Sector Wide Approach for Planning and Expanding Electricity Access Rwanda case study Arun P. Sanghvi Consultant, World Bank Dakar, November 14-15, 2011
Presentation Overview Sector wide approach (SWAp) in the energy sector What is a SWAp? Challenges in applying SWAp to energy sector operations Rwanda case Why SWAp approach The process The outcomes Lessons learned Expanding energy SWAp approach to other countries 2
Achieving near-universal access: A daunting challenge for most sub-saharan Africa AFREA (Population Support for without Energy Access Sector Electricity- SWAps 2008) Population without access to electricity (percent) 0% 20% 40% 60% High Access Nigeria Lao PDR Bangladesh Benin Pakistan Senegal Indonesia Cameroon Ghana Vietnam Mongolia Philippines Cote d'ivoire South Africa 80% Madagascar Ethiopia Cambodia Tanzania DR Congo Myanmar Kenya = 100 million people PNG Low Uganda Access Mozambique = 1 million people 100% Very high Poverty Prevalent Poverty Low Poverty 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% China Peru Tunisia Brazil Thailand High Access Majority Access Low Access 0% Population living under $2 per day (percent) Source: IEA and authors' calculations. 3
SWAP APPROACH IN THE ENERGY SECTOR 4
What is SWAp? A country-led, results focused, longterm sector development program Joint sector engagement and accountability across all partners and stakeholders Consumers Government Developmen t Partners Process aligned with national priorities and targets Sustainable, predictable funding Private Stakeholder s SWAp Stakeholders Utility Initially adapted to the social sector (health and education), then transport, water and agriculture Difficult to adapt to the energy sector, but necessary to support access scale up Sector Ministries Local Government Regulatory Authority Shift from aid delivery project-by-project and donor-by-donor to SECTOR-WIDE DEVELOPMENT FOCUSED ON RESULTS 5
SWAp vs. Business as Usual Key Characteristics Scope Government Involvement Stakeholder Involvement Level of Coordination Funding Drivers Sector-wide SWAp Results focused, strategic Long term programme Updated frequently more accurate Country ownership and government leadership Ccoherent policy framework & strategy Throughout the sector Joint accountability Harmonization of processes, procedures, implementation and monitoring Lower transaction costs All financed within SWAp timeframe Predictable Uses basket funding Increased transparency from single expenditure Demand driven Donors direct funding to subprojects in common sector-wide program Aligned to national priorities Project-by-project approach Project specific (e.g. just distribution without transmission or generation) Weak results focus: many projects locally may not add up to a national transformative impact Updated intermittently (e.g. every 5 years) Weak Government leadership Could fall outside national priorities Specialised in technical perspective Project specific monitoring and evaluation High transaction costs Possible duplication of activities and funding Project specific Less predictability often because full expenditures plans are not done Supply driven - Donor determines focus of project 6
Social sectors Low capital intensity of investments flow on account of numerous, smaller scale sub-investment projects Substantial annual recurrent expenditures, and minimal or no revenues from within the sector (user charges) Energy SWAp Challenges Large number of partners engaged Instruments readily amenable to SWAp framework, such as budget support, ear marked funds Energy sector High capital intensity and necessity for large scale multi-year discrete projects, especially in grid generation and transmission investments that are often one-off Recurrent expenditures including investments typically covered by end user connection fees and tariffs applicable to each unit of consumption Typically fewer development partners engaged and increasingly substantial private sector participation 7
THE ENERGY SWAP IN RWANDA 8
Why SWAp needed in Rwanda? Need to rapidly scale up energy access 2004 Extremely low electrification rate (65,000 connections = approx. 6% ) Severe drought period led to shortages Low available generation capacity (41MW) 2008 110,000 households and enterprises connected (80% of which are in Kigali) 50% Health facilities with access to reliable energy 20% Schools with access to reliable energy 2009- Next Steps: SWAp A programme to increase electricity connections from 110,000 (2008) to 350,000 (2014), and substantially increase access to electricity for social infrastructure 50% peak hour load shedding 25% Sector offices with access to reliable energy Electrogaz recorded annual operating losses >US$9.1million Recovering from civil war Urgent Electricity Rehabilitation Programme (UERP) invests US$34 million to deliver 20MW of thermal generating capacity 9
SWAp highlights in Rwanda July 2008 - Energy Sector Working Group (SWG) established MoU signed between the Ministers of Finance and Energy, and senior development partners A detailed 5-year investment and implementation plan (a bankable prospectus), with unique features: Spatial least-cost national rollout program (grid and off-grid) Integrated with most effective renewable energy supply sources Explicit cost reduction strategy Connection costs based on affordability Financing ( syndication ): Government + Development Partners + Power Utility + Customers: (80-10-10) policy Real capacity building plan for extending electricity access that achieves Rwanda s electricity access targets 10
Transitional off-grid areas shrink as grid rollout expands Rapid spatial AFREA planning Support for platform Energy Sector utilized SWAps in Rwanda 11
Rwanda - Least cost spatial planning for nation-wide electricity access scale up program Identifies the best way for electricity to be extended over the next 20 years (focused on the next 5 years), based on social and economic characteristics of different locations within the country, and supply and demand conditions Chosen by the sector working group as a better approach than traditional master planning visually appealing, clear criteria, comprehensive and analytically sound rapid planning platform; proven process for rallying diverse stakeholders buy-in itno the national program for energizing development. Technical assistance in place to regularly update spatial planning results 2009 12
GIS-Based Rapid Spatial Planning Platform Powerful Planning Tool for National Electrification Program Rollout to meet time bound targets 13
Spatial least cost national electrification rollout in Rwanda grid and off-grid, AFREA 2009-2020 Support for Energy Sector SWAps 14
Electricity access planning for national electrification SWAp - sector-wide national electrification planning platform - Spatial least-cost national grid (and off-grid) integrated rollout investment & implementation plan proved to be extremely effective: Seen as a national development plan rather than a electricity sector plan engaging all key stakeholders (in country and external) rallying development Partner contributions Modest cost and frequent updates resulting in a dynamic plannig platform: Classical style RE Master Plan overly cumbersome (2-3 years) high cost (1-2 million $) updated less frequently static in representation of changing conditions over time (grid rollout, demand, priority locations) project here and there and now and then approach when donors come shopping 15
Affordable connections for users and Government of Rwanda Controlling costs Technical specifications were revised: Changing from lattice framed steel towers to wooden poles (below) Using single-wire earth return (SWER) lines in rural areas Using local manufacturing for required materials, wherever possible Doubling contract sizes to gain economies of scale Targeted cost reduction per connection: US$1,000 (in 2009) to US$600 (in 2013) due to planned efficiencies Planning for affordability The proportion of households that live on less than US$1.25 per day is between 50% and 80% in most areas But affordability analysis showed a relatively high willingness to pay for electricity Despite low income levels in Rwanda, analysis showed that 370,000 hhs would be willing and able to pay cost of grid connection and recurrent charges 16
Sustainable Financing Policy Platform Consensus built around 80-10-10 policy for first SWAp (also used in Tunisia) Financially sound utility - Utility expected to contribute 10% to capital costs (from ongoing tariff revenues) - Investments in new generation also funded from tariffs Connection charges based on ability to pay - Consumers expected to pay nominal US$100 connection charge Programme Costs Government and donor support - Needs to meet remaining 80% of costs Can be revisited for future SWAps, depending on availability of funds 17
Matching costs with funding sources 18
Rwanda Practical Results of the SWAp Donors Round Table April 2009 - successful syndication (financing) pledges of US$225 million for first slice of the program (2009-2013) identified in program Prospectus National Electrification Program Management Department established integrally within Electrogaz s corporate structure to oversee planning, design, and implementation, pooling of all funds irrespective of donor, monitoring and evaluation, and Reporting accountability. Commitment to the staged reductions in average unit connection costs - first two years of connections achieved within budgeted unit cost estimates of US$1,000/connection, Substantially lower cost than pre-swap program project averages Program implementation early results some initial success in moving from 6% nationwide to 10%. On track to achieve objective of 16% electrification by 2013 Programme Connections (Target and Actual) 2008 Actual 2009 2010 2011 (August) 2014 Target New connections < 5,000 32,995 43,733 40,419 Households connected to electricity 110,896 143,891 187,624 228,043 350,000 19
LESSONS LEARNED FROM THE RWANDA ENERGY SWAP 20
Rwanda lessons Key Success Factors Strong country ownership and leadership up and down the chain of accountability Cabinet, MINECOFIN, MININFRA, Other Line Ministries Health, Education, Environment, Utility Linkages to National Priorities Ensured that the SWAp is aligned with the policy direction of the Government Key stakeholders buy-in from outset Ownership and consensus built through work by the SWG, led by the Minister of Energy Consultation process, workshops, retreats Investment program and implementation plan Prepared stakeholders well for the Donor Round Table South-South Cooperation Technical designs, planning, implementation, logistics, training GIS anchored data capture and grid rollout planning Preparation across all key ministries in a coordinated manner Affordability surveys Connection charges set at affordable levels Transition from planning to implementation 21
What are the key benefits for other countries to use a SWAp for scaling up electricity access? Increased predictability (and possibly scale) of sector funding Increased transparency and accountability More effective partnerships Increased donor coordination leading to complimentary investments less duplication or wasted resources Lower transaction costs of disbursing and receiving donor funds Ensures an appropriate level of input from development partners into policies, priorities, and sector expenditure 22
What are the conditions that need to be in place to make the SWAp approach work effectively? Government commitment and leadership Policy direction can be refined during process of preparing the Prospectus, as in Rwanda Planning - minimum level of GIS data Where the people are (demographic and socioeconomic; where the clincs, schools, administrative facilities are; where the main economic centers are; HV and MV lines captured in digitized format, population and other demographic statistics Donor buy-in and commitment built - regular consultation process via the sector working group (SWG) led preparation of sectorwide investment, implementation and results monitoring program Supply chains to drive lower costs for national programme 23
Expanding Energy SWAps to other countries AFREA Support for Energy Sector SWAps WB/AFREA program is providing support to mainstream SWAP programs in the energy sector in Africa In Kenya, SWAp approach raised US$1.5 billion to support the government target of 1 million new connections from 2009-2013 Ethiopia - SWAp planning effort underway Other countries - including Nigeria, Tanzania, and Mozambique have expressed interest in the SWAp-type planning support AFREA is supported by the Netherlands $28.75 million contribution to the ESMAP Clean Energy Investment Framework Multi-Donor Trust Fund. 24
Thank you 25