establish a funding mechanism for EE projects 6.5 ESCWA initiative Another EE initiative is planned by ESCWA for Yemen. With tasks planned under this initiative, following tasks are recommended for implementation under ESCWA initiative: 1) Household sector DSM pilots CFL/linear fluorescent/solar heating 2) Long term awareness programs 3) Improved metering for DSM 4) Pf correction of distribution substations 5) Rural sector loss reduction 6) Street lighting improvements design change and controls Year DSM/EE initiative for Yemen Taking into consideration all ongoing and planned DSM/EE initiatives, we propose the following five year DSM/EE plan with the close coordination of all donor activities. Table 22: Suggested DSM/EE initiatives for donors # WORLD BANK GEF ESCWA Institutional structure Detailed audits Household sector pilot projects: 1 development CFL/Linear Fluorescent/Solar DSM/EE action plan Tariff revision Initial awareness: Large consumers; utility staff; project developers; Financiers Load research Energy audit training & walkthrough audits (Indus/Gov/Hotel) Identify CDM links and promote investments ESCO activity development + pilot Capacity building of DSM/EE authority S&L program design and implementation Establish a data base Establish test facilities to support S&L: Lamps/fans/AC/water heaters Further assistance to sustain DSM/EE initiatives Integrated resource planning Financial assistance ESCO projects: Revolving fund + Guarantee fund water heater Long term awareness Improved metering Pf correction of distribution substations Rural sector loss reduction Street lighting improvements Further assistance to sustain DSM/EE initiatives 51

52 7. Measures to Sustain DSM/EE Initiative 7.1 Development of a structured data bank for the sector PEC lacks structured data for proper planning of all sector activities including DSM initiatives. Therefore, it is proposed to establish a data management unit under a senior data manager at MEE to manage all available sector data of the sector 7.2 Load research of the power sector PEC does not have end-use consumption data of any category. Therefore, it is strongly recommended to conduct a load research program to identify consumer consumption patterns in order to use same for generation, transmission, distribution and DSM program planning. Results of a typical load research program are given in annex 16. Figure 20: Load research flow chart - sample metering and market surveys System Load Profiles Substation, Generation Data Sector Load Profiles Segment Load Profiles B illing/sales Records μ x 2 σ 2 x Survey Data End-use Load Profiles M etered Data End-use Data 52

53 7.3 Management Information System (MIS) As DSM/EE authority evolves and expands its activities, it will be essential to establish a Management Information System to track various activities and timelines and keep tabs on costs with program impacts. A management information system is proposed for this purpose. 7.4 DSM friendly tariffs For DSM/EE programs to succeed, it is essential to provide correct price signals to encourage consumers. With this in mind, it is recommended to reclassify present consumer categories, introduce demand charge and a TOU tariff immediately with major changes to the present tariff structure. 7.5 Financial incentives Innovative financing and incentives are required for successful DSM/EE program implementation: Table 23: Suggested EE project financing mechanism in Yemen Govt. Incentives Financing Mechanisms Others Import duty waivers Higher depreciation Subsidies through the social development fund Commercial funds Micro financing Installment basis payments Donor funds - soft loans and revolving funds CDM investments Shared savings Loan Guarantee Mechanisms (Annex 17) 7.6 Improved metering It is proposed to improve metering to reduce non technical losses and improve revenue collection. Most large consumers are fitted with data logging type meters with remote reading facilities but the installed features not utilized by PEC. Prepaid metering can also be used for household to improve the revenue collection of PEC. Suggested features are included in annex Energy auditor certification process An energy auditor certification process should be developed and added to the portfolio of the DSM/EE authority to strengthen energy auditing activities under the business based EE initiatives. The certification is one that identifies professionals as having the required knowledge and experience needed to succeed in the growing field of energy auditing. 53

54 Objectives: 1. To raise the professional standards of those engaged in energy auditing. 2. To improve the practice of energy auditors by encouraging energy auditing in a continuing education program of professional development. 3. To identify persons with acceptable knowledge of the principles and practices of energy auditing through completing an examination and fulfilling prescribed standards of performance and conduct. 4. To award special recognition to those energy auditing professionals who have demonstrated a high level of competence and ethical fitness in energy auditing. Eligibility: To be developed in consultation with key stakeholders during the program design stage and after monitoring of performance of auditor after training. However, the following is proposed: 1. A candidate must have a degree in engineering. In addition, the applicant must have at least two years of experience in energy auditing, energy management, facility management, or experience related to energy management. or 2. Ten years of experience in energy auditing, energy management, facility management, or experience related to energy management. Examination: To be a Certified Energy Auditor, a candidate must sit an examination after attending a training session on fundamentals of Energy Auditing. The examination will be on Energy Auditing methodology; Energy Audit instruments; Auditing tools; Economic analysis; HVAC; Lighting; Electrical system; Boilers and steam distribution system and Building envelope. 7.8 Integrated resource planning of the sector Integrated Resource Planning (IRP) is presently not practiced in Yemen. IRP is a set of regulatory policies and utility practices used to promote energy resources that are in the best economic and environmental interests of society. In general, IRP requires periodical evaluation of all types of electric resources, including utility programs to reduce energy consumption, as well as conventional power plants and renewable resources. It also requires considering the many different impacts that these energy resources will have on utilities, their customers, and the society in general, in the long run. Presently the generation planning task is performed by the generation planning unit of PEC and it should look at all options available to meet generation requirements including DSM options. Therefore, the proposed DSM/EE department is expected work closely with generation planning unit of PEC in developing an integrated resource plan for Yemen. After the sector is unbundled and regulatory mechanism established, the DSM/EE authority is expected to function closely with the regulatory commission and the transmission company in developing an integrated resource plan. 54

55 8. Proposed DSM/EE Pilot Projects Proposed DSM/EE pilot projects are listed below. Programs delivery mechanisms have not been fully developed and it has to be done in consultation with the listed participants. All programs should also have program impact monitoring mechanisms before the commencement of programs. Table 24: Proposed pilot projects No Program Sector Delivery mechanism - Key features 1 CFL program Household 1) Interest free loan scheme to householders to purchase 2 lamps 2) Repayment with monthly electricity bills in installments 3) Subsidy to waive off taxes 4) Only good quality lamps to be considered 5) Vendor participation 6) 200,000 lamps to be distributed in 12 months 7) Location for pilot - SANA'A 8) Two year warranty for lamps sold. To be provided by vendors Funding Initially from PEC and Govt. funds, to be converted to a CDM investment later Participants 1) Householders 2) PEC 3) Vendors supply to lamps to international specification 4) DSM/EE authority 2 Solar water heater program 3 EE Govt. Installation demonstration Household 1) Micro financing for 10,000 units 2) To use one of the distribution network tested for off grid photovoltaic systems 3) 10,000 units to be disbursed 4) Aggressive marketing with vendor participation Govt. 1) A Govt. building that can be used to demonstrate benefits to be selected 2) Energy audit to be conducted by DSM/EE authority 3) Implementation to be undertaken engineering staff attached to the installation with guidance from DSM/EE authority staff 4) Saving verification to be done by DSM/EE staff 5) Publicity to be provided by the authority Initially funded from micro financing under the National Social fund. To be converted to a CDM investment later with a subsidy Partly funded by the DSM/EE authority 1) Householders 2) Vendors supply systems to international specification 3) DSM/EE authority 1) Govt. 2) DSM/EE authority 3) EE equipment suppliers 55

56 4 EE industry demonstration 5 S&L program for CFL 6 Awareness & Publicity 7 CDM investment Industry All All Household 1) A large industry or a hotel willing to participate in the program fully, to be selected 2) An energy audit to be performed by the DSM/EE authority 3) Implementation by the installation with guidance and supervision from DSM/EE authority 4) Saving monitoring and verification to be performed by the DSM/EE authority 5) Publicity to be provided by DSM/EE authority 1) Introductory program to promote labeling 2) Implemented based on international labels 3) Tested for international standards 4) Aggressive publicity program with the Standards Department 5) Impact evaluation to be in place 1) Preparation EE awareness brochures for householders, commercial establishments, industry and Govt. buildings 2) Distribution through participating stakeholders, followed by seminars, meetings and discussions 3) Media participation 4) Posting on website of Ministry of electricity and Energy 1) Identify a measure 2) Design a program 3) Follow CDM procedure established for Yemen Funded by the participating institution Initial funding from DSM/EE authority and partly sponsored by lamp suppliers Funding from the Govt and DSM/EE authority with assistance from donors To be funded by a CDM investor 1) Participating institution 2) DSM/EE authority 3) EE equipment suppliers 4) Project financier 1) All consumer categories 2) DSM/EE authority 3) Lamp vendors 1) Steering committee members 2) Other stakeholder and consumer groups/association 3) DSM/EE authority 4) Donors 5) EE equipment and appliance suppliers 1) Consumers 2) CDM investor 3) PEC 4) DSM/EE authority 5) Other institutions involved in CDM project development in Yemen 56

57 9. Roadmap for Development of DSM/EE Initiatives Following roadmap can be used to develop DSM/EE initiatives in Yemen. 9.1 Key steps Key steps to initiate DSM/EE initiatives in Yemen are listed below: Step 1: Review and accept DSM/EE institutional structure report Based on extensive discussions with officials and advisors attached to MEE and PEC on the draft institutional structures, a final institutional setup for staged development is included in this report. A seminar will be held shortly to present the final report and discuss project implementation strategy. Step 2: Obtaining policy level approval for the concept Obtaining policy approval for the implementation of stage 1 of the institutional structure will be the next important task. Step 3: Establish the DSM/EE Department Next step would be to establish to the DSM/EE Department under the Renewable Energy General Department as discussed in this report under stage 1 DSM/EE institutional structure development. Recruitments for the unit should follow - a head for the department, an engineer for the business based program division and an engineer for the public policy based program division, based on qualifications listed in the report. Step 4: Implementation of initial capacity building measures Next step would be to seek donor assistance to implement capacity building measures listed below: Table 25: Capacity building measures No. Measures Description Recommended start 1 Awareness Sector brochures + media advertising Month 1 2 Energy Audit Training Classroom + practical Modules Month 1 3 Detailed audits Conduct detailed audits: Month Energy Audit manual Preparation of guide for energy auditing in Yemen Month Load research City of Sana'a Month 6 6 S&L Labeling program to introduce S&L programs, based on international standards and testing Month 6 57

58 Step 5: Develop pilot projects identified for various sectors Households sector CFL and solar water heating programs Large consumers Energy Auditing program and technical assistance to implement projects General S&L program, starting with CFL labeling All pilot projects will be subjected to following stages: 1. Pilot project design 2. Pilot project implementation 3. Evaluation of project impact 4. Full scale program design Step 6: Implement full scale program implementation In addition to capacity building measures listed above, steps should be taken to implement measures to sustain DSM/EE initiatives. Important measures to sustain DSM initiatives included tariff revisions, development energy efficiency building code, load research program for the entire country and encouraging private sector participation in energy services business. 58

59 Figure 21: DSM/EE flow chart for program implementation in Yemen Review and Accept DSM/EE institutional structure report Policy level approval Establish DSM/EE Department Implement initial measures Implement Pilot projects CFL program Solar water heating program Business based energy services S&L program CFL labeling Impact evaluation Impact evaluation Energy audit training Impact evaluation CDM Benefits Full scale program implementation Micro financing Full scale program implementation Pilot: Hotel & Govt. Building Impact evaluation Program implementation: Refrigerator, A/C systems, Fluorescent tubes + ballasts, Fans, etc Promotions 59

60 9.2 Measures to kick start DSM/EE initiatives Few measures are also proposed to kick start DSM/EE initiatives in Yemen. Technical assistance will be required to implement measures listed below. Estimated costs of technical assistance are also listed in table 26. Table 26: Programs to kick start DSM/EE initiatives in Yemen Immediate measures to kick start DSM/EE initiatives in Yemen No. Measures Description Consultants' fee US$ Local costs US$ Equipment costs US$ Recommended start date 1 Awareness Sector brochures + media advertising Household 7,500 0 May - 09 Commercial & Govt. 5, * 0 Industrial 5, Energy Audit Training 3 Detailed audits 4 Guide on Energy Auditing 5 Load research Classroom + practical - Modules Technical Financing Bankable report preparation Implementation 26,160 5,000 Monitoring and verification Conduct detailed audits: Govt installation (1) 5,000 1,000 Hotels (1) 5,000 1,000 Industry (2) 7,500 2,000 Equipment will be brought from training purposes by the consultants Equipment will be brought from training purposes by the consultants May 09 Jun/Jul - 09 Energy Auditing manual for Yemen 15,000 0 Aug/Sep - 09 City of Sana's Data logging ** Market survey 25,000 7,500 0 Develop load curves 0 0 Oct 09 6 S&L Labeling program to introduce S&L programs, based on 15,000 5,000 Oct 09 international standards and testing Total 116,160 34,000 12, ,660 * Cost of printing brochures + TV advertising ** Cost of data loggers + handheld units 60

61 9.3 Final recommendations Demand-side management and energy efficiency programs can bring several short and long-term benefits to all concerned. PEC will be in a position to ensure financial viability by reducing subsidy related revenue loss and deferring or avoiding capacity expansion investments. Consumers in Yemen will also gain significant savings of energy costs through better management and conservation of energy utilized. In general, DSM/EE programs are economically beneficial to Yemen as a whole, as it reduces often costly captive and hired generation, avoid or reduce load shedding and its associated economic costs and has numerous environmental benefits associated with reduced electricity generation. DSM/EE initiatives also cost much less than what it would cost to add generation capacity and strengthen network to maintain an uninterrupted supply of electricity to all. Therefore, it is strongly recommended for GoY to implement measures listed in the report in stages with donor assistance after establishing the institutional structure proposed in the report. The proposed institutional structure is essential for the effective implementation and sustainability of DSM/EE programs in Yemen. 61

62 References: 1) International Energy Agency (IEA) database 2) Public Electricity Corporation commercial data 2007 & ) Clean Development Mechanism An experience from Yemen 4) International Institute for Energy Conservation 5) Efficient Lighting Initiative 6) Sri Lanka Standards Institution 7) South Asia Regional Initiative for Energy (SARI/E): Sustainable Guarantee Facility 8) Building Efficiency in the Republic of Yemen Study: Eng. Abdussalam Al-janad 9) Solar water heater direct and indirect economic and environmental benefits for the national economy 2006: Eng. Abdussalam Al-janad 10) Yemen Energy Subsidy Reform, A report by The World Bank visiting mission: May 24- June 1,

63 Annex 1: List of Stakeholder Meetings November 22 December 4, 2009 No. Institution Name of Person/s participated Date Time 1 PEC - General Manager Eng. Abdul Al-Mohmen Motahar 25-Nov PEC - Load Dispatch Unit Eng. Tarek Ismail Taher 22-Nov Ministry of Electricity/Renewable Energy Unit Eng. Abudussalam Mansoor Major donors 4 AFD Christian Flamant, Country Director 23-Nov GTZ Dr. Thomas Engelhardt/Ministry consultant 23-Nov UNDP Mr. Fuad Ali, Director 23-Nov Equipment Supplier - GE (Murjan Intl Com) Mr. Ahmed A. Al-Aghbari 23-Nov Ministry of Electricity and Energy (MoE&E) Dip. Eng. Adel Abdalghani Gen. Director for Planning, Mohamed Hameed, RE Gen. 23-Nov Director 9 Ministry of water & Environment Dr. Lia Carol Sieghart International Advisor 24-Nov Ministry of Industries Mr. Abdulellah Yahya Shaiban 24-Nov PEC - Power Sector Projects Eng. Ahmed Bokash 24-Nov Equipment standard setting institutions Mr. Jamal Mohamed AbdulRahman 24-Nov Environment Protection Authority Mr. Anwar Noaman 24-Nov Ministry of Planning Mr. Abdul Al Malek 25-Nov Ministry of Trade/Export/Import Dr. Taha A Al. Fusail 25-Nov PEC Commercial Dept. Eng. Abdallah AL-Eryani, Director Commercial Affairs 25-Nov Higher education establishments: University of Sana'a Listed 26-Nov Associations 18 Hotel Association Alwan S Al Shaibani, Chairman of Hotel Association 27-Nov Equipment Supplier Philips M.A. Alzubaire Bairi & bro Mohid Rashid & Hareth M Al-Zubairi 29-Nov GTZ project manager Mr. Julio F M de Castro, Energy Project Manager, Andrias Zulner 29-Nov Energy Audit - Large consumer Movenpick hotel audit 30-Nov End-use equipment/appliance suppliers Mr. Ali AI-Kholani and Nashwan Amin A Yemen 1-Dec PEC - Generation Planning To be listed 1-Dec Ministry of Public works & highways Eng. Yasmeen Mohammed Al-Awadhi 2-Dec Ministry of Finance & customs Dr. Lurf H Barakat, Deputy Chairman 2-Dec Energy Audit - Gov. building PEC & MoE&E building audit 2-Dec PEC Distribution Division Eng. Fuad H. Al-Qawsi, Managing Director, Distribution 2-Dec World Bank Mr. Ali Khamis 2-Dec Energy Audit - Textile Factory Energy audit 3-Dec

64 Annex 2: Visit Report Yemen: Energy Efficiency Institutional Framework - Visit report Consultants: M S Jayalath and Sadam Ameer of EnergySolve International (Pvt) Ltd Visit dates: November 22, 2008 to December 6, 2008 Background: The main objective of this assignment is to develop a suitable institutional arrangement to support the implementation of energy efficiency measures in Yemen. Efforts will also include an assessment of energy efficiency and demand side management opportunities, appliance labeling programs, energy auditor training and certification, building codes and demonstration projects. Purpose of visit: Following two tasks were accomplished during the visit Task 1: Assessment of electricity consumption characteristics across consumer classes; and electricity demand growth scenarios for different sectors Task 2: Identification of end-use efficiency and DSM opportunities that would be suitable for Yemen Key outcome of Stakeholder discussions: The consultants had twenty six meetings with key stakeholders. This includes the Ministry of Electricity; PEC (Planning, commercial units and load dispatch centre); Ministry of Industries; Ministry of planning; Ministry of finance; Ministry of Trade; Standards Department; Ministry of water and Environment; Ministry of Public Works; Environmental Protection Authority; Donor Agencies such as UNDP, WB, GTZ and AFD; Hotelier s Association and Industry Association; Appliance suppliers; and the University of Sana a. Key issues raised by the stakeholders during discussions and initiatives proposed to address these issues are listed below: # Key issues raised by Stakeholders Proposed initiatives Suggested time frames 1 Poor awareness of consumers; vendors; utility staff; others Propose to conduct following seminars during draft report discussion stage and issue guidelines for efficient use of electricity in different sectors: 1) Hotel sector 2) Govt. sector February Lack of information on enduser consumption patterns - Load research 3) Industry Propose to conduct a load research program in all three cities as the consumption patterns vary due to climate 3 Lack of energy auditing skills Energy Auditing training to a small group of 4-5 and implementation of few pilot measures are proposed. A simple audit manual could also be useful. Including providing suitable equipment 4 ESCO concept is new to project developers and financiers Propose to conduct introductory course for prospective project developers, bankers and PEC commercial division to generate interest. 5 Tariff revision is needed Proposals to be submitted to tariff review study team. 6 An Energy Efficiency Code is not in place Proposals to be submitted to building code development team After final study report is accepted by key stakeholders As soon as possible to provide to a good stating point for the program As soon as possible Recommendation will be included in the final report Recommendations will be included in the final report 64

65 7 Performance Standards for appliances are not available Proposals to set standards for CFLs, ballasts, fans, A/Cs and refrigerators, water heaters 8 Gov. policy recommendation Import duty concessions, control/license, quality regulations, incentives, financial incentives & guarantees 9 CDM benefits to EE not considered 10 Appliance Testing facilities not available How CDM benefits as well as financing can be obtained for EE projects Setting up of testing laboratories for end use appliance testing will be recommended Will be included in the final report Recommendations will be included in the final report. Recommendations will be included in the final report Recommended will be included in the final report. Data and information collections: The team of consultants faced difficulties in accessing data for the study mainly due to: 1) Lack of structured data within PEC 2) Lack of end-use consumption data and patterns. In the absence of above, certain assumptions were made. Site visits, walk-through audits and Customer surveys: Team also conducted walk-through audits of three large consumer installations to identify the end-uses, EE measures and saving potential in order to assess saving potential for major customer categories and conducted a brief customer survey of the domestic sector. A summary of DSM/EE measures identified: Based on above, following measures are identified for different sectors as cost effective measures. Urban houses Rural houses CFL CFL CFL Fluorescent ballasts Solar water heating Linear Fluorescent Solar water heating Small Commerc ial Linear fluorescent Large commercial Linear florescent Electronic Ballasts Solar water heating A/C units* A/C units* A/C units* Refrigerators * Refrigerat ors* Building envelope Building envelope Large industry Linear florescent Electronic Ballasts Daylight PF correction Hotels AC improvement PF correction Solar water heating LED lighting Day light Building envelope Govt Linear florescent + Lighting system improvem ents Electronic Ballasts PF correction Artificial & Cement Industry Efficient motors & drives PF correction Lighting Demand reduction Fuel switching Building envelope Water corporation Efficient pumps & drives PF correction Lighting Fuel switching Energy Auditing Energy Auditing Energy Auditing Energy Auditing Energy auditing Awareness Awareness Awareness Awareness Awareness Awareness Awareness Awareness Awareness * Under Standards &Labeling Program Estimated savings: Will be included in the report. 65

66 DSM/EE financing mechanism: Following EE/DSM incentives and financial mechanisms will be discussed in the report in detail. Govt. Incentives Financing Mechanisms Others Import duty waivers Commercial funds Loan Guarantee Mechanisms High depreciation Micro financing Installment basis payments Subsidies through the social Donor funds - soft loans and revolving funds CDM investments development fund Shared savings Institutional Structure for effective implementation of EE/DSM measures: Team also developed three institutional structures and discussed extensively with all stakeholders during meetings. Based on the feedback received, the consultants recommend the following for implementation. High Commission on Energy Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Ministry of Trade/Standards department 6) Ministry of oil and mineral resources 7) Ministry of Industry 8) University of Sana a 9) Large consumer associations 10) Vendor associations if listed MINISTRY OF ELECTRICITY RENEWABLE & DSM/EE AUTHORITY DSM/EE Division Renewable Energy Division DEPARTMENT OF PLANNING PUBLIC ELECRICITY CORPERATION DEPARTMENT OF DISTRIBUTION Loss reduction DSM/EE program design and Technical Assistance Pilot Project Implementation & ESCO Activity development Awareness promotion Appliance Standard Setting and Labeling program CDM managing entity Region A Region B PEC ESCO Govt. Departments INSTITUTAIONAL STRUCTURE FINALOPTION 2 PRIOR TO PEC UNBUNDLING This also includes the changes proposed to the final structure after PEC unbundling. Details will be discussed in the final report. 66

67 High Commission on Energy Ministry of Electricity & Energy Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Ministry of Trade/Standards department 6) Ministry of oil and mineral resources 7) Ministry of Industry 8) University of Sana a 9) Large consumer associations 10) Vendor associations if listed Renewable Energy and DSM/EE Authority Renewable Energy Division DSM/EE Division Other Authority Rural Electrification Authority ELECRICITY REGULATOR Dist. Co Tran. Co Gen. Co DSM/EE program design and Technical Assistance Pilot Project Implementation & ESCO Activity development Awareness promotion Appliance Standard Setting and Labeling program CDM managing entity INSTITUTAIONAL STRUCTURE OPTION 2 AFTER PEC UNBUNDLING List of pilot projects and capacity building initiatives proposed: CFL pilot project for CDM funding/investments Pilot solar water heating project in the household sector Pilot EE project in Government sector Pilot EE project in Hotel sector Awareness program seminar/workshops/ee awareness and publicity brochures for consumers, vendors, contractors, utility personnel, academic staff, etc Load research and market survey Pilot ESCO project Distribution substation Observations and recommendations: Based on above, the consultants propose the following: 1) Seminar to discuss the draft report February ) Awareness seminar/s for Large consumers to get few pilot projects implemented Project introduction, implementation mechanisms and ESCO concept development 3) Energy Audit training for a small group of technical personnel from the Govt and private sector 7 day course with class room and practical session an immediate need. 4) Load research To be planned 5) Review and comment on GEF TOR - as requested by Ministry of Electricity 6) List capacity building components and research requirements from the Universities 7) Standards and Labeling of few key appliances and provide standards used 8) Update Ministry of Electricity website to include EE guidelines, quick evaluation of saving potential, international standards, case studies, etc., mainly for the Govt. sector and large consumers 67

68 Institutional structures alternate proposal 1 prior to sector unbundling High Commission on Energy Ministry of Electricity & Energy Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Ministry of Trade/Standards department 6) Ministry of oil and mineral resources 7) Ministry of Industry 8) University of Sana a 9) Large consumer associations 10) Vendor associations if listed Renewable Energy Authority DSM/EE Authority DEPARTMENT OF PLANNING PUBLIC ELECRICITY CORPERATION DEPARTMENT OF DISTRIBUTION Loss reduction DSM/EE program design and Technical Assistance Pilot Project Implementation & ESCO Activity development Awareness promotion Appliance Standard Setting and Labeling program CDM managing entity Region A Region B PEC ESCO Govt. Departments INSTITUTAIONAL STRUCTURE OPTION 1 PRIOR TO PEC UNBUNDLING 68

69 Institutional structures alternate proposal 2 prior to sector unbundling MINISTRY OF ELECTRICITY Steering committee 1) Ministry of Finance 2) Ministry of Planning 3) Ministry of water and environment 4) Ministry of Trade/Standards department 5) Ministry of oil and mineral resources 6) Ministry of Industry 7) University of Sana a 8) Large consumer associations 9) Vendor associations if listed DEPARTMENT OF PLANNING PUBLIC ELECRICITY CORPERATION DEPARTMENT OF DISTRIBUTION DSM Unit Loss reduction DSM/EE program design and Technical Assistance Pilot Project Implementation & ESCO Activity development Awareness promotion Appliance Standard Setting and Labeling program CDM managing entity Region A Region B PEC ESCO Govt. Departments INSTITUTAIONAL STRUCTURE OPTION 3 PRIOR TO PEC UNBUNDLING 69

70 Institutional Structure Alternate proposal 1, after unbundling High Commission on Energy Ministry of Electricity & Energy Steering committee 1) PEC 2) Ministry of Finance 3) Ministry of Planning 4) Ministry of water and environment 5) Ministry of Trade/Standards department 6) Ministry of oil and mineral resources 7) Ministry of Industry 8) University of Sana a 9) Large consumer associations 10) Vendor associations if listed Renewable Energy Sector DSM/EE Authority Other Authority Rural Electrification Authority ELECRICITY REGULATOR Dist. Co Tran. Co Gen. Co DSM/EE program design and Technical Assistance Pilot Project Implementation & ESCO Activity development Awareness promotion Appliance Standard Setting and Labeling program CDM managing entity INSTITUTAIONAL STRUCTURE OPTION 1 AFTER PEC UNBUNDLING 70

71 Annex 3: Walk-through Audit Reports EnergySolve International (Pvt) Ltd Summary Energy Audit Report Prepared for Ministry of Electricity & Energy & Public Electricity Corporation Sana a, Yemen Prepared by ENERGYSOLVE INTERNATIONAL (PVT) LTD (A MEMBER OF THE UNITED STATES GREEN BUILDING COUNCIL) 165/55, Sri Saddharmarama Mawatha, Nawala Road, Narahenpita, Colombo 5, Sri Lanka. Tele: (94) / / Fax: (94) December 26,

72 1. Introduction Ministry of Electricity & Energy is the sole governing authority of the country s electricity supply & energy management for Yemen. The Public Electricity Corporation an entity under the above ministry, which operates and manages the electricity generation, transmission & distribution. Both institutions occupy adjacent buildings in the capital city of Sana a. EnergySolve International (Pvt) Ltd was invited by the Management of the above entities to conduct an audit of the electricity consumption as a pilot energy audit for government sector consumers. The study was part of a World Bank project to identify energy efficiency measures in Yemen. The walk through audit was carried out by a team of auditors attached to EnergySolve International (Pvt) Ltd on the 2 nd of December 2008 and this report highlights potential improvements to the systems installed at the premises. The study included an analysis of historical electricity consumption, onsite inspections of systems, analysis of measurements of electricity consumption, and discussions with the operation & maintenance staff attached to the installation. 2. Summary of System Efficiency Recommendations Improvement Lighting System General Lighting Computer System Power System Description Replace with 36W & 18W fluorescent lamps & electronic ballast Natural light introduction and lighting controls Replace CRT monitors with LCD screens Power factor correction Investment YR Saving (Annual) YR Pay back Period (Years) 2,300,000 1,950, , , ,600,000 2,300, ,400, , Total 10,350,000 4,735, Summary of electricity energy efficiency measures Note : Prices - Electricity unit = 30 YR / kwh Electricity fixed = 5 YR / kwh 72

73 3. Energy Efficiency Measures 3.1 Measure 1 Lighting system improvements is recommended to replace T12 lamps with T8 lamps to illuminate with high frequency electronic ballast. The reduction will be substantial with 14W from 36W tubes and 7W from 18W tubes. 3.2 Measure 2 General Lighting improvements will concentrate on introduction of natural light to the building cutting down heat transfer and introduction of lighting controls. Daylight will be introduced in common areas through special transparent material to transfer only light and not heat. Several points of lighting were found to have no proper controls for lighting points. These need to be rectified. There are few other possible areas where sensor controlled lighting can be introduced. This will solve the problem of switching off common area lighting. 3.3 Measure 3 Computer system efficiency is recommended to replace the CRT screen monitors with LCD screen monitors. This will have the following financial & user efficiency benefits. Energy saving from 150W to 35W Better view Less stress on eyes to the user Space saved on desk 3.4 Measure 4 Power system improvement is recommended to improve the power factor of the system to reduce reactive power requirement from national grid. The savings will be applicable after demand charge is applied from the tariff. 4. Conclusion In this report, EnergySolve has highlighted economically viable energy efficiency measures with regard to the electrical distribution system that can reduce operating costs of the facility drastically. We would strongly recommend that you consider implementing the findings. Our support can be extended in implementing the measures and guarantee the savings estimated. 73

74 EnergySolve International (Pvt) Ltd Summary Energy Audit Report Prepared for MOVENPICK Hotel Sana a, Yemen Prepared by ENERGYSOLVE INTERNATIONAL (PVT) LTD (A MEMBER OF THE UNITED STATES GREEN BUILDING COUNCIL) 165/55, Sri Saddharmarama Mawatha, Nawala Road, Narahenpita, Colombo 5, Sri Lanka. Tele: (94) / / Fax: (94) December 27,

75 1. Introduction Movenpick Hotel Group is one of the largest hotel chains in the Middle East. The facility in Sana a, Yemen located 10 km from the Sana a international air port consists of 338 rooms with large convention facilities. EnergySolve International (Pvt) Ltd was invited by the Management of the above entity to conduct an audit of the electricity consumption as a pilot energy audit for industrial sector consumers. The study was part of a World Bank project to identify energy efficiency measures in Yemen. The walk through audit was carried out by a team of auditors attached to EnergySolve International (Pvt) Ltd on the 3 rd of December 2008 and this report highlights potential improvements to the systems installed at the premises. The study included an analysis of historical electricity consumption, onsite inspections of systems, analysis of measurements of electricity consumption, and discussions with the operation & maintenance staff attached to the installation. 2. Summary of System Efficiency Recommendations Improvement Power System Description Investment YR Saving (Annual) YR Pay back Period (Years) Reduce transformer losses, pf correction, MDB paralleling 15,000,000 2,500, Lighting System Air conditioning System Natural light introduction and LED lighting with controls Economizer, fresh air control 10,000,000 11,600, ,000,000 5,000, Total 45,000,000 19,100, Summary of energy efficiency measures Note : Prices - Electrcity unit = 30 YR / kwh Electricity fixed = 5 YR / kwh Diesel = 35 YR / ltr 75

76 3. Energy Efficiency Measures 3.1 Measure 1 Power system improvements are recommended to the electrical distribution system to reduce load on generators and transformers. It is recommended to couple all MDBs and run only one transformer on standby operation. It is recommended to correct power factor at the distribution boards far apart from the generators. This will reduce the cable loss in the transmission and the reactive power load on generator is reduced. 3.2 Measure 2 General Lighting improvements will concentrate on introduction of natural light to the building through special prismatic sheets cutting down heat transfer. There are several lighting fixtures that can be replaced with LED lighting, which will be much less in consumption. There are few other possible areas where sensor controlled lighting can be introduced. This will solve the problem of switching off common area lighting. 3.3 Measure 3 Air conditioning System Improvements are recommended as the following wastages were found in the system, which can be rectified with new innovative techniques. Introduction of 100% fresh air to keep CO & CO2 down. This can be replaced by automatic fresh controlled dampers, which will monitor CO and introduce only required fresh air. Cold exhaust air exits the building, which can be modified to be heat extracted and cool down hot fresh air entering the building through a Heat Wheel mechanism. 4. Conclusion In this report, EnergySolve has highlighted economically viable energy efficiency measures withregard to the electrical distribution system that can reduce operating costs of the facility drastically. We would strongly recommend you to consider implementing the findings. Our support can be extended in implementing the measures and guaranteeing the savings estimated. 76

77 EnergySolve International (Pvt) Ltd Summary Energy Audit Report Prepared for Yemen Textile Industry Co. Ltd Sana a, Yemen Prepared by ENERGYSOLVE INTERNATIONAL (PVT) LTD (A MEMBER OF THE UNITED STATES GREEN BUILDING COUNCIL) 165/55, Sri Saddharmarama Mawatha, Nawala Road, Narahenpita, Colombo 5, Sri Lanka. Tele: (94) / / Fax: (94) December 27,

78 1. Introduction Yemen Textile Industry Co. Ltd. is one of the largest manufacturing facilities in Sana a, Yemen in the field of textile. The facility is vertically integrated, manufacturing from yarn to fabric to washing & dying to final finished garment manufacturing. The supply is mainly for local market and the client is keen on obtaining international exposure. EnergySolve International (Pvt) Ltd was invited by the Management of the above entity to conduct an audit of the electricity & fuel consumption as a pilot energy audit for industrial sector consumers. The study was part of a World Bank project to identify energy efficiency measures in Yemen. The walk through audit was carried out by a team of auditors attached to EnergySolve International (Pvt) Ltd on the 3 rd of December 2008 and this report highlights potential improvements to the systems installed at the premises. The study included an analysis of historical electricity & fuel consumption, onsite inspections of systems, analysis of measurements of electricity & fuel consumption, and discussions with the operation & maintenance staff attached to the installation. 2. Summary of System Efficiency Recommendations Improvement Heating System Lighting System Machinery Improvements Description Boiler improvements, Steam system improvements Natural light introduction and task lighting with controls Reduce machine idle time and improve utilization Investment YR Saving (Annual) YR Pay back Period (Years) 5,400,000 3,600, ,600, , ,200,000 1,100, Total 13,200,000 5,450, Summary of energy efficiency measures Note : Prices - Diesel = 35 YR / ltr 78

79 3. Energy Efficiency Measures 3.1 Measure 1 Heating system improvements are recommended to the steam boiler systems and thermic fluid systems. Several inefficiencies were found in the system and common solutions are provided below. o Rectify steam leaks o Rectify insulation failures o Proper condensate recovery o Steam / condensate isolation by traps o Variable volume flow 3.2 Measure 2 General Lighting improvements will concentrate on introduction of natural light to the building cutting down heat transfer and introduction of task lighting with controls. Daylight will be introduced in most areas of the production facility through special transparent material to transfer only light and not heat. Specific tasks like sewing will be introduced with task lighting for higher illumination. There are few other possible areas where sensor controlled lighting can be introduced. This will solve the problem of switching off common area lighting. 3.3 Measure 3 Machinery Improvements are recommended as the machinery used at the facility is basic machines. The idle time consumption of these machines are high and hence the facility consumes a considerable amount of unutilized energy. The following improvements were noticed. Machine power on/off controlling during breaks Heat rollers in fabric machines to have temperature control and sensor operation. 4. Conclusion In this report, EnergySolve has highlighted economically viable energy efficiency measures with regard to the electrical distribution system that can reduce operating costs of the facility drastically. We would strongly recommend you to consider implementing the findings. Our support can be extended in implementing the measures and guarateeing the savings estimated. 79

80 Annex 4: DSM Options Considered for Yemen a) Peak clipping 24 hr Load Curve b) Strategic conservation c) Load shifting 80

81 Annex 5: Results of DSM/EE Analysis DSM/EE Options Results of Evaluation Model 81

82 YEMEN: ECONOMIC AND FINANCIAL ANALYSIS OF DSM OPTIONS Prepared for The World Bank Prepared by EnergySolve International (Pvt) Ltd 165/55, Sri Saddharmarama Mawatha, Nawala Road, Narahenpita, Colombo 5, Sri Lanka. Tele: (+94) / Fax: (+94) March