Revision as of 12:35, 25 June 2018

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Delivery Model: The (market) chain of organisations through which electricity is delivered to users

Public Delivery Model

Definition:

Delivery of electricity access by an entity or entities all of which are publically owned and managed, using purely public finance.

In this delivery 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 state-owned. This implies that all the actors along the market chain1 (Project Development, Manufacture/Generation, Distribution and Retail) are publically owned. These may include electricity utilities, publically-owned generation, transmission and distribution companies, municipalities, or rural energy agencies.

Internactions wiht other NAE Categories:

	Technologies	National grid systems have most often been established under a public delivery model either through a single public electricity company owning and managing the entire system or through separate public generation, transmission and distribution companies. Grid-connected mini-grids and distribution systems may also be publically owned, for instance by a local municipality. Where isolated mini-grids or standalone systems are delivered through a public model this is generally by an electricity utility or distribution company which has adopted an integrated approach with electricity being provided using a combination of grid, mini-grid and standalone systems.
	Legual Basis	Regulation of public delivery models is often implicit, with oversight and control being through organisational hierarchy rather than any explicit regulatory framework. For instance a national utility company’s monopoly (concession) over generation and/or sale of electricity may be established through the legislation under which it is created rather than through any separate framework. However, though an explicit regulatory framework may not be needed to give private investors confidence, such a framework is nevertheless regarded as best practice to achieve transparency and provide a barrier to political interference.
	Price/Tariff Regulation	Where electricity is delivered through public models, with no need to attract private investment, there is also a temptation to manage prices by means of the organisational hierarchy. However, without independent regulation, there is a risk that political pressure will result in prices being depressed below cost-recovery levels leading to insolvency of the electricity providers and deterioration of the electricity provision.
	Finance	By definition, a public delivery model will use public finance – by publically-owned utility companies or national or local government, potentially supported by loans and grants from international agencies - (since any private finance would cause the delivery model to be categorized as a public-private partnership). In addition public delivery models will draw on finance from users, through standalone system purchases, connection charges and ongoing charges, and for multi-user systems (grids and mini-grids) there is 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 and capacity building or technical assistance may be needed where the key actors involved in public delivery models lack capacity is aspects of electrification. Technology development/adoption and adoption of appropriate technical standards, user awareness raising and demand promotion may be needed to increase revenues and make electricity access economically sustainable, regardless of the delivery model chosen.

Advantages and Disadvantages

A public delivery model has the advantage of making use of existing institutions. Where these organisations have strong capabilities and are efficient, a public delivery model may allow strongly focussed and effective delivery of electrification and good coordination of grid, mini-grid and stand-alone solutions. However public organisations are often monolithic and slow moving. They may be more focussed on managing existing assets than serving new consumers, particularly in remote rural areas, and they may lack the capabilities needed to deliver new forms of electricity access. They are also vulnerable to political pressure and interference, which can hamper electrification efforts and result in poor allocation of resources. Following a private sector or private-public partnership model can allow private sector finance and skills to be brought to bear and may achieve greater flexibility, speed and efficiency.

Further Informaiton and Guidance

Barnes, D. (2007). The Challenge of Rural Electrification: Strategies for Developing Countries. Book Chapter https://books.google.co.uk/books?id=iOBi17Pr3fIC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false
IEA, (2010), Comparative Study on Rural Electrification Policies in Emerging Economies https://www.iea.org/publications/freepublications/publication/rural_elect.pdf
Vietnam. The World Bank, (2011). State and People, Central and Local, Working Together: The Vietnam Rural Electrification Experience. Washington. http://documents.worldbank.org/curated/en/601001468027856008/Vietnam-State-and-people-central-and-local-working-together-the-rural-electrification-experience

Relevante Case Studies:

Private Delivery Model

Definition:

Delivery of electricity access by an entity or entities none of which are owned and managed by the state, using purely private finance.

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).

Internactions wiht other NAE Categories:

	Technologies	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.
	Legual Basis	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.
	Price/Tariff Regulation	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.
	Finance	As discussed above a private delivery model must be purely privately financed (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.
	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 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).

Advantages and Disadvantages

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 they will be unsure that they (rather than competitors) will capture the benefits and secure a return on their investment. In addition, where modern energy access is not affordable on a purely private financed basis or public financial input is needed to support the costs of early market development, a public-private partnership delivery model will be needed. 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 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.

Further Informaiton and Guidance

IRENA (2016), Policies and regulations to support renewable energy mini-grid development through private sector involvement https://policy.practicalaction.org/policy-themes/energy/poor-peoples-energy-outlook/poor-people-s-energy-outlook-2016
Practical Action, ODI, Solar Aid, GOGLA. (2016). Accelerating Access to Electricity in Africa with Off-grid Solar https://policy.practicalaction.org/policy-themes/energy/off-grid-solar
UNEP & GOGLA, (2015), Developing Effective Off-Grid Lighting Policy https://www.gogla.org/sites/www.gogla.org/files/recource_docs/developing-effective-off-grid-lighting-policy.pdf
WBCSD, Business Case for Low-Carbon Microgrids (2016) 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
World Resources Institute (2015),Clean Energy Access in Developing Countries: Perspectives on Policy and Regulation, Issue Brief 2https://www.irena.org/DocumentDownloads/Publications/Evaluating_policies_in_support_of_the_ deployment_of_renewable_power.pdf

Relevante Case Studies:

None of the examples examined have had a purely private sector delivery models (ie no public involvement in either ownership or funding).

Public-Private Partnership Delivery Model

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:

Standalone Systems

Definition:

A system for generating and supplying electricity to a single user (separate from any distribution system).

Standalone systems may use any locally available source of energy (including solar, wind, hydropower, biogas, biomass, biofuels or diesel generators). While these include fossil-fuel based generation, technology advances combined with environmental concerns mean that policy-makers are increasingly focussing on encouraging Renewable Energy based generation. They may serve a single purpose (such as lighting or irrigation water-pumping) or be designed to meet all the electricity needs of the user. They range in size from solar lanterns, through small household systems to larger installations serving industrial enterprises (though for the purposes of this review the focus is on systems suitable for households, community facilities and SMEs).

Internactions wiht other NAE Categories:

	Delivery Model	Standalone systems are most frequently supplied to users through a purely private-sector chain of manufacturers, importers, distributors and retailers. In a number of cases (such as shown in the NAE Case Study of the IDCOL programme in Bangladesh), public-private partnership models have been used. In general this has been through use of public finance (grants, subsidies and loans) to enhance affordability and support market growth, though there could be benefits in certain circumstances for government energy agencies to become 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). More rarely a purely public model is used to provide standalone systems to users, for example where the grid company provides standalone systems to those it is not economic to connect to the grid (eg in NAE Case Study South Africa).
	Legual Basis	Standalone system providers are rarely subject to regulation (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 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 or license to attract private capital (and would regard it simply as a regulatory burden). Concessions for standalone systems may however, as in NAE Case Study Peru, be used to bring standalone system companies into a market which they might otherwise be unwilling to enter by protecting them from competition (though the long-term risks of market distortion under such an arrangement should be carefully considered). Standalone systems may also be included as one means of providing electricity within an integrated electricity concession also encompassing mini-grid and/or grid system access. It’s also possible that 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, regulating electricity supply through standalone systems may become more appropriate.
	Price/Tariff Regulation	Prices of standalone systems supplied by the private sector are generally unregulated. Where public funding is used to support provision of standalone systems it may (as with the NAE Case Study of the IDCOL programme in Bangladesh) be appropriate to regulate prices. Also, if the move towards pay-as-you-go, with users paying for electricity as they do from grid or mini-grids, while suppliers retain ownership of the capital equipment, continues or accelerates, regulation of the prices they pay may become more relevant. Regulation of prices for standalone systems, or of electricity supplied through these systems, on an individual basis is impractical given the multiplicity of systems. Uniform price regulation, where a standard price or tariff is set is more likely to be viable. However, any such regulation should recognize the differentials in costs between different types and sizes of standalone system, and parity with grid (or mini-grid) prices should only be attempted if subsidies are available to balance the cost differentials between these different Technologies.
	Finance	Though provision of standalone systems requires less capital investment than investment in grid or mini-grid systems, those establishing standalone system business nevertheless require capital for business development and working capital to fund the period (typically three months or more) between purchase/ import of the product by the business and sale to the end-user. Because standalone systems are often imported, this also brings a requirement for access to foreign capital. Where standalone systems are sold to users, it is to these users that much of the requirement for capital investment falls. This need for up-front user finance has formed one of the most substantial barriers to growth of markets for standalone systems (even where these systems are demonstrably an economic option for the user in the longer term). This barrier can be alleviated through micro-finance and similar programmes, and has also driven the growth of pay-as-you-go arrangements whereby the need for up-front finance is transferred to the supplier (though users remain the ultimate source of finance through their payments for electricity). Though most standalone system providers are private companies, many have struggled to access private finance, reflecting private financiers reluctance to invest in start-up companies without established track-records seeking to grow a new market. Instead many have relied on finance from donors and social funders. This has been one of the main constraints on standalone system market growth. Public finance, through grants, subsidies and concessionary loans (to both suppliers and users) and tax exemptions (eg VAT and import duty exemptions) have been used to make standalone systems more affordable to users.
	Non-Financial Interventions	Clear national policies and targets and availability of market information have been identified as key factors enabling standalone system providers to assess market scale and so encourage market entry. Regulatory reform, particularly in the finance sector to enable pay-as-you-go arrangements is also seen as vital, as is establishment and enforcement of quality standards to give consumers confidence in products. Exemption from taxes and duties (particularly where this is needed to create a level playing field with other forms of energy access) can catalyse market development, and user awareness raising and development of a workforce with the technical and business skills need to support business growth are also important (and beyond the capacity of individual standalone system businesses) to support its growth.

Advantages and Disadvantages (Including Level of Electricity Provided)

Standalone systems encompass a wide range of technologies from solar lanterns, to solar home systems and pumps, to larger scale diesel, hydro, biomass and wind-powered generators. Because they lack the economies of scale provided by grid (or even mini-grid) systems, the cost per unit of electricity from standalone systems is generally higher than from a grid (or mini-grid) connection. However in areas which are remote from the grid system and are sparsely populated (or lack a substantial energy source), standalone systems may provide the lowest cost option for electricity supply because they avoid the cost of distribution infrastructure. In addition, while the cost per unit of electricity may be relatively high, for low-demand users (eg those only looking for lighting and phone charging) they can still offer the most economic solution. Standalone solutions are also used by those who want back-up for an unreliable grid or mini-grid supply, or who want independence from the grid system.

In line with the wide range of technologies encompassed by standalone systems, they can be designed to provide any level of electricity. In general, however, the differential in cost between grid/mini-grid and standalone systems increases as the level of supply goes up (particularly for solar standalone systems), and standalone household systems therefore most often provide only Tier 1 (or even lower) access and rarely provide more than Tier 2-3 access, though systems for enterprises and community facilities may be larger and provide a higher level of access (with larger systems often being supported by hydro or fuel rather than solar generation).

Further Informaiton and Guidance

Practical Action, ODI, Solar Aid, GOGLA. (2016). Accelerating Access to Electricity in Africa with Off-grid Solar https://policy.practicalaction.org/policy-themes/energy/off-grid-solar
UNEP & GOGLA, (2015), Developing Effective Off-Grid Lighting Policy. https://www.gogla.org/sites/www.gogla.org/files/recource_docs/developing-effective-off-grid-lighting-policy.pdf

Relevante Case Studies:

References

Authors

Authors: Mary Willcox, Dean Cooper

Acknowledgements

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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Public

Private (Non-Governement)

Public-Private Partnership

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@@ Line 215: / Line 215: @@
 *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><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>
 |}
@@ Line 223: / Line 223: @@
 == Relevante Case Studies: ==
-*[[NAE Case Study: Brazil, Luz para Todos (Light for All)|Brazil, Luz para Todos (Light for All)]]<br/>
+None of the examples examined have had a purely private sector delivery models (ie no public involvement in either ownership or funding).
-*[[NAE Case Study: Cambodia “Light Touch” Regulation|Cambodia “Light Touch” Regulation]]<br/>
-*[[NAE Case Study: Costa Rica, Distribution Cooperatives|Costa Rica, Distribution Cooperatives]]<br/>
-*[[NAE Case Study: Rwanda, Sector-Wide Approach to Planning|Rwanda, Sector-Wide Approach to Planning]]<br/>
-*[[NAE Case Study: Tanzania, Mini-Grids Regulatory Framework|Tanzania, Mini-Grids Regulatory Framework]]<br/>
-*[[NAE Case Study: Vietnam, Rapid Grid Expansion|Vietnam, Rapid Grid Expansion]]<br/>
 <br/>
-= Isolated Mini-Grids =
+= Public-Private Partnership Delivery Model =
 {| border="1" cellspacing="1" cellpadding="1" style="width:100%;"
 |-
-| style="width: 130px; background-color: rgb(103, 153, 0);" |
+| style="width: 130px; background-color: rgb(100, 203, 248);" |
 '''<span style="color:#FFFFFF;"><span style="font-size: 13.6px;">Definition:</span></span>'''<br/>
 | style="width: 618px;" |
-'''<span><span>A system for generation and distribution of electricity to multiple users which is not connected to the main grid system.</span></span>'''
+'''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'''<br/>
-Mini-grids exist at a wide range of scales, from those supplying a few households to systems covering several communities. Isolated mini-grids rely on one or more local, usually small-scale (diesel, bioenergy, biomass, hydro, solar, wind or hybrid), generating plants and must balance demand and generation at all times. While these include fossil-fuel based generation, technology advances combined with environmental concerns mean that policy-makers are increasingly focussing on encouraging Renewable Energy based generation. Being separated from the grid system, isolated mini-grids can used lower voltages and lower-cost technologies than the main grid, and may be designed to provide anything from lighting alone (a “skinny grid”) to a full grid-equivalent electricity service.&nbsp;<br/>
+This includes cases where:
+*a joint venture has been created between a state-owned organisation and a private company to provide electricity<br/>
+*one or more state-owned organisation fill some of the functions along the market chain1, while others are filled by private businesses<br/>
+*electricity provision is undertaken by private businesses with public financial support (subsidies, grants, loans etc)&nbsp; &nbsp;&nbsp;
 |}
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 {| border="1" cellspacing="1" cellpadding="1" style="width:100%;"
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-| style="width: 10px; background-color: rgb(103, 153, 0);" | <br/>
+| style="width: 10px; background-color: rgb(100, 203, 248);" | <br/>
-| style="width: 117px; background-color: rgb(51, 103, 152);" |
+| style="width: 117px; background-color: rgb(0, 101, 0);" |
-<span style="color:#FFFFFF;">Delivery Model</span><br/>
+<span style="color:#FFFFFF;">Technologies</span><br/>
 <br/>
 | style="width: 616px;" | <span style="color:#FFFFFF;"></span>
-Isolated mini-grids are often privately owned, but may be publically owned or combine both in a public-private partnership. Common models include:
+Public-private models for grid systems might include:
+*Publically owned generation and transmission combined with privately owned distribution;<br/>
+*Independent Power Producers (IPPs) connected to a publically owned transmission/distribution system;<br/>
+*<span style="font-size: 13.6px;">A privately owned grid system using grants from public sources to connect new users.</span>
+<span style="font-size: 13.6px;">For grid connected mini-grids and distribution systems:</span><br/>
-*An isolated mini-grid owned by a private developer, a user-cooperative or community organisation;<br/>
+*Mini-grids owned by a private developer connected to the (publically-owned) main grid, and thereby drawing on publically owned generation to meet demand;<br/>
-*Mini-grids owned and operated by the national grid company in off-grid areas;<br/>
+*A private company, or public-private joint venture, taking on operation of a section of the publically-owned grid distribution system;<br/>
-*A mini-grid operated by a municipality or other local public entity to supply an off-grid community;<br/>
+*Public grants or subsidies supporting development of a privately-owned mini-grid or distribution system.<br/>
-*Isolated mini-grids developed under a Public-Private Partnership, for instance on a Build-Own-Operate-Transfer basis.
+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);<br/>
+*Mini-grids built and operated by a public-private joint venture;<br/>
+*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.
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-Mini-grids require substantial, long-term, capital investment and hence a regulatory framework which will give developers, and particularly private financiers, confidence that there will be a market for electricity from the mini-grid for a long enough period to repay and provide an adequate return on their investment. Larger systems may require concessions (which protect against competition over a designated area and time period) to give investors the confidence in revenue forecasts to commit the long-term capital investment needed. For smaller mini-grids, with lower and shorter-term capital investment, a licensing regime (which grants a 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 (eg <100kW in the [[NAE Case Study: Tanzania, Mini-Grids Regulatory Framework|Tanzania NAE Case Study]]), 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 regulation.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
+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&nbsp;<span style="font-size: 13.6px;">may be required to convince private market participants that they are not facing unfair competition, and also to ensure that&nbsp;</span><span style="font-size: 13.6px;">any public finance is not being misused.&nbsp;</span>
-Under any regulatory regime 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 by the terms of the concession, or there may be explicit provision for compensation and transfer of assets to grid ownership. mini-grid licensees have less protection from grid extension than concessionaires, but even where there is no formal concession it is often beneficial to establish a compensation regime in the event of grid extension, to encourage private mini-grid investment in the interim.
-Where mini-grids are delivered through a public model with purely public finance, the legal basis will generally be less critical as public financiers are less likely to be concerned about recovery of and return on investment through future revenues.
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-Isolated mini-grids rely on revenues from the sale of electricity to users to cover ongoing operating,&nbsp; maintenance and administrative costs and repayment and return on investment. Regulation of tariff levels is therefore&nbsp; a critical factor for private investors in mini-grids, with inadequate or inappropriate tariff regulation often cited as the key barrier to mini-grid investment.<br/>
+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.&nbsp;
-A uniform-tariff regime, where all mini-grid operators must charge the same tariffs, has the attraction of apparent equity, but will generally encourage investment only in those areas where electricity can be supplied at a lower cost allowing the investor to retain a margin and discourage investment in harder to supply areas (unless public funding/subsidy, or cross-subsidies, are made available to overcome higher costs). Individually set tariffs, based on costs specific to individual mini-grid contexts, are more likely to encourage investments in more remote areas.
-Whatever form of tariff regulation is used the critical requirement is that it is clear and transparent, to reduce project development costs and give private financiers confidence that revenues from mini-grids are not vulnerable to arbitrary regulatory decisions and political pressure.
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-Financing for isolated mini-grids will generally align with the delivery model, with publically-owned mini-grids using public finance and privately owned mini-grids drawing on private finance. However, where incomes are lower or system costs higher, some form of public-private partnership is likely to be needed with public funding (eg through grants and subsidies) making electricity from mini-grids affordable to users and the mini-grid systems economically sustainable.
+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.&nbsp;
-User charges are the other main source of funding with connection charges and ongoing tariffs are used to contribute to investment, cover ongoing operating costs and support repayment and return on investment. As with any system supplying multiple users, there is likely to be some element of cross-subsidy between users connected to any individual mini-grid system. Cross-subsidy between isolated mini-grids or between the main grid and mini-grid systems may be appropriate, particularly if a uniform tariff is applied.
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-National energy planning and sharing of market information are key to establishing the planned<br/>extent and timescales for grid extension and hence the scope for isolated mini-grids. Regulatory reform and policy and target-setting are likely to be required to create the framework for isolated mini-grids to be developed. Capacity building or technical assistance may be beneficial where potential developers lack necessary skills and capabilities. User awareness raising and demand promotion are often essential to increase revenues and make mini-grids economically sustainable.<br/>
+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.&nbsp; 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.&nbsp;<br/>
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-<br/>
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-Mini-grids are most appropriate for relatively densely populated areas with higher demand levels which are distant from the grid system, particularly where there is a good local source of energy for electricity generation. Because mini-grids rely on local, small-scale, generation, and their demand profiles often have pronounced peaks (because their users want electricity at the same times of day), their generating costs are usually higher than costs of electricity from larger power plants connected to the main grid, so in areas closer to the grid, where the cost of connecting to the grid is relatively low, grid extension will usually be more economic. In sparsely populated low-demand areas, standalone systems, despite their higher generating costs, may be more economic because they avoid the cost of a distribution system. mini-grids may also, even in areas for which grid extension would be more economic in the longer term, provide a means for achieving energy access more quickly.
+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.&nbsp; 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.
-Mini-grids may be designed to provide any level of electricity access, from “skinny-grid”, which just support lighting and, perhaps phone-charging (Tier 1) to a grid-equivalent service, meeting all household, commercial, industrial and community requirements (Tier 5). In many more remote communities where isolated mini-grids are the most appropriate solution, it is a Tier 2-3 level (to support medium power appliances such as fans, refrigerators, small water pumps and hand tools). In theory, the grid system which is able to call on multiple sources of generation should be more reliable than an isolated mini-grid, but in practice 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. Poor grid reliability is one of the reasons many users turn to mini-grids and standalone systems even in areas where grid connection is available.
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-*ARE. 2014. Hybrid Mini-Grids for Rural Electrification - Lessons Learned [https://ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf https://][https://ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf]
+*<span style="font-size: 16pt; font-family: &quot;Calibri Light";">Clean </span><span style="font-size: 16pt; font-family: &quot;Calibri Light";">Energy Solutions Centre & </span><span style="font-size: 16pt; font-family: &quot;Calibri Light";">iied</span><span style="font-size: 16pt; font-family: &quot;Calibri Light";">. (2015). Policies to Spur Energy </span><span style="font-size: 16pt; font-family: &quot;Calibri Light";">Access<u><span style="font-size: 16pt; font-family: &quot;Calibri Light";">[https://cleanenergysolutions.org/resources/policies-spur-energy-access https]</span></u><u><span style="font-size: 16pt; font-family: &quot;Calibri Light";">[https://cleanenergysolutions.org/resources/policies-spur-energy-access ://]</span></u><u><span style="font-size: 16pt; font-family: &quot;Calibri Light";">[https://cleanenergysolutions.org/resources/policies-spur-energy-access cleanenergysolutions.org/resources/policies-spur-energy-access]</span></u></span>
-*<div>ESMAP (2005), Meeting the Challenge of Rural Electrification in Developing Nations: The Experience of Successful Programs [https://static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT https://][https://static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT]</div>
-*<div><span>EUEI </span><span>PDF (2014), Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs&nbsp;[http://www.euei-pdf.org/sites/default/files/field_publication_file/RECP_MiniGrid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf http://www.euei-pdf.org/sites/default/files/field_publication_file/RECP_MiniGrid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf]&nbsp;&nbsp;</span><br/></div>
-*<div><span></span>IRENA (2016), Innovation Outlook: Renewable Mini-grids, International Renewable Energy Agency, Abu Dhabi [http://www.irena.org/DocumentDownloads/Publications/IRENA_Innovation_Outlook_Minigrids_2016.pdf http://][http://www.irena.org/DocumentDownloads/Publications/IRENA_Innovation_Outlook_Minigrids_2016.pdf www.irena.org/DocumentDownloads/Publications/IRENA_Innovation_Outlook_Minigrids_2016.pdf]</div>
-*IRENA (2016), Policies and regulations to support renewable energy mini-grid [http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_minigrids_2016.pdf http://][http://www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_minigrids_2016.pdf www.irena.org/DocumentDownloads/Publications/IRENA_Policies_Regulations_minigrids_2016.pdf]<br/>
-*World Bank. 2014. From the Bottom Up. How Small Power Producers and Mini-Grids Can Deliver Electrification and Renewable Energy in Africa. [https://openknowledge.worldbank.org/handle/10986/16571 https://][https://openknowledge.worldbank.org/handle/10986/16571 openknowledge.worldbank.org/handle/10986/16571]
 |}

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National Approaches to Electrification – Delivery Model

Revision as of 12:35, 25 June 2018

Contents

Public Delivery Model

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

Private Delivery Model

Internactions wiht other NAE Categories:

Advantages and Disadvantages

Further Informaiton and Guidance

Relevante Case Studies:

Public-Private Partnership Delivery Model

Internactions wiht other NAE Categories:

Advantages and Disadvantages (Including Level of Electricity Provided)

Further Informaiton and Guidance

Relevante Case Studies:

Standalone Systems

Internactions wiht other NAE Categories:

Advantages and Disadvantages (Including Level of Electricity Provided)

Further Informaiton and Guidance

Relevante Case Studies:

References

Authors

Acknowledgements

Authors

Acknowledgements

Public

Private (Non-Governement)

Public-Private Partnership