ONE GOAL, TWO PATHS 64669 One Goal, Two Paths One Goal, Two Paths Achieving Universal Access to Modern Energy in East Asia and the Pacific Washington, DC © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 14 13 12 11 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The �ndings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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ISBN: 978-0-8213-8837-2 eISBN: 978-0-8213-8870-9 DOI: 10.1596/978-0-8213-8837-2 Library of Congress Cataloging-in-Publication data have been requested. The views expressed in this publication are those of the authors and not necessarily those of the authors and not necessarily those of the Australian Agency for International Development (AusAid). Cover photographs Left: Woman using New Lao Stove. http://www.flickr.com/photos/ashdenawards/4306546092/ Right: Extending the electricity grid to remote areas. iStockphoto. Cover/book design: LJ Design, Bethesda, Maryland Typesetting: BMW&W Publishing Services, Baltimore, Maryland CONTENTS Foreword ix Acknowledgments xi Abbreviations xiii Executive Summary 1 Two Faces of Energy Poverty: Lack of Access to Electricity and Modern Cooking Solutions 1 Electri�cation and Development: Fighting Poverty and Stimulating the Economy 3 Modern Cooking Solutions: Clean Fuels and Advanced Cookstoves 10 One Goal: Achieving Universal Energy Access 14 1 Two Paths to Universal Energy Access in the EAP Region 17 Energy Access, Poverty, and Development 17 Electricity Access in EAP: Success, Stagnation, and a Rural-Urban Divide 21 Laying Out the Energy Access Challenges for EAP Countries 23 2 Designing a National Electrification Program for Universal Access 31 Cost-Effectiveness: Least-Cost Technical Options for Desired Reliability and Quality of Service 31 Affordability of Electricity Access 38 Consumer Focus and Timing of Electri�cation 42 Universal and Business-as-Usual Electricity Access Scenarios 45 3 Electricity Access: Delivering Results on the Ground 51 Sustained Government Commitment 51 Effective Enabling Policy Framework 54 Accountability for Results 62 4 Modern Cooking Solutions: Status and Challenges 65 Relationship among Traditional Cooking Solutions, Health, and Poverty 65 Status of Cooking Fuel Use in EAP 68 Policies to Encourage Clean and Ef�cient Cooking 69 Advances in Cookstoves and Biogas Systems 73 Two Scenarios for Modern Cooking Solutions 77 5 Modern Cooking Solutions: The Way Forward 83 What Is Different from the Past? 83 Policy and Technical Support for New Approaches 84 Pathway to Implementation 89 v vi ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC 6 One Goal: Achieving Universal Energy Access in the EAP Region 95 Both Paths Must Be Implemented 95 Both Paths Will Bring Signi�cant Economic, Social, and Environmental Bene�ts to All EAP Countries 95 Appendixes 103 1 Electricity Access: Selected Country Briefs 103 A1.1 Cambodia 104 A1.2 Indonesia 110 A1.3 Lao People’s Democratic Republic (Lao PDR) 116 A1.4 Mongolia 122 A1.5 The Philippines 127 A1.6 Paci�c Island Countries (PICs) 132 A1.7 Vietnam 149 2 Energy Access Projects Funded in the EAP Region by IBRD, IDA, and GEF, 2001–10 157 References 161 Boxes 1.1 Importance of Modern Energy in Achieving Millennium Development Goals (MDGs) 19 1.2 China: Steady but Slow Transition to Modern Cooking Fuels 25 1.3 China: Sustained Commitment to Universal Electri�cation 26 2.1 Low-Cost Technical Options in Grid-Based Electri�cation 35 2.2 Vietnam: Balancing Speed and Quality in Electricity Grid Expansion 37 2.3 Technology Advances in Off-Grid Electri�cation 38 2.4 Electricity Connection Fees in Selected Developing Countries Including EAP 41 2.5 GIS-Based Spatial Planning Platform: Powerful Tool for National Electri�cation Program Rollouts 44 3.1 Thailand: Clear Criteria and Transparent Process for Electri�cation Expansion 53 3.2 Cambodia: Proposed Sector-Wide Approach for Electricity Access Expansion 57 3.3 Raising and Channeling Subsidies for Rural Electri�cation 58 3.4 Power to the Poor (P2P) Program: Affordable Connection Fees for the Poorest in Lao PDR 60 3.5 New Options for Serving Basic Electricity Needs in Off-Grid Areas 61 3.6 Applying Output-Based Aid (OBA) to Improve Accountability in Providing Energy Access 63 4.1 Women’s “Invisible� Work 68 4.2 Promoting LPG Use: Thailand’s Successful Approach 74 4.3 New Ef�cient and Cleaner Burning Stoves for China: Scope for Renewed Efforts 75 4.4 Setting up Supply Chain for New Lao Charcoal Stoves in Cambodia 76 4.5 Biogas Energy and Carbon Financing in the World Bank’s Hubei Eco-Farming Project, China 77 5.1 New Advanced Biomass Cookstoves Initiative in India 84 5.2 Potential for Financing Ef�cient Biomass Stove Projects through Climate and Carbon Funding Mechanisms 87 5.3 Water and Sanitation Program: Potential Model to Promote Modern Cooking Solutions 88 A1.6.1 Tonga Energy Roadmap: Many Partners, One Team, One Plan 141 A1.6.2 Advanced Battery Storage Technologies to Enhance Integration of Intermittent Renewable Energy Generation into Grid 144 A1.6.3 Fiji Electricity Authority: Good-Practice Neighbor Offering a Helping Hand 145 Figures 1 Rural-Urban Divide in Access to Modern Energy in EAP 2 2 Lack of Access to Modern Cooking Fuels and Its Relative Health Impacts in Developing Countries, 2008–30 3 Contents vii 3 Growth in Electricity Access versus GDP per Capita in EAP, 2000–09 4 4 Electricity Access in EAP: Business-as-Usual and Universal Access Scenarios, 2010–30 5 5 Schematic Pro�les of Relative Costs of Electricity Supply: Main Grid versus Household Solar PV Systems 6 6 Investment Needs in Business-as-Usual and Universal Access Scenarios: Electricity, 2011–30 9 7 Patterns of Cooking Fuel Use in EAP Countries, 2009 11 8 Use of Cooking Fuels in EAP by Urban and Rural Populations, 2010–30 12 9 Investment Needs for Modern Cookstoves under Business-as-Usual and Universal Access Scenarios by Cooking Fuel 15 1.1 Population without Access to Modern Energy 18 1.2 GDP per Capita versus Electricity Use, 2008 18 1.3 Exposure to Indoor Air Pollution from Biomass in Developing Countries: A Major Health Issue, 2008–30 20 1.4 Poverty and Lack of Access to Electricity by Country, 2008 21 1.5 Growth in Electricity Access versus GDP per Capita in EAP, 2000–09 22 1.6 Rural-Urban Divide in Electricity Access in EAP Countries, 2008 23 1.7 Poverty and Lack of Access to Modern Cooking Fuels: EAP and Other Countries, 2007 24 1.8 Rural-Urban Divide in Use of Modern Cooking Fuels in EAP Countries, 2007 24 2.1 Estimated Shares of Grid-Based and Off-Grid Electricity in EAP Countries, 2009 32 2.2 Schematic Pro�les of Relative Costs of Electricity Supply: Main Grid versus HH Solar PV Systems 34 2.3 Indicative Electricity Tariffs for Small Customers in EAP Countries 39 2.4 Transitional Off-Grid Areas Shrink as Grid Expands 43 2.5 Electricity Access: Estimated Results of Business-as-Usual and Universal Access Scenarios, 2010–30 45 3.1 Principles Underlying Successful Electri�cation Programs 52 4.1 Household Biomass Energy Use versus GDP per Capita in Developing Countries, 2007 67 4.2 Rural-Urban Divide in Use of Modern Cooking Fuels in EAP Countries, 2008 69 4.3 Patterns of Cooking Fuel Use in EAP Countries 70 4.4 Testing New Generation of Stoves in China 75 4.5 Baseline (2010) and Projected (2030) Cooking Fuel Use in EAP 78 4.6 Investment Needs for Modern Cookstoves under Business-as-Usual and Universal Access Scenarios by Cooking Fuel 80 6.1 Investment Requirements for Universal Access to Electricity and Modern Cooking Solutions in EAP, 2011–30 96 6.2 Focusing on the “Second Front�: Households beyond Reach of Standard Delivery Mechanisms for Modern Energy Access 98 A1.2.1 Electricity Access in Indonesia: Urban versus Rural, 2009 113 A1.6.1 World Bank East Asia and the Paci�c Region Member Island Countries 136 Box figures 1.2.1 Households cooking mainly with LPG or electricity in China, 1989–2006 25 2.1.1 SWER line, New Zealand 35 2.4.1 Indicative electricity connection fees in selected developing countries 41 2.5.1 GIS mapping for electri�cation rollout in Rwanda, 2009–20 44 3.5.1 Solar-powered LED light and cell phone charger 61 4.4.1 Cooking with New Lao Stove 76 A1.6.2.1 Use of NaS batteries for peak shaving 144 A1.6.3.1 FEA staff explain features of new electricity connection to customers 145 A1.6.3.2 Electricity tariffs among lowest in Paci�c, including Australia and New Zealand 146 viii ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Tables 1 Electricity Access in EAP, 2009 4 2 Electricity Access Challenges in EAP 5 3 Renewable Energy Options for Off-Grid Areas 9 1.1 Electricity Access in EAP Region, 2009 22 1.2 Population without Modern Cooking Fuels in EAP, 2009 24 1.3 Electricity Access Challenges in EAP 27 1.4 Context and Challenges for Promoting Modern Cooking Solutions in EAP 28 2.1 Levelized Power-Generating Costs for Various Technologies, 2005 33 2.2 Current National Targets for Electricity Access 43 2.3 Households Obtaining Electricity Access in EAP by 2030: Universal Access versus Business-as-Usual Scenarios 46 2.4 Investment Needs for Electricity Access in EAP by 2030: Universal Access versus Business-as-Usual Scenarios 46 2.5 Investment Needs for Business-as-Usual and Universal Access Scenarios for Electricity Access in EAP Countries by 2030 47 2.6 Universal Access Scenario for Electricity: Annual Incremental Needs by EAP Country by 2030 48 3.1 Tunisia: Multiple Funding Sources for Rural Electri�cation 56 4.1 Annual Premature Deaths Attributed to Air Pollution from Cooking with Solid Fuels in EAP Countries, 2007 66 4.2 Population Relying on Traditional and Modern Fuels in Developing Countries, 2007 69 4.3 Overview of Policies That Promote Clean and Ef�cient Cooking in Urban and Rural Areas 71 A1.1.1 Cambodia: Scenario Analysis for Universal Electricity Access by 2030 105 A1.2.1 Indonesia: Scenario Analysis for Universal Electricity Access by 2030 111 A1.3.1 Lao PDR: Scenario Analysis for Universal Electricity Access by 2030 117 A1.4.1 Mongolia: Scenario Analysis for Universal Electricity Access by 2030 123 A1.5.1 Philippines: Scenario Analysis for Universal Electricity Access by 2030 128 A1.6.1 EAP Region Paci�c Island Countries Selected Indicators 133 A1.6.2 EAP Paci�c Island Countries Electricity Grid Access and Cell Phone Coverage, 2009 134 A1.6.3 EAP Paci�c Island Countries: Physical Geography and Population Settlement Patterns 135 A1.7.1 Vietnam: Scenario Analysis for Universal Electricity Access by 2030 150 FOREWORD D espite impressive economic growth, Meeting the enormous challenge of provid- in the East Asia and Paci�c Region ing for universal access to electricity and mod- (EAP), over 1 billion people still ern cooking fuels and advanced cooking stoves lack the most basic access to elec- in EAP requires the governments of EAP coun- tricity and modern cooking solutions. With tries to work simultaneously on two paths. First, approximately 170 million persons lacking access achieving universal electricity access requires to electricity, EAP lags all other Regions in this accelerating both grid and off-grid programs respect except South Asia and Sub-Saharan Africa. while employing appropriate policies and inno- Almost every second household in the Region vative technical solutions to reduce costs, improve lacks access to modern cooking fuels or clean reliability, and provide timely service to all EAP and ef�cient cooking stoves. This lack of access households. On the second path, a major push is to modern forms of energy has a direct bearing needed to increase access to clean cooking fuels on achieving the United Nations’ Millennium (natural gas, lique�ed petroleum gas, and biogas) Development Goals (MDGs), which are intended and advanced cooking stoves, particularly those to reduce poverty while increasing education, utilizing biomass in poor rural areas. If the goal of empowering women, and improving child and universal access to electricity and modern cook- maternal health by 2015. ing solutions is to be achieved by 2030, efforts to Indoor air pollution from the widespread use of promote them must be scaled up massively. coal and wood-based biomass fuels is responsible Both of these paths are affordable. The com- for acute respiratory illnesses and related ailments bined investments required for a scenario of that lead to over 600,000 premature deaths in EAP “Universal Access� to electricity, modern cook- every year.Women and children are especially vul- ing fuels, and advanced cooking stoves are esti- nerable to this exposure which, in the case of par- mated at US$78 billion over the next 2 decades. ticulate matter in indoor smoke, can reach up to 20 This amount represents an increase of US$32 times the safety levels recommended by the World billion over the amount required to maintain the Health Organization (WHO). Large populations “Business-as-Usual� scenario over the same period. in the EAP countries will continue to depend on The annual incremental investment needed for coal and biomass fuels for several decades. Thus, universal access is only 0.1 percent of the Regional the most pragmatic approach to reduce indoor GDP, excluding China. Nevertheless, if most of pollution and its harmful effects is to move toward the poorer EAP countries are to reach the goal of advanced cooking stoves. So far, most EAP coun- universal access to modern energy by 2030, they tries have made only small and scattered efforts to will require signi�cant support from donors and promote advanced cooking stoves, and even these multilateral institutions. efforts have been constrained by institutional and The World Bank is well positioned to assist �nancial shortcomings. medium- and low-access countries to accelerate ix x ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC their electri�cation programs and open a sec- the Bank also will work toward establishing a ond front in �ghting energy poverty by increas- Regional forum that would share information ing access to modern cooking solutions. In doing and promote activities to catalyze access to mod- so, the Bank can build on its global knowledge ern energy in the Region. This facility would and experience in promoting access to modern focus on the poorest and most remote popula- energy, including successful rural electri�cation tions of the countries, who otherwise might not programs in the Region. In consultation with the gain access to modern energy in the next two EAP countries and other development partners, decades. James W. Adams Vice President East Asia and the Paci�c Region The World Bank Group ACKNOWLEDGMENTS T his flagship report was under- Alan Coulthart, Lead Specialist, AusAID; and taken by the Infrastructure Unit Anthony Jude, Director, Energy, South-East Asia of the Department for Sustainable Department, Asian Development Bank, for their Development in the East Asia and contributions as external peer reviewers. Paci�c (EAP) Region of the World Bank under The team bene�ted greatly from a wide range the guidance of John Roome, Sector Director, of consultations in Cambodia, China, Indonesia, and Vijay Jagannathan, Sector Manager. and the Lao People’s Democratic Republic (PDR). The energy sector leader for the report was Dejan The team wishes to thank the participants in these Ostojic. The core team comprised Ramachandra consultations, who included government of�cials, Jammi, Douglas Barnes, Arun Sanghvi, Subodh nongovernmental organization and civil society Mathur,Yabei Zhang, and Laurent Durix. representatives, the private sector, and donors. The project team is grateful to a number of The editorial and production team was led by World Bank colleagues who acted as advisors Alicia Hetzner. Patricia Katayama, Acquisitions and peer reviewers. They include Sameer Akbar, Editor, Of�ce of the Publisher, was always avail- Pedro Antmann, Veasna Bun, Enrique Crousillat, able for consultation. Gailius Draugelis, Kof� Ekouevi, Julia Fraser, The team would like to acknowledge the con- Defne Gencer, Mohinder Gulati, Wendy Hughes, tinued generous support from the Government Ede Ijjasz-Vasquez, Migara Jayawardena, Anil of Australia, which funds the EAP Energy Malhotra, Dana Rysankova,Yanqin Song, Richard Flagship Report series.This series includes Winds Spencer, Jie Tang, Natsuko Toba, Alan Townsend, of Change: East Asia’s Sustainable Energy Future Hung Van Tien, and Jia Zhenhang. The team (2010) and the present volume, One Goal, Two also wishes to acknowledge Raffaella Centurelli, Paths: Achieving Universal Access to Modern Energy Energy Analyst, International Energy Agency; in East Asia and the Paci�c. xi ABBREVIATIONS AAA Analytical and advisory EdC Electricité du Cambodge services EdL Electricité du Laos AC Alternating current EPIRA Electric Power Industry ADB Asian Development Bank Reform Act (Philippines) ADO Automotive diesel oil ERI Energy Resources Institute AECOM (Global �rm) ESCO Energy service company AEI Africa Electricity Initiative ESMAP Energy Sector Management AMS Approved small-scale Assistance Program (World methodology Bank) ASTAE Asia Sustainable and ETS Emissions trading system Alternative Energy Program EVN Electricity of Vietnam BioCF BioCarbon Fund FEA Fiji Electricity Authority BoP “Bottom of the pyramid� FIP Forest Investment Program (model) FJc Fiji cents CDM Clean Development FSM Federated States of Micronesia Mechanism GDP Gross domestic product CFL Compact fluorescent lamp GEF Global Environment Facility c/kWh US cents per kilowatt hour GHG Greenhouse gas CO Carbon monoxide GIS Geographic information CRESIP Cambodia Rural system Electri�cation Strategy and GIZ Gesellschaft für Internationale Implementation Plan Zusammenarbeit (formerly DC Direct current GTZ) DC/AC Direct current/alternating GNI Gross national income current GOI Government of Indonesia EA Energy Authority (Mongolia) GOP Government of Philippines EAC Electricity Authority of GOT Government of Tonga Cambodia GPOBA Global Partnership on EAP East Asia and the Paci�c Output-Based Aid Region (World Bank) GR Government Regulation EC Electricity cooperative HH Household(s) xiii xiv ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC HIV/AIDS Acquired Immunode�ciency NISP National Improved Stove Syndrome/Human Project (China) Immunode�ciency Virus NLS New Lao Stove HV High voltage NPC National Power Corporation IBRD International Bank for (Philippines) Reconstruction and NTT Nusa Tenggara Timur Development (World Bank) Province (Indonesia) IEA International Energy Agency O&M Operations and maintenance IFC International Finance ORE Of�ce of Rural Electri�cation Corporation (Thailand) IHP Indoor household pollution PC Power Corporation IIT Indian Institute of Technology PDR Lao People’s Democratic IPP Independent power producer Republic Km Kilometer PEA Provincial Electricity KW Kilowatt Authority (Thailand) kWh Kilowatt hours PERTAMINA Perusahaan Tambang Minyak Lao PDR Lao Peoples’ Democratic Negara (National Oil Co.) Republic (Indonesia) LDU Local distribution unit PICs Paci�c Island Countries LED Light-emitting diode PLN Perusahaan Listrik Negara LGU Local government unit (State Electricity Company) LPG Lique�ed petroleum gas (Indonesia) LV Low voltage PM Particulate matter MDG Millennium Development PNG Papua New Guinea Goal PNPM National Program for MEDP Missionary Electri�cation Community Empowerment Development Plan (Government of Indonesia (Philippines) pilot) MEM Ministry of Energy and Mines PoA Programme of Activities (Lao PDR) (CDM) MIME Ministry of Industry, Mines PPA Paci�c Power Association; and Energy (Cambodia) power purchase agreement MMRE Ministry of Mineral Resources PPL PNG Power Ltd and Energy (Mongolia) PPP Public-private partnership M/T Metric ton PRIF Paci�c Region Infrastructure MV Medium voltage; megavolt Facility MW Megawatt PROPER Program for Pollution MWSS Manila Water and Sewerage Control, Evaluation, and Services Rating (Indonesia) NaS Sodium-sulfur (battery) PSO Public service obligation NGO Nongovernmental P2P Power to the Poor (Lao PDR) organization PV Photovoltaic Abbreviations xv QTP Quali�ed third party SREP Scaling up Renewable Energy R&D Research and development Program RE Rural electri�cation; Sq km Square kilometer renewable energy SSC Sales and service center REAP Renewable Energy for SWAp Sector-wide approach Rural Access Project SWER Single-wire earth return (Mongolia) TA Technical assistance REC Rural energy company TERM Tonga Energy Roadmap (Cambodia) TPL Tonga Power Ltd. REC Rural electric cooperative UC-ME Universal charge for (Philippines) missionary electri�cation REDD Reducing Emissions from (Philippines) Deforestation and Forest UN United Nations Degradation UN-DESA United Nations Department REE Rural Electricity Enterprise of Economic and Social (Cambodia) Affairs REF Rural Electri�cation Fund UNDP United Nations Development REN21 Renewable Energy Policy Programme Network for the 21st Century UNEP United Nations Environment RMB Renminbi Programme RMI Republic of Marshall Islands VER Voluntary emissions reduction SFC Speci�c fuel consumption WB World Bank SFU Solid fuel WBG World Bank Group SHS Solar home system WESM Wholesale electricity market SME Small and medium enterprise trading SOE State-owned enterprise WHO World Health Organization SPC Secretariat of the Paci�c WSP Water and Sanitation Program Community (World Bank) SPUG Small Power Utilities Group WTS Wind turbine system (Philippines) Key Messages Achieving universal access to modern energy is within the reach of countries in the East Asia and the Paci�c (EAP) Region in the next two decades. Some EAP countries have practically achieved universal electricity access. Others that lag behind recognize electri�cation as a major governmental prior- ity. Nevertheless, the Region is still far from achieving universal access to modern energy given that more than 1 billion people––or every second household (HH) in the Region––lack modern cooking solutions. Indoor pollution from solid fuels using traditional and inef�cient cooking methods is a leading cause of health problems for women and children in the Region, and a major barrier to achieving the Millennium Development Goals (MDGs). However, with the right policies and approaches, universal access to energy is within the reach of the Region in the next two decades. Improving access to modern energy requires the governments to work concurrently on two paths. On the �rst path, achieving universal electricity access requires accelerating both grid and off- grid programs through applying appropriate policies and innovative technical solutions. These solutions can reduce the cost, improve the reliability, and provide timely access to all EAP HH by 2030. On the second path, a major breakthrough is needed to increase access to modern cooking fuels (natural gas, lique�ed petro- leum gas, and biogas) and advanced (clean and ef�cient) cooking stoves, particularly those utilizing biomass in poor rural areas. Both paths are affordable but require signi�cant �nancial support in low-access countries. The combined investment requirements for universal access to electricity and modern cooking facilities are esti- mated at US$78 billion over the next 2 decades. This estimate represents an increase of US$32 billion over the “Business-as-Usual� scenario until 2030. The annual incremental investment needs would be a small share (0.1 percent) of the Regional GDP (excluding China). Nevertheless, poor, low-access countries would require signi�cant concessional �nancing of the order of one percent of their GDP annually. The World Bank Group is committed to expand policy dialogue, knowledge-sharing, and �nancing to help EAP countries achieve universal access to modern energy. The Bank has accu- mulated global knowledge and experience in promoting access to modern energy, including successful rural electri�cation programs in the Region. Thus, the Bank is well positioned to assist medium- and low-access countries to accelerate their electri�cation programs and to open a second front in �ghting energy poverty by increasing access to modern cooking fuels and advanced cooking stoves. In consultation with client coun- tries and its development partners, the Bank also will initiate the establishment of a Regional forum that will promote access to modern energy in rural areas in EAP countries, particularly those that are not likely to obtain access to grid electricity or modern cooking options in the next two decades. EXECUTIVE SUMMARY TWO FACES OF ENERGY POVERTY: LACK OF ACCESS and advanced cookstoves2) is a broader phenom- TO ELECTRICITY AND MODERN COOKING SOLUTIONS enon that affects both rural and urban areas in EAP countries (�gure 1). Energy poverty still affects a large share of the pop- ulation in East Asia and the Paci�c. In the past Access to modern forms of energy has a direct bear- three decades, the East Asia and the Paci�c (EAP) ing on the achievement of the United Nations’ Region has experienced high economic growth Millennium Development Goals (MDGs). The and rapid urbanization. In parallel, energy con- MDGs seek to reduce poverty while increasing sumption has more than tripled and is expected education, empowering women, and improving to further double over the next two decades. child and maternal health to agreed levels by 2015. Nevertheless, approximately 170 million people Access to modern energy is a crucial input to (or 34 million households) in EAP countries do meeting the MDGs, and requires progress on both not have electricity connections in their homes. paths: electricity and modern cooking solutions. This number is equivalent to approximately 9 percent of the Region’s population, and 30 per- The bene�ts of increased access to electricity are cent of the Region’s population excluding China. high for poor people. The welfare bene�ts of rural Approximately 1 billion people (or nearly half of electri�cation for a household (HH) adopting all households in the Region) still use solid fuels electricity typically range from US$10–US$20 a including coal and wood-based biomass for cook- month, or up to US$1 per kilowatt hour (kWh). ing, primarily with traditional and inef�cient For household lighting alone, the bene�ts are stoves. The lack of access to electricity affects pri- marily rural areas. In contrast, the lack of access to modern cooking solutions (modern cooking fuels1 modern cooking solutions. The use of solid fuels in inef�cient or open stoves is considered a traditional 1. In this report, “modern cooking fuels� refers to cooking method. Coal, charcoal, and kerosene are seen natural gas, lique�ed petroleum gas (LPG), and bio- as “transition fuels,� which are best used with ef�cient gas. “Traditional cooking fuels� and “solid fuels� refer or less polluting stoves. to wood-based biomass fuels, agricultural residues, and 2. Recently, “advanced cooking stoves� has come to dung. For cooking, “modern energy� and “traditional represent a newer generation of stoves that have higher energy� are used to distinguish between ways of us- combustion ef�ciency and are manufactured in either ing energy rather than a type of fuel. Thus, the use of workshops or factories.These stoves can represent ma- natural gas, LPG, and biogas, as well as solid fuels in jor progress over the earlier generation of “improved ef�cient or less polluting stoves, is considered a set of cooking stoves.� 1 2 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 1. Rural-Urban Divide in Access to Modern Energy in EAP 1(a) Population without access to electricity, 2008 (%) 1(b) Population not using modern cooking fuels, 2007 (%) China China 100 100 Cambodia 80 Thailand Cambodia 80 Thailand 60 60 40 40 20 20 Indonesia 0 Vietnam Indonesia Vietnam 0 0 Mongolia Philippines Mongolia Philippines Lao PDR Lao PDR Rural Rural Urban Urban Sources: IEA 2009; authors’ calculations. Sources: WHO and UNDP 2009; authors’ calculations. estimated to be close to US$0.80 per kWh in Lao and malaria), which, given the continued support of PDR and US$0.50 per kWh in the Philippines. active programs, are expected to decline (�gure 2). These bene�ts are much higher than the cost of supplying electricity to rural areas, which ranges Universal access to modern energy is within the between US$0.15–$0.65/kWh. reach of EAP countries, but they must make sig- ni�cant progress on both paths: electricity and Improved access to modern cooking solutions can modern cooking solutions. While many EAP go a long way in improving health and reducing countries have made good progress in providing premature mortality, especially among women and electricity, among all regions, EAP has the largest children. In HH who rely signi�cantly on biomass number of people who do not use, or have access for cooking using traditional methods, women and to, modern cooking solutions. In urban areas, the children are exposed to air pollution levels in the challenge is to provide modern cooking fuels and form of small particulates from smoke that can advanced (clean and ef�cient) cookstoves to the reach 20 times the maximum recommended levels. large numbers of HH who lack them, and elec- Children and women also are more likely to suf- tricity to the fast growing numbers of HH. In rural fer the drudgery of gathering wood and other bio- areas, the challenge is to provide both electricity mass. Indoor smoke pollution from inef�cient use and modern cooking fuels and advanced stoves of biomass for cooking is estimated to cause over to the vast majority of people, including those 600,000 premature deaths annually in EAP. In the who live in remote, isolated, and/or sparsely absence of a suitable policy framework that sustains populated areas. market-based solutions, these numbers are expected to rise in keeping with trends in developing coun- Barriers to improving energy access include a lack tries worldwide. This trend contrasts with other of awareness and commitment as well as institu- leading causes of premature deaths (HIV/AIDS tional and �nancial constraints. A major barrier Executive Summary 3 Figure 2. Lack of Access to Modern Cooking Fuels and Its Relative Health Impacts in Developing Countries, 2008–30 2(a) Population without access to modern cooking fuels, 2007 (mil) 2(b) Projected trend in major causes of premature deaths in developing countries, 2008–30 (mil) 6 SSA HIV/AIDS 5 Annual premature deaths (mil ) 648 Tuberculosis Malaria China 4 Exposure to smoke 738 from biomass Million EAP 1,037 3 SAS 1,017 Indonesia 125 Rest of EAP 2 174 1 MNA LAC 51 M 0 101 M 2008 2008 2030 2030 Source: WHO and UNDP 2009. Source: IEA 2010. to addressing energy access issues is a lack of than 95 percent of HH having been electri�ed. awareness among policymakers as well as poten- Cambodia, Indonesia, the Paci�c Island Countries tial bene�ciaries––especially regarding modern (PICs), and the Philippines continue to have large cooking solutions––and inadequate attention to numbers of unelectri�ed HH and, more worri- the problem at the higher levels of government. some, have not had high rates of increase in access Provided that government commitment is forth- in the last decade. Interestingly, Lao PDR, one of coming, the main barriers to universal electricity the EAP countries with the lowest GDP per cap- access are limited institutional and implemen- ita, has achieved the highest electri�cation growth tation capacities, and low levels of affordability rate in the Region in the last decade. However, on part of the bene�ciaries. Regarding mod- the country faces the challenge of maintaining ern cooking solutions, a major additional bar- this rate as it now must serve increasingly remote rier is the lack of low-cost, reliable LPG supply and dispersed HH. Mongolia’s main challenge is and clean and advanced cookstoves that poor to provide cost-effective electricity access to its people can afford. Fortunately, there is adequate nomadic people. experience worldwide and within EAP to form Table 2 describes the main challenges that the basis of the policy interventions needed to EAP countries face in increasing their electricity achieve the goal of universal access to energy. access through grid and off-grid solutions. ELECTRIFICATION AND DEVELOPMENT: FIGHTING POVERTY Two Access Scenarios for Electricity Access: AND STIMULATING THE ECONOMY Business-as-Usual and Universal Access This report has developed two scenarios for The last decade has seen signi�cant progress in electricity access in EAP up to the year 2030: increasing electricity access in several EAP coun- (1) a “Business-as-Usual� scenario, based on cur- tries, but the overall picture is still quite diverse rent policies and trends in EAP countries; and (table 1; �gure 3). China, Thailand, and Vietnam (2) a Universal Access scenario, in which all EAP are close to universal electricity access with more HH would have access to electricity by 2030 4 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table 1. Electricity Access in EAP, 2009 Country Electricity access (%) Population without electricity (mil) Indonesia 65 81.4 Myanmar 13 43.9 Philippines 84 15.0 China 99 8.0 Cambodia 24 11.4 PNG 7 6.3 Vietnam 96 3.6 Lao PDR 70 1.9 Timor-Leste 22 0.9 Thailand 99 0.7 Mongolia 90 0.3 Source: IEA 2010; authors’ estimates. (�gure 4). These scenarios are not forecasts or Both scenarios in �gure 4 take into account plans. Their purpose is to help policymakers in all of the available technical options to provide EAP countries and their development partners electricity access: main grid connections in urban explore policy options and appreciate the incre- and rural areas; rural minigrids; and rural HH mental �nancing needs associated with achiev- systems, such as solar photovoltaic (PV) systems. ing universal access to electricity. Both scenarios, including the roles and shares of Figure 3. Growth in Electricity Access versus GDP per Capita in EAP, 2000–09 Thailand 100 China 2000 Vietnam Mongolia Philippines 2009 80 Lao PDR Indonesia 60 Percent 40 Cambodia 20 Papua New Guinea 0 0 500 1,000 1,500 2,000 2,500 GDP per capita (US$) Sources: IEA 2010; World Bank 2010e; authors’ calculations. Executive Summary 5 Table 2. Electricity Access Challenges in EAP Level of electricity access (% HH) Grid Off-grid High access (>95) Finalizing “last-mile� issues Innovating energy solutions for China, Thailand, Vietnam remote HH Medium access (50–95) Maintaining momentum of Solidifying existing efforts and Indonesia, Lao PDR, Mongolia, programs; jumpstarting pro- making necessary reforms to Philippines grams that have stagnated serve communities and HH in remote areas Low access (<50) Getting started and making a Developing the institutional Cambodia, Myanmar, most serious commitment to expand and  regulatory framework for Pacific Island countries (PICs), national grid off-grid solutions and Timor-Leste Source: Authors. Figure 4. Electricity Access in EAP: Business-as-Usual and Universal Access Scenarios, 2010–30 140 120 Unelectrified Rural off-grid 10 Rural grid Households (mil) Urban grid 80 60 40 20 0 Baseline Business- Universal Business- Universal as-Usual Access as-Usual Access 2010 2020 2030 Sources: IEA 2010; UN-DESA 2008; authors’ calculations. these technical options, are based on country- average rate of 0.45 percent per year) would create level analyses that take into account their speci�c new HH and increase the need for electri�cation. challenges (table 2) and projected trends in popu- In 2030 approximately 9 million HH in Indonesia lation growth and rural-urban migration. still would lack access to electricity––the largest number in any country in the Region. The focus Under the Business-as-Usual scenario, the number of the Business-as-Usual scenario is grid-based of HH without electricity access would decline from electri�cation, particularly in urban areas, even approximately 40 million in 2010 to 24.5 million though the number of HH electri�ed by off-grid by 2030. While nearly 40 million HH would be options also would increase from 6.5 million in connected over 2010–30, population growth (at an 2010 to approximately 11 million in 2030. 6 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC achieved near-universal access, such as China, Figure 5. Schematic Profiles of Relative Costs of Electricity Supply: Thailand, and Vietnam, already use minigrid and Main Grid versus HH Solar PV Systems HH energy options for remote and sparsely pop- 5(a) Cost curve for HH solar PV service in villages remote from main grid ulated areas. 1,000 Isolated grids Grid and off-grid options are cost-effective for Number of households served 800 different population densities and geographic seg- ments. Grid systems are least cost for serving 600 large loads in concentrated areas. Isolated grids are least cost for serving smaller, localized loads in 400 places far from the grid. Household energy sys- PV systems tems, such as solar PV, are least cost for low load are least cost 200 areas that are far from the grid. Figure 5 shows schematic cost-effectiveness boundaries among PV and grid costs are equal 0 grid electricity service, minigrids, and solar PV 50 60 70 80 90 100 110 120 130 140 150 service, based on HH density and distance of the Household density (HH/km2) village from the main grid. 5(b) Cost curve for HH solar PV service in villages 3–5km from main grid Both scenarios require subsidies to maintain (Business-as-Usual scenario) or to accelerate 1,000 (Universal Access scenario) the rate of rural elec- MV and/or LV grid extensions are least cost tri�cation. All rural electri�cation worldwide and Number of households served 800 in EAP has been based on some form of subsidy. While it is considered best practice to provide 600 subsidies for capital cost only, subsidies for variable PV systems are least PV systems are least cost commonly are employed for reasons of equity 400 cost compared to cost compared to and can be justi�ed if they are ef�ciently designed, LV and MV grids LV grid below this line below this line properly targeted, and effectively implemented. 200 LV grid 5 km from grid The need for subsidies would remain even after extension is least cost steps have been taken to reduce costs. For exam- 3 km from grid 0 ple, Lao PDR has introduced many cost-reducing 50 60 70 80 90 100 110 120 130 140 150 innovations in its network. Doing so has reduced, Household density (HH/km2) but not eliminated, the need for subsidies. Sources: World Bank 2008d ; authors’ calculations. The level of capital subsidy is a key criterion for de�ning the technology mix that maximizes the The Universal Access scenario additionally inten- electri�cation rate while meeting service stan- si�es the focus on minigrid and HH energy sys- dards. Since subsidies are needed, the overall tems. Although, in the Universal Access scenario, �scal affordability of the capital subsidy require- grid-based electri�cation would deliver the larg- ments plays a key role in selecting technical est increase in electricity access, the use of off-grid options for rural electri�cation. For example, a and HH energy systems would be comparatively country that is close to universal access, and has greater. Without this greater use, it would not be ample resources to provide subsidies, may choose possible to serve remote HH in a cost-effective grid extension to cover its unserved households and timely manner. EAP countries that have with the same quality of service as the rest of the Executive Summary 7 population.3 However, in EAP, it has been com- The above criteria––reliability, quality and time- mon to use lower-subsidy, lower-service off-grid liness––are interrelated. Furthermore, to some and HH energy systems as an option to maintain extent, these criteria themselves depend on gov- the �scal affordability of the subsidies. ernment actions and policies. For instance, reli- ability and quality depend on the actions taken to The reliability and quality of electricity supply augment the capacities of the grid operator, poten- are important factors in delivering the bene�ts of tial minigrid operators, and HH system installers. electri�cation. If there are grid power shortages or Reliability and quality of service provided by the network de�ciencies, as is common in some EAP grid also depend on actions taken to add and main- countries, rural consumers may suffer blackouts tain adequate generation capacity and the network. and brownouts (low voltages), particularly during The costs of the grid and minigrid options— periods of peak demand. This unpredictability which have implications for timeliness—depend limits the potential bene�ts of electri�cation and on the introduction of cost-reducing innovations discourages productive activities and even con- and practices. In addition, the costs of HH energy necting to the grid. In contrast, rural HH solar systems may depend on cost-saving arrangements PV systems may not suffer from these problems. such as bulk procurements. In practice, at different However, these systems usually are designed to times, the role of the various technology options provide only a limited amount of power for a few would be based on the country-speci�c current hours a day. Therefore, meeting acceptable ser- and expected future values of costs, capacity, and vice standards is an important planning criterion availability of subsidy funds. in de�ning the optimal technology mix for rural electri�cation. Policy Interventions to Achieve Universal Access to Electricity Timely electri�cation is another critical criterion, if Accountability for results is more important than universal access is to be achieved by 2030.Consider the speci�c organizational structure for electri�- a situation in which a minigrid is cheaper than cation. Experience shows that achieving a high grid extension––but the implementation capacity level of electricity access requires a competent of the established grid operator is much higher and responsive national institution accountable than that of a potential minigrid operator. In for delivering results on the ground in terms of this case, it may make sense to proceed with grid reliability, quality, and timeliness. In many cases, extension, provided that the grid is backed by this role has been performed by power utilities, adequate generation capacity and the incremen- which also serve as strategic reservoirs of techni- tal subsidy requirements are �scally affordable.4 In cal “know-how� for planning, design, implement- some situations, the grid operator may �nd it dif- ing, and operationalizing services required to scale �cult to provide service to remote communities. up off-grid and HH energy systems. However, In these cases, HH energy systems may provide as stressed above, the speci�c form of the orga- a timely solution until these areas are scheduled nization is less important than the principle of for grid extension in future periods, based on the accountability––a core value adopted by the most country’s grid extension plans. successful electri�cation programs. The best off-grid electri�cation programs com- bine dedicated institutional and �nancial support with public-private partnerships. The experience 3. For example, Brazil has extended the grid to from various off-grid electri�cation programs isolated and remote communities in the Amazon, for which costs are extremely high (Niez 2010). (most of them outside EAP) indicates the impor- 4. This has been the approach in South Africa (Niez tance of two success factors: a specialized off- 2010). grid agency and a targeted off-grid funding 8 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC mechanism. At the same time, a dedicated gov- diesel fuel in remote locations often is expensive ernment agency is needed to create a stable regu- and uncertain due to transportation and storage latory environment and set technical standards, dif�culties. On the other hand, renewable systems, but without prescribing speci�c technologies. such as micro- and minihydro, wind-based sys- The latter should be left to the entities imple- tems, hybrid PV-wind systems, and solar PV, have menting off-grid electri�cation. The specialized lower operating costs but involve higher capital off-grid agency can be well positioned to admin- investment costs relative to diesel systems. How- ister subsidies from the off-grid electri�cation ever, well-targeted subsidies that aim to reduce the fund to the implementing agents, including pri- burden of upfront investment cost and/or extend vate, nonpro�t, or nongovernmental organizations the maturity of supporting �nancial instruments (NGOs). Using such a public-private partnership can facilitate the transition to more sustainable (PPP) model can add the synergistic bene�t of sources of energy. It should be kept in mind that promoting small and medium-sized enterprises users may not receive the same level of service (SMEs) in parallel with the off-grid electri�ca- (available capacity, hours of service per day) from tion program. most renewable sources as can be expected from the grid or conventional diesel minigrids. A system of tariffs and subsidies should ensure sustainable cost recovery while minimizing price The provision of renewable energy can be structured distortions. The high costs of electricity supply in as a service delivery program,not merely as an exercise rural areas and the limited capacity of households in disseminating a speci�c technology. Especially for to pay for the service make it dif�cult to attract households who live outside grid-accessible areas, investment in rural electri�cation. The tariff and renewable energy sources such as solar home sys- subsidy mechanism should supplement the rev- tems (SHS) can be an effective option.Their provi- enues that the utilities receive from consumers sion can be structured as a service delivery program with subsidy funds to match costs that would be rather than be focused on a speci�c technology and incurred by an ef�ciently run service provider. simply distributing and installing the systems. The This complementary revenue should be paid latter approach has yielded uneven results. In con- upon con�rmation of delivery of service of ade- trast, the service delivery program would be akin quate quality. This subsidy would ensure that the to a utility service that focuses on regular mainte- utilities remain focused on rural service provision. nance and has a measurable means of accountabil- Subsidies could be funded through contributions ity. A service delivery approach also helps identify from the government as well as from within the priorities in providing electricity access for health power sector. The latter could be made through care and social and administrative services (table cross-subsidies within a consumer category (such 3). Furthermore, when deployed on a large scale, as lifeline tariffs that favor households with low the service delivery approach can help integrate consumption), between consumer categories (as energy into a wider development strategy for the from large industries to residential), and/or from country. urban to rural consumers. Incremental investment needs for universal access Improving environmental sustainability and reduc- to electricity are within reach but poorer countries ing the cost of off-grid electricity are possible will need external assistance. Figure 6 shows the through a transition to renewable energy, but ser- investment needs for each technology option vice levels may not always be comparable to the (grid and off-grid sources) in two electri�cation grid and conventional diesel minigrids. Most mini- scenarios. The incremental investment needs of grid systems still are based on diesel generation, the Universal Access scenario (with respect to the but often are too small to take advantage of econ- Business-as-Usual scenario) are US$26 billion, or omies of scale. Furthermore, the availability of US$1.3 billion per year until 2030.This amount is Executive Summary 9 Table 3. Renewable Energy Options for Off-Grid Areas Existing off-grid Examples of new and renewable Energy service energy sources energy sources Lighting and other small • Candles • Hydropower (picoscale, microscale, small-scale) electrical needs for • Kerosene • Biogas from HH-scale digester homes, schools, street • Batteries • Small-scale biomass gasifier with gas engine lighting, telecommuni- • Central battery recharging • Village-scale minigrids and solar/wind hybrid systems cations, hand tools, and by carting batteries to grid • Solar home systems vaccine storage • Kerosene refrigerators • Solar refrigerators Communications • Dry cell batteries, • Hydropower (picoscale, microscale, small-scale) (televisions, radios, • Central battery recharging • Biogas from HH-scale digester mobile phones) by carting batteries to grid • Small-scale biomass gasifier with gas engine • Village-scale minigrids and solar/wind hybrid systems • Solar home systems Process motive power • Diesel engines and • Small electricity grid systems from microhydro, biomass (small industry/SMEs) generators gasifiers, direct combustion of biomass, and large biodigesters Water pumping • Diesel pumps and generators • Mechanical wind pumps (agriculture and • Solar PV pumps drinking water) • Small electricity grid systems from microhydro, biomass gasifiers, direct combustion of biomass, and large biodigesters Source: REN21 2010. Figure 6. Investment Needs in Business-as-Usual and Universal Access Scenarios: Electricity, 2011–30 35 30 25 Rural off-grid US$ billion 20 Rural grid Urban grid 15 10 5 0 Business- Universal Business- Universal as-Usual Access as-Usual Access 2011–20 2021–30 Sources: UN-DESA 2008; authors’ calculations. 10 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC approximately 0.1 percent of the 2009 Regional The countries that face the greatest challenges in GDP (excluding China) and is expected to decline increasing the use of modern cooking fuels and as Regional GDP increases over time. However, advanced cookstoves for solid fuels are Cambodia, in low-access countries (table 1), the incremental Lao PDR, and Mongolia, in both urban and rural investment needs represent a much higher share areas. Solid fuels also are relatively more dominant (1.6 percent) of GDP. This greater share would in the rural areas of Indonesia, the Philippines, call for signi�cant concessional �nancing on the and Vietnam. Kerosene accounts for a large pro- order of US$200 million per year (approximately portion of cooking fuel in Indonesia. 1.0 percent of their GDP) to help achieve uni- versal access to electricity by 2030. Two Scenarios for Access to Modern Cooking Fuels and Advanced Cookstoves: Business-as-Usual MODERN COOKING SOLUTIONS: CLEAN FUELS and Universal Access AND ADVANCED COOKSTOVES Similar to the exercise for electricity access, this report has developed two scenarios for cook- Widespread Use of Solid Cooking Fuels ing fuel use in the urban and rural areas of EAP. in EAP Countries These scenarios take into account the projected The use of solid fuels for cooking is extremely increases in population and patterns of rural- common in EAP, even in countries with high rates urban migration up to 2030. of electricity access. Thailand and the Philippines have the highest percentage of people who use The Business-as-Usual scenario assumes that modern cooking fuels (mainly LPG but also there will be no growth in the percentage of HH electricity; and biogas in rural areas) for cooking. using clean cooking fuels in either urban or rural However, even in Thailand, well over 33 percent areas. This conservative assumption is based on of the people use wood, straw, or charcoal as their the fact that none of the EAP countries has in main cooking fuel. China has by far the largest place concrete policies to accelerate access to absolute number of people who lack access to modern cooking fuels or advanced cookstoves. modern cooking fuels, including approximately However, under the Business-as-Usual scenario, 400 million people who use coal,5 whose qual- due to increasing urbanization, the absolute ity varies signi�cantly from region to region.6 number of people using modern cooking fuels Coal also is commonly used for cooking in Lao would increase. In rural areas, by the year 2030, PDR, Mongolia, and Vietnam. Other countries 665 million people still would be using solid fuels in the Region––Cambodia, Indonesia, and the for cooking, 460 million of whom would be Philippines––depend heavily on biomass fuels dependent on wood straw or dung. In contrast, such as wood or agricultural waste for cooking. in urban areas, under the Business-as-Usual sce- Seventy percent to 90 percent of the people in nario, approximately 350 million people would these countries use biomass fuels for cooking. be dependent on solid fuels, including 150 mil- lion people who would be using coal and 100 Increasing Access to Modern Cooking Fuels: million people who would be using other solid Significant but Differing Challenges fuels (�gure 8). between Rural and Urban Areas in EAP Countries There are signi�cant differences between the pat- The Universal Access scenario for cooking fuels terns of urban and rural use of modern cook- assumes that the Region’s entire urban popula- ing fuels, solid fuels (coal and charcoal, wood, tions would use modern cooking fuels by 2030. straw, and animal dung), and kerosene (�gure 7). This assumption is based on the fact that the main barrier to urban universal access to mod- 5. Government of China 2009. ern cooking fuels is limited affordability––and 6. Aden and others 2009. this barrier could be overcome by an appropriate Executive Summary 11 Figure 7. Patterns of Cooking Fuel Use in EAP Countries, 2009 7(a) Rural 100 90 80 70 Population (%) 60 50 Other Dung 40 Wood 30 Charcoal Coal 20 Kerosene 10 Gas 0 Electricity Malaysia Thailand Vietnam China Philippines PICs Mongolia Cambodia Indonesia Myanmar Lao PDR 7(b) Urban 100 90 80 70 Population (%) 60 50 Other Dung 40 Wood 30 Charcoal Coal 20 Kerosene 10 Gas 0 Electricity Malaysia Thailand Vietnam China Philippines PICs Mongolia Cambodia Indonesia Myanmar Lao PDR Source: WHO and UNDP 2009. Note: The percentages are based on HH surveys conducted primarily 2006–08. Gas included biogas, piped gas, and LPG. use of subsidies. However, the rural population clean-burning, high-ef�ciency stoves is an essen- would switch only partially to modern cooking tial component of the Universal Access scenario fuels due to the lower affordability and lack of for modern cooking solutions. availability of LPG. The Universal Access sce- nario assumes that, across the entire Region, Modern cooking fuels and advanced stoves are key there would be a 20 percent increase in the use to clean and ef�cient cooking in EAP countries. of modern fuel use compared to the Business-as- In urban areas, achieving universal access to mod- Usual scenario. Under the Universal Access sce- ern cooking fuels will depend primarily on the nario, by 2030, in rural areas, 300 million people expansion of natural gas and LPG use. In rural still would be using traditional fuels, and over 130 areas, the path to clean and ef�cient cooking will million people would be cooking with charcoal require higher penetration of biogas and the uni- or coal (�gure 8). The promotion of advanced, versal application of ef�cient stoves for solid fuels. 12 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 8. Use of Cooking Fuels in EAP by Urban and Rural Populations, 2010–30 8(a) Rural 1,200 1,000 800 Population (mil) 600 Other Dung 400 Wood Charcoal Coal 200 Kerosene Gas-LPG-biogas 0 Electricity Baseline Business- Universal as-Usual Access 2010 2030 8(b) Urban 1,000 Population (mil) 800 600 Other Dung Wood 400 Charcoal Coal 200 Kerosene Gas-LPG-biogas 0 Electricity Baseline Business- Universal as-Usual Access 2010 2030 Sources: WHO and UNDP 2009; UN-DESA 2008; authors’ calculations. It will be more dif�cult to expand the infrastruc- In rural areas, the major challenge is the deploy- ture for natural gas and LPG to serve customers ment of ef�cient stoves. The main challenge in in remote rural areas, in which biogas may be the rural areas will be to develop and market large main option for a modern cooking fuel for HH numbers of advanced stoves that burn coal and with adequate livestock. traditional biomass. Mass-scale dissemination of these stoves faces four major barriers: In urban areas, the main challenge is to develop the infrastructure for modern cooking fuels. This 1. EAP in general exhibits a lack of momen- challenge will require signi�cant investments in tum among national institutions to pro- importing and processing facilities for natural gas mote advanced cookstoves. and LPG, in addition to investments in the elec- 2. The channels for providing credit for the tricity infrastructure. manufacture or purchase of advanced Executive Summary 13 stoves, and for marketing them widely, are in other sectors such as transport and industry. underdeveloped. Thus, subsidies for cooking fuels should be set 3. There are no widely accepted standards below the level that makes these fuels commer- or certifying institutions to qualify the cially attractive for non-cooking uses, and taxes stoves as safe, durable, ef�cient, and clean should not be set so high as to make the fuel too burning. expensive to use for cooking. 4. Financial support for the technical devel- opment of advanced stoves is limited. Access to cooking fuels in some EAP countries is related to import policies. Until the early 1990s, Financial incentives are essential to encourage China limited the import of LPG to conserve the transition to clean and ef�cient cooking. The foreign exchange. This policy meant that LPG adoption of modern fuels and advanced cook- was informally rationed, and even people who stoves depends on three key factors: income level, could afford it could not actually purchase it.8 In pricing policy, and physical access to fuels. As addition, many of the smaller EAP countries such their incomes rise, HH in EAP can be expected as Cambodia and Lao PDR also limit the import to switch to LPG and various specialized elec- of petroleum-based fuels, which means that the tric cooking appliances. However, past income majority of their populations remain dependent growth in EAP has not been enough to move the on solid fuels for cooking. majority of the people to modern fuels, even in urban areas, which have physical access to mod- Reducing the upfront cost of LPG cookstoves is ern fuels. Therefore, it is necessary to introduce important to accelerate use of LPG. Poor people pricing policies that will accelerate the transition often cannot afford the upfront cost of an LPG to modern fuels or improved stoves. Such pricing stove even if they can afford to buy the fuel. One policies also are needed to attract the investments clear policy solution is to subsidize the purchase in physical infrastructure required for market cost of the stove. Likewise, LPG cylinders that expansion. often are sold in containers that hold a month’s supply of fuel may be too expensive for poor HH, Fuel taxes and subsidies have major impacts on who are used to buying small amounts of fuel energy consumption patterns for cooking. EAP several times a month. The solution is to adopt countries employ a wide range of policies to tax suitable cooking fuel import policies and perhaps or subsidize cooking fuels. These policies often provide subsidies or loans to the poor to pay the are related to a country’s natural resource endow- upfront costs of both modern and advanced solid ments. If a country is required to import a fuel, it fuel cookstoves is likely to be taxed. If the fuel is produced within the country, price subsidies are more likely. For A major emphasis on marketing and promoting example, in Indonesia, kerosene subsidies have biogas energy systems is needed in rural areas. For been high in the past. Consequently, it is the only farmers that keep animals, biogas energy systems EAP country in which kerosene is used exten- can be an ef�cient way to increase access to mod- sively in both rural and urban areas for cooking. ern fuels. Such biogas systems can provide clean In China, 30 percent of people in both urban and rural areas use coal for cooking,7 as it is read- 8. Beginning in the early 1990s, as its LPG market was ily available and has a relatively low price. The opened to competition from international investors, problem with heavily subsidized prices is that China’s LPG consumption increased rapidly by an an- the cooking fuel inevitably is purchased for use nual growth rate of 18%. By the end of the 1990s, China became the third largest LPG consumer, after Japan and the US. China’s LPG consumption is highly 7. WHO and UNDP 2009. Numbers provided by in- dependent (40%) on imports. The country will con- dustrial and commercial sources may differ from this tinue to face challenges in the development of its LPG estimate, which is based on HH surveys. market (Tian 2002). 14 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC gas for cooking and have been successfully pro- paid more attention to electricity than to clean moted in China and Vietnam. However, they still cooking, as have large donor and multilateral are not widely known or disseminated in other institutions, including the World Bank. However, EAP countries. the one goal of universal modern energy access can be achieved only by implementing both the Most important, there is a need to develop advanced electricity and the clean cooking paths.The com- cookstoves that use traditional fuels. Under a cook- bined incremental investment in the Universal stoves program in China, over 100 million HH Access scenario for electricity and modern cook- have adopted improved cookstoves. However, ing solutions will be approximately US$32 billion even the best of these stoves are based on out- over 2010–30, a small fraction of Regional GDP. dated technology that does not achieve the com- The bene�ts from achieving universal access are bustion ef�ciency associated with modern fuels. signi�cantly greater than the investment costs. For modern cooking solutions, the development and promotion of advanced, clean-burning, high- Developing a Regional entity to facilitate universal ef�ciency stoves are prerequisites for the Universal energy access to “bottom-of-the-pyramid� HH.10 Access scenario.9 At present, most EAP countries share the com- mon problem that they are not well positioned Financing Requirements for Clean Cooking under the to provide HH energy systems nor improved Business-as-Usual Scenario cookstoves to the approximately 15 million HH Under the Business-as-Usual scenario, the invest- (approximately 75 million people) who will be ment requirement for clean cooking would be out of the range of the main grid or supply approximately US$16 billion by 2030 (�gure 9). chains of modern fuels. The products suitable for The �nancing requirement for rural areas would these HH, ef�cient cookstoves in particular, have be approximately US$6.6 billion by the same year, not yet been fully developed, tested, and certi- including US$4.6 billion for wood stoves and �ed. Furthermore, the �nancing schemes suit- US$1.7 billion for coal stoves. In urban areas, the able for the low and variable levels of income of investment requirement by 2030 would be approx- these HH have not yet been established. These imately US$9.5 billion, including US$1 billion for two challenges are related, and to a large degree wood stoves, US$2.5 billion for coal stoves, and shared, by EAP countries. Therefore, after con- US$4.4 billion for advanced fuel stoves. sultation with the EAP countries and donors, it is proposed to establish a Regional forum or entity Financing Requirements for Clean Cooking under the whose objective would be to facilitate the knowl- Universal Access Scenario edge sharing and capacity building in improving Under the Universal Access scenario for clean access to modern energy in poor rural areas. This cooking, the total �nancing requirement would Regional entity also would serve as a focal point be approximately US$22 billion by 2030 (�gure 9). via which to channel the assistance of various The additional investment for urban areas by the interest groups, such as NGOs that are interested same year would be approximately US$4 billion, in improving the quality of lives of the “bottom- and for rural areas approximately US$2 billion. of-the-pyramid� HH.The Regional entity would not substitute for the necessity to improve insti- ONE GOAL: ACHIEVING UNIVERSAL ENERGY ACCESS tutional and regulatory capacity of the countries that already have relevant institutions, or to build Universal Access under both the electricity and institutional capacity where it does not exist. In clean cooking paths is affordable, and both must be implemented. In the past, the EAP countries have 10. “Bottom-of-the-pyramid� refers to the poorest socioeconomic group, often de�ned as those living on 9. Smith and Deng 2010; Sinton and others 2004. less than US$2 a day. Executive Summary 15 Figure 9. Investment Needs for Modern Cookstoves under Business-as-Usual and Universal Access Scenarios by Cooking Fuel 14 12 10 US$ billion 8 Other 6 Dung Wood 4 Charcoal Coal 2 Kerosene Gas-LPG-biogas 0 Electricity Business- Universal Business- Universal as-Usual Access as-Usual Access Rural areas Urban areas Sources: WHO and UNDP 2009; authors’ calculations. fact, the Regional entity would be effective only It would be essential that any new Regional through close collaboration with national institu- forum have the endorsement of the bene�ciary tions and promotion of their joint learning and countries. Hence, this report recommends that implementation of best practices. this issue be discussed with the EAP countries Regardless of the approach, there needs to be concerned and that additional steps be taken in a credible international entity that ensures that consultation with them. the issue of universal energy access gets the atten- tion that it deserves at the Regional level. Mongolia. Solar panel on a ger, Photo credit: Ashden Awards, Flickr. 1 TWO PATHS TO UNIVERSAL ENERGY ACCESS IN THE EAP REGION I n the past three decades, the countries of the to the macro-energy issues of climate change and East Asia and the Paci�c Region (EAP) have reduction of greenhouse gas (GHG) emissions. experienced the fastest economic growth in the world. This growth was accompanied EAP countries have two steep paths to climb to by rapid urbanization. As a consequence, EAP achieve universal access to modern energy: Elec- energy consumption has more than tripled and tricity and Modern Cooking Solutions. Approxi- is expected to double again over the next two mately 170 million people, or 34 million house- decades (World Bank 2010e; IEA 2010).The 2010 holds, in EAP countries do not have electricity World Bank report, Winds of Change: East Asia’s connections in their homes.This number is equiv- Sustainable Energy Future, highlighted issues that alent to approximately 9 percent of the Region’s relate to sustainable energy and development in total population, and 30 percent of the Region’s the middle-income EAP countries. The other— population excluding China. Moreover, approxi- and perhaps even more pressing—challenge faced mately 6 times that number, or over 1 billion peo- by all countries in the Region is to provide access ple, still lack access to modern cooking solutions. to the hundreds of millions of people who still To put these �gures in perspective, among all the lack the most basic access to electricity and mod- Regions served by the World Bank, EAP has the ern cooking solutions.11 Even among the EAP largest number of people who do not have access countries that have progressed in this regard, there to modern cooking fuels. In addition, EAP is often are wide variations in access between urban exceeded by only Sub-Saharan Africa and South and rural areas. The lack of access to modern Asia in the number of people who lack access to energy services touches on a number of devel- electricity (�gures 1.1a and 1.1b). opmental concerns, ranging from income growth to environmental and health issues. The purpose of the current flagship report is to address energy ENERGY ACCESS, POVERTY, AND DEVELOPMENT access and related developmental issues in EAP The relationship between the use of modern that so far have received less attention compared energy and economic development is fairly well established. For instance, it is widely accepted that electricity use and GDP per capita are highly 11. “Modern cooking solutions� refers collectively to modern cooking fuels (electricity, LPG, and biogas) correlated (�gure 1.2). and advanced, clean, and ef�cient stoves for coal, char- Energy and development are mutually rein- coal, wood-based biomass, and dung. forcing factors. Access to energy not only results 17 18 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 1.1 Population without Access to Modern Energy 1.1(a) Population without electricity access, 2009 1.1(b) Population without access to modern cooking fuels, 2007 MNA: 24 LAC: 31 Middle East and SSA EAP: 174 North Africa (MNA) 648 Latin America and the Caribbean (LAC) China 738 Million East Asia and the Million SSA: 585 EAP Pacific (EAP) 1,037 South Asia (SAS) SAS SAS: 612 Sub-Saharan Africa 1,017 Indonesia 125 (SSA) Rest of EAP 174 MNA LAC 51 M 101 M Sources: IEA 2010; authors’ estimates. Source: WHO and UNDP 2009. Figure 1.2 GDP per Capita versus Electricity Use, 2008 EAP countries 100,000 Other countries Log GDP per capita (US$) 10,000 Korea, Rep. Malaysia Thailand China 1,000 Mongolia Vietnam Indonesia 100 Cambodia 10 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Electricity usage (KwH per capita per year) Source: World Bank 2010e. from, but also actively contributes to, economic cooking, mechanical power, and transport and growth (IEA 2010). Access to modern forms of telecommunication services. As incomes rise, energy is essential, �rst, to provide clean water, access to electricity tends to grow faster than sanitation, and health care. Second, access pro- access to modern cooking fuels, largely because duces sustainable development bene�ts by sup- governments tend to pay more attention to elec- plying reliable and ef�cient lighting, heating, tri�cation (IEA 2010). EAP is no exception. Two Paths to Universal Energy Access in the EAP Region 19 Box 1.1 Importance of Modern Energy in Achieving Millennium Development Goals (MDGs) Goal 1. Eradicate extreme poverty and hunger. Access to modern energy facilitates economic development by providing more ef�cient and healthful means to undertake basic HH tasks and the means to undertake productive activities. Modern energy can power water pumping, thus providing drinking water and increasing agricultural yields through the use of machinery and irrigation. Goal 2. Achieve universal primary education. In impoverished communities, children com- monly spend signi�cant time gathering fuelwood, fetching water, and cooking. Access to improved cooking fuels or technologies facilitates school attendance. Electricity also facilitates communication and education, particularly through information technology but also through providing such basic needs as lighting. Goal 3. Promote gender equality and empower women. Improved access to electricity and modern fuels reduces the physical burden associated with carrying wood. Access also frees valuable time, especially for women, widening their employment opportunities. In addition, street lighting improves the safety of women and girls at night. Goals 4, 5, and 6. Reduce child mortality; Improve maternal health; and Combat HIV/ AIDS, malaria, and other diseases. Most staple foods require cooking. Reducing HH indoor air pollution through more healthful cooking fuels and stoves decreases the risk of respiratory infections, chronic obstructive lung disease, and lung cancer (from burning coal). Electricity and modern energy services support the functioning of health clinics and hospitals. Goal 7. Ensure environmental sustainability. Modern cooking fuels and more ef�cient cook- stoves can relieve pressures on the environment caused by the unsustainable use of biomass fuels.The promotion of low-carbon renewable energy is congruent with the protection of the local and global environment. Using cleaner energy also reduces greenhouse gas emissions and global warming. Source: IEA 2010. However, access to both electricity and mod- no direct reference to energy in the MDGs, the ern cooking solutions is essential to address the need for access to energy, particularly modern enduring impacts of poverty and to move the energy, to improve overall welfare is well recog- poor onto a rising development trajectory. nized by the development community.The impor- tance of access to modern energy to achieve each Modern Energy and the Millennium of the MDGs is described in box 1.1. Development Goals Of particular importance among the MDGs The link between access to modern energy and are the profound implications of improving the development is most clearly de�ned by the Millen- health and reducing the workload of women nium Development Goals.12 The MDGs were and children. The use of solid fuels (coal, char- formulated to reduce global poverty while increas- coal, wood-based biomass, straw, and dung) for ing education, empowering women, and improv- cooking predominates in the Region, even in ing child and maternal health. Although there is countries that have signi�cantly enabled access to electricity. Women and children in particu- 12. Agreed during the 2000 United Nations Millen- lar are exposed to indoor cooking smoke from nium Summit, the Millennium Development Goals incomplete burning of biomass fuels in inef�- (MDGs) set forth the most important development goals for the world community in poverty reduction, cient stoves, in the form of particulates up to 20 health, education, and environment. The MDGs were times higher than the maximum levels considered set to be achieved by 2015. safe by WHO (WHO 2005). Strong evidence of 20 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC causal linkages between indoor biomass combus- and even more when compared to candles. The tion and family health (such as acute respiratory improved lighting and use of electricity to refrig- illnesses, heart disease, cataracts, and even can- erate clean water also improves health and creates cer) is now available (Kammen and others 2002; opportunities for more productive activities over Parikh and others 2001; Smith and others 2004). a longer period during evening hours. A recent Smoke from solid cooking fuels is estimated to study in rural Bangladesh indicates that access to result in approximately 665,000 premature deaths electricity has the cumulative impact of increas- annually in EAP (of approximately 2 million ing rural HH incomes by as much as 20 percent, such deaths in developing countries worldwide) resulting in a corresponding drop in the poverty (WHO and UNDP 2009). In the absence of a rate of approximately 15 percent (Barnes and oth- suitable policy framework that sustains market- ers 2010). based solutions, these numbers are expected to rise in keeping with trends in developing coun- Beyond Access: Affordability and Reliability tries worldwide. This trend contrasts with other of Electricity Service leading causes of premature deaths (HIV/AIDS If the expected social and economic bene�ts from and malaria), which are expected to decline given electricity are to be realized, electricity service the continued support of active programs (IEA needs to be affordable and reliable.13 Electricity 2010) (�gure 1.3). usage is likely to claim a higher share of rural Access to electricity also has a signi�cant incomes than of urban incomes. When electric- impact on the achievement of MDGs. Lighting ity connection and usage costs are perceived to is one of electricity’s most important and widely be unaffordable, HH may choose not to connect adopted bene�ts and positively impacts many of despite being in an area that already has access to the MDGs. Lighting enables reading after daylight electricity. Furthermore, compared to urban areas, and a better environment for education, develop- rural electricity supply is likely to be subject to ment of home enterprises, social interaction, and more frequent and longer service interruptions leisure activities. Lighting a single 60-watt bulb and lower overall quality of supply. If faced with for 4 hours a day can produce as much as 100 low affordability and poor reliability of service, times more light than traditional kerosene lamps, HH will display greater reluctance to pay even for existing services. This would put pressure on the revenues of the electricity provider, leading to fur- Figure 1.3 Exposure to Indoor Air Pollution from Biomass in Developing ther deterioration in service. Seen in this context, Countries: A Major Health Issue, 2008–30 not merely providing electricity access but also 6 ensuring the affordability, reliability, and quality of electricity supply is crucial for sustainable bene�ts. HIV/AIDS 5 Annual premature deaths (mil ) Tuberculosis Malaria Minimal Impact of Universal Access 4 Exposure to smoke to Modern Energy on Climate Change from biomass Meeting the goal of universal access to mod- 3 ern energy will have only a marginal impact on climate change. Reaching the goal of universal 2 access to modern energy services is expected to 1 have a relatively small impact on energy demand 0 2008 2008 2030 2030 13. The report focuses on providing access at the HH level through grid or off-grid means as appropriate Source: IEA 2010. and feasible. It does not make any assumptions relating to the level of consumption per HH. Two Paths to Universal Energy Access in the EAP Region 21 Figure 1.4 Poverty and Lack of Access to Electricity by Country, 2008 Thailand High 0 China Tunisia access Vietnam Brazil Mongolia Philippines 20 Peru Population without access Lao PDR Indonesia Fiji to electricty (%) India 40 Pakistan 60 Bangladesh Senegal 100 million people without access Cambodia 80 Madagascar Timor-Leste 1 million people without access DR Congo Myanmar Low Ethiopia PNG access 100 100 90 80 70 60 50 40 30 20 10 0 High poverty Population living under $2 per day (%) Low poverty Sources: IEA 2010; World Bank 2010e; authors’ estimates. and production, and CO2 emissions.14 Switching less if renewable energy and ef�cient light bulbs to modern cooking fuels and using ef�cient could be deployed (IEG 2008). The welfare cookstoves also would mitigate climate change by bene�ts of electricity access are on the order of reducing the CO2 emissions and deforestation asso- US$0.50–US$1 per kilowatt hour (kWh). In con- ciated with the use of traditional fuels. According trast, a stringent valuation of the corresponding to a recent estimate (IEA 2010), achieving univer- carbon damages in a worst-case scenario is far less sal electricity access would have a modest impact at only a few cents per kWh (Gilbert 2009). on energy-related CO2 emissions, raising them by 0.6 percent–0.8 percent (approximately 2 percent ELECTRICITY ACCESS IN EAP: SUCCESS, STAGNATION, AND A RURAL-URBAN DIVIDE of current OECD emissions) by 2030. Another estimate suggests that, under the most unfavor- able assumptions, providing basic electricity access The last decade has seen major progress in to the world’s unconnected HH would add only increasing electricity access in several EAP coun- 0.33 percent to global GHG emissions, and much tries, but the overall picture is still a mix of suc- cess stories and unmet challenges. In the Region and the across the world, electricity access rates 14. A related issue concerns aerosol emissions from tend to be inversely correlated with poverty rates biomass cookstoves, which consist of both black carbon and organic carbon. While the emissions characteris- (�gure 1.4). However, some EAP countries have tics of biomass burning in cookstoves are considered been remarkably successful in increasing electric- critical for climate science, surprisingly little concrete ity access to higher levels than their poverty rates scienti�c data exists on such key factors as the ratio would predict. In this respect, in recent years, Lao of organic carbon to black carbon. This ratio is criti- PDR and Vietnam stand out both in the Region cal for calculating the effect of HH biomass combus- and on the global stage. On the other hand, tion on global climate models. As a result, there is still signi�cant uncertainty about whether black carbon Cambodia, Myanmar, and PNG are at lower lev- emissions from burning biomass in cookstoves have a els of electricity access than might be expected net warming effect on climate globally. based on their poverty rates. 22 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table 1.1 Electricity Access in EAP Region, 2009 within the past decade shows that it is possible Electricity access Population without electricity to break out of this pattern and potentially lever- 2009 2009 age electricity access for economic development. Country (%) (mil) China and Thailand were the �rst to reach near- universal access to electricity (95 percent or Indonesia 65 81.4 greater) over a decade ago. Among the medium- Myanmar 13 43.9 access countries (access rates greater than 50 per- cent), Indonesia and the Philippines have made Philippines 84 15.0 reasonable progress over the last decade in the China 99 8.0 face of population growth. Nevertheless, in these Cambodia 24 11.4 2 archipelagic countries, 96 million people of 317 million (approximately 30 percent) still lack PNG 7 6.3 access to electricity, primarily in rural and remote Vietnam 96 3.6 island areas. Figure 1.5 shows that overcoming the Lao PDR 70 1.9 income barrier to electricity access goes hand- in-hand with accelerated economic development Timor-Leste 22 0.9 in EAP. This synergy is particularly important Thailand 99 0.7 for low-access countries such as Cambodia and Mongolia 90 0.3 Papua New Guinea (PNG). Sources: IEA 2010; authors’ estimates. Rural-Urban Divide in Electricity Access in EAP Many EAP countries show a vast rural-urban Overcoming the Income Barrier to Electricity Access divide in access to electricity. However, others have Despite the broad correlation globally between shown the way to overcome this divide.Among the relatively high poverty and low access to elec- middle income EAP countries, Indonesia has the tricity, the experience of Lao PDR and Vietnam largest gap between urban and rural access (urban Figure 1.5 Growth in Electricity Access versus GDP per Capita in EAP, 2000–09 Thailand 100 China 2000 Vietnam Mongolia Philippines 2009 80 Lao PDR Indonesia 60 Percent 40 Cambodia 20 Papua New Guinea 0 0 500 1,000 1,500 2,000 2,500 GDP per capita (US$) Sources: IEA 2010; World Bank 2010e; authors’ calculations. Two Paths to Universal Energy Access in the EAP Region 23 access: 97 percent; rural access: 32 percent). This Figure 1.6 Rural-Urban Divide in Electricity Access in EAP Countries, 2008 gap arises due partly to the geographic remoteness of its people, who live in the country’s many dis- Population without access to electricity, 2008 (%) tributed island kabupatens, or districts. Among the China lower-income EAP countries, Lao PDR has made 100 considerable progress in reducing the gap between Cambodia 80 Thailand urban and rural access but faces increasingly big- ger challenges as the grid extends to distant and 60 hilly terrain. 40 Nevertheless, the experience of China and 20 Thailand and, more recently, Vietnam shows that Indonesia 0 Vietnam 0 the challenges of connecting areas with low pop- ulation density and dif�cult terrain can be over- come through government commitment backed by appropriate institutional and �nancial policies. Each of these countries has achieved viable elec- Mongolia Philippines tri�cation of most of its rural areas (�gure 1.6). For the archipelagic countries, recent developments Lao PDR in renewable technologies, including HH energy Rural Urban systems, increasingly are providing viable techni- cal alternatives to grid-based electri�cation. Over Sources: IEA 2009; authors’ calculations. the past two decades, such approaches are being successfully used in China and Thailand to cover the “last mile� of universal access to electricity. many urban residents continue to use coal, wood, straw, and dung despite their negative impacts Widespread Use of Solid Fuels in EAP on human health and the environment (through In the EAP Region, well over 50 percent of the both indoor and outdoor air pollution). population relies on solid fuels for cooking. This In rural areas, as could be expected, the pro- majority contrasts markedly with the EAP record portion of people who cook with solid fuels is in electricity access. Although countries such as higher than in urban areas (table 1.2, �gure 1.8). China, Thailand, and Vietnam have set up exten- However, the health implications of cooking with sive programs to address electricity access issues, these fuels using traditional stoves are similar for they continue to rely heavily on solid fuels for both rural and urban areas. In contrast to urban cooking (�gure 1.7). Thailand has the Region’s areas, most of the solid fuels burned in rural areas, highest rate of access to modern cooking fuels mainly wood-based biomass, are not purchased (mainly LPG). Nevertheless, well over 33 percent but are collected from the local ecosystem. of its population uses wood, straw, or charcoal as the main cooking fuels. LAYING OUT THE ENERGY ACCESS CHALLENGES FOR EAP COUNTRIES In all EAP countries, whether in rural or urban areas, it is usually the poor HH who are likely to lack access to modern cooking fuels. Varying Challenges at Different Levels This dichotomy is particularly visible in urban of Electricity Access areas. There, a large majority of HH have access With respect to electricity, EAP countries can be to electricity; nevertheless, large numbers still classi�ed into countries with high, medium, and must resort to solid fuels for cooking (and, in low access. China, Thailand, and Vietnam have some countries, for heating) since they are more achieved high or near-universal access (95 per- affordable relative to LPG and electricity. Thus, cent of HH or more), primarily through grid 24 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 1.7 Poverty and Lack of Access to Modern Cooking Fuels: EAP and Other Countries, 2007 High 0 Tunisia access 100 million people without access Brazil 20 1 million people without access to modern cooking fuels (%) Population without access Peru Thailand 40 Indonesia Philippines Senegal Fiji 60 Vietnam China India Pakistan Mongolia 80 Bangladesh PNG Low Madagascar Timor-Leste Cambodia DR Congo Lao PDR Myanmar access 100 100 90 80 70 60 50 40 30 20 10 0 Ethiopia High poverty Population living under $2 per day (%) Low poverty Sources: WHO and UNDP 2009; World Bank 2010e. Table 1.2 Population without Modern Cooking Figure 1.8 Rural-Urban Divide in Use of Modern Cooking Fuels in EAP Fuels in EAP, 2009 Countries, 2007 Population without modern Population not using modern cooking fuels, 2007 (%) cooking fuels Country (%) (mil) China China 58 768 100 Indonesia 54 124 Cambodia 80 Thailand Vietnam 66 57 60 Myanmar 97 47 40 Philippines 51 45 20 Thailand 37 25 Indonesia Vietnam 0 Cambodia 93 15 PNG 87 6 Lao PDR 97 5 Mongolia 77 2 Philippines Mongolia Timor-Leste 100 1 Sources: WHO and UNDP 2009; authors’ calculations; Lao PDR Government of China 2008; Carolina Population Center Rural and NINFS 2008. Urban Sources: WHO and UNDP 2009; authors’ calculations. Two Paths to Universal Energy Access in the EAP Region 25 extension. The remaining electri�cation efforts local involvement. Of China’s 1.3 billion people, in these countries are focused on the more remote approximately only 8.0 million remain without and sparsely populated areas. Indonesia, Lao electricity (table 1.1). With its population of PDR, Mongolia, and the Philippines are in the approximately 65 million people, Thailand now medium access range (50 percent–95 percent of provides electricity to virtually all HH who can HH). In these countries, the challenge is to main- possibly be connected to the electricity grid. Its tain and/or accelerate their momentum in remaining population is on track to be provided expanding electricity access in the face of increas- with off-grid—primarily renewable—electricity ing costs. Finally, the countries with low access in the near future. The factors that have enabled (below 50 percent)—Cambodia, Myanmar, and these countries to provide electricity to their most of the PICs—have yet to signi�cantly initi- rural and more remote populations are a sus- ate their national programs to increase access tained commitment by their governments over to electricity and consolidate their institutional a long period, as in the case of China (box 1.3); framework and sector regulation. Therefore, the the dedication of their service providers in care- nature of challenges facing the EAP Region in fully planning and implementing programs; and increasing electricity access varies signi�cantly engaging local governments to facilitate the among countries with low, medium, and high electri�cation programs in their respective areas. access. China’s and Thailand’s successes are closely followed by those of Vietnam, which has made The high electricity-access countries—China, major progress in extending grid-based elec- Thailand, and Vietnam—have bene�ted from tricity access to its rural areas. With a popula- strong government commitment, planning, and tion of close to 96 million people, Vietnam has Box 1.2 China: Steady but Slow Transition to Modern Cooking Fuels Despite China’s impressive Box figure 1.2.1 Households cooking mainly with LPG or electricity in China, accomplishments in economic 1989–2006 growth and poverty reduction, Urban electricity Chinese households have been 50 Urban LPG 45 Rural electricity slow to climb the “energy lad- Rural LPG electricity as main cooking fuel (%) der� and transition from using 40 Households using LPG or coal and traditional fuels to mod- 35 ern cooking fuels. Even among 30 high-income groups, HH con- 25 tinue to use coal and biomass for 20 cooking, and/or a diverse port- 15 folio of fuels to meet their differ- 10 ent energy needs. The transition 5 to modern fuels is faster when 0 access to reliable electricity has 1989 1991 1993 1997 2000 2004 2006 been achieved for all sections of Survey year society, as illustrated by the slow but steady growth of LPG use for cooking in China’s urban areas (box �gure). However, despite progress in transitioning to modern fuels over 15 years—during which period China’s GDP per capita (current US$) has increased nearly 700 percent—the majority of people in China still cook with solid fuels. Source: WHO and UNDP 2009; Government of China 2008; Carolina Population Center and NINFS 2008. 26 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 1.3 China: Sustained Commitment to Universal Electrification China’s experience with rural electri�cation is unique among developing countries in that it grew from decentralized efforts, rather than as a centrally driven program. From relatively small and scat- tered beginnings in 1949 aided by progressive support from the government, and more recently driven by a market-oriented approach, China has managed to bring electricity to over 99 percent of its rural population. The following factors contributed to China’s successful electri�cation program. • The government has played a major role in rural electri�cation through laying down over- all policy for rural electri�cation, providing �nancial support, promoting diverse �nancing sources, and developing technical standards and support. • Power sector institutions have evolved from central planning to more private investment, com- petition, and less regulation. • Financial and operational viability is ensured through subsidized sources of �nance from cen- tral and provincial governments that increasingly are supplemented by private sector lending and capital. • Reliability and safety were addressed through a major reform of the rural power management system, which began in 1988. At one stage, the reform improved reliability to 99.7 percent, and the losses in the low voltage (LV) grids fell by 30 percent–45 percent. • Costs were kept under control by developing two compatible national technical codes—one for established regions and the other for poor and remote regions, with provision for a smooth transition. • Off-grid electri�cation efforts, beginning in 1996, have brought electricity to 1.3 million peo- ple through photovoltaic (PV) and PV/wind hybrid systems. • The poor have been served through favorable connection-cost policies, and direct assistance has been provided to the most vulnerable. • Large-scale renewable energy is being ramped up with recently announced plans to support the deployment of 500–600 MW of large-scale solar PV in both on-grid and off-grid areas by 2012. Source: Barnes 2007. approximately only 2 million people who lack effort. Several EAP countries have reached the access to electricity. After having connected majority of their populations but still have sig- approximately 60 percent of its population by ni�cant challenges ahead of them if they are to the late 1990s, Vietnam successfully reorganized reach the goal of universal access to electricity. its electricity sector.15 This was done in part to The largest challenges facing the two archipelagic address the growing problems faced by rural countries—Indonesia and the Philippines—arise electricity distribution companies as they faced from the relatively high cost of extending elec- increasing dif�culties in maintaining the pace tricity access to the large rural population that of electri�cation and service quality. As a result, lives on remote islands and in hilly areas. Lao Vietnam has reached a high access rate (96 per- PDR faces increasing costs as it continues to cent in 2009) while improving service perfor- expand electricity access to increasingly remote mance and reducing costs. areas. However, its electri�cation program shows remarkable vitality, as demonstrated in the last In medium-access countries, the challenge is to 15 years of rapid electri�cation. With the lowest maintain the momentum of the electri�cation population density in the world and a signi�cant nomadic population scattered over 1.5 million 15. Appendix 1: Vietnam. square miles, Mongolia faces unique challenges in Two Paths to Universal Energy Access in the EAP Region 27 Table 1.3 Electricity Access Challenges in EAP Level of electricity access (% HH) Grid Off-grid High access (>95) Finalizing “last-mile� issues Innovating energy solutions for China, Thailand, Vietnam remote HH Medium access (50–95) Maintaining momentum of Solidifying existing efforts and making Indonesia, Lao PDR, Mongolia, programs; jumpstarting programs necessary reforms to serve communities Philippines that have stagnated and HH in remote areas Low access (<50) Getting started and making a Developing the institutional and Cambodia, Myanmar, most Pacific serious commitment to expand regulatory framework for off-grid Island countries (PICs), and Timor-Leste national grid solutions Source: Authors. providing electricity access to its dispersed popu- import and pricing policies and to the affordabil- lation.These challenges will need to be addressed ity of the stove and fuel. In the 1990s, China’s through innovative solutions. policies limited the imports of LPG. These poli- cies resulted in an informal “rationing� of LPG Weak institutions, lack of planning, and low abil- so that even people who could afford to switch ity to subsidize rural electri�cation are common to LPG could not actually purchase it. This in low-access countries. Although EAP countries situation has improved in recent years. Several with low electricity access rates—Cambodia and other EAP countries, notably Cambodia, Lao most PICs—have diverse characteristics, they PDR, and PICs, also restrict the imports of mod- share three traits: weak institutional capacity, lack ern cooking fuels to different extents, mainly of integrated planning for a national electri�ca- to preserve foreign exchange for other strategic tion program, and low ability to �nance capital- imports. intensive rural electri�cation programs from �scal resources. Among this group, the Paci�c Rural areas need to put a major emphasis on Island Countries (PICs) are further challenged by marketing and promoting new ef�cient solid fuel remoteness, large dista nces separating locations, stoves and biogas systems. During the 1980s and low population densities. In many of the and 1990s, China successfully implemented PICs, the extension of grid electricity is virtu- the National Improved Stove Program (NISP) ally impossible. They must depend on innovative in which over 100 million people adopted solutions and new technologies typically associ- improved cookstoves. An additional constraint is ated with off-grid electri�cation programs. the lack of availability of ef�cient technologies The electricity access challenges for EAP for cookstoves that use biomass. Such advanced countries are summarized in table 1.3, which also cookstoves are particularly needed in rural areas, maps the main topics and issues covered in this which are unlikely to gain access to modern report regarding electricity. cooking fuels in the near future. While manu- facturers have begun producing newer high- Modern Cooking Solutions: Modern Cooking Fuels ef�ciency stoves, cost reductions through large- and Clean and Efficient Stoves scale production still have not been achieved to In urban areas, lack of availability of modern make these affordable to rural consumers, who fuels is the main factor limiting access to clean have limited purchasing power. These consum- and ef�cient cooking. Access to modern cook- ers continue to depend on obsolete stoves that ing fuels (mainly LPG) often is related both to are polluting and inef�cient. For rural areas, 28 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table 1.4 Context and Challenges in Promoting Modern Cooking Solutions in EAP Income and affordability Fuel prices and subsidies Access Urban • Higher incomes and greater • Fuel prices are significantly • Availability of modern fuels and affordability mean greater use affected by tax and subsidy transition fuels is low. of modern fuels by high-income policies. • Fuel import limits mean formal or groups. • Traditional fuel prices often informal rationing in certain countries. • Transitional or traditional follow the prices of modern • Transition and biomass fuels still are used fuels are used by lower income fuels so it is important not to by many of the poorest people. groups. excessively tax modern fuels, which indirectly would raise cooking costs for the poor. Rural • Lower incomes and lower • Modern and transitional • Modern and transitional fuels often affordability mean greater use fuels are priced beyond are not distributed in rural areas. of transitional and traditional affordable levels for low- • Traditional fuels often are overharvested, fuels. income consumers. reducing their availability and increasing • Excessive collection time for • Implicit price of biomass collection distances. biomass fuels and health fuels often is high if based • Biogas systems programs are small in problems (from indoor pollu- on collection time. most countries and relevant only for tion) further reduce productivity • Where available, market price farmers with livestock. and HH income. of biomass is relatively high • Advanced stoves are still in development compared to modern fuels and pilot stage and require refinement. based on energy content. Source: Authors. China’s and Vietnam’s experiences demonstrate Chapter 3. Electricity Access: Delivering Results the potential of expanding biogas energy systems on the Ground explores the policies that are to HH who own livestock. essential to successfully implement national elec- The above issues and key challenges for tri�cation programs, particularly in the context increasing access to clean and ef�cient cooking of rural electri�cation. in EAP countries are summarized in table 1.4. Following this chapter’s overview of energy Chapter 4. Modern Cooking Solutions: Status and access in EAP, the remainder of the report focuses Challenges lays out the main issues in promoting on key issues and strategies for increasing access modern cooking solutions in the two scenarios— in the Region. Business-as-Usual and Universal Access—and compares their implications for urban and rural Chapter 2. Designing a National Electri�cation consumers. Program for Universal Access discusses the key principles that guide the development of national Chapter 5. Modern Cooking Solutions:The Way electri�cation programs and how they apply in the Forward looks at the policies and strategies that EAP countries. This chapter also compares two are essential to increase access to clean and ef�- scenarios for electricity access: (1) the Business- cient cooking fuels and methods, for both rural as-Usual scenario, based on the current plans and and urban areas. electri�cation trends in EAP countries; and (2) the Universal Access scenario, under which all Chapter 6. One Goal: Achieving Universal HH will have access to electricity by 2030. Energy Access in the EAP Region looks at the Two Paths to Universal Energy Access in the EAP Region 29 synergy between two access paths—electricity Appendix 2. Energy Access Projects Funded in the and modern cooking solutions—in achieving EAP Region by IBRD, IDA, and GEF, 2001–10 the common goal of universal access to modern lists the energy and electricity projects that have energy solutions in EAP countries by 2030. been in the World Bank’s and Global Environment Facility’s (GEF) portfolios for Energy Access in Appendix 1. Electricity Access: Selected Country EAP since 2001. Briefs summarizes key issues for increasing elec- tricity access in low- and medium-access EAP countries. Photo credits: Top—Openyourap, Flickr; Bottom—Hung Tien Van. Replacing ad hoc electricity generation systems (top) with efficient distribution networks (bottom). Top: Run of the river pico-hydro generators, Lao PDR. Bottom: Distribution networks in rural areas, Vietnam. 2 DESIGNING A NATIONAL ELECTRIFICATION PROGRAM FOR UNIVERSAL ACCESS A chieving universal access to electric- This chapter examines each of these three ity presents unique challenges to principles for planning electricity access. The each EAP country in its own social, chapter unbundles the issues that are of most rel- political, and cultural context. This evance to EAP countries in the context of the report has identi�ed two categories of EAP coun- overall vision of achieving universal electricity tries that have yet to provide electricity access to a access in EAP by 2030. signi�cant portion of their populations. These are the low-access countries—Cambodia, Myanmar, and most PICs; and the medium-access countries—Indo- COST-EFFECTIVENESS: LEAST-COST TECHNICAL OPTIONS nesia, Lao PDR, Mongolia, and the Philippines. FOR DESIRED RELIABILITY AND QUALITY OF SERVICE As these countries develop their strategies and Grid-based electricity has been the mainstay of implementation plans to expand electricity access, electricity access. The experience of most EAP they have the advantage of being able to draw on countries and other parts of the world shows that the practices of countries in EAP and around the grid-based electricity is the mainstay of electric- world that already have achieved near-universal ity access. The extension of the electricity distri- electricity coverage. Successful national electri- bution grid generally is the least-cost approach to �cation programs share three key principles that reach new consumers and to rapidly increase the have governed their planning: number of HH with access to electricity. In most EAP countries, more than 90 percent of electri- 1. Cost-effectiveness. Technical solutions that �cation has been achieved through grid exten- are used to provide a speci�ed level of reli- sion both in urban and rural areas (�gure 2.1). ability and quality of electricity service Some EAP countries stand out with a relatively should be selected on a least-cost basis. lower share of grid-based electricity due to their 2. Affordability. Electricity service should be demographic and geographic characteristics. For affordable to consumers, �scally affordable instance, in Mongolia, almost 33 percent of the to the subsidy provider, and affordable to population consists of nomadic herder families; the service provider vis-a-vis its �nancial and off-grid electricity is their main option. The viability. other exceptions, due to their remote and dis- 3. Timeliness of implementation. Electricity persed locations and their sparse populations, are access should be provided to the intended the PICs and the outlying archipelagic regions of bene�ciary in a timely manner. Indonesia and the Philippines. 31 32 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 2.1 Estimated Shares of Grid-Based and Off-Grid Electricity in EAP Countries, 2009 100 Off-grid electricity (%) Grid-based electricity (%) 90 80 Population with electricy access (%) 70 60 50 40 30 20 10 0 China Thailand Vietnam Mongolia Philippines Lao PDR Indonesia Cambodia Timor-Leste PNG PICs (Other) Sources: IEA 2010; authors’ estimates. Achieving universal access in a least-cost man- Providing electricity through the main grid becomes ner requires use of both grid and off-grid tech- progressively more expensive as the grid spreads nologies. Until approximately two decades ago, outward from the urban and periurban into rural extension of the main grid, diesel-powered areas. The higher cost is due to decreasing econo- minigrids, and minihydropower generators were, mies of scale due to lower population densities in in most circumstances, the only electri�cation the outlying areas and the longer distances over options available to rural communities. However, which the grid must be extended. In the face the emergence of new, and primarily renew- of increasing construction costs per consumer able, energy technologies has opened up new and the logistical dif�culties and associated costs possibilities for expanding electricity service to encountered in managing rural systems, provid- areas in which the grid-based electricity is not ing electricity by extending the grid gradually viable or could take a long time to reach. With becomes less cost effective. the commercial maturation of various small- The costs of grid extension can become pro- scale, renewable-energy-based technologies, new hibitively high in mountainous areas and regions off-grid sources—from solar photovoltaic (PV) that are dif�cult to access, such as remote and systems to small wind generators and microhy- dispersed islands, all of which make up a signi�- dropower—have become viable alternatives for cant part of several EAP countries. In 2003 in Lao increasing electricity access. These sources are PDR, electricity access levels were approximately especially appropriate in remote and dispersed 50 percent, and the average cost per HH connec- communities or for HH whose consumption tion through grid extension was US$450–$550.16 levels are very low and are expected to grow Today Lao PDR has a 70 percent access level, and slowly. However, in recent years, successful coun- the average cost per HH has doubled to approxi- tries have adopted strategies that include both mately US$900 as the grid enters more remote grid and off-grid approaches (�gure 2.1). Such rural areas (World Bank 2010c).This cost is bound a multitrack approach is based on several factors to increase as the grid pushes into hilly terrain. including the cost of supply, projected electricity demand, and the expected development impacts 16. Connection cost includes cost of extending the of electri�cation. MV and LV lines and providing the service drop. Designing a National Electri�cation Program for Universal Access 33 In rural Peru, it has been estimated that the unit Table 2.1 Levelized Power-Generating Costs for Various Technologies, cost of providing connectivity through the main 2005 grid could be up to �ve times higher than in cit- Rated Levelized ies (World Bank 2010b), due to the higher capital Range of output cost costs of reaching remote and mountainous areas. applications Generation source (kW) (USc/kWh) Pico/microhydro 0.30 15 There is a wide range of off-grid technologies that Household/ Wind 0.30 35 can serve individual HH or small communities. community PV-wind hybrid 0.30 42 Sources of off-grid electri�cation can be classi�ed systems Solar PV 0.05 62 in two broad categories: (1) isolated minigrids, which can serve communities with up to several Diesel/gasoline generator 0.30 65 hundred or even thousands of HH; and (2) HH Biogas 60 7 energy systems, which typically serve one HH. In Minihydro 5,000 7 between are community systems that generally Municipal: Solid waste/ are scaled-up HH systems that serve small schools, landfill gas 5,000 7 health centers, or community facilities. The tech- Geothermal binary 20,000 7 nologies used for HH systems can range from Biomass gasifier 20,000 7 small gasoline/diesel generators to solar, wind, Biomass gasifier 100 9 and picohydro systems, all of which have a typi- cal rating of 50W. Community systems can have Isolated Diesel base load 5,000 9 a higher capacity of 300W or more. Minigrids minigrids Pico/microhydro 100 11 can be powered by a wider range of technologies Solar-thermal with storage 30,000 13 including diesel (by far the most common), mini- Geothermal binary 200 16 hydro, municipal solid waste/land�ll gas, geother- Diesel/gasoline generator 100 20 mal, biomass gasi�er, solar-thermal with storage, Wind 100 20 and wind-based systems. PV-wind hybrid 100 31 Grid and off-grid energy options have a wide range Microturbines 150 32 of costs. Table 2.1 presents the “levelized power Solar PV 25 51 generating costs� for various technologies used for Coal steam subcritical 300,000 4 HH energy systems and isolated minigrids.17 The Large hydro 100,000 5 table compares them with the costs for the large- Combined cycle natural gas 300,000 6 scale conventional sources that typically power Oil steam 300,000 7 the main grid. Table 2.1 shows that the range of Main grid levelized costs for HH systems (US$0.15–$0.65) Oil 300,000 12 is distinctly higher than that for minigrid systems Combustion turbines: (US$0.7–$0.51).18 In contrast, the large generation Natural gas 150,000 13 Combustion turbines: Oil 150,000 23 17. Levelized costs are the present value of the total Source: World Bank 2007b. cost of building and operating a generating plant over its �nancial life converted to equal annual payments and amortized over expected annual generation from sources that typically power the main grid provide an assumed duty cycle. the cheapest electricity (US$0.4–0.23). 18. The �gures shown in table 2.1 should be consid- Generally speaking, grid systems are least cost ered indicative, since new technological developments are likely to have changed the pattern of costs, particu- when they serve large loads in areas of high popu- larly for several off-grid renewable systems, which, in lation density. Isolated off-grid systems are least recent years, generally have shown a downward trend. cost for serving smaller, localized loads in places 34 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC far from the grid. Similarly, HH systems such as service and off-grid solar photovoltaic (PV) solar PV systems are least cost for low-load areas changes for the same parameters (HH density and that are even farther from the grid and in less number of HH served) as the distance to the grid accessible areas. Figure 2.2a shows schematically varies. The �gure uses 2 cases: the population the cost-effectiveness boundary between isolated served being 3 km and 5 km from the existing grids and solar PV systems as the boundary main grid. The implication of these �gures is that changes with HH density and the number of HH the cost-effectiveness of the technical option cho- served. Similarly, �gure 2.2b shows how the cost- sen for electricity expansion is driven by the den- effectiveness boundary between grid electricity sity and clustering of the consumers. The lower the values are in combination, the greater the case for individual solar PV. In addition, the greater the Figure 2.2 Schematic Profiles of Relative Costs of Electricity Supply: distance of the bene�ciary population from the Main Grid versus HH Solar PV Systems grid, the more attractive solar PV becomes. 2.2(a) Cost curve for HH solar service in villages remote from main grid Low-cost solutions and uniform technical stan- 1,000 dards can help stretch the reach of the grid within Isolated grids the same resource envelope. Incorporating low- Number of households served 800 cost solutions and uniform technical standards in the planning and design stages can substantially 600 reduce construction and procurement costs. Such advance planning can signi�cantly expand the 400 grid’s reach and coverage by stretching the avail- PV systems able resources. Thailand’s Provincial Electricity are least cost Agency (PEA) followed a comprehensive strategy 200 of reducing costs that included (1) standardiza- PV and grid costs are equal tion of technical features and all equipment and 0 50 60 70 80 90 100 110 120 130 140 150 components used for construction of distribu- Household density (HH/km2) tion systems; (2) centralization of procurement process and bulk purchases; and (3) reliance on 2.2(b) Cost curve for HH solar service in villages 3–5km from main grid locally manufactured materials, which often were cheaper than imported materials (Barnes 2007). 1,000 Lao PDR uses low-cost concrete poles that MV and/or LV grid extensions are least cost are manufactured locally and deploys low-cost Number of households served 800 pre-stressed concrete pole technology. Institu- tionalizing such innovative cost-saving measures 600 signi�cantly lowers the cost of both fabrication and transportation to the construction site. The PV systems are least PV systems are least cost compared to cost compared to simpler technology and production process makes 400 LV and MV grids LV grid below this line it feasible to produce the poles in portable below this line “mobile factories� that are easily dismantled and 200 LV grid 5 km from grid relocated to follow the progress of construction extension is least cost 3 km from grid as the network spreads out farther. These inno- 0 vations are a signi�cant achievement because pole 50 60 70 80 90 100 110 120 130 140 150 Household density (HH/km2) costs typically represent approximately 33 per- cent of the total investment costs of rural elec- Sources: World Bank 2008c; authors’ calculations. tri�cation programs (World Bank forthcoming 2011). Designing a National Electri�cation Program for Universal Access 35 The savings from integrating low-cost tech- standards adapted to rural/low demand pat- nologies in the early stages of planning and terns, frequently adopting low-cost single-phase design can reduce construction costs by 20 distribution systems (typically single-wire earth percent–30 percent without compromising ser- return, or SWER) and centralized procurement vice quality, and can contribute signi�cantly to processes, and/or incorporating incentives for the pace and scope of electri�cation programs. cost reduction in open and transparent bidding If electricity use is likely to be limited to lights (World Bank 2010a). and small appliances—a pattern common in rural For instance, Lao PDR has employed SWER areas—there may be little justi�cation for apply- (box 2.1) and has deployed shield wire technol- ing the same standards as for high-consumption ogy on some HV transmission lines in its moun- urban areas. Many countries have been successful tainous northern region. There, in addition to a in reducing construction costs by using technical more dif�cult terrain, load clusters tend to be Box 2.1 Low-Cost Technical Options in Grid-Based Electrification Single-Phase versus Three-Phase Power Supply Box figure 2.1.1 SWER line, New Zealand The use of two-wire, single-phase power supply provides several ways of reducing the cost of grid extension for rural electri�cation. A smaller length of conductor and fewer pole-top assemblies are required, and fewer poles are required between conductors before being limited by clearances. Single-phase supply has been widely used in Brazil, Peru, and Uruguay with up to 40 percent reduc- tion in costs compared to 3-phase con�gurations. Single- phase lines present no dif�culties for HH uses (such as refrigerators or color televisions) or small motors (such as electric pumps or manual tools). However, adapta- tions and conversions must be made to serve large-motor Photograph: http://www.flickr.com/photos/16164232@N00/ (above 7.5 horsepower), agro-industrial, and deep-bore- 157119903/in/photostream/ hole irrigation loads. In practice, most industrial develop- ment occurs in industrial zones and incorporated villages, transformer to earth through an earth-stake. From the which are supplied with 3-phase, 30-kV lines. Outside earth-stake, the current eventually �nds its way back to these areas, conversion from single-phase to three-phase the main step-down transformer at the head of the line, lines can be made later, if justi�ed by the load. completing the circuit. SWER’s main advantage is its low cost. It often is used in Single-Wire Earth Return (SWER) sparsely populated areas in which the cost of building an SWER, or single-wire ground return, is a single-wire isolated distribution line cannot be justi�ed. Capital costs transmission line to supply single-phase electrical power are roughly 50 percent of an equivalent 2-wire single- to remote areas at low cost. It is used principally for rural phase line. Several developing nations have adopted SWER electri�cation. SWER is considered to be equally safe, systems including Brazil, South Africa, and Tunisia. In more reliable, less costly, but with slightly lower ef�ciency, Tunisia, use of SWER resulted in a cost savings of 26 per- than conventional lines. The SWER line is a single con- cent–30 percent, compared even to single-phase systems. ductor that may stretch for tens or even hundreds of kilo- In Lao PDR, EDL has implemented 6 SWER projects in meters, visiting a number of termination points. At each as many provinces, using approximately 135 km of SWER termination point, such as a customer’s premises, current reticulation that connects 4,500 HH as well as a remote flows in the line through the primary coil of a step-down army camp. Sources: World Bank forthcoming 2011; World Bank 2006b; and Barnes 2007. 36 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC highly dispersed and small, making it expensive Several generating technologies used for off- to use normal network design and standards. grid electri�cation can compete with the cost Shield wire technology enables low-cost tap-offs of electricity provided by the main grid genera- from the shield wire that runs separately with the tion options (table 2.1). For example, innovations HV line, without compromising the security and and mass production of solar PV and small wind stability of the high voltage network. generation systems are bringing the cost of these renewable options closer to the cost of conven- Overextension of the main grid can lower the tional off-grid technologies such as microhydro reliability and quality of electricity supply while and biogas, which produce electricity more increasing losses and cost of supply. A lack of cheaply than do diesel generators. Strong sup- coordinated planning and minimum technical port for renewable energy (RE) under the Kyoto requirements could lead to overextension of the Protocol and related international and national main grid, particularly during periods of rapid efforts to reduce emissions of GHGs from the build-up. Such systems initially deliver some ben- energy sector play an important role in increas- e�ts of electri�cation. However, they could soon ing investments in R&D and expanding RE become liabilities due to the decline of service technologies. Such investment and expansion can quality, increase in distribution losses, and loss of improve their ef�ciency and drive down costs. payment discipline, because dissatis�ed consum- ers would not be willing to pay for poor service. Expansion of telecommunications services pro- For example, in the early stages of rural elec- vides opportunities for synergy between the elec- tri�cation in China, signi�cant safety, reliability, tricity and telecommunication business models. and quality issues surfaced due to lack of coor- The business model used to expand telecommu- dinated planning and adequate technical stan- nications services in poor and rural areas often dards. In 1988 the government launched a major is based on the principle of “slim pro�t margins reform of the rural power management system, and large sales volume,� also known as a “bottom- and transformed and renovated the rural grids of-the-pyramid,� or BoP, model. The BoP model to unify electricity prices for urban and rural also is potentially attractive in expanding off-grid dwellers within the same grid (Barnes 2007). energy systems. Another synergy between the Similar problems occurred in Vietnam in the early telecommunications and electri�cation busi- 1990s, after which the government moved toward nesses stems from the need to provide electricity better regulation (1998–2004) through de�ning to charge mobile phones as well as to operate cell strategies for the planning, implementation and towers in rural areas. Cellular telecom companies management of rural electri�cation (box 2.2). often arrive in remote rural areas faster than do However, the legacy of such an initial phase is a power utilities. The former invest in standalone high-cost rehabilitation program that is needed generation sources, which also can provide sur- to improve service performance and lower costs. plus electricity to nearby villages. Providing elec- While rolling back grid coverage is very rare, in tricity at reasonable prices to rural consumers principle, it may occur due to a combination of could help cellular operators increase their “aver- factors involving low service performance, high age revenue per user� because rural subscribers cost, and demographic changes due to migrations are likely to increase as cheap charging facilities from rural to urban areas. become available. Innovations and new technologies are expanding Off-grid household systems have limitations rela- the scope of off-grid electri�cation. Technological tive to grid-based electricity. There are signi�cant improvements and declining costs of minigrid differences in the range and quality of services that and HH energy systems are making off-grid can be provided by grid and off-grid sources of solutions more attractive for rural electri�cation. electricity. Household energy systems such as solar Designing a National Electri�cation Program for Universal Access 37 Box 2.2 Vietnam: Balancing Speed and Quality in Electricity Grid Expansion In its push for rapid electri�cation in the 1990s,Vietnam followed an approach of allowing multiple entities and �nancing arrangements to construct, manage, and operate rural distribution networks without imposing minimal technical requirements. This approach enabled a rapid increase in electri- �cation: from 1994 to 1997, access increased from 14 percent to 61 percent. However, longer term technical problems regarding reliability and quality of service and distribution losses began to emerge. Furthermore, the low ef�ciency with which some of these networks were operated, coupled with the lack of �nancial strength in some of the community rural distribution utilities, undermined the quality and �nancial sustainability of electricity service. The government’s response to this situation made a profound impact on moving to quality and �nan- cially sustainable rural electricity distribution. A signi�cant feature of the response was to de�ne strat- egies for the system planning, implementation, and management of rural electri�cation. Furthermore, to enhance the development of the power sector and all electricity activities, the government set a new legal and regulatory framework for the sector. An important recent milestone in this respect was the Prime Minister’s Decision 21, issued in 2009, which stipulated a uni�ed national tariff for all residential consumers. It was designed as an incremental block tariff with the �rst subsidized block to be a lifeline block.1 The Decision also enabled the takeover by the larger Power Corporations (PCs) of the local distribution utilities that could not demonstrate �nancial strength. These takeovers consolidated the rural electricity distribution and retail business. In 2010 the Vietnam Distribution Code was approved. It established the rights and obligations of PCs with respect to distribution and retail activities and their customers, including provisions regarding quality-of-service obligations and consumer protection. As of 2010, it is estimated that 99 percent of the communes and 96 percent of the households in Vietnam were connected to the grid.The four tasks lying ahead are to (1) rehabilitate the low voltage electricity distribution networks in approximately 3,000 communes, (2) determine the most suitable way to achieve the target of electrifying all of the country’s households, (3) continue to improve qual- ity of access and reliable supply, and (4) continue to ensure that electricity is affordable to the poor. Source: World Bank 2011b. Note: 1. In an incremental block tariff system, a consumer is charged incrementally higher unit rates at higher blocks (range of consumption). “Lifeline block� refers to an allotment of electricity suf�cient for a household to cover basic needs, such as lighting, cooking, and water-heating. home systems (SHSs) provide limited amounts of The source of electricity has implications for electricity and service a limited range of appli- consumption patterns and uses of electricity. For cations such as lighting, small appliances (radio, example, in Sri Lanka, the median total wattage television), and cell phone charging. The use of of all light bulbs used in a HH was estimated to energy for motive purposes (mechanical power) be 360W for grid-connected HH but only 60W typically requires more electric power than can for SHS users. Similarly, HH with SHS own be obtained from HH-sized systems. Technically, practically no electrical appliances other than HH energy systems can be scaled up to almost a television set, whereas a large proportion of any size. However, generally, the expense of using grid-connected HH own a range of appliances several PV cells or installing larger biogas plants (IEG 2008). Initially, SHS and similar HH energy or several microhydro systems is too expensive to systems can provide a most valuable, albeit lim- be considered in a rural context. ited, amount of electricity in a timely manner. 38 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 2.3 Technology Advances in Off-Grid Electrification Advanced Battery Storage Technologies Battery storage is one of the key solutions to improve the stability of the power supply from inter- mittent RE systems such as solar PV. In recent years, battery storage technologies have improved dra- matically. Large-capacity systems have been developed that can stabilize power supply from solar or wind systems and provide reliable and quality supplies of electricity for longer periods. For instance, a sodium-sulfur (NaS) battery of 1 MW capacity has been deployed on France’s Reunion Island to provide �rm power to the island grid system during periods of high demand. The battery is a part of a grid-connected solar PV power station and has an expected lifetime of 15 years. Such storage batteries hold potential for island grids in the PICs and geographically similar regions of Indonesia and the Philippines although, in the near future, investment and operating costs will be a constraint (Drouineau and others 2010). Getting More Power from Solar PV: Micro-Inverters for Solar Panels A new type of microinverter is being tested that can dramatically improve the ef�ciency of solar PV systems. In conventional PV systems, solar panels are wired together in series, and their combined high voltage DC power is fed to a single DC/AC inverter. If one module in the series is affected by a simple cause such as a shadow, a leaf blowing over a module, or dust, the entire array suffers a drop in power output. In contrast, the use of microinverters turns each PV panel into a standalone AC power source and can increase the total amount of power output from a multipanel installation. The use of microinverters is expected to improve a PV system’s ef�ciency by up to 25 percent, while costing approximately 15 percent less than the conventional system. Microinverters can not only help maximize the total power output for a set of solar panels but also make the PV system modular and flexible, enabling expansion. The modular flexibility is an important new feature because the expan- sion of conventional PV systems requires replacement of the single large inverter, which is one of the most expensive parts of the system. (www.sandfsolar/micro_inverters.html) DC Microgrids Due to the fast-increasing number of devices and appliances that require DC power, a new paradigm of the DC household microgrid is emerging.The main idea is to eliminate costs and losses associated with the DC/AC conversion by connecting DC appliances (cell phones, computers) directly to the source of DC power. Typically, a DC microgrid is based on solar PV systems and advanced battery storage, but it also can be connected to the AC network through a converter. At present, the main barriers to adopting this technology for rural electri�cation are the availability and upfront cost of the microgrid and DC appliances. (Savage 2010) Nevertheless, in many cases, these systems repre- the electricity service to the three main stake- sent a transitional solution toward a minigrid or holder groups: (1) consumers, for connection integration with the main grid, which can pro- and consumption costs; (2) electricity providers, vide a broader range of electri�cation bene�ts, for their operational and �nancial viability; and particularly in areas that are experiencing fast- (3) national and local governments, for the �scal growing electricity demand. affordability of subsidies needed for sustainable increases in electricity access. These three aspects AFFORDABILITY OF ELECTRICITY ACCESS of affordability are interrelated. All three have been generally secured by EAP countries that The overall viability of a national electricity already have reached near-universal access. These access program hinges on the affordability of countries have done so through an appropriate Designing a National Electri�cation Program for Universal Access 39 Figure 2.3 Indicative Electricity Tariffs for Small Customers in EAP Countries 20 Weighted average tariffs (2007) 18 Grid small customer tariff (2009–10) 16 14 12 US cents 10 8 6 4 2 0 Vietnam Lao PDR Mongolia Indonesia Thailand ASEAN Philippines Cambodia Papua New average Guinea Sources: World Bank 2010c; MIME 2009; National Utility websites: www.evn.com.vn, www.edl-laos.com, www.pln. co.id, www.pea.co.th, www.nea.gov.ph, www.edc.com.kh, and www.pngpower.com.pg subsidy and tariff policy that makes electricity However, the electricity that is provided by affordable to consumers; permits cost recovery off-grid sources in several EAP countries often for the electricity provider; and, where needed, is too expensive for the poor customer to afford. supplements internal generation of funds with For instance, in Cambodia, rural electric coop- external assistance. The bottom line is that the erative (REC) tariffs range between US20c–$1/ overall cost of increasing electricity access is too kWh, compared to 18c/kWh in Phnom Penh high to be fully passed through to newly con- (MIME 2009). In Mongolia, soums (district cen- nected consumers. Consequently, a cost-sharing ters) maintain small diesel-powered grids that mechanism is needed. How countries distribute recover the full cost of expensive diesel fuel. In the this cost between rate payers and tax payers, and, PICs, average tariffs are approximately 75c/kWh in some cases, donors providing concessional (appendix 1: PICs). In addition, in Cambodia, �nancing, reflects the, socioeconomic, political, Mongolia, and the PICs, supply either is provided and cultural realities in each country. for only a few hours per day, or is subject to fre- quent interruptions. In contrast, Brazil, which Affordable Consumer Tariffs has several thousand diesel minigrids in outly- Most countries seek to make electricity affordable ing areas, has overcome the issue of affordability to all consumers through cross-subsidies between through an effective tariff-subsidy system funded two different categories of consumers (indus- from a common source.19 This tariff subsidy sys- trial and residential) and among different income tem also has helped secure the �nancial and oper- groups. Targeting the poor and focusing on the ating viability of the electricity providers, which customer’s access needs are crucial for equity and to ensure that consumers receive an affordable and reliable service that can improve their economic 19. Brazil uses its Energy Development Account well-being and quality of life. Figure 2.3 shows (Conta de Desenvolvimento Energético) for making grants to its “Lights for All� rural electri�cation program. that the grid-based electricity tariff for the small The grant funds come from payments for the use of customer (typically for consumption of less than public assets by private operators, �nes collected by the 50 kWh per month) is signi�cantly lower than regulatory agency from concessionaires and permit- the average tariff within most EAP countries. holders, and annual quotas paid by electricity sellers. 40 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC has improved the reliability of the power supply central regions.20 To facilitate affordability, costs to (Niez 2010). connect communes to the grid have been shared Generally speaking, subsidies are necessary to among the Electricity of Vietnam Group (EVN), ensure that the price of electricity is affordable the provincial governments, the communes and or perceived to be fair in rural areas. However, the newly connected customers/households. In assessing “willingness to pay� for electricity, par- the Vietnam Rural Electricity Project I, connec- ticularly in unelectri�ed rural areas, is not easy. As tion fees required to be paid by HH were less a result, when the lifeline or some other form of than US$10 per HH, a fraction of the real cost. subsidized electricity tariff is designed for poor For the poorest HH, who could not afford even consumers, underpricing electricity service is a a minimal charge, local authorities often worked signi�cant risk. The maximum affordable tariff out ways to provide assistance. Once connected, can be determined through HH surveys based on however, all consumers were responsible for pay- an appropriate assumption that the electricity bill ing their electricity bills in full. should not be higher than a certain percentage of HH income (for example, 20 percent). Ensuring the Financial and Operational Viability of the Electricity Provider Connection fees present a major barrier to poor The �nancial and operational viability of elec- HH connecting to electricity. Even in areas that tricity providers depends on full cost recovery of have been provided with access to electricity, an ef�ciently run operation while signaling the many poor HH do not have an electricity con- right incentives to provide good quality services nection because they cannot afford the connec- to customers. As the grid expands to outlying tion fees. The paradox is that even though the areas, electricity providers are faced with increas- individual connection costs and fees represent ingly higher costs and a lower revenue base. Under a very small percentage of the total investment these circumstances, a carefully designed system required to expand electricity service, the inabil- of subsidies and tariffs that is capable of being ity of the consumer to pay for the connection fees administered ef�ciently is essential to ensure that keeps the access rate down. When the objective service in rural areas is not neglected and remains is universal access, poor consumers will require an important focus of the electricity provider. assistance in paying the connection fees. On a larger canvas, promoting productive uses Connection fees are treated quite differently of electricity through small/micro business and in many parts of the world (box 2.4). Some services can increase consumption and provide a HH connecting to grid electricity systems must more stable revenue base for the electricity pro- bear the burden of grid extension costs (all invest- vider, while increasing the economic impact on ments required to bring the network up to the the electri�ed area. household). Others must pay only for the house- The type and level of subsidies to be applied hold connection costs (drop line and the meter that in a particular country will depend on its social, connects their home to the grid). In most cases, economic, and political conditions. It often is customers must pay the full cost at the time of argued that subsidies for recurring costs should requesting a new connection. Other approaches not be encouraged, since these costs grow steadily to ease the burden of the connection fees range as access is extended and are not time bound. from a delayed monthly payment over a relatively However, when they are well targeted and applied long period to a partial or complete subsidy. In based on speci�c monitorable performance stan- Vietnam, average grid extension costs ranged dards and criteria, subsidies for distribution/ from approximately US$300 in the south—in operating costs can be economically ef�cient and which communes are more densely populated and MV lines had previously been construct- 20. These �gures relate to the World Bank’s Rural ed—to approximately US$400 in northern and Electri�cation I and II projects in Vietnam. Designing a National Electri�cation Program for Universal Access 41 Box 2.4 Electricity Connection Fees in Selected Developing Countries Including EAP Electric connection fees are treated quite differently in many parts of the world. Some HH connect- ing to grid electricity systems must bear the burden of infrastructure extension costs. Others must pay only for the drop line and the meter that connects their home to the grid. In most cases, customers must pay the full fees at the time of requesting a new connection. However, some electricity compa- nies provide loans, to be repaid over several years with the monthly bill to new customers. The goal of all companies should be to keep initial costs for new customers as low as possible so that they will attract new customers who can take advantage of the bene�ts of electricity and become sources of revenue to the electricity distribution company. Box figure 2.4.1 Indicative electricity connection fees in selected developing countries 500 EAP countries Kenya Other countries Connection fees for grid electricity (US$ ) 450 400 Central African Republic 350 Rwanda 300 Tanzania 250 Burkina Faso 200 Zambia 150 Uganda Mauritania Côte d‘Ivoire Cape Verde 100 Thailand Ethiopia Lao PDR Tunisia 50 Sri Lanka Sudan India Vietnam Bangladesh pp Philippines 0 0 10 20 30 40 50 60 70 80 90 100 Rural population with electricity access (%) For most EAP countries, the connection fees are relatively low (box �gure above). In Vietnam, the low connection fees (US$10) charged to a HH under the World-Bank-�nanced Rural Electricity Project I was made possible by distributing the real costs of grid extension, service drop, and metering among the Electricity of Vietnam Group (EVN), the provincial governments, the communes, and the newly connected customers/households. Source: Adapted from Golumbeanu and Barnes 2010. effective in addressing a country’s equity objec- 2. Quality control mechanism to ensure that tives.Three principles have been used successfully payments to service providers are effectively to implement subsidies to achieve long-term linked to compliance. This mechanism �nancial viability: requires monitoring the quality of ser- vice to clients and de�ning and imposing 1. Tariff/subsidy policy that recognizes the penalties in cases of noncompliance. The full cost recovery of an ef�cient service. The objective is to keep the focus on customer utility should be rewarded with the subsidy service. payment on con�rmation that the service 3. “Ring-fencing� the �nances of operation, provided has been of adequate quality and maintenance, and customer services. These quantity. Output-based aid (OBA) mech- should be separated completely from invest- anisms appear to be a good choice for ment activities, which are supported through implementing this principle (box 3.6). capital subsidies. 42 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC In Vietnam, to ensure the �nancial viability of revenue base before the loan repayment period electricity institutions, the government designed began. In Vietnam, EVN �nanced the majority the electri�cation effort with cost-sharing arrange- of its access investment needs through internal ments at all levels (national, EVN/PC, province, generation of funds. EVN’s strong self-�nancing district, and commune government agencies), performance helped to leverage multiple sources along with customer contributions, retained of �nance that were crucial to the program. depreciation from EVN, and international donor support. Leveraging climate change funds for off-grid elec- In the 1990s, Indonesia’s PLN was connect- tri�cation. Several private carbon funds provide ing rural consumers in the Java-Bali region at a carbon credits to off-grid energy projects that are record rate but was unable to make signi�cant using renewable energy resources. International progress outside this region. One of the main agencies involved in the Clean Development reasons was that the revenue under the uniform Mechanism (CDM), particularly the World national tariff from customers outside the Java- Bank’s Community Development Carbon Fund, Bali region did not cover PLN’s higher operat- have supported solar home systems and recently ing costs in those areas, and there was no subsidy expanded their interest to microhydro devel- mechanism to compensate PLN for this loss opment and other renewable energy technolo- (appendix 1: Indonesia). gies.21 However, small programs face signi�cant obstacles in obtaining carbon funding, so it may Securing Finance for Investments be necessary to streamline procedures while in Electricity Access observing CDM principles and methodologies. A sector-wide framework can attract and sustain With greater facilitation, the many groups that donor engagement and support. In low-income are developing �nancing for off-grid renewable EAP countries, donor support through long- energy systems could achieve the dual goals of term �nancing is needed to supplement domestic alleviating poverty and reducing carbon emis- sources of �nance for subsidies that are designed sions. A rapid increase in the number of public for capital and operating costs of electri�cation and private “green funds� that are interested in projects. The �nancing gap in such low-income supporting investments in renewable energy rep- countries can be very large, making the align- resents a new opportunity to attract additional ment of donors’ �nancial management and pro- support to renewable-energy-based electri�ca- curement procedures all the more important. In tion in EAP countries. this regard, a spatial electri�cation rollout plan is of vital importance. Such a plan can be lever- aged to develop a common �nancing platform CONSUMER FOCUS AND TIMING OF ELECTRIFICATION for donors and external sources of concessional Each EAP country has its own vision of providing �nance. The spatial plan can help present a clear electricity access to its population within a targeted and viable �nancing framework for the donors to timeframe. Overall, most countries are oriented coordinate their efforts and schedule assistance in toward achieving universal access to electricity step with the rollout. by 2020–30 (table 2.2). In moving toward their In Thailand, the Provincial Electricity Author- access targets in a timely manner, countries will ity (PEA) was able to secure low-cost capital and need to systematically prioritize the areas that are long-term loans for system expansion. Most loans to be connected. Efforts to reach the HH who from bilateral and multilateral sources in the 1970s are forever inaccessible to the grid—the “per- and 1980s were long term and carried below- manent� off-grid areas—can and should proceed market interest rates; in some cases, no interest was charged (Barnes 2007). The loans signi�- 21. Community Development Carbon Fund, World cantly reduced costs and enabled PEA to build its Bank, www.go.worldbank.org/QNLHGWLPS0 Designing a National Electri�cation Program for Universal Access 43 Table 2.2 Current National Targets access expansion; integrating RE in the broader for Electricity Access national development strategy; and taking into Population with account equity considerations. Lao PDR and electricity access Vietnam followed similar approaches. Country (%) Year A spatial plan integrates the least-cost consid- erations of grid and off-grid options. As the grid Cambodia 60 2020 spreads out and becomes gradually more expen- Indonesia 90 2020 sive, off-grid options may become cost effective. Off-grid electri�cation may be the only option Lao PDR 90 2020 in places in which it is dif�cult to provide access Mongolia 100 2020 such as in remote and mountainous areas and small, dispersed islands, all of which exist in sev- Philippines 90 2017 eral EAP countries.These areas can be considered Timor-Leste 80 2025 “permanent off-grid areas� (�gure 2.4). In areas in which grid extension is feasible but may not Sources: WHO and UNDP 2009; MIME 2009. occur in the medium to long term (10 years), off- grid electri�cation is an intermediate option. Such in parallel with grid expansion efforts. For those areas may be termed “transitional off-grid areas,� who live in areas that the grid will take 10–15 which gradually will shrink as the grid expands to years to reach—the “transitional� off-grid areas— cover them. In most countries, isolated generation interim off-grid solutions are an option (�gure and distribution facilities run by the informal sec- 2.4). In addition, through innovative use of low- tor had provided electricity services long before cost solutions, the expansion of the grid can be the national electri�cation programs reached accelerated and the need for transitional solutions these areas. In a systematically planned expan- minimized. sion, areas that are not likely to be reached by the To date, the experience of most countries is grid in the near future can be served by off-grid that their implementing capacity for off-grid facilities within a framework that would enable deployment—given its nature and constraints—is them to be absorbed subsequently into the grid. far below that of the traditional grid rollout. Although the framework and capacity for off- Figure 2.4 Transitional Off-Grid Areas Shrink as Grid Expands grid service are improving, the proven imple- mentation capabilities and speed of grid rollout still may seem attractive. All of these factors create a constantly shifting interface between the grid and off-grid space as the access effort gets under- way. This constant flux calls for a dynamic spatial rollout plan for the national electri�cation effort. Initial reach The planning process can establish a clear sys- of grid tem for prioritizing the areas to be electri�ed, while taking into account the conditions neces- sary for rural development: access to education Transitional off-grid areas and health services, an adequate transport sys- tem, agricultural potential, and access to markets. For example, Thailand employed a systematic Permanent off-grid areas and highly successful approach to plan for rural electri�cation through setting transparent socio- economic criteria for prioritizing target areas for Source: Authors. 44 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 2.5 GIS-Based Spatial Planning Platform: Powerful Tool for National Electrification Program Rollouts GIS-based platforms have proved powerful planning tools the end of 2013. All social institutions falling within the for grid/off-grid national rollouts to meet time-bound shaded planning cells are earmarked for grid connection. targets. They also have been effectively used by the gov- The remaining social institutions targeted for electricity ernments to syndicate large-scale �nancing on a program- supply are shown by distinct symbols in the box �gure and matic basis. In Rwanda, based on a fully developed spatial will be equipped with solar PV units. These results can be plan, donors committed US$250 million over 5 years. achieved by progressively extending the medium voltage Box �gure 2.5.1 illustrates spatial planning in Rwanda network and by concentrating initially on increasing the for extending the electricity grid over 10 years. The box number of connections within the areas already reached �gure shows the “footprint� of the areas in which grid by the MV network. Given the high population density in intensi�cation will deliver the connection targets indi- the country, the plan shows that most areas can expect to cated in each planned state of the grid for 2009, 2010, be connected to the national grid. However, in some areas, 2012, and 2020.This prioritization has been set to achieve local minigrids based on microhydro and solar PV systems some grid electricity supply to 100 percent of sectors by will continue to be ef�cient for some time. Box figure 2.5.1 GIS mapping for electrification rollout in Rwanda, 2009–20 IBRD 36915 RWA N D A ELECTRICITY ACCESS SCALE-UP UGANDA LEAST COST GRID PRIORITIZATION D E M . R E P. UGANDA LEAST COST GRID PRIORITIZATION AND SWAp DEVELOPMENT PROJECT FOR 2009: OF CONGO FOR 2012: 37,000 NEW CONNECTIONS 240,000 NEW CONNECTIONS D E M . R E P. CAMP CAMP NTARUKA NTARUKA Ruhengeri BELGE Ruhengeri BELGE OF CONGO MUKUNGWA Byumba MUKUNGWA Byumba GIHIRA EXISTING GRID GIHIRA EXISTING GRID GISENYI RULINDO GISENYI Rulindo Gisenyi 15kV Gisenyi 15kV 30kV 30kV Lake Kivu RWINKWAVU 70kV Lake Kivu RWINKWAVU 70kV JABANA JABANA GASOGI 110kV GASOGI 110kV GIKONDO MUSHA GIKONDO MUSHA 30kV PLANNED 30kV PLANNED KIGALI KIGALI MOUNT KIGALI SUBSTATIONS MOUNT KIGALI SUBSTATIONS Gitarama KABARONDO Gitarama KABARONDO Kibuye EXISTING CONNECTIONS Kibuye EXISTING CONNECTIONS 2009 CONNECTIONS 2009-2012 CONNECTIONS KILINDA Kibungo KILINDA Kibungo KARONGI KARONGI NATIONAL PARKS NATIONAL PARKS KIGOMA KIGOMA PROVINCE CAPITALS PROVINCE CAPITALS NATIONAL CAPITAL NATIONAL CAPITAL SECTOR BOUNDARIES SECTOR BOUNDARIES Gikongoro INTERNATIONAL BOUNDARIES Gikongoro INTERNATIONAL BOUNDARIES Cyangugu Cyangugu MURURU 1,2 MURURU 1,2 Butare Butare T ANZANIA TANZANIA 0 50 Km. 0 50 Km. BURUNDI BURUNDI 0 30 Mi. 0 30 Mi. D E M . R E P. U G A N D A LEAST COST GRID PRIORITIZATION D E M . R E P. UGANDA LEAST COST GRID PRIORITIZATION FOR 2013: FOR 2020: OF CONGO OF CONGO 312,000 NEW CONNECTIONS 706,000 NEW CONNECTIONS CAMP CAMP EXISTING GRID NTARUKA NTARUKA Ruhengeri BELGE Ruhengeri BELGE 15kV Byumba Byumba 30kV MUKUNGWA MUKUNGWA 70kV GIHIRA EXISTING GRID GIHIRA 110kV GISENYI Rulindo GISENYI Rulindo Gisenyi 15kV Gisenyi 30kV PLANNED 30kV SUBSTATIONS Lake Kivu 70kV Lake Kivu EXISTING CONNECTIONS JABANA RWINKWAVU JABANA RWINKWAVU GASOGI 110kV GASOGI 2009-2020 CONNECTIONS GIKONDO MUSHA GIKONDO MUSHA 30kV PLANNED KIGALI KIGALI SUBSTATIONS NATIONAL PARKS MOUNT KIGALI KABARONDO MOUNT KIGALI KABARONDO Kibuye Gitarama Kibuye Gitarama PROVINCE CAPITALS EXISTING CONNECTIONS 2009-2013 CONNECTIONS NATIONAL CAPITAL KILINDA Kibungo KILINDA Kibungo SECTOR BOUNDARIES KARONGI KARONGI NATIONAL PARKS INTERNATIONAL BOUNDARIES KIGOMA KIGOMA PROVINCE CAPITALS 0 50 Km. NATIONAL CAPITAL SECTOR BOUNDARIES 0 30 Mi. Gikongoro INTERNATIONAL BOUNDARIES Gikongoro Cyangugu Cyangugu This map was produced by the MURURU 1,2 MURURU 1,2 Butare Butare Map Design Unit of The World Bank. T ANZANIA TANZANIA The boundaries, colors, denominations and any other information shown on this map do not imply, 0 50 Km. on the part of The World Bank Group, any BURUNDI BURUNDI judgment on the legal status of any territory, or 0 30 Mi. any endorsement or acceptance of such boundaries. MAY 2009 Source: World Bank Map Design Unit. These transitional off-grid areas are best suited for It enables the identi�cation of communities and renewable minigrid technologies (�gure 2.4). HH who are to be provided access by taking In contrast to the traditional and relatively into account factors such as the existing infra- static Master Plan analysis, a spatial plan based structure, population densities, and distance from on GIS (geographic information system) mod- the electricity grid, as well as the local renew- els presents a far superior dynamic basis for sys- able energy resources. The spatial model can be tematic planning of the grid/off-grid interface. used to rapidly estimate and compare connection Designing a National Electri�cation Program for Universal Access 45 costs among different regions and communities. UNIVERSAL AND BUSINESS-AS-USUAL ELECTRICITY Other inputs for the model include electricity ACCESS SCENARIOS demand, costs, and geographic characteristics. The spatial nature of the model permits accurate The current trends in electricity access in EAP representation of the existing electricity network countries (�gure 2.5) are not likely to result in and population distribution, which can form the universal electricity access in the Region by basis for future expansion decisions. Box 2.5 illus- 2030. This delayed timetable is not acceptable in trates an application of a spatial planning model the context of the Region’s dynamic social and for electri�cation and points out its additional economic development, which is expected to advantage of attracting external funding for spe- continue in the coming two decades. This report ci�c programs. has developed an alternative scenario that goes Figure 2.5 Electricity Access: Estimated Results of Business-as-Usual and Universal Access Scenarios, 2010–30 2.5(a) Households electrified (mil) 140 120 Unelectrified Rural off-grid 10 Rural grid Households (mil) Urban grid 80 60 40 20 0 Baseline Business- Universal Business- Universal as-Usual Access as-Usual Access 2010 2020 2030 2.5(b) Investment needs (US$ bil) 35 30 25 Rural off-grid US$ billion 20 Rural grid Urban grid 15 10 5 0 Business- Universal Business- Universal as-Usual Access as-Usual Access 2011–20 2021–30 Source: Authors’ calculations. 46 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC beyond Business-as-Usual and seeks to achieve The two scenarios use standard projections for universal electricity access in all EAP countries population growth and urban-rural population by 2030. shares. Based on experience and expert estimates, This report examines these 2 scenarios of these scenarios also make speci�c assumptions electricity access growth up to the year 2030, and about the technology mix (urban grid, rural grid, posits an intermediate result for 2020. These sce- and off-grid), average costs of connection for the narios are not intended as forecasts or plans.Their urban and rural grids at different stages, and costs purpose is to enable policymakers to understand for off-grid applications. the scale of investments needed, the technology options involved, and the feasible timeframes Investment Requirements in the Business-as-Usual within which universal electricity access can be and Universal Access Scenarios achieved. The scenario analysis shows that providing uni- versal electricity access in EAP by 2030 would • The Business-as-Usual scenario takes the require (a) the electri�cation of approximately average annual growth of energy access 60 million HH and (b) an investment of approxi- over the past decade (2000–09) as the “ref- mately US$56 billion. Under the Business-as- erence.� It then assumes that the “refer- Usual scenario, the number of HH added would ence� rate of growth will continue over the be approximately 39 million, and the required next two decades. investments would be approximately US$30 bil- • The Universal Access scenario assumes that lion. The Business-as-Usual scenario still would all countries will reach (near) universal leave approximately 21 million HH without elec- access of 99 percent or more by 2030. tricity access by 2030 (�gure 2.5; tables 2.3, 2.4). Table 2.3 Households Obtaining Electricity Access in EAP by 2030: Universal Access versus Business-as-Usual Scenarios Total no. HH electrified Total no. HH Annual in Business-as-Usual electrified in Incremental no. HH in incremental no. HH in Period scenario Universal Access scenario Universal Access scenario Universal Access scenario 2011–20 19.8 28.6 8.8 0.9 No. HH connected 2021–30 18.8 31.2 12.4 1.2 (mil) Total 38.5 59.8 21.3 — Source: Authors’ calculations. Note: Any discrepancies in the totals in tables are due to rounding. Table 2.4 Investment Needs for Electricity Access in EAP by 2030: Universal Access versus Business-as-Usual Scenarios Total investment needs: Total investment needs: Business-as-Usual Universal Access Incremental Annual scenario scenario needs for Universal incremental needs Time 2030 2030 Access for Universal Access 2011–20 15.5 23.1 7.6 0.8 Total 2021–30 14.7 33.3 18.6 1.9 est. cost (US$ bil) Total 30.2 56.4 26.2 — Sources: Authors’ calculations. Designing a National Electri�cation Program for Universal Access 47 Table 2.5 Investment Needs for Business-as-Usual and Universal Access Scenarios for Electricity Access in EAP Countries by 2030 Total investment needs Incremental needs for universal scenario Business-as-Usual Universal Access Urban Rural Rural Country scenario scenario Total grid grid off-grid Low-access countries Cambodia 0.67 3.78 3.11 0.05 2.43 0.63 Myanmar 0.79 9.58 8.79 1.89 6.43 0.55 PICs (other) 0.05 0.35 0.30 0.04 0.03 0.23 PNG 0.12 2.54 2.42 0.12 1.72 0.58 Timor-Leste 0.06 0.36 0.30 0.03 0.10 0.18 Subtotal 1.69 16.61 14.92 2.13 10.70 2.18 Medium-access countries Indonesia 20.76 30.73 9.96 — 8.12 1.84 Lao PDR 0.69 0.69 — — — — Mongolia 0.13 0.13 — — — — Philippines 5.95 7.01 1.07 — 0.87 0.20 Subtotal 27.53 38.56 11.03 — 8.99 2.04 Source: Authors’ calculations. The incremental investment required for the their urban grids because this demand is ful�lled at Universal Access scenario over and above the the Business-as-Usual rate of growth.The share of Business-as-Usual scenario is US$26.2 bil- the rural off-grid component is far lower than that lion. This requirement is divided in 2 tranches: of the rural grid. The shares for the rural off-grid US$7.6 billion in the �rst decade (2011–20), and component are the same for both low-access and US$18.6 billion in 2021–30. This division trans- medium-access countries at approximately US$2 lates to an incremental requirement of US$0.8 billion (table 2.5). billion per year for the Universal Access scenario Among individual countries, Indonesia needs in the �rst decade, and $1.9 billion per year in the the largest annual incremental investment at nearly second decade. US$500 million. Cambodia requires US$156 mil- lion per annum. However, this amount is a much Incremental needs for low-access and medium-ac- larger share of Cambodia’s current GDP (1.6 per- cess countries. The total incremental investment cent) compared to Indonesia’s annual incremen- needs for universal access (US$26 billion) are split tal investment, which amounts to 0.1 percent of between low-access and medium-access countries GDP. At US$121 million, PNG’s annual incre- as US$15 billion and US$11 billion, respectively. mental investment requirement is similar to that Of these, the share of the rural grid is the largest at of Cambodia (1.5 percent of GDP). The nominal US$11 billion and US$9 billion, for low-access and incremental investment required for Timor-Leste medium-access countries, respectively. Regarding appears small at US$15 million per annum, but it the incremental investment needs for the urban is a signi�cant proportion of its current GDP at grid, low-access countries have an incremental 2.7 percent. The Philippines requires a relatively requirement of US$2 billion. The medium-access small amount at US$53 million per annum, a countries do not have any incremental needs for negligible share of its current GDP (table 2.6). 48 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table 2.6 Universal Access Scenario for Electricity: Annual Incremental Needs by EAP Country by 2030 (US$ mil) % GDP 2009 Urban grid Rural grid Rural off-grid Total (2009 US$) Low-access countries Cambodia 3 122 31 156 1.6 Myanmar 95 321 28 444 — PICs (except PNG 2 2 11 15 — and Timor-Leste) PNG 6 86 29 121 1.5 Timor-Leste 1 5 9 15 2.7 Subtotal 107 536 108 747 — Medium-access countries Indonesia — 406 92 498 0.1 Lao PDR — — — — — Mongolia — — — — — Philippines — 44 10 53 Negligible Subtotal 0 450 102 551 — Source: Authors’ calculations. EAP countries must discover electri�cation of electricity service continue to guide successful solutions consistent with their geographies and programs. When cost recovery is pursued through natural resources, �nancial requirements, demo- sound system design and adequate attention is paid graphics, and social and political realities. Increasing to its �nancial sustainability, most other program electricity access is a dynamic problem-solving elements fall into place. Finally, service providers process. The nature of problems may change as must take a customer focus by lowering barriers to programs evolve, but the underlying principles electricity access and involving local communities of cost-effectiveness, affordability, and timeliness in promoting electricity use. Photo credit: John D. Liu. Connecting houses in poor neighborhoods, Mongolia. 3 ELECTRICITY ACCESS: DELIVERING RESULTS ON THE GROUND A s seen in earlier chapters, several to achieve universal electricity access. This time- EAP countries—China, Thailand, frame is likely for the EAP countries with and Vietnam—have achieved near- medium and low electricity access. A correspond- universal access to electricity. In ing long-term national commitment over this recent years, Lao PDR has made impressive strides entire period is essential to sustain the pace of toward that goal. Outside the Region, Brazil, electri�cation to its successful completion. This Chile, South Africa, and Tunisia are notable exam- national commitment should be broad-based so ples of developing countries that have reached that it is not unduly affected by the normal polit- near-universal electricity in recent decades. In the ical and economic changes in a country. past, Indonesia and the Philippines also led suc- In Tunisia, which reached near-universal cessful electri�cation programs, which now are in access to electricity over a decade ago, the gov- need of greater momentum. In terms of off-grid ernment had included electricity access as part household electri�cation, Bangladesh and Sri of a broader, integrated rural development pro- Lanka have made signi�cant progress in recent gram that emphasized social equity. Chile’s suc- years (World Bank 2008b). cessful rural electri�cation program was founded Each of these countries developed electri�ca- on a high level of multiyear �nancial and politi- tion programs suited to its own conditions, and no cal commitment through various national agen- single model can be attributed to all of them. cies including the energy sector regulator and Nevertheless, all of these programs have demon- the planning ministry, as well as through strong strated three common underlying principles: a regional government buy-in (Barnes 2007). sustained national vision and commitment to uni- Sustained government commitment was a car- versal electri�cation, an enabling policy framework, dinal feature of China’s path to universal electric- and an accountable implementation system (�gure ity access (box 1.3). In Thailand, RE was closely 3.1). Following these principles will facilitate deliv- linked with the country’s 5-year National Eco- ery of results on the ground in the EAP countries nomic and Social Development Plans (Barnes in which electricity access remains a challenge. 2007). Similarly, the Vietnam government’s strong commitment to RE as a means to alleviate pov- SUSTAINED GOVERNMENT COMMITMENT erty and redress imbalances between rural and urban development was built into the govern- Long-term national commitment is needed. ment’s 5-year plan and 10-year strategy (World Experience shows that it takes at least 1–2 decades Bank 2011b). Electri�cation is a top priority of 51 52 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 3.1 Principles Underlying Successful Electrification Programs target may be dif�cult to achieve. The rural areas in the country are served by 249 small, privately owned rural electricity enterprises (REEs), most of which are in poor �nancial condition and lack Delivering affordable suf�cient technical expertise. Furthermore, the universal access national power utility, EDC, which serves only to electricity the Phnom Penh area and some provincial cen- ters, is not in a position to expand its activities Enabling policy Accountability framework for results due to high generation costs and low technical capacity. The credibility of the targets depends on the potential of the sector institutions to Sustained government commitment deliver results on the ground. If these institutions are �nancially or technically weak, they must Source: Authors. be strengthened to put the targets within the country’s reach. the Lao PDR government and an integral part of its growth and poverty reduction program. The Accountability is key. Indonesia has set a target of government translated this commitment into 95 percent–100 percent electri�cation of house- time-bound targets for electricity access, and fol- holds by 2025. The Philippines has set a target of lowed up with clear policy and �nancial commit- 100 percent electricity access by 2020. However, ment against the backdrop of its economy-wide simply setting targets will not be enough. In policies for encouraging growth (World Bank general, the governments must be accountable forthcoming 2011). to their constituencies, and the service provid- In Cambodia, and some of the PICs (includ- ers must be accountable to their customers. ing Timor-Leste and PNG) that have low levels of Accountability also requires transparency so that electricity access, there is a clear need to establish results on the ground can be compared clearly a long-term national commitment. In Indonesia, against targets, and adjustments made as needed. the Philippines, and Mongolia, whose electricity In the Philippines and Indonesia, decentralization access programs have slowed down, the govern- of governance to the provincial and district lev- ments must reaf�rm their strong long-term com- els has brought in locally elected of�cials as key mitments to universal electricity access, and take interlocutors. This development could be viewed additional steps to create or revitalize the insti- as an opportunity to de�ne, prioritize, and mea- tutions that will translate the commitment into sure performance on the ground through inten- results on the ground. sive local engagement. Clearly, engaging the bene�ciaries in all stages of the planning, imple- Credible targets are necessary. Setting credible mentation, and operational phases is critical. medium- and long-term targets in keeping with the potential of sector institutions is critical to Political interference should be minimized. In achieve universal access to electricity. For exam- setting medium-term milestones, national poli- ple, in Lao PDR, the government set time-bound cymakers should focus on setting objectives targets that consistently have been achieved by and measurable results indicators for the access the national utility, Electricité du Laos (EDL). program. Many electricity access programs in From 13 percent at present, Cambodia’s gov- developing countries have failed to meet their ernment has set a target of providing electric- targets due to signi�cant political interference ity access to 70 percent of rural HH by 2030. through lobbying by interest groups and politi- Under the country’s current institutional and cally connected communities. These pressures �nancial arrangements for electri�cation, this orient the implementing agencies more toward Electricity Access: Delivering Results on the Ground 53 Box 3.1 Thailand: Clear Criteria and Transparent Process for Electrification Expansion Thailand used three principles to select villages for electri�cation: 1. Maximize potential bene�ts while keeping project costs reasonable 2. Integrate rural electri�cation into the broader national development strategy 3. Give consideration to the social and political requirements of less stable areas—a political imperative. Within these boundaries, standard village selection criteria were applied. The selection process was carried out in three quantitative steps capped by a �nal qualitative step to determine which villages would receive electricity. 1. Village allocation for each province was based on socioeconomic conditions. This method favored the more advanced provinces, since the goal was to reach the largest number of ben- e�ciaries within the project’s budget. 2. Village allocation for districts within each province was based on the highest predicted levels of actual and potential demand for electricity, using the results of socioeconomic surveys con- ducted for this purpose. 3. Villages for �nal selection were based on three equally weighted factors: proximity of the grid and roads; village size and number of expected customers in the �rst �ve years; productive uses—agriculture, small industry and commercial establishments; and number of public infra- structural facilities (clinics, grade schools, potable water systems). The strategy of electrifying the more economically advanced areas �rst yielded returns on investment that contributed to achieving targets within 15 years instead of the planned 25 years. Source: Barnes 2007. meeting nominal political goals than toward pro- with provincial energy department of�cials and viding timely professional service to their target the relevant provincial authorities as to their pri- bene�ciaries. orities and regional development plans. Following In Thailand, the overall strategy was to elec- a cross-cutting review of all provincial and branch trify the more economically advanced areas �rst. proposals, a revised expansion plan is prepared and Doing so would put the utility, PEA, on a sound conveyed to branch of�ces for implementation �nancial footing and set the stage for further grid (World Bank forthcoming 2011). expansion. However, subsequently, it was rec- Vietnam’s successful electri�cation program ognized that social and political considerations also established three clear principles for selecting required giving simultaneous priority to politi- the communes to be connected: cally less stable areas. These two considerations were addressed through an objective process of 1. The commune should have reasonable goal setting and monitoring by PEA (box 3.1). potential for economic development to Lao PDR’s rural electri�cation planning pro- ensure that energy consumption will jus- cess takes into account the �nancial and economic tify the investment. viability of the investments. It also incorporates a 2. Connecting the commune to the grid simple but rigorous village screening and prioriti- should be the least-cost solution to elec- zation process to maximize social impact. Clinics, trify it. schools, temples, irrigation, and production activi- 3. The selection should follow a process ties get priority—within the available budget. The focused on economic suf�ciency and par- planning process features upstream consultations ticipation of local communities and HH. 54 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC There were clear incentives for local com- of the end-user enterprises but also improve the panies to submit sound plans, which increased �nancial viability of the service provider. their chances of obtaining �nance from provin- cial electricity companies. The public was kept informed of access expansion plans to keep the EFFECTIVE ENABLING POLICY FRAMEWORK process transparent and to manage expectations. The policy framework necessary to facilitate elec- tricity access has four principal components: insti- Links with other sectors facilitate rural electri�- tutional, �nancial, technical, and regulatory. Most cation. Meeting the national targets for electri- medium- and low-access EAP countries already �cation also will require that the government have in place at least some elements of this frame- facilitate cross-sectoral support and links as neces- work and should be able to add or strengthen the sary. Doing so may mean closer integration with other elements without much delay. However, other development programs; or it may mean that some countries, such as Cambodia and several of power sector agencies work closely with national, the PICs, are likely to require external assistance provincial, and local authorities. In Thailand, PEA for this purpose. actively sought and received strong local commu- nity support during all phases of system develop- Institutional Framework ment; and developed a strong rapport with district, Designate an entity with clear responsibility for subdistrict, and village heads. As a result, PEA was grid-based electri�cation. The government needs able to obtain in-kind contributions at the time to designate or create one or more implementa- of construction for rights-of-way and the right to tion agencies that will be responsible for achiev- cut trees, with no �nancial compensation. ing the national electri�cation targets through Outside the EAP Region, some governments grid-based electri�cation. Medium- and low- have explicitly linked rural electricity access access EAP countries already have national power to other sectors. From 1993–2005, the Brazil utilities that operate the main grid. In most cases, Northeast Rural Poverty Alleviation Program such a utility is the most well-established power- used an integrated rural development approach sector entity in the country. It is charged with under which approximately 650,000 families the responsibility to connect unserved urban and received electricity, and 802,000 families received rural HH primarily through grid-based rural water supply (World Bank 2010d). In Uganda, electri�cation. the Energy for Rural Transformation program Some countries have chosen to create sepa- explicitly features electri�cation of remote health rate entities or departments to focus on rural or clinics, schools, and water pumping via solar off-grid electri�cation. For instance, early in its photovoltaic systems. The program also aims national electri�cation effort, Thailand created a to provide electricity to rural agricultural and new agency, the Of�ce of Rural Electri�cation agro-based enterprises, such as honey processing, (ORE) under PEA for grid-based RE. Once milk cooling, and maize processing (World Bank the task of extending the grid to most vil- 2009). lages had been completed, PEA dissolved ORE The electricity provider’s �nancial viability in and resumed responsibility for serving vil- rural areas improves if there are businesses that lages and other nonurban provincial customers use electricity in the daytime. Household elec- (Barnes 2007). Bangladesh has a separate Rural tricity use in rural areas is mainly in the evening Electri�cation Board, which has shown encour- hours (for lighting and TV); without daytime aging results. Such options must be considered by use, the system’s capacity is lying idle most of the each country in its own context. time. Hence, establishing links with other sectors that could promote productive, daytime uses of Effective off-grid implementation agencies are electricity would not only boost the productivity needed. As noted above, off-grid electri�cation Electricity Access: Delivering Results on the Ground 55 will play a signi�cant role in the overall access electricity utility companies have set up sub- effort. Thus, the roles of private sector, public- sidiaries whose core business is to manage and private partnerships, and community groups in operate the off-grid SHS electri�cation service off-grid electri�cation must be clearly speci�ed. program (World Bank 2008a). If multiple implementing agencies are involved in the off-grid electri�cation effort, there should Coordination with local government and other be an institutional mechanism to coordinate agencies can greatly facilitate electricity access. their activities. Few EAP countries have well- Particularly in the rural areas, the service provider de�ned entities for off-grid electri�cation. In should coordinate with the local administrative the Philippines, some rural electric cooperatives units and agencies that can facilitate the electri- (RECs) operate independent minigrids. How- �cation effort. These entities include the local ever, the responsibility for electri�cation in “mis- government, which can help minimize delays sionary� areas—those not connected to the main and barriers by getting support and cooperation grid—is led by the Department of Energy, with a from various authorities; and environmental and heavy reliance on the Missionary Electri�cation social safeguard agencies, which must issue per- Development Plan (MEDP). This plan includes mits for the use of natural resources, such as water mechanisms by which areas unlikely to be served for minihydro schemes. by the RECs in the near future are opened up for service provision by other means, including Productive uses of electricity should be facilitated. “quali�ed third parties.� In Cambodia, the RECs The relevant government agencies and service are engaged in off-grid provision of electricity providers should coordinate with the local enti- and are subject to regulation by the Electricity ties that are responsible for promoting income- Authority of Cambodia (EAC). In other EAP generating activities in the rural areas. The use countries, private entities are operating without a of electricity by local enterprises can increase clear institutional framework. For instance, in the their productivity and the overall level of eco- PICs, several dealers are engaged in selling “solar nomic growth in the area. Furthermore, the day- lanterns� with no clear institutional mechanism time use of electricity by enterprises that are able to coordinate their activities. to pay more for electricity than poor HH can The experience of Latin America offers some improve the �nancial viability of electricity ser- insights that may be relevant to EAP. In Peru, vice. During their years of expanding electricity quali�ed service providers undertake SHS elec- access, the governments of China and Thailand tri�cation of targeted areas within an established deliberately promoted productive activities in the technical and regulatory framework that covers areas that were being electri�ed. China encour- equipment and service standards. The objective aged agroprocessing and other value-added activ- of these programs is the provision of electric- ities, while Thailand built criteria in its rollout ity service. Bene�ciaries pay a monthly tariff in plan to cover areas with the promise of economic a manner similar to customers of an electricity activity (Barnes 2007). There also should be a utility service. In Peru, any type of entity—pri- mechanism to coordinate the electri�cation pro- vate, public, or NGO—can bid to undertake off- gram with agencies in end-user sectors such as grid electri�cation programs in speci�ed areas. health, education, and water, particularly for off- In several instances, the regional power utilities grid schemes to ensure that the needs of these have won the bid to undertake these off-grid sectors outside the grid are fully met. programs by leveraging their technical expertise and knowledge of the demographics and needs of Rural electri�cation programs can bene�t greatly the area. In Brazil, regional power utilities oper- from the involvement of local communities. The ate approximately 3,000 isolated diesel minigrid participation of local communities from the start systems (Niez 2010). In Argentina, the regional of a project offers the advantages of helping to 56 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC improve its design and mobilizing cash or in-kind Financial Framework contributions. Community involvement also con- Sustained funding is needed for upfront invest- siderably increases local ownership, thereby help- ments. Providing electricity access requires major ing to ensure the operational sustainability of the upfront capital investment. State-owned power service. utilities in the medium- and low-access EAP In Thailand, PEA adopted a flexible, inno- countries do not have adequate equity funds or vative, pragmatic approach in dealing with creditworthiness to undertake this investment. communities through paying due attention to Whereas the private sector may be able to raise customer service, service promotion, and mar- its own funds, it is not a major participant in elec- keting; and encouraging community involve- tricity access programs in these EAP countries. ment. PEA actively sought and received strong Hence, it is essential that the government develop local community support during all phases of a �nancial framework to fund the upfront capital system development, beginning with the ini- costs of electri�cation through a system of grants tial surveys and continuing through construc- and loans. tion, electri�cation, operation, and maintenance. Funds for capital investments in electricity Local labor was hired when feasible. PEA was access should be available on a stable and reliable able to obtain in-kind contributions at the time basis, that is, the available funds should not fluc- of construction in terms of rights-of-way and tuate from year to year. Wide fluctuations would the right to cut trees, with no �nancial compen- make it dif�cult for the implementing agencies to sation (Barnes 2007). develop and implement effective medium-term In Vietnam, under the service agent model plans. In countries with successful electri�cation created under the Rural Electri�cation Projects, programs, funds have been provided from both local community members maintained LV sys- external and internal sources.Table 3.1 shows the tems on behalf of the Power Corporations (PCs), diversi�ed sources from which Tunisia �nanced carried out simple repairs, and handled col- its rural electri�cation program. lections. Citizens’ involvement helped ensure In Thailand, PEA received low-cost, long- accountability within local communities, mini- term loans for system expansion. In the 1970s mize nonpayment, reduce system losses, and sig- and 1980s, most loans from bilateral and multi- ni�cantly lower the costs of system operation lateral sources were long term and carried below- and management (O&M) for the PCs (World market interest rates. In some cases, no interest was Bank 2011b). charged. These loans signi�cantly reduced costs and enabled PEA to build its revenue base before Table 3.1 Tunisia: Multiple Funding Sources for Rural Electrification the loan repayment period began (Barnes 2007). Brazil uses its Energy Development Account Budgetary allocation External debt (Conta de Desenvolvimento Energético) for mak- • Regional Development • African Development Bank ing grants to its “Lights for All� RE program. The Program (AfDB) grant funds come from payments for the use of • Integrated Rural Development • World Bank (WB) public assets by private operators, �nes collected Program • French Development Agency by the regulatory agency from concessionaires (AFD) and permit-holders, and annual quotas paid by Extrabudgetary funds • Kuwait Fund electricity sellers (Niez 2010). • Presidential Fund Off-grid program In Vietnam, the RE program has involved a • National Solidarity Fund • Credits from SPV suppliers major public investment effort, matched by sig- (50%) ni�cant local contributions. The power utility, • World Bank loan credits (25%) EVN, was able to self-�nance a signi�cant amount • NGOs (25%) of the capital costs necessary for RE; and in the Source: World Bank 2005. early years, local governments and consumers also Electricity Access: Delivering Results on the Ground 57 Box 3.2 Cambodia: Proposed Sector-Wide Approach for Electricity Access Expansion Over the next 20 years, due to Cambodia’s low electri�cation rate and lack of adequate gener- ation and transmission capacity, the investment requirements for the country’s national electri�- cation program are enormous. Currently, the main source of energy consumed in Cambodia is expensive diesel fuel. The country is building several hydropower plants and a coal-�red plant, which are expected to reduce the share of oil-�red generation, and thus reduce aver- age power costs. A national transmission network is being developed, taking the form of a num- ber of high voltage (HV) transmission lines connecting to the neighboring countries of Vietnam and Thailand, to be followed later by cross-border connections to Lao PDR. This network will enable the import of power at lower prices. Over time, these lines are expected to be extended to create a single interconnected national grid. These ambitious plans will require Cambodia to mobilize signi�cant ongoing �nancing. This mobi- lization can be done most effectively within a sector-wide, programmatic framework, rather than a fragmented, project-by-project and donor-by-donor approach. Led by the government of Cambodia, the sector-wide approach (SWAp) would seek to rally donor partner engagement in alignment with a common sector-wide investment program and implementation and �nancing plan (“Sector-Wide Prospectus�). A key step in developing the prospectus is to build a strategic and credible grid rollout plan, including implementation, investment, and �nancing details for the grid and off-grid components (2012–30). The anchor for such a plan could be a GIS-based least-cost spatial grid rollout planning platform and model framework, which also determines the off-grid complement (box 2.5). Source: Authors. contributed signi�cantly. The government was funds to �nance their electri�cation programs. able to attract donor funds to support its well- In raising future donor funds, EAP countries implemented RE program. would do well to move toward a sector-wide In the 1990s, Indonesia’s successful RE pro- approach (SWAp) and programmatic framework. gram was �nanced by government and donor These purposes could be accomplished through funds. However, the macroeconomic crisis that formulating a “Sector-Wide Prospectus,� which began in 1997 badly damaged the �nancial health would consist of a medium-term investment pro- of the power company and made it dif�cult for the gram and a credible implementation and �nanc- government to provide funds. Meanwhile, donor ing plan. Donors could choose to �nance parts funds for RE dried up. This lack of funds was the of this prospectus, instead of providing funds on major reason for the decline of Indonesia’s RE a fragmented project-by-project and donor-by- program, which has not yet regained its former donor basis (box 3.2). rate of expansion (appendix 1: Indonesia). Use climate change funds more aggressively. In To better coordinate and plan for the long term, recent years, climate change funds have become a sector-wide approach for donor funds should be available to support renewable-energy-based followed. Expanding electricity access is a capital- electri�cation programs. Many private carbon intensive program and requires signi�cant long- funds are actively providing carbon credits to term �nance. Even in countries with deep �nan- off-grid energy projects. International agencies cial markets, the appetite to support these initiatives involved in the Clean Development Mecha- through private capital flows is limited.Therefore, nism (CDM), particularly the World Bank’s most EAP countries would bene�t from donor Community Development Carbon Fund, have 58 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 3.3 Raising and Channeling Subsidies for Rural Electrification Successful rural electri�cation programs have been able to provide the investment and subsidy funds necessary to serve rural consumers in three ways: 1. Direct budget transfers. Some countries have transferred budgetary funds to subsidize the expansion of rural electri�cation. The Tunisian government annually assessed the subsidies necessary to provide electricity to new customers. Over time, as costs per new customer rose, the government increased the level of subsidy per HH. In this way, the electricity price could be kept at reasonable levels for rural consumers, without raising rates for urban consumers. 2. Cross-subsidies. Thailand and Vietnam relied on within-sector cross-subsidies for rural con- sumers to provide most of the �nancing for rural electri�cation.This method provided a stable and consistent source of funds. 3. Universal electricity charge and rural electricity fund. A third way to �nance rural electri�cation is to place a small surcharge on existing electricity users that goes into a rural electri�cation fund (REF). This approach has been used in countries that have many electricity distribution companies, such as Brazil, Chile, and Peru. In the EAP Region, the Philippines has established a Universal Charge for Missionary Electri�cation (UC-ME), which is imposed on all elec- tricity end-users as stipulated in the country’s Electric Power Industry Reform Act (EPIRA). Cambodia has established an REF to support rural electri�cation projects, particularly off-grid schemes. It is expected that an REF will be less vulnerable to political interference because it protected by its own governance rules. Sources: Barnes 2007; Republic of the Philippines 2009. supported solar home systems, renewable energy taken to ensure that the public service obligation power generation, and even the provision of burden does not become onerous. energy-ef�cient light bulbs. While considerable Poorly designed subsidy schemes can under- experience with large-scale projects exists, a mine the �nancial health of power utilities. If the government may have to take some steps to service provider is not compensated for the cost enable small programs to overcome the burden- of connecting and serving poor HH, there will be some international requirements of qualifying for little incentive for the provider to ful�ll its role. such funds. One approach to ensure the full cost recov- ery of an ef�cient service is to calculate the ef�- Well-designed subsidies are necessary to ensure cient costs of service provision individually for affordability and the �nancial viability of the each speci�c utility or regional cost center. This service provider. It is considered good practice approach makes it possible to determine the reve- to subsidize capital costs only and let users pay nues that each utility should be allowed to collect for at least the operational costs. However, the through tariffs and other sources. This individual �nancial framework must design subsidy schemes computation is completely compatible with the that take consumer affordability and utility costs application of a nationwide uniform tariff system into account. To be effective in increasing access, (same tariff structure and rates in each category). the subsidy schemes should be well targeted. The In this case, the regulator or relevant agency must total subsidies that are needed for low-income design and implement a special-purpose mecha- and low-consumption groups can be seen as a nism for revenue compensation among distribu- public service obligation burden that must be tion companies. This option addresses the fact borne either by the budget or by within-sector that companies serving high-density urban zones cross-subsidy schemes (box 3.3). Care must be with generally higher income consumers have Electricity Access: Delivering Results on the Ground 59 lower costs than utilities that serve predominantly Technical Framework low-income customers in rural areas. Establish appropriate technical codes for grid For example, an important element of the expansion in urban and rural areas. In setting up Peruvian model is the full recovery of costs to their networks, all power utilities must follow a the concessionaire/distribution company. Costs technical code.These codes generally are designed of operation, maintenance, and provision of with urban conditions in mind so they may be customer services are higher in rural areas, in too stringent for rural expansion of the main which consumption levels are lower. The average grid, or for independent grids in isolated areas. In monthly consumption per Peruvian customer China, for example, costs were kept under control in rural consolidated areas is 30kWh, and for a by developing two compatible national technical newly connected customer is approximately 12 codes: one for high-demand regions; the other kWh; compared to the average urban consump- for poor and remote regions, with provision for tion of 100 kWh. The ability of rural and newly a smooth transition to the more stringent code connected customers to pay for the service also with future growth. is lower. Under these circumstances, extending In contrast, early in its rural electri�cation access in rural areas is served by a system of sub- program, Vietnam had to deal with distribution sidies that acknowledges the lower income and systems of low quality that used different distribu- lower electricity consumption levels of rural tion standards. The varying standards led to large households and the higher costs of supply result- system losses and added to costs. To respond, after ing from the remoteness of the location. broad consultation with both provincial and local companies, the national utility, EVN, established Upfront connection charges should be affordable for common technical standards so that the power poor customers. Upfront connection fees present companies could construct lines all the way to a major barrier for poor HH in connecting to the HH using the same standard. electricity. Many poor HH do not have an elec- Clearly, each country must consider this issue tricity connection even several years after their on its own, and formulate the code(s) and stan- area has been electri�ed, because they cannot dards based on the conditions prevalent in that afford the connection fees. When the objective country. is universal access, poor consumers will require assistance in paying the connection fees. Facilitate introduction of technical innovations. Common approaches to subsidizing connec- The technical codes/standards for grid-based tion fees—which are considered to be capital RE must be flexible enough to facilitate cost- costs—range from a delayed monthly payment of reducing innovations. the connection fee over a relatively long period to As discussed in chapter 2, many countries have a complete subsidy. Lao PDR and Vietnam have reduced construction costs by using technical successfully used low connection fees to facilitate standards that are adapted to rural/low demand electricity access. A study conducted in Lao PDR patterns, such as single-phase supply and single- found that approximately 20 percent of HH in a wire earth return (SWER). Shield wire technol- village remained unconnected even 10 years after ogy has been adopted by several countries with the village was electri�ed because the households highly signi�cant savings in investment costs. To could not pay the upfront connection charge of control costs, Brazil mandates the use of single- approximately US$80–$100 (World Bank forth- phase transmission for two-thirds of the rollout, coming 2011). In response, Lao PDR piloted the subject to satisfying quality parameters. In recent “Power to the Poor� (P2P) program to enable the years, Lao PDR has employed SWER and also poorest rural HH—typically headed by women— deployed shield wire technology in the mountain- to pay the connection costs in installments (box ous northern region, in which it can be expensive 3.4).The results were encouraging. to use normal reticulation design and standards. 60 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 3.4 Power to the Poor (P2P) Program: Affordable Connection Fees for the Poorest in Lao PDR The “Power to the Poor� (P2P) Program in Lao PDR is a subsidized �nancing mechanism being implemented by Electricité du Laos (EdL) to provide affordable connection and indoor wiring to poor households. Designed with a gender focus, the P2P program enables the poorest rural house- holds who cannot pay the entirety of these costs upfront to access the main electricity grid for basic services. The program’s objective is to raise HH connection rates to 85 percent–90 percent in village communities who already are connected to the grid. To minimize upfront payments, the program design utilizes participatory methods and gender- sensitive eligibility criteria. It particularly targets female-headed poor households. It provides eligible households with a no-cost “basic� 3/9 Ampere meter (low voltage) suf�cient to enable an average household to use 2 light bulbs and a small electrical appliance such as a radio. Eligible households initially pay an average of at least 200,000 Kips (approximately $20) and can receive an interest-free credit of up to 700,000 Kips (US$80) to cover the costs of installation and indoor wiring. A household repays the interest-free credit in equal installments of 20,000 Kips (US$2.50) to EdL over 3 years as part of the household’s monthly electricity consumption bill. Once connected, a typical bene�ciary household’s monthly repayment is US$1–$2, on top of electric- ity consumption charges of US$1–$3 per month.Without the subsidies and the connection, these HH typically would spend approximately US$3–$5 per month for vastly inferior traditional energy sources such as batteries, diesel lamps, and candles.The monthly savings on their energy expenditures are pro- jected to be suf�cient to enable households to fully repay their connection costs in three years. Implementation of the P2P pilot phase resulted in 537 newly electri�ed households, 68 of whom were female headed. This was an overall connection rate increase from 78 percent to 95 percent between 2008 and 2009. Based on the promising results of the pilot phase, since March 2009, EdL has scaled up the P2P program to cover approximately 8,000 additional households nationwide within 3 years. Source: World Bank forthcoming 2011. EDL has adapted innovations that help to minigrids or standalone HH systems. Without lower investment costs of the national electri- suitable technical standards to govern their �cation program. An example is the low-cost development, ensuring the quality of the ser- concrete poles based on simpler production pro- vice provided by these systems will be dif�cult. cesses that make it feasible to produce the poles Developing these standards need not be a time- in “mobile factories� that are easily dismantled consuming task because they have been used and moved to follow the progress of construction successfully in many countries. This international as the network spreads farther out. These mobile history forms a good starting point from which factories are a signi�cant achievement as pole to develop local standards. costs typically represent approximately 33 per- It is important that the technical standards for cent of the total investment costs of rural electri- off-grid systems are not so rigid as to make it �cation programs. dif�cult to introduce new technologies/products that either reduce costs or provide better service. Flexible technical standards also are needed for off- Instead, what is needed is the technical capacity to grid systems. Frequently, no well-de�ned techni- test and certify these new technologies/products. cal standards govern off-grid systems—whether One example of these emerging technologies is Electricity Access: Delivering Results on the Ground 61 Box 3.5 New Options for Serving Basic Electricity Needs in Off-Grid Areas A range of new small low-cost devices for charging the batteries of ef�cient LED lights, mobile phones, and small radios is becoming available in all regions of the world.These user-friendly devices offer the prospect of quickly and cheaply improving the quality of life in off-grid areas. Such light- ing solutions can cover room lighting, lights to illuminate a de�ned working area, and portable torch lighting. Furthermore, a new generation of solar lanterns, often called microenergy household solu- tions, is becoming available that can possibly operate a radio (perhaps a TV in the future).The variety of systems that is available in the market is growing, and prices are becoming more affordable, making them attractive interim solutions for households awaiting full electri�cation. For example, in Vanuatu, retail prices for such products are approximately US$30–$60, depending on whether the device provides lighting only, or lighting plus charging for mobile phones and radio bat- teries. The systems have no operational costs except battery replacement. Rural mobile phone users in Vanuatu without electricity access pay at least US$1 per recharge in the outer islands, which means that their savings would quickly pay for the solar lanterns. There are two key barriers to the rapid penetra- Box figure 3.5.1 Solar-powered LED light and cell phone tion of these devices. One is that there are no charger well-de�ned standards or certi�cation schemes that give the consumers some assurance about the quality of the product.The second is that it is dif- �cult for many HH to pay the upfront costs.The growing experience from the joint World Bank/ IFC ongoing “Lighting Africa� initiative provides lessons in developing the institutional framework to support the systematic growth of applying these low-cost off-grid devices. Such framework should cover providing product quality assurance, market intelligence, consumer education, business support/access to �nance, and policy and public sector operations (www.lightingafrica.org). Photograph: http://www.dlightdesign.com Sources: Aspden 2010; PPI 2009. low-cost, solar-powered battery-charging sys- government department or agency. Regardless of tems, often called solar lanterns (box 3.5). These which mode a country chooses, a well-functioning systems provide a basic amount of electricity. regulatory system is necessary to undertake key However, this amount of electricity is suf�cient functions. Without such a regulatory system, the to quickly and inexpensively change the lives implementing agencies would �nd it dif�cult to of people in remote areas who will not receive meet their electri�cation targets. conventional electricity for many years and who cannot afford to buy larger solar home systems. Establish tariffs and cross-subsidy schemes that make the service provider �nancially viable. The Regulatory Framework regulator is responsible for setting tariffs and approv- Some EAP countries have chosen to set up an ing cross-subsidy schemes that transfer funds from independent regulator for the power sector; oth- higher-income users to �nance system expansion. ers have managed the sector directly via a These tariffs and schemes must be designed with 62 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC three competing pressures in mind: to ensure the ACCOUNTABILITY FOR RESULTS �nancial viability of the implementing agencies, to make electricity access affordable to poorer peo- Using output-based aid (OBA) to ensure account- ple, and to keep the cross-subsidy charges imposed ability. Output-based aid approaches are being on higher income users reasonable. implemented in the energy sector in several Regions to improve access and targeting for the Encourage private sector and community par- poor. Compared to input-based schemes, OBA ticipation in off-grid schemes. Experience with shifts performance risk and accountability to off-grid schemes from several countries demon- service providers, because payments to them are strates that the potential exists for private sector made only after veri�ed delivery of access and participation, including public-private partner- service. How much performance risk is borne ships and community schemes. However, some by the OBA service provider depends on three preconditions need to be met, notably, a suit- components: the de�nition of outputs, the extent able regulatory framework, well-de�ned �nanc- of phasing in subsidy payments, and the service ing arrangements, technical assistance (TA), and provider’s ability to pre�nance the investments capacity building support within which the pri- and services until subsidy payments are made vate sector �rms operate. In general, small private (box 3.6). or community organizations operating in remote areas need “light-handed� regulation to keep the Make service providers accountable to consum- compliance costs manageable and similar to those ers. In the end, the results on the ground will be of other microentrepreneurs. delivered by the designated implementing agen- cies. These agencies must be held accountable Service providers must be made accountable to to the government and consumers. There must consumers. The ultimate aim of an electri�cation be a mechanism to monitor the progress of each program is not only to extend electricity service implementation agency, and the results should but also to provide consumers with a quality of be made transparent and available to the public. service that meets their needs and expectations. The public reporting system should cover the use When actual or potential consumers do not �nd of public funds by the implementing agency in the electricity service up to their expectations, achieving its results. The consumers should be they must be able to convey their dissatisfaction able to discuss the progress of electri�cation and to the regulator simply and inexpensively; and the register their complaints with each service pro- regulator must be able to respond to these con- vider. They also should be able to convey their sumers. The regulatory system must provide for complaints to the regulator if the service pro- a suitable “consumer voice� mechanism that will vider does not meet expected standards.With the help make the service providers accountable to spread of cell phones and the internet, establish- the target bene�ciaries for the quality and timeli- ing a system of transparent reporting of service ness of the service provided to them. provider performance is feasible, as demonstrated in Indonesia and the Philippines in the environ- Manage the grid and off-grid boundaries. The ment and water sectors, respectively.22 boundaries between the grid and off-grid options for rural electri�cation (chapter 2) can change 22. Indonesia’s PROPER (Program for Pollution as a result of changes in technologies, costs, and Control, Evaluation, and Rating) is a national public incomes. The regulatory system must manage the environmental reporting initiative that has been dis- closing data on industrial pollution of water bodies in boundary on a rolling basis so that consumers in metropolitan Jakarta for the past 15 years. In Manila, each area receive service from the appropriate pro- a public performance assessment system managed by vider with no overlap or confusion about which the Metropolitan Waterworks and Sewerage System entity will provide service in a particular region. (MWSS) Regulatory Of�ce has been reporting on Electricity Access: Delivering Results on the Ground 63 Box 3.6 Applying Output-Based Aid (OBA) to Improve Accountability in Providing Energy Access The use of OBA is most widespread in individual off-grid systems for rural electri�cation. The “output� in an off-grid project is usually the installation of a functioning off-grid unit, such as a solar home system (SHS). Most OBA projects use the “dealer model,� whereby private dealers sell systems in the open market. A third-party �nancial institution, such as a micro�nance institution, may provide household credit for the initial down payment. Consumers own the standalone systems and, follow- ing the warranty period, are responsible for maintenance. Typically, the “outputs� in grid-based systems are veri�ed working connections to the network. An output also could be a speci�ed period of service delivery, demonstrated through billing or col- lection records. The OBA subsidy generally is used to buy down the capital cost to make access affordable and is paid once installation is veri�ed. In addition to one-off capital subsidies for access, transitional and ongoing output-based subsidies have been used in grid-based schemes, such as the Pamir Private Power Project in Tajikistan. An OBA program in Ethiopia offers a $35 payment to the utility, Ethiopian Electric Power Corporation (EEPCo), upon veri�cation by an independent agent of pre-agreed outputs, including the connec- tion and sustainable provision of services. As a result, the number of electri�ed towns in Ethiopia has grown very fast during the last �ve years. OBA schemes are only as sustainable as the regulatory environment in which they operate.They cannot bypass the need for a strong regulatory regime. Ultimately, an output-based capital investment program is only one part of a larger service delivery arrangement. To provide sustainable service over time, tar- iffs need to be set at appropriate levels, and subsidies need to be minimized. There also are additional costs associated with implementing OBA. Monitoring and veri�cation require capacity and resources. Capacity can be an issue in OBA schemes, especially with small and local private providers. Sources: Mumssen and others 2010; World Bank 2010a. Monitor the extent of cost reductions achieved by This chapter has covered three important the service providers. Given the high costs of elec- principles for driving results on the ground to tricity expansion and the associated subsidies, it is achieve electricity access: sustained government important that service providers make an effort commitment, an enabling policy framework, to reduce costs. In the EAP Region, the utilities and a focus on accountability for results. These in Thailand and Lao PDR have shown that it is principles have derived from the experience of possible to develop a culture of cost-cutting and countries within the EAP and other Regions introducing low-cost innovations. Outside the that have succeeded in providing near-universal EAP Region, South Africa and Tunisia also have access to their populations. There are no straight- cut their costs signi�cantly. Hence, an element of forward recipes for applying these principles. the accountability of the service providers is their Each EAP country must formulate policy solu- ability to reduce costs over time. tions that are consistent with its electricity access status, its institutional and �nancial strengths and the service quality for water and sanitation services for weaknesses, and its demographic and geographic the two water concessionaires. realities. Photo credits (top and bottom): Michael Wild. Traditional cooking methods rely heavily on the use of solid fuels and inefficient stoves. Top: Charcoal market, Cambodia. Bottom: Cooking on a three-stone stove, Cambodia. 4 MODERN COOKING SOLUTIONS: STATUS AND CHALLENGES T he promotion of modern cooking in greenhouse gases. International coalitions are solutions in EAP is a challenge that giving increased attention to developing busi- will require attention for at least the ness models that promote modern cooking solu- next 20 years. One the one hand, the tions for the poorest households (IEA 2010; UN promotion of modern cooking fuels—princi- Foundation 2010). In recent years, new options pally LPG and natural gas—is the responsibility have emerged that may accelerate this access. of large energy companies that have dif�culty in serving even the existing customer base in RELATIONSHIP AMONG TRADITIONAL COOKING SOLUTIONS, many EAP countries. Many such �rms have not really begun to tackle the challenge of providing HEALTH, AND POVERTY affordable modern fuels to poor sections of the The use of biomass and solid fuels for cooking population. On the other hand, the promotion of is extremely common in EAP, even in countries advanced cookstoves that can use biomass, char- with high rates of modern fuel use.This pervasive coal, or coal cleanly and ef�ciently is not attrac- use of solid fuels––including wood, coal, straw, tive to the private sector due to low affordability and dung––and traditional cookstoves23 results in among poorer households, the main target group. high levels of household air pollution, extensive In other words, it is not �nancially attractive to daily drudgery required to collect fuels, and seri- sell either modern fuels or advanced stoves to ous health impacts. relatively poor populations. It is well known that open �res and primitive The poorest sections of the population, who stoves are inef�cient ways of converting energy live primarily in rural communities form the into heat for cooking. The average amount of “bottom-of-the-pyramid� opportunities.This pop- biomass cooking fuel used by a typical family can ulation segment traditionally has been viewed as being relatively unattractive to investors. The 23. The use of biomass energy in inef�cient or open economic and social bene�ts of reaching these stoves is considered a traditional way of cooking. On markets with modern cooking fuels and advanced the other hand, gas, LPG, kerosene, electricity, and bio- cookstoves are signi�cant. The bene�ts include mass energy used in ef�cient or less polluting stoves are considered modern ways of cooking. Other ex- fewer premature deaths; improved health and pro- amples could be used, but the general idea is that tra- ductivity; hours of drudgery avoided, mostly for ditional ways of using energy typically are inef�cient women; less pressure on the local ecosystem from and somewhat polluting, whereas the opposite is true wood collection; and perhaps even a reduction of modern energy use for cooking. 65 66 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table 4.1 Annual Premature Deaths Attributed to Air Pollution from Cooking with Solid Fuels in EAP Countries, 2007 (mil) Chronic obstructive Pneumonia lung disease Cancer (children (adults older (adults older EAP Region under 5 yrs) than 30 yrs) than 30 yrs) Total premature deaths Total 40,800 589,300 34,700 664,800 Source: WHO and UNDP 2009. Note: According to the de�nitions used by WHO and UNDP 2009, solid fuels (SFU) refer to traditional biomass—wood, charcoal, dung, straw, and crop residues—and coal. The �gures in this table were computed by WHO to ensure compatibility. Thus, they are not necessarily the official statistics of WHO member states, which may use alternative rigorous methods. The number of deaths attributable to indoor air pollution from solid fuel use was calculated without removing chronic obstructive pulmonary disease and lung cancer deaths, both attributable to smoking, thus leading to higher �gures than previously reported. The percentages of population using SFU, which were used as an exposure measure to calculate the present death �gures, were published in WHO 2006 and in the WHO Country Pro�les of the environmental burden of disease (WHO and UNDP 2009). For global methodological reasons, WHO does not exclude smoking from its more recent statistics on the number of premature deaths due to solid fuel use. However, as noted above, not excluding smoking produces current �gures that are higher than some previously published �gures. For instance, excluding the number of deaths due to smoking would reduce the number of premature deaths due to chronic obstructive pulmonary disease by approximately 33 percent. Nevertheless, a very high number of premature deaths due to HH solid fuel use would remain. be as high as two tons per year.24 Indoor biomass 1.8 times more likely to contract pneumonia cooking smoke also is associated with a number than children in households who do not use of diseases, including acute respiratory illnesses, solid fuels.27 In addition, strong evidence supports cataracts, heart disease, and even cancer. Women the causal linkages between biomass combustion and children in particular are exposed to indoor emissions and acute respiratory infection among cooking smoke in the form of small particulates children.28 Thus, there also is signi�cant evidence up to 20 times higher than the maximum rec- linking indoor air pollution to a variety of health ommended levels of the World Health Organiza- problems prevalent in developing countries. tion.25 It is estimated that smoke from cooking Biomass fuel often is collected from the local fuels accounts for nearly 2 million premature ecosystem, most often by women and children. deaths annually worldwide26––more than the This time-consuming drudgery diverts time from deaths from malaria and tuberculosis combined. productive and family activities. Family members In EAP, the number of deaths that can be spend a considerable amount of their human attributed to cooking with coal and biomass energy collecting fuel, whether from common fuels exceeds 600,000 per year (table 4.1). The village land or farmers’ �elds.The time spent col- Region accounts for approximately 33 percent lecting fuel sometimes can be as high as one hour of the world’s deaths attributable to these dis- per day (World Bank 2002). Biomass fuel collec- eases. Young children are especially vulnerable tion often entails walking long distances carry- since they spend much time indoors close to ing heavy headloads and enduring safety hazards. their mothers, including while they are cooking. Furthermore, it can lead to a gradual deteriora- A meta-analysis of global studies on pneumonia tion of the local environment and depletion of risk in children under 5 years indicated that chil- biomass supplies, meaning even longer walks and dren exposed to smoke from solid fuels were over greater drudgery. 24. World Bank 2011a. 27. Kammen and others 2002; Parikh and others 25. WHO 2005. 2001; Smith and others 2004: 1435–94. 26. WHO and UNDP 2009. 28. Dherani and others 2008; Smith and others 2004. Modern Cooking Solutions: Status and Challenges 67 Traditional Cooking Solutions and Poverty Figure 4.1 Household Biomass Energy Use versus GDP per Capita in Developing Overall, the use of solid fuel and biomass is Countries, 2007 closely intertwined with poverty (�gure 4.1). 100 EAP countries EAP countries conform to worldwide patterns 90 Other countries Households using biomass (%) in which the percentage of a country’s popula- 80 tion who use biomass for cooking is signi�cantly 70 related to the level of GDP per capita. Based on 60 the cross-sectional data for 2007, the general pat- 50 tern is that the use of biomass fuels declines as 40 GDP per capita increases, although at a far slower 30 rate (�gure 4.1). The proportion of HH using 20 biomass for cooking declines approximately 0.16 10 percent for every 1.0 percent of income growth. 0 100 1,000 10,000 100,000 In EAP, the highest percentage of people Log GDP per capita (US$) using modern fuels for cooking is in the relatively higher income urban communities of Indonesia, Source: WHO and UNDP 2009. the Philippines, and Thailand. However, even in Thailand, whose LPG use is the highest in the a priority by policymakers, who are focused on Region, well over 33 percent of the population high-pro�le energy projects. In formulating use solid fuels such as wood, straw, or charcoal policies and investment priorities, energy policy- as their main cooking fuels (WHO and UNDP makers should take account of women’s non- 2009). Perhaps because coal is used for heating market productive work. Clearly, the lives of and cooking, the countries in the next group are women—especially poor women––and children China, Mongolia, and Vietnam. The remaining stand to bene�t signi�cantly from energy pro- countries in the Region, which have lower GDP grams that take into account the output pro- per capita, are heavily dependent on biomass fuels duced by women and the burdens they bear such as wood or agricultural residues for cooking. in the production process. However, it must be In this third group, which includes Cambodia, acknowledged that the relationship between Lao PDR, and Myanmar, 70 percent–90 percent interventions and changed exposure to cook- of the people use biomass energy for cooking. ing smoke is complex. For instance, in China it was found that, in cold climate regions, the type Gender Dimensions of Clean Cooking of stove had more of an impact on exposure to Although women have cooked with traditional pollution than the programs that attempted to biomass stoves for millennia, it is only in recent change cooking behavior (World Bank 2007a). years that the accompanying health risks and The conclusion was that, to have an impact on work burden, as outlined above, have been fully lower exposure to pollution levels, training in understood. The past “invisibility� of this issue to �re-tending techniques needs to be coupled policymakers explains, in part, why governments with the use of different stoves. and international organizations previously failed Solutions for reducing the burdens on women to assign this issue the priority it deserves. Much from traditional cooking practices are likely to of the time and energy women spend on domestic involve smaller, demand-side interventions and tasks remains invisible to policymakers since non- investments different from the more visible large- market productive work is not counted in eco- scale energy projects. The strategies for small- nomic statistics or national accounts (box 4.1). scale electricity goods and services such as solar At present, in part because women are home systems and lamps actually are very similar at the lowest level of paid and unpaid work, to those that involve the development and imple- women’s energy uses often are not considered mentation of clean cooking solutions. Depending 68 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 4.1 Women’s “Invisible� Work The language used to describe nonmarket productive work has contributed to the invisibility of women’s time- and energy-intensive work. For example, cooking is considered “active labor� when cooked food is sold, but “economically inactive labor� when it is not. Similarly, housework is “pro- ductive� when performed by a paid domestic servant, but “nonproductive� when no payment is involved. Those who care for children at an orphanage are considered “occupied,� while mothers who care for their children at home are “unoccupied.� An electric pump that transports water is counted as part of the economy, whereas a woman who carries water is not. A water mill that grinds grain is “economic output,� but a woman who performs the same task with mortar and pestle does not count. Trucks that consume fossil fuel to transport crops are considered part of GDP, while women who carry headloads of crops never show up in national accounts. Source: Cecelski 1995. on the possibilities within countries, it may be type of cooking fuels in most rural areas in the possible to merge these similar agendas to achieve Region (�gure 4.2). the scale necessary to enable larger and more vis- The countries that face the greatest chal- ible investments. lenges in moving to modern cooking systems are Cambodia, Lao PDR, and Mongolia in both STATUS OF COOKING FUEL USE IN EAP urban and rural areas. Indonesia, the Philippines, and Vietnam show a greater use of kerosene and The widespread use of biomass energy is one rea- charcoal, but also signi�cant traditional use of son that the quality of stoves used by households in biomass and solid fuels in rural areas. Even though developing countries is so critical. Approximately its share of traditional fuel use is lower, China has 50 percent of people in the East Asia and the by far the largest absolute number of people who Paci�c Region use solid fuels––coal, wood, dung, still do not cook with modern fuels such as LPG and agricultural residue––as their main cooking or electricity. fuels (table 4.2). Of these, close to one-half billion Despite rapid modernization in the Region, people rely on biomass energy for cooking, and the transition to modern cooking fuels and for these populations, the collection of biomass is clean and ef�cient stoves has been much slower a frequent and very arduous task. than electri�cation. The number of people who There are signi�cant rural and urban differ- depend on traditional biomass fuels and coal in ences in cooking fuel use in EAP. Modern fuels the Region is still quite high (�gure 4.3). Close such as LPG and, to a lesser extent, electricity are to 1 billion people still use solid fuels for cooking fairly prevalent in urban areas. Kerosene, coal, and and heating. Of these, approximately 40 percent, charcoal are transitional fuels because they gener- or approximately 400 million people, mainly in ally are bought, not self-collected, and are more China29 and Vietnam, use coal. The other 600 convenient to use than traditional biomass fuels. million are dependent on wood, straw, or animal As might be expected, the number of people in dung for cooking. Thus, cooking and/or heating rural areas cooking with solid fuels is higher than with solid fuels remains pervasive in East Asia and in urban areas. Although the health implications the Paci�c. of cooking with these fuels are similar, most of the solid fuels burned in rural areas are not pur- 29. WHO and UNDP 2009; Government of China 2008; Carolina Population Center and NINFS 2008. chased but are collected from the local environ- Numbers provided by industrial and commercial ment. The traditional fuels, comprising wood, sources may differ from this estimate, which is based straw, and dung, generally are the predominant on household surveys. Modern Cooking Solutions: Status and Challenges 69 Table 4.2 Population Relying on Traditional and Modern Fuels in Developing Countries, 2007 (mil) No. of people using solid fuels People using modern fuels Traditional LPG, kerosene, gas, Country group biomass Coal Total electricity Total developing country 2,564 436 2,999 2,294 Less developed countries 703 12 715 74 East Asia and the Pacific 552 427 986 948 Source: WHO and UNDP 2009; authors’ calculations. With the exception of China, most other EAP income, (2) price of the fuels, and (3) physical countries have not focused on developing sig- access to fuels (table 4.3). As their incomes rise, ni�cantly scaled-up programs to propagate clean households in developing countries generally and ef�cient cooking. In sum, cooking with solid switch to LPG fuel and various types of special- fuels on traditional stoves appears to be the rule ized electric cooking appliances (Barnes and rather than the exception in EAP. Today, promis- others 2005). However, even under optimistic ing alternatives to such traditional cooking prac- projections of income growth, the use of bio- tices exist (chapter 5). mass fuel among developing-country households Households in China and Mongolia use will continue for years to come (IEA 2010). In stoves for heating, and these stoves have prob- lems similar to those of cookstoves. Many of the Figure 4.2 Rural-Urban Divide in Use of Modern Cooking Fuels in EAP traditional heating stoves burn fuel very inef�- Countries, 2008 ciently, leading to higher fuel costs and exten- sive pollution, especially in periurban areas. Population not using modern cooking fuels, 2007 (%) Studies conducted in Northern China on the China impact of improved stoves on household air 100 pollution showed that new stoves and better ventilation techniques resulted in much higher Cambodia 80 Thailand ef�ciency and lower emissions than did the old 60 stoves (World Bank 2006a; World Bank 2007a). The new stoves decreased fuel consumption by 40 30 percent–50 percent. Measurements taken 20 under controlled conditions show a more sub- Indonesia Vietnam 0 stantial reduction in concentrations of particu- late matter (PM) and carbon monoxide (CO) (13 percent–15 percent). Thus, in the northern provinces of China and in Mongolia, this issue of traditional heating stoves is extremely impor- tant and can be addressed in a way similar to the Mongolia Philippines promotion of clean cooking. Lao PDR POLICIES TO ENCOURAGE CLEAN AND EFFICIENT COOKING Rural Urban The extent of the adoption of modern fuels Sources: WHO and UNDP 2009; authors’ calculations. depends on three primary factors: (1) level of 70 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 4.3 Patterns of Cooking Fuel Use in EAP Countries 4.3(a) Rural 100 90 80 70 Population (%) 60 50 Other Dung 40 Wood 30 Charcoal Coal 20 Kerosene 10 Gas 0 Electricity Malaysia Thailand Vietnam China Philippines PICs Mongolia Cambodia Indonesia Myanmar Lao PDR 4.3(b) Urban 100 90 80 70 Population (%) 60 50 Other Dung 40 Wood 30 Charcoal Coal 20 Kerosene 10 Gas 0 Electricity Malaysia Thailand Vietnam China Philippines PICs Mongolia Cambodia Indonesia Myanmar Lao PDR Source: WHO and UNDP 2009. Note: The percentages are based on HH surveys conducted primarily 2006–08. Gas included biogas, piped gas, and LPG. fact, there is evidence that people often switch tailor the promotion of modern cooking to each to better types of cooking only in a partial and area. In urban areas, higher incomes and greater gradual manner. For instance, households may affordability result in greater use of modern use LPG for boiling water and wood for cook- fuels, whereas rural areas with lower incomes ing main meals before graduating completely to make greater use of transition or traditional fuels. LPG (Masera and others 2000). Therefore, it is During the coming decades, as urban incomes necessary to consider policies and programs that grow, the marketing of modern fuels by commer- encourage faster adoption of modern fuels or cial companies will increase. Some countries such stoves that offer more complete combustion of as Thailand already have reached almost universal biomass fuels. levels of LPG use in urban areas. In low-income Urban and rural areas in EAP show clear countries, if lower incomes and lower affordabil- income differences, making it important to ity persist even in urban areas, the use of transition Modern Cooking Solutions: Status and Challenges 71 Table 4.3 Overview of Policies That Promote Clean and Efficient Cooking in Urban and Rural Areas Income and affordability Fuel prices and subsidies Access Urban Overview: Higher incomes, good Overview: All fuels are priced. Overview: Modern fuels and transition access, and greater affordability Taxes and subsidies impact fuel fuels are available. mean the higher use of modern adoption and use. fuels by high-income groups, and Some countries have set fuel import of transition or traditional fuels by Traditional fuel prices often follow limits. These generally should be avoided. lower income groups. the price of modern fuels so it is important not to tax modern fuels excessively. Policies Policies Policies Improve affordability by provid- Modern and transition fuels: LPG: Partial subsidies for stoves and ing microcredit or loans to lower Minimize taxes or subsidies. cylinders. upfront payments. Applicable grant programs also may be used Traditional fuels: Prices are set by Kerosene: Partial subsidies for clean- to lower costs to consumers. market but often adjust to price burning stoves. of modern or transition fuels. For this reason, modern or transition Solid fuels: Technical assistance to develop fuel taxes increase energy costs of and market stoves; partial subsidies for the poor and should be avoided. improved or advanced stoves. Rural Overview: Lower incomes, poor Overview: Modern and transition Overview: Modern and transition fuels access, and lower affordability fuels are priced above affordable often are not distributed in rural areas, mean greater use of transition levels for those with low income. but traditional fuels are always available. and traditional fuels. More efficient improved or advanced stoves can lower fuel costs and improve affordability. Policies Policies Policies Improve affordability by provid- Modern and transition fuels: Price Modern and transition fuels: Encourage ing microcredit or loans to lower at level similar to fuel prices in greater distribution of modern and upfront payments. Applicable urban markets, perhaps through transition fuels and partial subsidies for grant programs also may be used cross-subsidy mechanism that stoves and/or cylinders. to lower costs to consumers. makes up for higher distribution costs. Traditional and solid fuels: Provide techni- cal assistance for better stove develop- Traditional fuels: Let market ment and partial subsidies for improved set price; encourage local tree and advanced stoves. planting; and encourage local forest management to increase Biogas: Promote biogas systems to farm- sustainable supply. ers with animals; include partial subsidies. Sources: Derived from Barnes and others 2005; World Bank 1996; World Bank 2002. Note: Modern fuels are electricity and any form of gas. Transition fuels are kerosene, coal, and charcoal. Traditional fuels are wood, straw, and dung. 72 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC and traditional fuels will continue to be high. In fuel. Thus, it is better to have prices that are not Cambodia, over 40 percent of the urban popula- signi�cantly higher or lower than international tion still uses traditional fuels. For these reasons, it benchmarks. However, in recent years, coal prices is appropriate to approach urban and rural energy have steadily increased and may have encouraged in different ways when considering programs to a transition to improved cooking stoves. promote clean cooking (table 4.3). Improving Affordability of Modern Cooking Fuels Prices: Modern Fuels and Interfuel Substitution The access to various cooking fuels often is Fuel prices have a very signi�cant impact on related to import policies and the affordability energy consumption patterns for cooking. In of purchasing the stove and fuel. Until the early most rural areas, biomass energy is available from 1990s, to conserve foreign exchange and to use the local environment, and the cost is the labor the readily available and relatively inexpensive time used to collect it.Therefore, it is not surpris- coal in the country, China limited the import of ing that low-income HH in rural areas use bio- LPG. This policy resulted in LPG being rationed mass fuels for a large percentage of their cooking informally so that even people who could afford needs. the fuel could not purchase it.30 Since the early Petroleum-based fuels for cooking––mainly 1990s, as the country opened its LPG market to LPG––are preferred in higher income urban competition from international investors, China’s areas because these fuels are convenient and easy LPG consumption grew rapidly by an annual rate to use, even though they are more expensive than of 18 percent. At the end of the decade, China biomass fuels. Often no �nancial help is provided had become the world’s third largest LPG con- to the poor households because it is assumed that sumer, following the United States and Japan. they eventually will catch up and switch to petro- Presently, to conserve their foreign exchange for leum fuels. However, the cost differentials to do other goods and products, small countries in the so are quite high. Thus, strong reasons exist for Region including Cambodia and Lao PDR have policymakers to seek attractive alternatives that very limited capacity to import cooking fuels.The use the same biomass fuels in more ef�cient and nature of import policies is one reason that the modern ways. majority of their populations remains dependent EAP countries have adopted a wide range of on solid fuels for cooking. The solution to such policies to tax or subsidize cooking fuels. These obstacles is to adopt appropriate cooking fuel policies generally are related to the availability of import policies and perhaps provide subsidies or the relevant natural resources in a country. If a loans to the poor to pay the upfront costs of both country is required to import a fuel, the tendency modern and advanced solid fuel cookstoves. is to tax it. If the fuel is produced within the Likewise, low-income households often can- country, subsidies are more likely. Until recently, not afford the upfront cost of an LPG stove even kerosene subsidies in Indonesia traditionally were if they can afford to buy the fuel. Furthermore, very high.As a result, the country stands out in the LPG cylinders often contain a month’s supply. Region as using kerosene extensively for cooking Distribution of fuels in large container sizes can in both rural and urban areas. The problem with make these fuels unaffordable to poor people. keeping prices high is that the fuel inevitably is Their response is to avoid adopting LPG. Instead, purchased and used in other sectors such as trans- they purchase small amounts of kerosene several port and industry (von Moltke and others 2003). times a month. The solution to such obstacles is In contrast, in China, coal is readily available and to adopt suitable cooking fuel import policies, has a relatively low price.The consequence is that and perhaps provide subsidies or loans to the close to 30 percent of people in both urban and rural areas in China use coal as their main cooking 30. Tian 2002. Modern Cooking Solutions: Status and Challenges 73 poor to pay the upfront costs of both modern access to LPG for the people in the Region and and advanced solid fuel cookstoves. elsewhere are: To achieve both ef�ciency and equity, it is important for governments to rationalize taxes on • Possibly provide grants for stoves but not modern fuels because the prices of modern fuels for fuel effectively set an upper limit for the prices of tra- • Distribute LPG in small bottles and make ditional fuels used by the urban poor (Barnes and them widely available at a prorated price others 2005). A tax on modern fuels also drives similar to LPG in larger bottles many middle-class HH to continue their reli- • Devise �nancial and regulatory incentives ance on wood beyond the point at which they to distribution companies to expand LPG otherwise would have switched to cleaner fuels. markets This tax puts additional pressure on the wood- • Apply tax policies that do not make LPG or based biomass resources around cities. Clearly, kerosene unaffordable or raise the prices of restrictions or bottlenecks on the distribution of traditional alternatives such as fuelwood. transition fuels such as kerosene should be elimi- nated. Imports of petroleum products in limited quantities and subsequent subsidies and rationing ADVANCES IN COOKSTOVES AND BIOGAS SYSTEMS should be avoided because the poor have dif�cul- Improved and Advanced Stoves ties in obtaining ration cards. Moreover, the lim- For rural areas, a major emphasis on marketing and ited supply means that the fuel has no cap effect promoting new ef�cient solid fuel stoves and biogas on the price of fuelwood. Abandoning targeted energy systems is needed.To date, there have been subsidies and loosening fuel import restrictions some very successful improved-stoves programs in may be needed to clear the bottlenecks or blocks the Region; in China, people have adopted over to the adoption of transition fuels (Bacon and 100 million improved cookstoves (Sinton and others 2010). Transition fuels are comparatively others 2004; Smith and others 1993). However, attractive and ef�cient, so it may be more produc- even the best of these stoves still have a signi�cant tive to provide credits to low-income consumers way to go to match the combustion ef�ciency of to purchase ef�cient stoves than to subsidize the modern fuels. Today, manufacturers in China and fuels purchased by the consumers. some other EAP countries have begun produc- Thailand has one of EAP’s most successful ing newer high-ef�ciency and high-combustion programs to promote LPG use and has the high- stoves (�gure 4.4). For rural areas, it also is pos- est level of LPG use in the Region.Thailand does sible to promote biogas energy systems for farm- have the advantage of being an LPG producer so ers who have animals. Biogas systems can provide is able to price the fuel below world market lev- clean gas for cooking and have been disseminated els. However, the main reason for the success of with some success in China and Vietnam. the LPG program was that the government estab- lished an oil price stabilization fund for domestic Existing regional cookstove programs in China and petroleum prices. This fund was used to provide Cambodia. While several EAP countries have con- �nancing for storage facilities intended to keep ducted fairly successful improved stove programs, the price of LPG in rural areas at levels similar to China’s National Improved Stove Program (NISP) the price in Bangkok (box 4.2). stands out as a remarkable success. It was imple- To summarize, with the exception of electric- mented during the 1980s and 1990s by the county ity, which is not used extensively for cooking, it rural energy agencies, supported by the Ministry will be necessary to work with oil and gas com- of Agriculture and other entities. The two focal panies to promote LPG or kerosene for cook- points of this program were energy ef�ciency ing. The established best practices for providing and removing indoor smoke through chimneys. 74 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 4.2 Promoting LPG Use: Thailand’s Successful Approach The use of lique�ed petroleum gas (LPG) for cooking in Thailand began in the mid-1970s. At that time, large petroleum companies such as Shell, Esso, and Caltex began selling LPG for households in Bangkok. LPG sold by these companies was largely a byproduct from their oil re�neries in the coun- try and a small amount from imports. However, the use of LPG initially was limited to a small group of higher-income HH in Bangkok. The reason was that LPG distribution was limited to Bangkok, and the price of LPG was very high compared with the prices of the widely available �rewood and charcoal. In the early 1980s, the use of LPG gradually spread to upper-middle- and middle-income HH in Bangkok.The government began a series of efforts to promote the use of LPG for cooking by all HH in Bangkok and throughout the country. The price of LPG was set at the cost of production, which included regulated pro�t margins, rather than at world market prices. In 1986, to promote the use of LPG among HH who lived in the provincial cities and rural areas, a government decree set a uniform wholesale pricing policy for LPG. The decree stated that whole- sale prices at the �ve large regional storage facilities serving consumers outside the Greater Bangkok Metropolitan Area would be the same as the wholesale price in the Bangkok Metro Area. Using the fuel levy from Thailand’s Oil Stabilization Fund, the government subsidizes the costs to transport LPG from the three main LPG storage facilities to regional storage facilities, which also serve as the distri- bution centers for those regions. In addition, as part of the effort to promote the entry of new LPG distributors into the country, especially outside the Bangkok Metro Area, the government instructed the state-owned oil company, which owns storage facilities.The state-owned company allows other LPG suppliers/distributors and traders to use the company-owned storage facility free of charge. As a result, the number of LPG suppliers/distributors in the country has increased from 3 to 6. Although the amount of LPG used for cooking has increased by an annual average of approximately 10 percent for the past 25 years, the share of LPG used for cooking declined from the peak of 78 percent in 1989 to approximately 50 percent in 2009. This decline was due to two compounding factors: the increasing use of LPG (a) for automobiles and (b) as the feedstock for the petrochemical industry for the past 10 years, caused in part by the low price of LPG in Thailand. Source: Tuntivate 2010. Over 100 million NISP improved stoves are still The National Improved Stove Program ended in use in the China. They have resulted in the in the late 1990s. With the exception of grant- largest improvement in energy ef�ciency among funded programs in very poor areas, Chinese gov- EAP countries and perhaps all regions (Smith and ernment support for commercializing stoves has Deng 2010). China’s experience supplies ample ceased. Some manufacturers still are producing and evidence that the development of a program for selling the legacy stoves. However, more recently, better stoves can succeed. the private sector began selling highly ef�cient and The two drawbacks of the NISP stoves are that cleaner burning stove models (box 4.3). In fact, this their combustion ef�ciency is low and they can- development can be characterized as the emer- not achieve a very clean burning. Consequently, gence of a new generation of more advanced stoves. although smoke was moved outside of the houses They are quite durable and have low emissions and through the chimneys, thus resolving some of the high ef�ciency. Many of them have received sig- indoor air pollution problems, the chimneys did ni�cant consumer testing before being introduced not alleviate the general build-up of pollution to the public. Presently, advanced biomass stoves levels in the communities. are being produced in limited quantities and are Modern Cooking Solutions: Status and Challenges 75 Box 4.3 New Efficient and Cleaner Burning Stoves for China: Scope for Renewed Efforts In China, with the extensive use of coal for heating in many regions, the market for commercial coal heating stoves is very strong. Each year, China produces approximately 2 million ef�cient coal stoves. Nevertheless, much larger numbers of such improved coal stoves must be produced soon to serve the nearly 50 million coal-using households in China. In comparison to China’s promotion of improved coal stoves, its promotion of more ef�cient and cleaner burning biomass stoves has lagged far behind. Most active government support for bio- mass stove programs has been curtailed. Moreover, the role of the county rural energy units, which actively supported the previous programs, has been assumed by the private sector. Many biomass- using households rely on the cooking technologies developed decades ago and still being dissemi- nated by the private sector. However, the development and production of new biomass stoves has not kept pace with the dimen- sions of the challenges to promote clean cooking. Approximately only 180,000 low-emission, high- ef�ciency biomass stoves are being produced and sold every year in China. Although the production of such stoves has been rising, it will take many years to reach the nearly 130 million households who use biomass as their main cooking fuel. China clearly needs to build on its earlier successful stove programs and undertake more active interventions. Options include developing an innovative new generation of cleaner burning biomass stoves, developing better marketing techniques to promote them, and encour- aging the private sector to both market and sell a new generation of more advanced biomass stoves. Source: Jia 2011. not sold or promoted widely. The impacts that and delivery of the New Lao Stove (NLS), while these stoves could have on both improving health ensuring product quality and service (box 4.4). and reducing drudgery could be quite signi�cant While, in the past, there have been prob- for China. The possibility exists that if these new lems in implementing improved stove programs stoves were produced on a larger scale, their costs in EAP and around the world, there also have could be lowered signi�cantly, enabling them to been successful instances from which to draw be sold widely in EAP. Already, some of these new advanced biomass stoves are being manufactured in China and exported to many parts of the world. Figure 4.4 Testing New Generation of Stoves in China New possibilities exist to promote improved stoves on a wide scale in the Region. For instance, in Cambodia, GERES, an NGO, is working to convert traditional stove makers into improved stove makers and to turn traditional stove cus- tomers into consumers of improved charcoal stoves.31 The GERES program also is one of the �rst improved stove programs to participate in the international carbon market. An important achievement of the GERES program has been to set up a viable supply chain for the manufacture 31. Groupe Energies Renouvelables, Environnement et Solidarités. Photograph: Ashden Awards. 76 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 4.4 Setting up a Supply Chain for New Lao Charcoal Stoves in Cambodia Since 1994, GERES (Groupe Energies Renouvelables, Environnement et Solidarités), an NGO, has been working in Cambodia to develop energy-ef�cient solutions designed to conserve the environ- ment and improve the living conditions of the Cambodian population. In 1999 GERES stimulated the introduction of the New Lao Stove (NLS), supported by trainers from Thailand, where it was being marketed under the name, “Thai Bucket.� The technical design of the NLS is an updraft com- bustion stove with a grate. After training a group of existing cookstove producers, Lao PDR began the initial comparative tests against the competing traditional model known as the Traditional Lao Stove. The New Lao Stove is a charcoal stove, but similar stoves are manufactured by international �rms specializing in wood stove development and sales. Box figure 4.4.1 Cooking with New The more innovative aspect of the GERES effort is the successful Lao Stove institutional model for selling the stoves, rather than the design of the stove itself. One challenge that emerged during proj- ect implementation was the large number of decentralized production units. Having approximately 31 scattered pro- duction centers made it dif�cult to control the quality of the stove. GERES addressed this challenge by consolidating the scattered production centers to �ve centralized facilities. Next, the NGO set up a local supply chain, selected a trial area, and trained producers to produce stoves �rst for this area, and then for the country. The entire supply chain has the extensive participation of women, who are managing retail shops and promoting stoves. From 2003 to 2010, the sales of the NLS in Cambodia totaled 1 million units, well ahead of projections. According to the manufacturer, compared with traditional stoves, the New Photograph: www.geres-cambodia.org/ Lao Stove can save a considerable quantity of charcoal. Due to its proven ability to reduce CO2 emissions, in 2006 GERES Cambodia was the �rst project devel- oper in the world to put forward an improved cookstove project to trade on the carbon market. The price of the stove is US$2–$4. Sources: www.geres.eu; World Bank 2011. lessons. Furthermore, the outlook for improved is well proven, although the use of biogas is lim- stoves is encouraging as new varieties of stoves ited to farmers who have two or more farm ani- are developed and new alliances are formed to mals. In addition to new varieties of cookstoves, break through the barriers to wide dissemination. smaller niche cooking technologies such as bio- Expanding such efforts would greatly bene�t the gas systems can play signi�cant roles in improving Region. cooking practices (REN21 2010). The introduc- tion of biogas for cooking has been a slow but Biogas Systems, Gasification, and LPG: steady process in developing countries, in part Encourage Commercialization and Marketing because the manure feedstock limits the market The use of biogas systems for cooking is based on for household biogas systems to animal owners. methane gas that can be used in a manner similar However, after roughly 25 years of design to LPG. The biogas system is a small niche tech- experimentation, the technology is entering a nology that can transform biomass into clean- new phase. China now has some 25 million bio- burning gas for modern cooking.The technology gas systems, with an estimated 3 million added Modern Cooking Solutions: Status and Challenges 77 Box 4.5 Biogas Energy and Carbon Financing in the World Bank’s Hubei Eco-Farming Project, China The Government of China sees biogas use as a means to improve the lives of rural households and address global and local environmental issues. For these reasons, in 2001 the country launched a large National Rural Biogas Program. To date, investments total more than RMB 3 billion (approximately US$375 million). This program has resulted in 7.2 million rural households in China cooking with biogas. Recently, a World-Bank-funded Eco-Farming Project was initiated to complement the government’s efforts and support further expansion of the rural biogas program. The project is located primarily in the region of Hubei, a rural mountainous district in China whose main economic activity is agriculture. Households in this region are being given the opportunity to install biogas digesters that use animal waste to generate gas for use in domestic heating, lighting, and cooking. Under the Carbon Development Mechanism (CDM) component of the project, more than 33,000 households––or approximately 165,000 people––are bene�tting from the installation of domestic digesters, which are displacing more carbon-intensive traditional domestic fuels such as �rewood, coal, coke, and crop residues. The Eco-Farming Project also assists farmer households to integrate biogas in their agricultural produc- tion systems to improve their environmental impact, quality, and ef�ciency; and to improve the house- holds’ living conditions. For the sustainable operation and maintenance (O&M) of the biogas systems, the project will (1) strengthen rural energy and agricultural extension services as well as local extension and training facilities, and (2) provide equipment and materials for the service systems; training for counties, townships, farmer technicians, and farmers; and support to farmer biogas organizations. In addition, the project illustrates how the CDM mechanism can be leveraged effectively through biogas applications to: • Reduce the time spent by women collecting �rewood or travelling to purchase fuel • Signi�cantly reduce the amount of household income spent on fuel • Improve indoor air quality in homes due to the smoke-free combustion of biogas compared to traditional fuels • Enhance sanitation services by improving swine manure handling techniques, as well as pro- viding a connected latrine for households. Sources: UNFCC 2010; World Bank 2008c. during 2009 (REN21 2010) (box 4.5). Vietnam supply network and the relatively low incomes has more than 150,000 systems. Outside EAP, and affordability on the part of rural consumers. Nepal’s Biogas Support Program combines the Consequently, there is a strong need for the gov- participation of the private sector, micro�nance ernment to provide incentives for expanding the organizations, community groups, and NGOs. availability and use of LPG through appropriate During the last decade, this program steadily has policy interventions. increased biogas systems: close to 200,000 systems have been implemented. The use of LPG has been expanding rapidly TWO SCENARIOS FOR MODERN COOKING SOLUTIONS in China, Thailand, Vietnam, and other coun- Due to increasing urbanization, by 2030 over tries in the Region. Continuing the incentives 50 percent of the EAP population will reside in to use LPG is a wise policy. Large companies are urban areas. This report has developed two sce- not likely to be interested in promoting LPG narios for both urban and rural areas that pre- in rural areas due to the costs of extending the dict fuel use for 2030 based on the changes in 78 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 4.5 Baseline (2010) and Projected (2030) Cooking Fuel Use in EAP 4.5(a) Rural 1,200 1,000 800 Population (mil) 600 Other Dung 400 Wood Charcoal Coal 200 Kerosene Gas-LPG-biogas 0 Electricity Baseline Business- Universal as-Usual Access 4.5(b) Urban 1,400 1,200 1,000 Population (mil) 800 600 Other Dung Wood 400 Charcoal Coal 200 Kerosene Gas-LPG-biogas 0 Electricity Baseline Business- Universal as-Usual Access 2010 2030 Sources: WHO and UNDP 2009; UN-DESA 2008; authors’ calculations. population and rural-urban population patterns. cookstoves. The following sections de�ne these These scenarios closely resemble those for elec- scenarios more precisely. (See also �gure 4.5.) tricity but are more complicated due to the complex relationship between income growth Business-as-Usual Scenario and interfuel substitution. The �rst scenario is The Business-as-Usual scenario for clean cook- relatively conservative and involves interfuel sub- ing involves no growth in the percentage of EAP stitution caused mainly by urbanization. The sec- households using modern fuels (mainly LPG and ond scenario is for near-universal access to clean electricity) in urban or rural areas. However, due cooking fuels, and involves signi�cant increases to increasing urbanization, the absolute num- in the rural use of LPG, biogas energy, and better ber of people using modern fuels will increase. Modern Cooking Solutions: Status and Challenges 79 Under this scenario, by 2030 rural areas still will new customers under the Business-as-Usual sce- have 665 million people who use solid fuels for nario and 430 million new customers under the cooking. Of these, 460 million still will depend Universal Access scenario by 2030. These chal- on wood straw or dung. In contrast, in urban lenges will require signi�cant levels of increased areas, only 100 million people still will be using electricity generation as well as investments in traditional fuels and 250 million using coal for developing importing and processing facilities cooking, for a total of 350 million people who for gas and LPG. These investments could gen- will not be using modern fuels. erate new market opportunities for commercial development of these fuels. However, expanding Universal Access Scenario decentralized market infrastructure is much more For the Universal Access scenario, this report dif�cult than serving large customers. For some of assumes that by 2030 the entire population in EAP the smaller countries, foreign exchange may be a urban areas will be using modern fuels (electricity, constraint. Finally, to achieve their energy access LPG, or kerosene). However, rural populations will goals, many countries in the Region may have to make only a partial switch to modern fuels due to consider reforming their pricing and related poli- lower incomes and the lack of availability of mod- cies regarding modern fuels. ern fuels. Overall, compared to the Business-as- Usual scenario, under Universal Access, by 2030 Rural challenges. Dif�culties are even more pro- an estimated additional 435 million urban house- nounced in reaching out to rural customers in holds will be using modern energy. Moreover, and remote areas. The comparatively low population importantly, the rural population using traditional densities of rural areas means that commercial fuels will have adopted clean and ef�cient stoves. fuel companies often do not wish to serve in such For rural areas, compared to the Business-as-Usual areas due to high costs, low-income consumers, scenario, Universal Access assumes approximately and the relatively low number of new consum- 20 percent growth in the use of modern fuels. ers. However, even more challenging will be the Universal Access also assumes that 300 million development of BoP models to market and intro- rural HH still will be using traditional fuels, and duce large numbers of improved solid fuel stoves in over 130 million still will be cooking with char- rural areas. To scale up, governments must address coal or coal by 2030. six fundamental issues (World Bank 2011a): According to these scenarios, two quite differ- ent types of challenges exist. The urban areas will 1. Few countries have national institutions/ gain population so must develop the requisite agencies to promote cookstove programs. energy infrastructure, mainly through the types 2. Stove models suitable for BoP popula- of energy that are provided through large com- tions have been developed and continue to mercial networks. This energy includes electric- evolve, but these models have not yet been ity, LPG, and kerosene. In contrast, in rural areas, disseminated on a large scale. some growth of cooking with LPG and kerosene 3. Existing loan funds administered by �nan- is expected. However, it also will be necessary cial groups generally are not used to �nance to address the problems arising from the use of clean and ef�cient biomass stoves. solid fuels as the main cooking sources (table 4. No well-accepted standards, or even quasi- 1.4). This challenge will be to address the issue of standards, exist to qualify the stoves as safe, clean cooking in both urban and rural areas with durable, ef�cient, and clean burning. related but somewhat different strategies. 5. Support for the technical development of clean and ef�cient stoves is limited. Urban challenges. The main challenges in urban 6. Most petroleum fuel companies in the areas will be to develop the commercial fuel Region lack incentives to provide access infrastructure to serve approximately 230 million to such fuels as LPG in rural areas. 80 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC If they are to achieve universal access to Even though it is recognized that a stove will clean and ef�cient cooking in the next 2 decades, not last 20 years, the costs are based on the cost EAP countries must address these 2 challenges of of only the �rst stove that a household buys achieving a high level of commercial fuel mar- because it is dif�cult to estimate the number of keting and scaling up the use of better solid fuel stoves that a household will need over 20 years. stoves. The assumed prices are US$100 for modern fuel stoves (such as LPG stoves) and US$50 for high- Financing Requirements for Clean Cooking quality solid fuel stoves. The investments neces- The investment projections under the 2 scenar- sary for LPG do not include the associated new ios are based on the projected population growth storage or distribution costs required to enable from 2010 to 2030. The Business-as-Usual sce- retailers to sell the fuel to the urban poor or those nario assumes that interfuel substitution will in rural areas. Thus, these investment �gures are occur passively, primarily from urbanization. In approximations that are intended primarily to contrast, the Universal Access scenario assumes indicate the minimum investments necessary to that governments will make signi�cant shifts in promote a clean cooking agenda. The modern policies to actively encourage better cooking fuel stove investments are intended only for the practices. The �nancing for these scenarios will incremental stoves being purchased by new users come mainly from the households who purchase who are part of rapid urbanization. the cooking fuels. However, some government The total investment costs of the Business- interventions may be required to promote this as-Usual scenario are an estimated $16 billion transition to more modern cooking methods. (�gure 4.6). In rural areas, the total would be For both the urban and the rural scenarios, the approximately $6.6 billion, including $4.6 bil- costs of the cooking practices are assumed to be lion for wood stoves and $1.7 billion for coal similar. Thus, the differences between urban and stoves. In urban areas, the cost of the stoves rural areas will be the different types of fuels and would total $9.5 billion, including $1 billion for the different numbers of people according to the wood stoves, $2.5 billion for coal stoves, and population projections. $4.4 billion for modern fuel stoves. Under the Figure 4.6 Investment Needs for Modern Cookstoves under Business-as-Usual and Universal Access Scenarios by Cooking Fuel 14 12 10 US$ billion 8 Other 6 Dung Wood 4 Charcoal Coal 2 Kerosene Gas-LPG-biogas 0 Electricity Business- Universal Business- Universal as-Usual Access as-Usual Access Rural areas Urban areas Sources: WHO and UNDP 2009; authors’ calculations. Modern Cooking Solutions: Status and Challenges 81 Universal Access scenario, the required invest- Similar to the electricity sector, for modern ments rise from $16 billion to $22 billion. The fuels, large government or private commercial additional investments (above the Business-as- enterprises already exist that deal with modern Usual scenario) for urban areas by 2030 would fuels such as kerosene or LPG. However, these be $4 billion; and for rural areas, $2 billion. enterprises generally lack suf�cient incentives to Promoting the modern fuel stove would cost extend their market reach to the poor in urban approximately $4 billion dollars. areas and to rural areas in which population den- Given the potential bene�ts, these are not sities and commercial markets are less desirable. excessively large investment amounts, Most of Thus, countries that have lagged in expand- these expenses will be borne by household con- ing the use of modern fuels should put in place sumers. However, to move from the Business-as- incentives to encourage �rms to reach out to the Usual scenario to the Universal Access scenario people who still use solid fuels with traditional will require both innovations in the way that the means of cooking. problem is perceived by policymakers and techni- To develop better solid fuel stoves, there would cal innovations in the way that household energy have to be a period of technical assistance for mar- services are delivered to consumers. It is obvious ket and technical stove development. It would be that new investments are required to move from followed by a period in which government would the Business-as-Usual to the Universal Access encourage improved stove adoption through par- scenario for EAP households. tial subsidies or microcredit loans for the stoves themselves. Assuming a commercial approach to Implementation Requirements the promotion of clean cooking, governments Efforts to improve access to modern fuels require generally need to focus on the ways to promote cooperation and coordination among multiple market development for interventions that are sectors: rural, forests, environmental, social, and clean, ef�cient, safe, and reliable. It is likely that �nancial.The deployment of improved cookstoves such promotional efforts would require high levels is a logistically challenging exercise that requires of TA and specialized institutions to deal with the coordinating appropriate technology and designs, problem. In addition, for such small interventions, distribution channels, �nancing mechanisms, and generally the private sector, NGOs, and micro- service support. As part of overall Regional energy �nance organizations would have to market and plans, the problems associated with the high num- promote the stoves, so a period of support would ber of people cooking with solid fuels in the be necessary to strengthen the capacity of these Region need to be more actively addressed. organizations to undertake such activities. Photo credit: Ashden Awards. Cooking with biogas, Vietnam. 5 MODERN COOKING SOLUTIONS: THE WAY FORWARD T he efforts to provide universal access In recent years, new approaches to promot- to modern cooking solutions will ing modern cooking solutions have emerged, include at least three focal points: along with a growing consensus on the urgency expansion of LPG, promotion of of this effort. Furthermore, there have been some clean and ef�cient stoves, and development of successful programs in EAP from which lessons biogas energy systems, with the last limited to can be derived for future programs. For instance, HH with the requisite number of farm animals. China’s successful NISP has disseminated over To date, the promotion of LPG probably has been 100 million improved stoves (Sinton and others the major approach to advance clean cooking in 2004). This success was achieved through learn- the Region. The wider dissemination of LPG is ing by doing and adjusting early unsuccessful dependent primarily on governments’ pricing methodologies. In Thailand, before LPG became and import policies (chapter 4). the predominant fuel, the ef�cient bucket stove This chapter focuses on promoting clean and became almost universally adopted by people in ef�cient cookstoves and biogas systems among urban areas (Kammen 1995). the rural and urban poor, who are unlikely to be The emerging new approaches and lessons able to afford LPG in the near term. Since biogas from past programs provide the foundations on energy systems can serve only a limited number which to design future programs in the Region. of people, the key to delivering clean cooking It is essential to begin now because most EAP systems is the development and dissemination of countries face a long road ahead to adopt and pro- improved cookstoves that use traditional biomass mote the best policies and strategies for achieving and coal as fuel. universal access to modern cooking solutions. Even though efforts to promote clean cook- stoves have been ongoing for many decades, pro- grams in EAP and worldwide have been limited. WHAT IS DIFFERENT FROM THE PAST? China and India have undertaken large-scale It is widely accepted that many past cookstove programs, but most other countries have not and small-scale renewable energy programs had advanced signi�cantly beyond pilots. However, several shortcomings in their technical designs even where the pilot programs have succeeded, and distribution strategies. The three major the commitment to clean cooking often has been problems were that (1) most products were not limited and fragmented. well designed; (2) there was little quality control 83 84 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box 5.1 New Advanced Biomass Cookstoves Initiative in India In 2009 India announced a large initiative for advanced biomass cookstoves. This initiative was intended to reach the millions or even hundreds of millions of people who use biomass energy and enable them to meet their daily cooking needs more healthfully. Under development, the program will focus on �ve key areas: • Technical issues related to testing and standards, including R&D • Cookstove delivery procedures • Potential programs to process and supply fuel • An innovation contest for next-generation cookstoves • Exploring what can be accomplished with community cookstoves. Expected in 2011, a new protocol will be adopted to test and qualify cookstoves based on their energy ef�ciency and stove emissions. Testing facilities will be set up prior to qualifying the cookstoves. It is expected that new manufacturers will be involved. Subsidy design may include carbon credits. Source: IIT and ERI 2010. during installation; and (3) some cookstoves initiative was started with the goal of getting had short working lives because they were built most people who use solid fuels to begin to use a with limited expertise entirely of local materi- new stove in the not too distant future (box 5.1). als. Ironically, these problems arose from well- India’s cookstove initiative highlights the intentioned efforts to use local entrepreneurs necessity to develop innovative stoves that are to manufacture them, to keep costs low, and to subject to standards and testing methods that ensure that the stoves were appropriate for local qualify them for the new effort. The concept is cooking practices. Many of the stoves did work that stoves should be certi�ed to be safe, reliable, well when new, but their performance quickly ef�cient, and clean burning. The initiative also degraded, and the stoves began to crack and break may have scope for different levels or tiers of cer- down. As a result, most of these past programs, ti�cation or stove labeling. Certainly, methods to with the notable exception of those in China and �nance the high costs of stoves are an issue that India, remained at a small scale and often were must be addressed along with the appropriate evaluated as problematic and unsuccessful. levels of subsidies for the stove itself.The research Today, the situation is quite different. In the on the health bene�ts of reducing emissions is last decade, there has been an emergence of new still an area that policymakers should emphasize. technologies, new ways of producing stoves, bet- Today, all stakeholders have the opportunity to ter quality control, innovative �nancing schemes, join together to tackle energy and indoor pol- and new coalitions to support the scaling up of lution problems that intensely affect the world’s new programs (World Bank 2011a). Some new poorest populations. stoves are being manufactured in factories and workshops and delivered ready to use. Other manufacturers are producing essential stove com- POLICY AND TECHNICAL SUPPORT FOR NEW APPROACHES ponents such as �reboxes and chimneys in the Implementation of new approaches for better form of kits that can be assembled onsite. stoves requires several different types of support. In 2009 India began a renewed effort to To achieve the goals for cleaner cooking in the develop a successful stove program to meet the Region requires a new coalition of government, needs of the hundreds of millions of people who donor, private sector, and nongovernmental enti- use biomass energy for cooking. That year, a new ties. Governments can play a supporting role as Modern Cooking Solutions: The Way Forward 85 catalysts to promote the development of inno- standards exist worldwide, but some EAP coun- vations, as opposed to providing heavy subsidies tries have developed their own standards. There- for a particular type of stove. This support will fore, a Regional review and recommendations include providing incentives to both private concerning acceptable standards for advanced sector and nongovernmental organizations to biomass stoves are necessary to complement any develop better products through the interaction existing country-level work in the Region among the designers, manufacturers, and users of (MacCarty and others 2007; MacCarty and others stoves to produce more diverse stove designs that 2010). This Regional review would have to be appeal to consumers. To enable this interaction, a coordinated by an entity that is directly involved technical infrastructure must be put in place to in, or at least knowledgeable about, new work at test the claims of new product manufacturers and the international level. to ensure that products deliver on performance At present, over 100 different new types of promises and are safe and reliable. In addition, stoves are estimated to be available in developing once satisfactory products become available, gov- countries. These products vary substantially in ernments and other entities will have to launch their sophistication, durability, and reliability. As consumer information campaigns to inform the a consequence, suitable codes or standards need public of the health and ef�ciency advantages of to be established to ensure that products meet the the new products. needs of consumers and perform satisfactorily. The requirements to promote small retail Thus, there is a need to test new products, while products are fairly similar whether the latter are making sure that standards are not so stringent better stoves or more ef�cient lighting appliances. that they discourage the products’ commercial These requirements include encouraging innova- development. tive product designs that are signi�cant improve- In the initial stages, technical support will be ments over past methods of cooking, lighting, or necessary to encourage better and more diverse heating. In all likelihood, the new designs will products. For such small interventions as clean emerge from small private companies or NGOs. and ef�cient stoves, it is best to encourage a Product development often is very expensive and diversity of products to enable consumers to could be supported through competitive innova- choose what best �ts their needs. This diversity tion grants or other �nancial incentives provided will require encouraging interaction among stove by governments or other entities to assist with users, builders, and designers. In addition, govern- such expenses. The general requirements are to ments and other entities should support signi�- develop a system of technical support to ensure cant monitoring and evaluation (M&E) of stove that (1) stoves perform as expected, and (2) �nan- performance to ensure that lack of stove durabil- cial and possible subsidy arrangements are put in ity, a signi�cant issue in past programs, does not place to support larger scale program develop- remain a problem. Technical issues that should ment along with institutional support for imple- be addressed include stove durability, safety, and mentation (World Bank 2010c). performance. To encourage product innovation, it would be a good idea to set up a technical Technical Support, Performance, exchange for information sharing on the issue of and Information Exchange clean cooking.This exchange could be combined Technical support certainly is needed to certify with the commercialization of lighting and other stoves to ensure that they perform satisfactorily. small household-energy related products. Certi�ed stoves could be considered eligible for government �nancing or partial grants to sup- Financial Framework to Encourage Production, port dissemination. Certi�cation would require Development, and Sales accepted country or international standards for The �nancing requirements for initiating any improved stoves.Today, no such generally accepted new agenda for clean cooking are fairly similar to 86 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC programs that market new products such as solar Furthermore, efforts should be made to home systems or microlighting systems. Many explore the use of climate change funds so past cooking programs have suffered due to their that the �nancing of advanced stoves is broadly pilot nature or short-term focus. To give them a mainstreamed. The Global Environment Facility greater chance to succeed, larger programs will (GEF) has listed clean cookstoves as eligible for require longer term government and donor grants. Methodologies already are available for commitment. voluntary carbon markets and are beginning to Subsidies will be necessary to promote the be used, although not yet widely (box 5.2). development of new stoves. Generally, the most Specialized funds also have been used success- effective stove programs have �nanced stove fully to promote better stoves and other technol- development costs, with minimal or no subsi- ogies. Rural energy funds, which have been used dies for the stove itself. In many countries, high in many countries to support rural electri�cation, subsidies for stoves themselves have proved prob- can be used to promote improved cookstoves. lematic (World Bank 2011a). In the early stages Such funds are, by their very nature, open to new of the NISP in China, the government provided types of projects and use both NGOs and the pri- signi�cant subsidies for stoves, and stoves were vate sector to implement projects. Private sector promoted through county rural energy of�ces. entities and NGOs could be employed to coor- After initial dif�culties, China altered its approach dinate efforts to deal with these very important to include support to develop and promote issues. Generally, specialized funds are flexible and the stoves. Their distribution was accomplished also could be used by, or coordinated with, other without subsidies. This approach resulted in the sectoral programs such as clean water, rural devel- establishment of factories to produce the stove opment, and local forest management. components, which then were assembled by local In addition to rural energy funds, many coun- entrepreneurs.The success of this program meant tries have community block grants or social funds that China had no need to continue its past level that could be used to promote clean cooking and of support for stove development. other energy technologies. One very successful There could be a role for vouchers that pro- program in Guatemala provided communities with vide increasing subsidies based on the smoke many development options, one of which was to removal or energy ef�ciency of stove products. use the funds for improved stoves.These stoves had The necessary balance between loans and grants large iron or steel cooking surfaces that were con- to promote better stoves in developing countries venient for cooking with pots, making flat breads, will need to be evaluated in each situation, taking and roasting corn (Ahmed and others 2005). both cost and affordability into consideration. Indonesia’s Green PNPM (National Program The �nancing and subsidies involved in cook- for Community Empowerment) is an environ- stove promotion programs are complex because mental pilot that provides block grants and tech- the stoves generally are sold by private companies. nical assistance to communities (World Bank Programs such as Lighting Africa have addressed 2010b).33 At present, the main grant products are such issues for electricity access (Lighting Africa forest and water resources management, environ- 2011),32 and lessons can be derived from their mental services, waste management, and renew- experience. able energy. With the right type of improved 33. PNPM Generasi is an innovative pilot program launched by the Government of Indonesia in July 32. Lighting Africa, a joint IFC-World Bank program, 2007. PNPM aims to accelerate achievement of three is helping to develop commercial off-grid lighting mar- Millennium Development Goals: Universal basic edu- kets in Sub-Saharan Africa as part of the World Bank cation, Reduction in child mortality, and Improve- Group’s wider efforts to increase access to energy. ment in maternal health. Modern Cooking Solutions: The Way Forward 87 Box 5.2 Potential for Financing Efficient Biomass Stove Projects through Climate and Carbon Funding Mechanisms Several �nancing mechanisms designed to mitigate climate change can be leveraged to fund biomass energy projects including the development and deployment of ef�cient cookstoves. Clean Development Mechanism (CDM). To date, the CDM has approved two methodologies for improved cookstoves and reduction of nonrenewable biomass: (a) AMS (Approved Methodology for Small-Scale) II.G and (b) “Methodology for Improved Cookstoves and Kitchen Regimes� (Gold Standard V.01). The AMS methodology is based primarily on carbon mitigation. The Gold Standard is more onerous. It uses a fossil-fuel baseline to compute the expected fossil-fuel savings from the local fossil alternative to determine the scale of �nancing. The Gold Standard methodology, used in voluntary carbon markets, also accounts for the inclusion of upstream emissions reductions, that is, emissions from charcoal production, as well as methane and nitrous-oxide emissions reductions. With the ongoing simpli�cation of the CDM process, it is becoming easier to develop smaller scale biomass energy projects such as with improved cookstoves. Additionally, CDM-certi�ed cred- its traded on the emissions trading system (ETS) usually carry a premium over voluntary emissions reductions (VERs) credits. The CDM already has approved 26 household energy-ef�ciency projects and has registered 6 more. Climate Investment Funds (CIF). Channeled through the multilateral development banks (MDBs), CIFs comprise the Clean Technology Fund (CTF) and the Strategic Climate Fund (SCF). SCF, in turn, covers two programs that may be used for scaling up forests and other biomass energy projects. These two programs are the Forest Investment Program (FIP) and the Scaling Up Renewable Energy Program (SREP). FIP supports developing countries’ efforts for REDD (Reducing Emissions from Deforestation and Forest Degradation). The World Bank Group. The World Bank (IBRD) houses three funds with particular relevance to biomass energy: (a) the BioCarbon Fund (BioCF), (b) the Community Development Carbon Fund (CDCF), and (c) the Forest Carbon Partnership Facility (FCPF). The �rst two funds focus on land- use-based credits and rural-community-based projects, respectively. FCPF is designed to support the Bank’s efforts to address REDD. The International Finance Corporation (IFC) also has helped to develop a large number of �nance products for businesses and consumers that could be used to sup- port biomass energy. IFC recently also agreed to provide �nancing to support improved cookstoves. Global Environment Facility (GEF). The GEF has three grant mechanisms to promote better bio- mass stoves and improve the sustainability of household biomass use: (a) the Earth Fund (and other private sector development funds), (b) the Sustainable Forest Management program, and (c) the Small Grants Program. Sources: World Bank 2011a; UNEP Risoe Center 2010; www.ifc.org; GIZ 2011. stoves, this program could be expanded to include needs. These divisions are important because the �nancing of an ef�cient and durable stove. In methods and strategies need to be tailored to address addition, a wide variety of global funding sources, the varied goals of cookstove programs. The pro- especially climate and carbon funding mecha- gram funding types and objectives include: nisms, could be harnessed to support clean cook- ing (box 5.2). • Rapid-deployment �nancing to successful To summarize, cookstove �nance can be bro- cookstove project developers to scale up ken down into components that address different existing projects 88 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC • Market development activities to create and social sectors. Consequently, responsibil- robust markets for advanced cookstoves in ity for this work does not fall squarely on any priority countries and regions one sector. This multisectoral aspect is similar to • Pilot programs to assess the technical per- the challenge in the water and sanitation sec- formance and market viability of advanced tor, in which handwashing, smaller latrines, and stoves that deliver the best local (health) toilets cut across the water, health, and envi- and global (climate) bene�ts ronmental sectors. This multisectoral charac- • Support to cookstove entrepreneurs and teristic has been addressed by developing the manufacturers in the form of funding and multisectoral, grant-based Water and Sanitation TA to foster the quality and quantity of Program (WSP), which is responsible for pro- advanced cookstoves in the market and to moting projects within countries and creating reduce costs international consensus for action (box 5.3). A • Policy support to country governments to similar arrangement can be considered for deal- create enabling policy environments and to ing with the multisectoral nature of improved direct public sector resources to the prob- cookstoves. In the past, the Energy Strategy lems that advanced cookstoves can address Management Assistance Program (ESMAP) • Humanitarian assistance in disaster and has supported a considerable amount of work conflict zones to provide cookstoves to on biomass energy and could play a signi�cant distressed populations, such as residents of role in assisting the EAP Region’s cookstoves refugee camps. programs. Several different types of institutions are These various needs could be �nanced by a needed to scale up clean cooking in EAP. One diverse set of organizations including multilateral requirement is an institution that supports pol- and bilateral donors, international carbon funds, icy studies and project preparation. The World country governments, and private foundations. Bank’s Asia Sustainable and Alternative Energy Program (ASTAE) is well suited for this type of Possible Global and Institutional Support work. As an example, much of the project devel- to Clean Cooking opment work for small market energy interven- The promotion of modern cooking solutions tions in both East and South Asia was the result has links with the energy, environment, health, of work �nanced by ASTAE grants. ASTAE Box 5.3 Water and Sanitation Program: Potential Model to Promote Modern Cooking Solutions The challenge for modern cooking solutions is to promote and replicate successful approaches, con- tinue targeted learning efforts, and support reforms that ensure the adoption of sustainable policies and investments across the relevant sectors: energy, environment, health, and social.The Water and Sanitation Program (WSP) presents a useful model. WSP is a multidonor partnership administered by the World Bank to support poor people in obtaining affordable, safe, and sustainable access to water and sanita- tion services. WSP works directly with client governments at the local and national levels in 25 coun- tries through regional of�ces in Africa, East and South Asia, Latin America and the Caribbean; and in Washington, DC. Over the last three decades, WSP has led or supported many of the advances made within the water and sanitation sector. It has been able to share best practices across Regions and place a strong focus on capacity building by forming partnerships with academia, civil society organizations (CSOs), donors, governments, media, the private sector, and others. WSP’s work helps to effect the regulatory and structural changes needed for broad water and sanitation sector reform. Source: www.wsp.org Modern Cooking Solutions: The Way Forward 89 could provide �nancing for project innovations EAP countries have a variety of institutions and policy work on how to scale up clean cook- that already implement cookstove programs. ing in EAP. Moreover, because ASTAE also cov- China’s Ministry of Agriculture has been the ers the South Asia Region, EAP could provide focal point for improved stoves. Mongolia’s new useful lessons for projects developed for all of energy institution (Energy Authority) could be Asia. In fact, ASTAE already supports a limited adapted to cover clean cooking as part of its number of project interventions to promote bet- work. However, in most EAP countries, the pro- ter stoves and clean cooking. In short, ASTAE grams for clean cooking are small and sometimes could be one of the focal points for intervention ineffective. It is essential that individual countries within EAP. commit to promote improved cookstoves, and The promotion of better cookstoves in EAP nominate/develop capable institutions that will is a large-scale intervention that will require a take overall responsibility for the successful imple- new or existing institution to take on the chal- mentation of improved cookstoves programs. lenge of moving the Region’s 1 billion people Fortunately, many effective NGOs already are to more modern and clean ways of cooking. promoting clean cooking. These and other orga- Any new institution would have to be sup- nizations will be necessary partners in the efforts ported by the country governments. Its primary to promote such new technologies at the local role would be the development and exchange of community level. A prominent example outside information to promote clean cooking solutions. of the EAP Region is Bangladesh’s Grameen All of these issues need to be addressed in EAP Bank, which has made better stoves a focus of to support the expansion of efforts to promote its development efforts. In Vietnam, the Institute clean cooking. of Energy long has supported small efforts on In 2010 the United Nations Foundation improved biomass stoves, and the Women’s Union launched the Global Alliance for Clean Cook- has become involved in new programs as well. stoves to advocate for the implementation of a Any new institution for knowledge exchange variety of programs for better biomass stoves in that has ideas for new programs to promote clean developing countries (UN Foundation 2010; cooking can work with such local micro�nance World Bank 2011a). The issues featured in the organizations and NGOs as partners that can Global Alliance are similar to those that are bring in their experience with local issues and facing EAP countries. The types of activities problems. encompassed by the Global Alliance to scale up The private sector also is actively involved and deploy clean cooking solutions include: in the development of technologies to promote clean cooking. At both the international and • Development of standards and testing local levels, private companies are engaged in methods developing better technologies, participating in • Ways to encourage adoption of advanced the discussions of standards and ratings systems, stoves and setting up distribution and sales campaigns. • Ways to spread out the upfront cost of stoves Although these efforts are at an early stage, this through securing appropriate �nancing new development should be encouraged through • Filling in some of the major existing support from international organizations. research gaps that will be necessary to pro- mote the program • Development of effective awareness-rais- PATHWAY TO IMPLEMENTATION ing methods Although some improved stoves are available • Promotion of market-based solutions that today, there is still a need for a period of tech- include the private sector, and nongovern- nical assistance to develop locally appropriate mental and micro�nance organizations. options. The basic components that are necessary 90 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC to move forward and address the problems facing of the functions necessary for having successful the adoption of these stoves are: small energy interventions such as better stoves. The need for additional research and pol- • Ways to encourage or ensure the participa- icy development should go hand in hand with tion of governments, NGOs, and the pri- the development of projects that deliver better vate sector stoves to the target bene�ciaries. Such projects • Assessment of the best methods for �nance already operate in the EAP countries. The goal or subsidies to lower the higher initial costs is to expand them and implement new ones— of stoves perhaps initially on a modest scale––while pro- • Improvements in testing protocols and viding feedback on technology development to development of standards for products that manufacturers. are reliable, durable, and ef�cient During the �rst 2–3 years of the program, • An organization or combination of orga- a period of testing and project assessment is nizations to take charge of a development anticipated to ensure that the stoves and other issue that straddles many sectors including interventions deliver on their promises of energy, environment, health, forests, and reduced pollution and greater energy ef�ciency. gender. Signi�cant experience in the international com- munity already is available. Centers of excellence Many lessons can be learned across the Region in product development and promotion could from small energy programs that have succeeded lead the way toward ever larger programs leading or experienced problems. EAP countries also to universal access to better stoves, while pursu- are at different levels of both awareness of the ing synergies with other programs that promote problems associated with cooking with tradi- better lighting and heating systems. tional stoves and their efforts to promote better The challenges of promoting clean and ef�- models. Large countries such as China have been cient cooking practices have been addressed in doing basic research on this issue and implement- many regions of the world (World Bank 2011a). ing programs for many years. Smaller countries Successful programs have been developed in such as Cambodia have NGO-run programs for Africa, Latin America, South Asia, as well as East charcoal stoves that have achieved a large scale of Asia and the Paci�c. These programs range from operation. The way forward will vary by country. promoting charcoal stoves that have minimal costs Overall, the EAP Region needs Region-wide to promoting fairly expensive and substantial wood capacity to deal with the issues that are common stoves. A substantial body of knowledge also exists to the EAP countries. These issues include stan- on how to promote private sector participation in dards; testing protocols; and ways of �nancing �rst the development, marketing, and sales of products cost that encourage market development, effec- that improve people’s lives. This wide range of tive communication strategies, monitoring and experience with a variety of different stove types evaluation techniques, and market studies to assess offers lessons that can be the foundation for the the suitability of various stoves. For instance, it development of new projects or programs. would be essential to identify centers at either the The way forward comprises several key ele- Region or the country level that could test the ments (World Bank 2011a). Such a strategy existing improved stoves in the Region according would require cooperation among government, to guidelines that are agreed by the EAP coun- the private sector, and NGOs quali�ed to sup- tries. International donor programs will need port program dissemination. assurance that the promotion of stoves actually has development impacts and that the stoves are • Some form of government institutions or clean, reliable, and safe. A large country such as agencies would be needed to facilitate the China has the resources to accomplish almost all program. Modern Cooking Solutions: The Way Forward 91 • Incentives would need to be provided for have been developed. The model for implement- NGOs, the private sector, or other orga- ing better stove programs can follow a path simi- nizations to address demand-side interven- lar to that of small, renewable energy systems tions, principally more ef�cient stoves. deployed for those who lack either main grid • Technical development of all types of stoves electricity or modern fuels such as LPG for cook- is still necessary. The leading manufacturers ing. The path forward to reach universal access of advanced stoves continue to re�ne and will have to include the promotion of both small develop new models. appliances provided through retailers or NGOs • Monitoring and evaluation for both and the promotion of electricity and LPG by improved and advanced stoves are neces- large energy companies that work through net- sary under conditions of actual stove use work systems or distributors. and to link grants or subsidies to program The pieces are falling in place for the EAP performance. Region’s intensi�ed promotion of clean cooking • Grants and �nancing would be necessary solutions. New technologies are being developed to encourage the development of busi- through the cooperation of private organizations nesses or other organizations to sell or and donors. Climate change funds are increas- retail stoves. The grants can be channeled ing their attention, and opening their doors, to through retail markets or organizations �nancing clean and ef�cient cooking and ensur- that can provide both �nancing and qual- ing that lack of funding is not an obstacle to the ity assurance for products. growth of retail businesses that serve the poor. New international alliances have been formed to Financing from international organizations more actively support and promote clean cook- to support the development of clean cooking stoves in ways consistent with past successes. The programs is essential to achieve the elements increasing international focus on improving the of this strategy. This �nancing will require the productivity of rural women and, more generally, cooperation of many international organiza- on clean and healthier homes is directly related tions to ensure that the program focuses on the to promoting better cooking practices. The pri- commercialization and sustainable scaling-up of vate sector has joined the efforts to develop new projects that support clean and ef�cient cooking. products for improving cooking practices and Consideration could be given to the develop- making commitments to focus on the poorest ment of an agency based on the experience of segments of society. the Water and Sanitation Program (box 5.3). The remaining challenges of scaling up the provision of energy services to the poorest peo- Outlook for Modern Cooking Solutions ple in the world should not be underestimated. For many years, the health and environmental issues For some time, it will be necessary to support arising from burning biomass energy in primi- the technical development of products suitable tive stoves or open �res have been on develop- for poor and rural people in EAP. This support ment agencies’ list of priorities. Many of the early will be necessary because the target bene�ciaries cooking stoves that were promoted under various make up the bottom of the pyramid. They can- national programs were untested and of poor qual- not afford to support the technical innovations ity. In addition, the dif�culties of promoting small for the continued development of new products. products that improved energy ef�ciency for cook- However, it should be cautioned that many past ing, lighting, and heating through retail markets or programs that have focused on the poorest house- rural development programs are well known. holds have promoted low-cost products that were However, the outlook for modern cooking not much better than traditional stoves. With solutions has changed for the better. Despite past 1 billion people using solid fuels in the Region, problems, during the last decade, new products better products manufactured on a large scale are 92 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC essential to reduce costs enough to reach those and biofuels in ways that are economically and in the lowest income groups. There also is a need environmentally sustainable. These fuel options to support the efforts to promote clean cooking are extremely important and should be actively being undertaken by micro�nance organizations, pursued. However, their reach is limited to those private companies, government, and NGOs. who can afford either the monthly costs or the Apart from improved cookstoves, it is impor- rather high costs to purchase the initial system. tant to promote the use of LPG, kerosene, biogas, Photo credits (top and bottom): Ashden Awards. Top: Testing improved cookstoves, China. Bottom: High-quality, industrially produced improved cookstoves, China. 6 ONE GOAL: ACHIEVING UNIVERSAL ENERGY ACCESS IN THE EAP REGION T his report concludes that two sepa- its people cook with modern fuels or improved rate paths—electricity, and clean and stoves that use traditional fuels. Overall, every ef�cient cooking solutions—lead to second household in EAP depends on solid achieving the one goal of universal fuels (coal and wood-based biomass) for cook- access to modern energy in the EAP Region. ing. Therefore, a major breakthrough is needed This chapter discusses the overall strategy to to signi�cantly increase access to both modern achieve this goal via the two paths. cooking fuels (natural gas, LPG, and biogas) and improved cookstoves for biomass, particularly in BOTH PATHS MUST BE IMPLEMENTED poor and remote rural areas. To achieve universal access to modern energy in the Region, there are no trade-offs between the BOTH PATHS WILL BRING SIGNIFICANT ECONOMIC, two paths. Both must be implemented. However, SOCIAL, AND ENVIRONMENTAL BENEFITS in the past, the progress on these two paths has TO ALL EAP COUNTRIES been uneven. Even though many EAP countries have made signi�cant progress toward achiev- Bene�ts of electricity access are high and generally ing universal access to electricity, the challenges well understood. Electricity can provide the basis and strategies differ for each nation (appendix for investments in new productive activities and job 1). Nevertheless, there is enough international, creation. Conventional power can increase agri- Regional, and in-country experience to design cultural productivity through motorized water- and successfully implement national plans for pumping and value-adding grain-processing fa- universal electricity access within the next two cilities. Lighting from grid-based electricity or decades. Most important, electri�cation remains solar PV systems helps to extend the number of a top priority for governments of EAP countries active hours for domestic and social life and small that have low access rates. businesses and stores. Even simple solar lanterns In the past, EAP countries have given more improve the quality of life by providing essen- attention to electri�cation than to access to mod- tial lighting and convenient charging of mobile ern cooking solutions. For example, Lao PDR phones, thus facilitating communication and mak- has provided electricity to approximately 70 per- ing it easier for farmers and other rural users to cent of its people, whereas less than 10 percent of receive timely market and weather information. 95 96 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Recent studies con�rm that the bene�ts of large portion of expenditures among the poor. rural electri�cation are quite high. In a broad In addition, improved cooking solutions directly review of World Bank projects, the bene�ts of and principally bene�t women and children, electricity were found to range from $10–$20 a who bear the brunt of the physical labor and month per HH and sometimes higher, or up to time expended to collect traditional fuels and the $1 per kWh. For household lighting alone, the adverse health impacts of the indoor air pollution bene�t ranged from $0.47–$0.81 per kWh (IEG created by traditional cookstoves. 2008). In contrast, the life-cycle cost of supplying Reducing the use of traditional fuels in cook- electricity to rural areas is much less, at $0.15– stoves also may result in extensive environmen- $0.20/kWh for grid-based rural electri�cation tal bene�ts. For example, the reduction in wood and up to $0.65/kWh for remote, off-grid systems collection can revitalize the local environment (World Bank 2007b). Taking into consideration in some areas that either are densely populated its high potential to improve health, education, or have poor climatic conditions for growing and communications, electricity clearly is essen- biomass. In addition, fuelwood that comes from tial to enable countries to experience both eco- unsustainable local biomass resources actually nomic and social progress. emits signi�cant incremental quantities of CO2 into the atmosphere. Benefits of Access to Clean and Efficient Cooking Solutions Are Important to Achieve the Millennium Both Paths Are Affordable but Require Significant Development Goals (MDGs) in EAP Countries Subsidies to the Poorer People The direct bene�ts of cleaner and more ef�cient The combined investment for electricity and cooking methods arise from the improvement in clean cooking solutions in the Business-as-Usual respiratory health and other illnesses caused by scenario from 2011–30 is estimated to be $46 indoor pollution from cooking with solid fuels. billion. The combined investment requirement When household members are in better health, for the Universal Access scenario over the same they are more productive; they miss fewer days period is estimated at US$78 billion. This com- of work and school. Moreover, better health bined total investment of US$78 billion spread reduces medical expenditures, which can be a over 2 decades is a small fraction of the Regional GDP,34 and the incremental investment of US$32 Figure 6.1 Investment Requirements for Universal Access to Electricity and billion is affordable from a Regional perspective Modern Cooking Solutions in EAP, 2011–30 (�gure 6.1). However, the annual incremental cost of the 80 Modern cooking fuels electricity path—US$1.3 billion—is an order of Electricity 70 Total magnitude more expensive than the annual incre- mental cost of the clean cooking path (US$86 60 million, excluding China). The reason clearly is 50 that supplying electricity inherently is much more US$ billion 40 capital intensive than providing advanced cook- stoves, even though the population bene�ting 30 from the latter would be four times more than the 20 number of electricity bene�ciaries. Furthermore, 10 34. At current prices, the combined 2009 GDP of 0 Cambodia, China, Indonesia, Lao PDR, Mongolia, the Business-as-Usual Universal Access Incremental investment Philippines, Thailand, and Vietnam was approximately Source: Authors’ calculations. US$6 trillion. Excluding China, GDP was approxi- mately US$1 trillion. One Goal: Achieving Universal Energy Access in the EAP Region 97 the unit costs of electricity supply rise as service overall strategy and targets for universal energy is provided to distant and scattered communi- access according to its own strengths and needs. ties. In contrast, the expenses related to advanced This effort should be given the high pro�le and cookstoves are not likely to increase in the same urgency that it deserves by designating an agency proportion, even for remote communities. or a high government of�ce with overall respon- The high cost of the universal electri�ca- sibility for the overarching goal of national uni- tion program is particularly challenging for poor, versal energy access. Under such an arrangement, low-access countries, for which the incremental electricity and cooking will receive commen- investment needs are approximately 1.6 percent surate weight at the policymaking and higher of GDP. This high cost calls for signi�cant annual implementation levels.This high-level uni�cation subsidies or concessional �nancing on the order of responsibility also will facilitate coordination, of US$200 million (approximately 1 percent of both within the two paths (electricity and mod- their GDP in 2009) to assist the low-access coun- ern cooking solutions) and with other linked sec- tries to achieve universal access by 2030. tors, including environment, health, forests and gender. Strategic Framework for Achieving Universal Access Since implementation on the ground would to Modern Energy be carried out by a number of of�cial, private, To achieve universal access to modern energy, and nonpro�t institutions and agencies, the des- both paths need a sustained national commitment ignated responsible agency would determine its and a clear division of roles and responsibilities. roles and responsibilities. In particular, this agency Based on the experience in EAP countries and would determine the key parameters of the pro- worldwide, a sustained national commitment is gram.They would include the annual or multiyear a key success factor in reducing energy poverty. targets, sequencing of geographical areas, share Although private sector and nonpro�t organi- of off-grid options in electricity access, share of zations will have key roles, the goal of universal improved cookstoves among all cookstoves using access will not be achieved without effective and solid and biomass fuels, and total of�cial funds accountable government actions. On the other needed to support the electri�cation and cook- hand, a government alone cannot ef�ciently deal ing programs. with all aspects of expanding access to all con- The designated agency also would liaise with sumers.This goal requires concerted action by the international and Regional institutions and public and private sectors, donors, and NGOs; as channel funds and knowledge into the coun- well as continued learning, sharing experiences, try. Finally, this agency would be responsible to and adapting approaches and instruments to the monitor and evaluate progress and recommend conditions on the ground. any changes arising from lessons learned dur- ing implementation or from shifts in national or In each EAP country, signi�cant bene�ts can international circumstances. arise from designating a single agency or of�ce as responsible for delivering the one goal of universal The responsible agency should open two action access to electricity and modern cooking solutions. fronts in �ghting energy poverty. The �rst front So far, no EAP country has looked at universal comprises all urban and many rural consumers energy access in a holistic manner that includes in areas in which the suf�ciently high density both electricity and modern cooking solutions. of energy consumption justi�es network-based This partial view has led to the relative neglect solutions for their energy needs. This �rst front of providing modern cooking solutions for the consists of households who, under the Universal large proportion of populations that continues to Access scenario, will receive grid-based electric- depend on traditional cooking fuels and meth- ity and LPG/gas/kerosene for cooking (�gure ods. Each country government will formulate its 6.2).These consumers generally will be served by 98 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure 6.2 Focusing on the “Second Front�: Households beyond Reach of Standard Delivery Mechanisms for Modern Energy Access 140 Rural off-grid Wood-dung Fifteen million–20 million Other biomass households are “out of reach� 120 Coal-charcoal of the network-based delivery systems. They often are the same 100 households for both electricity Rural grid and cooking fuels. Households (mil) 80 Gas LPG 60 Kerosene 40 Urban grid 20 Electricity 0 Electricity access Cooking fuels Type of access in Universal scenarios, 2030 Source: Authors. existing utilities using network-based approaches. options such as independent microgrids, solar These consumers are designated as the �rst front home systems (SHS), and other distributed energy of the universal access program in the sense that solutions. For cooking, these consumers will have the technologies and institutions to serve them to be served by improved cookstoves that burn are reasonably well established in most EAP traditional biomass fuels, coal, or charcoal. Either countries. The second front—comprising people these consumers are located in remote, rural areas in poor and remote areas—requires a decentral- that the existing agencies will not be able to reach ized approach based on distributed energy solu- in a timely manner, or the agencies do not offer tions designed to meet the needs of low-income products suitable for these consumers. Generally, consumers. Most important, �ghting energy these consumers have lower incomes and low lev- poverty on the second front should not be post- els of energy consumption. These characteristics poned until energy poverty is eradicated on the make the network-based solutions economically �rst front. Both fronts are equally important to unviable and likely unsustainable, even if signi�- achieve universal access to modern energy in a cant subsidies are provided. timely manner (by 2030). Therefore, simultane- ous action is required on both fronts. Strategic Approaches for the Two Action Fronts The populations belonging to the two fronts Will Differ can be viewed in terms of the nature of the prod- On the �rst action front, the approach will be to ucts that they will receive and the agencies that extend the reach of large energy suppliers using will serve them. Under the Universal Access sce- network-based solutions. The second front, how- nario, it is projected that 15 million–20 million ever, requires a decentralized approach based on EAP HH (75 million–100 million consumers, or distributed energy solutions designed to meet the 15 percent–20 percent of the total EAP Region needs of poor consumers, often in remote areas. population, excluding China) cannot be served by extending the power grid or by petroleum Action Plan for the First Front company distribution networks. For electricity, In most EAP countries, large energy companies these consumers will have to be served by off-grid already provide modern energy services using One Goal: Achieving Universal Energy Access in the EAP Region 99 network-based solutions. For instance, in almost useful for the utilities to develop links with com- all urban areas, households expect a grid-based munity groups and NGOs that are familiar with electricity connection and fairly high levels of reli- these consumers and can facilitate speci�cally tar- ability of electricity supply. Likewise, most urban geted schemes to serve them. This arrangement areas host well-established national or private could work in slum areas in which such organi- petroleum distribution companies that sell LPG zations could be a voice for the service concerns and kerosene. These companies, suitably strength- of low-income populations. ened, should have the responsibility of connecting all urban HH to electricity and shifting them to Action Plan for the Second Front modern cooking fuels. The expansion of modern energy services to In rural areas—with the exception of China, those who are not within reach of either the grid Thailand, and Vietnam—programs will be nec- electricity systems or petroleum fuels for cooking essary to strengthen grid-based rural electri�ca- will require a more decentralized approach and tion cost effectively. This responsibility can be the use of distributed energy systems. The num- entrusted to the urban-based utility, as is com- ber of consumers in this group will be fewer than mon, or to a separate rural electri�cation agency. those being served by the major energy carriers Regardless, it is essential that the responsible using network-based solutions (�gure 6.2). For agency has sound governance systems, good man- this reason, unless these underserved consumers agement, healthy �nances, adequate technical are speci�cally targeted, governments may tend capacity, and a corporate culture of cutting costs. to neglect them due to their primary focus on Cost reduction is essential to keep the total sub- expanding national electricity and other energy sidy requirements manageable (chapters 2 and 3). networks. To expand petroleum-based cooking fuels In future, governments of low-energy-access to rural areas, in most cases, it would be natural countries must make a special effort to serve for the urban-based agencies to be responsible poor and remote consumers in parallel with their for increasing access through expanding their efforts to expand access to consumers on the �rst supply chains to rural areas. Such is the case in front. In particular, it is necessary to develop suit- Thailand, which has EAP’s highest level of LPG able technical products and workable �nancial use in rural areas. This success was accomplished schemes to meet the needs of consumers on the through subsidizing regional LPG storage depots second front. Nevertheless, this special focus on that could be used by multiple private sector poor and remote populations de�nitely should companies to serve people in rural areas. Since not lead to reduced funds and support for the circumstances vary signi�cantly among countries, expansion of energy services to consumers on care must be taken to ensure that rural consumers the �rst front, who form the bulk of the under- are not neglected or overlooked by the service served and who also are largely poor. providers and other service entities, which may Since providing universal energy access to �nd it easier to continue with their mainly urban poor and remote households is not easy and has customers. not been a mainstay of energy policies in most With respect to electricity, the existing utili- countries, these countries now must face certain ties will need to take special steps to serve poorer institutional, technical, and �nancing issues. consumers who may not be able to pay the full cost, particularly the upfront capital cost, of the Institutional issues. The core of a second-front service that they receive through network-based strategy is that each EAP country either desig- solutions. It may be necessary for a tariff-setting nates an existing agency, or creates a new one, to authority, such as an energy regulator, to develop take overall responsibility for access to energy— cross-subsidy schemes that would make the ser- electricity and modern cooking solutions—for vice affordable to these consumers. It also may be the poorest or most inaccessible households. This 100 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC agency could contain separate implementing units agency for improved cookstove programs is war- or programs for electricity and cooking solutions. ranted. However, if an existing agency is selected Alternately, if implementation capacity is limited, (such as the off-grid electri�cation agency), it the agency could be organized as a single unit. must ensure that an institutional mechanism The structure of this agency could vary by coun- exists within the agency to guarantee that cook- try. What is important is that it be held account- stoves are not neglected. able to develop programs that reach the poorest Private �rms, community groups, and NGOs households with electricity and more modern all will have important roles to play in serving the ways of cooking. consumers on the second front. Pro�t-oriented Decentralized systems of rural electri�ca- �rms and NGOs, such as Grameen Shakti in tion traditionally have not been seen as a natural Bangladesh, have been involved in disseminat- extension of grid-based RE. Even when existing ing solar home systems and solar lanterns in the electricity companies have been designated with rural areas of many countries. It also is common the responsibility to provide off-grid electricity, for community groups, NGOs, and nonpro�t- these companies have not always been suited to oriented �rms to own and operate village-level carry out such programs. Nevertheless, a grid- electricity microgrids. Within the EAP Region based RE agency could be suitable for off-grid and in most developing countries, it has been electri�cation if this role were given adequate common for community groups and NGOs to attention in the overall mission of the agency. If take the lead in the dissemination of improved an electricity company were designated as the cookstoves. Thus, all groups have the potential to national electri�cation agency, it also could con- participate in the provision of decentralized/dis- sider an institutional mechanism, such as a dedi- tributed electricity services and improved cook- cated well-staffed subsidiary, to implement the stoves, with their roles depending on the situation off-grid electri�cation program. in each country, or region of a particular country. Alternately, a separate agency could be used It will be the responsibility of the agency respon- for off-grid RE provided that it could be estab- sible for the poor and remote (second-front) con- lished quickly and could attract suitably quali�ed sumers to assess the circumstances and assess the staff. One advantage of a separate off-grid agency roles of these groups. is that it could exploit synergy in promoting off- grid electricity and clean cooking solutions since Technical issues. Although the products for both both involve similar methods for commercializa- decentralized HH electricity and clean cooking tion of smaller scale energy products and services. solutions are fairly well developed, they continue Regardless of the choice of agency, it is essen- to evolve and improve at a relatively fast pace. As tial for governments to ensure that off-grid RE a result, although good systems are available, this is undertaken expeditiously and in parallel with area is likely to remain dynamic in the coming grid-based RE. years, and many current solutions will be replaced The development and dissemination of ad-- with improved versions. vanced cookstoves have no synergy with the In the past, solar systems commonly were expansion of LPG networks in rural areas due con�gured as “solar home systems (SHS),� which to signi�cant differences in the products, costs, provided enough electricity for multiple lights and target groups whom LPG and improved and other uses, such as a television.While SHS are cookstoves will serve. The petroleum companies a well-established product in EAP, they are evolv- that will be important for promoting LPG in ing. New types of lights (light-emitting diodes, or both urban and rural areas have no comparative LEDs) are being introduced. Their lower energy advantage in the commercialization of improved use has to be balanced against their higher initial cookstoves. In general, a separate implementing cost and the lack of �eld experience with them. One Goal: Achieving Universal Energy Access in the EAP Region 101 The use of conventional appliances adds to the poor households. Most programs that �nance convenience and flexibility of SHS but in the the development and marketing costs of solar �eld may introduce another element of cost and lanterns do not use subsidies. The reason is that, possibility of technical failure. Finally, more ef�- if the capital cost is subsidized, poor consumers cient solar panels are being developed. can easily resell them in the market to better-off As mentioned above, in recent years, “solar households who may be willing to buy a sup- lanterns� have emerged as a new product that plemental source of electricity. How to �nance provides enough electricity for a single light affordable small lighting systems will be an issue and charging a cell phone. They are a promis- in scaling up any major new programs. ing option to meet the basic electricity needs of A second option for �nancing small elec- second-front consumers. However, solar lanterns tricity systems is that consumers pay a monthly are evolving rapidly—much faster than SHS—in electricity bill to a utility service provider, which technology and capacity. Practically, to select solar owns and maintains the solar systems installed in lanterns that are suitable, cost-effective, and not individual homes. Often called the energy service outdated will present a challenge for each EAP company (ESCO) model, this type of program has country.Thus, programs to promote decentralized become popular for reaching the poorest house- electricity systems should be flexible and open to holds in Latin America. The ESCO arrangement innovation. makes it easier to target the number of HH to Over the last 5 years, cookstoves also have be served during a particular period than does evolved through many innovative designs. A the vendor model. However, the ESCO model wide variety of manufacturers are working on places some revenue risks on the utility because additional improvements. The future looks very the �nancial viability of the service company promising, but no clear designs can be consid- depends on its ability to collect relatively small ered fully developed or mature. At present, gov- monthly bills over a long period and to adjust ernments need to develop technical standards for the price charged when costs rise due to over- improved cookstoves, and introduce type testing all inflation. Although Latin America has had and certi�cation procedures based on these stan- some success with the ESCO model, it has not dards. There also is a need to launch a consumer yet been very popular in EAP. Thus, each EAP awareness program to educate the target bene�- country will have to make the choice regarding ciaries about the features, bene�ts, and limitations how to reach out and make services affordable to of the new products. This situation resembles the poor and remote populations. context that prevailed for SHS in developing Similarly, �nancing improved cookstoves countries 10–15 years ago. A strong need exists to (which are comparable to solar lanterns in cost) initiate and accelerate resolving these cookstove has been based on a wide variety of differ- issues. However, at present, few EAP countries are ent models. It is now generally accepted that it equipped to undertake this task. is preferable to reduce cookstoves’ upfront cost through support for technical development, mar- Financial issues. A major �nancial issue for SHS keting, and retail services; and to sell the stoves is how consumers should pay for them. One through the marketplace without direct con- option, often called the vendor model, is that sumer subsidies except perhaps rebates. In this consumers buy the systems using capital cost sub- way, the stoves that are purchased and appreciated sidies and credit, as is succeeding in Bangladesh, by consumers could be included in more general China, and Sri Lanka. However, this model faces development programs as well. Moreover, once some limitations when applied to solar lanterns. quality stoves are available in the marketplace and At the current prices of US$20–$40 per lantern, valued by consumers, micro�nance organizations subsidies are needed to make them affordable to could provide consumer loans for their purchase. 102 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Regional Entity for Universal Energy Access with them. A Regional entity on universal energy The institutional, technical, and �nancial issues dis- access dedicated to working with governments cussed above are similar across the EAP countries and their implementing units and committed to and across South Asian countries as well. However, sharing knowledge with donors, �nancing agen- most EAP countries are developing their own cies, NGOs, and the private sector could play an programs for achieving universal energy access in important role. Such an entity could keep track relative isolation. While each country will tackle of energy access programs in the Region, facili- these three issues taking into consideration its tate the implementation of more effective courses own speci�c circumstances and level of develop- of action, and ensure that the issue of universal ment, it would be more cost-effective and faster if energy access is given its deserved attention and countries could learn from one another and from public visibility. international best practices through a Regional An alternate approach might be to establish a entity, which would facilitate knowledge sharing Regional or international program to deal directly and capacity building. This Regional entity also with these issues. The Water and Sanitation would be a focal point to channel the assistance Program (WSP), which deals directly with related of various interest groups, such as donors and issues at the HH level, employs this approach. NGOs, who are interested in improving the qual- WSP places dedicated staff in the Region. They ity of lives of poor households. are supported by a central group, who deal spe- It would be essential that any new Regional ci�cally with the necessary government agencies entity have the endorsement of the bene�ciary and related programs. Regardless of the Regional countries. Hence, this report recommends that approach, there needs to be a credible interna- this issue be discussed with the EAP countries tional entity that ensures that the issue of univer- concerned and that additional steps toward estab- sal energy access gets the attention that it deserves lishing such an entity be taken in consultation at the Regional level. APPENDIX 1 ELECTRICITY ACCESS: SELECTED COUNTRY BRIEFS 104 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A1.1 Cambodia With the exception of Myanmar and most Paci�c access), Thailand (99 percent), and Vietnam (95 Island Countries (PICs), Cambodia has the lowest percent). Access to electricity within Cambodia electri�cation rate in EAP. In 2009 approximately is highly uneven. Approximately 87 percent of only 26 percent of its 2.8 million HH were con- the urban population is covered, compared to nected to several isolated grids. Cambodia’s elec- only 13 percent of the rural population.The gov- tri�cation levels stand in stark contrast to those ernment has set an ambitious target of provid- of its neighbors: Lao PDR (70 percent electricity ing some form of electricity, including access to Population (2008) (mil) 13.4 Rural population (% total population, 2008) 80 Population density (people/sq km) 82 Land area (sq km) 181,035 GNI per capita (Atlas Method: Current US$, 2008) 610 Access to modern cooking fuels 7.9 Urban (% HH, 2008) 37.3 Rural (% HH, 2008) 1.5 Electricity access, national (% HH, 2009) 26 Urban (% HH, 2008) 87 Rural (% HH, 2008) 13 No. of people w/o access to electricity (2009) (mil) 11.3 Population served by off-grid sources (minigrids and HH systems) (%) 4 Electricity access target and year (% HH) 70; 2030 Electric power consumption (kWh per capita, 2007) 124 Installed capacity (MW 2008) 386 Thermal 373 Hydro 13 Other renewable — Electricity net generation (bil kWh) 1.38 Distribution losses (% net generation) 10.5 CO2 emissions (M/T per capita, 2007) 0.3 Indicative residential electricity tariffs for rural USc23.5/kWh. Ranges 670–1220 Riel consumers (2011) (Source: Electricity Authority of Cambodia 2009) Key institutions in the Ministry of Industry, Mines and Energy (MIME) electricity sector Electricité du Cambodge (EdC) Independent regulator: Electricity Authority of Cambodia (EAC) Rural Electricity Enterprises (REEs) Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. Appendix 1. Electricity Access: Selected Country Briefs 105 IBRD 38382 This map was produced by the Map Design Unit of The World Bank. 104° E 105° E 106° E 107° E The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. THAILAND L A O P. D . R . 0 20 40 60 80 Kilometers To To Pak Charang Khu Khan 0 20 40 60 Miles To Champasak To Samraong Phiafai 14° N 14° N To To Play Cu Buri Phnum Tbeng Meanchey Bun Long Sisophon Stung Treng Siem Reap Battambang Tonle CAMBODIA 13° N 13° N Sap Pailin Kampong Thom Pursat Kratie Senmonorom To Duc Lap Kampong 12° N Ca Phnum Cham 12° N rd Aoral am To (1,810 m) om Ba Ra M Krong Koh Kong PHNOM PENH ts . Kampong Speu Prey Veng To Ta Khmau Gulf of Tay Ninh V I E T N A M T h ai l a n d Svay To Ho Chi Minh City Rieng 11° N Takeo 11° N To Cao Lanh Sihanoukville Kampot Kep To CAMBODIA Cambodia is bounded by Thailand on the north, Lao PDR on Long Xuyen PROVINCE CAPITALS To Rach Gia the east, Vietnam on the southeast, and the Gulf of Thailand NATIONAL CAPITAL and Thailand on the west. Much of the country’s area consists MAIN ROADS of rolling plains. Dominant features are the large, almost INTERNATIONAL BOUNDARIES centrally located Tonle Sap (Great Lake) and the Mekong 104° E 105° E 106° E 107° E River, which traverses the country from north to south. FEBRUARY 2011 Table A1.1.1 Cambodia: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 315 1,446 1,131 80 801 250 2021–30 355 2,337 1,982 — 1,602 380 2011–30 669 3,783 3,113 80 2,403 630 Annual requirements: 156 4 120 31 Note: No. of HH without electricity in Business-as-Usual scenario in 2030: 2.4 million (60% of population). minigrid and off-grid electricity, to 70 percent of • Sector structure fragmented and of low rural HH by 2030. capacity • Coherent and workable nationwide CHALLENGES plan for improving access yet to be • Government’s leadership and “visible developed hand� in promoting energy access yet to • Institutional and �nancial frameworks for materialize off-grid electri�cation weak or absent 106 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC • High costs of power supply major barrier Electricity Enterprises (REEs) are engaged in to scaling up access transmission, generation, and/or distribution of • National program to improve access in electricity, mainly through diesel-based minigrids need of large-scale concessionary �nancing throughout the country. Most REEs are in poor technical and �nancial condition. EDC is much STRATEGIES stronger in technical capacity and �nancial terms • Under the leadership of Electricité du than the other entities. Thus, EDC is the only Cambodge (EDC), the of�cial power util- credible sector institution to anchor the planning ity, jump-start the national electri�cation and implementation of a national grid program scale-up in a systematic and programmatic for nationwide electri�cation. mode The Electricity Authority of Cambodia (EAC) • Move toward sector-wide approach (SWAp) is the independent regulator. EAC is responsible and programmatic framework for licensing electric power suppliers, managing • Build a comprehensive and credible plan for tariffs and fees, and generally regulating the eco- grid rollout and its off-grid complement nomic environment of power production. • Rationalize sector structure, especially role The current structural and transactional of Rural Electricity Enterprises (REEs) framework rules for key sector institutions— • Develop sustainable �nancing platform EDC, REEs, EAC, and the private sector—are and subsidy and tariff framework not conducive to national program planning and • Revisit centralized planning and imple- implementation, even with a ready, willing, and mentation of rural electri�cation and make able EDC. There needs to be a clear policy that necessary changes to advance RE program clari�es the respective roles and scope of sector institutions in the current context and a road- CHALLENGES map for how they would evolve in the future. The principles that should govern the transac- Government’s leadership and “visible hand� in tions and interface between institutions and promoting energy access have yet to materialize. regulatory oversight need to be clari�ed and Cambodia has set a target of electrifying 100 harmonized into a well-coordinated and func- percent of its villages and 70 percent of its rural tioning whole. HH by 2030. However, there is little evidence of government leadership and “visible hand� A coherent and workable nationwide plan for advancing this commitment. The targets have improving access has yet to be developed. Cambodia not yet been backed by an enabling policy and has yet to systematically develop and implement �nancial commitment. There does not appear to a set of socioeconomic criteria, similar to those be “buy-in� at the cabinet level or consensus by used by Lao PDR,Thailand, and Vietnam, to pro- the key stakeholders—EDC, EAC, REEs—or vide a clear, technical basis for network expan- the private sector. Overall, the lack of a “cham- sion. Consequently, a national grid rollout plan pion� with a clear vision has resulted in a policy that is analytically sound, comprehensive, spatially vacuum and stagnation in the electricity access representative, and current has yet to be prepared. effort. While Cambodia does use geographic informa- tion systems (GIS) in its current power system Sector structure is fragmented and of low capacity. planning, the technology needs to be upgraded Electricité du Cambodge (EDC), the national and training provided to raise capacity to accept- power utility, is structured as a vertically integrated able standards. national power company that serves Phnom Penh area and some provincial centers. Additionally, High cost of power supply is a major barrier 249 regulated private sector entities called Rural to scaling up access. Lack of power supply at Appendix 1. Electricity Access: Selected Country Briefs 107 reasonable cost remains a major barrier to scaling the costs of a rural electri�cation program from up access. EDC has had high generation costs due tax revenues. to high diesel prices, small-scale operation, low technical capacity, weak management, and non- Institutional and �nancial frameworks for off-grid transparent investments in generation and trans- electri�cation are weak or absent. Cambodia has mission. Consequently, the current tariff rates for no clear institutional focal point that systemati- EDC (US$0.09–0.23/kWh in Phnom Penh) are cally will pursue off-grid electri�cation. A semi- among the highest in the world. autonomous Rural Electri�cation Fund (REF) has Of the 249 REEs, approximately 226 are been set up with the mission of “rural electri�ca- engaged in distribution and retailing. Fifty per- tion,� with representation from MIME (Ministry cent of them offer 24-hour service; the rest offer of Industry, Mines and Energy). REF provides a only 4–12 hours’ supply per day. Most REEs have household connection subsidy of US$45/HH a generation capacity in the 1–10MW range and for new connections by REEs within their ser- typically serve 500–2,000 customers. vice areas. This subsidy has resulted in over 42,000 The REEs have the same high-cost features additional HH being connected. REF received its as does EDC. Their costs are even higher than initial capitalization from a GEF project but has no EDCs because they use expensive diesel fuel. provision for reflows back into the fund, and no Correspondingly, the REE tariffs, in the range sector or �scal funds have been earmarked for fresh US$0.20–1.00 per kWh, are higher than EDC capital inflows. REF has the responsibility to pro- tariffs. Despite their higher fees, most REEs are mote the solar home system (SHS) program and �nancially weak. In addition to low technical microhydro grids of approximately below 1MW capacity and weak management, they have little capacity each. However, REF currently lacks possibility of expanding their operations and the technical expertise to design either the SHS gaining economies of scale. program and subsidy scheme or the microhydro Tariffs are regulated by EAC and are deter- program. mined separately for each REE licensee. A sur- vey estimated that rural HH can afford to pay approximately US$7.50 monthly for electricity STRATEGIES supplies (AECOM 2009).This amount is equiva- Under EDC’s leadership, jump-start the national lent to a tariff of approximately US0.15c/kWh, electri�cation program in a systematic and pro- compared to a cost of supply of US.23c/kWh grammatic mode. Good-practice experience or more. The difference needs to be made up con�rms that achieving high national electri�ca- from other sources including cross-subsidies from tion coverage ef�ciently, effectively, and quickly urban customers, subsidies from the government, requires a well-orchestrated and well-managed and concessionary �nancing from donors. national grid rollout program implemented by a committed national utility that has the lead- A national program for improving access needs ership, capacity, autonomy, and means to carry large-scale concessionary �nancing. The govern- out the task. A national grid extension led by ment’s target of extending access to 70 percent of EDC should be the main delivery vehicle of the all HH by 2030 translates to connecting approxi- national electri�cation program. EDC should be mately 100,000 rural HH annually between now the principal implementing agent of the govern- and 2030, or 2.2 million rural HH in all. The ment for planning and securing adequate and total cost of this electri�cation program (exclud- affordable bulk supply. The authority should lead ing generation and transmission) is estimated at the national grid and MV network rollout as well US$2.6 billion. Given its current large budget as the LV network development and retailing in de�cit, the government is unlikely to be able to areas in which no REEs are operating or are not make any signi�cant �nancial contribution to likely to operate in the future. 108 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC At best, the private sector and off-grid service expected to be extended to create a single inter- delivery can play an important and complemen- connected national grid. tary niche role but not as the main organizing instruments of national electri�cation. The ef�- Build a comprehensive and credible plan for grid cient and better performing REEs can play an rollout and its off-grid complement. A key step effective role if they are recast as buyers of cost- is to build a strategic and credible grid rollout competitive bulk power supply and manage the plan, including implementation, investment, and distribution and retailing business in their respec- �nancing details for the grid and off-grid com- tive service areas. ponents (2012–30). The anchor for such a plan should be a GIS-based, least-cost spatial grid Move toward a sector-wide approach (SWAp) rollout planning platform and model framework, and programmatic framework. The investments which in turn would determine the off-grid required to fund Cambodia’s national electri�ca- complement. An illustration of such an exercise tion program over the next 20 years are huge. is described in box 2.5. Consequently, Cambodia should mobilize suf�- cient ongoing �nancing. Doing so can be achieved Rationalize sector structure, especially the roles of most effectively within a programmatic frame- REEs. A well-coordinated and harmonized func- work, rather than by using a fragmented, project- tioning sector should be established to cover cur- by-project, and donor-by-donor approach. The rent and future licensees vis-a-vis EDC as well as SWAp would be led by the government of to de�ne principles that govern interface issues Cambodia and seek to rally partner engagement and transactions across key sector institutions and in alignment with a common sector-wide invest- regulatory oversight. A suggested �rst step would ment program and implementation and �nancing be a rapid assessment of today’s REE sector per- plan (“Sector-Wide Prospectus�). formance and capacity along selected technical, The key building block of a sector-wide pro- commercial, and other key indicators of perfor- spectus is a comprehensive, consistent, and cred- mance. This assessment would help point the way ible strategic-level grid rollout implementation, toward a workable and effective framework that investment, and �nancing plan for the national would be politically acceptable while promot- electri�cation program rollout and its off-grid ing ef�ciency. Speci�c steps may include, �rst, complement for 2012–30. The underlying basis rationalization including consolidation of one or of this plan should be a GIS-based, least-cost more REEs when and where justi�ed. A second spatial grid rollout planning platform and model step could be to select better-performing REEs framework, which also would determine the off- to be strengthened as sector-retailing agents with grid complement. access to bulk supply from EDC grid bulk deliv- Currently, 93 percent of energy generated ery transfer point(s). by licensees in Cambodia is based on expen- sive diesel fuel. The country is building several Develop a sustainable subsidy and tariff frame- hydropower plants and a coal-�red plant, which work. No country has achieved high electri�ca- are expected to reduce the share of oil-�red gen- tion rates without ongoing concessionary �nance eration and thus reduce average power costs. A being made available to the implementing agents. national transmission network is being devel- This issue is particularly relevant to Cambodia oped. It is taking the form of a number of HV given its low income status and limited internal transmission lines connecting to the neighbor- sources of revenue. The bulk of electri�cation ing countries of Thailand and Vietnam, which needs in Cambodia are in its rural areas. Outside of will be followed by cross-border connections to the major urban areas, electri�cation is not com- Lao PDR. This network will enable the import mercially viable. Nevertheless, the electri�cation of lower-priced power. Over time, these lines are program cannot be sustained over the duration Appendix 1. Electricity Access: Selected Country Briefs 109 without a �nancially viable utility, which recov- and areas of RE expansion are centralized. A ers, at a minimum, all recurrent costs through an bottom-up approach from the subnational to appropriate tariff and subsidy framework. the national level would be more effective. Such decentralization could pose challenges to EDC Revisit the centralized planning and implementa- at the subnational, if not the national, level. To tion of rural electri�cation and make the necessary improve RE planning and implementation, it changes to advance the RE program. Currently, would be necessary to devolve accountability to planning and implementation of the scope, scale, the subnational level. 110 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A1.2 INDONESIA Indonesia is characterized by a high population access in the late 1970s, Indonesia’s national elec- density in the Java-Bali region and progressively tricity company, PLN, set a scorching pace for lower densities in other regions. As of 2008, 55 electri�cation. This growth occurred especially percent of Indonesia’s 227 million people lived in the decade starting in late 1980s and achieved on Java-Bali (among the most densely populated national access of at least of 65 percent by 1999. By areas in the world). The remainder was spread the same year, PLN was connecting over 1 million across Sumatra (19 percent), Sulawesi (7 percent), rural HH per year. PLN was able to achieve this Kalimantan (5 percent), Nusa Tengara and Maluku remarkable success by steadfastly strengthening (4 percent), and Papua (10 percent). Starting from its implementation capacity for planning, design, a very low base of 2 percent national electricity procurement, and construction services logistics, Population (2008) (mil) 227.4 Rural population (% total population, 2008) 47 Population density (people/sq km) 125 Land area (sq km) 1,904,600 GNI per capita (Atlas Method: Current US$, 2008) US$2,010 Access to modern cooking fuels 46 Urban (% HH, 2008) 77 Rural (% HH, 2008) 22 Electricity access, national (% HH, 2009) 65 Urban (% HH, 2008) 97 Rural (% HH, 2008) 32 No. of people w/o access to electricity (2009) (mil) 81.6 Population served by off-grid sources (minigrids and HH systems) (%) <7 Electricity access target and year (% HH) 95–100, 2025 Electric power consumption (kWh per capita, 2007) 566 Installed capacity (MW 2008) 27,801 Thermal 22.000 Hydro 4,869 Other renewable 932 Electricity net generation (bil kWh) 141.2 Distribution losses (% net generation) 10.7 CO2 emissions (M/T per capita, 2007) 1.8 Indicative residential electricity tariffs for rural USc1.9/ kWh under 50 kWh consumers (2011) (Source: www.pln.co.id) Key institutions for Ministry of Energy and Mineral Resources electricity sector Perusahaan Listrik Negara (PLN): State-owned utility Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. Appendix 1. Electricity Access: Selected Country Briefs 111 IBRD 38383 This map was produced by the Map Design Unit of The World Bank. 110° 115° 120° 125° The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 15° INDONESIA MYANMAR VIETNAM PHILIPPINES 10° 10° THAILAND Sulu Sea 135° Banda Aceh A Y 5° A L S BRUNEI 5° Medan M I Celebes Sea PA C I F I C O C E A N A SINGAPORE Manado Pekanbaru Tanjungpinang Ternate 0° Pontianak Samarinda Gorontalo 0° Padang Manokwari Palu Jambi Palangkaraya Pangkalpinang Jayapura Mamuju Palembang Bandjarmasin Kendari NEW GUINEA Bengkulu Ambon Puncak Jaya (5030 m) 5° Bandar Java Sea Makassar PAPUA Lampung JAKARTA Banda Sea Serang Bandung Semarang INDONESIA Surabaya Yogyakarta Indonesia is an archipelagic country extending Denpasar Mataram TIMOR-LESTE Arafura Sea 5,120 km from east to west and 1,760 km from 10° Kupang north to south. It encompasses an estimated PROVINCE CAPITALS 17,508 islands, only 6,000 of which are NATIONAL CAPITAL INDIAN OCEAN inhabited. It comprises 5 main islands: Sumatra, MAIN ROADS 0 400 Kilometers Java, Kalimantan, Sulawesi, and New Guinea; 15° INTERNATIONAL 2 major archipelagos: Nusa Tenggara and the BOUNDARIES 0 400 Miles AUSTRALIA 110° 115° 120° 125° 130° 135° 140° Maluku Islands; and 60 smaller archipelagos. FEBRUARY 2011 Table A1.2.1 Indonesia: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 9,684 10,154 470 470 — — 2021–30 11,078 20,572 9,494 — 7,655 1,839 2011–30 20,762 30,726 9,964 470 7,655 1,839 Annual requirements: 498 24 383 92 Note: No. of HH without electricity in Business-as-Usual scenario in 2030: 7.5 million (11% of total population). as well as its on-the-ground implementation of INTRODUCTION AND SECTOR CONTEXT: MV and LV networks. Following the macroeco- ELECTRICITY ACCESS nomic crisis that began in 1997 and subsequent organizational changes within PLN, this capacity Aftermath of �nancial crisis. In 1997 the rapid has deteriorated signi�cantly. The national elec- progress of the grid-based electri�cation rollout tricity access rate remains at approximately 65 program was abruptly and unexpectedly inter- percent because the rate of increase in electric- rupted by the East Asian �nancial crisis, resulting ity access has barely kept pace with population in the insolvency of PLN. PLN had huge �nancial growth. commitments denominated in US dollars under 112 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC the power purchase agreements with a number of which vary enormously by region. A big independent power providers (IPPs). The value �rst step toward region-speci�c costing is of these commitments increased several fold due moving toward tariff and subsidy differen- to the huge devaluation of the rupiah, whereas tiation and ef�cient targeting. PLN’s tariffs, denominated in rupiahs, remained • 2003 State Enterprises Law introduced unchanged. In 2001 PLN disbanded the rural PSO policy. This law empowers GOI to electri�cation division at its headquarters and impose a public service obligation (PSO) curtailed most of its rural electri�cation program. on state-owned enterprises (SOEs). The The electri�cation program has not yet regained law is accompanied by compensation from speed. state budgets for full associated costs plus a margin. PLN’s poor �nancial health remains a critical • 2009 Electricity Law. This law opens a issue. A key barrier to electricity access scale-up door to introduce innovative solutions to had emerged pre-crisis and has yet to be addressed expand access. For example, it allows PLN satisfactorily and sustainably. Speci�cally, in the to create subsidiaries that operate indepen- years immediately preceding the �nancial cri- dently in decisionmaking and establishing sis, PLN’s fast-paced national electricity access locally cost-based tariffs. program had confronted a rapidly rising cost- • Tariff adjustments. GOI recently approved of-service structure for network extensions and a 10 percent average increase in the national had increased expectations for new connections, uniform tariff as an initial step toward including an oil-dominant generation fuel mix, better alignment with the average cost of especially outside Java-Bali. By the onset of the service. �nancial crisis, the outside-Java operations were losing money in most regions and required CHALLENGES increasing and unsustainable levels of cross- • Ensure adequate and cost-competitive subsidies from their Java-Bali operations. On the generation supply to keep pace with robust other hand, PLN’s overall electricity sales reve- economic growth nue growth was (and remains) constrained by the • Extend electricity for lighting to over 80 level and structure of the uniform national tariff million Indonesians (33 percent of the regime allowable for PLN by the Government of population). Of these, over 50 percent are Indonesia (GOI). outside Java-Bali • PLN’s �nancial health remains precarious Government initiatives underway: A good start and a “deal-breaker� for scaling up electric- but un�nished sector reform agenda. The govern- ity access outside Java-Bali and for overall ment recognizes that the �nancial health of the sector development electricity sector is key to Indonesia’s growth and developmental aspirations. Over the last decade, STRATEGIES the GOI has introduced several initiatives relat- • Re-energize the national electri�cation ing to critical pricing, subsidy, and sector reform program implementation with special issues. Noteworthy initiatives are aimed at PLN’s emphasis outside Java-Bali decentralizing, unbundling, corporatizing, and • Refocus the public service obligation (PSO) restructuring, as well as attracting private sector subsidy �nancing mechanism framework participation, especially in generation: to catalyze electri�cation programs outside Java-Bali within a programmatic framework • Regional business units created to better • Set a few good examples in a few promis- manage PLN operations and track costs, ing regions (Wilayahs) outside Java-Bali Appendix 1. Electricity Access: Selected Country Briefs 113 CHALLENGES ongoing �nancial health, it also is crucial that these costs be integrated with GOI’s tariff policy and Ensuring adequate and cost-competitive generation PSO subsidy design and �nancing mechanism. supply to keep pace with robust economic growth. Economic growth has returned, resulting in elec- Over 80 million Indonesians, or 33 percent of the tricity demand growth averaging over 7 percent population, remain in the dark; of these, over 50 annually in recent years. GOI’s target is to have percent are outside Java-Bali. The government 55,000 MW in generating capacity online by has set ambitious targets of achieving an overall 2015, compared with approximately 30,000 MW, access of 90 percent by 2020 and near-universal including PLN and IPPs, installed today. access by 2025 across most of Indonesia. To meet Its oil-dominant generating mix results in a these goals will require adding approximately 2 high cost of service for PLN. Over the medium million connections per year from today. In real- term, Indonesia has several options by which ity, PLN is connecting approximately only 1 mil- to invest in cost-competitive energy generation lion customers annually today—mostly urban alternatives as well as green energy sources.These and on Java-Bali—and is challenged to ramp up options include geothermal, hydro, and larger its implementation rate. scale grid-connected solar PV. Investment costs for the medium and low The investment costs for an expansion pro- voltage network extensions required for the gram of this scale and scope, sustained over the access scale-up program are estimated at US$1.3 medium term, are daunting. Inducing suf�cient billion/year through 2025. This estimate assumes private sector participation until the related sec- widespread deployment of low-cost appropriate tor reforms are suf�ciently advanced remains a network designs and equipment standards as well challenge. Similarly, the cost to PLN of power as cost-conscious construction practices. While purchase obligations needs to be established physical implementation capacity is a factor, it can transparently and competitively. To ensure PLN’s be addressed readily. Figure A1.2.1 Electricity Access in Indonesia: Urban versus Rural, 2009 100 Poverty headcount 80 Total access Rural access Urban access 60 Percent 40 20 0 la es en a Su nta lat h iB o la ro ra Ja Jak u lim an ng t DK p. R g m ra am Su law n T an aB a Yo en at a T ta Ba L ng an g es e ah a Ja yak ah au ka p lu a Ka ngg a li Ka ma nta Tim t Ri t al a t Be lat i Su we si U ur Ba ur Pa ku U ku en a B ra en tan lim nta n ur Pa rat e b Ka ant n Te ara li a a a a M M ara Su law si T tar er ar pu ar Ba Ja wa art a Se a es al I ia Ke litun Be un Su Go gga ng am ku DI a T Bar w ar Ka lim ar Bar ar aS m pu ta la e im im w iS g g g u lu nt a w nt at Ut Su ate sal i T la B er Ja m us Su Dar Te gg w at sa en eh m Nu sa T Ac Su p. N Nu Ke Source: Government of Indonesia. 114 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A signi�cant challenge is to mainstream cost- most important public service obligation (PSO) conscious network design and equipment stan- providers, notably PLN and PERTAMINA. dards and speci�cations appropriate for lower Considerable progress already has been made in density, rural area network extension, especially the short period since Law 19/2003 was enacted outside Java-Bali. These features are well proven and Government Regulation (GR) 45/2005 and widely deployed elsewhere. They help mini- was issued. The government has developed mize the national subsidy and �nancing burdens Infrastructure Policy Package maps that identify a imposed by a rapidly rising cost structure typi- set of actions designed to re�ne the policy frame- cally faced by the country in its grid extension work for subsidy and PSO management in sectors programs, especially outside Java-Bali. including power. In summary, attracting quali�ed IPPs in suf- PLN’s �nancial health remains precarious and �cient numbers and enabling PLN to play its due a “deal-breaker� for scaling up electricity access roles in sector expansion in a timely, ef�cient, outside Java-Bali and for overall sector develop- and sustainable manner hinges on effectively ment. The GOI imposes a public service obli- addressing the key outstanding pricing and sub- gation (PSO) on PLN to connect and supply sidy policy issues. Moreover, the PSO �nancing electricity to all Indonesians. At the same time, mechanism can be more effective in scaling up the government regulates the average level and the access agenda by calibrating its structure and structure of retail tariffs that PLN is permitted to design, and targeting appropriately. Additionally, charge nationally on a uniform basis. This pol- for sector development to keep pace with robust icy has resulted in PLN facing a tight �nancial and sustained economic growth at least cost, situation despite substantial subsidies to PLN via attracting private sector participation requires GOI’s PSO �nancing mechanism towards capital pressing ahead with the enabling reforms. These and operating costs.35 reforms comprise decentralizing PLN; helping Due to the importance attached to ensuring regions to create fully functioning business units the �nancial health of SOEs tasked with pub- with established cost structures; and advancing lic service obligations, government has opted reforms to encourage transparent and competi- to progressively re�ne procedures and processes tive IPP participation. through piloting their implementation on the STRATEGIES 35. Financially, PLN operations on Java-Bali are mar- ginally break-even under the allowable tariff level. Re-energize the national electri�cation program Compounding this situation, PLN’s cost of service implementation with special emphasis outside outside Java-Bali typically is 20%–30% higher in the Java-Bali. Large areas of southern Sumatra, more densely populated areas of Sumatra, Kaliman- much of Southern Sulawesi, and some coastal tan, and Sulawesi; and between 50%–200% higher in city areas of Kalimantan in particular offer rela- NTB (Nusa Tengara and Maluku) and Papua. As a tively high economic and demographic density, consequence, PLN is not in a �nancial position to sig- ni�cantly and rapidly expand access outside Java-Bali. so are appropriate for a medium-sized grid sys- Moreover, from a �scal and public �nance standpoint, tems rollout. Speci�cally: PSO subsidy transfers from the Ministry of Finance have risen sharply over the years. In 2009 the transfers • Sumatra (population: 45 million).The south- reached an all-time high of approximately US$6 bil- ern Sumatra Wilayahs of PLN together are lion (for recurrent and investment costs incremental to akin to the “the next Java-Bali,� but with a revenues recoverable by PLN via the uniform national tariff set by GOI). The transfers were estimated in the scaled-down interconnected system 2010 budget at US$5 billion, contingent on a realized • Sulawesi, Kalimantan (population: 28 mil- oil price of $60 per barrel. lion). Medium-small-scale grid network Appendix 1. Electricity Access: Selected Country Briefs 115 solutions especially in Southern Sulawesi and subsidize the higher cost of service outside and the areas on Kalimantan that have con- Java-Bali. Essentially, these three goals can be centrations of economic and demographic achieved by redesigning the PSO subsidy from density. PLN’s customer categories to PLN regions/ In the regions and areas broadly identi- Wilayahs. This redesign implies a shift of cross- �ed above, small-scale decentralized elec- subsidies across customer classes nationwide to tri�cation solutions also are worth pursuing stay within each particular region rather than at the margins to complement the expan- among regions within customer classes. sion of the grid system. A second and key building block, and an essen- • Eastern Indonesian Islands: Nusa Tenggara tial complement to implement the above strategy, Timur Province (NTT) and Papua. The is to advance the formation of standalone business Eastern Islands of Indonesia consist of units in PLN Wilayahs. Properly designed and NTT (population 9 million) and Papua (24 functioning decentralized business units of PLN million). These islands have low economic will enable a veri�able basis on which to establish density and comprise primarily widely the differentiation of cost structures across regions spread and scattered small settlements. For outside Java-Bali. Such decentralized units will these islands, a mix of technically feasible enable establishing the cost-accounting links to and economically viable service delivery the redesigned PSO mechanism. If designed well modes can be applied. Small grid systems and implemented accordingly, such a strategy can (mostly diesel) are appropriate for major yield a “triple win� in meeting the access targets towns and surroundings; otherwise, what- outside Java-Bali consistent with the govern- ever grids are available: hydro, geothermal, ment’s National Electricity Plan timeline. These and grid-connected solar PV systems. For targets are better poverty targeting, better access the remaining populations living outside targeting, and better green energy targeting. grid-accessible areas, portable solar prod- ucts for lighting, powering cell phones, Setting a few good examples. The strategy outlined and powering small radio batteries offer above can be tested in a few promising Wilayahs an immediate life-changing option. SHS that span the range of cost variation outside Java- service delivery programs also can be an Bali. Another potential consideration concerns effective option. They can be structured supportive regional governor(s) who may be not as programs with a focus on technol- willing to champion aggressive implementation ogy but as service delivery programs with backed by �nancing from provincial/local admin- integrated regular maintenance akin to a istration funds. These funds would complement a utility service. Moreover, they should be better targeted PSO subsidy allocation adequate targeted on a priority basis to entities that to cover the true margin between PLN’s revenue deliver social and administrative services. in that region and the cost structure to expand access. Evidence shows that Southern Sumatra Refocus the PSO subsidy �nancing mechanism and South Sulawesi are strong candidates. It also to catalyze electri�cation programs outside Java- would be important to apply the redesigned PSO Bali within a programmatic framework. The PSO mechanism and strategy in two islands in the East- mechanism is a key to effectively address the ern Indonesia region, as these islands are de�ned interlocking issues of maintaining the policy of by different cost structures and a much higher share uniform national tariffs, and to effectively target of decentralized and small local-grid supply. 116 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A1.3 LAO PEOPLE’S DEMOCRATIC REPUBLIC (LAO PDR) Over 15 years (1995–2009), electricity access from approximately 120,000 HH connected in in Lao PDR has more than quadrupled, from 1995. The Lao program has maintained a faster approximately 15 percent in 1995 to 70 percent pace of implementation than have most other in 2010. Of the latter amount, approximately 2 countries. Lao PDR has managed to achieve this percent comes from the off-grid program. This result at a relatively low level of GDP per capita, expanded electricity access has resulted in over comparable to the experiences of Vietnam and 700,000 HH grid connections by 2010, up China. Population (2008) (mil) 6.2 Rural population (% total population, 2008) 69 Population density (people/sq km) 27 Land area (sq km) 230,800 GNI per capita (Atlas Method: Current US$, 2008) 750 Access to modern cooking fuels 2.6 Urban (% HH, 2008) 8 Rural (% HH, 2008) 0 Electricity access, national (% HH, 2009) 70 Urban (% HH, 2008) 84 Rural (% HH, 2008) 42 No. of people w/o access to electricity (2009) (mil) 1.9 Population served by off-grid sources (minigrids and HH systems) (%) <4 Electricity access target and year (% HH) 90; 2020 Electric power consumption (kWh per capita, 2007) 243 Installed capacity (MW 2008) 723 Thermal 673 Hydro 50 Other renewable — Electricity net generation (bil kWh) 3.98 Distribution losses (% net generation) 7 CO2 emissions (M/T per capita, 2007) 0.3 Indicative residential electricity tariffs for rural 0–25 kWh: 269 lak (USc3.36) consumers (2011) 26–150 kWh: 773 lak (USc9.66) Above 150 kWh: 320 lak (USc4.00) (Source: www.edl-laos.com) Key institutions for electricity sector Ministry for Energy and Mines Electricité du Laos (EDL) Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. Appendix 1. Electricity Access: Selected Country Briefs 117 IBRD 38384 100°E 102°E 104°E 106°E To CHINA Lincang To Gejiu To Daluo 22°N 22N LAO P.D.R. Phongsaly V IETNA M MYANMAR Luang To Namtha Hanoi Muang Ban Xai Huaisai Sam-Neva L A O P. D . R . To Chiang Rai 20°N X ian gkh oan g P l ateau 20°N Luang Phrabang Plain of Jars Xiang Sayaboury Khoang Phou Bia Gulf of (2,817 m) Nam Ngum Tonkin Reservoir Pone Hong Paksane 18°N VIENTIANE 18°N Cammon Plateau To Thakhek Vinh To Khon Kaen To Khon Kaen Savannakhet Lao PDR is located in Southeastern Asia, northeast of TH A IL A ND To Qui Nhon Thailand and west of Vietnam. The topography of Lao 16°N 16°N PDR is largely mountainous with elevations above Saravane 500 meters, typically characterized by steep terrain PROVINCE CAPITALS To Ubon Sekong and narrow river valleys. This mountainous landscape NATIONAL CAPITAL Ratchathani extends across most of the north of the country, MAIN ROADS Bolovens except for the plain of Vientiane and the Plain of Jars Plateau in Xiangkhoang Province. The southern “panhandle� of 0 50 100 Kilometers Champassak INTERNATIONAL Attapeu BOUNDARIES 0 50 100 Miles the country contains large level areas in Savannakhét This map was produced by the Map Design Unit of The World Bank. and Champasak provinces. Much of Khammouan Province and the eastern part of all of the southern The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank 14°N Group, any judgment on the legal status of any territory, or any C A MB ODIA endorsement or acceptance of such boundaries. 104°E 108°E provinces are mountainous. FEBRUARY 2011 Table A1.3.1 Lao PDR: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 470 491 21 — 19 2 2021–30 223 196 — — — — 2011–30 694 687 — — — — Annual requirements: — — — — Note: No. of HH without electricity in Business-as-Usual scenario by 2030: <1%. CHALLENGES STRATEGIES • Grid rollout: Approaching economic limits • Address “last-mile� challenges of grid • Off-grid program: High expectations; weak extension through systematic planning and institutional and �nancial framework greater use of proven low-cost solutions 118 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC • Off-grid electri�cation program: Gearing extension has nearly doubled from US$450– up for acceleration, scale-up, and reach. 550/HH 7 years ago, when national access levels • Approach solar home system (SHS) elec- were approximately 50 percent, to approximately tri�cation as a program to provide and US$900 today. However, the cost per connection maintain electricity service, not as an exer- at the fringes of the EDL grid is likely to be 33 cise in the procurement and installation of percent–50 percent more than the current aver- SHS equipment age and will continue to rise rapidly as the grid • Conduct targeted campaigns for SHS elec- is extended. tri�cation based on speci�c connection targets for delineated areas within each Off-grid connections program: High expectations province and big challenges. The government has set a • Use EDL as a technically competent entity national target of 90 percent electricity access by to implement off-grid programs 2020. Given the economic limits of grid expan- sion, off-grid electri�cation will need to increase CHALLENGES 3- to 4-fold over the next decade. This increase translates to an annual off-grid connection rate Lao PDR is on the threshold of graduating from of 8,000–10,000 connections every year over Low Income status. The country’s power sec- the medium term. This target is much higher tor, anchored by the national utility Electricité than the current annual rate of approximately du Laos (EDL), has been a key partner and 2,000 systems under the SHS program being enabler of the nation’s development. The over- implemented by the Department of Electricity whelming majority of electric connections to (DOE).36 Moreover, the current SHS program date—approximately 68 percent of the 70 per- framework is already challenged by the rising cent national coverage—have been implemented costs of extending delivery chains beyond the by EDL through effectively extending the grid. close-in rural areas outside the grid’s footprint. This extensive use of the grid was made pos- The program also is encumbered by an inade- sible through a least-cost expansion plan, which quate design and incentive framework that covers included a simple but rigorous prioritization multiple agents across an overly extended supply and village-screening process and deployment of chain. The apex agent lacks the capacity to man- many cost-cutting technical innovations. age the overall project day to day. Private sector/ As the grid spreads into less accessible and less community-based schemes for mini/micro grids densely populated areas, the current approach have been planned but are still nascent. to electri�cation is becoming very expensive. Looking ahead, new demands and expectations from the sector are posing challenges of greater STRATEGIES scale and scope than were encountered earlier. Stretching the limits of grid extension: Confronting To keep up the current rate of progress in elec- the “last-mile� challenges. EDL recognizes that tri�cation, it will not suf�ce merely to do more the next stage of grid network extensions increas- of the same on both the grid and off-grid elec- ingly will be challenged by population settlement tri�cation fronts. patterns that are less nucleated and require longer line distance-per-kilovolt-Ampere (kVA) con- Grid expansion is approaching its economic lim- nections than typically encountered so far. There its. In Lao PDR, an increasing share of the popu- is a pressing economic case for systematic plan- lation without electricity access lives in scattered ning and widespread deployment of the lowest communities in ever more remote villages, many cost network designs and reticulation that are cost of which are hard to reach, including mountain- ous areas. As a result, the average cost of grid 36. Ministry of Energy and Mines (MEM). Appendix 1. Electricity Access: Selected Country Briefs 119 effective for the next stage of grid electri�cation. A key �rst step is to reassess its current pace of In developing its strategic approach to farther implementing off-grid connections. It is impor- grid extension, EDL can bene�t from the expe- tant to establish realistic and achievable targets rience of other nations’ electri�cation programs to expand off-grid connections in the context that are recognized as good practice. These have of the overall national access targets. This deter- successfully dealt with “last-mile� access chal- mination should take into account the relative lenges while being mindful of cost-effectiveness costs per connection of various technical options, and �nancial viability. Among the proven and and—critically—the proven implementation promising technical options for grid extensions capabilities and speed of grid rollout compared to that have withstood the test of time are con- the pace at which primary off-grid agents can be ventional single-phase primary network designs mobilized for the task. This approach clearly goes and, where appropriate, single-wire earth-return beyond a narrow, simplistic comparison of the (SWER) spur lines. economic cost of new connections at the mar- Speci�c cases that are relevant to the Lao gins between grid and off-grid options. Finally, PDR context include Brazil, Peru, South Africa, a results-driven off-grid electri�cation strategy and Tunisia.37 In all of these countries, single- and implementation plan that can be counted phase primary networks are a prominent fea- on to deliver the national targets on time need ture of their “last-mile� network design, and to be developed. In this context, the following helped achieve cost savings of 30 percent–50 three steps, derived from the experience of better percent compared to conventional network performing off-grid designs in other countries, design. Furthermore, South Africa and Tunisia in are proposed for Lao PDR’s off-grid implemen- particular have effectively integrated the use of tation program. SWER spur lines with single-phase and three- phase medium voltage (MV) primary networks. • Ongoing assessment of the off-grid “space� Together, these networks stretch the reach of the and grid interface. If EDL were to embrace grid coverage to the maximum extent, in some a systematic and widespread deployment of instances reaching loads as remote as 100 km lower cost single-phase primary network from the MV network. design and reticulation and maximize the use of SWER line spurs where appropri- Off-grid electri�cation program: Gearing up for ate, the nation could greatly expand the acceleration, scale-up, and reach. If it is to suc- reach and coverage of its grid. This type of ceed at the formidable challenge of quadrupling deployment clearly would require updat- its present rate of implementing new off-grid ing the off-grid program targets each year. connections to meet its overall access target, Lao To continually make this assessment, it is PDR needs to substantially refocus the strategy crucial to have a nationwide spatial grid and design of its off-grid electri�cation program. expansion plan that is updated continu- ously and reflects EDL’s grid extension strategy as it is implemented. A planning 37. For example, Brazil has achieved near-universal access to electricity, with 97% or more coverage pro- and rapid appraisal platform especially rel- vided by grid-based electricity. The last 4% of cover- evant for developing such a plan is available age was obtained through a conscious strategy of grid from the recent generation of GIS-based extensions, using single-phase network design to the spatial planning models. In contrast to the maximum extent feasible. When unit costs breached traditional (and cumbersome) Master Plan the $4,000 per connection zone, isolated diesel mini- analysis approach, analysis that is based on a grids were deployed. Now that near-universal access has been achieved, an ongoing program converts as GIS-based appraisal platform provides a many of the diesel isolated grids as possible to gas or quantitative and representative spatial ref- other cost-competitive fuels if available locally. erence frame for (a) tracking and updating 120 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC ongoing actual progress and (b) more for an electricity utility service type of sharply delineating the evolving off-grid arrangement. program space in relation to the grid. (See Bids from quali�ed service providers— box 2.5 for an illustration of the GIS-based private sector, NGOs, and other quali�ed spatial planning technique.) agents—are evaluated on a competitive • Solar home system (SHS) electri�cation basis for each package. To date, a notable program: Targeted campaigns with con- feature of Peru’s off-grid program design nection targets, staged by delineated areas and experience is that the SHS electri�- within each province. In seeking to expand cation bid packages also are open to the its SHS electri�cation program, Lao PDR regional electric utilities. Indeed, in several can learn from Peru’s main off-grid elec- instances, utilities have won the bid. The tri�cation program. It offers particularly utilities then undertake all of the key func- relevant lessons and design insights for tions including overall project management developing a program of the required of the delivery and installation of the sys- scale, speed, and enhanced spatial reach tems, and, signi�cantly, manage the ongo- and coverage. ing provision of the electricity service.38 Peru’s national electri�cation coverage • Utilities can be effective implementation is approximately 80 percent–95 percent in agents for off-grid programs. In addition to urban areas, and approximately 35 percent Peru, Argentina and Brazil offer instructive in rural areas—mostly from the grid. The examples for the Lao PDR off-grid pro- limits of grid coverage from the ongo- gram. In many countries, electricity utilities ing electri�cation are projected to be 90 have been effectively mobilized, together percent. The reason is that large parts of with the private sector, to implement one the country consist of highly challenging or more off-grid program components. mountainous terrain with spatially dis- Brazil’s off-grid program covers over 3,000 persed small settlements akin to the north- isolated diesel minigrid systems that are ern Lao PDR region. For these settlements, embedded in the respective service areas in parallel to its grid rollout program, Peru of the distribution utility serving that area. is orchestrating a well-planned, targeted, A nationally operated cross-subsidy mech- and structured off-grid electri�cation anism funds the Universal Access fund, program. Its main driver is an SHS-based which compensates each utility for 90 electri�cation service targeted to reach approximately 300,000 HH and staged in a 38. In Peru, it is common to �nd instances in which programmatic manner. the regional electric utility proximate to the bid area Under Peru’s approach, quali�ed service is the winning bidder. The utility is already familiar providers undertake SHS electri�cation of with the area demographics and other characteristics. targeted areas within an established tech- Moreover, it has the capacity to undertake effectively project management and, later, maintenance and com- nical and regulatory framework that cov- mercial functions. The reason for the utilities’ success ers equipment and service standards, and is that an integral part of their core business model modalities for �nancing and subsidy. for grid-based services has been outsourcing a broad The objective is not a program paradigm range of technical and commercial activities to small designed and managed to procure and private enterprises. The regulatory and subsidy ar- install SHS equipment. The objective and rangements for the solar PV connections allow for a full cost recovery tariff (as for grid connections) and guiding philosophy of this program is to are �nancially structured to enable the most ef�cient provide and thereafter maintain electric- agents to make a pro�t. In many instances—although ity service. In keeping with this approach, not in every case—the regional local electric utility customers pay an equivalent monthly tariff has both a competitive edge and an interest. Appendix 1. Electricity Access: Selected Country Briefs 121 percent of the allowable investment cost in and results-oriented culture, of these utili- addition to any operating losses. Tariffs are ties can be harnessed under a supportive more or less uniform across the nation. A regulatory, policy, and incentive framework signi�cant component of Argentina’s last- for effective off-grid program delivery. mile electri�cation strategy is the staged implementation of a SHS electri�cation From these three steps, it follows that there program with ongoing maintenance ser- is a strong case for establishing an EDL subsid- vice charged on a monthly billing basis, iary whose core business would be solely off-grid akin to a normal grid customer’s monthly project design, management, and operations. This bill. In Argentina, the regional electric subsidiary would undertake this program on a utility companies have set up subsidiaries fully costed fee basis charged to the Department whose core business is to manage and oper- of Energy. Subsidy funds for a scaled-up off-grid ate the off-grid SHS electri�cation service program can be sourced from a properly designed program. and capitalized Rural Electri�cation Fund and In short, established national and disbursement mechanism. Such a subsidiary regional utilities—public or private—with would be open to compete with other quali�ed proven track records represent valuable agents for a range of functions and services.These national assets that could be deployed to could include project management and oversight implement one or more off-grid program for scaled-up SHS program design, installations, components. These technical and manage- and services and maintenance thereafter; as well ment capacities, and the professionalism as minigrid design and construction oversight. 122 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A1.4 MONGOLIA Approximately 90 percent of Mongolia’s popula- (district) center residents and to only 25 per- tion has access to electricity, but with wide dis- cent of the herder population of approximately parities between urban and rural areas. Nearly 99 850,000 (approximately 30 percent of the coun- percent of urban residents, including Ulanbaatar try’s population). In the soum centers, electricity and the aimag (province centers), have access is provided through isolated grids based on diesel to electricity; compared to 80 percent of soum systems. The electricity is of signi�cantly lower Population (2008) (mil) 2.6 Rural population (% total population, 2008) 43 Population density (people/sq km) 2 Land area (sq km) 1,560,000 GNI per capita (Atlas Method: Current US$, 2008) 1,679 Access to modern cooking fuels 23 Urban (% HH, 2008) 31 Rural (% HH, 2008) 2 Electricity access, national (% HH, 2009) 90 Urban (% HH, 2008) 99 Rural (% HH, 2008) 75 No. of people w/o access to electricity (2009) (mil) 0.63 Population served by off-grid sources (minigrids and HH systems) (%) 20 Electricity access target and year (% HH) 100; 2020 Electric power consumption (kWh per capita, 2007) 1369 Installed capacity (MW 2008) 832 Thermal 832 Hydro — Other renewable — Electricity net generation (bil kWh) 3.9 Distribution losses (% net generation) 11 CO2 emissions (M/T per capita, 2007) 4.0 Indicative residential electricity tariffs for rural US 2.9c/kWh in all aimags and soums if under consumers (2011) 50kWh/month (Source: Energy Regulatory Authority Annual Report 2009) Key institutions for electricity sector Ministry of Mineral Resources and Energy (MMRE) Electricity Authority (EA) Electricity Regulatory Authority Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. Appendix 1. Electricity Access: Selected Country Briefs 123 IBRD 38385 100°E 110°E 115°E 120°E 105°E PROVINCE (AIMAG) CAPITALS NATIONAL CAPITAL MAIN ROADS RUSSIAN FEDERATION INTERNATIONAL BOUNDARIES Lake Baikal To Biysk To To To Chita 50°N Ulan-Ude Chita 50°N Ulaangom Tavan Bogd Uul (4,374 m ) Olgii Mörön Sühbaatar Darhan Erdenet Jargalant Bulgan Kherlen (Khovd) (Choibalsan) Ha A Uliastai ng Erdenebulgan ULAANBAATAR ay (Tsetserleg) l t n a M Zuunmod Öndörhaan ts y Esonbulag . MONGOLIA Baruun-Urt (Altai) Bayankhongor Choir 45°N Arvaiheer M Mandalgovi Mongolia is a landlocked country whose terrain o 45°N u comprises mountains and rolling plateaus, with n t a i n Sainshand s a high degree of relief. Overall, the land slopes from the high Altay Mountains of the west and To Jining 115°E the north to plains and depressions in the east Dalandzadgad s e r t and the south. The country has an average D e b i elevation of 1,580 meters. The landscape G o includes one of Asia’s largest freshwater lakes 0 300 Kilometers (Lake Khövsgöl), many salt lakes, marshes, MONGOLIA To Hami sand dunes, rolling grasslands, alpine forests, CHINA 0 200 Miles and permanent mountain glaciers. Northern This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information and western Mongolia are seismically active zones, with frequent earthquakes and many hot shown on this map do not imply, on the part of The World Bank 95°E Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 100°E 105°E 110°E springs and extinct volcanoes. FEBRUARY 2011 Table A1.4.1 Mongolia: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 88 88 — — — — 2021–30 38 38 — — — — 2011–30 126 126 — — — — Annual requirements: — — — — Note: No. of HH without electricity in Business-as-Usual scenario by 2030: <1%. duration, quality, and reliability compared to Sector Structure Ulanbaatar and the aimag centers. With limited Mongolia’s Ministry of Mineral Resources and or no access to electricity, rural (mostly remote Energy (MMRE) has overall responsibility for soum centers, and herder communities) living the power sector. The Energy Authority (EA), standards are constrained by low agricultural and which reports to MMRE, is charged with policy- livestock productivity and very few opportunities making and project implementation. The Energy for nonfarm employment or other value-adding Regulatory Authority oversees licensing, tariff- economic activities. setting, and promotion of competition. In 2001, 124 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC to improve the ef�ciency of the sector, the power present, approximately 60,000 independent sector was unbundled into 18 generation, trans- solar PV systems are being used by herd- mission, and distribution companies. However, ers to operate lights, radios, televisions, and these reforms have yet to yield the desired results. satellite dishes. Under the “100,000 Ger� program, the government has �nanced, Consumer Groups procured, sold, and installed over 40,000 The power sector in Mongolia is segmented into SHS.39 The government is on track to reach three consumer groups: urban, soum (district), 92,500 in the next phase, operating through and herders. a combination of the soum administration network, private dealers, and sales and ser- • Urban. The urban consumer group is the vice centers (SSCs). An additional 60,000 largest and includes all grid-connected cit- SHS are expected to be delivered through ies and towns.This group is served by three the WB-�nanced Renewable Energy for grids: Central, which supplies Ulaanbaatar; Rural Access Project (REAP). Eastern; and Western Energy Systems. These three supply mostly coal-based power Rural Targets and account for approximately 97 percent The government has assigned off-grid soum of the electricity sales in Mongolia. and HH electri�cation an ambitious target of • Soums. Of the 314 soum centers in the 150,000 HH by 2020. This target envisages that country, only 117 are connected to the up to 20 percent of the rural population located national or regional grids. The remaining in isolated areas can be powered with indigenous 197 soum centers depend on small die- energy resources, including solar, picohydro gen- sel generators and microgrids, which are erator units, biomass, and wind. owned and operated by local governments. These small systems provide at most 4–6 Use of Off-Grid Renewable Systems hours a day of electricity to the soum resi- The government plans to expand the use of off- dents. Several off-grid soum centers have grid renewable systems while preserving service been provided with new “free� diesel gen- quality and affordability.The strategy is to expand erators through bilateral assistance, but, electri�cation while improving service quality otherwise, local governments have been and affordability through (1) increasing electric- left to fend for themselves in operating and ity access through SHSs and small wind turbine maintaining these generators, and �nanc- systems (WTSs) and (2) developing renewable ing operating costs. or renewable-diesel hybrid systems among off- To increase rural coverage and improve grid soum centers. The government also aims to the cost-effectiveness of the isolated grids improve the �nancial viability of the soum center in remote soum centers, the government’s electricity service by making it more commer- National Renewable Energy Program has cially oriented and encouraging private sector set ambitious goals for broad-based renew- and community participation in providing elec- able energy development. These goals are tricity service. to increase the share of renewable energy technologies in total energy supply from CHALLENGES 0.9 percent in 2005 to 3.0 percent– • Low capacity in the Energy Authority (EA) 5.0 percent by 2010; and to 20.0 percent– for integrated rural access planning 25.0 percent by 2020. • Herders. This group consists of nomadic herders. Household-based power supply sys- 39. A ger is a felt-lined tent home used by Mongolian tems are the only option for this market. At nomads. Appendix 1. Electricity Access: Selected Country Briefs 125 • Low �nancial and operating viability of customers collectively cannot pay the additional most soum center minigrids costs, the hours of service are reduced to cut over- • Lack of effective mechanism for SHS/wind all fuel costs. system rollout The government plans to connect most off- grid soum centers with national or regional grids STRATEGIES in the next 10 years or so. However, approxi- • Improve planning capacity through tar- mately 70 off-grid soum centers are considered geted external technical assistance and uneconomical for grid connection due to their expertise remoteness and will need �nancially sustain- • Improve �nancial and operating viability for able solutions to improve the reliability of their soum grids services. • Develop a service-oriented approach to SHS and wind turbine systems Lack of effective mechanism for SHS/wind sys- • Secure concessional �nance for wind- tem rollout. Multiple factors have inhibited the diesel and wind-solar-diesel hybrid power expansion of the herders’ SHS market: stations by mobilizing a common platform of donors and leveraging climate change • The incomes of the target group are low. funds Approximately 40 percent of the estimated 170,000 herder HH have annual cash CHALLENGES incomes below US$450 (2006) and cannot afford the capital costs of solar home sys- Low capacity for planning in the Energy Authority tems (SHS), which today normally would (EA) in the overall context of integrated rural exceed $500. planning. Soum-based rural electri�cation proj- • It is dif�cult to develop an effective supply ects are constrained by weak rural electri�ca- chain to support a decentralized market for tion planning capacity in the Energy Authority. a small and mobile customer base spread More generally, in the absence of integrated rural over a vast area. development planning, income-generating elec- • Basic quality and services standards are tricity uses have not increased enough to make lacking for SHS. rural power supply �nancially viable. • Even though there is a growing micro- �nance market, because of the unpre- Lack of �nancial viability and operating capacity dictable market and regulations and the of soum center minigrids. Soum center minigrids perception of high risks in investing in the display generation inef�ciencies and high distribu- supply chains, the private sector does not tion losses. In addition, generation costs are high participate in the SHS market. due to diesel prices.Tariffs do cover the operating • Private sector capacity for scaling up imple- costs.There are no clear tariff-setting mechanisms mentation of rural electri�cation through or rate classes among customers. For the most part, retail systems for private HH and public electricity consumption is not metered, except for institutions or for soum center grid elec- large public institutional facilities. It is estimated tri�cation is limited. that rural HH consume 80 percent of the total • Financing, whether grant or concessional electricity while providing approximately only 33 debt, for RE is insuf�ciently available. percent of the total revenues. In other words, rural HH effectively are being cross-subsidized by the Approximately 40,000 HH solar PV and wind rural public institutions. Soum centers must pay power systems and 3,000 wind turbine systems for diesel in cash.When the cash cost of operation (most of which were donated by the governments goes up due to increases in diesel prices, and if the of China and Japan) have been sold in Mongolia, 126 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC sometimes with heavy and poorly targeted subsi- options with lower operating costs, including full dies. Some public investments have been made in or hybrid renewable energy power generation. PV, wind, or hybrid systems for institutional use (schools, hospitals). Develop a service-based approach for SHS and WTS. One option is a shift to provide off-grid STRATEGIES electri�cation as a service, not as a program para- digm designed and managed to procure and install Improve EA’s technical and planning capacity. SHS or other off-grid equipment. In keeping with External TA is needed to develop the capac- this approach, for being provided with reliable ser- ity for technical operation and management vice from off-grids sources, customers would pay in the relevant government departments, the a monthly tariff as is done for grid electricity. The Energy Authority, and the independent regulator. institution charged with providing the service Without this capacity, it will be dif�cult to meet must have adequate capacity for this task. Such the government’s access targets. a service-oriented approach would need to be anchored by an institution with adequate capacity Improve �nancial and operating viability for and familiarity with the consumer base. soum grids. Improving the technical and �nan- cial performance of the soum microgrids is the Secure concessional �nance for renewable energy �rst step toward universal HH coverage within and hybrid power stations by mobilizing a com- the soum center areas. To improve their perfor- mon platform of donors and leveraging climate mances, Mongolia needs to (1) adopt a rational change funds. Expanding the base of renewable tariff and subsidy policy based on clear perfor- energy will need substantial investments that will mance benchmarks; (2) reorient soum center require external �nancial and technical assistance. electricity service to be more commercial; and Mongolia should develop a phased spatial elec- (3) actively pursue private sector and community tri�cation rollout plan to cover the unconnected participation in the provision of electricity ser- HH. Such a plan could be the basis for obtaining vice. Additional actions to strengthen the viability external programmatic assistance. The plan also of soum microgrids would be to (4) invest in net- could be used to leverage climate change funds work rehabilitation and (5) develop generation that support renewable energy. Appendix 1. Electricity Access: Selected Country Briefs 127 A1.5 THE PHILIPPINES Population (2008) (mil) 90.4 Rural population (% total population, 2008) 34 Population density (people/sq km) 303 Land area (sq km) 300,000 GNI per capita (Atlas Method: Current US$, 2008) 1,700 Access to modern cooking fuels 49 Urban (% HH, 2008) 77 Rural (% HH, 2008) 29 Electricity access, national (% HH, 2009) 84 Urban (% HH, 2008) 97 Rural (% HH, 2008) 65 No. of people w/o access to electricity (2009) (mil) 9.5 Population served by off-grid sources (minigrids and HH systems) (%) <2 Electricity access target and year (% HH) 90; 2017 Electric power consumption (kWh per capita, 2007) 586 Installed capacity (MW 2008) 15,680 Thermal 10,397 Hydro 3,291 Other renewable 1,992 Electricity net generation (bil kWh) 59.2 Distribution losses (% net generation) 13 CO2 emissions (M/T per capita, 2007) 0.8 Indicative residential electricity tariffs for rural First 20 kWh free for lifeline; next 30 kWh consumers (2011) @ 50% of general tariffs (Source: Meralco) Key institutions for electricity Department of Energy sector National Electrification Administration (NEA) National Power Corporation (NPC) Rural electric cooperatives (RECs) Small Power Utilities Group (SPUG), division of NPC Energy Regulatory Board Transmission Corporation Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. The Government of the Philippines (GOP) plans in the country from the present level of 84 per- to increase the share of electri�ed households40 cent to 90 percent by 2017. For rural areas, the Philippines Energy Plan (2009–30) envisions 40. Targeting connections is relatively new for the reaching 90 percent household electri�cation, country, as the main goal of electri�cation policy had been the interim target of achieving full barangay (local district) electri�cation. The DOE considers the goal electri�ed if a very basic level of service has been es- of full barangay electri�cation to have been reached tablished (for example, the barangay district of�ce has this year (2010). In practice, a barangay is considered a connection and/or a street light has been installed). 128 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC IBRD 38386 Batan Is s Basco Islands REGION CAPITALS 20ºN NATIONAL CAPITAL Luzon Strait MAIN ROADS INTERNATIONAL BOUNDARIES PHILIPPINES Laoag City Kabugao Bangued Tuguegarao Tabuk Bontoc Ilagan Lagawe 125ºE San Fernando La Trinidad Cabarroguis Baguio Bayombong Baler San Fernando 15ºN MANILA P HIL IP P INES Calamba Lubang g a atanduanes s Islands Virac MamburaoCalapan or r Mindoro ro Legaspi Sorsogon P h i l i p pine M ind or Catarman Sea Busuanga o Str Samar ai t Borongan Tacloban San Jose de Iloilo Buenavista Dumaran Cebu 10ºN Palawan The Philippines is an archipelago comprising 7,107 Sulu Sea Butuan islands. The 11 largest islands contain 94 percent of the Bugsuk Cagayan de Oro total land area led by Luzon at 105,000 sq km, followed Balabac Pagadian by Mindanao at 95,000 sq km. The islands are divided Cotabato Davao into three groups: Luzon, Visayas, and Mindanao. The Zamboanga Shariff Aguak (Maganoy) 0 150 Kilometers Luzon islands include Luzon Island itself, Palawan, Bas lan Basilan asilan asi an as asilan Isulan Koronadal Mindoro, Marinduque, Masbate, and Batanes. The Visayas Jolo 0 100 Miles in the central Philippines contain Panay, Negros, Cebu, Tawi-Tawi -T w This map was produced by the Map Design Unit of The World Bank. M A L AYS I A Celebes Sea ar ar Sarangani The boundaries, colors, denominations and any other information Bohol, Leyte, and Samar. The Mindanao islands comprise shown on this map do not imply, on the part of The World Bank Panglima Sugala Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 125ºE Mindanao itself plus the Sulu Archipelago. 120ºE FEBRUARY 2011 Table A1.5.1 Philippines: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 3,605 3,605 — — — — 2021–30 2,340 3,408 1,068 — 871 198 2011–30 5,946 7,014 1,068 — 871 198 Annual requirements: 53 — 44 10 Note: No. of HH without electricity in Business-as-Usual scenario by 2030: 1 million (<4% of the total population). from the present estimated level of 65 percent.To expand electricity generation capacity in approxi- reach these targets, electricity will have to be pro- mately 200 nonelectri�ed areas through subsidies vided to 3.4 million households over 2000–17. and private sector participation programs. Over Generation capacity is presently a constraint. To 2009–17, nearly 1 million households will have respond, under the Missionary Electri�cation be served by solar home systems (SHS) because Development Plan (2009–18), the GOP intends to it is not possible to connect these households at Appendix 1. Electricity Access: Selected Country Briefs 129 reasonable cost to either the major regional grids of 119 rural electric cooperatives (RECs), or any of the isolated systems in remote locations although RECs do not serve exclusively rural throughout the archipelagic nation. areas. RECs are supervised by NEA, which tra- ditionally has provided technical support and BACKGROUND �nancial support to them. However, since 2001, EPIRA has been expected to prepare the RECs Institutions. Several agencies are involved in pro- for the implementation of various industry viding power supply to rural and remote loca- reforms, including wholesale electricity market tions. These agencies include the Small Power trading (WESM) and retail competition. RECs’ Utilities Group (SPUG) of the National Power customer bases vary widely from 1,000 to over Corporation,41 119 rural electric cooperatives 130,000 customers each. (RECs), local government units (LGUs), private RECs’ �nancial performance has been uneven distribution companies, and “quali�ed third par- due to low cost recovery from socially acceptable ties� (QTPs).42 SPUG operates in 78 islands and tariffs, poor �nancial management, decline in bill an additional 8 isolated areas on major islands. It collection rates, and increasing political interfer- has over 300 generators totaling approximately ence. Regardless of the conditions in its service 129 megawatts, almost all of which are diesel territory, each REC is required to meet the same �red. Most of the buyers of SPUG’s generated �nancial ef�ciency standards. This requirement power are RECs and private QTPs. LGUs no imposes �nancial strains on RECs that must oper- longer are major buyers of SPUG power. ate under unfavorable conditions. In fact, in some Over the years, the government has under- cases, regulatory pressure on rates can reduce taken several institutional reforms to meet ef�ciency by preventing RECs from spending increasing demand and improve performance, adequately for maintenance and renewals. It is particularly through the 2001 Electric Power estimated that, given current tariffs, 33 percent Industry Reform Act (EPIRA). Several LGUs are of RECs are not �nancially viable; and many do small and loss making. If potentially viable, their not meet the technical and �nancial requirements operations are sold off. If not, the assets typically necessary to recover costs. Options to improve the are transferred to SPUG or the RECs. A hand- performance of RECs include reorganizing and/ ful of QTP operations still exist in the country, or merging RECs into viable units, or converting although not nearly so many as the government them into joint stock companies. However, these had hoped for. Combined, the state agencies, approaches can be dif�cult to implement. RECs, and QTPs have considerable capacity and Improving governance and management is experience to provide electricity services. key to improve the performance of RECs, which are independent entities that have the freedom Rural electric cooperatives. In the rural Philip- to make decisions on most issues. For a well-run pines, power distribution is under the purview REC, access to capital should not be a constraint. Potential sources include NEA, the Development 41. SPUG is a division of NPC responsible for gener- Bank of the Philippines (DBP), LGU Guarantee ating electricity for sale to electric cooperatives (ECs) serving areas that, due to their remoteness, are unable Corporation (LGUGC), and the Rural Electri�- to access a grid connection. cation Financing Corporation (REFC). Neverthe- 42. A QTP is a private company or organization that less, the reality is that several RECs need to improve generates and distributes, or distributes only, services their operations, �nances, and governance in some in a franchise area that either has been ceded by the combination to become attractive even to public local electric cooperative, or is an unserved territory sector lenders such as NEA. not associated with an EC, in which electricity ser- vice is being established under the GOP’s Missionary The ending of the government role as sup- Electri�cation Development Program. (“Missionary� plier of last resort through the National Power means essentially “unserved.�) Company/Power Sector Assets and Liabilities 130 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Management Corporation (NPC/PSALM) pre- through the “universal charge for missionary sents an opportunity to improve accountability electri�cation� (UC-ME), which is added to the and performance in RECs. A utility that does not bills of all customers on the integrated networks. pay for electricity supply risks being cut off, and, The main use of UC-ME revenue is to cover perhaps more important from the viewpoint of SPUG’s operating losses. However, added to the an individual REC, risks having NEA exercise fact that the level of actual UC-ME revenue and its step-in rights to replace existing management the timeliness with which SPUG receives it are and dissolve the board. This prospect, which not adequate, there simply is not enough money has materialized in some cases, has signi�cantly to support electri�cation expansion programs. improved the RECs’ performance. SPUG’s annual subsidy requirement is esti- mated by DOE at 18 billion pesos (US$400 mil- CHALLENGES lion). Most of this amount is intended to pay for • Address large �nancing gap for operating oil-�red generation and reflects the difference costs and new investments in rural areas between the cost of generation, which is at least • Improve REC performance 20 pesos (45 cents) per kWh, and the socially • Promote private sector role in rural acceptable charge for service of approximately 8 electri�cation. pesos (18 cents) per kWh. STRATEGIES Improving REC performance. Despite overall • Develop well-costed and time-bound spa- improvements in recent years, REC performance tial electri�cation plan as basis for channel- continues to be constrained by governance issues, ing programmatic assistance inadequate management, and poor technical • Explore opportunities for output-based aid performance. • Move toward tailored standards for distri- bution losses and reinvestment allowance Promoting private sector role in rural electri�ca- for RECs tion. The government’s policy provides for a sub- • Encourage “service� approach for off-grid stantial private sector role. However, in practice, renewable applications the private sector has a limited appetite for rural electri�cation, whether as generators, distributors, CHALLENGES or SHS providers. Green-site mini/microgrids with private sector/community-based schemes Addressing large �nancing gap for operating costs as a service delivery model operate outside main- and new investments in rural areas. This mis- stream frameworks and are still few in number. match between policy objectives and the level of Part of the reason for the reluctance is that allocated resources is a critical barrier to expand- GOP programs are limited, often by the amount ing rural electri�cation in the Philippines. Under of money that can be attracted from speci�c almost any circumstance, though, there is likely to donors such as GEF, the World Bank, and ADB. be a signi�cant funding gap that cannot be �lled However, even for limited operations, private and without the government’s committing additional public operators alike must deal with dif�cult funds. and expensive supply chains; and service territo- DOE’s electri�cation plan calls for signi�- ries with dif�cult geography, dispersed and poor cantly expanding SPUG activities to over 70 households, and limited economic growth pros- new areas. Doing so would require an additional pects. Many remote regions also have a law and 54 MW of new generating capacity. However, order problem. Finally, even if a company wanted SPUG’s poor �nancial condition makes this to be in the business of providing energy services expansion extremely dif�cult. Missionary elec- to remote areas, it is very dif�cult to �nd quali- tri�cation programs are expected to be �nanced �ed people willing to do this kind of work. Appendix 1. Electricity Access: Selected Country Briefs 131 STRATEGIES conditions under which they operate. Better per- forming RECs serve large and progressive pro- Develop a well-costed and time-bound spatial vincial cities, whereas the poor-performing RECs electri�cation plan as the basis for channeling pro- normally serve small islands or those with law and grammatic assistance. External assistance will be order problems. A regulatory approach of stipulat- required on a signi�cant scale to supplement gov- ing common standards for distribution losses and ernment funds for making necessary investments reinvestment allowances is ineffective in promot- in generation and off-grid technologies and for ing ef�ciency On the contrary, regulatory pres- distribution of assets.A pragmatic approach would sure on rates can reduce ef�ciency by preventing be to prepare a spatial and time-sequenced plan RECs from spending enough on maintenance that would (1) systematically identify the com- and renewals.The regulator (ERC) should under- munities and clusters that need to be served—by take a detailed examination of costs for each REC. both minigrid and household systems; (2) esti- ERC then should create ef�ciency standards that mate costs; (3) identify subsidy requirements and are speci�c to each entity against which to judge sources; and (4) sequence investments. Such a plan its performance and to provide a basis for “smart� could provide an improved basis for attracting subsidies. The regulator already has moved toward programmatic lending from donors and sources a performance-linked benchmarking system for of concessional �nance. For the greatest impact, the ECs that differentiates among the cost struc- these sources of funds then should be passed on at tures of individual ECs. similar concessionary terms for investments. Encourage “service� approach for off-grid renew- Explore opportunities for output-based aid. The able applications. It will be important to lever- Philippines’ rapid rate of urbanization suggests age the strengths of existing entities to design that many of the millions of future connections and implement off-grid investments and services, will be made by distribution companies in urban such as minigrids and SHS systems design, tech- and peri-urban areas. A large proportion of the nical oversight, investment rollout, and opera- projected 1 million SHS connections will be very tion of off-grid services. In contrast to a “dealer� expensive. Output-based aid can be a promising approach, a “service� approach should be tried option to (1) subsidize the initial connection and for off-grid HH applications in which the cus- (2) develop a regulated utility model so that service tomer pays a monthly fee for equipment that is providers can be fairly compensated for ongoing maintained by the service provider. Peru has such services and held accountable to speci�c service a system. In Argentina, the regional electricity standards. A well-designed OBA model could utility companies have set up subsidiaries whose attract multilateral and bilateral donor assistance. core business is to manage and operate the off- grid SHS electri�cation service program. The For RECs, move toward tailored standards for Philippines has made a start in this regard with distribution losses and reinvestment allowance. a few RECs’ attempts to install approximately RECs vary widely in size and in the geographical 2000 SHS. 132 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC A1.6 PACIFIC ISLAND COUNTRIES (PICS) Shared Context: Economic Geography Shaping High electricity tariffs also put additional pres- Development Challenges Far More Than Elsewhere sure on enterprises by raising the already high The 12 Paci�c Island Countries (PICs) in the costs of doing business. Finally, those not con- World Bank’s East Asia and the Paci�c Region nected to the grid incur even higher costs by self- include approximately 10 million people (approx- generating with heavily taxed fuels. imately 2.2 million people if Papua New Guinea The high grid electricity prices are due in and Timor-Leste are excluded).43 Of the 12 PICs, part to the dependence on high-cost diesel-based 8 have populations well below 200,000 (table generation and, in some instances, to avoid- A1.6.1). The per capita GNI in most of these able operational inef�ciencies, particularly high countries is US$4,000. Several are characterized network losses and high unit fuel consumption by high population growth rates. Literacy rates rates.44 Many grid utilities also have chronic prob- exceed 90 percent in most of the countries, lems of service unreliability and poor revenue excluding PNG, Timor-Leste, and Vanuatu. The management. Some are substantially dependent Region is relatively aid abundant on a per capita on recurrent subsidies from their governments. basis, and several of these island economies rely These subsidies take the form of direct transfers or heavily on development cooperation flows. In contingent liabilities arising from �nancial guar- particular, the North Paci�c region states receive antees provided to utilities to procure oil. Such some of the highest levels of aid per capita of any direct and implicit subsidies often are signi�cant countries in the world (up to as much as US$1,000 in magnitude, adding to the countries’ �scal and per capita, or approximately 50 percent of the macroeconomic management challenges. GNI per capita). However, in many PICs, devel- Another special facet of the PICs is the chal- opment results in both service delivery and growth lenge of meeting even the most basic electric- have not matched the aid (table A1.6.1). ity services needs of two large populations. One The citizens of most Paci�c Island nations put group lives outside the grid coverage today and for up with low access to secure, reliable, and afford- the foreseeable future. The second group is scat- able energy. Of the nearly 10 million people liv- tered widely across far-flung islands and remote ing in the Paci�c Island Countries, an estimated small communities. Combined, these 2 groups 8 million do not have access to electricity (0.9 comprise 80 percent of the PICs population on million excluding PNG and Timor-Leste) (table a regional basis (41 percent excluding PNG and A1.6.2). Timor-Leste) (table A1.6.3). The extent of spatial As a group, PICs have some unique features. dispersion of settlements in the PICs contrasts For one, in most instances, even the fortunate sharply with the situations of most other coun- few with grid service pay unit prices for elec- tries, whose geographic and settlement patterns tricity that rank among the highest in the world generally permit 85 percent–95 percent of the (25–50+ USc/kWh). High unit prices pose a population ultimately to be connected to the signi�cant affordability barrier and overly restrict grid through a least-cost grid rollout plan. household consumption and its derived bene�ts. This chapter highlights the key relevant strate- gic and policy directions worthy of consideration 43. The World Bank’s East Asia and the Paci�c (EAP) in addressing the interlocked set of challenges Region comprises 12 Paci�c Island Country mem- to secure, affordable, and widely accessible qual- bers: Melanesia (Fiji, Solomon Islands, and Vanuatu), ity energy services for all PIC citizens. These Polynesia (Samoa, Tonga, and Tuvalu), Micronesia (Kiribati and Republic of Marshall Islands, or RMI), Federated States of Micronesia (or FSM, and Palau), 44. There is considerable scope for improvements in Papua-New Guinea (PNG), and Timor-Leste. the customer-side ef�ciency of electricity use as well. Appendix 1. Electricity Access: Selected Country Briefs 133 Table A1.6.1 EAP Region Pacific Island Countries Selected Indicators GNI per Population capita 2008 GNI per Population growth rate, (Atlas capita Aid per Literacy 2009 1990–2008 Method) rank capita 2007 2008 Country (‘000s) (%/yr) (US$) (US$) (US$) (%) Fiji 843 0.8 3,930 112 69 94 Kiribati* 100* 1.6 2,000 143 285 — Marshall Islands 60 1.4 3,270 124 894 94 Micronesia, 111 0.8 2,340 138 1,035 89 Fed. States Palau 20 1.6 8,650 79 1,108 92 Papua new Guinea 6,599 2.5 2,030 168 50 57 Samoa 179 0.7 2,780 129 204 ~100 Solomon islands 510 2.7 1,180 156 501 — Timor-Leste 1,098 2.2 2,460 136 262 59 Tonga 103 0.5 2,560 133 296 99 Tuvalu 12 — — — — — Vanuatu 233* 2.4 2,330 139 251 74 Source: World Development Indicators 2009 database. Notes: * = Kiribati: World Bank estimates 2010; Vanuatu: Census update December 2010. suggestions are grounded in established good Remote and “sea locked.� The total land area of practice lessons drawn from relevant worldwide the PICs (excluding PNG), comprising hundreds experience. These lessons include regional good of small islands and atolls, is only 89,000 square practices, especially experience with deployment kilometers (sq km), or approximately one-third of grid-renewable energy generation systems on the size of New Zealand. This land area is widely the scale of island utilities that can substantially scattered across an ocean area that is equiva- reduce the diesel dependency and lower unit lent to approximately 15 percent of the earth’s costs of Paci�c Island grid systems. surface. The physical distances from the world’s For the nearly 80 percent of the PICs popula- trade centers make these populations among tion who live in dispersed settlements outside of the most isolated anywhere. For most of these grid system footprint areas, of particular signi�- islands, the closest major ports and export mar- cance are the experience and trends in the market kets are Auckland, Sydney, or Tokyo, which are for consumer friendly “picosolar� products.These over 3,000 km away on average. The least remote relatively low-cost, user-friendly gadgets provide island, Palau, is 1,677 km from Manila (�gure high-quality modern light-emitting diode (LED) A1.6.1). As a consequence, the petroleum supply lighting and suf�cient power for cell phone and chains to the PICs are among the most extended small radio battery charging. Taken together, this and have low economies of scale. “basic electricity� service potential represents an immediate life-changing prospect for off-grid Fragmentation and remoteness within. Signi�- populations (box 3.5). cantly, in the majority of the small island nations, 134 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Table A1.6.2 EAP Pacific Island Countries Electricity Grid Access the United States). The 233,000 inhabitants and Cell Phone Coverage, 2009 of Vanuatu are spread over 80 mostly volcanic islands in an 800-km north-south-aligned chain Population Electricity without Teledensity (�gure A1.6.1).45 access electricity (cell phones/ Country (%) (000s) 100 pop) Economic isolation. Perhaps more than any other countries, the Paci�c Island nations are shaped Fiji 75 211 75* by their economic geographies. In general the Kiribati 45* 55 1 correlation between access to markets and eco- nomic growth is strong. Besides their small mar- Marshall Islands 50 30 1 ket sizes, PICs’ long distances from main centers Micronesia, Fed. States 45 61 25 of economic activity have hampered their devel- opment. The World Development Report 2009 Palau 95 1 53 (WDR) presents several potential market remote- Papua New Guinea under 10 6,137 — ness measures for the Paci�c Island Countries. The mean GDP-weighted distance rank for all Samoa 95+ 9 60* the islands is 197 of 219 countries. Micronesia Solomon islands Under 20 408 2 is ranked at 176; Polynesia and Melanesia tied at rank 207.46 Timor-Leste Under 20 878 7 Tonga 95+ 5 60* PIC governments are especially challenged to deliver vital services to their far-flung citizens. Tuvalu 95+ 1 — PICs’ geographic constraints not only have played Vanuatu 27 170 60* a major role in shaping economic opportunities in the Paci�c but also pose special challenges to Total 20 7,903 — the provision of basic infrastructure delivery and (excl. PNG and (59) (1,761) other priority services. As noted above, popula- Timor-Leste) tions are widely dispersed and located at great Source: World Development Indicators 2009 database. distances from capital cities and economic hubs; Note: * = Entries are for 2009. transportation (intra- and interisland) as well as communication and information flow links tend less than half the population lives on the main to be limited and expensive; and regional and island; and, typically, less than 30 percent lives in cities. PNG’s rugged geography means that the majority of people live in highly remote com- 45. Melanesia is characterized by larger land masses munities with almost no road access to neighbor- and populations, Polynesia by smaller but relatively ing districts and with very distinct cultural and compact land masses, and Micronesia by very small and widely dispersed land masses. Melanesia tends to be linguistic practices. For instance, in PNG, the relatively resource rich; Polynesia generally possesses large number of highly fragmented communities adequate resources; Micronesia tends to be resource comprise over 1,000 languages in PNG, Solo- poor. mon Islands, and Vanuatu. Another illustration 46. Overall, the PICs are considerably smaller and of remoteness within a country is found in far more remote from key export markets than are Kiribati. Its population of approximately 100,000 the Caribbean islands. The approximately 40 million people in the Caribbean live across a sea area equiva- is spread over 33 low-lying atolls scattered over lent to 0.5 percent of the world’s surface area and are 4,000 km of ocean from east to west, and 2,000 fewer than 1,000 km from the huge US market. The km from north to south (a sea footprint equiv- 2009 WDR estimated the Caribbean island country alent to the land area of the lower 48 states of remoteness index mean to be 100 of 219. Appendix 1. Electricity Access: Selected Country Briefs 135 Table A1.6.3 EAP Pacific Island Countries: Physical Geography and Population Settlement Patterns Area Urban Pop. Avg. HH (000 pop. Country (‘000s) size sq km) (%) Selected physical and spatial geography characteristics Fiji 843 4.8 18.0 52 320 islands (approx. 100 inhabited). Largest 2 islands comprise approx. 87% of land and 95% of pop. (Viti Levu, Vanua Levu). Kiribati 100* 6.3 0.8 44 32 widely scattered low coral atolls in 3 groups and 1 raised coral island. They stretch 4200 km east-west, 2000 km north-south. Approx. 48% of pop. resides on islets of S. Tarawa atoll. Republic 60 7.2 0.2 71 Two archipelagic island chains of 29 atolls; (22 inhabited) and of Marshall 5 raised coral islands (4 inhabited). Islands Fed. States of 111 6.7 0.7 23 607 islands varying from mountainous to low coral atolls; spread Micronesia over 2500 km east-west and 1000 km north-south. Palau 20 3.9 0.5 77 200+ islands; most very small (9 permanently inhabited). 95% of islands and 90% of pop. is within main reef containing Babeldaob, Koror, and Peleliu islands. Papua 6,599 5.5 453.0 13 600+ islands; 80% of pop. in eastern half of island of New New Guinea Guinea. Samoa 179 7.6 2.8 23 Two volcanic islands with rugged high mountains and narrow coastal plains: Savai’i (58% of land and 24% of pop.) and Upolu (38% land and 76% of pop.), plus 8 small islands. Solomon 510 6.3 29.0 18 Nearly 1,000 islands; mixed group of mountainous and coral Islands atolls (350 inhabited). Six main islands account for 80% of land area and bulk of pop. Timor-Leste 1,098 — 15.0 27 Located on southernmost edge of Indonesian archipelago. Country includes eastern half of Timor island, Oecussi enclave in northwest Indonesian West Timor, and islands of Atauro and Jaco. Tonga 103 5.8 0.8 25 Archipelago; 176 islands in 4 groups (Tongatapu, Ha’apai, Vava’u, Niua) (36 inhabited). Tuvalu 12 — 0.026 — Six atolls with large lagoons enclosed by a reef plus 3 raised coral islands without large lagoons. Funafuti has 22% of land and over 48% of pop. Vanuatu 233* 5.1 12.0 25 Over 80 mountainous islands of volcanic origin with narrow coastal plains; 90% of pop. on 4 islands. Total 9,868 — — — Source: World Bank 2008d; SPREP 2004. 136 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Figure A1.6.1 World Bank East Asia and the Pacific Region Member Island Countries Bonin Islands ) p. (Jap.) CHINA (Ja ds Daito- an u Isl Shoto Volcano N O R T H P A C I F I C O C E A N ky (Jap.) Islands Ry u (Jap.) Hawaii (U.S.) PALAU FEDERATED STATES Northern Mariana OF MICRONESIA MARSHALL Islands (U.S.) ISLANDS Guam (U.S.) PHILIPPINES MELEKEOK MAJURO TUVALU KIRIBATI PALIKIR TARAWA equator equator NAURU INDONESIA DILI PORT MORESBY FUNAFUTI Tokelau HONIARA (N.Z.) TIMOR-LESTE PAPUA NEW Wallis and APIA American Samoa GUINEA Futuna (Fr.) (U.S.) Cook Is. (N.Z.) PORT-VILA SUVA French SOLOMON NUKU'ALOFA Niue Polynesia (Fr.) ISLANDS New Caledonia (Fr.) (N.Z.) AUSTRALIA VANUATU FIJI TONGA SAMOA S O U T H P A C I F I C O C E A N IBRD 37748 APRIL 2010 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank NEW Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. ZEALAND Source: World Bank Design Unit. local markets typically are low in both supply and consumption in PIC electricity grid systems demand. accounts for 30 percent–40 percent of total petroleum imports (approximately 50 percent in Energy Sector: Extreme Vulnerability to Oil Supply the case of Kiribati and 25 percent in Solomon and Price Shocks Islands). Also signi�cant, in the vast majority of PICs are among the highest petroleum-dependent PICs, the electricity sectors are characterized by nations. Imported petroleum fuels account for an nearly 100 percent dependency on imported die- estimated 99 percent of commercial energy use sel for power generation. in the PICs, except for PNG and Fiji. In PNG and Fiji, petroleum fuels account for 60 percent Extreme vulnerability to oil supply and price shocks. and 20 percent of commercial energy use, respec- Petroleum dependency makes the Paci�c Islands tively (ADB 2009). The 99 percent petroleum highly vulnerable to oil price shocks—which dependency rate in the PICs (excluding PNG feed into the affordability of food imports, elec- and Fiji) is the highest in the world. Available sec- tricity, and transport. This issue was highlighted in toral consumption data for the PICs—transport 2008, when world crude oil prices peaked at over (land, maritime), utility generation, private sec- US$140 per barrel. However, it should be noted tor self-generation—are neither reliable nor up that many Paci�c Island countries effectively were to date.47 Indicatively, in most cases, diesel fuel enclave mine operations, resorts, and other enclave 47. In some countries, diesel fuel used for private sec- developments with self-generation. Such data are not tor generation can be signi�cant, such as that used by readily identi�able in available statistics. Appendix 1. Electricity Access: Selected Country Briefs 137 paying over US$100 per barrel well before then communicate in real time, and access basic infor- due to the high costs associated with transporting mation and other services to improve their lives and distributing fuel across the Paci�c and among is severely limited, if not totally denied. remote islands within each PIC. Many PICs Indeed, revealed preferences and health statis- remain exposed due to reliance on spot market tics point to the two most highly valued bene�ts purchases of petroleum products with no mitiga- derived from even basic electricity access. These tion measures such as petroleum supply contracts. bene�ts enable them to take control of their lives Those would limit the risks that PICs face from in a way that they are not free to do otherwise. rising oil prices and enable them to capture some These bene�ts are (1) communication—the abil- of the bene�ts from falling oil prices. ity to stay “connected� and in touch with people and events outside of their immediate proximate PICs pay among the highest retail energy product spatial location. Examples of such empower- prices in the world. Unleaded petrol and auto- ment are cell phones for voice communications motive diesel oil (ADO) typically are US$1.30– with family and friends, for business and of�cial $1.50 per liter (including taxes) in urban areas transactions, and for emergencies48; and radio but substantially higher elsewhere. The scattered broadcasts for information and entertainment. In island settlements on the outer islands or in addition, (2) at the mere flick of a switch, the remote small communities on the main islands ability to turn on a modern—safe and clean— commonly rely on kerosene for lighting. They light to read and study for school, extend evening pay extremely high retail prices at the end of the hours, enhance night-time security, and increase supply chain—approximately US$3.00 or more income-generation opportunities through both per liter although they generally are not taxed. more schooling and later work hours.49 Electricity Sector Context Electricity grid systems’ performance commonly Approximately 8 million people in EAP are in is plagued by high-cost generation fuel mix and the dark (0.9 million excluding PNG and Timor- operational ef�ciency limitations. Electricity grid Leste). Overall electricity grid access in the PICs is estimated at 59 percent (excluding PNG, in 48. There has been a rapid increase in mobile tele- which access is considerably lower). Table A1.6.2 phone use throughout the Region in the last four shows the wide variation in coverage levels years, since the introduction of reforms in the coun- achieved across the Region. Coverage ranges tries, which opened their telecoms markets to new private operators. Notably, these countries are Samoa from near universal access in the Polynesian island (2006), Papua New Guinea (2007), Tonga (2008), nations to under 20 percent for some (Solomon Vanuatu (2008), and Solomon Islands (2010). The Islands,Timor-Leste) to a low of less than 10 per- resulting competition has caused prices for mobile cent in PNG. telephones to fall dramatically. In areas without access to grid electricity, residents have to endure consider- Without a fresh start, prospects dim for near-term able inconvenience in time and costs each time that they get their phone batteries recharged. PIC residents change. Region-wide, approximately 80 percent typically pay from US$0.50 cents per recharge in ur- of the EAP population lives well outside the reach ban proximate zones to $1 per battery charge or even of existing main grid systems. Approximately 41 more in remote areas. percent of the people (excluding in PNG and 49. In particular, the “off-grid population� must make Timor-Leste) tend to be spread across remote do with grossly inferior alternatives to modern light- communities of the main islands and outer islands. ing powered by electricity: kerosene lamps, batteries, candles, and flashlights. These options both are costly The human costs of their extreme isolation— as a share of typical HH budgets and provide extremely from the world at large and within their own poor illumination. Kerosene lamps in particular pose a country or island—tend to be huge. The ability serious safety and health hazard, especially to woman to participate in the formal Regional economy, and children. 138 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC systems in the PICs are operated most com- skewed by diesel fuel as well as operational ef�- monly by government-owned, vertically inte- ciency standards generally well below ef�cient grated utilities.50 These systems typically serve the practice, most Paci�c Island grid system utilities larger concentrations of the population in the are characterized by a high cost structure. It is urban areas of the major towns and the imme- not uncommon to �nd network losses in the diate environs as well as the settlements along 30 percent range. Retail tariffs in the PICs typi- the higher density coastal belt areas found in cally range between US$0.35/kWh–$0.75/kWh. some islands. Due to the archipelagic nature of Fiji Electricity Authority’s (FEA) average tariff, the island nations, a large number of such inde- approximately $0.17/kWh, is the lowest due to a pendent grid systems are operating. They range nearly 60 percent share of generation from hydro in size from tiny (“microgrid�) systems, with and operational ef�ciency standards that de�ne installed capacity on the order of magnitude of Regional best practice. With the exception of 0.1 MW and typically serving approximately Unelco, the private sector utility in Vanuatu, and 500 customers or fewer to 3 relatively “large� the public utility, FEA, the utility tariff formulae systems. These have generating capacity of 100 applied generally do not recover capital costs. MW–150 MW that serves in excess of 125,000 Cost recovery would necessitate raising tariffs customers each.51 Most grid systems are in the even higher, when most domestic and small busi- middle range. Each of 40 such grid systems serves ness customer consumption already is severely peak demands in the range 1 MW–15 MW. limited due to the lack of affordability of electric- Combined, these mid-size grid systems account ity bills in relation to HH budgets. for an installed generating capacity of 400MW– For most PIC utilities, the dream of achiev- 500 MW, almost all diesel based. They serve a ing �nancial sustainability is oriented at best combined maximum demand of 250 MW–300 toward an initial big step of achieving recurrent MW. Together, the 3 large systems and the cost recovery via retail tariffs. The ability to do so nearly 40 mid-size range grid systems among means that utilities need to begin with a proper others account for almost the entire 59 percent least-cost plan and large-scale investment in die- coverage statistic reported in table A1.6.2. sel fuel substitution. This substitution should go from grid-connected, cost-effective renew- Financial sustainability a constant challenge for able energy options—hydro, geothermal, and most. Due to a generation fuel mix heavily solar PV—and investment to lower network losses and the speci�c fuel consumption of existing die- 50. An exception is the private utility, UNELCO, in sel stations. However, donors generally have not Vanuatu. In Tonga, the private utility, Shoreline, was sold back to the state in 2008. The 100% state-owned supported efforts to maintain infrastructure as an successor, Tonga Power Ltd (TPL) has a regulatory economic and productive asset. Furthermore, the contract that speci�es a 12.9% return on regulated as- practice has been that, rather than being system- sets and, in principle, should be able to cover capital atically planned and implemented at the opti- costs. In Fiji, a 9 MW biomass-based IPP sells to FEA mal times, new investment is rare. Customarily, and plans call for more IPP development. In PNG, planning is not the driver of new generation entities other than PPL increasingly are generating power. Such entities include provincial-government- and network investment timing and of the type operated small grid systems and mining enclave op- and speci�cations. Rather, investment tends to erations and church organizations that supply and dis- be wholly grant �nanced and off balance sheet. tribute power to adjacent communities. Moreover, its timing usually depends on the 51. Fiji Electricity Authority (FEA)-operated grid whims of donors, most crucially, when an inter- systems on the main island of Viti Levu have installed ested donor may step forward to invest to keep generation capacity of 185 MW. PNG Power, Ltd (PPL) Port Moresby grid system has an installed ca- the lights on. These actions typically occur in pacity of approximately 140MW, and the Ramu grid response to a looming crisis, with the donor system has 200MW of installed capacity. specifying the choice and type of equipment. Appendix 1. Electricity Access: Selected Country Briefs 139 Renewable energy: Weak record due to misdirected Energy Sector: Main Policy Challenges efforts. Starting in the early 1990s, donors directed Managing energy security risks: Continuing key substantial interest and support to increasing the role of hydrocarbons. The petroleum supply chains use of renewable energy technology in the energy to the Paci�c Islands are long, narrow, and vul- supply mix, almost as an end in itself. This inter- nerable to disruption. Increasing the share of est shows prominently in the form of numerous renewable energy will reduce the extent of oil studies and project activities in the Region.52 In dependence and the risk of supply disruptions the absence of national or utility strategic plan- as well as reduce the economic vulnerability of ning to indicate priorities, donor �nancing has these countries to oil price shocks. However, for been largely misdirected, driven by funds ear- the foreseeable future, imported petroleum fuels marked for priorities developed at a global scale will continue to play a major role in energy sup- rather than for PIC-speci�c priorities. A dispro- ply and demand, and not only in the transport portionate amount of funding has been directed sector. To reduce the growth of demand for to off-grid renewable energy technologies for imported fuel and to reduce costs and cost vola- access and otherwise driven by climate change, tility, improvements in the petroleum supply which is a developed country agenda. chain and in price risk management, as well as National energy infrastructure investments improved customer ef�ciency, must be priorities. and related support for the main grid systems These improvements will require signi�cant largely have been neglected. Furthermore, even investment in new assets in the petroleum supply in off-grid areas to which investment has been chain and in the electricity-generation sector. Just delivered, the results and performance do not as urgently, improvements, including investment, measure up. For example, in most countries, solar are needed in safety and emergency response sys- home systems (40Wp–100Wp range) have yet to tems and readiness. However, most Paci�c Island achieve measurably signi�cant penetration areas.53 governments are suffering severe budget pressures Furthermore, instances of renewable-energy- from shrinking income sources, and rising costs, based micro/small grids that have been running one of which is for oil.Tight budgets restrict pos- with a track record of good performance and sibilities for investment in initiatives for oil sub- maintainability as well as cost competitiveness stitution or ef�ciency improvements. Meanwhile, are hard to �nd. Donors generally have focused as noted above, development partners have tended more on demonstration and testing, and less on to direct their support to off-grid activities. achieving ef�cient costs, reliable performance, and scalability. Addressing climate change: Putting people �rst. The global nature of greenhouse gas (GHG) emis- sions puts pressures on all nations to reduce their carbon footprints and at times introduces condi- 52. A notable exception is Fiji, which has aggressively tions for access to external funding sources that developed hydropower resources; has a power purchase have more to do with global trends than national agreement with a biomass-based IPP; and has an active priorities. Nevertheless, even if access to fossil program to further promote expand cost-competitive, renewable-based generation supply. Vanuatu’s promo- energy increased signi�cantly across the Paci�c tion of coconut oil so far has been uneconomical. Islands, their emissions would add negligibly to 53. One notable exception is Kiribati’s outer islands global GHGs. The challenge is to formulate and electri�cation program. It has been operated for implement a balanced set of energy policies and several years by a government-owned entity, Kiribati initiatives. These can be identi�ed through a cred- Solar Electricity Corporation (KESC). With grant �- ible least-cost planning process that highlights the nancing of its capital costs by the European Union, KESC operates a fee-for-service-based SHS program expanding role of low-carbon energy forms while on the outer islands for homes, community halls, and recognizing that petroleum will continue to play a key institutions. key role in meeting PIC energy needs. 140 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC The Regional energy agenda is framed appro- common thread weaving throughout the energy priately as one to improve energy security rather sector challenge and those related to addressing than to promote renewable energy. The latter energy access is the PICs’ extreme vulnerability agenda is driven by global climate change con- to high oil dependency, high import costs, and cerns. Development of the renewable energy supply and price shocks. Accordingly, the frame- supply is an important part of the diversi�cation work formulated a clear and concise vision of an strategy to improve energy security. Speci�cally, “energy-secure Paci�c�: increasing the share of renewable energy—on- and off-grid—should not be seen as an end in “Energy security exists when all people at all itself nor even as the sole effective route to reduce times have access to suf�cient sustainable sources GHG emissions. Rather, increasing the renew- of clean and affordable energy and services to able energy share is one among several means enhance their social and economic well being.� to be deployed and assessed within a balanced, —Framework for Action on Energy Security bigger-picture approach to energy issues. The in the Paci�c, 2010 ends sought are to ensure secure, affordable, widely accessible, high-quality energy services to Bringing it all together: “Whole-of-sector� the people of the Paci�c. framework and principle of “many partners, one team, one plan.� Besides clearly articulating Strategic Directions: New Horizons the problem de�nition and development out- and Opportunities come sought for the energy sector, the forum This section draws attention to relevant strategic leadership rightly signaled the imperative to break and policy directions to address the interlocked set from the past. This shift can be characterized as of challenges to secure and affordable energy access a move away from a fragmented “project-by- for the citizens of the Paci�c Island Countries.The project and donor-by donor approach� toward a key messages that follow are intended to inform programmatic approach.The latter will be embed- the approach, scope, and depth of country-speci�c ded in a sector-wide framework and process that strategies and policies; and the staging of actions is country owned and country driven with joint and speci�c investments tailored to the PICs’ accountability for results that are aligned with respective national priorities and sectoral contexts. national priorities. A notable and example-setting application of the whole-of-sector approach and 20-20 vision of the problem de�nition: “An organizing principles is the recently completed Energy-Secure Paci�c.� Paci�c Island nations Tonga Roadmap (box A1.6.1). face a tangled web of challenges and constraints to the formulation of a coherent set of national Grid Electricity Systems: Time for Strategic and regional energy policies and actions coor- Investment in Renewable Energy dinated across key sectors and stakeholders. The Substituting diesel fuel in grid-based electricity 2010 endorsement of the “Framework for Action generation arguably would be the most effective on Energy Security in the Paci�c� was a signif- way to reduce the sector’s petroleum dependency. icant milestone and a big �rst step in the right Substitution could be achieved through improving direction.54 This framework recognized that the energy ef�ciency and cost-competitive and proven 54. “Toward an Energy-Secure Paci�c: A Framework for Action on Energy Security in the Paci�c (2010– units at other organizations; bilateral and multilateral 2020)� (SPC 2010). This framework is the outcome development organizations; and development partners of an extensive and widely cast consultative process from Australia, China, Italy, Japan, and New Zealand, coordinated by the Secretariat of the Paci�c Com- among others. On June 30, 2010, a special forum of munity (SPC) (2010). Extensive consultations took energy ministers was convened in Brisbane as part of place with the PICs; regional power utilities; private the lead-up to the Forum Leadership summit held sector; nonstate actors; major regional development August 5, 2010 in Port Vial,Vanuatu. Appendix 1. Electricity Access: Selected Country Briefs 141 Box A1.6.1 Tonga Energy Roadmap: Many Partners, One Team, One Plan “Energy is a fundamental building block for the Kingdom in its social and economic develop- ment and in enhancing the livelihood and well-being of all Tongans. It affects all businesses and every household.Accessible, affordable and sustainable electricity that is environmentally respon- sible and commercially viable is a high priority. My government recognized the importance of having dependable, accessible and reasonably priced power as a key catalyst for sustainable eco- nomic growth. Achievement of these goals is crucial to achieve the government’s primary target of ‘poverty alleviation’ including 100 percent accessibility to electricity.� —Hon. Dr. Fred Vaka’uta Sevele, Prime Minister of Tonga, April, 2010 The “Tonga Energy Roadmap� (TERM) effort was led by the government of Tonga (GOT) in coordination with the World Bank. The effort convened development partners and embarked on a sector-wide review to improve the performance of the energy sector and to mitigate the risks. In so doing, TERM recalled and rede�ned a sector-wide framework and process that colloquially has become known as a “whole-of-sector� approach to energy planning and investment. Development of TERM involved unprecedented information sharing by government ministries and Tonga Power Ltd (TPL). The process set a new standard in the Paci�c for government leadership and coordinated development partner support. Over the past year, the process has bene�ted from the active participation of more than 15 development partners, including multi- and bilateral agencies and regional organizations responsible for energy in the Paci�c. TERM is important not only for its expected impact on the Tongan energy sector. Other PIC energy sector discussions already are citing the roadmap as exemplary and citing the government’s leadership and development partners’ coordination of sector-wide planning applicable to infrastructure more broadly. The roadmap covers 1 decade starting in 2010. It addresses improvements in the petroleum supply chain and considers price-hedging instruments. These comprise reducing cost and volatility in the price of petroleum imports and delinking electricity production from petroleum to the extent fea- sible. TERM also focuses on (1) increased ef�ciency in electricity supply and use, (2) development of grid-connected domestic renewable energy resources, (3) improved access to quality electricity services in remote areas, (4) reduced environmental impacts both locally and globally, (5) enhanced energy security, and (6) overall sector �nancial viability. TERM’s scope also includes policy, legal, regulatory, and institutional aspects of the sector as well as investment. It is envisioned that TERM will be updated periodically to take into account technologies, costs, demand for electricity, and sources of �nancing as they evolve. GOT formally adopted TERM in August 2010. The World Bank is providing GOT ongoing sup- port to implement TERM via the Tonga Energy Roadmap Project, which is under preparation, The project will reinforce the focus on, and provide the support to achieve, the medium-term energy sec- tor outcomes highlighted for this proposed operation. Other development partners also are working with GOT to prepare support aligned with speci�c aspects of TERM implementation. renewable energy-generating options: hydro and contexts all over the world. Examples include geothermal power generation. Diesel substitution remote operations on several Caribbean basin would be followed by ef�ciency improvements island utilities, Reunion Island in the Indian on the utility and customer sides.55 Moreover, Ocean, and, more recently, in EAP.56 Present-day grid-connected large-scale solar PV generation good-practice technical designs and component increasingly is being deployed effectively in island 56. New Caledonia: 2.1 MW grid-connected central 55. Estimated by the scale of ef�ciency improvements power station, operational since April 2010; Tuvalu: relative to the timeframe per unit of investment. 40 kW solar PV power station. 142 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC speci�cations for key equipment components, their governments, while over time giving some such as inverters, can effectively address perfor- relief on electricity tariff levels. mance and maintenance issues in the earlier gen- eration installations, even in remote settings. Grid Systems Target Two-Part Renewable Nevertheless, until recently, the deployment of Energy Goal such designs in the PICs’ grid systems usually was Diesel conversion/substitution program: 20 per- absent. cent–25 percent substitution of diesel generation. For many PICs, hydro, geothermal, and solar- As discussed above, the EAP Region hosts 42 PV-grid-connected generation—grid systems— grid systems: approximately 40 mid-size grid sys- represent the largest scale, fastest, and most tems and 1 large system each on Fiji’s main island cost-effective interventions for increasing access (FEA) and Port Moresby. Combined, these mid- to electricity. More speci�cally, in the Paci�c size and large grid systems account for a peak Island context, electricity generated from utility- load of approximately 450MW and installed gen- scale, grid-connected solar power stations already eration capacity of 700 MW58 (of which at least is competitive with today’s oil prices. On both 600MW is diesel based). As a reference point, a a total-cost basis (26USc/kWh–28c/kWh versus �rst-stage programmatic goal of substituting at 30c/kWh–35c/kWh), and a variable-cost-only least 20 percent of today’s diesel generation share basis, solar PV generation is far more cost-effective over a 10-year horizon through cost-competitive than diesel (1c/kWh–1.5c/kWh versus 25c/kWh– renewable energy59 is realistic.60 30c/kWh). Looking ahead, unit costs of mod- ule production are expected to decline further A separate goal of 50MW of grid-connected capac- along the “technology learning cost curve� in ity from renewable and other sources including response to the rapid global increases in the solar PV wind, and biomass is an indicative target , annual capacity of installations of solar PV mod- to be phased in over the medium to long term.61 ule capacity.57 As this decline continues, the cost Early-stage systems would be designed simply advantage in favor of solar PV generation will to supply energy as available. Over time, these continue to increase. However, it needs to be systems increasingly would use battery storage kept in mind that the amount of solar PV power systems to an extent for �rm power availability that can be added and its impact on total cost is limited by its intermittent nature without the 58. Additionally, PNG has captive power genera- means for storage. tion, mainly for the mining industry, of approximately 300MW. After hydro and geothermal, grid-connected 59. Where available, hydro or geothermal energy; oth- solar PV generation is the most versatile and erwise, primarily solar PV and, in some instances, bio- dependable among the intermittent supply options mass or wind energy. available and deployable across the Paci�c Islands. 60. Outside of PNG, electricity demand growth is Over time, PIC utilities can signi�cantly reduce projected to be low in the short to medium term. As electricity generation costs and improve �nan- a consequence, for most PIC grid systems, the renew- able energy generation investments will be driven by cial performance. These results can be achieved a “conversion/diesel substitution� program. The pro- through a well-staged and systematic implemen- gram’s objectives will be to (a) lower the costs of elec- tation plan that duly considers ef�ciency improve- tricity generation and tariff relief for electricity users, ments on both the supply and customer sides. In and (b) diversify fuel to enhance energy security via this way, the utilities can lower subsidy burdens on reduced supply risk. 61. Fiji already has established a diversi�ed genera- tion mix and has additional plans to diversify. PNG’s 57. Grid-connected solar PV has grown by an average considerable hydro and other resources tend to be the of 60% every year of the past decade, increasing 100- dominant prospects. The Solomon Islands have good fold since 2000 (Ren21 2010). hydro prospects. Appendix 1. Electricity Access: Selected Country Briefs 143 during periods of peak demand (“peak shaving�). implementing network loss reduction programs Along the way, PIC utilities will gain operating (many PICs have system losses in the high 20 experience in integrating intermittent systems— percent–low 30 percent range62), reducing speci�c with and without some storage (see below)—and fuel consumption (SFC) of diesel power stations, in building institutional capacity. These develop- improving billing and revenue management prac- ments will set the foundations for those interested tices and systems, and sound advance planning. in deploying even “deeper penetration� of grid- These interventions will need ongoing invest- connected solar PV capacity that uses sophisti- ment. Also crucial will be dependable and relevant cated control systems hardware and software to TA as well as strengthened institutional capacity manage the network operating system. to diagnose and scope, design, and manage ongo- In this future context, a relevant development ing speci�c operations improvement programs. In is that battery storage technologies are making this context, the Fiji Electricity Authority (FEA) it increasingly feasible and attractive to use solar is considered the Region’s best-practice utility PV power as a dispatchable resource for peak (box A1.6.3). shaving. A case in point is sodium sulfur (NaS) battery technology, which has been proven over Using Simple Power Solutions to Change Lives 2 decades in utility-scale applications. This tech- of Poor and Remote Dense Populations: nology was applied in the Tokyo Electric Power Thinking and Acting Differently Company grid system (200MW of NAS bat- Approximately 8 million people in the PICs live in teries); in northern Japan (51MW hydro sta- off-grid areas (6.6m in PNG, 0.9m in Timor Leste, tion coupled with 34MW NAS battery system); and approximately 0.5m in the other PICs). Most and more recently in Texas (4MW battery). In of these people are unlikely to receive grid service addition, use of the NAS batteries in a remote in the foreseeable future.63 Conventional solar island context is undergoing ongoing testing and home systems (SHS) (that power 2–3 lights and a measuring over 2010–12 in Reunion Island in black and white TV) are not affordable for most the Indian Ocean. However, the investment and poor HH. Typically, these systems cost at least operating costs likely will remain a major con- US$400–1,000+ (2–5 times the per capita income straint in the near future versus deployment in of most PICs) coupled with US$10–$15 monthly the PICs (box A1.6.2). service fees for the huge costs of supporting What is most important are to (1) get sup- extended and specialized service and maintenance porting �nancing and TA mechanisms in place to chains. Furthermore, with the exception of Kiri- enable a Region-wide push, and (2) organize and bati (mentioned earlier), SHS have not achieved implement a systematic programmatic framework. signi�cant market penetration. Once the program is underway, timeframes can be better calibrated as they are informed by evolving A recent generation of pico (“very small�) solar implementation and operation experience. The charger consumer products is available for the �rst-phase buildup of grid-connected renewable most essential life-giving elements that have been energy generation investments also will help set the denied to remote and poor populations. These stage for longer term, least-cost expansion plans. 62. Systematically collected and up-to-date reporting Operational Efficiency Improvements: of data is vital to inform the diagnostics for each grid Capacity Building and Upstream Technical system because key performance indicators—techni- Assistance for the Grid System cal, commercial, and customer service—are not yet readily available. For many PIC utilities, a top priority is �rst to 63. In the long run, it is projected that approximately get their own houses operationally in order. 2.2 million of the 8 million are likely to be served by Among the highest priority interventions are grid systems in PNG and Timor Leste. 144 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box A1.6.2 Advanced Battery Storage Technologies Enhance Integration Potential of Intermittent Renewable Energy Generation into Grid Solar, and more so, wind energy generation are inherently intermittent. This reality limits the typical extent to which such generation can be absorbed by island-scale grid systems to under 15 percent–20 percent. This limitation is determined by several operational considerations. These derive from the technical imperative that requires that supply and demand in a grid system be matched instanta- neously and ongoing. Speci�cally, in the absence of storage, intermittent generation reduces power quality (harmonics and voltage fluctuations) while it increases the need for balancing in real time. This balance is achieved by increasing the reserve �rm capacity on line to maintain the grid sys- tem frequency to rated 50Hz. However, when coupled with proper storage, otherwise intermittent renewable energy from grid-connected solar PV power stations and wind can be stabilized as well as counted on as a �rm dispatchable resource to balance system demand and supply at each instant. NaS Battery Storage System Over the years, many battery technologies have been proposed and developed for electrical energy storage applications. Nonetheless, only a handful have been used in �eld systems and proven on a util- ity scale. A promising case in point is the sodium-sulfur (NaS) battery storage system. NaS batteries have a relatively small footprint (high energy density); high discharge ef�ciency (89 percent–92 per- cent) if used regularly; integral thermal management; and low maintenance requirements. NaS batter- ies also offer cycling flexibility and long cycle life, and are fabricated from inexpensive materials. Box figure A1.6.2.1 Use of NaS batteries for peak shaving Source: http://www.jase-w.eccj.or.jp/technologies/pdf/electricity/E-18.pdf Currently, NaS battery costs are approximately US$2,500 per kilowatt—approximately 10 percent more than the cost per kW of a new coal-�red plant. Mass production is expected to drive down NaS battery prices. Reunion Island Grid System Installation of a 1MW NaS Battery Since 2009, an NaS battery system has been piloted in France’s Reunion Island in the Indian Ocean to provide �rm peak shaving power on the island grid system. The installation is integral to a grid- connected solar PV power station, and is rated for 7 hours of �rm power per day and for 2,500 cycles over its lifetime. The battery supplier guarantees a 15-year life and performance, and provides turn-key scheduled maintenance per design and performance speci�cation. The NaS battery system requires scheduled maintenance every 3 years, and the entire battery module to be replaced every 15 years, with recycling included. Sources: http://www.ngk.co.jp/english/products/power/nas/index.html; Electrochemical Society Interface 2010; Drouineau and others 2010. Appendix 1. Electricity Access: Selected Country Briefs 145 Box A1.6.3 Fiji Electricity Authority: Good-Practice Neighbor Offering a Helping Hand The Fiji Electricity Authority’s (FEA) record of accomplishments and performance is exemplary. FEA’s record not only stands out in the context of Paci�c Islands national utilities but also places it among the best of island nation utilities globally. Beginning in 1966, FEA had a generating capacity of 3,394 kilowatts and only 2000 customers. The utility has grown steadily and now provides electricity supply via several grid systems to approxi- mately 150,000 customers in the 3 main islands of Viti Levu, Vanua Levu, and Ovalau (81 percent coverage overall). Today, the installed generating capacity stands at 205MW, comprising a combina- tion of hydro, a wind farm, and several diesel power stations (100MW). An independent power pro- ducer (IPP) supplies electricity to FEA via biomass generation. Noteworthy examples that serve to highlight FEA’s impressive and sustained ef�ciency gains and serve as reference benchmark beacons for PIC utilities follow. System Losses at Best-Practice Levels Box figure A1.6.3.1 FEA staff explain features The moving average system loss—network losses and of new electricity connection to customers auxiliary station usage—for the last 5 years ranges from 8.70 percent to 10.23 percent. These numbers compare favorably with the international benchmark of approxi- mately 10.00 percent. Diesel Station Fuel Performance FEA operates 9 thermal power stations with an installed capacity of 110 MW. The average speci�c fuel consump- tion (SFC) across all these diesel stations is 0.2419L/kWh with the station usage at 1.84 percent of total generation. This good-practice performance is underpinned by Photograph: Fiji Electricity Authority. effective work practices and discipline. These include regularly scheduled maintenance on all fuel injection systems, tuning fuel pump timing, ensuring loadings of the generator sets for optimum fuel ef�ciency, and attending to fuel supply quality management. FEA recently signed a Fuel Purchase Agreement with an international supplier. This agreement includes a value-added initiative undertaken by the supplier: implementation of improvements in fuel consumption of the diesel generation sets. This initiative will lead to a minimum additional 1 percent fuel ef�ciency and savings. Throughout the 1990s through 2008, FEA’s average tariff level stayed nearly flat in nominal terms at approximately 21FJc/kWh–22 FJc/kWh. In 2009 the tariff rose to 25.5FJc/kWh (still well below inflation). In June 2010, the Commerce Commission approved a price increase that raised the aver- age to 32.3 FJc/KWh. In comparison, tariffs in Australia and New Zealand are 42.4FJc/kWh and 47.5FJc/kWh, respectively. Apart from Fiji and Palau, tariffs for all other PICs range from 60FJc/ kWh (PNG) to 147FJc/kWh (Solomon Islands) (box �gure A1.6.3.2). This tariff story is a proxy bottom-line testament to FEA’s management- and results-driven culture. This culture is driven by technical excellence, professionalism, and accountability instilled throughout the organization; orchestrating a sustained and impressive record of cost containment and productiv- ity gains, while continuously expanding and improving service and maintaining �nancial soundness. (continued) 146 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Box A1.6.3 Fiji Electricity Authority: Good-Practice Neighbor Offering a Helping Hand (continued) Box figure A1.6.3.2 Electricity tariffs among lowest in Pacific, including Australia and New Zealand 160 147.8 140 120 Fiji cents/kWh 100 93 6 93.6 W 89.4 83.8 80 67.2 69.1 61.8 60.7 60.1 58.8 F 60 47.5 43.1 42.4 40 32 3 32.3 20 0 ds oa ue lia oa i a ds lu d a ji u G at ni ng Fi an la va PN an ra an m m Ni rib do Pa al To st Tu Sa Sa Isl Isl Ki Ze le Au on n ok Ca ica w m Co Ne w er lo Ne Am So Source: FEA Statistics 2010. Training Institute in Lautoka FEA also operates a well-run facility for training front-line technical personnel in Lautoka. In sum, FEA is a proven Regional resource that PIC utilities can readily tap for knowledge, TA, and upstream diagnostics under arrangements such as twinning with, and secondment to, FEA. FEA experts also can visit utilities that require assistance at the front end of their process to advise and scope. Source: FEA statistics and discussions with FEA management team 2010. devices are powered by a small solar PV panel. for long-life performance to withstand high heat They contain a built-in battery that can store suf- and humidity and rough use. These solar chargers �cient electrical energy to charge cell phones and do not need special-purpose and high-cost supply small radio batteries, and power a light-emitting and after-sales maintenance chains, as do SHS.64 diode (LED) light. Pico chargers’ small size and Instead, these products are characterized by cash- portability have been made possible by the devel- and-carry, plug-and-play features. Hence, they are opment of LED bulbs, which are 30 percent–50 readily piggy-backed on established retail trade percent more ef�cient than even high-ef�ciency supply chains and other existing networks, such compact fluorescent lamps (CFLs). Conveniently as those of rural NGOs, church organizations, and as well, LEDs use DC power, which is the output cell phone service operators, that extend out to of a solar panel. In contrast, CFLs use AC power, Regional and localized markets commonly found which requires an additional inverter component, in the PICs. These small solar-powered devices thereby adding to CFLs’ cost and complexity. 64. These “plug-and-play� devices can be replaced at Rapid Scale-up Potential with Genuine Global relatively low cost. In comparison, for people in re- Reach. The better performers among these solar mote rural areas, SHS require constant and ongoing chargers are user friendly and have robust circuitry maintenance by the users and servicing chains. Appendix 1. Electricity Access: Selected Country Briefs 147 offer the real prospect for rapid market penetra- effective working partnerships across key tion within a decade (box 3.5). Regional institutions • Leveraging resources from development Right push needed at this early “starter-market� partners, and possibly from “special global phase. In the formative stages, government’s roles funds,� for jointly agreed Regional and include enabling market development by help- national investment and TA plans aligned ing promote product awareness, providing reli- with Regional and national priorities. able information on product(s) quality and price, providing incentives to improve product quality, A noteworthy initial step away from the and enabling wholesale trade �nance. Also vital at donor-by-donor and fragmented approach was this early stage is a modest capital subsidy. established with the formation in 2008 of the Paci�c Region Infrastructure Facility. PRIF Case for price subsidies in starter-market develop- is under the joint leadership of Australia, New ment phase. Speci�cally, under today’s conditions, Zealand, the Asian Development Bank, and the to achieve retail prices for pico solar devices that World Bank. The facility emphasizes better link- range between US$10–$25 depending on the ing of investments to longer term reforms in the features, price subsidies are required.65 Such subsi- way that Paci�c Island countries plan, manage, dies can range from 35 percent to 60 percent (for and �nance their infrastructure needs. In addi- high-end phone chargers), equivalent to subsidies tion, PRIF provides an effective mechanism to of $20–$35, respectively. Eventually, it is expected marshal coordinated donor support for invest- that today’s better performing devices will rapidly ments in economic infrastructure and to address achieve high market scale at prices affordable to the problem of funding for infrastructure asset the majority of bene�ciaries. maintenance.66 PRIF has a way to go to achieve the goals of harmonization, alignment, and coor- Delivering better value for money: Partnerships dination across a wider set of donors. However, and funding mechanisms that align with national formation of this facility does mark a promising and Regional priorities. Above all, PICs need signi�cant step in the right direction. �nancial assistance to formulate realistic plans to expand grid-renewable energy and improve Enhanced expectations for key Regional insti- operations. Funding should align with national tutions: The “many partners, one team, one and Regional priorities and avoid being tied to plan� approach. Finally, progress in implement- speci�c technologies. Past funding decisions too ing the framework for an energy-secure Paci�c often were driven by donor priorities or global will require harnessing and exploiting to the agendas. These priorities and PICs’ needs fre- fullest the synergies arising from the respective quently are not the same. Successful implementation of the strategy and wide-ranging actions underpinning the vision of 66. The following are examples of ongoing PRIF efforts, especially those involving Australia and an energy-secure Paci�c hinges on: World Bank, that capture the reasons underlying sev- eral of the strategic directions outlined in the preceding • The degree of success achieved by PIC section.They are (a) Tonga: Energy Roadmap (support governments in fostering and leading for some elements of the preparation); (b) Kiribati: Grid-connected solar PV power generation—central 65. PIC governments and donors have been subsidiz- station and distributed—for diesel fuel substitution of ing new connections for grid and off-grid bene�cia- the S. Tarawa grid system (investment, TA, and project ries all along. These capital investment subsidies argu- preparation); and (c) Vanuatu: (1) Efate Geothermal ably exceed $1,000 per grid connection and at least Power and Island Ring Grid Development Program $500 per off-grid SHS connection plus subsidies for and Framework (pre-feasibility study) and (2) Hydro- overhead costs of the SHS program. carbon Supply Chain Management Ef�ciency Study. 148 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC mandates and comparative strengths of the key interested partners. The purpose of the part- relevant regional institutions and organizations. nership would be to monitor and assess in real An example would be a grid-connected time the on-the-ground experience with grid- renewable energy program mounted along the connected renewable energy in the PICs (as lines outlined above. There is a clear, urgent well as in relevant countries outside the Paci�c). need for a collaborative and coordinated pro- This partnership could feed back pertinent les- gram going forward. This program could involve sons learned to countries that are trying to a joint working partnership of the Secretariat increase grid-connected renewable energy and of the Paci�c Community (SPC), Paci�c Power strengthen their capacities to chart their courses Association (PPA), World Bank, and other in that direction. Appendix 1. Electricity Access: Selected Country Briefs 149 A1.7 VIETNAM The rural electri�cation effort in Vietnam has increased from 1.2 million in 1976 to approxi- been a remarkable achievement.The share of HH mately 82.0 million in 2009. with electricity access grew from 2.5 percent in Along the way, the government addressed a 1975 to 96 percent by 2009 (World Bank 2011b). wide array of challenges. For example, it success- Through an unparalleled effort, the country pro- fully balanced the sometimes-competing interests vided access to more than 80 million people over of local, provincial, and central governments; gov- 33 years. Vietnamese with access to electricity ernment programs; and, in later years, support from Population (2008) (mil) 86.2 Rural population (% total population, 2008) 72 Population density (people/sq km) 278 Land area (sq km) 310,070 GNI per capita (Atlas Method: Current US$, 2008) 890 Access to modern cooking fuels 34 Urban (% HH, 2008) 76 Rural (% HH, 2008) 20 Electricity access, national (% HH, 2009) 96 Urban (% HH, 2008) 99 Rural (% HH, 2008) 94 No. of people w/o access to electricity (2009) (mil) 4–5 Population served by off-grid sources (minigrids and 1 HH systems) (%) Electricity access target and year (% HH) 100; 2020 Electric power consumption (kWh per capita, 2007) 728 Installed capacity (MW 2008) 13,850 Thermal 8,350 Hydro 5,500 Other renewable — Electricity net generation (bil kWh) 69,965 Distribution losses (% net generation) 10.5 CO2 emissions (M/T per capita, 2007) 1.3 Indicative residential electricity tariffs for rural USc3.1/kWh; EVN customers, first 50 kwh @600 consumers (2011) VND/kwh (Source: EVN) Key institutions for electricity sector Electricity of Vietnam (EVN) Electricity Regulatory Authority of Vietnam (ERAV) Ministry of Industry Distribution Power Corporations (PCs) Sources: World Bank 2010e; www.eia.doe.gov; IEA 2010; WHO and UNDP 2009. 150 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC IBRD 38387 This map was produced by 102°E To 104°E To To 106°E 108°E 110°E the Map Design Unit of The Kunming Babao World Bank. The boundaries, Kaiyuan To colors, denominations and any other information shown Tiandong CHINA on this map do not imply, on the part of The World Bank Ha Giang Cao Bang Group, any judgment on the To legal status of any territory, Lao Cai Nanning or any endorsement or Lai Chau Town acceptance of such Bac Can To Tuyen Hepu 22°N boundaries. Quang Lang Thai Son Yen Bai Nguyen Son La Viet Tri Vinh Yen Bac Giang Dien Bien Phu Bac Ninh To HANOI Hai Duong Ha Long Muang Xai Hoa Binh Hung Yen Hai Phong Ha Nam LAO Ninh Binh Thai Binh Nam Dinh To 20°N PEOPLE'S Luang Thanh Hoa 20°N Prabang DEM. REP. G ulf of Hainan I. A (China) Vinh Tonkin n Ha Tinh n 18°N a 18°N To VIETNAM m Khammouan Dong Hoi C o To r Dong Ha d Savannakhet THAILAND il Hue le 16°N Da Nang 16°N r a Tam Ky VIETNAM Quang Ngai Ngoc Linh (3143 m) Kon Tum 14°N Ce n tr a l 14°N Pleiku Quy Nhon H ig h la n d s Tuy Hoa CAMBODIA Buon Ma Thuot Nha Trang To Gia Nghia Kampong Cham Da Lat 12°N To Dong Kampong Xoai G ulf Chhnang Tay Ninh Phan Rang- Thap Cham of Thu Dau Mot Bien Hoa Phan Thiet Vietnam has a diverse topography with steep Tha ila nd Ho Chi Minh City Cao Lanh Tan An Long Xuyen My Tho Vung Tau mountains in the north and flat coastal lowlands in Rach Gia Vinh Long Can Tho Ben Tre 10°N the south. The rural areas are densely populated. The PROVINCE CAPITALS Vi Thanh Tra Vinh Soc Trang poorest communities are found in the more remote NATIONAL CAPITAL Ca Mau Bac Lieu 0 200 Kilometers areas of the central highlands and northern mountains, MAIN ROADS INTERNATIONAL in which 75 percent of the country’s ethnic minority BOUNDARIES 104°E 106°E 0 108°E 150 Miles populations reside. FEBRUARY 2011 Table A1.7.1 Vietnam: Scenario Analysis for Universal Electricity Access by 2030 Total investment needs Incremental needs for universal access (US$ mil) (US$ mil) Business-as-Usual Universal Access Urban Rural Off- Period scenario scenario Total grid grid grid 2011–20 1,459 1,459 — — — — 2021–30 1,064 1,064 — — — — 2011–30 2,522 2,522 — — — — Annual requirements: — — — — Note: No. of HH without electricity in Business-as-Usual scenario by 2030: <1%. development partners, to create an institutional daunting. At the outset, the country did not have structure for rural electricity supply that bodes well one uni�ed master plan. The government con- for long-term sustainable development. tinually evolved in the ways that it tackled the Over time, Vietnam’s rural electri�cation challenges, which themselves were shifting. The (RE) program and its priorities have evolved. challenge of the early stages—to provide sim- The issues encountered during the RE effort ple connections—evolved into one of securing were constantly changing and the challenges quantity and quality of supply combined with Appendix 1. Electricity Access: Selected Country Briefs 151 meeting ever burgeoning urban and rural energy developments during this period were the estab- demand. lishment of Vietnam Electricity (EVN) in 1995 and the clear nationwide electri�cation targets set Progress of Rural Electrification in Vietnam by the government in 1996. During this period, Vietnam’s electri�cation progressed through sev- the government and the World Bank began pre- eral phases, or periods, to its present level: paring their �rst joint energy sector project. Recovery period (1976–85). After three decades of Focus on regulation (1998–2004). The growth in war, with underdeveloped and isolated systems, electricity access rates over these 7 years from 61 electricity supply was available only for cities and percent to 87 percent of HH was slower than in large industries. “Productive uses� were given the previous period. Instead, this period was host priority. The HH electri�cation rate grew from to a series of fundamental changes in the sector 2.5 percent to 9.3 percent. that would pave the way for future sustained suc- cess. A signi�cant feature was more pronounced Preparation period (1986–93). The Doi Moi government involvement in determining the reforms were implemented.67 They resulted in course of rural electri�cation through three an increase in rural incomes, the development of means. They comprised (1) de�ning strategies several large power plants across the country, the for the planning, implementation, and manage- start of the construction of the 500 kV transmis- ment of rural electri�cation; (2) setting the legal sion line running the length of the country, and framework for the sector; and (3) engaging with the building of medium voltage networks. The Vietnam’s international partners to implement foundations laid by these important developments its strategic priorities.Two important actions that enabled signi�cant progress in rural electri�cation resulted were Decision 22 and Decree 45, which in the subsequent periods. set out institutional and �nancial arrangements for the electricity system. “Take-off� period (1994–97). Electri�cation This period also witnessed the passage of the experienced remarkable growth. The HH elec- country’s �rst electricity law and the issuance of tricity access rate more than quadrupled from 14 a policy paper on rural electri�cation. Another percent to 61 percent. The local and central gov- critical government initiative was to set a ceiling ernment authorities responded to the strong soci- tariff for rural customers as a step toward estab- etal demand for electricity. Indeed, by the lishing �nancial controls over the rural electricity mid-1990s, electricity access rates had become supply business. Technical speci�cations for rural one of the key indicators in the annual socio- electricity systems also were developed, and were economic development assessment of every com- formally adopted in later years. mune, district, and province. Meeting the increase During this period, institutional arrange- in demand for electricity access had become pos- ments and sources of �nancing for rural electri- sible as a result of the completion and coming �cation shifted signi�cantly. EVN began a pilot online of two signi�cant sources. They were program for operating low voltage (LV) systems (1) the last unit of the Hoa Binh Hydropower and started to acquire medium voltage (MV) sys- station as well as other relatively large power tems that had been �nanced, by other entities. plants; and (2) the 500 kV transmission line, Under the service agent model, created under which made abundant power sources available the First Rural Energy Project, local community throughout the whole country. Other important members maintained LV systems on behalf of the PCs, carried out simple repairs, and handled 67. “Doi Moi� refers to the economic reforms initi- collections. This model helped ensure account- ated in Vietnam in 1986 with the goal of creating a ability within local communities, minimize non- “socialist-oriented market economy.� payment, reduce system losses, and signi�cantly 152 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC lower the costs of system operations and man- learned are organized in two parts. The �rst is agement (O&M) for the PCs. from the perspective of the government. These lessons can inform the strategies of other develop- Focus on quality and regulation (2005–09). Mean- ing countries in their efforts to expand access to while, the quality and reliability of electric- electricity. The second part came from the World ity supply were emerging as important issues. Bank experience. These lessons can be relevant The government chose to pay attention to these during the development of future projects. issues and to continued expansion of electric- Vietnam’s success in rural electri�cation can ity access. This period could be characterized by be explained by a range of factors: the enforcement of legal requirements; a shift in focus from network extension to rehabilitation; 1. Unwavering government commitment, and direct government support for extending responsive to strong demand from society electricity access, particularly to minorities and 2. Long-term vision, gradual and flexible those in remote areas. The government’s focus approach was not only on increasing electri�cation rates 3. Responsibilities shared by all levels of gov- but also on ensuring ef�ciency and addressing ernment, sector participants, and consumers institutional shortcomings in the sector. 4. Costs and mobilization of various resources shared by all stakeholders Consolidation for the last mile (2009).The period 5. Flexibility in the management and opera- from 2009 onward was characterized by solidify- tion of rural networks. ing the focus on ensuring the sustainability of the rural electricity supply business. Simultaneously, Key lessons learned from Vietnam’s experi- the government was pushing for greater account- ence are summarized below. ability, working to determine the most appro- priate strategies for extending access to those Lesson 1: Vietnam’s success can be credited to its without electricity, and ensuring the affordability unwavering national commitment to rural electri- of electricity for the poor. �cation. A signi�cant feature of Vietnam’s experi- An important milestone of this period was ence has been the bottom-up manner in which the Prime Minister’s Decision 21, issued in the drive for RE manifested. Demand for electric- February 2009. It stipulated a uni�ed tariff for ity was very high across Vietnam. However, one all consumers, along with an incremental block can easily argue that high demand for electricity tariff arrangement, with a new lifeline block. The is present almost everywhere in the world. What decision also enabled the takeover of �nancially was distinctive about the Vietnamese experience weak local distribution utilities (LDUs) by the was the way that this high demand translated into PCs, now renamed Power Corporations. In fact, action and, eventually, results. The local and cen- a signi�cant consolidation of the rural electric- tral governments listened to the people and were ity distribution and retail business took place in responsive to their strong desire for electricity which smaller and �nancially weak LDUs were access. Local and central government authorities absorbed by the larger PCs. In 2010 the Vietnam made RE a priority and mobilized their resources Distribution Code was approved. It outlined the to make it possible. Local authorities’ responsive- rights and obligations of PCs and their customers, ness to the strong societal demand, their choice including provisions regarding quality of service to accord adequate priority to this issue, and the obligations and consumer protection. culmination of this in a national agenda item were Certain features of Vietnam’s experience, key factors for success. Dedication and collabora- especially the ways in which the government tion were persistent among central government tackled the challenges that emerged, can provide policymakers; provincial, district, and commune useful lessons for other countries. The lessons authorities; as well as EVN and local communities. Appendix 1. Electricity Access: Selected Country Briefs 153 Once RE targets were set and pledges to support However, EVN’s emergence as a strong cham- RE were made, policymakers never back-tracked. pion for rural electri�cation in the late 1990s has been an important factor in ensuring the quality Lesson 2: Transformation in the rural sector and sustainability of rural electricity supply going needs to be seen in a long-term context. The forward. Despite recognizing the high societal Vietnamese government maintained a strategic demand and government support for RE, EVN vision for achieving its electri�cation targets.The initially was reluctant to engage in rural elec- core tenet was to achieve RE through extending tricity supply due to concerns over the apparent the national grid. An important factor for success unpro�tability of RE and the limits on its own was setting targets for a gradual and flexible pro- �nancing capacity. From 1999 on, the central gov- gram based on a realistic analysis of what can be ernment made it possible and, even more impor- achieved given the available resources. tantly, pro�table, for EVN to participate in RE. Through a series of decisions, such as Decision Lesson 3: The presence of a long-term vision and 22 and Decree 45, the Prime Minister’s of�ce a systematic plan is important for grid extension. equipped EVN with the mandate and resources When based on a realistic assessment of what it needed to lead RE in a �nancially sustainable can be achieved within available means, such a way. The resulting reorganization of the rural plan can help maintain costs at reasonable levels, electricity supply sector had considerable impact improve revenues in the early years to support later on the pursuit of the access agenda. system expansion, manage expectations, and keep As Vietnam’s experience demonstrates, ensur- political pressure to extend the grid to unsuitable ing the sustainability of rural electricity supply areas to a minimum. On the other hand, where businesses is critical. In the case of expansion of grid extension to some remote areas is deemed access through large-scale grid extensions, a pre- not feasible or economically viable, alternative condition of sustainability is to secure interest, means to secure access to electricity should be commitment, and dedication from the country’s explored. The framework for alternative options main utility. These can be obtained by enabling including �nancial and other incentives should the utility to participate in rural electri�cation be communicated to stakeholders through policy on terms by which it can meet its commercial statements and other means. objectives. The utility should be equipped with a clear mandate and provided with the resources it Lesson 4: Vietnam’s electri�cation success story needs to perform its leadership role in electrify- is rooted in a strategy that was anchored in very ing rural areas through grid extension. clear objectives, implemented gradually, and �ne- tuned over time to reflect changing priorities. Lesson 6: The presence of cost sharing among The central government, in collaboration with different parties has been an important contribu- various levels of local authorities and stakeholders, tor to the success of Vietnam’s rural electri�ca- continually assessed how to advance the program. tion program. In addition to making �nancing Building flexibility into the design and imple- and building rural systems easier, cost sharing mentation of RE programs also proved useful. All helped create a sense of ownership by the parties actions were taken without losing sight of the involved. Financial support by provincial, com- overarching goal of electri�cation. This uni�ed mune, and district authorities and the Prime thought, in turn, contributed to the high-level Minister’s of�ce was a critical element in ensuring political goal of national solidarity. the rapid increase in rural access to electricity. Lesson 5: In the early years of its existence as a Lesson 7: A well-formulated and properly com- commercial entity, Electricity of Vietnam (EVN) municated program with achievable goals and stayed out of the rural electricity supply business. investments from multiple sources has proved very 154 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC effective. Issuing policy documents that outlined to a series of medium- and long-term costs that the principles underlying this program was use- eventually had to be recovered. ful in formalizing the government’s commitment Thus, it is critical for decisionmakers to be and sending a clear message to all stakeholders aware of the trade-offs involved in the various that government resources would be available to options and their long-term consequences. It will backstop local resources. be important to carefully weigh the bene�ts and costs of introducing some kind of minimal tech- Lesson 8: The culture of payment is likely to nical standards for rural systems and speci�cations have a signi�cant bearing on the success of rural for equipment and materials used. electri�cation. It may not be possible to repli- cate Vietnam’s strong culture of payment in other • If decisionmakers’ focus is to rapidly expand countries. However, countries easily can adopt access to electricity, the option of allowing local involvement in the management and opera- multiple entities and �nancing arrange- tions of rural electricity networks, particularly ments for the construction, management, bill collection. The service agent model adopted and operation of rural networks68 is likely in the early 2000s is a good illustration of how to provide the fastest expansion of access. local involvement can be accomplished. This • Some decisionmakers would like to focus model helped ensure accountability within local instead on the longer term sustainability communities and minimize nonpayment. It also of rural electri�cation. For these decision- reduced system losses and lowered PCs’ system makers, the suitable choice would be to operation and management costs. Overall, the limit the number of actors that can build, involvement of local people in managing and manage, and operate rural networks; and to operating the LV system played an important role introduce minimal technical standards that in ensuring the success and sustainability of scal- should be adhered to. In this case, decision- ing up electricity access. makers should expect to move more slowly, as was Vietnam’s experience after 2004. Lesson 9: It is important to note that ensuring the �nancial viability of grid extension for rural As a general principle, it may be useful to electri�cation does not mean a private-sector distinguish between sharing costs and sharing style rate of return. Rather, the focus should be responsibilities for building, management, and on allowing reasonable returns to investors while operation of rural networks. Sharing is a must so seeking to make new connections as affordable as it is important to determine the most appropri- possible. When grid extension covers customers ate ways of combining different funding sources who cannot afford to pay the full cost of connec- and allocating costs proportionally. On the other tions, there should be mechanisms that compen- hand, it is advisable to allocate responsibilities in sate the investors. a way that will not hamper the coordinated con- struction, management, and operation of the sys- Lesson 10: The separation of responsibilities tems themselves. for MV and LV systems, and the multiplicity of entities being allowed to build, manage, and Lesson 11: After the initial delay, the beginning operate rural networks proved to be very effec- of EVN’s involvement in the rural energy sup- tive in facilitating the rapid expansion of access. ply business was a major turning point in ensur- However, this rapid build-up of networks was ing the technical quality of the rural energy carried out without minimal technical standards networks. In the later years, the introduction of for the equipment and materials used. As a result, issues with system performance, including low 68. Without imposing minimal technical require- ef�ciency, high losses, and low supply quality, led ments, as was the case in Vietnam until the late 1990s. Appendix 1. Electricity Access: Selected Country Briefs 155 national technical speci�cations further buttressed service is of concern in some rural areas improvements in power supply quality, alongside because existing systems are becoming a signi�cant reduction in technical losses, costs, unable to meet existing and projected and tariffs. This reduction, in turn, helped gener- load requirements. In some instances, ate signi�cant long-term savings. the MV systems bottlenecked the power flow from the transmission system to the Lesson 12: Rural electri�cation is as much about low voltage systems in the communes. electrifying households as it is about providing electricity for other uses. The initial focus on 2. Ensuring the sustainability of rural electric- productive uses may have been helpful to rapidly ity networks. In February 2009, Decision develop networks. However, to capture the full 21 made it possible for a PC to take over potential bene�ts from rural electri�cation, once the management and assets of any local dis- basic constraints with respect to availability of tribution utility (LDU) that was �nancially supply are overcome, it is crucial not to lose sight weak. The challenge going forward is to of the importance of HH connections. ensure that the transfer of the responsibil- ity for managing and operating existing LV The Way Forward systems that came from �nancially weak Going forward, a number of tasks need to be LDUs is paced according to the absorptive ful�lled as part of Vietnam’s rural electri�cation capacity of the PCs. To be sure, it may be program. necessary to �nd the most effective ways to build the institutional capacity of PCs 1. Continued investment in existing distribu- to equip them to manage and operate tion networks. In the years ahead, signi�cant rural electricity networks ef�ciently and investment will be needed to rehabilitate sustainably. existing LV systems to reduce losses, and to 3. Extending access to those still without upgrade the MV networks to meet grow- it. Approximately 1 million Vietnamese ing demand. households, mainly poor and in moun- tainous areas and islands, still lack access • Investment to rehabilitate existing LV to electricity. The objective of expanding systems. Many of the small LV sys- electricity access to unserved rural and tems developed during the 1990s in mountainous areas of the country was rural communes remain relatively weak. included in the December 2007 National These systems need to be rehabilitated to Energy Development Strategy. This strat- reduce losses and to increase the quality egy envisages that all rural HH will have and quantity of power supply. A signi�- access to electricity by 2020.The challenge cant amount of resources and effort will will be to identify the most appropriate need to be dedicated to rehabilitate LV way of electrifying these remaining HH. networks in approximately 3,000 com- 4. Continuing to ensure that electricity is munes. Based on preliminary EVN esti- affordable to the poor. As the country mates, bringing existing LV systems up expands access to a greater number of to current Vietnamese standards could people, chances are that a greater num- cost US$2 billion–$3 billion. ber of poor people will be connected to • Investment to upgrade MV networks. the system. The Prime Minister’s Decision The growth in LV systems and increased 21, issued in February 2009, established a demand in rural areas imply greater need clear framework for providing energy to to improve the MV distribution net- the poor. The decision stipulates an incre- work over the medium term. Quality of mental block tariff with a lifeline block that 156 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC pays a lower electricity price for the �rst competing priorities. The lawmakers will have to 50kWh of consumption. Decision 21 also determine how to allocate resources among invest- allows the PCs to recover operating costs ments to rehabilitate LV systems, upgrade MV through the tariffs charged to all consumers networks, and expand electricity access to those in their territory, in effect, cross-subsidizing remaining without it. Simultaneously, policymak- the remote and poor consumers with rev- ers will need to set aside resources to continue enues generated from other low-cost con- to provide for the poor and build institutional sumers. If, in the future, policymakers, for capacity for the sustainable management and any reason, wish to make subsidies more operation of the rural networks.There is no doubt transparent, they will need to make a deter- that improving the existing distribution systems mination as to how this can be achieved will bene�t a larger number of people. On the through a new mechanism. other hand, completing the last mile of the access agenda to connect the unserved populations is a Vietnam needs to make hard choices concern- key priority for the government. The question is ing the future of its rural electri�cation program. how the upgrading can be done sustainably and The country’s policymakers must determine how from what sources the necessary resources will be to allocate the scarce resources among the country’s forthcoming. APPENDIX 2 Appendix 2. Energy Access Projects Funded in the EAP Region by IBRD, IDA and GEF, 2001–10 (US$ mil) Effective Project Country Project from Objective cost IBRD IDA GEF Cambodia Rural 2003 a. Improve power sector efficiency and reli- 150.0 — 40 5.75 Electrification ability and reduce electricity supply costs. and b. Improve standards of living and foster eco- Transmission nomic growth in rural areas by expanding rural electricity supplies. c. Strengthen electricity institutions, regula- tory framework, and “enabling environ- ment� for sector commercialization and privatization. Global environment objective: Overcome barriers to renewable energy development in Cambodia, including those related to lack of policy framework, financing, information, and institutional capacity. Lao PDR Rural 2006 a. Increase access to electricity of rural 36.3 10.0 — 5.00 Electrification households in villages of targeted Phase I provinces. Lao PDR Rural 2010 b. Improve financial performance of power 34.8 20.0 — — Electrification sector. Phase II Mongolia Renewable 2006 Increase access to electricity and improve 27.0 3.0 — 4.60 Energy for reliability of electricity service among herder Rural Access population and in off-grid soum centers. REREP addresses 30% of isolated soum cen- ters and 40% of herders’ market. Global development objective: Remove barriers to development and use of renewable energy technologies in grid- and off-grid- connected systems and reduce CO2 emissions. (continued) 157 158 ONE GOAL, TWO PATHS: ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC Appendix 2. Energy Access Projects Funded in the EAP Region by IBRD, IDA and GEF, 2001–10 (US$ mil) (continued) Effective Project Country Project from Objective cost IBRD IDA GEF Philippines Rural Power 2004 a. Test and demonstrate viable business 26.7 10.0 — 9.0 models that maximize leveraging of public resources with private investment for decentralized electrification. b. Support transformation of electric cooperatives (ECs) through institutional and operational improvements. c. Avoid CO2 emissions through wider use of renewable energy. Philippines Electrical 2004 Achieve significant and sustained energy ef- 62.3 — — 12.0 Cooperative ficiency improvements in ECs to provide current System Loss and prospective viable EC customers with reli- Reduction able and least-cost power supply over long term. To this end: a. Develop and test financial and contractual mechanisms to support private sector investment, operations and management, and risk-sharing to support system loss reduction measures in selected ECs. b. Support commercial lending to qualified ECs for efficiency improvements Timor-Leste Energy Services 2006 Stabilize power services in Dili by restoring or 8.5 — 4.5 2.0 Delivery improving operational efficiency, reliability, safety, and availability of power supply; promote sustainability of power sector. Vietnam Rural Energy 2000 a. Expand rural access to electricity in 902 216.0 — 150.0 — communes located in 34 provinces of Vietnam through extending grid. b. Define and establish institutional mecha- nisms and strategy for rural electrification. c. Promote application of renewable energy sources in areas inaccessible to national grid and supplement grid power supply. (continued) Appendix 2. Energy Access Projects Funded in the EAP Region by IBRD, IDA and GEF, 2001–10 159 Appendix 2. Energy Access Projects Funded in the EAP Region by IBRD, IDA and GEF, 2001–10 (US$ mil) (continued) Effective Project Country Project from Objective cost IBRD IDA GEF Vietnam Second Rural 2005 Improve access to good-quality, affordable 329.5 — 200.0 5.25 Energy electricity services efficiently and sustainably to rural communities to support Vietnam’s efforts toward socioeconomic development through: a. Major upgrade and /or expansion of rural power networks in approximately 1,200 communes. b. Conversion of current ad-hoc local electricity management systems to LDUs as legal entities. c. Capacity building assistance for LDUs, pro- vincial authorities, participating regional power companies, and national authorities involved in planning and regulating rural electrification. Vietnam Rural 2008 Improve reliability and quality of medium volt- 207.5 — 150.0 — Distribution age service to targeted retail electricity distribution systems. 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References 165 Helpful URLs Selected national electricity utility/institution websites: Electricité du Cambodge (EDC) www.edc.com.kh Electricité du Laos (EDL) www.edl-laos.com Electricity of Vietnam (EVN) www.evn.com.vn Fiji Electricity Authority (FEA) www.fea.com.fj National Electricity Authority (NEA) (Philippines) www.nea.gov.ph Perusahaan Listrik Negara (PLN) (Indonesia) www.pln.co.id PNG Power Ltd www.pngpower.com.pg Provincial Electricity Authority (PEA) (Thailand) www.pea.co.th Other relevant URLs Community Development Carbon Fund www.go.worldbank.org/QNLHGWLPS0 Global Alliance for Clean Cookstoves http://cleancookstoves.org Groupe Energies Renouvelables, Environnement www.geres.eu et Solidarités Global Alliance for Clean Cookstoves http://cleancookstoves.org/ Lighting Africa Project www.lightingafrica.org Water and Sanitation Program www.wsp.org ECO-AUDIT Environmental Benefits Statement The World Bank is committed to preserving Saved: endangered forests and natural resources. • 14 trees The Office of the Publisher has chosen • 6 million BTU of to print One Goal, Two Paths on recy- total energy cled paper with 30 percent post-consumer • 1,434 lbs. of CO2 waste, in accordance with the recom- equivalent of mended standards for paper usage set greenhouse gases by the Green Press Initiative, a non- • 6,468 gallons of profit program supporting publishers wastewater in using fiber that is not sourced from • 410 lbs. of endangered forests. For more information, solid waste visit www.greenpressinitiative.org. ONE GOAL, TWO PATHS ACHIEVING UNIVERSAL ACCESS TO MODERN ENERGY IN EAST ASIA AND THE PACIFIC This flagship report of the East Asia and the Paci�c Region of the World Bank outlines an ambitious course of action to eradicate energy poverty in the Region by 2030. Despite its impressive economic growth, over 1 billion people in the EAP Region still lack the most basic access to electricity and modern cooking solutions. With every second household in the Region depending on solid fuels for cooking, indoor air pollution is a major health risk factor, particularly for women and children. This flagship report urges the governments of EAP countries to work simultaneously on two paths. The �rst path is to achieve universal electricity access by accelerating both grid and off-grid programs while employing appropriate policies and innovative technical solutions to reduce costs, improve reliability, and provide timely service to all EAP households. The second path calls for a major push to increase access to clean cooking fuels (natural gas, lique�ed petroleum gas, and biogas) and to advanced cooking stoves, particularly for biomass in poor rural areas. Both of these paths are affordable. The combined investments required for universal access to modern energy in the EAP Region are estimated at US$78 billion over the next 2 decades. This amount is US$32 billion more than the amount required to maintain the “business-as-usual� scenario over the same period. Although the annual incremental investment will be a small fraction of the Regional GDP, most EAP countries will require signi�cant support from donors and multilateral institutions to reach the goal of universal access to modern energy by 2030. ISBN 978-0-8213-8837-2 90000 9 780821 388372 SKU 18837