Hugo Arriaza
NRECA International Ltd.
14 Calle 13-56 zona 10, Oakland, Ciudad de Guatemala, Guatemala
[email protected]
The government role in rural electrification
There is Governmental concern to encourage the rural electrification efforts to bring electricity to the furthest places of the country. This concern has oriented the governments of the region to prepare a series of steps to facilitate the investment in the electric subsector and to play a solidarity and subsidiary role. In this way, they can fulfill their obligation as defined by the National Constitution, to assure that rural electrification develops in an equitable manner. Examples of such efforts are the electric law in Guatemala, incentives for renewable energy law in Honduras, creation of National Commissions of Energy in the region, and so forth.
Finding niche markets for photovoltaic energy
Institutional inertia in the region to support the rural electrification to hook communities to the Interconnected National Systems, has always dominated the institutional expectative and the creativity for investments. However, lately it is possible to observe that there is concern about the geographical area and niches in which difficult degrees to make conventional electrification are enormous. Definitions of such niches let the renewable resources of energy be more competitive and preferable.
When characterizing the energy consumption pattern in the rural population, it is important to emphasize that those families show a low actual and potential requirement of energy (around 7 kWh per month) for basic needs which are: lighting and entertainment (radio /BW TV). Studies done by NRECA in the region, established average current expenditures of US$ 5-8 per month for lighting. Traditional sources commonly used in the region for rural lighting are: kerosene (used in home-made kerosene container) or by using candles, pine torch or simple 1.5 V batteries. However, based on the rural communities income, there are families with higher energy consumption and a higher capacity and willingness to pay. These higher capacities to pay are based on their economic status in those rural communities, which make them an attractive niche that guides natural interventions from a market eager to attend those needs. Those communities, that are looking for opportunities, generate a social and institutional pressure on governmental entities and cooperation organizations. This has been an important sign for an active government involvement and international cooperation entities to look for resources and creative mechanism to attend this dispersed target - population, poor, low consumption and without general opportunities in non electrified villages.
The key role of intermediaries and communities in electrification by PV
Photovoltaic technologies are performing a key role to attend those niches that are unattractive for rural electrification with grid extension. The institutional concern and communityinvolvement are becoming crucial in the sustained growth of the rural market that can be covered by photovoltaic systems, specially in Guatemala, Honduras and Nicaragua. Considering the capacity to pay, international support and governmental involvement we would estimate a potential market of approximately 200,000 families in Guatemala, Nicaragua and Honduras for the next 10 years in areas without possibilities to be connected to the grid (Dirección General de Energía, Plan Indicativo 1999).
Guatemala
An important characteristic in the Guatemalan situation is the presence of a diverse institutional group promoting and financing photovoltaic projects. Some governmental entities (Fondo Nacional para la Paz – FONAPAZ, Fondo para el Desarrollo Indigena Guatemalteco – FODIGUA, Fondo de Inversión Social – FIS and Ministry of Energy and Mines – MEM), Embassies (Swiss, Japan, Netherlands), international NGO’s (CARE, PLAN INTERNACIONAL, UNDP, etc.) and local organizations that are promoting the technology and working jointly with the communities on rural electrification programs and community centers using photovoltaic systems. There are about 12 local suppliers of integrated packages and components. Siemens, Kyocera, Solarex, Isofoton and Golden Genesis are the main international trade marks for hardware in the country.
A basic kit (hardware and installation) costs approximately between US$ 480 - 560 depending on the installed capacity and quality of the components, the quantity of kits requested and the geographic location of projects. Two credit programs have been established for community projects: CREDIEEGSA (actually not available for PV) and NRECA-BANRURAL (available for PV). Other programs were established for PV projects in Genesis Empresarial and FUNDAP, but they are currently suspended because communities want are demanding to be connected to the grid and paid by the trust fund. Such funds from the credit programs are used to complete the financial scheme for the projects, where are also participating funds from the international cooperation and from the governmental entities. The annual interest rate in credit programs in the NGO’s normally is about 30% in local currency and the approval procedure also requests collateral (normally the equipment itself is committed), income evaluation and debt history. The amount of the loan normally is to complement other funds.
The Ministry of Energy and Mines (MEM) has developed an important leadership providing funds for implementation projects using photovoltaic systems. Considering the group of national and international entities involved in the PV dissemination, it is estimated that an amount of approximately 2,800 systems has been installed at national level. About 350 of these systems are installed in community centers such as schools, health clinics and churches. MEM has kept the leadership in investing in SHS. At the moment, they are defining a new role as a facilitator. They look for alliances to leverage their scarce funds and to encourage the participation of local NGOs to maintain the leadership in coordination and to implement large- scale SHS projects as demanded by the large non electrified area.
The lack of institutionalized support mechanisms in the post-project stage of the photovoltaic projects has been one of the main hindrances to make photovoltaic technology accepted and purchased by the people. Support is needed to follow the communities and to identify weaknesses in the process of transference and learning. However, investors, support programs and governmental agencies do not provide enough funds to finance the post-projects stages (evaluation, training, productive uses and so on). This lack of vision made that projects were abandoned. Considering the relatively large amount of SHS that has been installed, just a few isolated and not systematic evaluations of photovoltaic projects were made. The most effort was done by the Minister of Energy and Mines, Solar Foundation and NRECA, with active participation in projects such as: San Buena Ventura Project (build by NRECA-Sandia and
evaluated by Fundacion Solar-Universidad del Valle), Projects in Lanquin and Chiquimula (build and evaluated by MEM), School Lighting Project (build and evaluated by NRECA). MEM has just finished a rapid appraisal of their projects that include about 1200 photovoltaic systems5. They have considered practical issues, technical performance and basic problems under real conditions of use. A similar approach is being developed by NRECA to perform a continuous improvement plan for the institutional methodology. Solar Foundation / Winrock International Group is implementing two initiatives for monitoring system performance. The first initiative, Metrics, is sponsored by Sandia National Laboratories and will review the performance and failures in about 350 PV systems. The idea is to investigate component failure, system integration and community acceptance. In the second initiative, as part of the Post-Mitch program, CARE in Alta Verapaz will define indicators for designing and monitoring PV projects. The first results of the evaluation of the PV projects in Guatemala show the need for a systematic follow-up to identify weaknesses in the stability of the project caused by an inappropriate transfer of technology to the end user. It has also been learnt to strengthen the organizational and managerial capabilities, to establish of a seed fund for regulatory and other non-technical issues that may have strong effects on the sustainability. Field visits, interactive research in their local languages and practices focused on weaknesses are becoming common ingredients for a more effective practice. A common mistake at the beginning was to define the men as the target for the training. Later, the emphasis was changed to women and children who normally spend more time in house, while the men go out to work in coffee, sugar and urban opportunities depending of the season.
The results of the rapid appraisal show that the technology has an appropriate performance according to the needs. However, the above-mentioned problem of communication, lack of follow up and the cultural identity create specific problems in each specific site that affect the transfer process of technological, social and managerial knowledge to the communities. As an example, good projects (for example in El Jute, Huité, Zacapa, Guatemala) failed when the local organizational structured is weak and lack of trust in the local leaders do not stimulate the families to deposit their monthly payments for replacement of system components.
The entities involved in PV technology promotion suggest that there exists a common filling: lack of sound, deep and statistically verified information from field evaluations of PV projects. Such data will help to understand what is really happening with our assumptions about “end users’ needs and the hardware”. It remains to be investigated whether the assumptions, about the expected performance of the components to fulfill their needs are appropriate, whether the time of use per load is correct, and the technical losses, safety measures and security level as considered in the design are as expected or the weather effect on the autonomy level is cost effective. In addition, it will help to evaluate the need of certification of the components and installations and specially to monitor the impact of the teaching-learning process in target groups and decide if modifications have to be done to the methods for dialogue and approach of the targets groups. These efforts will improve the expected sustainable benefits from the technology, when it is adopted and adapted to the living conditions of the end user.
The Director of Energy of the Ministry of Energy and Mines announced the creation of a National Coordination of Rural Electrification that will take care of the quality standard in the hardware and the procedures used by the project implementers. Governmental agencies will participate in this coordination unit and will follow the proceedings.
It was reported (by the entities involved in PV Projects) that the lack of an entity and of funds for appropriate technical assistance, project preparation and evaluation have created misunderstanding and confusion in the end users. Communities do not know where to go to present their studies when they look for financial assistance. ANER (National Association of
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Non Electrified Communities) was organized to support the organization of community committees and to guide them in presenting their pre-investment studies prepared by NRECA. This mechanism is just emerging and is not institutionalized by other actors.
The coming months promise an appropriate availability of funds for photovoltaic projects. While the central government is providing its full support and funds to increase the conventional rural electrification trust fund (with US$ 334 millions to provide electricity to 283,000 families), the group of international entities committed with rural developed in coordination with National Rural Electric Cooperative Association (NRECA) have proposed a joint strategy to work on a joint complementary rural electrification plan. This effort has incorporated the results of the pre-evaluations done, especially a strong support scheme in the post-installation stage to create a full community involvement and to define responsibilities on initial investment and about the mechanism to administrate, operate and maintain the systems. NRECA’s allies for using such strategy in the PV communities are: Minister of Energy and Mines (with scarce funds availability), Switzerland Embassy, Japanese Embassy, USDA- Electricity for Progress Program (confirmed with an available fund approximately $1.3 millions for rural electrification. An important part of the fund, according to the demand, is available to be used for PV projects), USAID-NRECA and its Post-Mitch Program (with about UD$1.5 millions to invest directly in clean energy in the region), the Swiss Embassy – NRECA - MEM and its solar fund (propose a mixed credit of US$ 4.8 millions for photovoltaic projects).
Great intents for extensive rural electrification with photovoltaic panels have failed, such as the one by Total Energy. This plan considered to implement PV in Guatemala, Nicaragua and Costa Rica using a pre-paid mechanism for an integrated service under the Community Service Utility concept. However, in this plan the market and regulatory setting is not clearly defined. Lack of policies to support these efforts and lack of definition of concession area to be electrified using PV could be the main barriers that affect the extensive efforts to promote PV. A better scenario could be defined by the actual trust fund available for grid connected rural electrification program that have funds only for 283,000 families in 2660 villages6, leaving out about 500,000 additional families.
Guatemala is taking the leadership in the use of PV panels because its advanced privatization scenario is defining who will be part of communities to be connected and who not. A group of NGO’s and the international cooperation is doing intensive labor looking for a mechanism to encourage investments in the communities out of the governmental rural electrification plan using the trust fund. The rest of central America is coming behind Guatemala, learning the lessons of the privatization process in Guatemala. Guatemala’s government canceled the rural electrification tasks budgeted in the wide range of involved entities, concentrating the governmental effort in above mentioned trust fund that will finance only grid extension. Entities affected by that decision was FONAPAZ, FODIGUA, FIS, MEM and Local Development Councils – Executive Secretariat of the Presidency.
Honduras and Nicaragua will follow with the privatization of electric distribution service and that definition will also clarify the trend for the coming efforts in rural electrification.
Honduras
In Honduras there were not much investment in Rural Electrification, specially considering that rural electrification didn’t have a specific responsible to manage the problem. Traditionally, ENEE is responsible for the grid extension programs, but it has no funds or a systematic program for rural electrification. According to technicians of ENEE, they were not in the past
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nor will be in the future interested to use photovoltaic technology for rural electrification. Some governmental efforts have been done to promote investments in rural electrification, such as FOSODER, the seven cities initiative, the western rural electrification plan with KFW’s funds. None of the initiatives have put together the funds to go ahead with the projects, specially addressed to extend the grids and to strengthen the transformation and distribution system. Under such circumstances, with ENEE as leader in rural electrification in the main government, there was no chance for rural electrification with photovoltaic technology.
The CARES Program (Central American Rural Electrification Support) encouraged ENEE’s decisions makers and policy makers to consider rural electrification and the productive uses to facilitate rural development. Again, lack of funds and programs in ENEE created spaces for NGOs interested in rural communities, by creating small funds and affordable mechanism to implement PV systems in isolated villages. This led to the ENERSOL Program, that later changed to ADESOL Program, and to AHDEJUMUR (Honduran Association for Rural Youth and Women Development), which started credit programs for solar panels.
The central Government created SERNA (Secretary of Energy, Natural Resources and Environment), which brought big changes to encourage renewable energy projects in the country. SERNA came to integrate the efforts from the NGOs and the international cooperation and also to guide the governmental effort to promote clean energy. The legal framework delegated to SERNA the responsibility for the leadership in energy, including rural electrification policies. SERNA will have to go beyond the formal frame delegated, being creative to look for appropriate alliances to create financial mechanisms to encourage the private sector to invest in clean energy and to leverage the community efforts to attend renewable energy projects.
Actually three formal suppliers are attending the local demand and have developed alliances with other sub suppliers at departmental standard.
There is also the presence of international cooperation entities (FAO, UNESCO, USAID, GEF- PNUD), with pilot projects to promoting their approach to the local governments and institutions to encourage the market of photovoltaic technology. Complementary, SERNA is creating the structure, the alliances and looking for international cooperation to promote clean energy. According to the actual coverage by the grid, there are a lot of zones where PV panels are the only chance to bring electricity to the villagers. Intense efforts are done by SERNA and the Congress to encourage alliances among the National Government and international community.
Regarding to the system evaluations in the country, lack of access to the information from the responsible entities made difficult to know their experiences. SOLUZ, ADESOL and AHDEJUMUR have been promoting their financial scheme as a key factor for technology dissemination. However, problems with their strategies, lack of funds and follow-up are the cause for the low growing rate in their programs. The causes of this low growing rate are not clear; the responsible entities did not respond to our questions.
It is very important to study the strengths and weaknesses of the Honduran cases to analyze the low increase in the technology dissemination and to establish a relationship between acceptance and sustainability and community participation. Honduras has been a case with slow technology adoption rate where foreign entitities managed the leadership in the technology. Lately, people with appropriate background in rural electrification and renewable resources management are making decisions in SERNA, that could change the scenario for the photovoltaic technology. Also lately, the European Community, UNDP-GEF, USAID and others entities are strengthening alliances with local and regional entities to implement projects in compliance with the Clean Development Mechanism, where PV projects are a key part.
Nicaragua
Efforts in Nicaragua have been made to improve the living standards in the rural area through local initiatives or pilot projects. The Fenix Group, for example, is taking the leadership in rural electrification by using solar panels manufactured locally using disposable cells from foreign industries as raw material. The homemade solar panels do not offer the same level of efficiency as the ones manufactured and certified under international standards. However, they are accepted by the end users and Fenix is becoming a low cost and affordable solution to the isolated communities without expectance for connection to the national system. They have been promoting their solution through the region with less penetration in the market. Also, the Fenix Group offers training for trainers and for leaders in their regions. This disseminate the technology through community leaders and have community activities such as the Solar