Revision as of 13:21, 25 June 2018

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Legal Basis: The basis on which organisations are legally entitled to sell electricity

Concession

Definition:

An exclusive right (monopoly) granted by government to sell electricity or standalone systems

A concession may:

Cover the entire country or a specific area
Be time-limited or unlimited
Relate to one, several, or all means of electricity provision

Concessions are usually granted to attract private investment by guaranteeing the investor protection from competition, or to protect public investment.

Internactions wiht other NAE Categories:

	Technologies	Grid systems and larger grid-connected mini-grids / distribution systems and isolated mini-grids almost always require concessions (because of the substantial investment required). As a result, the right to transmit and sell electricity is often reserved to the national grid company and/or mini-grid/distribution system operator (at least within the area they reach). For smaller mini-grids, with lower, shorter-term capital investment, a license (which grants a non-exclusive right to sell electricity) may be seen as more appropriate, and mini-grids below a certain size are often unregulated. A key question for private mini-grid investors will be what happens when the main grid arrives? Grid extension into a mini-grid concession area within the concession period may be prohibited, or there may be explicit provision for compensation and transfer of assets to grid ownership. Grid and mini-grid concessions thus often interrelate (with each preventing or having explicit provision for extending into the other’s area). Concessions are more rarely used for standalone systems. This reflects policy-makers’ perception of them as product retailers rather than infrastructure providers, but also that without long-term fixed capital investment private companies have not needed the protection of a concession to attract private capital (and would regard it as a regulatory burden). Concessions may however be used to bring standalone system companies into a market which they might otherwise be unwilling to enter. It’s also possible where pay-as-you-go arrangements are used, where the provider retains ownership of the system until the user has bought it through monthly payments, or even over its full life with the user paying for electricity used, a concession arrangement may be appropriate. Where grid or mini-grid concessions are set up, these rarely forbid sale of standalone systems by others, and vice versa, though standalone systems may be included as one means of providing electricity within an integrated electricity concession encompassing mini-grid and/or grid access.
	Delivery Models	Public delivery models are frequently combined with what are effectively concessions, though the monopoly may be created by, for instance, reserving the right to sell electricity to a national utility company, and may not therefore be labelled as a concession. Oversight and control may then be through organisational hierarchy rather than any explicit regulatory framework. Concessions are used to attract private participation in private and public-private models and may be the means through which public-private models are established.
	Price/Tariff Regulation	Where a concession is granted prices will almost certainly be regulated both to enable private investors to estimate revenues over the concession period and to protect users and ensure that the concessionaire is not over-exploiting their monopoly position. This regulation may be through the terms of the concession itself, rather than through a wider framework. Prices may be set on either a uniform or an individual basis.
	Finance	A concession is a means of attracting private finance, by offering the investor higher levels of sales (in the absence of competition) and lower risk in predicting those sales. It may also be used to protect public investment in infrastructure such as grid systems, and as a means of channelling public financial support into electricity provision.
	Non-Financial Interventions	National energy planning is key to establishing the optimum mix of technologies to meet electrification needs across the country, regardless of the regulatory model employed. Institutional restructuring (eg of the national utility company) and regulatory reform may be needed to enable concessions to be established and capacity building or technical assistance may be required if the key actors lack the capacity to undertake this regulatory reform or design concession arrangements. Awareness raising and demand promotion amongst users and service providers, as well as training (capacity building) to develop the skilled workforce needed by concessionaires can be beneficial alongside financial forms of public support.

Advantages and Disadvantages

The key advantage of a concession is that, by removing the potential for others to sell within the concession area, it allows demand to be captured by a single supplier, giving them economies of scale, and makes it easier to forecast volume of sales and so easier for investors to forecast future revenues (whereas license-based price/tariff regulation only reduces price uncertainty). As well as attracting more private finance this may reduce required return on investment and hence finance costs, but it also removes the benefits of competition once the concession has been granted and so places heavier demand on regulation to protect users, though potential providers may be required to compete for the concession through a tender process. Concession approaches can be rigid, and require significant capacity within regulatory authorities to design approaches which attract private finance while avoiding over-exploitation of users. Concessions also, by their nature, create boundaries and so push investors towards project finance and thinking by limiting their ability to expand their business beyond pre-set borders or to continue it beyond the end of a concession period. For capital-intensive infrastructure-based means of electrification (grid and mini-grids), however, a concession may just represent recognition of a natural monopoly and the need for explicit arrangements for arrival of the grid, and it is for these that a concession is most likely to be appropriate.

Further Informaiton and Guidance

EUEI PDF (2014), Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs http://www.euei-pdf.org/sites/default/files/field_publication_file/RECP_mini-grid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf
IRENA (2016), Policies and regulations to support renewable energy mini-grid development through private sector involvement <u>http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_mini-grids_2016.pdf</u>
Senegal. Agence Senegalaise d’Electrification Rurale (2009), Concession d’Electrification Rurale au Senegal, The Africa Electrification Initiative (AEI) Workshop, Maputo, Mozambique 9-12 Juin 2009. <u>http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1264695610003/6743444-1268073657582/15.4.Senegal.pdf</u>
World Bank, (2000), Regulatory Approaches to Rural Electrification and Renewable Energy: Case Studies from Six Developing Countries http://www.martinot.info/Martinot_Reiche_WB.pdf

Senegal. OBA (2007), OBA in Senegal – Designing Technology-Neutral Concessions for Rural Electrification https://openknowledge.worldbank.org/bitstream/handle/10986/11034/396090SN0OBApp1140Electric01PUBLIC1.pdf?sequence=1&isAllowed=y

Relevante Case Studies:

License

Definition:

A non-exclusive permission granted by government (or regulator) to sell electricity or standalone systems.

Licenses are employed to enable regulatory authorities to control who provides electricity or electricity goods, to ensure that they meet quality and safety standards and to allow price controls. At the same time licensing is a means of making clear that electricity providers are entitled to sell – without which private financiers may be reluctant to invest. A license may:

Cover the entire country or a specific area or project
Be time-limited or unlimited
Relate to one, several, or all means of electricity provision

Internactions wiht other NAE Categories:

	Technologies	Grid systems and larger grid-connected mini-grids / distribution systems are usually licensed through a concession arrangement as, often, are larger isolated mini-grids. For smaller mini-grids, with lower and shorter-term capital investment, a licensing regime (with its non-exclusive right to sell electricity) may be more appropriate, with greater flexibility and a generally less demanding process balancing lack of protection from competition for the investor, while still providing the means to protect users through price/tariff regulation and setting technical and safety standards. (mini-grids below a certain size, are often unregulated, as the administrative burden (and costs) of regulation are seen as disproportionate to the protection it would provide to investors and users, and the right to operate instead being granted through a general derogation from licensing). Without a concession, a key question for private mini-grid licensees will be what happens when the main grid arrives, and it may be beneficial to establish a compensation regime in the event of grid extension, to encourage private mini-grid investment in the interim. Standalone system providers are rarely subject to licensing (beyond general business licensing requirements) though they may be required to meet certain standards in order to access subsidies and tax exemptions. In part this reflects both policy-makers’ and businesses’ perception that as product retailers rather than infrastructure providers or sellers of electricity itself they do not require licensing. Also, without long-term fixed capital investment, private companies have not needed the protection of a concession or license to attract private capital (and would regard it simply as a regulatory burden). With standalone system providers increasingly looking to pay-as-you-go arrangements, where they retain ownership of the system until the user has bought it through monthly payments, or even over its full life with the user simply paying for electricity used, more formal regulation of standalone system businesses may become more appropriate.
	Delivery Models	Licensing may be regarded as unnecessary with a public delivery model, since one arm of the state is granting a license to another, though it can act as a mechanism for establishing independent and transparent oversight. With private and public-private delivery models, licensing is used to explicitly establish the right for the licensee to sell electricity (or a technology used to provide electricity) as the basis for attracting private participation and protecting users through standards and price controls.
	Price/Tariff Regulation	One of the purposes of licensing is to provide the vehicle and framework for price/tariff regulation, with license withdrawal being the sanction for failure to comply with price/tariff regulation. Prices may be set on either a uniform or an individual basis.
	Finance	The right to sell conveyed by a license is the most fundamental requirement for attracting private finance. A licensing regime may also provide a transparent regulatory framework to attract private investment (see below), and may be linked to access to grants, subsidies, tax exemptions and guarantees.
	Non-Financial Interventions	National energy planning is key to establishing the optimum mix of technologies to meet electrification needs across the country, regardless of the regulatory model employed. Regulatory reform is the path to establishing any licensing framework, including quality and technical standards, and capacity building or technical assistance may be required if the key actors lack the capacity to undertake this regulatory reform. Awareness raising and demand promotion amongst users and service providers, as well as training (capacity building) to develop the skilled workforce needed by licensed electricity businesses can be beneficial alongside financial forms of public support.

Advantages and Disadvantages

The key advantage of licensing electricity providers is that it provides the means to impose technical and quality standards and price controls, and thereby protect users, in return for the explicit right to operate. The clarity provided by a well-designed and managed licensing arrangement can serve to attract electricity providers, particularly if long-term capital investment is involved. If licensing is complex, bureaucratic and time-consuming, or imposes disproportionate costs, it may instead delay projects and discourage potential providers, which is the main disadvantage of licensing.

Further Informaiton and Guidance

Relevante Case Studies:

Unregulated

Definition:

Delivery of electricity access by an entity which is part publically and part privately owned or by a mix of publically and privately owned entities or using a combination of public and private finance

This includes cases where:

a joint venture has been created between a state-owned organisation and a private company to provide electricity
one or more state-owned organisation fill some of the functions along the market chain1, while others are filled by private businesses
electricity provision is undertaken by private businesses with public financial support (subsidies, grants, loans etc)

Internactions wiht other NAE Categories:

	Technologies	Public-private models for grid systems might include: Publically owned generation and transmission combined with privately owned distribution; Independent Power Producers (IPPs) connected to a publically owned transmission/distribution system; A privately owned grid system using grants from public sources to connect new users. For grid connected mini-grids and distribution systems: Mini-grids owned by a private developer connected to the (publically-owned) main grid, and thereby drawing on publically owned generation to meet demand; A private company, or public-private joint venture, taking on operation of a section of the publically-owned grid distribution system; Public grants or subsidies supporting development of a privately-owned mini-grid or distribution system. For isolated mini-grids: Mini-grids developed on a Build-Own-Operate-Transfer basis (initially owned and operated by a private developer, but transferred to public ownership at the end of a concession period); Mini-grids built and operated by a public-private joint venture; Public grants or subsidies supporting development of a privately-owned mini-grid. Use of public finance (grants, subsidies and loans) to enhance affordability and support market growth often results in a public-private model for standalone systems, even when there is a purely private-sector chain of manufacturers, importers, distributors and retailers. There could also be benefits in some circumstances from government energy agencies becoming directly involved in the standalone system market, by forming a joint entity to supply systems or by taking on one of the roles along the value chain (eg providing a distribution service for all system providers), as a means of supporting market development.
	Legual Basis	Because a public-private model involves private ownership and investment, an explicit legal framework will be required for any form of electrification which involves significant long-term capital investment in order to attract private finance and allow for price regulation to protect users. A concession, which offers protection from competition, will provide the greatest attraction for private financiers. Where no long-term capital investment is involved, as with standalone systems sold directly to users, no legal control (beyond that for any business) may be necessary – however if there is partial public sector ownership, a transparent legal framework may be required to convince private market participants that they are not facing unfair competition, and also to ensure that any public finance is not being misused.
	Price/Tariff Regulation	Where significant capital investment is involved, a transparent framework for price/tariff regulation is likely to be required to attract the private element into any public-private partnership. Tariff regulation will also protect users and provide a means of ensuring that public finance is not being misused or exploited by the private sector. It may also demonstrate to private market participants that they are not facing unfair competition from partially publically-owned market participants.
	Finance	All public-private partnerships will involve a combination of private and public finance. Private finance will come through ownership and investment in, and loans to electricity providers. Public finance may come through these routes, but may also be through various forms of grant, subsidy, tax exemption or guarantee. Ultimately public-private models, like other forms of electricity provision, will rely on connection and ongoing charges, and standalone system purchases from users. For multi-user systems (grids and mini-grids) there is also likely to be some element of cross-subsidy between users.
	Non-Financial Interventions	National energy planning is key to establishing the optimum mix of technologies to meet electrification needs across the country, regardless of the delivery model employed. Institutional restructuring may be needed to establish public-private partnerships and capacity building or technical assistance may be required if the key actors lack the capacity to undertake regulatory reform or design arrangements for public financial support. Awareness raising amongst users and other potential market actors and service providers, as well as training (capacity building) to develop the skilled workforce needed by new energy access businesses can be beneficial alongside financial forms of public support. Public-private partnership may also provide the means to bring in new technology, with the private sector providing the technology know-how while the public sector bears the risk inherent in new technology which private investors may be reluctant to take on.

Advantages and Disadvantages (Including Level of Electricity Provided)

Public-Private partnerships offer the potential to combine the benefits of both models, with public security being combined with private efficiency, innovation and flexibility. Bringing in private finance can extend the capacity for electricity provision beyond that which the public sector alone can offer, while public financial support can be used to attract private finance and make electricity affordable for users. Combining public and private inputs is not, however, simple. Significant expertise is required to ensure that private investment is attracted while making optimum use of public resources. Moreover the appropriate form of public-private partnership will change as markets develop and levels of electricity access increase – and this must be recognised while at the same time creating regimes which can give the private sector the confidence in the future they require to invest.

Further Informaiton and Guidance

Clean Energy Solutions Centre & iied. (2015). Policies to Spur Energy Accesshttps://cleanenergysolutions.org/resources/policies-spur-energy-access

Relevante Case Studies:

References

Authors

Authors: Mary Willcox, Dean Cooper

Acknowledgements

The Review was prepared by Mary Willcox and Dean Cooper of Practical Action Consulting working with Hadley Taylor, Silvia Cabriolu-Poddu and Christina Stuart of the EU Energy Initiative Partnership Dialogue Facility (EUEIPDF) and Michael Koeberlein and Caspar Priesemann of the Energising Development Programme (EnDev). It is based on a literature review, stakeholder consultations. The categorization framework in the review tool is based on the EUEI/PDF / Practical Action publication "Building Energy Access Markets - A Value Chain Analysis of Key Energy Market Systems".

A wider range of stakeholders were consulted during its preparation and we would particularly like to thank the following for their valuable contributions and insights: - Jeff Felten, AfDB - Marcus Wiemann and other members, ARE - Guilherme Collares Pereira, EdP - David Otieno Ochieng, EUEI-PDF - Silvia Luisa Escudero Santos Ascarza, EUEI-PDF - Nico Peterschmidt, Inensus - John Tkacik, REEEP - Khorommbi Bongwe, South Africa: Department of Energy - Rashid Ali Abdallah, African Union Commission - Nicola Bugatti, ECREEE - Getahun Moges Kifle, Ethiopian Energy Authority - Mario Merchan Andres, EUEI-PDF - Tatjana Walter-Breidenstein, EUEI-PDF - Rebecca Symington, Mlinda Foundation - Marcel Raats, RVO.NL - Nico Tyabji, Sunfunder -

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Any feedback would be very welcome. If you have any comments or enquires please contact: mary.willcox@practicalaction.org.uk, benjamin.attigah@euei-pdf.org, or caspar.priesemann@giz.de.

Download the Tool as a Power Point: https://energypedia.info/images/a/aa/National_Approaches_to_Electrification_-_Review_of_Options.pptx

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@@ Line 112: / Line 112: @@
 |
 *EUEI PDF (2014), Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs <u>[http://www.euei-pdf.org/sites/default/files/field_publication_file/RECP_mini-grid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf http://www.euei-pdf.org/sites/default/files/field_publication_file/RECP_mini-grid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf]</u>
-*<u></u>IRENA (2016), Policies and regulations to support renewable energy mini-grid development through private sector involvement <u><u>[http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_minigrids_2016.pdf http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_mini-grids_2016.pdf]</u></u>
+*IRENA (2016), Policies and regulations to support renewable energy mini-grid development through private sector involvement <u>&lt;u&gt;[http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_minigrids_2016.pdf http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_mini-grids_2016.pdf]</u>&lt;/u&gt;
-*Senegal. Agence Senegalaise d’Electrification Rurale (2009), Concession d’Electrification Rurale au Senegal, The Africa Electrification Initiative (AEI) Workshop, Maputo, Mozambique 9-12 Juin 2009. <u><u>[http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1264695610003/6743444-1268073657582/15.4.Senegal.pdf http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1264695610003/6743444-1268073657582/15.4.Senegal.pdf]</u></u><br/>
+*Senegal. Agence Senegalaise d’Electrification Rurale (2009), Concession d’Electrification Rurale au Senegal, The Africa Electrification Initiative (AEI) Workshop, Maputo, Mozambique 9-12 Juin 2009. <u>&lt;u&gt;[http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1264695610003/6743444-1268073657582/15.4.Senegal.pdf http://siteresources.worldbank.org/EXTAFRREGTOPENERGY/Resources/717305-1264695610003/6743444-1268073657582/15.4.Senegal.pdf]</u>&lt;/u&gt;<br/>
 *World Bank, (2000), Regulatory Approaches to Rural Electrification and Renewable Energy: Case Studies from Six Developing Countries <u style="font-size: 13.6px;">[http://www.martinot.info/Martinot_Reiche_WB.pdf http://www.martinot.info/Martinot_Reiche_WB.pdf]</u>
 *
 Senegal. OBA (2007), OBA in Senegal – Designing Technology-Neutral Concessions for Rural Electrification <u>[https://openknowledge.worldbank.org/bitstream/handle/10986/11034/396090SN0OBApp1140Electric01PUBLIC1.pdf?sequence=1&isAllowed=y https://openknowledge.worldbank.org/bitstream/handle/10986/11034/396090SN0OBApp1140Electric01PUBLIC1.pdf?sequence=1&isAllowed=y]</u>
@@ Line 128: / Line 129: @@
 | style="width: 10px; background-color: rgb(191, 144, 0);" | <br/>
 |
-*[[NAE_Case_Study:_Bangladesh,_IDCOL_Solar_Home_Systems|Bangladesh, IDCOL Solar Home Systems]]<br/>
+*[[NAE Case Study: Bangladesh, IDCOL Solar Home Systems|Bangladesh, IDCOL Solar Home Systems]]<br/>
 *[[NAE Case Study: Brazil, Luz para Todos (Light for All)|Brazil, Luz para Todos (Light for All)]]<br/>
-*[[NAE_Case_Study:_Costa_Rica,_Distribution_Cooperatives|Costa Rica, Distribution Cooperatives]]<br/>
+*[[NAE Case Study: Costa Rica, Distribution Cooperatives|Costa Rica, Distribution Cooperatives]]<br/>
-*[[NAE_Case_Study:_Mali,_Rural_Electrification_Programme|Mali, Rural Electrification Programme]]<br/>
+*[[NAE Case Study: Mali, Rural Electrification Programme|Mali, Rural Electrification Programme]]<br/>
-*[[NAE_Case_Study:_Peru,_Concession_Model_for_Standalone_Systems|Peru, Concession Model for Standalone Systems]]<br/>
+*[[NAE Case Study: Peru, Concession Model for Standalone Systems|Peru, Concession Model for Standalone Systems]]<br/>
-*[[NAE_Case_Study:_Philippines,_Islanded_Distribution_by_Cooperatives|Philippines, Islanded Distribution by Cooperatives]]<br/>
+*[[NAE Case Study: Philippines, Islanded Distribution by Cooperatives|Philippines, Islanded Distribution by Cooperatives]]<br/>
 *[[NAE Case Study: South Africa, Integrated National Electrification|South Africa, Integrated National Electrification]]<br/>
 *[[NAE Case Study: Tunisia, Low Cost Distribution Technology|Tunisia, Low Cost Distribution Technology]]<br/>
@@ Line 142: / Line 143: @@
 <br/>
-= Private Delivery Model =
+= License =
 {| border="1" cellspacing="1" cellpadding="1" style="width:100%;"
 |-
-| style="width: 130px; background-color: rgb(0, 204, 248);" |
+| style="width: 130px; background-color: rgb(248, 192, 0);" |
 '''<span style="color:#FFFFFF;"><span style="font-size: 13.6px;">Definition:</span></span>'''<br/>
 | style="width: 618px;" |
-'''<span><span></span></span><span><span>Delivery of electricity access by an entity or entities none of which are owned and managed by the state, using purely private finance.</span></span><span><span></span></span>'''
+'''<span><span></span></span><span><span></span></span><span><span>A non-exclusive permission granted by government (or regulator) to sell electricity or standalone systems.&nbsp;</span></span><span><span></span></span><span><span></span></span>'''
-In this model all of the organisations engaged in provision of electricity access (whether through supply of electricity itself or provision of electricity systems), as part of the National Electrification Approach being considered, are non-state-owned. This implies that all the actors along the market chain1 (Project Development, Manufacture/Generation, Distribution and Retail) are non-state entities such as private companies, cooperatives, social enterprises, community organisations or NGOs (all characterised for this purpose as “private” organisations).&nbsp;<br/>
+Licenses are employed to enable regulatory authorities to control who provides electricity or electricity goods, to ensure that they meet quality and safety standards and to allow price controls. At the same time licensing is a means of making clear that electricity providers are entitled to sell – without which private financiers may be reluctant to invest. A license may:
+*Cover the entire country or a specific area or project<br/>
+*Be time-limited or unlimited<br/>
+*Relate to one, several, or all means of electricity provision
 |}
@@ Line 162: / Line 167: @@
 {| border="1" cellspacing="1" cellpadding="1" style="width:100%;"
 |-
-| style="width: 10px; background-color: rgb(0, 204, 248);" | <br/>
+| style="width: 10px; background-color: rgb(248, 192, 0);" | <br/>
 | style="width: 117px; background-color: rgb(0, 103, 0);" |
 <span style="color:#FFFFFF;">Technologies</span><br/>
@@ Line 169: / Line 174: @@
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-Few, if any, national grid systems have been established through a private delivery model (though in many countries privatisation has been used to transfer them into private ownership and bring in private investment). Grid-connected mini-grids and distribution systems have frequently been developed by private (non-state-owned) organisations. Where the grid system is also privately-owned, this constitutes a private model. (However, if the grid system is publically owned, and the mini-grid or distribution system uses electricity from the grid system, or the development draws on public grants, subsidies, loans, tax exemptions or guarantees, it constitutes a public-private partnership). The most frequently used models for delivery of standalone systems are private, though involvement of state-organisations along the market chain, or use of funding from grants or subsidies provided by the state, donors or international agencies, may result in private-public partnerships.
+Grid systems and larger grid-connected mini-grids / distribution systems are usually licensed through a concession arrangement as, often, are larger isolated mini-grids. For smaller mini-grids, with lower and shorter-term capital investment, a licensing regime (with its non-exclusive right to sell electricity) may be more appropriate, with greater flexibility and a generally less demanding process balancing lack of protection from competition for the investor, while still providing the means to protect users through price/tariff regulation and setting technical and safety standards. (mini-grids below a certain size, are often unregulated, as the administrative burden (and costs) of regulation are seen as disproportionate to the protection it would provide to investors and users, and the right to operate instead being granted through a general derogation from licensing).&nbsp; Without a concession, a key question for private mini-grid licensees will be what happens when the main grid arrives, and it may be beneficial to establish a compensation regime in the event of grid extension, to encourage private mini-grid investment in the interim. &nbsp;Standalone system providers are rarely subject to licensing (beyond general business licensing requirements) though they may be required to meet certain standards in order to access subsidies and tax exemptions. In part this reflects both policy-makers’ and businesses’ perception that as product retailers rather than infrastructure providers or sellers of electricity itself they do not require licensing. Also, without long-term fixed capital investment, private companies have not needed the protection of a concession or license to attract private capital (and would regard it simply as a regulatory burden).&nbsp; With standalone system providers increasingly<br/>looking to pay-as-you-go arrangements, where they retain ownership of the system until the user has bought it through monthly payments, or even over its full life with the user simply paying for electricity used, more formal regulation of standalone system businesses may become more appropriate.
 |-
-| style="width: 10px; background-color: rgb(0, 204, 248);" | <span style="color:#FFFFFF;"></span><br/>
+| style="width: 10px; background-color: rgb(248, 192, 0);" | <span style="color:#FFFFFF;"></span><br/>
-| style="width: 117px; background-color: rgb(154, 103, 0);" |
+| style="width: 117px; background-color: rgb(49, 101, 153);" |
-<span style="color:#FFFFFF;">Legual Basis</span><br/>
+<span style="color:#FFFFFF;">Delivery Models</span><br/>
 <br/>
 | style="width: 616px;" | <span style="color:#FFFFFF;"></span>
-A private delivery model calls for an explicit legal framework for any form of electrification which involves significant long-term capital investment (grid, mini-grids and potentially standalone systems which are charged for on a pay-as-you-go basis) in order to attract private finance and allow for price regulation to protect users. A concession, which offers protection from competition, will provide the greatest attraction for private financiers. Where no long-term capital investment is involved, as with standalone systems sold directly to users, it’s generally considered that no legal control (beyond that for any business) is necessary.&nbsp;<br/>
+Licensing may be regarded as unnecessary with a public delivery model, since one arm of the state is granting a license to another, though it can act as a mechanism for establishing independent and transparent oversight.&nbsp; With private and public-private delivery models, licensing is used to explicitly establish the right for the licensee to sell electricity (or a technology used to provide electricity) as the basis for attracting private participation and protecting users through standards and price controls.
 |-
-| style="width: 10px; background-color: rgb(0, 204, 248);" | <span style="color:#FFFFFF;"></span><br/>
+| style="width: 10px; background-color: rgb(248, 192, 0);" | <span style="color:#FFFFFF;"></span><br/>
 | style="width: 117px; background-color: rgb(205, 52, 0);" |
 <span style="color:#FFFFFF;">Price/Tariff Regulation</span><br/>
@@ Line 189: / Line 194: @@
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-Where electricity is delivered by the private sector, using purely private finance, in a competitive market with no legal or effective monopoly (eg where several solar lanterns providers are operating) price regulation may be regarded as unnecessary. However, where any form of concession has been granted (or exists in practice), price regulation would be expected to protect users. On the other side, where significant capital investment is involved private financiers are likely to require a transparent framework for price/tariff regulation, to reduce the risk of price controls being introduced in the future at below cost-recovery levels and preventing full recovery of and return on investment.
+One of the purposes of licensing is to provide the vehicle and framework for price/tariff regulation, with license withdrawal being the sanction for failure to comply with price/tariff regulation. Prices may be set on either a uniform or an individual basis.
 |-
-| style="width: 10px; background-color: rgb(0, 204, 248);" | <span style="color:#FFFFFF;"></span><br/>
+| style="width: 10px; background-color: rgb(248, 192, 0);" | <span style="color:#FFFFFF;"></span><br/>
 | style="width: 117px; background-color: rgb(32, 56, 100);" |
 <span style="color:#FFFFFF;">Finance</span><br/>
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-As discussed above a private delivery model must be purely privately financed&nbsp; (since inclusion of any public finance would cause the delivery model to be categorized as a public-private partnership). Ultimately private delivery models will rely on connection and ongoing charges, and standalone system purchases from users. For multi-user systems (grids and mini-grids) there is also likely to be some element of cross-subsidy between users.<span style="font-size: 13.6px;">&nbsp;</span>
+The right to sell conveyed by a license is the most fundamental requirement for attracting private finance. A licensing regime may also provide a transparent regulatory framework to attract private investment (see below), and may be linked to access to grants, subsidies, tax exemptions and guarantees.<span style="font-size: 13.6px;"></span>
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 <span style="color:#FFFFFF;">Non-Financial Interventions</span><br/>
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-National energy planning is key to establishing the optimum mix of technologies to meet electrification needs across the country, regardless of the delivery model employed. Institutional restructuring and capacity building or technical assistance may be needed where the key actors lack the capacity to undertake regulatory reform in order to establish the legal and regulatory framework for private electrification, or to set and implement technical and quality standards (needed where the private sector is delivering access through mini-grids or distribution systems to ensure safety and compatibility between systems, and to support user confidence). Awareness raising amongst users and other potential market actors and service providers, as well as training (capacity building) to develop the skilled workforce needed by new energy access businesses are likely to be particularly relevant under a private delivery model, and demand promotion may be needed to increase revenues and make electricity access economically sustainable. Private delivery models are often a means of introducing new technologies, with private sector players bringing in technologies which they believe will have advantages over existing options which will allow them to grow their businesses. (Such new technology introduction, however, brings risks, and the private sector will expect to reap additional returns to balance these risks).
+National energy planning is key to establishing the optimum mix of technologies to meet electrification needs across the country, regardless of the regulatory model employed. Regulatory reform is the path to establishing any licensing framework, including quality and technical standards, and capacity building or technical assistance may be required if the key actors lack the capacity to undertake this regulatory reform.&nbsp; Awareness raising and demand promotion amongst users and service providers, as well as training (capacity building) to develop the skilled workforce needed by licensed electricity businesses can be beneficial alongside financial forms of public support.
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-The private sector is widely seen as being more efficient, innovative flexible and nimble that the public sector and it is these virtues that it brings to energy access provision. Use of a private delivery model can be a way of bringing private sector skills and finance (both national and international), and the benefits of competition into the energy sector. Where public institutions are weak and ineffective, private delivery models may seem attractive, but it must be recognised that successful private delivery relies (particularly for grids and mini-grids) on effective public management including strong regulatory frameworks and this calls for capabilities within public institutions which they may lack. There are also elements needed for the private sector to deliver, such as workforce skills and user awareness, which individual businesses may be reluctant to provide, because of the costs involved and because in a competitive market&nbsp;<span style="font-size: 13.6px;">they will be unsure that they (rather than competitors) will capture the benefits and secure a return on their investment.&nbsp;</span><span style="font-size: 13.6px;">In addition, where modern energy access is not affordable on a purely private financed basis or public financial input is&nbsp;</span><span style="font-size: 13.6px;">needed to support the costs of early market development, a public-private partnership delivery model will be needed.&nbsp;</span><span style="font-size: 13.6px;">Grid-connected mini-grids can, in theory, provide any level of electricity supply, but in most cases if the investment is made for grid connection and associated standards are met, they&nbsp; provide a grid-equivalent service, meeting all household, commercial, industrial and community requirements (Tier 5). (If the grid system itself is over-stretched with inadequate generation; or insufficiently robust or poorly maintained transmission and distribution systems reliability and quality of supply may deteriorate so that while users have a physical connection, they may not in fact have reliable access to electricity (bringing the supply Tier 3 or lower). To the extent that a grid-connected mini-grid draws on electricity from the grid its construction should be coupled with development of additional centralized generation capacity to support the resulting additional demand.</span>
+The key advantage of licensing electricity providers is that it provides the means to impose technical and quality standards and price controls, and thereby protect users, in return for the explicit right to operate. The clarity provided by a well-designed and managed licensing arrangement can serve to attract electricity providers, particularly if long-term capital investment is involved. If licensing is complex, bureaucratic and time-consuming, or imposes disproportionate costs, it may instead delay projects and discourage potential providers, which is the main disadvantage of licensing.<span style="font-size: 13.6px;"></span>
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-*IRENA (2016), Policies and regulations to support renewable energy mini-grid development through private sector involvement <u>[https://policy.practicalaction.org/policy-themes/energy/poor-peoples-energy-outlook/poor-people-s-energy-outlook-2016 https://policy.practicalaction.org/policy-themes/energy/poor-peoples-energy-outlook/poor-people-s-energy-outlook-2016]</u>
-*Practical Action, ODI, Solar Aid, GOGLA. (2016). Accelerating Access to Electricity in Africa with Off-grid Solar <u>[https://policy.practicalaction.org/policy-themes/energy/off-grid-solar https://policy.practicalaction.org/policy-themes/energy/off-grid-solar]</u><br/>
-*UNEP & GOGLA, (2015), Developing Effective Off-Grid Lighting Policy <u>[https://www.gogla.org/sites/www.gogla.org/files/recource_docs/developing-effective-off-grid-lighting-policy.pdf https://www.gogla.org/sites/www.gogla.org/files/recource_docs/developing-effective-off-grid-lighting-policy.pdf]</u><br/>
-*WBCSD, Business Case for Low-Carbon Microgrids (2016) <u>[http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/learning+and+adapting/knowledge+products/publications/publications_report_gap-opportunity http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/learning+ and+adapting/knowledge+products/publications/publications_report_gap-opportunity]</u><br/>
-*World Resources Institute (2015),Clean Energy Access in Developing Countries: Perspectives on Policy and Regulation, Issue Brief 2<u>[https://www.irena.org/DocumentDownloads/Publications/Evaluating_policies_in_support_of_the_deployment_of_renewable_power.pdf https://www.irena.org/DocumentDownloads/Publications/Evaluating_policies_in_support_of_the_ deployment_of_renewable_power.pdf]</u>
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-None of the examples examined have had a purely private sector delivery models (ie no public involvement in either ownership or funding).
+<br/>
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 <br/>
-= Public-Private Partnership Delivery Model =
+= Unregulated =
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National Approaches to Electrification – Legal Basis

Revision as of 13:21, 25 June 2018

Contents

Concession

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

License

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

Unregulated

Internactions wiht other NAE Categories:

Advantages and Disadvantages (Including Level of Electricity Provided)

Further Informaiton and Guidance

Relevante Case Studies:

References

Authors

Acknowledgements

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National Approaches to Electrification – Legal Basis

Revision as of 13:21, 25 June 2018

Contents

Concession

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

License

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

Unregulated

Internactions wiht other NAE Categories:

Advantages and Disadvantages (Including Level of Electricity Provided)

Further Informaiton and Guidance

Relevante Case Studies:

References

Authors

Acknowledgements