Regional Micro-Hydropower Capacity Development and Investment for Rural Electricity Access in Africa
UNDP Project Document
Governments of Mali, Togo, Benin, Cameroon, Congo-Brazzaville, Gabon, Central African Republic, Burundi, Rwanda and DRC
United Nations Development Programme
African Microhydro Initiative: Regional Micro/Mini-Hydropower Capacity Development and Investment for Rural Electricity Access in Sub-Saharan Africa
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Regional Micro-Hydropower Capacity Development and Investment for Rural Electricity Access in Africa
TABLE OF CONTENTS
Section I: Elaboration of the Narrative 6
PART I: Situation Analysis 6
1.1. Context and Global Significance 6
1.2. Threats, Root Causes and Barriers Analysis 7
1.3. Institutional, Sectoral and Policy Context 13
1.4. Stakeholder Analysis 31
1.5. Baseline Analysis 31
Baseline Analysis 31
PART II: Strategy 38
2.1. Project Rationale and Policy Conformity 38
2.2. Project Goal, Objective, Outcome and Outputs/Activities 49
2.3. Load Curve Estimation, Peak Load Analysis and Productive – End Use Capacities 54
2.4. Investment Project Cost Estimation 55
2.5. Micro-hydro Financial and Economic Analysis 57
2.6. Project Indicators, Risks and Assumptions 66
2.7. Expected Global, National and Local Benefits 70
2.8. Country Ownership: Country Eligibility and Country Drivenness 73
2.9. Sustainability 75
2.10. Replicability 86
PART III: Management Arrangements 87
3.1. Implementation Modalities 87
PART IV: Monitoring and Evaluation Plan and Budget 91
4.1 Monitoring and Reporting 91
4.2 Independent Evaluation 96
4.3 Audit Clause 96
Section II: STRATEGIC RESULTS FRAMEWORK AND GEF INCREMENT 101
Part I : Incremental Cost Analysis 101
PART II : Logical Framework Analysis 101
SECTION III: Total Budget and Workplan 102
Section IV: Additional Information 107
PART I: Legal Context and Pre-requisites 107
List of Tables
Table 1: Electrification Rate in DRC 23
Table 2: Linking barrier removal and project design 52
Table 3: Levelized Cost of Micro-hydro Investments and Derivation of the cost of Electricity 58
Table 4: Levelized Cost of Diesel Gensets Investments and Derivation of the cost of Electricity 59
Table 5: Electricity Tariff evolution in Gabon 62
Table 6: Rwanda electricity tariff 1990-1997 64
Table 7: Evolution of Rwanda electricity tariff 1997-2005 64
Table 8 Environmental Risk Classification for West-Africa (Benin, Mali and Togo) 66
Table 9: Environmental Risk Classification for Central Africa 67
Table 10: Environmental Risk Classification for East-Central Africa 67
Table 11: Countries eligibility references 73
Table 12: Determination of weighted average KWh tariff for financial break-even in Benin 79
Table 13: UNDP-GEF baseline Diesel Scenario tariffs settlements for comparison with Prior/on-going Private Sector lead Diesel Operation in the decentralized rural electrification sector in Mali. 80
Table 14: UNDP-GEF Microhydro Scenario tariffs settlements before government contribution for comparison with Prior/on-going Private Sector lead Diesel Operation in the decentralized rural electrification sector in Cluster 3. 81
Table 15: UNDP-GEF Estimated Diesel Scenario tariffs settlements before government contribution for comparison with proposed Microhydro Tariff settlements in table 12. 82
Table 16: Break-even tariffs for equivalent Diesel generation scenario in Cluster 2 85
Table 17: Tentative financing plans of sub-regional projects (in million USD) 90
Table 18: Indicative Monitoring and Evaluation Work plan and corresponding Budget 98
Table 19: Financing plan by outcome/component (in million of USD) (excludes PDF B). 102
Table 20: Financing plan by level of intervention (national, sub-regional, regional) (in million of USD, excludes PDF B) 102
Table 21: Sources of co-financing 103
Table 22: Overall Project Financing Plan 103
Table 23: Project Financing Plan/West AFRICA 104
Table 24: Project financing Plan/Central AFRICA 104
Table 25: Project Financing Plan/East-Central AFRICA 105
Table 26: Overall cost and Financing Plan 106
List of figures
Figure 1: Proposed Ownership and Management for Micro-hydro Mini-Grid Systems 53
Figure 2: Proposed Execution Arrangements for Micro-hydro Mini-Grid Systems at National Level 54
Figure 3: Illustration of economic effect of Micro-hydro Activities in West African Countries 65
Figure 4: Opportunities for Load Curve improvement/displacement and revenue increase 83
Figure 5: Opportunities for Load Curve improvement/displacement and revenue increase 84
Figure 6: Load Profile Magoulumba-RCA 86
Figure 7: Proposed Execution Arrangements for Micro-hydro Mini-Grid Systems at National Level 89
LIST OF ACRONYMS AND ABBREVIATIONS
ABERME Benin Agency for Rural Electrification and Energy Management
AEC African Economic Community
AFD Agence Française de Développement
AfDB African Development Bank
AMADER Malian Agency for the Development of Domestic Energy and Rural Electrification
ARSE Autorité de Régulation du Secteur de l’Électricité au Togo/Electricity Sector Regulatory Agency
CAS Country Assistance Strategy
CAR/RCA Central African Republic/République Centre Africaine
CBO Community-Based Organization
CEDP Competitiveness and Enterprise Development Project
CEMAC Communauté Economique et Monétaire de l’Afrique Centrale
CFR Country Framework Report
CLIE Comité Local d’Initiative de l’Energie
COMESA Common Market for Eastern and Southern Africa
DE Direction de l’Energie
DGE General Electricity Directorate
DGHER Direction Générale de l’Hydraulique et de l’Electrification Rurale
DRC Democratic Republic of Congo
DSM Demand Side Management
Electrogz Public National Electricity company
ELGZ Electrogaz
ENDA Environmental Development Action in the Third World
ENERCA Energie Electrique de Centre Afrique
ESCO Energy Services Company
EU European Union
FMR Financial Monitoring Report
GEF Global Environment Facility
GHG Greenhouse Gas
GOR Government of Rwanda
GWh Gigawatt Hours
HFO Heavy Fuel Oil
IBRD International Bank for Reconstruction and Development
ICB International Competitive Bidding
ICT Information, Communications & Telecommunications
IDA International Development Association
IEPF Institut de l’Energie et de l’Environnement de la Francophonie
IRR Internal Rate of Return
JV Joint Venture
KIST Kigali Institute o f Science and Technology
kV Kilo Volt
kW Kilowatt
kWh Kilowatt Hour
LI Lahmeyer Intemational GmbH
LPG Liquid Petroleum Gas
LV Low Voltage
MFI Micro-Finance Institution
MinaLoc Ministry o f Local Government
MinInfra Ministry o f Infrastructure
MiniTerre Ministry of Lands, Environmental Protection, Water, and Natural Resources
MV Medium Voltage
MW Megawatt
NDF Nordic Development Fund
NEPAD New Partnership for Africa’s Development
NGO Non-Governmental Organization
OD Operational Directive
OP Operational Procedure
OPEC Organization of Petroleum Exporting Countries
PCU Project Coordination Unit
PPA Power Purchase Agreement
PPIAF Public Private Infrastructure Advisory Facility
PRSC Poverty Reduction Support Credit
PRSP Poverty Reduction Strategy Paper
PV Photovoltaic
RE Renewable Energy
RPM Regional Project Management
RURA Rwandan Utility Regulatory Authority
SBD Standard Bidding Documents
SHS Solar Home System
SIDA Swedish International Development Agency
SIL Specific Investment Loan
Sinelac National Electricity company o f the Great Lakes
SME Small and Medium-size Enterprise
SNEL National Electricity company of DRC)
SSM Supply Side Management
TA Technical Assistance
TOR Terms of Reference
UER Urgent Electricity Rehabilitation
UNDP United Nations Development Programme
UNEP United Nations Environment Programme
UNIDO United Nations Industrial Development Organisation
UPEGAZ Unit of Promotion and Exploitation of Gas of the Lake Kivu
UEMOA Union Economique Monétaire Ouest Africaine
VAT Value-Added Tax
Exchange rate: 1 US $ = 525 FCFA (May 2004)
Section I: Elaboration of the Narrative
PART I: Situation Analysis
1.1. Context and Global Significance
1. In April 2004, GEF approved a PDF intended to assist 10 Sub-Saharan African countries in the preparation of a first regional micro/mini hydropower Capacity Development and Investment in rural electricity access in Sub-Saharan Africa. With co-financing from IEPF and the collaboration of the African Development Bank, an international project preparation Steering Committee composed of UNDP/UNDP-GEF, AfDB, UNEP, UNIDO, UN-ECA, the World Bank together with E&Co Inc. and two African NGOs (ENDA and KITE) was established to launch project preparation through the 10 participating UNDP-Field Offices. Additional key players were the national directorates of Energy, which had been collaborating on the project concept in recent years with UNDP-GEF and IEPF under the aegis of “Francophonie”.
2. By way of a letter dated July 28th 2004 signed by the Burundian Minister of Communal Development followed up by a similar request dated July 29th 2004, which was signed by the Minister of Energy and Mineral resources, Burundi and UNDP-Bujumbura made a convincing case for the country’s participation in the first round of African Micro-hydro projects under UNDP-GEF. Principally, the need to assist Burundi on the same priority issues as in Rwanda, DRC and RCA was evident given the close geographical proximity with the above countries and the country’s documented sizable water resources in sharp contrast with the close to zero rural electrification rate.
3. In September 21-22, 2004, the above African countries along with Burundi gathered in Douala (Cameroon) to: (i) review progress made towards the preparation of the First African Regional Micro-hydro Project, including; (a) technical feasibility studies; (b) financial/economic feasibility with Micro-hydro systems maintenance arrangements at the national and regional levels; (c) review of the project’s legal and institutional due diligence; (d) analysis of the provisional environmental impact assessments; (ii) discuss co-financing arrangements to ensure timely submission of the project to GEF Council (original target submission date was May 2005); and (iii) inform the participating countries of the eligibility criteria guiding the selection of the micro/mini-hydro sites to be equipped through the intended project activities. An important illustration of the level of commitment and ownership of the project by these countries was the pulling of national resources worth over US$0.5 million under the institutional umbrella of UNDP to support the feasibility phase, cover the expenses for knowledge sharing events and cross-fertilization of national experiences.
4. As suggested by the participating countries’ electricity sector assessments/reviews, the beginning of any sensible attempt to provide productive rural electricity access through micro/mini-hydropower in ways that attract private sector financing is two fold: (i) mobilize and strengthen national capacity to manage and make the required adjustments to the sector’s regulatory/legislative framework (particularly, after many years of political isolation and donor absence in the post conflict countries) and (ii) take measures to significantly clarify the operational responsibilities of national utilities and improve the operational capacities of the national rural electrification agencies. Rural electrification rates in all participating countries are strikingly low and the prospect for improvement looks bleak given the focus of local energy institutions on urban electricity supply capacity increases. At the projected growth rate for rural electricity demand, and unless the use of a micro/mini-hydropower scheme has been successfully piloted, it will be extremely difficult to secure adequate private financing to meet rural electricity demand in the near future through micro/mini-hydropower systems. The most appealing option to governments in Sub-Saharan Africa could remain diesel-fired generators with even more reliance on fuel-oil instead of breaking the grip of the dependence on conventional fuels.
5. All ten countries were visited by the Technical Feasibility team composed of five experts with complementary expertise and their findings with the technical recommendations laid a solid foundation for additional field missions by the other thematic teams (ESW –Economic Sector Work for each country, Financial Analysis of Power Utilities in connection with rural electrification issues, Legal/institutional review of the on-going reforms, Participatory approaches and Social Analysis, Environmental Impact Assessments, Micro-hydro Systems maintenance planning etc.). Overall, the above investigations were executed with an eye to strengthening the synergies and avoiding duplication given that the gaps in one country’s analysis could be offset by insights from sector analysis from a surrounding country. The regional approach of this project was found useful in establishing a minimum level of national ownership on renewable energy policies and rural electrification access with a consensus on the roles and responsibilities of the various players. When such a dialogue is initiated and the funding is within reach as it is the case with the AfDB’s co-financing commitment, some cooperation can be expected particularly with the catalytic support of UNDP-GEF and the momentum that can be created by regional synergies. The micro-hydro power project will also reduce the overall project costs among participating countries through economies of scale in addition to its policy leveraging impact. The remarkable level of cooperation of the host National Directorates of Energy allowed the field visits of several sites which had been identified through prior donor funded activity and/or during the review and discussions that took place within the PDF-B exercise. The positive reaction from the targeted rural beneficiaries helped enrich the socioeconomic and environmental data collected to put in focus the development of the project under GEF SP-3 principally.
6. A sub-regional execution arrangement was agreed upon to allow for effective coordination, while maximizing managerial flexibility and efficiency. Given the political and social synergies as well as geographic proximity, the participating countries were grouped into three separate sub-regional projects:
· West Africa: Benin, Mali and Togo;
· Central Africa: Cameroon, Congo Brazzaville, CAR and Gabon;
· East-Central Africa: Burundi, Democratic Republic of Congo (DRC) and Rwanda.
1.2. Threats, Root Causes and Barriers Analysis
1.2.1 Barriers and Constraints to Micro-hydro power Development in participating countries
7. While the lifecycle costs of the electricity produced by small hydro power plants can be comparable to the price of non-subsidized electricity from the grid and lower than electricity costs of a diesel generator, different market barriers have so far prevented the broader adoption of small hydro power plants for rural electrification. During the preparatory phase of this project, an analysis of the barriers to the adoption of micro/mini-hydropower[1] in West, Central, East-Central African countries was conducted at the regional level. The outcome of the investigation served as a basis for the design of the current project. The common threads that were identified throughout the region can be summarized as follows:
Policy Barriers
· Lack of an enabling policy, legal and regulatory framework for the development and operation of small hydro power projects by the private sector, touching issues such as land and water use rights, tariff setting, required certificates and licenses, conflict solving procedures, possible incentives and competitiveness with other, eventually subsidized energy sources (such as diesel or grid electricity) etc.
· Weak institutional framework and capacity, at all levels (sub-regional, national and local) to support the rural electrification on the basis of the available renewable energy sources. For instance, only very few or none of the recently established Rural Electrification Agencies in Sub-Saharan Africa appear to have the development of renewable energy solutions as a component of their principal mandate; and there are no electrification agencies or institutions that are currently considering – without GEF intervention – a focus on micro-hydropower for rural areas.