Bolivia Energy Situation

Situation analysis and framework conditions

Energy situation especially in rural areas

Energy demand and supply in the household sector

Bolivia, with a population of approximately 10 million inhabitants, is considered one of the poorest countries in Latin America. While urban areas such as La Paz and Santa Cruz are modern cities with a relatively good supply of modern energy services, the majority of Bolivia’s rural areas are still experiencing a lack of most basic services, including reliable and affordable access to electricity and improved biomass cooking stoves. Thus, in 2005, total access to electricity in Bolivia was 68%, one of the lowest in Latin America. Urban access was 87%, while rural access remained as low as 30%.

Electricity Consumption by Sector (1970-2006)

Bolivia is a significant exporter of hydrocarbons, especially natural gas. Due to low levels of investment in the electricity, and oil and gas sectors, energy supply has started to be a concern. Limited gas availability might delay necessary investments in thermo-generation. Additionally, low levels of investment in the oil sector may result in shortages in the supply of diesel oil, liquefied petroleum gas (LPG) and other oil derivatives. This situation might have an adverse effect on Bolivia’s ability to meet export commitments to Argentina and Brazil. Due to the absence of refineries Bolivia has to import refined petroleum products as well.
Electricity is nearly exclusively generated by private companies from hydropower (40%) and thermal power plants mainly based on gas (60%). The total installed capacity in 2007 was 1,5 GW and the contribution of other renewable sources than hydropower is almost negligible. 85% of the electricity were produced in the Sistema Interconectado Nacional (SIN - National Grid System), while 15% were produced in isolated systems (mainly diesel-driven generators). The demand for electricity rose in the last 20 years dramatically and led into a series of outages and unsatisfied demand. There was a significant rise in the household sector.

Rural electricity supply

Bolivia has one of the lowest rural electrification ratios of Latin America. While urban access was 87%, rural access is as low as 30%. This situation gets even worse considering that the electrification programmes had no significant effect on the rural electrification ratio in the last 10 years.

Bolivia´s Electrification ratio (1995-2006)

Traditional biomass (wood, dung, charcoal and green residue) still accounts for 15% of primary energy consumption and is the third most important source of energy after gas and petroleum. This is mainly due to the important role of biomass for the energy supply in the country’s rural areas. Traditional biomass represents nearly 90% of total energy consumption by rural households and is mainly used for cooking, the remaining 10% are mainly used for Lighting and ICT.
Although the electricity consumption rose in the resident sector the consumption in rural households remains very low (less than 40kWh/month/HH).

Policy framework, laws and regulations

Poverty reduction strategy

Bolivia is one of the poorest countries in Latin America and has one of its highest levels of inequality. The reduction in poverty rates experienced in the 1990s when Bolivia had modest but consistent growth rates was reversed by external and internal shocks at the end of the millennium. The per capita Gross National Income (GNI) amounted to US$1,260 in 2007, and the United Nations Development Program (UNDP) ranked Bolivia 117th (out of 177 countries) on its Human Development Index.
An Interim Strategy Note was signed by the Bolivian Government and the Worldbank in 2009. The mayor focus is on equity. With respect to the energy sector the paper focusses on the development and exploitation of the hydrocarbon resources. the Decentralized Infrastructure for Rural Transformation (US$20 million), which provides alternative energy mechanisms (solar panels) to remote areas, and might help reduce, although not significantly, pressures on energy demand. Depending on performance and Government priorities, a second phase of the programme will be considered.

Energy policy

The Bolivian government’s efforts to improve delivery of energy services to the poor have been quite intensive in recent years. First, the broad energy sector reform programme that comprised among others the privatisation of state utilities, was implemented in the mid-1990s. The reform improved the overall performance of the electricity sector and achieved important coverage gains in urban areas, connecting and providing access to the grid for about 90% of the urban population. The access rate in rural areas, however, has only grown from 13.7% in 1997 to 30% in 2005.

In 2002, the government of Bolivia developed an ambitious rural electrification plan (PLABER – Plan Bolivia de Electrificación Rural) to increase access to electricity in rural areas from 25% to 45% within five years. However, implementation of the plan has been slow due to the ongoing political and economic crisis.

The Decentralized Infrastructure for Rural Transformation Project (US$20 million) is supporting the Government’s effort to improve the delivery of electricity services in rural areas of the country. More specifically, the project is supporting rural converge expansion through Solar Photovoltaic Systems, grid extension to consumers that are close to the grid (densification) and other forms of energy and Information and Communication Technologies (ICT) Investments.

Laws

In the new constitution from 2009, the universal access to services such as electricity is a fundamental right. (Art.20).

The Electricity Law (Ley de Electricidad) establishes the electricity policy in Bolivia. Article 5 defines that the use of water and other renewable resources has to be multiple, rational, integral and sustainable. To ensure this the government can define a minimum share for hydropower in the total production capacity. Furthermore the responsibilities of the public actors and the institutional set up.

In 2006 a new Law for Universal Access to Electricity (Ley de Acceso Universal) was proposed. Under the framework of this Law, the program called ‘Electricity for a Decent Living” has been designed to improve both rural and urban electrification. The short term goal (2006-2010) of the program is to increase rural electrification to 53% (connection of 210,000 new households) and urban electrification to 97% (connection of 460,000 new households). The medium term goal (2010-2015) is to achieve universal access in urban areas and a 70% access in rural ones. In the final stages, rural access would have increased to 87% by 2020 and universal coverage would be reached by 2025. The Law also mandates de creation of a Common Fund for Universal Access to Public Electricity Sevice (FOCO) and creates a co-financing mechanism of the National Government with Prefectures, municipalities and the private sector. However, the Law has not been approved yet, although it is expected that the Law and the mechanisms it creates will be approved soon.

A new Rural Electrification Decree was approved in 2005 (Supreme Decree No. 28567). This new decree aims at increasing rural access through the extension and densification of electric networks, development of renewable energy and a change in the energy mix (substitution of diesel by natural gas, biomass and other renewable energies) and an increase in distribution capacity. The Rural Electrification Decree and its associated regulatory framework encourages stakeholders in the energy sector to establish partnerships with other government agencies to implement the rural electrification plan. An agreement between the Ministry of Public Works, Services and Housing and the Ministry of Education will allow for the installation of solar PV systems in rural areas in conjunction with the literacy program, “I can” (Yo sí Puedo).

Institutional set up and actors in the energy sector

Public institutions

The Viceministry of Electricity and Alternative Energy (VMEEA), within the Ministry of Petroleum and Energy (MHE), is in charge of establishing policies and designing the regulation for the electricity sector. The VMEEA and the Viceministerio de Desarrollo Energético (VMDE) are in charge to develop policies to promote energy efficiency and renewable energy. A Working group of VMDE and VMEEA, the "Unidad de Desarrollo Energético", develops the National Plan for Rural Electrification.

The Superintendencia de Electricidad (SE) is responsible for applying the regulation set by the VMEEA and it grants and supervises concessions. It controls the Comité Nacional de Despacho de Carga (CNDC), which coordinates the activities of the actors in the three markets (generation, transmission and distribution). The CNDC consists of delegates of the relevant companies.

Electricity companies

Like in other countries, Bolivia’s electricity sector consists of National Interconnected System (SIN) and off-grid systems (known as the Aislado). The Bolivian electricity market is strictly divided into the three fields: generation, transmission, distribution. One company is not allowed to work in more than one of this fields. However there is an exception for off-grid systems.

Power Generation:
In 2007 nearly 5,000 GWh were generated in the national grid. Currently, there are eight generation companies in the interconnected system, all of them privately owned. The three largest companies alone represent 70% of the total generation. The largest company serving the SIN is the Compañia Boliviana de Energía Eléctrica (COBEE), which serves the region surrounding La Paz. Furthermore COBEE is the only company, which has both thermoelectric power plants and hydroelectric ones. The other two bigger companies are Empresa Eléctrica Guarachi (EGSA; thermal) and Empresa Eléctrica Corani (CORANI; hydropower).

National grid and isolated power lines

Transmission:
All mayor cities -except Tarija and Trinidad- are connected to the national grid. A line to connect Tarija is projected.
Currently, there are two transmission companies in the SIN, Transportadora de Electricidad (TDE), owned by Spain’s Red Electrica de Espana (REE), and ISA Bolivia, which was created in 2005. ISA Bolivia, which runs 53% of the transmission network in Bolivia, is a subsidiary of Interconexión Eléctrica S.A. (ISA), a corporation controlled by the government of Colombia. The number of companies is limited due to the existence of institutional entry barriers in this sector.

Distribution:
In Bolivia, the six existing distribution companies enjoy a geographic monopoly in their concession areas. The largest company (in terms of sold kWh) is the Rural Electrification Cooperative (CRE), which operates in the Department of Santa Cruz; followed by Electropaz, majority-owned by Spain’s Iberdrola. The third place is occupied by the Empresa de Luz y Fuerza Eléctrica Cochabamba (ELFEC), which was owned by the American PPL Global until 2007

Off-grid and self-supplying systems:
The departments of Beni, Pando and Tarija and the eastern region of Santa Cruz are not integrated in the SIN. As a result, there are vertically integrated operators that provide the service. The most important operators are:

• SETAR (Servicios Eléctricos Tarija, S.A.): 44 MW, serves 56,885 clients
• ENDE (Empresa Nacional de Electricidad): 16.65 MW, serves 28,554 clients
• CRE (Cooperativa Regional de Electricidad): 14.53 MW, serves 4,940 clients.

In some cases, especially in the high plateau, cooperatives and community organizations access the distribution companies’ network and sell electricity to small rural communities. Sometimes, those are organized enterprises that provide the service to middle-size towns, but in most cases, they are small organisations that serve family communities. This situation faces a legal vacuum since the consumers benefiting from these scheme, who do not consume the minimum power established legally established, cannot be considered as regulated ones. In addition, these consumers are localized outside the distribution companies’ concession areas, so they cannot receive the companies’ service. In practice, the distribution companies are reselling electricity to the mentioned organizations outside the legal framework. Accurate information on the number of organizations that operate in rural areas does not exist. However, there are approximately three in La Paz, twenty in Oruro and three in Potosi.

Non governmental service providers for rural areas in the field of energy

Projects implementing NGOs:

• Centro de Promoción de Tecnologías Sostenibles (CPTS), La Paz
• Centro de Información en Energías Renovables (CINER) seeks to contribute to the conservation of natural resources through the rational use of energy. Thereby orienting, assessing, and promoting the exchange of information, investigation, and techonology between institutions, businesses, and people that work in the field of energy, stimulating a relationship between the use and production of energy. CINER is also a CIM-partner.
• Energética is a Bolivian NGO which gives technical assistance for the end users, micro-enterprises, government offices and other institutions in many issues like the energy planning, design, execution and evaluation of energy projects, etc. There is a strong cooperation with CINER.
• Cedesol provides creative market practices to enable the people of Bolivia, regardless of their economic standing, to be able to acquire an ecological stove.
• Consejo Empresarial para el Desarrollo Sostenible (CEDES) works generally on sustainable development and has as well projects on ICS .
• PROLEÑA - BOLIVIA is a sister organisation of the Nicaraguan NGO PROLEÑA and works on improved stoves as well.
• Sobre la Roca - Energías Alternativas is a partner organisation of CEDESOL. It focusses on solar cooking and improved stoves.
• Tecnologías en Desarrollo a non for profit organisation created in 2000 to promote the use of appropriate technology, focusing particularly on renewable technology, especially in biogas.

Commercial service provider:

Biogas:

• Bravotec, Santa Cruz.

Solar:

• Batebol: Batteries for solar appliance
• Enersol, Santa Cruz: PV for rural, commercial or refrigeration appliance and solar pumping.
• Eco Sol, Cochabamba: Solar collectors
• Isofoton: Bolivian subsidiary; PV panels
• Phocos: Bolivian subsidiary; PV and Micro-Hydro
• Pro Sol, Cochabamba: PV
• RC Limitada, Santa Cruz: PV and Winde Energy.

Micro-Hydropower:

• Alternative Energy Systems (AES)
• Phocos: Bolivian subsidiary; PV and Micro-Hydro
• Ecotecnologías Energéticas y Productivas (ECOTEC), La Paz

Wind Energy:

• RC Limitada, Santa Cruz: PV and Wind Energy.

Micro-Finance Institutions: The micro-finance sector in Bolivia is well developed. The Fondo de Desarrollo del Sistema Financiero (FONDESIF) as a public institution is responsible for the development of this sector. There are a lot other institution. Among them the most important are:

• Prodem is the oldest private micro-finance institute. It has subsidiaries in all departments.
• Banco Solidario (BancoSol) is the biggest private micro-finance institute in Bolivia.
• FIE is another important private micro-finance institute. It is specialised in micro-entrepreneurs.
• Banco Los Andes ProCredit is the forth private institute, which grants credits to micro- and small entrepreneurs.
• Fundación para la Producción (FUNDA-PRÓ) gives micro-credits to small entrepreneurs using biomass.
• Fondo de Desarrollo Comunal (FONDECO) is specialised in financial services in rural areas.

Key problems hampering access to modern energy services in rural areas

Obstacles for off grid energy technologies and services

Despite great efforts of the government and foreign donors to improve access to electricity, the majority of the rural poor lacks access to modern energy for lighting, communication etc. . Close to 70% of the population have to rely on biomass for their energy needs. Especially wood and other traditional biomass is widely used for cooking in a very inefficient manner. This issue needs to be tackled urgently since biomass has become scarce in some arid areas. Furthermore, indoor air pollution, resulting from traditional combustion technologies and practices, is causing severe health problems, especially among women and children. Moreover, extensive use of wood for cooking is resulting in deforestation and related environmental problems - since forests are often not managed in a sustainable manner. In addition, most schools and health facilities in rural areas are suffering from a lack of warm water, adequate cooking conditions and means to heat their premises. The responsible municipalities are able to cater to the regular budgets; but they have great deficiencies in channeling their increased financial resources into energy related investments. Their human and institutional capacity to improve access to modern energy for households and community-run social infrastructure institutions is very low.

In nearly all national and municipal support programmes for the productive sector, energy related issues such as technology or reliable energy supply, are missing. This hampers in many cases the development of better processing facilities and value added products in rural areas.

EnDev-Bolivia