In
Sri Lanka the supply of energy is mainly from biomass,
electricity and petroleum oil. Petroleum products and
electricity are the major commercial sources of energy
used by the households, industries and the commercial
sectors. The rural domestic sector uses mainly biomass
(mostly fuel wood).
Owing to economic growth and population increase, the
consumption of energy has been escalating annually.
However, constraints lie in meeting this demand since
the power generation, transmission and distribution
capacity have not increased simultaneously. The population
in Sri Lanka receiving electricity from the main grid
is in the region of 62%. The majority of 38% who are
not connected to the main grid is rural population who
constitute about 70% of the total population of the
country. Some rural communities living in remote areas
do not have the prospect of enjoying grid-connected
electricity in the foreseeable future. The main reasons
being paucity of funds to extend the grid to these areas
and low density of population in these locations make
it a non-viable operation. The main grid supply has
become unreliable due to high dependence on hydropower
and a large demand–supply gap. It has also become
very expensive as a result of recent increase in capacity
through high cost thermal power. In this background
there was a compelling need for exploring decentralized
sources of energy.
| 2.
EARLY INITIATIVES IN DECENTRALIZED RURAL ENERGY
|
The
Intermediate Technology Development Group-South Asia
(ITDG) has conducted a series of studies since 1980
on Village Hydro Schemes (VHS). They eventually carried
out the formulation and implementation of VHS in 1990s.
The strategy adopted by the ITDG is as follows:
Introduce micro hydropower as a decentralized source
of energy
Develop a feasible public awareness campaign to educate
the masses
Setup a feasible system where the implementation,
management, operation and maintenance are carried out
by the beneficiaries VHS, developed with the technical
assistance of ITDG, had the following objectives:
Development of local capacity - to resolve engineering
and technical issues pertaining to micro-hydro projects,
and - to design and implement micro-hydro projects
Replication of village hydro
Capacity building of public and private sector organizations
Information collection and disseminations
Influencing policy makers to promote micro-hydro power
generation concepts
Networking internationally to share experiences By
the end of 1997 there were 36 Village Hydro Projects
developed by ITDG.
Solar PV system is another decentralized energy system
introduced in Sri Lanka. Due to the relatively high
cost of solar PV, direct commercial sales have been
limited. The success rate of these types of projects
has been mixed before 1998. However, about 5000 systems
had been installed by 1998.
| 3.
WORLD BANK INVOLVEMENT IN RURAL ENERGY SERVICES
DELIVERY IN SRI LANKA |
In
response to a request from the Government of Sri Lanka
(GOSL), the World Bank and the Global Environment Facility(GEF)
approved Energy Services Delivery (ESD) project. This
consisted of a US $24.2 million IDA credit and a US
$5.9 million GEF grant on the 18 th of March, 1997.
The credit program was for private sector and community
based provision of grid connected and off-grid electricity
using renewable energy resources. The ESD project was
very successfully completed in December 2002. It ranked
highly in Principal Performance Ratings of the World
Bank.
| 3.1.
VILLAGE HYDRO PROJECTS |
ESD
Project has supported the installation of 350 kW of
Village hydro systems serving 1732 beneficiary households
in 35 projects. There were further 49 projects at various
stages of completion, transferred to the follow-on Renewable
Energy for Rural Economic Development (RERED) Project.
Issues faced at the beginning:
Project development heavily dependent on consultant
assistance, as village communities are unable to handle
technical, institutional and financial matters on their
own
Very few project consultants/developers working on
village hydros
Participating Credit Institutions (PCIs) unfamiliar
with technical issues, ascertaining project costs and
doing business with community organizations
Supervision cost for PCI is high relative to the small
size of the loan
A sustainable, r eplicable village h ydro implementation
model not available Key Success Factors:
Development of Technical specifications to ensure
minimum standards
Project cost reduced by capacity related subsidy
Project preparation cost of consultants financed through
a grant
Technical assistance for capacity building
Partnership with provincial council
| 3.2
SOLAR HOME SYSTEMS (SHSS) |
The
solar industry was at a nescient stage when the project
became effective with 2-3 small operations (Solar Power
and Light, Sarvodaya, RESCO) selling roughly 20 –
30 systems/ month in 1998. SHS market took some time
to take off. However, ESD project catalyzed the market
for SHSs and the average annual sales were about 850
systems/month in 2002.
Issues
faced at the beginning:
Lack of consumer awareness
Very few ESD compliant products in the market
High retail prices of solar PV systems
Non-availability of strong distribution channels needed
for market penetration
False promises of grid extensions by politicians
PCIs rural credit capability limitations Success Factors:
Technical standards, warranty arrangements and consumer
protection scheme
Technical assistance for technician training
Tripartite relationship between credit provider, supplier
and consumer-several innovative arrangements evolved
Partnership with provincial councils for supplementary
subsidy in three provinces with lowest electrification
rates
ESD
Credit Program Achievements with regard to Village Hydro
& Solar Home Systems
------------------------------Plan
-----------------------------------Actual
Village
Hydro -------------20 projects ---------------------------36
projects
-----------------------------2,000
homes -------------------------1,732 homes
-----------------------------200
KW
Solar
Home Systems ----15,000 homes -------------------------21,000
homes
| 4.
ROLE OF DONORS IN RURAL ENERGY SERVICES DELIVERY
|
It
is observed that there are several positive results
to the World Bank funded ESD credit project and the
present RERED project. The donor agencies have a preference
for renewable energy sources, which are environmentally
friendly rather than the non-renewable sources. The
donor funding can be directed towards decentralized,
renewable energy options to create or develop the market.
A main constraint in the development of these systems
has been village communities’ inability to handle
technical, institutional and financial matters on their
own. There is a dearth of consultants and suppliers.
Donors could intervene to develop capacity of various
stakeholders. Another setback in decentralized energy
systems is lower reliability; and the users are not
guaranteed the outcome of the product. Donor agencies
can play a role in introducing minimum standards through
specifications, allowing onlyacceptable quality equipment
and introducing a warranty mechanism so that product
quality is guaranteed.
| 5.
NEED FOR INITIAL CONCESSIONAL CAPITAL |
The
capital cost of RESDMs is prohibitively high for rural
communities. Therefore initial concessional capital
from the donors will help development of RESDMs. Initial
concessional capital can be in 2 ways as seen from ESD
and RERED projects:
Project co-financing grant based on the capacity
Concessionary term lending through PCIs In addition
to the co-financing grant, the provincial councils support
these developments with a grant of their own. For the
sustainability of RESDMs, there is a need to continue
with
a co-financing grant whether it is from a donor or any
other institutions.
6.
IMPROVED COORDINATION OF
FINANCING LINES
|
When there are several financing lines available for
a project, it is essential to improve coordination for
proper use of funds and avoiding delays. In case of
ESD and RERED projects, Administrative Unit (AU) coordinates
all the financing except for the grant from the Provincial
Council. However, we have observed delays in project
implementation and non-payment of suppliers/contractors
in case of Village Hydro development. Various grants,
loans and other payments to different stakeholders are
given below.
Project
preparation grant------------ Developer
Loan
from World Bank through------- PCI
Central Govt
Loan
for the sub project from PCI--- Consumer
Co-financing
grant----------------- Consumer
Monitoring
grant------------------- PCI
Design
Verification Fee------------- Consultant
Completion
Verification Fee--------- Consultant
The
co-financing grant is received by the consumer on receipt
of satisfactory completion report. The suppliers of
equipment extend them credit until then. Some suppliers
claim they are not paid by the consumer even after co-financing
grant has been received.
7.
CONCLUSIONS AND RECOMMENDATIONS
|
Private RESDM is a growing need due to inability of
national grids to supply quality, low cost electricity
to rural areas
Rural communities do not possess financial, technical
and organizational capacity to develop RESDMs on their
own. However, we have observed Village Hydro Consumer
Societies forming an Association of their own. This
association has organized capacity development projects
for their members. In some instances these are sponsored
by the World Bank
Donor intervention in financing, capacity development,
ensuring supply of reliable systems and development
of organizational arrangement to coordinate between
various stakeholders is needed
Involvement of local financial institutions that have
access to and expertise in working with rural communities
is essential for sustainability of RESDMs
There is a need for a clear Government Policy on RESDMs
and stand-alone renewable options Reform and regulation
in the main sector shall be extended to RESDMs
Establishing an organizational setup to develop, coordinate
and facilitate capacity development of Rural Energy
Service Delivery Sector similar to Administrative Unit
of ESD and RERED Projects is needed on or before completion
of RERED project
