Bolivia Energy Situation

1.1 Energy Situation

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 67%, one of the lowest in Latin America. Urban access was 87%, while rural access remained as low as 30%.

Bolivia produces oil and natural gas. Thus, it is a net exporter of gas and oil. Electricity is mainly generated by private companies from hydropower (53%), gas (27%) and oil (18%). According to other sources total installed capacity in 2006 was 1,43 GW, of  which 60% was thermal production, which primarily burns natural gas, and 40% hydroelectric. The contribution of other renewables is almost negligible.

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.

Electric power consumption per capita in 2006 was 588 kWh (a 19% increase since 1996). By sector, residential consumption represents 40% of the total, followed by industrial consumption with 28%.

1.2 Institutional set up and actors in the energy sector

The Viceministry of Electricity and Alternative Energy, within the Ministry of Petroleum and Energy, is in charge of establishing policies and designing the regulation for the electricity sector. The Superintendencia de Electricidad (SE) is responsible for applying the regulation.

The electricity sector in Bolivia was privatized in the early 1990s and was unbundled into generation, transmission and distribution.  The electricity coverage in rural areas is among the lowest in Latin America and improving it represents a major challenge in the future and requires the joint efforts from both the public and private sectors. Like in other countries, Bolivia’s electricity sector consists of National Interconnected System (SIN) and off-grid systems (known as the Aislado).

Generation

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. The other two are Empresa Eléctrica Guarachi (EGSA) and Empresa Eléctrica Corani (CORANI).

Transmission

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 is Electropaz, majority-owned by Spain’s Iberdrola; followed by Empresa de Luz y Fuerza Eléctrica Cochabamba (ELFEC), which was owned by the American PPL Global until 2007. The third place is occupied by the Rural Electrification Cooperative (CRE), which operates in the Department of Santa Cruz.

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 organizations 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.

Operators in the off-grid system

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.

Other donors

The World Bank is financing a rural infrastructure project in Bolivia which, among others, plans to install 17,000 solar home systems by 2009. Another project funded by the Global Partnership on Out-based Aid which is administered by the World Bank intends to scale up the installations by an additional 7000 in the next three years.

1.3 Policy framework

• 1.3.1 Poverty reduction strategy
• 1.3.2 Energy policy

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 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. 1 Situation analysis and framework conditions
   • 1.1 Energy situation especially in rural areas
     • 1.1.1 Energy demand and supply in the household sector
     • 1.1.2 Rural electricity supply
   • 1.2 Institutional set up and actors in the energy sector
     • 1.2.1 Public institutions
     • 1.2.2 Electricity companies
     • 1.2.3 Non governmental service providers for rural areas in the field of energy
     • 1.4 Key problems hampering access to modern energy services in rural areas
     • 1.4.1 Obstacles for grid based rural electrification
     • 1.4.2 Obstacles for off grid energy technologies and services

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.