Bolivia Energy Situation

1.1 Energy 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.

Bolivia produces oil and natural gas. Thus, it is becoming a net exporter of gas and electricity. Electricity consumption is relatively low but the demand has increased steadily at an annual rate of 3.1% between 1980 and 2002. Electricity is mainly generated by private companies from hydropower (53%), gas (27%) and oil (18%). 17% of total power production is generated by decentralised systems.

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 (much of the hydrocarbon sector might be renationalised soon). 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 over 90% of the urban population. The access rate in rural areas, however, has only grown from 13.7% in 1997 to 25% in 2001. Thus, still more than 575,000 homes are without electricity.

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.

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 new elected government aims to establish a basket fund especially for financing rural electrification activities. The financial means of the energy projects of the Worldbank (WB) and the Inter-American Development Bank (IADB) should be integrated into this fund.

The promotion and strengthening of the productive sector is the main target of the Bolivian government. It plans to build up additional financing mechanisms for small and medium size enterprises. The major challenge is to reduce the unemployment rate which grew up to 8.7% in 2004. It is estimated that 50% of the economically active population works in the informal sector (mostly comprised of SMEs).

1.2 Problem Situation

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 thunneling their increased financial resources into energy related investments. Their human and institucional 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.