Difference between revisions of "NAE Case Study: Philippines, Islanded Distribution by Cooperatives"

From energypedia
***** (***** | *****)
m
***** (***** | *****)
m
Line 8: Line 8:
 
= Description<br/> =
 
= Description<br/> =
  
−
The Rural Energy Development Programme (REDP) aimed to increase energy access from micro-hydro systems, based on a mobilization process which put the community at the centre of planning and implementation. After its launch in 1996 as a small pilot initiative in five remote hill districts, the programme was scaled-up in response to the national Hydropower Development Policy of 2001. Three phases addressed the cycle of pilot operation, expansion, replication, mainstreaming and institutionalization. The programme expanded from 5 to 40 districts in its third phase from 2007-11. Communities were selected based on technical feasibility and requests from residents willing to implement, manage and partly finance each proposed scheme, thereby ensuring ownership and timely execution. The REDP operated at three levels. At the community level, activities focused on planning, implementation, operation, and maintenance of energy systems. This included establishment of Community Energy Funds where revenues - from grants, subsidies, charity, loans and tariff collection - were deposited, and payments made for operations, repairs and maintenance (done entirely by the community).&nbsp; Tariffs were set at local level, with flat tariffs ranging from RS 0.25-2/W/month applied in most cases,. At the district level, activities focused on building capacity to plan, manage, and monitor the rural energy development process.&nbsp; At the national level, activities focused on policy support and coordination based on lessons learnt from decentralized local operations.<span style="font-size: 0.85em;"></span>
+
Successful electrification in the Philippines was achieved on the basis of central funding and the implementation of islanded distribution systems operated by rural electrification cooperatives. Following a Government commitment to the co-operative model, the National Electrification Authority was formed in 1969 to manage rural electrification.&nbsp; By 1973, the NEA had established 46 RE co-operatives, and 119 by 1985.&nbsp; BY 2002, 88% of Filipinos had access to some form of electricity.&nbsp; To address concerns over poor customer service in some areas, a private sector participation scheme for power generation was introduced based upon the privatization of generation, transparency in pricing, and true cost recovery measures. Under this new scheme, the electric co-operatives were required to outsource their power supply requirements and private sector companies gradually took over the role of generating the required power.&nbsp; Each of these New Power Producers (NPPs) generates electricity and sells it to a Distribution Utility (DU) for distribution within its franchise area. The NPP is an entity that is financially and technically capable to take over the generation capacity of NPC-SPUG operators in the off-grid areas, either by building a new plant or buying the SPUG assets.&nbsp; Early public sector support for electric co-operatives has thus&nbsp;<span style="font-size: 0.85em;">established an opportunity for private sector suppliers who are now in a good position to satisfy the needs of a sustainable market.</span>
 +
 
 +
<span style="font-size: 0.85em;"></span>
  
 
<span style="font-size: 0.85em;"></span>
 
<span style="font-size: 0.85em;"></span>
Line 14: Line 16:
 
= Context =
 
= Context =
  
−
Nepal has no known major oil, gas, or coal reserves, and its position in the Himalayas makes it hard to reach rural communities, many of which&nbsp; are extremely remote. Nepal has one of the world’s lowest rates of per capita electricity consumption, with an average in&nbsp; 2007 of 86 kWh/year rising to 139kWh/year by 2014. Between 2005 and 2014 peak demand more than doubled from 557 to 1200 MW. In the same period of time annual electricity production increased from 2642 GWh to 4631 GWh. Out of these, 3558 GWh were produced domestically, while 1072 GWh were imported from India.&nbsp; 88% of the population relies on traditional biomass fuels for cooking and heating; about 45% of the population has access to electricity (only 8% in rural areas).&nbsp; The National Electricity Authority (NEA) serves only 15&nbsp;% of the total population with electricity supplied from the main grid and, for these customers, average electricity supply is less than eight hours per day, with load shedding accounting for up to 16 hours during winter.&nbsp; (This level of intermittency means that even those consumers who are connected to the national grid may receive electricity for only 8 hours per day, which means at most a Tier 3 energy supply).&nbsp; The remaining 30% of the population with electricity access are served by the thousands of small installations (e.g. diesel gensets, micro-hydro systems, solar home systems, small island mini-grids.) that are mostly installed at the users' premises in Nepal. There are however untapped hydropower resources of about 83,000 MW, with 43,000 MW deemed to be economically viable for development.
+
The Philippines is divided into three electrical grids, one each for Luzon (largest island), Mindanao (second largest) and the group of Visayan Islands.&nbsp; The total installed capacity in the Philippines (in June 2016) was 20,055MW, of which 14,348 MW was on the Luzon grid. The all-time peak demand on Luzon was 9,726 MW, on Visayas was 1,878 MW, and on Mindanao was 1,593 MW.&nbsp;&nbsp; The fuel sources for electricity generation are 43% coal, 24% natural gas, 13% geothermal, 12% hydro, 7.5% oil, 0.5% other renewable energy sources (including wind, solar, biomass).&nbsp; Power generation is zero-rated for value added tax (i.e. not subject to 12% VAT) to ensure lower rates for end-users. Total electrification of the country was announced as a national policy objective in 1960.&nbsp; This was addressed using the rural electrification co-operative model (based on US experience).&nbsp; The Electrification Administration (EA) was established by the government in 1960 to implement its new policy.&nbsp; This became the National Electrification Administration (NEA) in 1969, responsible for implementation. Approximately half of all households in the Philippines, and the majority in rural areas, now rely upon electric cooperatives for power. Power generation is not considered as a public utility operation, which means that interested parties do not need to secure a congressional franchise to operate a power generation company. The National Power Corporation (previously the national utility but, following deregulation, now focussed on non-commercial electrification targets across the country) uses its Small Power Utilities Group (NPC-SPUG) to provide electricity in off-grid areas, particularly in areas where private investors hesitate to come in due to lack of infrastructure and political and security concerns. In 2009, NPC was able to install 12,718 kW of new capacity in 34 SPUG areas nationwide.
  
 
= Objectives =
 
= Objectives =
  
−
REDP was launched in 1996 with the aim of expanding energy access to remote rural communities, strengthening capacities of energy institutions and establishing a national rural energy policy framework.&nbsp; The ultimate objectives were:&nbsp; i) develop best practices for rural electrification, bringing new models and continuous learning for rural energy access and poverty alleviation in Nepal; ii) build local capacity to increase energy access through a community management model in 40 districts, iii) develop productive and other end uses, including for women and the socially excluded; iv) support the AEPC for energy planning and the preparation of a Rural Energy Policy; and v) pilot innovative approaches for long-term micro-/mini hydro. There were few quantitative targets, though the aim for phase II was to provide 3MW of increased supply (though the outcome fell 20% short of this aim).
+
This initiative aimed to provide sufficient power to meet highly decentralised electricity demand in an efficient and sustainable manner, providing an acceptable customer service whilst reducing the long-term costs and subsidies.&nbsp; The objective was to supply the off-grid islands in the Philippines in the most cost-effective manner, which initially involved the establishment of electric co-operatives.&nbsp; Inefficiencies subsequently arising in&nbsp; power sector meant a revised objective to push a new set of players from the local private sector to invest in the power supply sector by offering them the right incentives, and by convincing them of the strong potential local growth prospects once power infrastructure constraints were addressed.
  
 
= Legal Basis =
 
= Legal Basis =
  
−
The Renewable Energy Development Programme (REDP) of Nepal was an international co-operation programme supported by the World Bank and United Nations Development Programme, in partnership with the national Government.&nbsp; The Alternative Energy Promotion Centre (AEPC), the managing agency for REDP, is a Government entity. The Department of Electricity Development (DoED), oversees the issuing of licenses for hydropower projects, though no licensing is required for projects of up to 1,000 kW capacity.
+
Conversion of NEA into a public corporation by Presidential Decree No. 269 in 1973. In 2001, the Electric Power Industry Reform Act (EPIRA), Republic Act No. 9136, was passed by Congress to ensure the quality, reliability, security, and affordability of the supply of electric power. Resolution no.21, Series of 2011: A Resolution Adopting the Amended Guidelines for Setting and Approval of Electricity Generation Rates and Subsidies for Missionary Electrification Areas - provision for electrification costs of SPUG at remote sites to be met by consumers in grid areas (i.e. cross-subsidy) through the UCME component of power bills, as provided by EPIRA.
  
 
= Institutions, Roles and Responsibilities<br/> =
 
= Institutions, Roles and Responsibilities<br/> =
  
−
Many entities – including the government, non-governmental organizations, international organizations, and private institutions – are involved in promoting renewable and rural energy service delivery in Nepal. Overarching authority for electrification efforts is provided by the Nepal Electricity Authority (NEA), established in 1984, whose primary objective is to generate, transmit, and distribute adequate, reliable, and affordable power by planning, constructing, operating, and maintaining all generation, transmission, and distribution facilities in Nepal’s power system. Thus, NEA’s engagement in rural electrification is primarily through the national grid system. Off-grid, decentralized energy service provision is led by the Alternative Energy Promotion Centre (AEPC), established in 1996 as an autonomous agency within the Ministry of Environment (MoEnv). AEPC presides over various rural energy projects, including the Rural Energy Development Programme (REDP). REDP projects received about 45% grant finance through the programme (from the World Bank and UNDP), a 16% subsidy from the Government of Nepal, and about 10% from Village and District Development Committee (VDC/DDC) funds, representing a total subsidy of approximately 70%.&nbsp; The remainder was paid via the tariffs collected from users.&nbsp; (The total programme cost for the Phase III was USD 35 million, which consisted of&nbsp;: UNDP – USD 3.4 million; World Bank – USD 16 million; GoN – USD 5 million; and community – USD 10.6 million). Private sector firms such as the Rural Energy Services Centre (RESC) provided technical support services to communities for feasibility studies and installation, operation and maintenance of RE systems.
+
In 1969, the National Electrification Administration (NEA) was created as the implementing agency of the country’s total electrification policy.&nbsp;&nbsp; The NEA was the originator of the programme to establish electric co-operatives as the principle supplier of electricity across the Philippines.&nbsp; The Co-operative Development Authority (CDA) was created in 1990 as the lead Government agency in advancing and sustaining the growth of the cooperative sector by establishing support systems and strong links with stakeholders.&nbsp; Co-operatives now had the choice whether to register with NEA and/or CDA.&nbsp; CDA's vision is a strong cooperative sector that helps to overcome poverty and strengthen the middle class in the Philippines.&nbsp; The National Power Corporation’s Small Power Utilities Group (NPC SPUG) is in charge of generating power for areas not connected to the main grid.&nbsp; The SPUG held the electricity supply monopoly in the islands and rural areas before the programme to encourage New Power Producers (NPPs) to increase the efficiency of remote power supply.&nbsp; NPPs&nbsp; are private companies that took over and overhauled SPUG’s plants or constructed new power plants, including hydro plants.&nbsp; The Energy Regulatory Commission is an independent, quasi-judicial regulatory body established to regulate electric power service.&nbsp; The Power Sector Asset & Liabilities Management Corporation engages in the management, sale, and privatization of existing generation assets of the National Power Corporation (NPC) and independent power producer (IPP) contracts; it also manages the outstanding obligations of the NEA's electric cooperatives.
  
 
= Interventions<br/> =
 
= Interventions<br/> =
  
−
REDP focuses on involving local communities and building institutional capacities and local skills.&nbsp; It created a Rural Energy Fund at the district level (using the grant funds from the WB, UNDP and the Government) that provided subsidies for mini-grid electrification. Micro- and mini-hydropower systems (up to 1,000 kW) were made exempt from certain taxes, royalties, and licensing requirements.&nbsp;&nbsp; Key elements of the REDP interventions included: i) community mobilization to encourage and support them in undertaking productive activities resulting in strong social capital, economic growth, and environmental sustainability. Even the poorest families were made capable to own and use the systems, and pay a tariff for the electricity consumed; ii) broad-based participation to ensure transparency and consensus-based decision-making by all households; iii) support for institution building, helping to create District Energy and Environment Sections in the District Development Committees (DDCs); iv) training for local NGOs, community groups, and the private sector to strengthen their technical and managerial skills to deliver and manage micro-hydro systems.
+
In 1970, NEA drafted a total electrification program, based on electricity supply through co-operatives, which was intended to be realized by 1990.&nbsp; Under NEA, electric co-operatives (ECs) were designated as the country’s primary electricity distribution system. NEA was given the authority to establish and oversee the ECs, to make loans, to acquire physical property and franchise rights of existing suppliers, to borrow funds, and to extend subsidies to ECs.&nbsp; It served as a regulator with extensive authority over the development and business conduct of the ECs.&nbsp; These electric cooperatives are mostly autonomous and governed by democratically elected boards.&nbsp; Although the original total electrification target was not achieved, only 13% of the 47,000 (districts/villages) remained un-electrified by the end of 2002.&nbsp; However, a World Bank report in 2000 noted a significant number of areas with poor-performing ECs where numerous households still lacked connections, faced frequent power cuts, and, in general, were poorly served by their ECs.&nbsp; The study concluded that poor EC performance was largely due to weak corporate governance, particularly political interference in EC management.&nbsp; The main driver behind subsequent improvement was the introduction of New Power Producers (NPPs) through a competitive selection process for 15-year local concessions that were anchored by a power supply agreement (PSA) with the electric cooperatives.&nbsp; NPPs were selected based on the lowest true generation cost proposed.&nbsp; An output-based aid subsidy was offered by the national utility (NPC), aiming to cover the difference between the true generation costs and the price paid by the end-users.&nbsp; The systems introduced were mostly based on power generation from diesel - no renewable energy project has been proposed so far (due primarily to the lack of awareness of renewable energy options).&nbsp; NPPs act as market delivery partners of the Government in achieving the goal of facilitating access to electricity even in the remotest areas of the country.&nbsp;&nbsp;
  
 
= Impacts Achieved<br/> =
 
= Impacts Achieved<br/> =
  
−
The impressive performance of the REDP is reflected by its outputs, which included the preparation of pragmatic policy and regulation based upon the lessons learned, and the internalization of rural electrification development at country, district and community levels. 317 micro-hydro mini-grids with a cumulative capacity of 5,814 kW were implemented,&nbsp; benefitting almost 350,000 people living in rural areas unlikely to be grid-connected for at least five years. At the end of the project period, an additional 137 micro hydro systems were at an advanced stage of installation and expected to generate 4,441 kW, providing electricity services to an additional 250,000 people (42,000 households).&nbsp; By 2014, more than 1,000 micro-hydro plants with total generation capacity of 22 MW had been developed, providing off-grid electricity access to 20% of the population, including power for agro-processing and other productive activities. Local governments have integrated the REDP approach into local development planning (rather than leaving isolated, donor-funded projects) and they have supported the capacity development needed for sustainable impact.
+
Prior to the NPPs, the services provided by the SPRUGs were characterized on the generation side by poor reliability and high costs (and therefore the high level of subsidies); and on the distribution side by less-than-efficient distribution utilities or rural electric cooperatives. After the competitive engagement of the private sector NPPs, the prices proposed were much lower than former prices and therefore the level of subsidies also dropped - the service became much more cost-effective.&nbsp; The objective is to reach a point where the installation would become commercially viable, especially thanks to the strong private development programme that has been implemented.
  
 
= Lessons Learned<br/> =
 
= Lessons Learned<br/> =
  
−
REDP’s community-based approach to energy planning and managing rural energy systems has proven to be an effective model for decentralized energy solutions, providing an attractive alternative to what had historically been a weak and centralized government approach to rural energy development.&nbsp; Key drivers of success were: national ownership and commitment, local engagement, catalytic finance, community mobilization and local partnerships, and capacity development at all levels.&nbsp; The funding arrangements were particularly significant, including a relatively well-functioning subsidy scheme and the mini-hydro revolving debt fund, with communities financing an increasing proportion of the costs as the programme progressed.
+
For the initial introduction of the electric co-operatives, the driving force was the commitment from Government and the associated resources allocated to reach the target of total electrification.&nbsp; Although access to electricity was dramatically improved, there was insufficient guidance to secure the effectiveness of management of the co-operatives in the longer-term.&nbsp; Concerns over the governance of the co-operatives were highlighted after the World Bank's assessment, which required a new approach to secure greater cost-effectiveness and quality of service.&nbsp; These issues were successfully addressed by the introduction of the New Power Producers. Key factors making success possible were:
 +
 
 +
i) project developers remained technologically neutral in order for the private companies to propose their own solutions with their own cost;
 +
 
 +
ii) developers tried to create transaction structures that served consumers and balanced the interests of the off-taker and the private provider on a sustainable basis;
 +
 
 +
iii) from inception, a major effort was made by the programme promoters (the Energy ministry and the IFC) to set up information, communication, and education programs for national and local stakeholders.
 +
 
 +
It was a long process to get local authorities and cooperatives, as well as the private sector, on board for the tranistion required to a more efficient, customer-oriented operation.&nbsp; From this experience, some of the key constraints that needed to be addressed included the lack of awareness or the most relevant technologies; inefficient distribution utilities or rural electrification cooperatives; and&nbsp; poor reliability/high costs of systems (and therefore the high level of subsidies required).
  
 
= Effectiveness<br/> =
 
= Effectiveness<br/> =
  
−
The micro-hydro power systems constructed with support from REDP, have a cost range of US$1280-1780 per kW.&nbsp; The investment cost per connected household (cost of micro-hydro infrastructure and&nbsp; village distribution system) is estimated at about US$ 325 of which approximately US$70 is paid by the customer (for internal wiring and a connection charge).&nbsp; This is good value for customers, who have reduced their average annual household spending on energy by US$22 (from US$41 to US$19), which represents a payback period of about 3 years for an improved and far more convenient service.&nbsp; It also reflects well on the government support that has been provided (with input from the United Nations Development Programme), particularly the funding to offset capital costs, which is otherwise a key barrier. The REDP has been recognized as a "best practice" programme, receiving awards in various national and international events for the approach and achievements made. It should however be recognised that REDP is aimed to advance rural households from no electricity supply to the first step on the energy access ladder.&nbsp; Committed finance of US$325 per household at an average of US$1500/kW equates to energy capacity of less than 200W which is enough to provide a tier 2 level of energy access at best.&nbsp; The REDP has made very positive process, but represents just a foundation for the increased power supply required to meet the customers' social and economic development needs.
+
The electric co-operatives provided the basis for widespread access to affordable power supplies in the remote, islanded areas across the country.&nbsp;&nbsp; The availability of a relatively cheap source of power through this&nbsp; rural electrification facilitated investments in agricultural infrastructure, business and industrial enterprises, health and environmental sanitation facilities and services, and educational facilities and services which brought about significant changes in productivity, employment, and income. The introduction of New Power Producers significantly improved the cost-benefit for rural electrification.&nbsp; However, the ongoing cost of required subsidisation remained significant.&nbsp; In 2016, NPC requested approval to collect approximately US$470m from electricity end-users for 2015 and 2016 in order to cover the subsidies required for rural areas (this is the so-called universal charge for missionary electrification, UCME).&nbsp; The UCME is included in the bills of all electricity consumers and is needed to cover the subsidy for remote areas.&nbsp; It is also used to maintain the reliability and stability of sufficient funding sources for NPC's fuel and other cost requirements including guaranteed sufficient payment for NPPs and RE developers.&nbsp; Overall, although the electrification process introduced with NPPs has achieved great improvements over the previous SPUG-driven approach, the continued dependence upon a significant national subsidy must raise some doubt over its sustainability.&nbsp;
  
 
= References =
 
= References =
  
−
*[http://www.aepc.gov.np/rerl/uploads/publication/6attachment2.pdf http://www.aepc.gov.np/rerl/uploads/publication/6attachment2.pdf]
+
*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://ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf]
−
*Bouille et al (2010). Policies For Energy Access [https://pdfs.semanticscholar.org/abc5/eeed05d6f30d72169c29cad7f6f69b8002ad.pdf https://pdfs.semanticscholar.org/abc5/eeed05d6f30d72169c29cad7f6f69b8002ad.pdf]
+
*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 https://books.google.co.uk/books?id=iOBi17Pr3fIC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false]
−
*[https://www.climate-eval.org/sites/default/files/evaluations/364 Rural Energy Development Programme.pdf https://www.climate-eval.org/sites/default/files/evaluations/364 Rural Energy Development Programme.pdf]
+
*http://www.bworldonline.com/content.php?section=TopStory&title=subsidy-bill-for-off-grid-sites-to-drop&id=94553
−
*[https://www.dmu.ac.uk/documents/technology-documents/research-faculties/oasys/project-outputs/working-papers/wp17---nepal-case-study.pdf https://www.dmu.ac.uk/documents/technology-documents/research-faculties/oasys/project-outputs/working-papers/wp17---nepal-case-study.pdf]
+
*https://www.doe.gov.ph/expanded-rural-electrification
−
*[[Nepal Energy Situation|https://energypedia.info/wiki/Nepal_Energy_Situation]]
+
*https://www.doe.gov.ph/sites/default/files/pdf/issuances/dc_2014-09-0018.pdf
 +
*https://en.wikipedia.org/wiki/Electricity_sector_in_the_Philippines
 +
*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://static.globalinnovationexchange.org/s3fs-public/asset/document/Meeting0the0Ch10Discussion0Version0.pdf?q3Tol9Bdn4yH4J43t3P9t3hq5lh6ZipT]
 
*EUEI PDF (2014), Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs. Eschborn [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_mini-grid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf]
 
*EUEI PDF (2014), Mini-grid Policy Toolkit: Policy and Business Frameworks for Successful Mini-grid Roll-outs. Eschborn [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_mini-grid_Policy_Toolkit_1pageview_(pdf,_17.6MB,_EN_0.pdf]
−
*[https://www.giz.de/fachexpertise/downloads/2013-en-bhupendra-pep-informationsworkshop-mini-grids.pdf https://www.giz.de/fachexpertise/downloads/2013-en-bhupendra-pep-informationsworkshop-mini-grids.pdf]
+
*IED. 2013. Low Carbon Mini Grids. Identifying the gaps and building the evidence base on low carbon mini-grids [http://www.ied-sa.fr/index.php/fr/ressources-documentaires/publications/send/2-publications-ied/19-gmg-dfid-ied-nov-2013-vol-1.html http://www.ied-sa.fr/index.php/fr/ressources-documentaires/publications/send/2-publications-ied/19-gmg-dfid-ied-nov-2013-vol-1.html]
−
*[http://www.microhydropower.net/download/mhpcosts.pdf http://www.microhydropower.net/download/mhpcosts.pdf]
+
*http://www.nea.gov.ph/; http://industry.gov.ph/national-electrification-administration/
−
*[https://www.researchgate.net/profile/Bikash_Sharma2/publication/237803040 https://www.researchgate.net/profile/Bikash_Sharma2/publication/237803040]
+
*NRECA, (Year Unknown), Guides for Electric Cooperative Development and Rural Electrification [http://www.nrecainternational.coop/wp-content/uploads/2016/11/GuidesforDevelopment.pdf http://www.nrecainternational.coop/wp-content/uploads/2016/11/GuidesforDevelopment.pdf]
−
*[https://www.stimson.org/sites/default/files/file-attachments/Developing_Nepals_Hydroelectric_Resources_-_Policy_Alternatives.pdf https://www.stimson.org/sites/default/files/file-attachments/Developing_Nepals_Hydroelectric_Resources_-_Policy_Alternatives.pdf]
+
*http://www.partnership-africa.org/sites/default/files/13-Edith-Bueno-Rural-Electrification-in-the-Philippines.pdf
−
*[http://www.undp.org/content/undp/en/home/ourwork/environmentandenergy/projects_and_initiatives/rural-energy-nepal.html http://www.undp.org/content/undp/en/home/ourwork/environmentandenergy/projects_and_initiatives/rural-energy-nepal.html]
+
*Waddle, D. (2012), Principles of Successful Expansion of Rural Electrification Programs Pacific Energy Summit, Summit Papers [http://www.nbr.org/downloads/pdfs/eta/PES_2012_summitpaper_Waddle.pdf http://www.nbr.org/downloads/pdfs/eta/PES_2012_summitpaper_Waddle.pdf]
−
*[http://www.undp.org/content/dam/undp/library/Poverty Reduction/Participatory Local Development/Nepal_REDP_web.pdf http://www.undp.org/content/dam/undp/library/Poverty Reduction/Participatory Local Development/Nepal_REDP_web.pdf]
 
−
*[http://www.worldbank.org/en/news/feature/2015/09/26/ensuring-sustainable-rural-electrification-in-nepal http://www.worldbank.org/en/news/feature/2015/09/26/ensuring-sustainable-rural-electrification-in-nepal]
 
  
 
<br/>
 
<br/>
Line 64: Line 74:
 
{{NAE Acknowledgements}}
 
{{NAE Acknowledgements}}
  
 +
[[Category:NAE]]
 
[[Category:Philippines]]
 
[[Category:Philippines]]
−
[[Category:NAE]]
 

Revision as of 13:05, 5 July 2018

NAE Overview Page

Category Dashboard:

TechnologyTechnology: Grid ExtensionTechnology: Grid-Connected Mini-Grid/Distribution SystemTechnology: Isolated Mini-GridTechnology: Standalone SystemsDelivery ModelDelivery Model: PublicDelivery Model: Private (Non-Government)Delivery Model: Public-Private PartnershipLegal BasisLegal Basis: ConcessionLegal Basis: LicenseLegal Basis / Price/Tariff Regulation: UnregulatedPrice/Tariff RegulationPrice/Tariff Regulation: UniformPrice/Tariff Regulation: IndividualFinanceFinance: PrivateFinance : UserFinance: Grants & SubsidiesFinance: Cross-SubsidiesFinance: Tax ExemptionsFinance: GuaranteesNon-Financial InterventionsNon-Financial Interventions: Direct Energy Access ProvisionNon-Financial Interventions: Institutional RestructuringNon-Financial Interventions: Regulatory ReformNon-Financial Interventions: Policy & Target SettingNon-Financial Interventions: Quality & Technical StandardsNon-Financial Interventions: Technical AssistanceNon-Financial Interventions: Capacity Building & Awareness RaisingNon-Financial Interventions: Market InformationNon-Financial Interventions: Demand PromotionNon-Financial Interventions: Technology Development & AdoptionNon-Financial Interventions: National Energy PlanningNAE Case Study Table Philippines.png]]



Description

Successful electrification in the Philippines was achieved on the basis of central funding and the implementation of islanded distribution systems operated by rural electrification cooperatives. Following a Government commitment to the co-operative model, the National Electrification Authority was formed in 1969 to manage rural electrification.  By 1973, the NEA had established 46 RE co-operatives, and 119 by 1985.  BY 2002, 88% of Filipinos had access to some form of electricity.  To address concerns over poor customer service in some areas, a private sector participation scheme for power generation was introduced based upon the privatization of generation, transparency in pricing, and true cost recovery measures. Under this new scheme, the electric co-operatives were required to outsource their power supply requirements and private sector companies gradually took over the role of generating the required power.  Each of these New Power Producers (NPPs) generates electricity and sells it to a Distribution Utility (DU) for distribution within its franchise area. The NPP is an entity that is financially and technically capable to take over the generation capacity of NPC-SPUG operators in the off-grid areas, either by building a new plant or buying the SPUG assets.  Early public sector support for electric co-operatives has thus established an opportunity for private sector suppliers who are now in a good position to satisfy the needs of a sustainable market.

Context

The Philippines is divided into three electrical grids, one each for Luzon (largest island), Mindanao (second largest) and the group of Visayan Islands.  The total installed capacity in the Philippines (in June 2016) was 20,055MW, of which 14,348 MW was on the Luzon grid. The all-time peak demand on Luzon was 9,726 MW, on Visayas was 1,878 MW, and on Mindanao was 1,593 MW.   The fuel sources for electricity generation are 43% coal, 24% natural gas, 13% geothermal, 12% hydro, 7.5% oil, 0.5% other renewable energy sources (including wind, solar, biomass).  Power generation is zero-rated for value added tax (i.e. not subject to 12% VAT) to ensure lower rates for end-users. Total electrification of the country was announced as a national policy objective in 1960.  This was addressed using the rural electrification co-operative model (based on US experience).  The Electrification Administration (EA) was established by the government in 1960 to implement its new policy.  This became the National Electrification Administration (NEA) in 1969, responsible for implementation. Approximately half of all households in the Philippines, and the majority in rural areas, now rely upon electric cooperatives for power. Power generation is not considered as a public utility operation, which means that interested parties do not need to secure a congressional franchise to operate a power generation company. The National Power Corporation (previously the national utility but, following deregulation, now focussed on non-commercial electrification targets across the country) uses its Small Power Utilities Group (NPC-SPUG) to provide electricity in off-grid areas, particularly in areas where private investors hesitate to come in due to lack of infrastructure and political and security concerns. In 2009, NPC was able to install 12,718 kW of new capacity in 34 SPUG areas nationwide.

Objectives

This initiative aimed to provide sufficient power to meet highly decentralised electricity demand in an efficient and sustainable manner, providing an acceptable customer service whilst reducing the long-term costs and subsidies.  The objective was to supply the off-grid islands in the Philippines in the most cost-effective manner, which initially involved the establishment of electric co-operatives.  Inefficiencies subsequently arising in  power sector meant a revised objective to push a new set of players from the local private sector to invest in the power supply sector by offering them the right incentives, and by convincing them of the strong potential local growth prospects once power infrastructure constraints were addressed.

Legal Basis

Conversion of NEA into a public corporation by Presidential Decree No. 269 in 1973. In 2001, the Electric Power Industry Reform Act (EPIRA), Republic Act No. 9136, was passed by Congress to ensure the quality, reliability, security, and affordability of the supply of electric power. Resolution no.21, Series of 2011: A Resolution Adopting the Amended Guidelines for Setting and Approval of Electricity Generation Rates and Subsidies for Missionary Electrification Areas - provision for electrification costs of SPUG at remote sites to be met by consumers in grid areas (i.e. cross-subsidy) through the UCME component of power bills, as provided by EPIRA.

Institutions, Roles and Responsibilities

In 1969, the National Electrification Administration (NEA) was created as the implementing agency of the country’s total electrification policy.   The NEA was the originator of the programme to establish electric co-operatives as the principle supplier of electricity across the Philippines.  The Co-operative Development Authority (CDA) was created in 1990 as the lead Government agency in advancing and sustaining the growth of the cooperative sector by establishing support systems and strong links with stakeholders.  Co-operatives now had the choice whether to register with NEA and/or CDA.  CDA's vision is a strong cooperative sector that helps to overcome poverty and strengthen the middle class in the Philippines.  The National Power Corporation’s Small Power Utilities Group (NPC SPUG) is in charge of generating power for areas not connected to the main grid.  The SPUG held the electricity supply monopoly in the islands and rural areas before the programme to encourage New Power Producers (NPPs) to increase the efficiency of remote power supply.  NPPs  are private companies that took over and overhauled SPUG’s plants or constructed new power plants, including hydro plants.  The Energy Regulatory Commission is an independent, quasi-judicial regulatory body established to regulate electric power service.  The Power Sector Asset & Liabilities Management Corporation engages in the management, sale, and privatization of existing generation assets of the National Power Corporation (NPC) and independent power producer (IPP) contracts; it also manages the outstanding obligations of the NEA's electric cooperatives.

Interventions

In 1970, NEA drafted a total electrification program, based on electricity supply through co-operatives, which was intended to be realized by 1990.  Under NEA, electric co-operatives (ECs) were designated as the country’s primary electricity distribution system. NEA was given the authority to establish and oversee the ECs, to make loans, to acquire physical property and franchise rights of existing suppliers, to borrow funds, and to extend subsidies to ECs.  It served as a regulator with extensive authority over the development and business conduct of the ECs.  These electric cooperatives are mostly autonomous and governed by democratically elected boards.  Although the original total electrification target was not achieved, only 13% of the 47,000 (districts/villages) remained un-electrified by the end of 2002.  However, a World Bank report in 2000 noted a significant number of areas with poor-performing ECs where numerous households still lacked connections, faced frequent power cuts, and, in general, were poorly served by their ECs.  The study concluded that poor EC performance was largely due to weak corporate governance, particularly political interference in EC management.  The main driver behind subsequent improvement was the introduction of New Power Producers (NPPs) through a competitive selection process for 15-year local concessions that were anchored by a power supply agreement (PSA) with the electric cooperatives.  NPPs were selected based on the lowest true generation cost proposed.  An output-based aid subsidy was offered by the national utility (NPC), aiming to cover the difference between the true generation costs and the price paid by the end-users.  The systems introduced were mostly based on power generation from diesel - no renewable energy project has been proposed so far (due primarily to the lack of awareness of renewable energy options).  NPPs act as market delivery partners of the Government in achieving the goal of facilitating access to electricity even in the remotest areas of the country.  

Impacts Achieved

Prior to the NPPs, the services provided by the SPRUGs were characterized on the generation side by poor reliability and high costs (and therefore the high level of subsidies); and on the distribution side by less-than-efficient distribution utilities or rural electric cooperatives. After the competitive engagement of the private sector NPPs, the prices proposed were much lower than former prices and therefore the level of subsidies also dropped - the service became much more cost-effective.  The objective is to reach a point where the installation would become commercially viable, especially thanks to the strong private development programme that has been implemented.

Lessons Learned

For the initial introduction of the electric co-operatives, the driving force was the commitment from Government and the associated resources allocated to reach the target of total electrification.  Although access to electricity was dramatically improved, there was insufficient guidance to secure the effectiveness of management of the co-operatives in the longer-term.  Concerns over the governance of the co-operatives were highlighted after the World Bank's assessment, which required a new approach to secure greater cost-effectiveness and quality of service.  These issues were successfully addressed by the introduction of the New Power Producers. Key factors making success possible were:

i) project developers remained technologically neutral in order for the private companies to propose their own solutions with their own cost;

ii) developers tried to create transaction structures that served consumers and balanced the interests of the off-taker and the private provider on a sustainable basis;

iii) from inception, a major effort was made by the programme promoters (the Energy ministry and the IFC) to set up information, communication, and education programs for national and local stakeholders.

It was a long process to get local authorities and cooperatives, as well as the private sector, on board for the tranistion required to a more efficient, customer-oriented operation.  From this experience, some of the key constraints that needed to be addressed included the lack of awareness or the most relevant technologies; inefficient distribution utilities or rural electrification cooperatives; and  poor reliability/high costs of systems (and therefore the high level of subsidies required).

Effectiveness

The electric co-operatives provided the basis for widespread access to affordable power supplies in the remote, islanded areas across the country.   The availability of a relatively cheap source of power through this  rural electrification facilitated investments in agricultural infrastructure, business and industrial enterprises, health and environmental sanitation facilities and services, and educational facilities and services which brought about significant changes in productivity, employment, and income. The introduction of New Power Producers significantly improved the cost-benefit for rural electrification.  However, the ongoing cost of required subsidisation remained significant.  In 2016, NPC requested approval to collect approximately US$470m from electricity end-users for 2015 and 2016 in order to cover the subsidies required for rural areas (this is the so-called universal charge for missionary electrification, UCME).  The UCME is included in the bills of all electricity consumers and is needed to cover the subsidy for remote areas.  It is also used to maintain the reliability and stability of sufficient funding sources for NPC's fuel and other cost requirements including guaranteed sufficient payment for NPPs and RE developers.  Overall, although the electrification process introduced with NPPs has achieved great improvements over the previous SPUG-driven approach, the continued dependence upon a significant national subsidy must raise some doubt over its sustainability. 

References


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 -


NAE Overview Page

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

►Go to Top

Retrieved from "https://energypedia.info/index.php?title=NAE_Case_Study:_Philippines,_Islanded_Distribution_by_Cooperatives&oldid=263232"