Restoring Service Supply in Yemen’s Electricity Sector Input to the Yemen Policy Note no. 4. on Inclusive Service Delivery WOLD BANK GROUP 1 B Table of Contents Acronyms iii Background 1 Introduction: Situation before the conflict 1 Conflict related damages and challenges 1 Key principles for engagement in-conflict and post-conflict 2 Restoring electricity services in-conflict and post-conflict in Yemen\ 3 Key considerations 8 i ii Acronyms ACG Arab Coordination Group DNA Damage and Needs Assessment EU European Union GCC Gulf Cooperation Council GDP Gross Domestic Product HFO Heavy Fuel Oil IsDB Islamic Development Bank kW Kilowatt kWh Kilowatthours MEE Ministry of Electricity and Energy MENA Middle East & North Africa MW Megawatt PCNA Post-Conflict Needs Assessment PEC Public Electricity Corporation PMU Project Management Unit PWP Public Works Project REAP Rural Energy Access Project SEDF Small and Micro Enterprises Development Fund SFD Social Fund for Development SMEPS Small and Micro Enterprise Promotion Service UN United Nations iii A. Background B. Introduction: Situation 1. This note is a part of a series of before the conflict policy notes prepared by the World 3. Already before the conflict, much Bank in anticipation of a post-con- of Yemen’s population was deprived flict transition in Yemen. These notes of basic electricity services. Even aimed to identify immediate priorities before the conflict, Yemen was con- for stabilization, recovery and restora- sidered the least electrified country in tion of services and infrastructure in the the MENA region, with a pre-crisis ac- aftermath of Yemen’s current conflict. cess rate from all sources of only 55 A subset within these notes focused percent.1 The country’s per capita elec- on ways to restore service delivery in tricity consumption stood at 243 kWh in an inclusive manner immediately after 2013, almost one-sixth of the regional conflict. As such, these notes exam- average. Installed capacity was about ined short-to-medium-term institutional 1,200 MW, giving only about half the challenges facing the restoration and population access to (often unreliable) improvement of service across sec- electricity. The remainder of the popu- tors. They focused on the immediate lation lacks any form of electricity ac- post-conflict priorities and challenges cess, with severe consequences for facing Energy, Water, Telecommunica- socioeconomic development and pov- tion, Education, Health, and Transport erty. sectors in restoring services while also contributing to higher-level objectives 4. There had been little progress in of addressing systemic inequities and the energy sector over the last de- reinforcing trust in the state. The notes cade. The sector made little progress make practical suggestions to the Gov- on improving operational efficiency ernment of Yemen and international and quality of service or in reduc- development partners to provide im- ing high electricity losses, while cost- mediate post-conflict support to ensure ing the country over 10 percent of its empowerment, accountability, and bet- GDP annually through direct and indi- ter governance in service delivery. rect subsidies. No major infrastructure was completed in the electricity sector 2. The current paper focuses specifi- since the Marib power plant, which was cally on how support to Yemen’s Elec- contracted in 2005 and came online in tricity services can be mobilized more 2009. Electricity supply and demand effectively to restore public services in remains seriously out of balance. In- a more inclusive manner immediately stalled generation capacity was about after the conflict ends Yemen 1,300 MW in 2015, which was 20% 1- World Bank (2012). Interim Strategy Note for the Republic of Yemen. FY20132014-. 1 short of peak demand. Until 2009, all Bank, UN, EU and IsDB), the ongoing electricity was generated through the conflict has significantly damaged Ye- combustion of heavy fuel oil (HFO) and men’s electricity infrastructure and cut diesel, when the first gas-fired Marib I off most of Yemen’s population from power plant was commissioned. The PEC’s services. Public electricity sup- rest consists of old and inefficient HFO/ ply has been completely shut down in diesel fired plants owned by Public most populated areas and PEC has Electricity Corporation and small die- become virtually bankrupt. The cur- sel units contracted through short- rent supply of public power capac- term rentals with the private suppliers. ity is averaging 200–250 MW, most In 2010, HFO and diesel fired-power of which is supplied to the port cities plants accounted for about 70 percent Aden and Al-Mukalla in the South. The of grid-connected generation. In addi- capital Sana’a, which has a demand of tion, there are millions of small diesel around 500 MW, is barely supplied by units owned by industry, commercial 40 MW for a few hours a day. The rest establishments and households to of the country, including the port city Al combat the frequent blackouts of the Hodeida, is lacking access to any reli- lack of access to the grid-connected able public energy services. Using fuel electricity. The key feature of the HFO/ sales to electricity plants as an indica- diesel dominated power generation sys- tor, total power generation in 2015, in- tems is the associated high electricity cluding from PEC and private genera- costs and heavy pollution. Despite an tors, dropped by 77 percent compared average consumer tariff of about US$8 to 2014. cent/kWh, which is higher than the 6. The top-down model of service consumer prices in most MENA coun- delivery has been replaced by a tries, revenues covered only about 25 combination of locally managed ur- percent of the economic cost of supply. ban public services and a private- Even in Sana’a, the service quality was sector driven bottom-up model. poor with typically 2-3 outages per day The almost complete collapse of pub- for over 4 hours. Most of the grid-con- lic electricity supply and limited fuel nected consumers in other parts of the availability for diesel generators has country suffered from more frequent spawned a booming industry for small daily load shedding of longer hours. to medium-scale solar systems, espe- cially since 2015. A recent market as- C. Conflict related damages sessment commissioned by the World and challenges Bank estimates that over the last five 5. The civil war has significantly years, around 1 billion USD has been worsened the electricity supply situ- invested into solar PV systems for the ation from an already low level, with residential sector in Yemen. Based on severe impact on health, education, interviews, the report estimates the water and sanitation, and the private market penetration of PV systems at sector, which all rely heavily on a around 50% of households in rural ar- functioning power supply. As docu- eas and 75% in urban areas. The mar- mented in the World Bank’s Damage ket is entirely driven by the private sec- and Needs Assessment (DNA Phase tor, with a supply chain that ranges from I) and the multi-agency DNA (World trading houses that import panels, con- 1 trol units and batteries from the GCC violence for the future. The continued to small-scale electronics retailers that weakening of national institutions has expanded their business to solar pan- also diminished chances of sustain- els. In the capital Sana’a alone, over able peace as any peace-agreement 170 such retailers registered with the would be undermined without a strong Government to enter the solar market institutional foundation to safeguard over the period 2014 to 2016. While a its terms. Therefore, any recovery and supply shortage limited growth until the reconstruction plan post-conflict would second quarter of 2015, prices have also have to mandatorily focus on re- come down significantly since Q3 2015 inforcing state institutions—while ad- as supply has caught up with demand. dressing urgent humanitarian needs— to prevent the slide back into conflict. 7. The poor have limited access to Experiences from around are replete solar so far, and there are concerns with instances where the singular focus about the quality of the installed on post-conflict humanitarian relief— technology. The market assessment without regard for institutional transfor- found that almost all systems are paid mations—have ended up being costly in cash and that debt finance is not missed opportunities for breaking the readily available to most households. cycle of violence. While several financial institutions offer loans for solar systems, these are of- 9. There is thus a clear need for new ten mainly targeted at government em- thinking on Yemen to support more ployees and costumers able to provide sustainable and inclusive ways of guarantees. This suggests that access service delivery during conflict and to solar is so far limited for the lower immediate post-conflict periods. In quintiles of the population, especially this context, the key challenge for Ye- in rural areas. Furthermore, the market men’s development partners is to de- assessment many household solar in- vise new and innovative ways to sup- stallations suffer from high failure rates port the country, to not only recognize due to improper system design, poor the fundamental causes and effects of quality components, and a lack of af- conflict and fragility but also, important- ter-sales service. Households that gain ly, enhance the resilience and coping access to electricity through solar are capabilities of communities and house- thus at a risk of losing it again in case holds. Therefore, these notes on in- the system fails. clusive service delivery—including the current note on electricity services— D. Key principles for en- propose a new approach that focuses gagement in-conflict and on attending to urgent service delivery needs in the most affected parts of Ye- post-conflict men while also incrementally enhanc- 8. Yemen is trapped in a vicious ing inclusiveness, resilience and thus, ‘cycle of conflict’ with chronical- the effectiveness of service delivery ly weak state institutions directly institutions. contributing to the current round 10. Because the limited functional- of violence. This violence, in turn, ity of the energy sector has severe has further undermined state institu- consequences for other sectors tions thereby portending even more 2 and the overall Yemeni economy, lic Electricity Corporation (PEC) and restoring electricity supply will be the Ministry of Electricity and Energy a priority for any in-conflict or post- (MEE), did not have adequate institu- conflict engagement. Reestablishing tional capacity to implement large in- access to electricity will be a highly vis- vestments with multiple contracts in a ible contribution to restoring public ser- timely manner even before the conflict: vice delivery and critical for restoring only one new large power plant was peace and revitalizing economic activ- built in the last fifteen years. Progress ity. Moreover, it is likely to contribute to was hindered by: a decrease in productivity, deteriora- a. Limited capacity of sector tion of the business environment, and institutions to prepare finance- reduction in the country’s gross domes- able projects; tic product. Assisting Yemen early on b. Inability to make timely in the reconstruction of Yemen’s elec- procurement decisions; tricity system will lay the foundation for c. Poor execution and su- long-term engagement to improve gov- pervision of contracts. ernance and resilience in the energy 12. This was despite significant lend- sector, support to livelihoods’ stabiliza- ing made available and technical as- tion and recovery, and expand access sistance to the PMUs in the form of to sustainable energy. engineering consultants hired to sup- 11. A recent review of the World port decisions and the procurement Bank’s interventions2 over the last process. The 2015/16 conflict has led 15 years in the energy sector con- to further weakening of the sector in- cluded that alternative models for stitutions, fragmentation of institutional procurement and/or project imple- authority and deteriorated capacity. mentation may be needed for in- 13. The development of the sector conflict or post-conflict interven- more broadly mirrors the Bank’s ex- tions.3 The World Bank’s interventions perience, with only one power plant over the last 10 years in the energy constructed over the past 10 years. sector have been largely unsuccessful, There are three overarching lessons: in part due to what turned out to be a a. Building bulky, large-scale mismatch between the Bank’s strategy energy infrastructure in Yemen and the governance and institutional within the existing institutional capacity in Yemen4. The World Bank’s framework is close to impossi- strategy in Yemen’s electricity sector in ble. The main public institutions the past decade had been to finance in the energy sector, specifically large-scale, public-sector owned in- the Public Electricity Corporation frastructure jointly with other donors, (PEC) and the Ministry of Elec- including from Gulf States, the Euro- tricity and Power (MoEP), did not pean Union and international finance have adequate institutional ca- institutions. However, even before the pacity to implement large invest- conflict, the main public institutions in ments with multiple contracts in the energy sector, specifically the Pub- 1, 2. The Bank approved three IPFs with a total volume of US$90mn between 2006 and 2012. Disbursement for all three projects was very slow as decision making in the sector institutions, especially in procurement, took much longer than expected. None of the projects yielded measurable outcomes. 3. Options for Project Management for Emergency Infrastructure Financing, Draft Note. 4. The World Bank, RY Power Sector Project: Implementation Completion Report, Washington DC, 2016 3 a timely manner even before the ergy infrastructure investments. Any conflict: only one new large power alternative institutional options for proj- plant was built in the last fifteen ect management post-conflict should years. This was despite signifi- adhere to the following principles: cant lending made available and a. Simplicity. In view of the lim- technical assistance to the PMUs ited government capacity – and in the form of engineering consul- institutions that make very little tants hired to support decisions use of the capacity that does exist and the procurement process. – complex institutional arrange- b. New, project-specific pub- ments are unlikely to work. If a set lic sector institutions created for of options is pursued in parallel, the purpose of infrastructure de- the portfolio of options has to be velopment were no panacea. assessed in aggregate so as to Examples of such new public not overburden the Governm sector institutions in the energy ent. sector include institutional vehi- b. Flexibility. Reengagement cles created for implementation should seek to map institutions to of the Rural Energy Access Proj- solutions, rather than pursuing a ect (REAP) and the Mocha Wind one-size-fits all approach. Rigidity Project, which faced the same ca- should be avoided to ensure the pacity and procedural constrains institutional arrangement can be as PEC and MoEP. adapted to changing realities on c. Distributed infrastructure the ground. investments worked better, but c. Service delivery. Emergen- may be difficult to scale nation- cy reconstruction of infrastructure wide. The distribution grid compo- should focus on critical public ser- nent of the Power Sector Project, vices, including health services, managed by the regional offices water supply, street lighting, elec- of PEC, was the only component tricity and fuel supply and schools. of the project that showed some d. Pro-poor. Emergency recon- (limited) results. Community-led struction of infrastructure should ownership and management of prioritize services that target poor energy infrastructure, e.g., as at- urban households and rural com- tempted under the REAP, can munities. improve responsiveness to local e. Innovation. Post-conflict needs but there is no one-size- procurement should make re- fits-all institutional model that alistic and practical use of the works across all communities in Bank’s new procurement frame- Yemen. The learning process that work, specifically donor-led pro- is needed to adapt models to lo- curement and hands-on extended cal circumstances may slow down implementation support (HEIS). a rollout to a national level. 14. This means that there may be a need to explore alternative models of procurement and financing en- 4 E. Restoring electricity ser- on a regional level first before mov- vices in-conflict and post- ing to the national level. Govern- ment reports indicate that all surveyed conflict in Yemen transmission lines in the country had 15. Restoring and expanding energy suffered at least partial damage by Oc- access will require a portfolio of in- tober 2015. It is very likely that the situ- vestments embedded in a program ation has only deteriorated since then. of significant energy sector reforms. Experience from the Power Sector Preparing such a portfolio will involve: Project suggests that restoring inter- • Quantifying the financial resources regional transmission will require inter- needed for restoring, expanding national contractors as local firms do and sustaining energy access; not have enough capacity. These will • Identifying business models to be hesitant to return to Yemen even build infrastructure and implement after peace is restored. The only prac- and grow energy services, as well tical approach to restoring grid-based as means to support them; power supply may therefore be to start • Developing a strategy to rebuild the from municipal ‘island grids’ and then investment climate in the upstream gradually expand the reach of supply oil and gas sector; through interconnections. • Defining conditions on the ground 18. The DNA also points to severe that need to be present to trigger dif- damage to the urban distribution ferent forms of engagement; grid, which suggests that the dis- 16. The current status of informa- tribution grids in all major cities tion on the electricity sector and the require significant rehabilitation to sector institutions suggests that in- restore urban power supply. The conflict interventions to restore ac- DNA only contains information on the cess to affordable electricity should status of the distribution substations in follow a two-pronged approach. Aden, Taiz, and Sana’a, but this infor- First, to provide funding and advice to mation offers insights into the status of what were the former regional offices the distribution grid overall. In Aden, of PEC (municipal level) to repair and Taiz, and Sana’a, 25 percent, 50 per- reconstruct the heavily damaged ur- cent, and 37 percent, respectively, of ban distribution grids. A strong empha- the surveyed distribution substations sis would be on restoring the quality of are known to have suffered partial or public services such as street lighting, complete damage as of October 2015. water pumping, telecommunications, 19. Municipal authorities would need government services, health, educa- material and equipment to rehabili- tion, etc. Second, to expand access tate the heavily damaged urban dis- to solar energy for the rural and urban tribution networks. This would allow population. grid-based electricity supply to be re- Urban grid rehabilitation stored within specific parts of the coun- 17. Many of the major transmission try, as a precursor for a broader effort to linkages in the country are dam- restore supply across the transmission aged, suggesting that grid-based grid. The focus should be on standard- electricity supply has to be restored ized grid components and material that 5 can be procured rapidly. Components phase. Yemen’s authorities have strug- to be supplied include but are not lim- gled for decades to expand energy ac- ited to (a) mobile, ‘plug and play’ 33/11 cess through the expansion of the na- kV substations; (b) distributed genera- tional grid, and recurring conflicts have tion sets, including solar-diesel hybrid repeatedly set back whatever small systems; (c) overhead line hardware; progress was being made. A protracted (d) compact distribution transformers conflict would mean that a centralized, and low-voltage substations; (e) switch- nation-wide electricity grid is a distant gears, lighting arrestors, and fuses; and prospect and electricity supply would (f) aluminum and copper conductors. for a foreseeable future be provided In general these components are rela- through a mix of private sector driven tively easy to move around, as even distributed energy, in particular solar the larger components such as sub- and diesel, and smaller ‘island’ grids in stations are available in skid-mounted urban population centers that are op- or containerized designs. However, erated by what are now the regional substations would still require rela- units of the Public Electricity Corpora- tively good roads to be supplied to the tion (PEC). Strengthening the service target destination. Hence the focus in delivery capacity of these units—both the short-term should be on ports to fa- technically and institutionally—will be cilitate rapid delivery of the material to critical to restore electricity supply over the implementing agencies. Candidate the coming years. cities include Aden and Al-Mukalla in the South and, if possible, Al-Hodeida. Expanding access to solar power Yemen’s distribution grid is relatively 22. Given the difficulties in devel- standardized across the country, with oping new generation assets or most regions relying on 33/11 kV volt- expanding energy access over last age levels. decade, there is an opportunity to 20. A strong emphasis should be take advantage of the emerging so- on restoring the electricity supply lar supply chain to provide decen- to critical public services such as tralized power under a model driven street lighting, water pumping, tele- by local citizens and private sector. communications, government ser- Distributed solar has been one of the vices, health and education. This few thriving industries in Yemen during would be achieved by prioritizing those the past two years and is a rare suc- districts and parts of the grid that offer cess story for the private sector in the the highest dividend in terms of restor- conflict. However, access has been un- ing public services, e.g., circuits that even, with most systems being owned connect hospitals or water infrastruc- by better-off households in urban ar- ture. eas. 21. Strengthening service delivery 23. Expanding and sustaining ac- on a municipal level would contrib- cess to solar power could be part ute to a more decentralized service of a “new social compact” in the delivery model and build capacity electricity sector. Stand-alone solar that is critical for the reconstruction systems and/or solar-powered mini- 6 Figure 1: Service delivery channels in the Yemen’s electricity sector. The proposed project would aim to strengthen the private sector driven, bottom-up service delivery model that has emerged during the conflict (marked in bold/red in figure b). a) Pre-crisis b) Coping mechanisms during crisis c) Possible scenario post crisis MEE Governorates MEE Governorates MEE Governorates GARE PEC (HQ) GARE PEC (HQ) GARE PEC (HQ) Off-grid supply 7 PEC Publicly-owned PEC Publicly-owned PEC Publicly-owned SHS RESPs RESPs RESPs (provincial divisions) minigrids (provincial divisions) minigrids (provincial divisions) minigrids On-grid supply On-grid supply On-grid supply Private sector Private sector Private sector Private sector Private sector Private sector Public sector Public sector Public sector (households) (commercial) (households) (commercial) (households) (commercial) Diesel generators SHS SHS Off-grid supply Off-grid supply Off-grid supply Diesel generators Diesel generators Legend: GARE: General Authority for Rural Electricity Sector entities MEE: Ministry of Electricity and Energy Service provision PEC: Public Electricity Corporation Main entities/channels RESP: Rural electricity service provider Current role unclear SHS: Solar home systems grids could a more resilient infrastruc- sources would initially be more costly ture and, if powered by renewable en- than current (subsidized) grid-electrici- ergy, replace the infrastructure needed ty tariffs in Yemen, it is more affordable for importing, refining and transporting than electricity from the informal sys- fuels. They could also reduce costs: tem of diesel generators, which is the While electricity from distributed re- only real alternative for most people in newable energy sources would initially low-access regions. Experience from be more costly than current (subsi- the region, including in Iraq and Kurdis- dized) grid-electricity tariffs in Yemen, it tan, suggests the willingness to pay is is more affordable than electricity from there if the level of service is high. the informal system of diesel genera- Medium-term, post-conflict tors, which is the only real alternative 26. Leapfrogging to more resilient, for most people in low-access regions. decentralized energy services looks Experience from the region, including feasible for part of Yemen’s electric- in Iraq and Kurdistan, suggests the will- ity consumers, especially in rural ingness to pay is there if the level of areas. This could be predominantly service is high. driven by the private sector, but public 24. In addition to energy services to investments or support would be need- households and commercial estab- ed to expand access to public services lishments, there is an urgent need and less affluent communities. for restoration of energy services 27. Investments in larger-scale in- for water extraction, preserving food frastructure may be required in the supply chain and provision of medi- medium-term to achieve economies cal services. Quick and urgent solu- of scale in urban areas and enable tions for decentralized provisions of industrialization. power supply to these sectors should factor in solutions provided in other conflict countries as well as the com- F. Key considerations plex relationship between incumbent 28. The main risks to any interven- PEC, government and its departments, tion relate to (a) the political and se- other factions, regional diversity, role curity situation, which if it changes sig- of regional players, civil society institu- nificantly may reverse any gains made; tions and the private sector. (b) the fiduciary and technical capacity of the implementation partners, which 25. Restoring and expanding access may limit the pace at which interven- to electricity through distributed tion can be implemented; and (c) the solar would contribute to building political economy of the sector, as is- more inclusive, bottom up service sues such as the non-payment of sal- delivery driven by the private sector. aries may limit the pace at which any Expanding distributed energy creates intervention can be implemented. jobs, strengthen the private sector, pro- vide a more resilient energy infrastruc- 29. The institutional arrangements ture and significantly reduce the need in particular would require careful for fuel import, refining and transport. It consideration. The experience from could also reduce costs: While electric- the Bank’s recent engagement sug- ity from distributed renewable energy gests that better delivery channels will be necessary to improve the perfor- 8 mance of the energy sector in Yemen. private sector. This could work well in Many recommendations of previous sectors that strived despite the con- analytical assessments turned out to flict, such as solar energy, and where be out of sync with the GoY’s imple- there is a strong business case post- mentation capacity. The lending proj- conflict. ects for alternative generation sources d. Community-led project – mostly grant-financed – were closed management, where the Government largely undisbursed, despite the coun- or donors would specify general proj- try’s low generation capacity and the ect requirements and institutionalize fact that most existing plants run on the fund allocation process but would hugely expensive imported diesel. leave project management to the local communities. The most obvious chan- 30. Alternative institutional options for nel for such an approach would be to project preparation, procurement deci- expand funding to, and broaden the sions and execution/contract manage- scope of eligible infrastructure proj- ment for reconstruction of infrastruc- ects of the Social Fund for Develop- ture projects include: ment. a. Centrally coordinated proj- e. Sector-led project manage- ect management by a cross-sectoral ment with implementation support, PMU, which like the Executive Bu- where the traditional public sector reau is integrating functions across institutions (ministries, SOEs) take line ministries, but whose mandate responsibility but are supported by in- would include not only planning but ternationally funded project manage- also project identification, prepara- ment staff that are seconded to the tion, appraisal and procurement. Such institutions. a ‘reconstruction agency’ would be a transitionary structure with a limited 31. The advantages and limitations of mandate (e.g., three-years). the different options are summarized in b. Donor-led project manage- Table 1 next page. ment, where Government is involved 32. The current status of Yemen’s in prioritization but donors prepare energy sector suggests that a port- projects, procure on behalf of the folio of options would be most suit- Government and execute/manage able for re-engagement: contracts directly; hand-over could a. Option B could be an al- happen either directly after construc- ternative for larger-scale infra- tion or after a certain time of asset structure post conflict as the operation (illustrations range from the donor-led project management recently approved emergency project could compensate for the sector of World Bank managed by UNDP or institutions’ lack of implementa- potential management of projects by tion capacity. Procurement of donors from Gulf countries). the equipment would be done c. Private sector led project on behalf of the client, either by management, where the Government the Bank or by one of the mem- or donors would specify general proj- ber institutions of the Arab Co- ect requirements and institutionalize ordination Group (ACG). Upon the fund allocation process but would delivery, the local implementa- leave project management to the local tion partners would install the 9 Table 1: Alternative options for infrastructure project management Option Advantages Limitations May not be suitable for country with multiple Could enable high-level coordination to power centers, as likely in post conflict Yemen match donor funds and priority needs Possibly difficult to coordinate with / ensure Centrally coor- Could build on experiences/institutional smooth hand-over to line ministries A dinated project setup of Executive Bureau Low responsiveness to local needs management Could be targeted at the poorest citi- Mandate too short for greenfield projects zens Mandate too short for asset ownership / super- Possibly preferable to some donors vision High capacity to restore infrastructure services rapidly across procurement cycle Political acceptability within Yemen may be low, Suitable for large infrastructure especially linked to specific donors Potentially quick restoration of infra- Donor coordination may be difficult Donor-led proj- structure B Possibly lower accountability and transparency, ect management Fits in economic and industrial strategy depending on donor systems of some of key donors, may therefore Sustainability of efforts post construction may be preferred by donors and lead to be difficult to ensure greater mobilization of donor resources Could be targeted at the poorest citi- zens May not reach those with least ability to pay Resources can be mobilized rapidly Lack of local capacity in many fields Private sector- High responsiveness to demand Risks may for some time remain too large for C led project Strengthening of private sector, provi- foreign contractors to commit to projects in management sion of employment and diversification Yemen of economy as associated benefits May not be suitable for larger or greenfield infrastructure May not be suitable for larger infrastructure Existing institutions such as PWP and SFD may Community-led be overloaded if tasked with reconstruction project manage- High responsiveness to local needs work across all sectors ment through Could build on existing institutional Possible conflicts of interest with formal D the Social Fund setup of SFD government institutions, as institutions such for Development Could be targeted at the poorest citi- as PWP and SFD currently exist outside of the or a comparable zens formal government structure institution Coordination to match donor funds and priority needs possibly more difficult Lack of institutional capacity, especially in the Sector-led proj- Capacity building would happen in criti- energy sector, make this approach unsuitable ect management cal sector institutions F for large projects with many contracts with implemen- Could be targeted at the poorest citi- May not be suitable for country with multiple tation support zens power centers 10 equipment where needed. The the program can build on prov- local implementation partners en, widely adopted institutional would be the respective region- model, such as the SFD or the al divisions of PEC, where these PWP. are still functional, or otherwise d. Option F (Sector-led the municipal authorities. project management with imple- b. Option C (private-sector mentation support) would be led) would be a suitable in- suitable for larger-scale infra- conflict or post-conflict inter- structure post conflict, how- ventions to scale up distributed ever only with extensive imple- energy services using solar en- mentation support, as the post ergy, building on the existing, conflict capacity of PEC and private-sector driven delivery ministry is likely to be further channels. These could be sup- constrained compared to pre ported through external funding conflict. provided to consumers through 33. Project identification would one or several financial interme- have to be consistent with (or done as diaries (private sector or NGOs). part of) the government’s Post-Conflict The financial intermediaries Needs Assessment (PCNA). could be selected from the com- 34. Procurement under any of the in- mercial banks and NGOs that stitutional options may also have to be already provide financing for so- consistent with Yemen’s legal frame- lar systems, including the CAC work which has, among others, rela- Bank, the Yemen International tively stringent requirements for pro- Bank, the Yemen Commercial curement approval. Bank, the National Microfinance 35. Ultimately, the choice of institution- Foundation, the Alkurami Islam- al arrangement for post-conflict infra- ic Micro Finance, Azal Micro Fi- structure investment has to be made nance and the Small and Micro by the Government. However, donors Enterprises Development Fund can facilitate decision by fleshing out (SEDF) (or other relevant inter- technically sound options. national NGOs). 36. Monitoring and evaluation (M&E) c. Option D (Community- could be arranged through a third par- led project management) would ty, such as a local or international NGO be suitable in-conflict or post- active in the targeted areas or a private conflict intervention to scale contractor. up distributed energy services if 11