Energy-Policy Framework Conditions for Electricity Markets and Renewable Energies

Division Environment and Infrastructure TERNA Wind Energy Programme

Energy-policy Framework Conditions for Electricity Markets and Renewable Energies

21 Country Analyses

Eschborn, June 2004 Division Environment and Infrastructure TERNA Wind Energy Programme

Energy-policy Framework Conditions for Electricity Markets and Renewable Energies

21 Country Analyses

Eschborn, June 2004

Published by: Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Division Environment and Infrastructure PO Box 5180 65726 Eschborn Germany Internet: http://www.gtz.de

Edited by: Dr. Jens Drillisch Tel. +49 (0)6196 79-1380 E-mail: [email protected]

Authors: Dipl.-Ing. Detlef Loy (responsible), LOY ENERGY CONSULTING, Berlin; www.loy-energy-consulting.de, Dipl.-Ing. Hinnerk Fütterer, Dipl.-Wirtschaftsgeograph Patrick Jüttemann, Dr. Danyel Reiche

Design: Open Ffm., www.open-agentur.de Verena Siebert Background to the New Edition The analyses of the individual countries comprise sections on the respective electricity markets and the actors in Structural changes in the energy sector, accompanied by those markets, along with information on the energy-policy liberalisation of the relevant markets, have been continuing framework. The policy for promoting electricity generation in many developing and transition countries in recent years. from renewable energy sources is examined, and the status Growing demand for electricity and the ongoing climate of the various forms of renewable energy is analysed in debate are increasing the level of interest in technologies detail. The chapters on each country are rounded off by for generating electricity from renewable energy sources in information about rural electrification. these countries. In comparison with the 2002 edition, eleven new countries The rapid expansion of the use of renewable energy in have been added. The information about a further ten Germany is a subject that is being followed with interest, countries has been updated: even outside Europe. Experience here shows that the creation of a conducive political and economic framework and New since 2002 Updated the implementation of appropriate promotion measures can Albania Philippines Brazil India speed up the exploitation of renewable energy. Bosnia - Senegal Chile Mexico Herzegovina Sri Lanka China Morocco The German and European market acts as the motor for a Croatia Vietnam Colombia South Africa wind energy industry and provides an indispensable back- Georgia Yemen Dominican Tunisia ground of experience. The level of growth in this sector Jamaica Republic within Germany has slowed down, however. Project devel- Pakistan opers are therefore increasingly turning their attention to off-shore schemes, other parts of Europe, and the Mediter- ranean states. The markets for technologies based on Information about Argentina, Cuba, Jordan, Kazakhstan other renewable energy sources are also experiencing and Turkey is given in the 2002 edition. Analyses of Egypt, growing interest. While it is true that the potential for hydro- Indonesia and Thailand were conducted in the 1999 edition. power, wind power, solar power, biomass and geothermal These previous editions are available in electronic form free energy in developing and more advanced countries is often of charge from www.gtz.de/wind/english/downloads.html. considered to be high, obstacles to entry into this field include insufficient knowledge of the framework conditions Our grateful thanks go to a large number of GTZ staff prevailing in the energy industry in those countries and a members and other experts for their help with putting this lack of transparency with regard to the prior experience information together. and interests of the national actors.

Eschborn, June 2004 One of the aims of this third, updated and expanded edition of the study – under a new title – is to facilitate entry into the field of renewable energy. It is based on the previous editions from 1999 and 2002, which were published under the title ‘Producing Electricity from Renewable Energy Sources: Energy Sector Framework in 15 [or 12] Countries in Asia, Africa and Latin America’. These studies have been much in demand, not only by suppliers and project developers but also by financing and operating companies involved in renewable energy technologies. Legal Information The TERNA Wind Energy 1. The data used in this study is based on both publicly Programme accessible sources of information (publications, specialist articles, Internet sites, conference papers etc.) and non- Specialised knowledge and experience are needed to public papers (for example internal expert reports from pro- determine what wind energy resources a country possesses moting institutions), as well as personal interviews with and to identify suitable locations. Technical and economic experts (for example officials at energy ministries in the analyses of wind power projects are also impossible with- investigated countries and project staff at promoting insti- out hard information about wind conditions. Such analyses, tutions). Although all information has been checked as far however, form the basis for the financing and ultimately the as possible, errors cannot be ruled out. Neither the GTZ successful implementation of a wind farm. nor the authors can therefore provide any guarantee of the accuracy of the data included in this study; no liability can The purpose of the TERNA (Technical Expertise for Renew- be accepted for any loss or damage resulting from use of able Energy Application) Wind Energy Programme, imple- the data included in the study. mented by the GTZ on behalf of the Federal German Minis- try for Economic Cooperation and Development (BMZ), is 2. The sole authorised user of this study for all forms of use to assist partners in developing and more advanced coun- is the GTZ. Duplication or reproduction of all or part of the tries in planning and developing wind power projects. study (including transfer to data storage media) and distri- Since 1988 the aim within the TERNA framework has been bution for non-commercial purposes is permitted, provided to lay the foundations for sound investment decisions while the GTZ and the TERNA Wind Energy Programme are named at the same time enabling partners to plan and develop fur- as the source. Other uses, including duplication, reproduc- ther wind power projects in the future. tion or distribution of all or part of the study for commercial purposes, require the prior written consent of the GTZ. The TERNA Wind Energy Programme’s partners are institutions in developing and more advanced countries that are interested in commercial exploitation of wind power: these include, for example, ministries or government institutions which have the mandate to develop BOT/BOO projects, state-owned or private energy supply companies (utilities) and private enterprises (independent power producers).

TERNA offers its partners know-how and experience. In order to initiate wind power projects, favourable sites must be identified and their wind energy potential ascertained. To do this, wind measurements are normally taken over a period of at least twelve months and wind reports are drawn up. If promising wind speeds are found, the next step is to conduct project studies investigating the technical design and economic feasibility. TERNA also provides advice to partners on matters of finance, thus closing the gap between potential investors and offers of funding from national and international donors. If required, CDM baseline studies can be prepared and advice can be offered to potential operators on setting up an efficient operator structure. In order to ensure as much transfer of know-how as possible, efforts are made to ensure cooperation between international and local experts, for example when preparing the studies. In successful cases, TERNA initiates investment-ready wind farm projects by this method. TERNA itself is not involved in financing. In addition to the activities that are tied to specific locations, TERNA advises its partners on how to establish suitable framework conditions for the promotion of renewable energy sources.

The prerequisite for promotion by the TERNA wind energy programme is that project development has a realistic prospect of implementation: if the underlying conditions in the electricity sector are sufficiently favourable, and if the proposed wind farm project has a minimum capacity of roughly 20 MW and is situated in a windy area (expected annual average wind speeds of over 6 m/s at a height of 10 m above ground level). Small individual installations or decentralised wind/diesel systems are not normally eligible for promotion, nor are research projects.

Up until 2004, TERNA has been active in over ten countries around the world. In Colombia the first wind farm started operation at the end of 2003 with the help of the TERNA programme. The municipal utility of Medellín built the 19.5MW Jepírachi wind farm on the Guajira peninsula with a total investment volume of some 27 million euros. The 800,000 tons of carbon dioxide saved by the wind farm by 2012 will be documented and sold to the Prototype Carbon Fund (PCF), which will mean additional revenues of around 3.2 million euros for the investor.

The TERNA projects are not financed from the country quotas which the Federal Germany Government agrees with individual partner countries. From the viewpoint of the partner country, therefore, TERNA offers additional funds for wind energy.

Further information on the GTZ’s TERNA Wind Energy Dr. Jens Drillisch Programme, the application procedure etc. is available at Tel. +49 (0)6916 79-1380 Fax +49 (0)6916 7980-1380 www.gtz.de/wind or directly from: E-mail: [email protected]

Deutsche Gesellschaft für Technische Zusammenarbeit Dr. Rolf Posorski (GTZ) GmbH Tel. +49 (0)6916 79-1352 Postfach 5180 Fax +49 (0)6916 7980-1352 E-mail: [email protected] 65726 Eschborn Germany Dr. Jasper Abramowski Tel. +49 (0)6916 79-1760 Fax +49 (0)6916 7980-1760 E-mail: [email protected] Contents

Pagination of PDF

3 Background to the New Edition 4 The TERNA Wind Energy Programme

Latin America – Caribbean 7 Brazil 22 Chile 33 Dominican Republic 44 Jamaica 52 Colombia 61 Mexico

Africa 72 Morocco 80 Senegal 87 South Africa 96 Tunisia

Europe – Caucasus 103 Albania 110 Bosnia - Herzegovina 119 Georgia 128 Croatia

Asia – Pacific 135 China 148 India 159 Yemen 167 Pakistan 177 Philippines 187 Sri Lanka 193 Vietnam Brazil

Brazil

Electricity Market Electricity generation (TWh) Generating capacity Natural gas 9.8 At the end of 2003 Brazil’s total generating capacity was Coal 5.0 about 85.3 GW. Some 6 GW of this is used purely for Diesel 4.3 on-site provision. More than 50% of production cap- Heavy oil 3.7 acity is located in the three federal states of Minas Gerais, Nuclear 13.8 São Paulo and Paraná. The total capacity licensed by the Hydropower 278.7 regulatory authority in the public supply sector and at Total 315.3 independent power producers and self-generators, in other words also including projects at the planning and Table 2: Public electricity supply – generation; Brazil; 2002; TWh construction stage, was about 130 GW at the end of 2003. Self-generators In operation U. constr. Approved On the other hand, due to links with the agricultural Number MW Number MW Number MW and industrial sectors, the energy resource base for self- Hydropower 536 67,534 0 0 121 7,157 generators is much more widely dispersed and in par-

Thermal 765 17,7451 50 4,626 242 8,854 ticular makes use of organic residues. The number of power stations self-generators roughly doubled in absolute terms

Wind energy 9 22 0 0 0 0 during the last decade and some years during this period showed very steep increases indeed. Wind energy 1 0,02 22 5,610 90 12,825

Total 1,311 85,301 72 10,236 453 28,836 Electricity generation

Energy source (TWh) Table 1: Electricity generating capacities; Brazil; Natural gas 3,4 end of 2003; MW Coal 0,2 Electricity generation Wood 0,7 In 2002 electricity generation totalled 381 TWh. Pro- Sugar cane bagasse 5,4 duction by public utilities amounted to 315 TWh Black liquor4 3,5 (4.6% above the previous year’s level). Self-generators Other waste products 4,2 accounted for 29 TWh and electricity imports totalled Diesel 1,5 37 TWh. The technical and non-technical losses in the Heavy oil 1,7 public supply network amounted to 60 TWh (18%). Coke 0,7 Domestic electricity generation is based almost 80% on Hydropower 6,3 hydroelectric power. The rest is provided almost exclu- Others 1,7 sively by thermal power stations fired by coal and gas, as Total 29,3 well as by two nuclear reactors. Since natural gas resources have been newly tapped within Brazil, and following Table 3: Self-generated power; Brazil; 2002; TWh installation of a gas pipeline from the neighbouring country of Bolivia2, the share of thermal power stations Electricity imports is expected to increase substantially in the coming years.3 A first block of 50 MW was imported from Paraguay in July 1999. In addition there is a transnational link with Argentina via which 2,150 MW can be imported to Brazil, as well as to Venezuela and Uruguay.

1 Including some 2,000 MW in the nuclear power plants. 2 This pipeline crosses the south of Brazil and also touches on the heavily populated and industrialised regions of São Paulo. 3 It is expected that in 2030 gas will account for 25% of electricity generation. 4 Black liquor is a residue product of the paper and cellulose industry that contains not only organic residues. Transmission grid country was particularly marked. Interestingly At the end of 2002 the transmission network extended enough, average household consumption has only risen to 72,000 km and consisted of transmission lines at the insignificantly even after the end of the electricity crisis. levels of 230–750 kV. All major producing and consumer centres are connected via this national intercon- Considered geographically, electricity consumption is nected grid. However, during recent years there have concentrated above all in the South-East region of the been bottlenecks in supply as a result of the low trans- country with its industrial conurbations, as well as in mission capacities between the North and North-East the Centre-West (South-East/Centre-West intercon- on the one hand, and the South of the country on the other. nected grid), where altogether about 60% of national electricity demand was located. In 2002 almost 40 TWh Electricity consumption of total household electricity consumption was accoun- Following years of growth, total electricity consumption ted for by the three South-East federal states of Minas dropped drastically in 2001 by comparison with the Gerais, São Paulo and Rio de Janeiro alone.5 previous year due to a decline in water resources. The consumption level of the year 2000 was only reached Since the beginning of the 1970s the increased again in 2003, at around 330 TWh. In particular public growth in electricity consumption has regularly been electricity generation and imports declined substan- well above the rates of growth in GNP. Even economic tially in the meantime, while the self-generators increased crises failed to damp this development much in the past. their output. Concession-holding distributing firms and Only the electricity crisis of 2001 and Argentina’s eco- electricity traders (public sector supply) supplied some nomic problems broke this trend.6 Despite these dips, 300 TWh in 2003 (+3.7% by comparison with the pre- forecasts for the 10-year period 2003–2012 in the refer- vious year). However, due to a further expansion of self- ence scenario assume an average growth in consumption generators increasing capacity to almost 30 TWh of 5.7% a year. Consequently a total consumption of (including the craft & trades sector), the growth of the about 577 TWh is assumed for the year 2012, to which industry remained within bounds. Part of the growth in distribution companies with concessions are expected to previous years is also attributable to new consumers contribute 510 TWh. being connected, as grids were expanded in rural areas. Electricity prices Electricity consumption In mid-2003 the average electricity prices were Sector (GWh) 167 R$/MWh (49 €/MWh), fluctuating between Households 76.2 130 R$/MWh (37 €/MWh) in the North and Craft & trades 47.5 181 R$/MWh (52 €/MWh) in the Centre-West region. Industry 129.9 Prices for the household sector averaged 239 R$/MWh Other customers 47.1 (68 €/MWh), and in the industrial sector 112 R$/MWh Total 300.6 (32 €/MWh)7. The prices were increased by high taxes and charges that account for almost 30% of the total Table 4: Electricity consumption by sector – electricity bill. public supply; Brazil; 2003; GWh

Between 2000 and 2002 electricity consumption dropped Economic situation of electricity suppliers sharply from 84 to 73 TWh, especially in the household Brazil’s supply companies are in a troubled financial sector, as a result of the drastic economy measures, and situation as a result of the declines in electricity con- has not yet been able to reach its former level, even in sumption triggered by the electricity crisis. Estimates 2003 when it rose to 76 TWh. The average monthly talk of losses amounting to R$ 5 billion (€ 1.43 billion) consumption in households fell from 173 kWh in 2000 for 2003 alone and put unutilised capacities at 7,500 MW. to 140 kWh at the end of 2003. The decline in the At the same time the companies lack finance for main- South-East/Mid-East as well as in the North-East of the tenance and fundamental investments. Restructuring of

5 In 2003 only 6.2 TWh was consumed in the isolated networks that supply above all the settlement centres in the north of the country (with Manaus as the largest consumer unit) and are under the control of concessionaires. The situation in smaller communities that frequently generate electricity themselves with diesel generators is generally described as precarious in view of the outmoded plant technology. 6 Energy efficiency programmes have lowered current consumption by about 20% and the peak load by 5 GW. 7 These prices are net without taxes and charges. Brazil

the electricity sector announced in 2003 aims in part- Installed icular to reduce consumer tariffs by purchasing electri- Companies capacity (MW) city from the most favourable production sources. However, this could slow down the development of new Companhia Hidro Elétrica do São Francisco 10,484 (CHESF) renewable energy sources. Furnas Centrais Elétricas S/A. 9,407

Companhia Energética de São Paulo (CESP) 7,455 Market Actors Tractebel Energia S/A 6,503

Brazil’s electricity market has been undergoing a process Itaipu Binacional 6,300 of great change for some years now. After completion of Companhia Energética de Minas Gerais 6,043 (CEMIG) the restructuring operation, the original state-monopoly supply sector is set to give way to a largely privatised, Centrais Elétricas do Norte do Brasil S/A 5,874 (ELETRONORTE) liberalised and competition-oriented service sector. However, following the sale of many distribution com- Copel Geração S/A 4,541 panies, privatisation has largely come to a standstill in AES Tietê S/A 2,651 recent years and expressly excludes the generating Duke Energy Internacional, 2,299 sector, which is still centrally controlled by the state. Geração Paranapanema S/A

Structure of the public electricity sector Table 5: Generating capacities of the major electricity suppliers; Brazil; 2003; MW The (public) Brazilian electricity sector is essentially divided up into the state holding Eletrobrás with the bi- Generating sector national hydropower station Itaipú (operated jointly with The generating sector is dominated above all by govern- Paraguay), an operating company for the nuclear power ment-run enterprises. At the end of 2003 altogether stations, three large electricity producers as subsidiaries8, 931 electricity generators were registered (companies many independent and individual state electricity with permits to generate electricity), including suppliers, a relatively large number of distribution 70 public suppliers, 416 self-generators and 392 inde- companies at regional – in other words mainly federal pendent power producers. However, these figures also state – level, and a series of locally-oriented supply include many companies which have yet to begin elec- companies in the larger municipalities9. Only some of tricity generation. the regional and municipal suppliers have their own generating capacities. They generally purchase their The function of Eletrobrás is still significant, despite electricity from the central electricity generators. curtailment of its scope of tasks following the unbundling of part of the generation and distribution sector. It forms the umbrella of a holding company for the important remaining undertakings. In view of its technical and organisational competence it also plays a major role in conjunction with the Ministry of Mining and Energy (MME) in higher-level energy planning, and now also performs important tasks as a financing institution for the electricity sector.

Regulatory authority ANEEL At the end of 1997 the new, independent regulatory authority ANEEL (Agência Nacional de Energia Elétrica) was established.10 Its task is mainly to issue concessions for electricity generation and distribution, and to spe-

8 Furnas, CHESF and Eletronorte. 9 However the three largest of these municipal and regional suppliers contribute almost 40% to Brazi’s electricity resources. 10 On the basis of Law 9.427/96. The structure and tasks of ANEEL are described comprehensively in Regulation 2.335 of 6 October 1997. This was partly amended by Law 10.848 of 15 March 2004. cify tariffs and entitlements for access to the grid and for December 2003 Eletrobrás held more than 33% of total the regulated sector of final electricity consumption.11 capacities, its subsidiary CHESF a little over 12%, Ele- tronorte at least 11% and Furnas almost 7%, so that the Electricity imports central government share in generation still accounts for ANEEL must approve the import and export of electri- about two thirds of the installed capacity. city as well as the associated construction of transmission lines and other facilities. Since July 1999 approvals Interconnected grid operator ONS have been issued for importing 5,420 MW, including and wholesale market 5,050 MW from Argentina, 300 MW from Bolivia, Further foundations for a competition-oriented electri- 70 MW from Uruguay and 50 MW from Paraguay. city market were created with Law 9648/98 and Decree However, implementation of these approvals has fallen 2655/1998 for setting up the Operador Nacional do behind expectations, since the demand for electricity has Sistema Elétrico (ONS), which commenced its tasks on not grown at the rate forecast due to the supply crisis in 1.3.1999, and for instituting a wholesale electricity the meantime and the poor rate of economic develop- market (MAE–Mercado Atacadista de Energia14) ONS ment. ensures non-discriminatory access by market participants to the interconnected grid (Sistema Interligado Nacional – SIN) and coordination between supply and Legal Framework demand. The generators, distributors, traders, bulk consumers and representatives of the other consumer groups Privatisation hold shares in this private-sector company. In September The national privatisation programme (Programa 2003, 68 electricity generators and 75 electricity buyers Nacional de Desestatização, Law No. 8.031) was launched participated in the wholesale market. As of the year in 1990. This also provided for the privatisation of 2006 the electricity market is to be based solely on bila- sectors of electricity generation and distribution for teral contracts (85 to 90% of the total electricity which Eletrobrás had been responsible. The basis for a volume) and a short-term spot market. fundamental reform was set with the Concession Laws 8987/95 and 9074/95 in 1995, which also aimed to set Concessions for distributing electricity up new regulatory bodies. A first step was taken with Concessions are awarded to distribution companies on the privatisation of the distribution company Escelsa in the basis of public auctions. Distributors have a prior 1995, and this was followed by many other sales, pri- right to supply consumers in their own supply territory, marily to foreign investors. However, within the but large-scale consumers can also enter into contracts restructuring of the electricity sector under the present with other suppliers. government, Eletrobrás and the electricity suppliers that it controls, i.e. Furnas, CHESF, Eletronorte, Independent electricity generators CGTEE (Companhia de Geração Térmica de Energia and owner-operators Elétrica),12 along with the transmission firm Eletrosul Regulation 2003 of 10 September 1996 granted independ- are excluded by law from privatisation.13 ent power producers and self-generators the right to operate. Any consumer with more than 10 MW installed Limitation of market dominance load15 was already granted the right to select their own ANEEL Resolution 278 of 19 July 2000 states that no electricity supplier under Concession Law 8987/95.16 electricity generator or the companies controlling it (the Independent power producers and self-generators have same applies to electricity distributors too) may hold free access to the interconnected grid and to the electri- more than 20% of the total capacity of the national grid city grids of the distributors by paying the transmission or more than 25% of the southern interconnected grid charges.17 ANEEL drew up a comprehensive set of rules and 35% of the northern interconnected grid. In on calculating this in 1998 with which the transmission

11 However only a few suppliers operate across the board in all three sectors, for example CEMIG in the federal state of Minas Gerais. 12 CGTEE operates three thermal power stations and belongs to Eletrobrás since July 2000. 13 Law 10.848 of 15.3.2004, Art. 31. 14 Converted by law in the meantime into the private law company Câmara de Comercialização de Energia Elétrica–CCEE. 15 A further condition is that the supply must be provided via a connection of at least 69 kV. 16 New consumers can do so from a lower threshold of purchased power, 3 MW, and for supplies from hydropower the figure is 500 kW. 17 However it is problematic for smaller units feeding in electricity that access to the distribution level is not regulated yet. Brazil

price is formed for each individual case in accordance for trading in emission permits during recent years. The with the respective parameters (transmission lengths, sugar factory Vale do Rosário that aims to substantially voltage level, electricity quantity etc.). The supply limit increase its bagasse-based electricity generation ob- for free selection of suppliers was lowered to 3 MW in tained a first certification by TÜV Süddeutschland in the year 2000. 2002. Further information on CDM projects can be found on the Internet, including the site of the German- Independent power producers can sell their electricity to: Brazilian Chamber of Trade.20

• a licensed electricity supply company (or grid operator) Policy for Promoting Electricity • consumers who can select their electricity generator Generation from Renewable freely on the basis of the minimum power Energy Sources requirements described above • consumers who also purchase heat at the same time The Proinfa programme (Programa de Incentivo às (in other words in cogeneration) Fontes Alternativas de Energia Elétrica) was introduced • consumer communities in agreement with the local with Law 10.438 of 26 April 200221. In two phases, this electricity supply company law provides for the purchase of electricity from plant • any consumer who proves that he has not been operators that use renewable energy sources and supply supplied by the local electricity supply company the electricity generated to the interconnected grid. The 180 days after signing an electricity supply goal expressly targets greater market participation by agreement independent producers who are not governed by concessionaires in the public supply sector. A special status is With special permits, self-generators can exchange elec- granted to those operators that work with plant manu- tricity between themselves or sell surplus electricity to facturers who supply at least 60% (in the second phase the local electricity supply company. However, there is 90%) of nationally produced components. no legal obligation for grid operators to purchase the electricity offered from either independent producers or Proinfa – first phase up to end of 2006 self-generators.18 In view of the very high peak-load In the first phase up to the end of 2006, 1,100 MW each tariffs many self-generator plants are run primarily to of wind power plants, small hydroelectric power systems avoid these peaks and are not operated for base-load and biomass power stations are to start operation and supply, so that it is frequently not cost-effective to cover supply electricity to the interconnected grid at defined heat requirements at the same time. price rates that have been agreed with Eletrobrás for a period of 20 years. The prices determined by the Minis- Clean Development Mechanism try of Energy must satisfy certain minimum rates that Brazil ratified the Framework Convention on Climate are oriented to the average electricity tariffs for final Change in February 1994 and the Kyoto Protocol in consumers (Tarifa Média Nacional de Fornecimiento ão August 2002. It has not yet submitted a national cli- Consumidor Final–TMNF): at least 90% for wind mate protection report, although this is now well over- energy, at least 70% for small hydroelectric power, and due.19 Since July 1999 an Interministerial Commission at least 50% for biomass. The prices are limited by coordinated by the Ministry of Science and Technology maximum ceiling values resulting from the uniform (Comissão Interministerial de Mudança Global do spread of the additional costs among all electricity con- Clima) has been responsible for climate and hence for sumers. Consumers with very low consumption (up to CDM projects too. The private sector and NGOs partici- 80 kWh/month) will be exempted from all additional pate via the Brazilian Forum on Climate Change (Forum costs. Brasileiro de Mudanças Climáticas). The Ministry of the Environment also plays a major role in selecting CDM projects. Various projects have already been suggested

18 An exception here is formed by electricity from renewable energy sources produced within the framework of Proinfa. 19 A preliminary version can be found on the Internet page www.mct.gov.br/clima. 20 http://www.ahk.org.br/cdmbrazil/index.htm. 21 Partially amended by Law 10.762 of 11.11.2003. For implementation see Decree 5.025 of 30.3.2004. Remuneration rates and selection of projects Proinfa – second phase At the end of March 2004 the price tariffs were pub- In the second phase scheduled to start after the target of lished for plants that will enter service in the course of 3,300 MW is reached, further projects are to be realised 2006.22 Here it is planned to adjust the tariffs in line in order to ensure that renewable energies (not including with general price developments up to the conclusion of large-scale hydropower) account for a share of 10% of the contract. annual electricity demand within a period of twenty years. At least 15% of the annual growth in electricity Feed-in-tariff23 Lower limit24 generation should originate from these sources. The R$/MWh €/MWh R$/MWh €/MWh purchase prices, also guaranteed for 20 years by Eletro- Small hydropower 117.02 33.38 117.02 33.38 brás, are to be oriented to the production costs of new Wind power 180.18 51.40 150.45 42.92 hydropower plants with more than 30 MW and new –– 204.3525 58.29 natural gas power stations. Operators will also be Biomass granted a right to compensation for additional costs up Sugar cane bagasse 93.77 26.75 83.58 23.84 to a remuneration rate fixed by the government (valor Rice husks 103.20 29.44 83.58 23.84 econômico) outside the electricity purchase agreements. Wood 101.35 28.91 83.58 23.84 Landfill gas 169.08 48.23 83.58 23.84 ANEEL resolutions ANEEL Resolution 112 of 18 May 1999 decreed sim- Table 6: Remuneration rates within the framework of Proinfa; plified rules for approving small hydropower plants and Brazil; March 2004; R$/MWh, €/MWh other facilities on the basis of renewable energy sources A first contract round for those projects possessing the under electricity law, including those for wind power necessary permits under electricity and environmental plants. Accordingly ANEEL can authorise the construc- law is planned for the end of May 2004. If necessary, fur- tion and operation of such plants without prior public ther electricity suppliers are to be contracted in a second calls for tender. public call for tenders at the end of October 2004. Limits were introduced for the projects that can be re- ANEEL Resolution 245 of 11 August 1999 expanded a alised under Proinfa in each federal state (220 MW26 each fund for the use of fossil energies in isolated grids (Conta for wind energy and biomass, 165 MW for hydropower). Consumo de Combustíveis Fósseis–CCC), originally set While independent autonomous producers enjoy prior- up to cushion the high cost burdens in off-grid regions, ity for small-scale hydropower and biomass, autono- to finance renewable energies provided that these mous producers and independent non-autonomous pro- replace mineral oil products in isolated grids in the ducers are to be treated equally for wind energy (max. North. 550 MW each). Further details of the documents necessary for submitting an application to Eletrobrás can be ANEEL Resolutions 22 and 256 from the year 2001 taken from the application guidelines of the Ministry of defined new bases of calculation and maximum values Energy. for specifying electricity tariffs by distribution companies. This includes special ‘normative values’ (valor In addition the National Development Bank BNDES normativo) that can be passed on as boundary values will provide low-interest credits for Proinfa projects on to consumers for additionally purchased renewable the basis of hydropower and wind energy up to the end energies.27 However, the values for small-scale hydropower of 2005 and for a maximum of ten years. and biomass still lie below the mark for electricity from thermal power stations (with the exception of national coal).

22 Ministerio de Minas e Energia, Portaria No. 45 of 30.3.2004. 23 Valor Econômico da Tecnologia Específica da Fonte–VETEF. 24 The base value is the average electricity price of 167.16 R$/MWh. 25 The remuneration rate for wind energy is dimensioned according to the ratio between the potential yields and a reference yield determined by an ANEEL resolution. 26 These limits can however be shifted or exceeded if this quota is not exhausted in individual federal states. 27 Does not apply to plants within the framework of the Proinfa programme. Brazil

Law 10.438 of 26 April 2002 (Art. 17) and ANEEL Hydropower Resolution 219 of 23 April 2003 specified that the The hydropower potential is quoted as being about transmission and distribution tariffs may not exceed 260 GW that would be hypothetically available, and is 50% of the prices normally allotted if hydropower, bio- concentrated above all in the northern region (Amazon mass or wind energy is used in power units between territory, approx. 40%) and in the South and South-East 1 and 30 MW. This ruling was extended by Law 10.762 of Brazil. About one quarter of this potential (67.5 GW) of 11 November 2003 to hydropower plants up to is currently utilised, whereby hydropower contributes 1 MW and generally for wind energy and biomass plants more than 40% to primary energy resources and about up to 30 MW. 90% to electricity generation. At the end of 2003 some 4.6 GW of generation capacity was under construction, SWERA and there were generating concessions in place for Within the framework of the multinational, GEF-sup- almost another 9 GW, divided between 242 plants. ported project ‘Solar and Wind Energy Resources Asses- More than half the expansion of electricity generation sment (SWERA)’ that has been ongoing since 2002, the will be attributable to hydropower in the coming years. existing national wind atlas is being improved and simi- An additional 90 GW is considered to be secured and lar information is being gained for solar irradiation. In economically exploitable. Beyond the hydropower the solar sector the country is represented by the National plants already in operation the total energy volume can Space Institute, and in the wind sector by the National only be developed to a relatively small extent in prac- Wind Centre in Recife. The research facility CEPEL is tice, however, since intervention in nature to build large also involved. dam projects appears unjustifiable in many cases, especially in the flat north of the country. In the South and Energia Produtiva South-East, on the other hand, over 50% of the available In September 2003, with support from USAID, the capacity is already being used. international development institute Winrock launched the ‘Energia Produtiva’ (2003–2007) programme involv- Small-scale hydropower ing eight Brazilian institutions that belong to the Hydropower plants rated at between 1 and 30 MW are RENOVE28 network, which has existed since June defined as small-scale hydropower plants, and provided 2000. The goal of the programme is to use renewable that the associated reservoir is not larger than 3 km2 and energy sources in the North and North-East of the coun- they are operated by independent power producers or try to develop or expand productive activities. self-generators, they only need a simple permit under electricity law, which is granted to the first suitable applicant.29 In exceptional cases public auctions may Status of Renewable also be held. Concessions are granted for a period that Energy Sources allows refinancing of the investment, but at most for 35 years. The use of renewable energy sources is traditionally accorded a high ranking in electricity generation as Small-scale hydropower plants are currently concen- well as in the provision of energy supplies to rural trated above all in the mountainous regions of the South areas of Brazil. Recently efforts to develop renewable and South-East of the country. energy sources (especially sun, wind and biomass) have increased substantially in the research and development sector, as well as in application-oriented implementation. The abundant renewable resources are hardly used at all in urban and industrialised centres, however.

28 Rede Nacional das Organizações da Sociedade Civil para as Energias Renováveis, www.renove.org.br. 29 ANEEL Resolution 394 of 4 December 1998 and 395/1999. According to ANEEL Resolution 652 of 9 December 2003 larger reservoirs are also authorised in specially defined cases. Output duced is considered to be 272 TWh a year. Not least the Region (MW) coastal regions in the North and North-East where South 287 mean wind speeds of 8 m/s and more prevail at a height South-East/Centre-West 498 of 50m are ideally suitable for using wind energy. North 41 North-East 76 Wind use to date Total 902 So far however there have been only a few examples of wind power installations with significant output being Table 7: Small-scale hydropower plants in operation; Brazil; 2004; MW implemented in practice, including two wind farms near Fortaleza (Ceará state) with 5 MW (Taíba) and 10 MW Despite the investment incentives and the large number (Prainha), which entered service in 1999. Both projects of permits issued under electricity law (3,900 MW from were erected by Wobben Windpower31, a subsidiary of 1998 to March 2004), the building of additional cap- the German firm Enercon, which operates them on the acity has remained very limited in recent years. However, basis of bilateral agreements with the regional electri- it is to be expected that a number of new plants will be city supplier Coelce. In both cases the German invest- constructed within the scope of the first phase of Pro- ment and development consultancy Deutsche Investi- infa. Altogether the potential for small-scale hydro- tions- und Entwicklungsgesellschaft (DEG) financed power plants is quantified at 7 to 14 GW. It is estimated the projects with low-cost credits. that 700 MW alone can be developed by expanding and improving existing plants and reactivating dormant Wind measurements power stations. Thanks to international programmes and other assistance, most of the wind-rich areas are well surveyed and Promotion of small hydropower plants documented. Wind measurements were carried out at Various incentives have been used to stimulate the con- three coastal locations in the state of Ceará as long ago as struction of new small hydropower plants in recent 1990/91 within the framework of GTZ’s TERNA pro- years: 30 gramme in conjunction with the electricity supply firm Coelce. They revealed excellent wind potential at a • At most 50% of the normal tariffs are to be paid for highly constant level. The Brazilian Centre for Wind electricity transmission and distribution, whereby a Energy published a first wind atlas for the North-East in discount of as much as 100% was granted for small 1998. At state level wind atlases are available for Ceará32 hydropower plants that went into operation up to and Paraná. The first version of a pan-Brazilian wind the end of 2003. atlas by the Reference Centre for Solar and Wind Energy • Exemption from compensation payments for flooded CRESESB (Centro de Referência para Energia Solar areas and from tax payments for water use. e Eólica Sérgio Brito) at the Research Centre for Electrical • Consumers with a demand of 500 kW or more Energy (CEPEL) was completed in 2002. This atlas is (or 50 kW for isolated supply) can negotiate based on measurements by various supply companies agreements freely. and other actors.

Wind Energy Brazil has important know-how resources for future devel- Despite good to very good wind energy conditions, the opment, in the form of the Brazilian Centre for Wind use of wind to generate electricity is still in its infancy Energy in Recife, which has a test facility, and CRESESB in Brazil. At the start of 2004 the total installed cap- in Rio de Janeiro. Academic institutions in other federal acity, shared between a few locations, was only 29 MW. states are also looking at wind energy more closely and are Yet the production potential is estimated at more than contributing to training specialists. In the past, training 140 GW and the amount of electricity that can be pro- measures for Brazilian energy and finance experts have

30 In July 2000 the programme was launched for developing and commercialising electricity from small-scale hydroelectric plants, limited to the period 2001–2003 (PCH-COM). Due to a lack of implementation provisions and insufficient remuneration, however, this programme hardly produced results and was replaced by the PROINFA programme following the enactment of Law 10.438 in April 2002. 31 Wobben Windpower is so far the only plant manufacturer in Brazil with factories in the states of São Paulo and Ceará. 32 See www.seinfra.ce.gov.br. Brazil

been held repeatedly with German assistance (InWEnt Proálcool and Deutsches Windenergie-Institut). The best-known example of a different energy-specific use of biomass is the Proálcool programme, which has Wind energy within the framework of Proinfa been ongoing since the mid-1970s to substitute alcohol After a number of political approaches towards inten- on a sugar-cane basis for mineral oil in the transport sifying investment in wind energy failed (for example sector. Thus in the period 2003/2004, 14 million m3 of the emergency programme ‘Proeólica’ of 2001), with ethanol was gained from the harvest of 350 million t the publication of the rules on remuneration in the Pro- sugar cane in addition to the sugar. This programme is infa programme attention is now being focused on the still being supported by government subsidies, since the period up to the end of 2006 in which 1,100 MW of mineral oil price has not increased to the extent neces- wind power is due to go onto the grid. By the end of sary to make this alternative fuel cost-effective. March 2004 altogether 161 wind projects had received electricity generation licences from ANEEL for a total of Potential for electricity generation some 8,560 MW. Applications were made by a number At the end of 2002 ANEEL published an inventory of of different operating firms. However, some of these the biomass potential that can be additionally developed licenses have already expired or were returned by the for electricity generation at short notice in agriculture operators. Most of the proposed plant locations are in the and forestry in the different parts of the country. states of Rio Grande do Norte and Ceará. After presentation of the necessary environmental permit and depend- North North- Centre- South- South East West East ing on the production cost situation at the relevant locations, it will become apparent which projects will MW MW MW MW MW remain in the running and enter into an agreement with Sugar cane 10 120 60 353 42 Eletrobrás, and be realised within the specified time- Oilseed crops Pará: 157 45 No data No data No data frame. Rice husks 33 34 68 13 190 Forestry33 13 52 3 121 127 Wind farm projects in Ceará Coconut shells 6 36 - 5 - The supply company Coelce in the state of Ceará, with Cashew nut shells - 13 - - - finance from Japanese development cooperation (Over- seas Economic Cooperation Funds–OECF), has been Table 8: Biomass potentials exploitable at short notice for electricity generation, by region; Brazil; MW34 preparing two wind farms at Paracuru and Camocim of 30 MW each for a number of years now; a pre-qualifica- However, with regard to the resources already used, tion round was held at the beginning of 2001. Both pro- above all in sugar production and in sugar-cane crop- jects are to be handed over on a turnkey basis and subse- ping35, which has grown substantially in the last few quently be operated by Coelce. years, the identified potentials are more likely to be a conservative estimate. The Ministry of Energy quan- Biomass tifies the technical production potential in the alcohol Brazil has wide-ranging biomass resources at its disposal and sugar sector at around 4,000 MW and in rice growing that already account for almost a quarter of primary and the paper and cellulose industry at 1,300 MW.36 energy consumption and contribute about 2% to elec- The technical electricity generating potential that can tricity generation. However, often these resources are be utilised at short notice through the use of timber not exploited sustainably at present; for instance char- residues, rice husks and sugar-cane components in the coal is burned without there being any specific refor- southern states of Santa Catarina, Paraná and Rio estation measures in place. Grande do Sul alone is estimated at several hundred megawatts.

33 Only timber residues from forestry. 34 Data source: ANEEL, 2002. 35 In the medium term a further increase of the harvest by 100 to 150 million t of sugarcane is expected. 36 Other estimates quote a possible electrical capacity of CHP stations on a sugar-cane basis of 6,000 MW for the state of Sao Paulo alone. For the whole of Brazil the prospect is held out that the energy potential could even be more than 21,000 MW, provided that high efficiency techniques are used by 2010. Use of biomass estimates quantify the generation potential from landfill So far the main instances where biomass is used for gener- gas for Brazil under current conditions of waste storage ating electricity are in industrial self-generation. Mostly at 300 to 500 MW. There are also some initial pilot pro- this involves the use of bagasse from sugar production and jects examining the use of sewage gases from waste (the associated) alcohol production37 as well as the use of water purification. residual substances in the timber and paper industries. About three quarters of the electricity-generating bio- Biodiesel and pure plant oil mass plants with a total capacity of about 2,500 MW are The National Reference Centre for Biomass (CENBIO) combined heat and power plants, where bagasse is used intends to start supplying electricity to an isolated com- almost exclusively. munity in the state of Ceará using a biodiesel engine in the second half of 2004. Further-reaching plans are In 2002, 128 of a total of 377 sugar factories possessed being pursued by the supply company Ceam (Centrais licences as self-generators, and 35 were authorised to Elétricas do Amazonas), a subsidiary of the state-owned operate as independent power producers (supplying Eletronorte, which intends to convert its 91 isolated surplus electricity to the public grid). In the state of São grids in the Amazon territory to biodiesel step by step. Paulo alone, the most important location in the Brazilian These projects are also being advanced by a biodiesel sugar industry with 165 factories, more than 850 MW programme in the transport sector, according to which was installed in such plants for electricity and heat pro- biodiesel is supposed to account for 5% of total diesel duction in 2002. use by 2010. CENBIO also converted a conventional diesel engine to operation with pure plant oil within the Promotion of industrial biomass use framework of the PROVEGAM project in 2002/2003 in In future more surplus electricity is to be provided for order to supply electricity to a community in the state the public grid by improving the efficiency of convert- of Pará. ing biomass and thanks to promotion by the Proinfa programme. In May 2001 an operational programme Solar Energy was also started for company-owned combined heat and The Federal University of Pernambuco presented the power plants on the basis of residual substances from new version of a solar atlas for Brazil in 2001 on the basis sugar production. The national development bank of results from 350 measuring stations. Thanks to its BNDES meets up to 80% of plant costs via credits in position close to the equator, Brazil has good to very order to enhance willingness to invest. good solar conditions in all parts of the country. Average daily irradiation ranges between 4.5 kWh/m2 on the Other biomass resources coast of the state of Paraná and 6.3 kWh/m2 in the At the same time the development of further biomass interior of the country in the North-East (Sertão region). resources is being discussed and partly already being There is a regional solar radiation atlas for the state of implemented on a small scale. Attention is focused here Santa Catarina which was prepared in partnership not only on organic constituents of domestic waste, but between the regional energy supply company and the also on residues of other agricultural products, for example Federal University. cocoa and coffee husks, and on oleaginous fruits that could play a major role above all in rural electrification Photovoltaic use of the North and North-East with the use of internal During recent years solar electricity was used above all combustion engines. The first electricity-generating within the framework of the federal PRODEEM pro- plant designed to utilise rice husks began operation in gramme. Initial experience with a grid-coupled plant 1996.38 The Dutch CDM fund (Netherlands Clean was gained in the grounds of the Federal University of Development Facility) intends to purchase tradable per- Santa Catarina. Altogether the potential for photovoltaic mits generated by the use of landfill gas from two land- facilities within the framework of the target deter- fill sites for domestic waste in Nova Iguaçu in the federal mination of PRODEEM is estimated at about 35 MW. state of Rio de Janeiro for generating electricity. First Solar home systems for elementary supply of private

37 With electricity generation of more than 4,000 GWh a year. 38 At São Gabriel in the state of Rio Grande do Sul. Brazil

households were distributed above all within the scope instance in the northern states Acre and Amazonas more of bilateral development projects. However, due to than 70% of rural households do not have any electricity insufficient market density and a lack of maintenance, connection. In absolute figures the need is particularly the failure rate of PV systems has been very high in the high in the North-East, at about 1.3 million house- past. It is hoped that such faults will be avoided in holds. In the relatively populated state of Bahia alone future by greater market integration of PRODEEM and the number of households in rural regions without elec- direct involvement of the distribution companies in the tricity supplies is put at about 440,000. electrification measures within the framework of the new programme ‘Luz para Todos’. The firm Heliodinâ- ‘Luz para Todos’ programme mica is the sole national manufacturer of solar cells and To improve electrification in rural areas the ‘Luz para modules, but its production volume is only very low to Todos’ (‘Electricity for All’) programme was launched date. in November 2003.41 According to this, all 12 million people without access to electricity are to be supplied Solar-thermal electricity generation with electricity as soon as 2008 (10 million of these in Since 1996 Brazil has been participating in the inter- rural areas). The programme is being coordinated by the national SolarPACES project (Solar Power and Chemical Ministry of Energy with participation by Eletrobrás and Energy Systems) through the research facility CEPEL the companies it controls. For 2004 it is planned to (Centro de Pesquisas de Energia Elétrica). No specific connect 400,000 households, and 500,000 each in consideration has been given to building solar-thermal 2005/2006, followed by 300,000 in each of 2007 and power stations. 2008. It was expected that the first pilot projects would be implemented in 2003. Geothermal Energy Due to its geological features, Brazil does not have The distribution companies had to set out their relevant favourable conditions for using geothermal energy. It targets for 2004 by the end of August 2003. A plan for has not yet been explored whether there are any local the subsequent years has to be drawn up in 2004. potentials for using geothermal energy to produce elec- Priority is assigned to projects in communities with a tricity. connection rate of less than 85% and projects providing for productive use of electrical energy or in state schools, health stations, or for water supply. Rural Electrification Electrification is to be achieved through network expan- Due to its territorial size, low population density in sion, distributed generating systems with isolated net- large parts of the country, and severe poverty in rural works or individual plants, whereby renewable energies regions, Brazil still has a high proportion of non-electri- can also be used for generating electricity in addition to fied communities and households.39 According to the diesel. Regionally graded tariffs serve to provide economic 2000 census, some 3.1 million households (corres- balance, and if these are exceeded alternatives to ex- ponding to 6.5% of the total) do not have electric panding the network should be considered. The marginal lighting.40 This rate is much higher in rural areas at costs in the North-East, for instance, are R$ 5,200 29% (2.2 million households) than in urban areas (approx. € 1,500) per consumer. (2.6%). Some 63% of the rural population in the North and almost 40% in the North-East do not yet have any The funds for the programme, estimated to total access to electricity. In some states the supply to the US$ 7 - 9 billion, originate at least partly from the rural population is particularly underdeveloped. For concession fees and fines paid by the energy supply

39 Non-electrification is to be understood literally in this connection, since even diesel generators for elementary autonomous supply are generally not available and frequently only batteries can be procured for basic needs (for example for operating radio sets). Communities are to be interpreted as local communities whose residents are frequently settled over a wide area but do not necessarily possess individual land property. That is why in Portuguese the term used is more frequently ‘Propriedade’ (‘property’). 40 According to estimates in 2002 Brazil’s total population numbered 176 million. Moreover in many regions the existing electricity supplies are frequently interrupted and thus only available for part of the time. 41 Decree 4.873 of 11 November 2003, which relates to Law 10.438 (Art. 14 and 15). The new project follows the ‘Luz no Campo’ programme managed by Eletrobrás with which about 1 million rural households and buildings were to be supplied with electricity within four years. However, due to the fact that promotion funds were only granted on a credit basis for supply companies with concessions and rural cooperatives, the programme did not lead to the desired success. companies and collected by ANEEL, as well as from the installation and installation materials, and of mainten- CDE (Conta de Desenvolvimento Energético), a fund ance. The programme also targets the involvement of which is paid into by all electricity consumers. The rest supply companies, banks and other domestic and is to be contributed by the federal states and the actors foreign financial donors. in the electricity market. Electricity consumers do not have to pay for any network expansions. Federal state promotion programmes Some federal states have conducted or are still con- GTZ projects ducting their own programmes for solar electrification, In a new project scheduled to run until 2007, the GTZ partly supported by foreign donors, even if these pro- is supporting rural electrification with renewable energy grammes are of a comparatively modest nature. In the sources in the North and North-East of Brazil. With states of Pernambuco and Ceará investment of at least reference to the government electrification programme, 2% of annual turnover for electrifying rural areas was the cooperation between Eletrobrás and the other energy contractually agreed in the privatisation of the relevant supply companies in testing and developing models for regional supply companies.44 rural electrification based on renewable energies is to be strengthened in a first phase. Exchange rate (Novembre 2003): 1 Brasilian Real = 0,294 €; 1 € = 3,408 Real PRODEEM In order to at least start to improve the poor supply situation in rural areas, the electrification programme PRODEEM (Programa para o Desenvolvimento da Information Sources Energia nos Estados e Municípios) was launched at the end of 1994. The project aims above all to equip com- • ANEEL, Atlas de Energia Elétrica do Brasil, 2002 munity facilities such as schools, health centres and (www.aneel.gov.br/arquivos/PDF/livro_atlas.pdf) churches with electricity generating systems based on • ANEEL, Panorama do Potencial de Biomassa no renewable energy sources. A further priority area com- Brasil (Projeto BRA/00/029 – Capacitação do Setor prises projects that can contribute to improving income Elétrico Brasileiro em Relação à Mudanca Global do situations, for instance by irrigation systems in agricul- Clima), Dezembro 2002 ture, or that supplement diesel generators in isolated facilities. • ANEEL, Panorama do Potencial Eólico no Brasil (Projeto BRA/00/029 – Capacitação do Setor In practical implementation, solar energy using PV Elétrico Brasileiro em Relacao à Mudanca Global do systems has developed into almost the sole energy Clima), Dezembro 2002 source, while for example hydropower and wind resources • Brazil – a new model for decentralized energy?, in: do not yet play any role.42 Solar home systems (SHSs) for Cogeneration and On-Site Power Production, supplying individual private households are not promo- January-February 2004 ted within the scope of PRODEEM. • C.M. Ribeiro, A. Andrade de Souza, F. L. de Oliveira MME bears the costs of PV modules, inverters, charging Rosa, RENOVE: Uma rede de Organizações do regulators, batteries and pumps, as well as of international Terceiro Setor promovendo o Desenvolvimento das transport.43 In return the federal states, local authorities Fontes Renováveis no Brasil, s/d or responsible prefectures (district governments) are expected to assume the costs of national transport,

42 Within the framework of PRODEEM only two wind power systems were procured in 1996, each rated at 10 kW, one of which is used for pumping water and the other for generating electricity. In addition a small hydropower plant with 40 kW entered service in May 1999 and a further plant with 25 kW in October 1999. 43 Altogether six international calls for tender were held in the years 1996 to 2001 by the MME and with the aid of CEPEL for central procurement of the necessary components. In Phases I to IV and a so-called special phase to overcome a drought period by using water pumps at the end of 1998 almost 6,000 PV systems with a total capacity of just under 3 MW were ordered and almost all installed by the end of 2001. Of these, 2,500 units alone are used for pumping water. 3,000 systems with a capacity of almost 2.2 MW were planned for Phase V, which started at the beginning of 2002. 44 In Pernambuco only 1% as of 2008. Brazil

• Centro Nacional de Referência em Biomassa • MME, Secretaria de Energia, Comitê Coordenador (CENBIO), Levantamento do Potencial real de do Planejamento da Expensão dos Sistemas Elétricos Cogeração de Excedentes no Setor Sucroalcooleiro, (CCPE), Plano Decenal de Expensão, Sumário Setembro 2001 Executivo 2003–2012, Versão Preliminar, Dezembro de 2002, www.ccpe.gov.br • Centro Nacional de Referência em Biomassa (CENBIO), Noticias, No. 10 (2000) – • MME/Eletrobrás, Programa Nacional de Universa- No. 14 (2003) lização de Acesso e Uso da Energia Elétrica – Luz para Todos, Manual de Operacionalização, 2003 • Detlef Loy, Jörgdieter Anhalt, Trainingsmaßnahmen im Rahmen des brasilianischen PRODEEM-Pro- • MME/PNUD/BID, Apoio ao Desenvolvimento de gramms zur Elektrifizierung ländlicher Regionen Mercados para Energia Renovável: Levantamento de durch erneuerbare Energien, Projektprüfung im dados Primários e Secundários para implementação Auftrag der Carl Duisberg Gesellschaft, do Programa Nacional de Capacitação, Januar 2001 Fevereiro 2003

• Eletrobrás, Informe de Mercado, various issues • MME, Guia de Habilitação de Projetos de Geração de Energia Elétrica, Centrais Termelétricas a • Eletrobrás/MME, Mercado e carga própria, Biomassa, 2004 Anual 2002, Maio 2003 • MME, Guia de Habilitação de Projetos de Geração • Eletrobrás, Plano Decenal de Expansão 2003/2012, de Energia Elétrica, Pequenas Centrais Sumário Esecutivo, Janeiro de 2003 Hidrelétricas – PCHs, 2004 • Emilio Lèbre La Rovere, André Felipe Simoes, Re- • MME, Guia de Habilitação de Projetos de Geração newable Energy and Energy Efficiency – Brazil, de Energia Elétrica, Centrais Eólicas, 2004 Paper for Latin America and Caribbean Regional Meeting of the Renewable Energy and Energy • Tolmasquim, M.T. und Neto, V.C., Estímulo ao uso Efficiency Partnership (REEEP), August 2003 da cogeração a partir do bagaço de cana-de-açúcar, Arbeitspapier, PPE/COPPE/UFRJ, • Energy Information Administration (US-Depart- Rio de Janeiro, 2002 ment of Energy), Country Analysis Briefs Brazil, July 2003 • UNIDO, CDM Investor Guide Brazil, Vienna, Austria 2003 • Lizcano G., Rohatgi, Janardan, e Feitosa, Everaldo, Wind Atlas for the North-East Region of Brazil, • Winrock International, Renewable Energy State of editado por ANEEL, 1998 the Industry Report (No. 9 – April-June 2003, No. 7 – October-December 2002, No. 6 – Sept. • Marco A. Galdino, Jorge H.G. Lima, PRODEEM – 2002, No. 5 – June 2002) O Programa Nacional de Eletrificação Rural Basedo em Energia Solar Fotovoltaica, s/d • Winrock International, Trade Guide on Renewable Energy in Brazil, October 2002 • MGM International Inc., Clean Development Mechanism, Project Design Document: Aquarius Further information is available under the following hydroelectric project (A small-scale CDM project), Internet addresses: Buenos Aires, Argentina, April 2003 www.energiabrasil.gov.br www.infraestruturabrasil.gov.br/english/ • MME, Brazilian Energy Balance 2003 home.asp www.jb.com.br www.electrica.com.br www.canalenergia.com.br Contact Addresses Associação Brasileira dos Pequenos e Médios Produto- res de Energia Elétrica (APMPE) Ed. Palácio do Rádio II – SRTV/SUL GTZ Office Brasilia Q. 701 CJ.E Edificio Brasilia Trade Center/SCN Quadra 01 Bloco C / Sala Bl. 2 e 4, Sala 537 1501 Zona Central 70340-902 Brasilia – DF Caixa Postal 01991 Tel. 0055 (61) 224 5986 70.259-970 Brasilia/DF, Brazil Fax 0055 (61) 223 3930 Tel. + 55 61 3 262 170 www.apmpe.com.br Fax + 55 61 3 289 149 E-mail: [email protected] Associação Brasileira de Distribuidores de Energia Elétrica (ABRADEE) Ministério de Minas e Energia (MME) Rua da Assembléia 10 – sala 3201 Secretaria de Energia 20119-901 Rio de Janeiro DNDE – Departamento Nacional de Tel. 0055 (21) 2531-2053 Desenvolvimento Energético Fax 0055 (21) 2531 2595 Esplanada dos Ministérios, Bloco U www.abradee.com.br 70065-900 Brasilia - DF Tel. 0055 (61) 319-5012 Associação Brasileira das Grandes Empresas de Trans- Fax 0055 (61) 224-1973 missão de Energia Elétrica (ABRATE) www.mme.gov.br Rua Deputado Antonio Edu Vieira, 999 – Pantanal 88040-901 Florianópolis / SC – Brasil Agência Nacional de Energia Elétrica – ANEEL Tel. 0055 (48) 231-7215 / 233-5647 SGAN - Quadra 603 – Modulo ‘J’ Fax 0055 (48) 233-5551 70830-030 Brasilia – DF E-mail: [email protected] Tel. 0055 (61) 312 59 50 www.abrate.com.br Fax 0055 (61) 312 56 23 E-mail [email protected] Associação Brasileira dos Produtores Independentes www.aneel.gov.br de Energia Elétrica (APINE) SCN Qd. 02 Ed. Centro Empresarial Encol – Operador Nacional do Sistema Elétrico – ONS Torre ‘A’ Salas 626/8 Escritório Central 70710-500 Brasília – DF Rua da Quitanda 196 Tel. 055 (61) 315-9182 / 4 or 328-5707 20091-000 Rio de Janeiro Fax 0055 (61) 327-2069 Tel. 0055 (21) 2203 9400 [email protected] Fax 0055 (21) 2203 9444 www.apine.com.br E-mail: [email protected] www.ons.org.br Mercado Atacadista de Energia Elétrica (MAE) Alameda Santos, 745 – 9º andar Eletrobrás Cerqueira César Av. Presidente Vargas 409 01419-001 São Paulo – SP 20071-003 Rio de Janeiro www.mae.org.br Tel. 0055 (21) 2514-5151 Fax 0055 (21) 2507-8487 and 2224-0535 Associação Brasileira dos Grandes Consumidores de www.eletrobras.gov.br Energia Elétrica (ABRACE) Av. Paulista, 1439 – 11. andar – conj. 112 Associação Brasileira das Grandes Empresas Gera- 01311-926 São Paulo – SP doras de Energia Elétrica (ABRAGE) Tel. 0055 (11) 3284-4065 Rua Alvarenga Peixoto, 1408 – sala 906 Fax 0055 (11) 288-3882 Santo Agostinho E-mail: [email protected] 30180-121 Belo Horizonte – MG www.abrace.org.br Tel. 0055 (31) 3292-4805 Fax 0055 (31) 3292-4682 E-mail: [email protected] www.abrage.com.br Brazil

Centro de Referência para Energia Solar e Eólica – Banco Nacional de Desenvolvimento CRESESB Econômico e Social (BNDES) Av. Hum s/nº, Cidade Universitária – Ilha do Fundão Av. República do Chile 100 21941-590 Rio de Janeiro – RJ 20139-900 Rio de Janeiro Caixa Postal: 68007 Tel. 0055 (21) 2277-7447 Tel. 0055 (21) 2598-2174 / 2187 www.bndes.gov.br Fax 0055 (21) 2260-6211 E-mail: [email protected] Associacão de Comercio Exterior do Brasil www.cepel.br Av. General Justo 335, 4. andar 20021-130 Rio de Janeiro – RJ Centro Brasileiro de Energia Eólica CBEE Tel. 0055 (21) 2544 0048 Centro de Tecnologia da Universidade Federal de Pernam- Fax 0055 (21) 2544 0577 buco (UFPE) E-mail: [email protected] 50740-530 Recife – PE www.aeb.org.br Tel. 0055 (81) 453-4662 / 453-4453 / 453-2975 Fax 0055 (81) 271-8232 Brazilian Embassy in Berlin E-mail: [email protected] Wallstrasse 57 www.eolica.com.br 10179 Berlin Tel. (030) 726 28 – 0 Centro Nacional de Referênzia em Biomassa Fax (030) 726 28 – 320 Av. Professor Luciano Gualberto, 1289 – Cidade Universitária E-mail: [email protected] 05508-010 São Paulo – SP www.brasilianische-botschaft.de Tel. 0055 (11) 3091-2655 and 3091-2654 Fax 0055 (11) 3091-2649 E-mail: [email protected] www.cenbio.org.br

Grupo de Estudos de Energia Solar / Green Solar Av. José Gaspar Talento, 500 – Vizinhança Coração Eucarístico 30535-610 Belo Horizonte – MG Tel. 0055 (31) 319-4387 E-mail: [email protected] www.green.pucmg.br/

Centro Nacional de Referência em Pequenos Aproveit- amentos Hidroenergéticos – CERPCH Escola Federal de Engenharia de Itajubá Avenida BPS, 1303 Bairro Pinheirinho 37500-903 Itajubá – MG Tel. 0055 (35) 3629-1278 Fax 0055 (35) 3629-1265 E-mail: [email protected] www.cerpch.efei.br/

Ministério do Desenvolvimento, Indústria e Comércio Exterior Secretaria de Comércio Exterior Esplanada dos Ministérios, Bl. j, 8. andar 70065-900 Brasilia – DF Tel. 0055 (61) 329 70 80 E-mail: [email protected] www.mdic.gov.br Chile

Chile

Electricity Market isolated grids in the south (Sistema Eléctrico de Aysén in Region XI and Sistema Eléctrico de Magallanes in Generating capacity Region XII), each run by a power supplier with vertical At the end of 2002, installed generating capacity in the interconnection. public supply sector in Chile totalled 10,462 MW, 6,382 MW of which was in thermal power stations and The northern interconnected grid system SING relies 4,080 MW in hydropower plants. Added to this is another almost entirely on thermal power stations and exports 684 MW or so belonging to self-generators (including surplus electricity when needed to the central region, industrial combined heat and power stations). whereas the generating capacity in the southern SIC is largely based on hydropower (61% of total output). Installed capacity Power generation in the separate grids of Magallanes is MW % % dependent on gas and diesel engines and on gas turbines. Thermal power stations 6,989 63 Power in the extra-high voltage range is largely trans- Self-generators 319 5 mitted via the north-south 220kV line, which reaches Industrial CHP stations 288 4 all major consumer centres. However, quite a number of Public supply 6,382 91 areas, and particularly the coastal region, are only Hydropower 4,157 37 connected with low-voltage lines. Self-generators 78 2 Capacity Peak Gross Electri- Customers Public supply 4,079 98 Inter- load power city 2002 connected gener- sales Table 9: Installed capacity by power station type and supply grid ation segment; Chile; 2002; MW, % system 2002 2000 2002 2002 MW MW GWh GWh

Thermal capacity in particular has expanded greatly SING 3,645.0 1,420.0 10,400 9,482 230,000 since 1994, when only some 2,000 MW was available. SIC 6,733.0 4,878.0 31,971 30,330 3.85 Mio. In recent years, new combined-cycle power plants in Aysén 23.4 15.2 86 83 20,188 particular have gone into operation, with now four pipe- Magallanes 64.5 35.1 176 170 45,801 lines supplying them with Argentinian natural gas since Total 10,465.9 6,348.3 42,633 40,065 4.16 Mio. 1997.45 Table 11: Gross installed capacity, generation and electricity sales in the interconnected grid systems 19992000 2001 2002 (public supply); Chile; 2000, 2002; MW, GWh MW % MW % MW % MW % Hydropower 4,012 40.0 4,128 39.8 4,124 37.8 4,157 37.3 Power generation Hydropower 2,299 22.9 2,638 25.4 3,126 28.6 3,441 30.9 Gross power generation in the public supply sector in Coal 2,260 22.5 2,225 21.5 2,264 20.8 2,253 20.2 2002 amounted to about 42,650 GWh, with self-gener- Diesel/ 1,244 12.8 1,170 11.3 1,023 9.4 1,006 9.0 ators adding another 2,836 GWh. heavy fuel oil

Other 211 2.1 211 2.0 375 3.4 289 2.6 Due to lack of rainfall and the growing role of fossil

Total 10,026 10,372 10,912 11,146 fuels, power generation from thermal power stations in 1998 exceeded that from hydropower plants for the first Table 10: Installed capacity by power station type; Chile; time. In the two subsequent years the percentage of 1999–2002; MW, % hydropower also remained well below the average for Interconnected and separate grids previous years. In 2001 and 2002, fossil fuels and hydro- Power supply is subdivided into large interconnected power accounted for approximately equal shares in the grid systems in the north (Sistema Interconectado del generating mix. Power generation based on (lower quality) Norte Grande–SING) and in the centre (Sistema Inter- local coal and on oil has, however, been greatly reduced conectado Central–SIC) of the country, each with several in recent years, although capacity has remained more or power producers and distributors, and two territorial or less the same.

45 Chile’s own gas reserves are very limited and are located in the south of the country, where they are also used by local suppliers. 1999 2000 2001 2002 Consumer sector Consumption GWh % GWh % GWh % GWh % GWh %

Hydropower 13,577 35.4 19,081 46.2 21,680 49.4 23,187 51.0 Transport 214 0.5

Natural gas 6,698 17.4 9,771 23.7 12,504 28.5 12,529 27.5 Industry 28,117 68.9

Coal 13,260 34.5 9,354 22.7 6,228 14.2 6,925 15.2 Trade/services 4,110 10.1

Public services 1,199 2.9 Diesel/heavy 3,399 8.9 1,687 4.1 1,822 4.1 1,062 2.4 fuel oil Households 7,161 17.5

Other 1,455 3.8 1,365 3.3 1,683 3.8 1,780 3.9 Total 40,801

Total 38,389 41,268 43,917 45,483 Table 13: Power demand by final customers according to sector; Chile, 2002, GWh, %46 Table 12: Gross power production (public supply and self-generators) by source of energy; Chile; 1999–2002; GWh, %

Imported electricity Market Actors For greater supply security, consideration is being given to stepping up electricity exchange with Argentina in Power producers the medium term. At present the only cross-border Approximately 90% of installed generating capacity is connection is with the northern interconnected system, owned by private enterprise. Of the remaining 10%, a which transmits electricity from the natural-gas-fired large part is owned by the state copper company Codelco. power station Termo Andes (643 MW) in Salta Province, Altogether, there are 31 power producers, 5 transmission which belongs to the Chilean producer AESGener. Con- firms and 36 power distributors operating in Chile. sideration is also being given to a line to Bolivia. Endesa and AESGener Generating and transmission costs Chile’s largest power producer with a market share of nearly The generating costs for new natural-gas-fired com- 40% is Endesa (Empresa Nacional de Electricidad), which bined-cycle power plants range between US$ 25 and belongs to the Spanish company of the same name via the US$ 43 per MWh. In contrast, existing coal-fired power Enersis holding.47 Endesa operates almost all the hydro- stations whose cost has already been written off incur power stations in the country. The same holding also owns marginal costs of approximately US$ 20 per MWh. the distributor Chilena de Electricidad (Chilectra), which operates in the region around the capital and, with some 1.3 On average about 10% is added to these costs for power million customers (at the end of 2003), serves about 45% transmission via the interconnected grid system. Approxi- of the entire market.48 The second-largest producer is AES- mately 40% of the price of electricity for standard Gener with a market share of nearly 30% (including sub- customers goes on generation and transmission, which sidiaries), which is majority-owned by the American AES. cost an average of some US$ 25 per MWh in the two interconnected grid systems in October 2002. Grid operators The transmission grids that transport electricity from Electricity the producers to the distributors or directly to the final Electricity consumption in 2002 amounted to about customer are also privately owned. The owner of roughly 41 TWh, with the industrial sector clearly predominating. 80% of all transmission grids is Transelec, which Annual power demand by private households was rela- belongs to the Canadian company Hydro Quebec. tively low, averaging 473kWh per person. At an average of 10.6%, rates of growth in power demand over the pre- Load despatch centres vious 10 years (1993–2002) were very high. CNE an- Coordination within the two large transmission systems ticipates that the demand for electricity could at least SING and SIC is effected by two load despatch centres double by 2011. (Centro de Despacho Económico de Carga–CDEC), autonomous authorities made up of representatives from all utilities in the respective interconnected grid system.

46 Additionally transformation sector 1984 GWh. 47 For more details see www.endesa.cl. 48 For more details see www.chilectra.cl. Chile

Actors in the various interconnected tistical database. Disputes relating to competition are grid systems arbitrated by a monopolies commission, which in the past, In the SING interconnected grid system, which serves however, has undertaken little against the obvious verti- the northernmost administrative regions I and II, there cal reintegration on the Chilean electricity market. are six power producers in operation that also run the transmission lines and for the most part (90%) supply Water rights are issued by the Ministry of Public Works large consumers. Also located in the SING area are high- (Ministerio de Obras Públicas) in compliance with prin- voltage routes that are not connected to the inter- ciples set out in the water legislation of 1981. Under this, connected grid and are largely used in mining. limited-term usage rights are assigned to each private person or company, usually free of charge. There is no At the end of 2002 there were 10 power producers and obligation to make use of these rights, however. Partly three transmission grid operators operating in the SIC as a result of this regulation, Endesa in particular has interconnected grid system that stretches from Taltal in acquired water rights in large parts of the country with- the north to the island of Chiloé in the south. This grid out any current need to use them for power generation. supplies approximately 90% of the whole population of the country. The National Commission of the Environment(CONAMA) is responsible for evaluating the environmental impact The Aysén supply grid (Sistema de Aysén) is served by assessments of projects in the electricity sector under Law the vertically integrated company EDELAYSEN.49 The 19.300 of 1994 and for issuing environmental permits.52 Magallanes supply grid (Sistema de Magallanes) is divided into independent subsystems for the three conurbations Free market competition (Puerto Natales, Puerto Porvenir and Punta Arenas), Open competition in power generation and guaranteed each served by the vertically integrated enterprise grid access is laid down in electricity sector legislation EDELMAG.50 A very small supply grid is also maintained adopted in 1982.53 Generating licences are not required. on Easter Island, run by an operator under the auspices Anyone can build and own transmission lines. Grid of the development authority CORFO. capacities permitting, the grid operators must accept electricity transport to consumers or for sale on the spot market. Inadequate provisions on transport costing have Legal Framework led to repeated disputes in the past, however. If due to additional power transmission the grids need upgrading, As far back as the early 1980s, the previously state- the cost burden and its distribution must be negotiated owned power utilities were unbundled horizontally and between users and grid operators. vertically and then privatised. Government is largely accorded a regulatory and supervisory role exercised by Licences for power distributors the Ministry of Economy and Energy. Government does The distribution and sale of electricity to standard not carry out planning for the power generating sector. customers is seen as a public service in the nature of a monopoly, for which a licence has to be obtained from Responsibilities of the various institutions the Ministry of Economy. In exchange, distributors are The Comisión Nacional de Energía (CNE) was established obliged to supply electricity to customers connected to as the regulatory supervisory authority, which also over- their system or located in their service area. Licences do sees pricing in generation and distribution.51 The not, however, confer sole supply rights for certain regions, Superintendencia de Electricidad y Combustibles (SEC) so that the service areas of the distributors can overlap in was also set up to supervise the technical and financial parts. Reliable electricity supply is secured through input of market players, process franchise applications, agreements between producers and distributors over collate information on setting tariffs and maintain a sta- terms of several years.

49 For more details see www.edelaysen.cl. 50 For more details see www.edelmag.cl. 51 The electricity tariffs for regulated customers are set twice annually (April/October) by CNE. 52 Projects with minor environmental impacts only need to submit a simpler environmental assessment. 53 The law was supplemented and updated in key passages by a ruling adopted in 1998: Reglamento de la Ley General de Servicios Eléctricos. Decreto Supremo No. 327, Ministerio de Minería, Publicado en el Diario Oficial del 10 de septiembre de 1998. Free choice of supplier ing that distributors also bear an adequate share of the Large-scale consumers with a power demand of more transmission costs, which have so far been charged solely than 2 MW can buy their electricity directly from the to the producers. New arrangements apply to the use of producers or distributors at freely negotiated prices.54 In grids by power producers for direct supply to large-scale contrast, power producers in turn can either sell their consumers. The upper limit for electricity customers electricity at regulated prices (precios de nudo) to the without regulated tariffs will in future be lowered to distributors or to the respective load despatch centre in 500 W. At the same time, buyer interests in disputes the interconnected grid system (Centro de Despacho have been strengthened, for example in relation to eco- Económico de Carga–CDEC) at marginal costs fixed nomic losses due to power failure, for which they have every hour (spot market). received inadequate compensation in the past.

Regulated electricity tariffs Clean Development Mechanism Electricity sales to small consumers (< 2 MW) have to Chile signed the Framework Convention on Climate keep to statutory maximum electricity tariffs. These Change in June 1992 and ratified it in December 1994. regulated tariffs are based on the distributors’ purchase The Kyoto Protocol was signed in June 1998 and rati- prices, which are set twice a year, and on a ‘valor agregado fied in August 2002. Initial pilot projects under the de distribución’ (VAD) that includes the investment and Clean Development Mechanism are under way or are operating costs of the distribution grid and is reset every in planning. four years. In addition, when the distributors’ purchase price is fixed, the calculations of the regulatory authority must be compared with current market prices. Where Policy for Promoting Electricity the calculated price is more than 10% above or below Generation from Renewable the reference figure on the free market, adjustments Energy Sources must be made. There are no or at best rudimentary systems of incen- For isolated electricity systems with a power demand of tives for renewable energies outside rural electrification 1.5 MW or less, the law requires that local authorities development. There is no separate legislation. agree with distributors on maximum tariffs. The new electricity law provides for exemption from New electricity law transmission fees for electricity fed in from non-conven- Despite the expansion in generating capacity, there was tional energies up to a capacity of 9 MW. a far-reaching supply crisis and rationing of power distribution between the beginning of 1998 and May 1999 Regulation for geothermal energy due to drought, which was exacerbated by management A law on licensing for geothermal energy sources was shortcomings among power suppliers, inadequate legal adopted in January 200055 to regulate and promote provisions and mistakes in the supervision exercised by national and foreign investments in this energy sector. government authorities. As a result of this, an amendment Based on this legislation and on studies by the National was made to the electricity law (19.613) in 1999, which Service for Geology and Mining (Servicio Nacional de included the authorisation of SEC to supervise power Geología y Minería–Sernageomin), an ordinance stipu- suppliers more closely and impose fines for infringing lating possible geothermal energy sources was issued in supply obligations. Quite a few passages in the law were June 2000.56 rejected for breaching the constitution, however. After several years of discussion, another amendment to the GTZ-assisted project electricity law was adopted by the senate and parliament In a six-year project beginning in May 2004, the GTZ in January 2004. It regulates the linkage of inter- will assist CNE in integrating non-conventional renew- connected grid systems and responsibilities in the case able energies into (grid-linked) power generation. The of a power failure. There is also a new regulation requir- prime concern is to contribute to establishing a suitable

54 These unregulated customers accounted for around 55% of total electricity consumption in 2001. 55 Ley sobre concesiones de energía geotérmica, Ley No. 19.657, Ministerio de Minería, Publicado en el Diario Oficial del 7 de Enero de 2000. 56 Reglamento identifica fuentes probables de Energía Geotérmica, Decreto No. 142, Ministerio de Minería, Publicado en el Diario Oficial del 28 de Junio de 2000. Chile

framework. It also envisages setting up advisory centres combined annual power output of approximately for investors, upgrading specialists and management 6.8 GWh. The market for microturbines is served by personnel, and generally involving the private sector in some ten local manufacturers. preparing and implementing projects. The first studies show that particularly in the southern Regions VIII to XI there are sufficient water resources Status of Renewable Energy available to install more small hydropower systems. No Sources reliable data is available on potential, however.

A review of the use of non-conventional renewable en- CNE and the regional governments are presently imple- ergies in Chile was published in 1998.57 Until then, menting a programme for micro-hydropower systems to the main focus has been on the application of solar supply isolated municipalities in various regions of the thermal installations. northern and southern zones. Three small hydropower plants have been installed in indigenous municipalities Of all (localised) renewable energy sources, solar energy on the Bio-Bio river (Region VIII) as part of a demon- (photovoltaics) and small-scale hydropower have been stration project.58 In Pallaco in the Tirúa municipality a almost the sole methods used for electricity generation micro-hydropower plant built with UNDP and Japanese in the past. assistance was put into operation in November 2001. In 2003, other facilities of this kind were installed in Rio Hydropower Grande, Talabre and Socaire in the San Pedro de Atacama Chile has a number of rivers with a steep gradient due to municipality. Technical studies are scheduled in the the topography which makes for a short distance be- Maule, Araucanía, Lo Lagos and Aysén regions. tween the source and their entry into the sea. At present, only approximately 15% of hydropower potential is Chacabuquito hydropower plant exploited. Most facilities in operation are run-of-river In June 2003, the Chacabuquito small hydropower power stations, often rated at considerably less than plant was approved as the first project under the Proto- 100 MW. However, there are some storage power stations type Carbon Fund (PCF). This plant is operated by rated at up to several hundred MW, which make a much Hidroelectrica Guardia Vieja with an installed capac- larger contribution to power supply. ity of 26 MW, and is located approximately 100 km north of Santiago. With a gross power output of

Development locations 175 GWh p.a., the project is designed to reduce CO2 New development locations are mostly situated in re- emissions by some 2.8 million tonns over 21 years. In mote regions and would require long transmission lines a first step, emission certificates worth approximately to the consumer centres. For this reason – and due to com- US$ 3.5 million have been sold to PCF.59 The South petition with low-cost combined-cycle power plants – German technical inspectorate has already confirmed the addition of medium to large systems (10–100 MW) the CO2 reductions for the first year of operation. is expected to be limited in the next few years. On the other hand, the economic viability of small installations Wind Energy with capacities of 1–10 MW has improved recently. Despite good potential in the north and south of the country, wind power has only played a marginal role so far. Small and micro hydropower No specific policy to promote the development of this An interesting option is also to expand hydropower use potential has been implemented to date. The emphasis primarily on a micro scale to supply rural regions or for on competitiveness and very low average costs for gener- specific applications (for example telecommunications). ating electricity leave limited scope for wind power, for Currently, 110 of these systems with capacities of up to example for supplying remote regions to save on high 100 kW are registered at CNE, mostly located in Regi- diesel costs or in non-electrified rural areas. Neverthe- ons VIII to XI, with a total capacity of 3.3 MW and a less, there are initiatives at least to sound out the options

57 Inventory for the Elaboration of the Installations of Non-Conventional Renewable Energies in Chile. 58 On the upper reaches of the same river, a 570MW power station is being built at the Ralco dam by Endesa, which is highly controversial due to the need to resettle indigenous groups, and will in future be the largest hydropower facility in Chile. 59 At investment costs of approximately US$ 37 million. for future applications in more detail and implement merely covers maintenance and operation, but not the pilot and demonstration projects. investment outlay amounting to some US$ 200,000. Major development funds came from the national fund Appraisal of wind resources for rural development and from US cooperation The first studies to evaluate wind resources in the Ata- assistance. cama Desert under UNESCO leadership go back to the early 1960s. In 1992, the University of Chile published Another project of this kind was launched in the Chonchi a study on wind directions and velocities at 60 meteoro- municipality on Chiloé in November 2003. In this case, logical stations.60 This study evaluated available read- nine families are supplied from their own micro wind ings, which were, however, only partly obtained to the power systems, while 12 families obtain electricity from international standards now established. Wind meas- three somewhat larger communal wind power facilities. urements are currently being carried out at 10 locations The project received Japanese financial assistance and is to obtain suitable basic information for projects at the also overseen by Wireless Energy. coast and on islands. In February 2004, CNE started an international invitation Projects with small hydropower and wind-diesel to tender for building and operating a wind-diesel systems system on Robinson Crusoe Island in the Juan Fernández Three pilot projects for off-grid supply to villages archipelago. In this case, the present expensive municipal (Puaucho, Isla Nahuehuapi and Villa Las Araucarias) in generation scheme with diesel engines will be partly Region IX were started at the beginning of 1997 by CNE replaced with small wind power systems. In preparation, with US assistance. Small wind power plants supply wind measurements were taken at four sites on the electricity to households, schools, health centres and island. churches. There have been plans by the power producer Edelaysen A recent study by CNE conducted under a cooperation for a small wind farm in Region XI in southern Chile agreement with the USA estimated that more than since 1993. Wind-generated electricity in this case was 3,100 families could be supplied with energy from primarily supposed to replace the diesel-fired option, hybrid wind-diesel systems on the 32 islands of the which incurs considerable costs due to the long fuel Chiloé and Cabulco archipelago in Region X and an- transport distances. other 200 families on the Robinson Crusoe Island in the Juan Fernández archipelago.61 The Alto Baguales wind farm, which is owned by the parent company of Edelaysen Sociedad Austral de Elec- A first demonstration project of this kind was put into tricidad (SAESA) and situated some 5 km from Coyhai- operation on the island of Tac in 2001. In this case, 82 que, has been in operation since November 2001. It has residential buildings with more than 250 residents, a an installed capacity of nearly 2 MW, generated by three health station and a school were supplied with electricity turbines of 660 kW each, thus accounting for almost by two small wind-powered generators rated at 7.5 kW 10% of total installed capacity in the Aysén inter- each, a storage battery for 100 kWh and a 12kW diesel connected grid system. In 2002, this wind farm sup- generator via a 15 km long separate grid. The whole plied about 6.5 GWh of electricity, demonstrating an system belongs to the regional government. Operation availability of 41%. and maintenance are in the hands of the power distributor SAESA, which has signed a power supply agreement Wind farm for CODELCO for an initial 10 years and a technical implementation Not yet implemented are plans to build a wind farm of contract with the builder, Wireless Energy.62 The elec- 37.5 MW for self-generation by the state copper company tricity tariff, made up of a monthly standing charge of CODELCO. Wind measurements have been carried out US$ 5.7 and a kilowatt-hour charge of US$ 0.24 per kWh for this at three locations and a feasibility study has been

60 CORFO, 1993: Evaluación del Potencial de Energía Eólica en Chile, desarrollado por el Dpto. Geofísica de la Universidad de Chile, 1993. 61 Altogether, there are more than 32,000 inhabitants in this region with no power supply. In this project with the National Renewable Energy Laboratory (NREL) a provisional wind atlas has also been drawn up for Chiloé Island. 62 For the initial operating results, see: Nelson E. Stevens (Wireless Energy Chile Ltda.), Isla Tac Power System – First Year Status Report: October 2000–October 2001; November 2001, www.wireless-energy.cl. Chile

drawn up. Additional sources of finance through the sale GTZ and GEF projects of CO2 certificates have also been sounded out. In view of Jointly with the Centro de Energías Renovables at the CODELCO’s plans to entrust power supply for mining to University of Tarapaca/Arica and the INDAP farm an independent private enterprise as of 2004, it is doubt- extension service, the GTZ ran a demonstration project ful whether this wind farm will be built. for using PV water pumps in agriculture between 1998 and 2002. The pump systems were combined with a CERE desalination facility for desert irrigation and drinking Wind energy studies are conducted by the Research water supply. In the course of the project the project Centre for Energy Resources (CERE) at the University of partners were given further training and the wider Magallanes. So far, CERE has carried out some small public was informed about ways of using photovoltaic wind power projects to electrify rural schools and farms. 63 pump systems for irrigation.

Solar Energy Under the GEF project to remove barriers to rural elec- The solar conditions in Chile are good to excellent, par- trification with renewable energies, cofinance will be ticularly in the north. In 1987, the Solarlabor at Federico provided until 2005 for building and operating 6,000 PV Santa Maria University published a national inventory systems in Region IV, Coquimbo, on the basis of licensing with solar irradiation data from 129 measuring stations. agreements. The region, which in 2002 recorded a de- Annual irradiation in Regions I and II is amongst the gree of electrification of nearly 79% with 38,000 rural highest in the world. households, already had more than 1,000 individual solar energy systems at that time. Between 2003 and Region Solar irradiation 2006, another 3,100 isolated residential buildings and (kcal/m2.d) settlements are each scheduled to be equipped with

I 4,554 100 Wp solar systems at a cost of US$ 3.8 million. Over II 4,828 50 schools and health stations will also be equipped III 4,346 with PV systems and existing solar systems improved. A IV 4,258 comprehensive survey has already been conducted to V 3,520 select suitable properties. The project will be flanked by VI 3,676 measures to train users and set up small businesses or VII 3,672 cooperatives for the operational upkeep and mainten- VIII 3,475 ance of the systems. IX 3,076 X 2,626 Biomass XI 2,603 Despite Chile's extensive agricultural and forestry XII 2,107 resources, the use of biomass for electricity generation is Región Metropolitana 3,570 still at an early stage. In each of Regions VII and VIII, Antarctica 1,563 Energía Verde S.A., the subsidiary of the power producer AESGener, runs an 8.7-MW combined heat and power Table 14: Annual mean daily solar irradiation on a horizontal station fired with waste wood. 66 area by region, Chile, kcal/m2.d64

PV use In cooperation with the environment authority and with One of the first industrial photovoltaic systems in the assistance and finance from UNDP/GEF, a project was world began operation in 1972 in Antofagasta, a town in conducted by CNE on the island of Butachauques in the the north. However, photovoltaic technology is used town of Metahue (Region X) to generate electrical mainly in the form of solar home systems in outlying areas energy through the gasification of wood biomass. A 40- in the north under the programme for rural electrifica- kW system was installed to supply 31 families with tion. Between 1995 and 1999, alone almost 1,000 resi- electricity. The facility is run by a cooperative set up for dential buildings were fitted out with these systems.65 this purpose. As the project is oversized, CNE is consi-

63 E.g. in 1999 in the Agua Fresca school south of Punta Arenas to support a diesel generator. 64 The data is based largely on a national solarimetric archive already established in 1965 at this university. 65 CNE says that between 1992 and 1999 as many as 2,500 individual PV systems were installed in residential buildings, schools and health stations. 66 For more details see www.energiaverde.cl. dering supplying the whole island comprising approxi- Rural Electrification mately 100 households. Out of a total of roughly 15 million inhabitants, 15% Geothermal Energy (about 2.2 million) live in rural areas. The power coverage Due to the volcanic zone where Chile lies, prospects are for these areas in 1994 amounted to about 59%, while also good for geothermal energy, but it has only been almost full coverage was achieved in the urban centres. used on a small scale (0.4 MWth) just for heating in the Metropolitana region (Santiago). PER programme Against this background, therefore, at the end of 1994 Geothermal explorations CNE launched the Programa de Electrificación Rural Geothermal explorations under a cooperation agreement (PER), which was extended in 2000 to the end of 2005 between UNDP and the Chilean development institu- with a coverage target of 90%.67 The April 2002 census tion CORFO (Corporacón de Fomento de la Producción) recorded a national electrification coverage of 85.7%.68 began as long ago as 1968 in the northern zone along the Between 1995 and 2002 altogether about 135,000 house- Andes, where volcanic activities are known. Exploratory holds were either connected to the public mains or drillings near El Tatio and Puchuldiza revealed possible equipped with individual facilities (mostly diesel genera- suitability for the exploitation of geothermal energy, tors). including for power generation. According to estimates at the end of 2000, of the house- There are also numerous areas in the mid-southern zone holds lacking regular power supply, 88,420 could be with indications of volcanic activity. At the end of 1999, served by the conventional grid, while about 48,250 a three-year research project led by the University of households could be supplied from renewable energy Chile in Santiago was therefore started in cooperation sources separately or via small separate grids.69 In add- with the ENAP oil company. Also taking part were geo- ition, households supplied from their own diesel gener- thermal and geological institutes from Italy, Germany ators could also be converted to renewable energy, so and New Zealand. Detailed exploration studies were that altogether over 120,000 rural households could be carried out in the regions of Puyehue, Chillán, Copahue electrified on the basis of renewable energy sources. and Laguna del Maule. Energy source Household potential The first applications for options on geothermal conces- Solar 20,667 sions were submitted in January 2001 for 23 locations Hydropower 19,094 under the new legislation. Together with its partner Biomass 55,604 ANEP, AESGener is planning to build a 50 MW geo- Wind 17,324 thermal power station. Table 15: RE potential in rural electrification; Chile; 2000; number of households As part of its energy plans, CNE has announced its intention to build a geothermal power station with a Planned increase in power capacity of 100 MW by 2010. Since 2003 geothermal connections 2003–2005 energy has also been gaining importance in the future Another 37,000 households are scheduled for electrifi- Chilean energy mix due to the activities of German cation between 2003 and the end of 2005. Efforts will enterprises. concentrate primarily on regions with the lowest electrification ratios.

67 Based on a total number of rural households of 622,500 in 2005. 68 This includes urban supply areas. 69 According to a PDF B study prior to the GEF application in 2001, the potential market for non-conventional renewable energies (including those already supplied by diesel generators) comprises as many as 75,000 households. It cites solar energy, biomass and wind energy or a combination of these as the main energy sources. Most of these households are located in Regions VIII and X. Chile

GEF project for rural electrification 71 100 As part of a GEF project, a comprehensive programme 90 has been under way since the end of 2001 to introduce 80

70 non-conventional renewable energies in rural electrifica- 60 tion. For outlying municipalities and scattered residential

% 50

40 buildings, most use will be made of small hydropower 30 plants, photovoltaic modules and small wind power 20 facilities. The tasks of the project, which is funded with 10

0 more than US$ 6 million in GEF assistance, include cer- I II III IV V VI VII VIII IX X XI XII RM Total Region tifying and standardising products for renewable energy 1992 2002 use, developing training programmes, implementing large-scale projects, drawing up a wind atlas, and setting 70 Figure 1: Rural electrification ratio; Chile; 1992, 2002; % up a guarantee fund to reduce investment risks. Despite all efforts, approximately 64,735 households are expected to have to make do with candles, kerosene and batteries when PER has been completed. Exchange rate (6 Feb. 2004): 1,000 Chilean pesos = € 1.40

The PER programme is highly decentralised and leaves it to the regions to identify, evaluate and finance suitable projects. Each project is subjected to a strict assessment to determine private investment and the corresponding development assistance tied to the achievement of bene- ficial social impacts.

A special role is played by local distributors, which submit technical proposals. On approval, a rural electrification franchise agreement is concluded according to which the power suppliers undertake an obligation to the local administration to set up the supply facilities and run them for a certain period (at least 30 years for distribution grids and at least 20 years for supply using renewable energy sources).

The investment costs for generating facilities and distribution lines are borne by local governments (60–70%), the distributors (20–30%) and the users (10%). The electricity consumers pay for the meters, cabling in the houses and the power connection, and can pay off the requisite contribution in instalments along with their regular charges.

The public finance stems from a national fund for regional development (Fondo Nacional de Desarrollo Regional– FNDR) set up to develop the regions through various social sector projects. As of 1995, part of this fund has been earmarked for rural electrification (FNDR-ER).

70 Data source: Datos Censales INE. 71 Removal of Barriers to Rural Electrification with Renewable Energy. Information Sources • Departamento de Ingenieria Eléctrica, Facultad de Ciencias Físicas y Matemáticas Universidad de

• Alejandro Jadresic, A case study on subsidizing rural Chile, Simulación Preliminar de desempeño opera- electrification in Chile, in: World Bank, Energy and cional y comercial de Centrales de Generación Development Report 2000: Energy Services for the Eléctrica Geotermicas y Eólicas, Informe Final, World’s Poor, Washington 2000 Febrero 2003

• Alejandro Jadresic, Promoting private investment • Energer S.A./ASELAT Ltda., Estudio: Elaboración in rural electrification – The case of Chile, in: View- de un catastro nacional de instalaciones de energías point (World Bank), June 2000 renovables no convencionales en Chile, Informe final, im Auftrag der Comisión Nacional de Energía • Alfredo Lahsen, Investigación de los Recursos (CNE), 2000, unpublished Geotérmicos en Chile, in: Chile Sustentable, Las Fuentes Renovables de Energía y el Uso • Gobierno de Chile, Exploración de Interés Interna- Eficiente, Octubre 2002 cional en el proyecto ‘Sistema de Generación Eléc- trico Híbrido Eólico/Diesel, Comunidad de San Juan • Arturo Kunstmann (CERE/UMAG) et al., Sistemas Bautista, Isla Robinson Crusoe, Archipiélago aislados de Aerogeneración de Electricidad en Juan Fernández, Chile’, Febrero 2004 Escuelas Rurales de Magallanes, Punta Arenas, Mayo 2000 • Pedro Roth, Las Energías Renovables no Convencio- nales en Chile: Potencial y Registro de Los Recursos, • Arturo Kunstmann, Miguel Mansilla, Aprovecha- in: Chile Sustentable, Las Fuentes Renovables de miento de la Energía del Viento en la Región de Energía y el Uso Eficiente, Octubre 2002 Magallanes y Potencialidad para su uso en Chile, en: Chile Sustentable, Las Fuentes Renovables de • Prototype Carbon Fund, Baseline Study, Chile: Energía y el Uso Eficiente, Octubre 2002 Chacabuquito 26 MW Run-of River Hydro Project, September 24, 2001 (http://carbonfinance.org) • CDEC-SIC, Estadísticas de Operación 1993–2002 • Prototype Carbon Fund, Chile: Chacabuquito • CDEC-SING, Estadísticas de Operación 1993–2002 26 MW Run-of River Hydro Project, Project Design Document, October 2001 • Comisión Nacional de Energía, La Electrificación Rural en Chile, Logros de un programa social de • Ricardo Forcano, Removal of Barriers to the Use of Gobierno, 1992–2002, Abril 2003 Renewable Energy Sources for Rural Electrification in Chile, 2003 • Comisión Nacional de Energía, Präsentation ‘Remoción de Barreras para la Electrificación Rural • SGA Ltda., Estudio: Estimación del potencial de con Energías Renovables’ CHI/00/G32, Proyecto aplicación de energías renovables en la electrificación Fotovoltaico IV Región de Coquimbo – Chile rural, commissioned by Comisión Nacional de Energía (CNE), 2000, finanziert durch GEF-PDF B, • Comisión Nacional de Energía, Programa de Electri- unpublished ficación Rural, 2000–2006 • UNDP/GEF, Project Document, Chile: • Information and statistics of the Comisión Barrier Removal for Rural Electrification with Nacional de Energía (CNE) im Internet: www.cne.cl Renewable Energies, June 2001

• U.S. Department of Energy, An Energy Overview of Chile, October 2003 Chile

Contact Addresses Centro de Despacho Económico de Carga del Sistema Interconectado del Norte Grande – CDEC-SING Embassy of the Republic of Chile in Germany General Lagos 0377 Mohrenstr. 42 Playa Blanca 10117 Berlin Antofagasta Tel. 0049-30-726 203-5 Tel. 0056 (55) 247 474 Fax 0049-30-726 203 – 603 Fax 0056 (55) 246 129 E-mail: [email protected] www.cdec-sing.cl www.embajadaconsuladoschile.de Centro de Estudios de los Recursos GTZ Office in Santiago de Chile Energéticos – CERE Concordia Nr. 2246 Universidad de Magallanes (UMAG) Casilla 50.430 Av. Bulnes Providencia, Santiago de Chile Casilla 113-D Tel. ++56-2-333 80 20 01855 Punta Arenas E-mail: [email protected] Tel. 0056 (61) 207 182 Fax 0056 (61) 207 184 German-Chilean Chamber of Industry and Commerce E-mail: [email protected] Cámara Chileno-Alemana de Comercio e Industria Av. El Bosque Norte 0440 of. 601 German Embassy in Chile Santiago de Chile 6760235 Las Hualtatas 5677 Tel. 0056 (2) 203 53 20 Vitacura Fax 0056 (2) 203 53 25 Santiago de Chile E-mail: [email protected] Tel. 0056/2/463 2500 Comisión Nacional de Energía – CNE Fax 0056/2/463 2525 www.cne.cl E-mail: [email protected] E-mail: [email protected] www.embajadadealemania.cl

Superintendencia de Electricidad y Combustibles – SEC Amunátegui 58 Santiago de Chile Tel. 0056 (2) 54 96 000 www.sec.cl

Comisión Nacional del Medio Ambiente – CONAMA Obispo Doloso 6 – Providencia Santiago de Chile Tel. 0056 (2) 240 56 00 Fax 0056 (2) 244 12 62 E-mail: [email protected] www.conama.cl

Centro de Despacho Económico de Carga del Sistema Interconectado Central – CDEC-SIC Teatinos 280 Santiago de Chile Tel. 0056 (2) 42 46 300 Fax 0056 (2) 42 46 301 www.cdec-sic.cl Dominican Republic

Dominican Republic

Electricity Market Power generation Net power output in 2002 was somewhat more than Generating capacity 10,000 GWh (compared to 9,623 GWh in 2001), and The power generating capacity feeding into the public the three power providers together sold 7,073 GWh to grid in the Dominican Republic totals 3,596 MW (as of ultimate consumers. The forecast for 2003 was July 2003) and relies largely on fossil fuels (coal, fuel oil 11,037 GWh generated, or 7.8% more than in 2002. and natural gas, totalling 84%) and, to a lesser degree, Between 1993 and 2002 net power generation increased on hydropower (534 MW, or just under 16%). This by 8.4% annually on average, though quite irregularly, heavy dependence on fossil fuels, all of which have to be and the sale of electricity grew by 11.3% per year. imported, poses a heavy burden on the trade balance of the Dominican Republic. Power generation in 2003 relied on hydropower (11%), coal (13%), heavy fuel oil (58%), natural gas (9%) and In mid-2003, only 2,145 MW of the total capacity was diesel (9%). reliably available. The maximum anticipated demand for power in 2003 was forecast at 1,950 MW. Despite EDESUR EDENORTE EDEESTE Total the existing technical reserves, an average of 15% of the Sale of electricity GWh 2,749 1,946 2,378 7,073 potential power demand could not be delivered in 2002. Technical losses GWh 390 332 327 1,049 (distribution only) % 10. 8 10.8 10.8

Lack of supply reliability Non-technical GWh 463 786 315 1,564 losses New power plants with installed capacities totalling % 12.9 25.7 10.4 some 1,300 MW were installed between the end of Peak load MW 572 481 514 2000 and mid-2003, but the situation still has not improved with regard to the reliability of supply, which Table 16: Sale of electricity and power-distribution losses; Dominican Republic; 2002; GWh, %73 remains characterised by frequent outages and lack of demand coverage.72 The unsatisfactory supply situation Transmission network is attributable not only to a considerable rise in demand, The transmission network is made up of 1,500 km of but also to poor payment behaviour on the part of ultim- 138kV power lines extending radially outward from ate consumers and the public sector, where electricity Santo Domingo to the north, west and east, plus nearly bills for public-sector consumption and subsidies prom- 2,000 km of 69kV lines. The east/west and north/south ised for certain consumer tariffs are not being paid on connections in particular are in urgent need of reinforce- time, if at all. Expanding burdens of debt, attributable ment to prevent the kind of system outages that have in part to the temporary freezing of electricity tariffs occurred in the past. despite the increasing cost of fuel, are making it difficult to find and procure new kinds of fuel and have repeat- Losses edly prompted the power producers to remove capacity Roughly 29% of all generated electricity is lost due to from the grid and cease the supply of electricity. In early technical and non-technical factors. The rate of unpaid 2004, the total debt owed to distributing companies electricity consumption from illegal connections, un- and power producers by the government added up to an licensed routing of electricity and poor payment behav- estimated US$ 400 million. For several weeks running, iour is extremely high, even to the extent of exceeding, power plants with ratings totalling only about 700 MW in absolute terms, the network power losses in 2002. were on line, and power outages lasting more than The non-technical losses are particularly high in the 20 hours daily crippled the economy and everyday life. Edenorte distribution network.

72 In 2003 alone, 422 MW of new power generating capacity was added to the interconnected power grid. 73 Source: Superintendencia de Electricidad, March 2003. GWh IPP electricity prices Net power demand 11,781.5 In June 2003, the average contractual supply price for Power deficit 1,766.8 electricity from all sources (including hydropower) Net power generation 10,014.8 amounted to 7.1 US cents/kWh. At the same time, Transmission losses 252.1 5.9 US cents/kWh was achieved on the spot market. The Supply to distributors et al 9,762.7 overall market-average producer’s price therefore Distribution losses 2,614.1 amounted to 6.9 US cents/kWh. Distribution losses 7,148.674 Electricity tariffs Table 17: Breakdown of public power supply; The household tariffs (BTS1) have a progressive compon- Dominican Republic; 2002; GWh75 ent for both the fixed, consumption-dependent base Power consumption prices and the kilowatt-hour rates. All private-sector Only about half of the country’s officially counted nearly consumers receive their first 300 kWh at a subsidised two million households are registered electricity custom- price. Like all other regulated tariffs, that price is sub- ers. Their average consumption is low, amounting to ject to monthly adjustment. However, the rapid depre- some 340 kWh per year. In addition to these official ciation of the Dominican peso’s exchange rate in the electricity customers, there are probably some 500,000 course of 2003 was not fully apportioned to the electri- households that use electricity without paying for it. city tariffs. Consequently, the highest tariff for consumption in excess of 300 kWh dropped from approxi- Customers Consumption (GWh) mately 15 US cents/kWh in January 2003 to approxi- Households 950,000 3.232 mately 9 US cents/kWh in January 2004 and, as a result, Services 85,500 649 is now submarginal. Industry 8,644 2,131 Public sector 7,081 1,062 Total 1,051,723 7,074

Table 18: Electricity customers and consumption; Dominican Republic; 2002, GWh76 * CCGT: combined-cycle gas turbine

Company Steam Gas CCGT* Fuel-oil Diesel Hydro- Total turbines turbines engines engines power

Haina % 10.2 4.8 4.5 19.5

Itabo % 7.6 5.1 12.7

EGEHID % 15.9 15.9

Union Fenosa Gen. % 5.7 5.7

Cia. De Electricidad de Puerto Plata (CEPP) % 2.3 2.3

Monte Rio % 2.9 2.9

AES Andrés77 % 8.8 8.8

Complejo Metalurgico Dominicano (Metalcom) % 1.2 1.2

Consorcio Laesa % 2.5 2.5

Dominican Power Partners LDC % 6.9 6.9

Transcontinental Capital Corp. % 3.4 3.4

Smith Enron Cogeneration Ltd. % 5.4 5.4

Maxon Engineering Services % 0.9 0.9

Energycorp Caribbean S.A. % 3.0 3.0

Cia. Eléctrica de San Pedro de Macorix (CESPM) % 8.8 8.8

Total % 17.8 19.8 23.0 20.0 3.4 15.9 100.0

Table 19: Breakdown of installed capacities according to type of generation; Dominican Republic; June 2003; %

74 The reader's attention is called to the difference between this figure and the corresponding fig. in the previous table. Both fig., however, stem from the same source. 75 Source: Superintendencia de Electricidad, March 2003. 76 Source: Superintendencia de Electricidad, March 2003. 77 The first combined-cycle power plant, with a rating of 300 MW, to operate on imported compressed natural gas (CNG) from Trinidad entered service in October 2003. Dominican Republic

Market Actors plants’, which sell their electricity either directly to a supply contract partner (normally a regional power dis- Ever since the early 1990s, as a result of the Law on tributor) or via the electricity exchange (spot market). Energy Sector Development Incentives (Ley de Incentivo Now, CDEEE is to be liberated from its role as a specula- al Desarrollo Energético), not only the formerly state- tive buyer of electricity in a gradual manner based on owned Dominican Electricity Company CDE (Corpora- new negotiations with the power producers and, hence, ción Dominicana de Electricidad), but also a dozen the replacement of all PPAs by new contract agree- (mainly American) independent power providers are ments. active on the Dominican electricity market. Together, those companies are providing roughly half of the in- Distribution networks stalled generating capacity, which is composed solely of The power distribution networks were privatised in thermal power stations. 1999. A group under the leadership of the Spanish company Unión Fenosa took over the northern and southern State-owned companies grids (EDENORTE/EDESUR), with each holding 50%, Under the General Electricity Act of 2001, independent and the American company AES bought itself into the state-owned power transmission companies (Empresa de eastern grid (EDEESTE). In both cases, operational Transmisión Eléctrica Dominicana–ETED and Empresa management was left to the private co-owners. Due to de Generación Hidro-eléctrica Dominicana– EGEHID) the poor financial and operational situation of the dis- were established and made responsible for the trans- tribution networks82, the Dominican Government has mission network and for the operation of hydroelectric reacquired, via CDEEE, Unión Fenosa’s stakes in Eden- power plants. The tasks of rural and urban-marginal orte and Edesur as of September 2003. Reprivatisation electrification, the coordination of electricity companies, by way of international competitive tendering is and the administration and implementation of contracts planned for September 2004. with independent power producers were combined and assigned to a new company called Corporación Domini- Comisión Nacional de Energía (CNE)) cana de Empresas Eléctricas Estatales (CDEEE), which The duties of Comisión Nacional de Energía (CNE), also serves as a holding company for ETED and which was established in 2001, include the formulation EGEHID.78 of laws and ordinances and the preparation of supply and demand forecasts. Acting under the auspices of the Itabo and Haina Ministry of Industry & Commerce, CNE is subordinate CDE’s thermal power generating division was split up to the Ministry of Finance, the Technical Secretariat of into two separate companies. The new thermal power the Office of the President, the Director of the Central operator Itabo was partially owned by Gener79 (Chile) Bank, the Ministry of Agriculture, the Ministry of the and Coastal (USA), while Seabord and the erstwhile Environment and the Director of the Telecommunications Enron (both USA)80 initially held interest in the power Institute. This executive body has the legal power to producer Haina. At the end of 2002, each of those two enact regulations for the power sector. Since mid-2003, companies held roughly 22.5% of the country’s total CNE has a new department for alternative energy installed power generating capacity.81 sources and rational use of energy (Gerencia Energías Alternas y Uso Racional de Energía). New power providers The statistics differentiate between the ‘traditional’ Regulatory authority SIE independent power producers operating on the basis of Superintendencia de Electricidad (SIE), which was estab- power purchase agreements (PPA) with the former CDE lished by decree no. 118-98 on 16 March 1998 and and present CDEEE, and so-called ‘merchant power became functional in July 1999, supervises market

78 According to the Madrid Agreement dating from July 18, 2001, certain contracts with independent power producers are to be transferred from CDEEE to the distribution companies. 79 Now operating under the name of AESGener, with AES (USA) as majority owner. 80 The possessory interests have changed a number of times since then. The present owner of the holding is a consortium comprising Commonwealth Development Corporation (UK), Basic Energy (USA), Fondo Básico del Caribe, Haert Energy (USA) and the Dominican Grupo Nacional de Finanzas. 81 Due to the appearance of new power producers on the market in 2003, this percentage has decreased markedly. 82 Substantial debts are still outstanding vis-à-vis the Interamerican Development Bank and other commercial banks as well as various power producers (including power plants operated by Unión Fenosa), which have not received payment for supplied electricity. regulation. SIE’s status as a public law body was offi- Legal Framework cially established by the General Electricity Act of 2001. Its duties include in particular the supervision of prices Unbundling and privatisation for regulated consumers (households, trade & com- Law 141-97 on the Reform of Public Enterprises83, which merce), who have to purchase electricity from one of the was adopted in June 1997, initiated the unbundling and distribution companies. By contrast, large consumers partial privatisation of the erstwhile state-owned power are allowed to negotiate freely to obtain electricity from utility CDE (Corporación Dominicana de Electricidad). the supplier offering the most favourable conditions. A The generation, transmission and distribution of electri- spot market for electricity was set up in June 2000 to city were separated from each other in 1998. All constitu- enable short-term power purchasing transactions. ents of the company with the exception of the transmission lines and the hydroelectric plants were put up Coordination of the wholesale market for privatisation. Private companies were allowed to Another new body that was created by way of the 2001 acquire 50% capital interests and to take over operational General Electricity Act is Organismo Coordinador, a management of the plants. Private-entrepreneurial coordination group with the main task of harmonising involvement in the thermal power stations was also the operations of the various power producers and net- accompanied by the obligation to build an additional work operators with each other on the wholesale market 100 MW of capacity per year and to bring the plants up and ensuring that the necessary capacity is made avail- to World Bank standards within five years. All economic able on the spot market. This institution serves to pro- activities on the part of the government in the electricity mote the market’s self-regulating capacities. It is not a sector were subordinated to the newly formed CDEEE. state authority. Its highest authority is a coordinating committee, the members of which include one represen- General Electricity Act of 2001 tative each of the independent power providers, the A General Electricity Act (Ley General de Electricidad, power producers with private participation, and the No. 125-01) was approved by parliament and entered transmission and distribution sectors. into force at the end of July 2001. This law set out the general conditions for further private-sector involve- Ministry of Industry & Commerce ment, gave customers better legal protection vis-à-vis The Ministry of Industry & Commerce (Secretaría de power providers, and created a flexible wholesale market Estado de Industria y Comercio – SEIC) is concerned for electricity. with the energy policy guidelines and establishes the general framework conditions for the energy sector. In addition to the institutional changes described in the Decree no. 146-2000 placed the Non-Conventional preceding chapter, the key provisions of the new electri- Energy Programme (Programa de Energía no Conven- city act relate primarily to the following areas: cional) under the auspices of SEIC for the purpose of promoting research & development projects concerning • ensuring that at least 20% of all electricity trading the exploitation of renewable energy sources. is done on the spot market • authorising power generators to install connecting Water management lines to the interconnected grid system and/or to Instituto Nacional de Recursos Hidráulicos (INDRH) their own customers (self-sufficient suppliers) is responsible for water resource management. This • limiting distribution companies’ ownership of institute also issues licences for the use of water as a generating plants to not more than 15% of peak load source of energy and attends to its harmonisation with in the interconnected system; renewable energy other forms of use, especially with regard to agricultural sources are exempted from this rule irrigation. • regulating electricity tariffs for public-grid customers with maximum connected loads of 2,000 kW (1,400 kW from 2002, 800 kW from 2003, or 200 kW from 2004 onwards), as long as the

83 Ley General de Reforma de la Empresa Pública (141-97). Dominican Republic

customers do not enter into direct contracts with the Clean Development Mechanism suppliers The Dominican Republic ratified the UNFCCC in • regulating transit tariffs for the use of transmission October 1998 and acceded to the Kyoto Protocol in and distribution of facilities February 2002. An initial national report on climate • giving preferential treatment to companies that protection was submitted in June 2003. No Clean Devel- generate electricity from renewable energy sources opment Mechanism projects have yet been defined. with regard to sales and load distribution if prices and conditions are otherwise identical • exempting companies that generate electricity from Policy for Promoting Electricity renewable energy sources from national and local Generation from Renewable Energy taxes for five years Sources • creating a national energy commission (Comisión Nacional de Energía – CNE) to develop energy Taxation of fossil fuels policy measures and long-term planning of the At the end of 2000, with a view to promoting the use of energy sector renewable energy sources, the Dominican Government • strengthening Superintendencia de Electricidad to supplemented the preferential arrangements in the elec- establish it as an independent, neutral regulatory tricity act by passing a law that levies consumption taxes authority with far-reaching competences on fossil energy sources and petroleum products.84 • investing 10% of the proceeds from fines for the Beginning in 2002, 2% of those tax revenues is being theft of electricity in an incentive fund for the fed into a special fund for the promotion of alternative development of renewable energy sources energy sources and energy conservation programmes.85 Each year, the proportion of revenues earmarked for the Implementation regulation for the General fund will increase by one full percentage point until it Electricity Act of 2002 reaches 5%. A regulation governing the application of the General Electricity Act (Reglamento para la Aplicación de la Ley Draft of a law promoting renewable General de Electricidad) was adopted as Regulation energy sources 555-02, dated 19 July 2002, and modified by Regulation The draft version of an incentive law for the develop- 749-02, dated 19 September 2002. This regulation ment of renewable and clean energy sources was submit- details the roles played by the various market actors and ted to the National Congress for debate in October the functioning of the market. 2001.86 With the help of the GTZ, that draft was modified in the course of 2003 and resubmitted in December New tariff system 2003 under the altered title Proyecto de Ley de Incen- SIE Resolution 31-2002, dated 17 September 2002, tivo al Desarrollo de Fuentes Renovables de Energías. introduced a new tariff system for ultimate consumers The October 2003 version of the law relates to wind and substantially reduced cross-subsidisation. Comparable farms with ratings up to 50 MW, hydroelectric power to the Chilean model, the regulated tariffs comprise a plants up to 5 MW, biomass power plants with an organic component dictated by energy costs and demand costs, fuel content of at least 80% and a maximum output of regular adjustments for changes in the cost of fuel, 40 MW, and electricity-generating solar installations of exchange rates and inflation rates, plus a fixed amount any size. for power distribution (Valor Agregado de Distribu- ción), which is redetermined at four-year intervals. This The law provides for subsidies covering up to 50% of the is intended to reduce the heavy losses sustained by the initial capital outlay for up to 5 MW installed capacity electricity industry, amounting to some 4.4 billion (to be provided on an individual-case basis); tax exemp- pesos in 2002 alone. tions for imported components to be employed in installations using renewable supplies of energy; halving of the power transmission fees (except in cases where trans-

84 Ley que establece un impuesto al consumo de combustibles fósiles y derivados del petróleo (112-00). 85 Fondo de Interés Nacional, for which the Ministry of Industry and Commerce is responsible. 86 Proyecto de Ley de Incentivo al Desarrollo de Fuentes de Energías Renovables o Limpias. The original draft was drawn up by INDOTEC. mission lines had to be specially installed for electricity Mini hydropower potential–international involvement generating systems based on renewable energy sources); In the early 1980s, with Taiwanese assistance (Sinotec fixed remuneration rates for wind and hydropower and Engineering Consultants, Inc., Taipei), the erstwhile biomass electricity for 15 years; a five-year tax exemp- hydropower divisions at CDE and INDRHI identified tion on earnings from electricity generation based on an extensive portfolio of possible mini hydropower renewable energy sources; and a fiscal incentive for auto- plants (> 100 kV) with grid connection potential and producers. have since developed them to the point that they are now ready for implementation. This engendered a total of Preferential arrangements are also envisaged for feeding 25 projects with capacities ranging from 370 kW to into the public power grid. Moreover, CNE is authorised 4,000 kW and a total capacity of 30 MW, only two of to set annual quotas for the amount of electricity which were implemented by 1986. Recently, however, from renewable energy sources to be remunerated out- diverse investors have begun to turn their attention to side of the spot market. Due to the presidential elections these projects. Belgium’s Fortisbank, for example, is scheduled for May 2004 and to the anticipated amend- planning to become actively involved, while French ments to the draft law, it is not yet foreseeable just when development cooperation is represented in the choice of these promotive arrangements will actually enter into two projects that are to be implemented with the help of force. the power provider EdF, and the French building contractor Bouygues also intends to actively participate in a GTZ project since 2003 pair of projects. Since March 2003 the GTZ has been providing SEIC and CNE with assistance for their projects promoting UNDP-GEF provided financial and technical assistance the use of renewable energy sources.87 The focal areas in for basic studies into 18 mini and micro hydropower this connection are the provision of advice and guidance plants89 with ratings of 1.5 kW to 250 kW for supply- for the shaping of legal and regulatory framework con- ing electricity to remote communities, and UNDP and ditions and for managing the Fund for Renewable PROFER/GTZ are further pursuing those studies. Energy, for the electrification of rural communities with micro hydropower plants, and the promotion of PPP ap- All in all, only half a dozen mini hydropower plants proaches to the exploitation of renewable energy sources. with capacities totalling roughly 1 MW are presently in operation. Additionally, there are roughly 15 pico hydropower plants with ratings of less than 1 kW in service. Status of Renewable Energy Sources According to a presidential decree dated 8 December Hydropower 2000 (no. 1277-0), the private sector is authorised to Despite extensive exploitation, the Dominican Republic engage in the licensed use of hydropower resources yield- still has untapped hydropower resources. Frequently, ing 1 MW or less. Conversely, this also means that all power generation is closely linked with reservoirs for hydroelectric plants of larger size count as being relevant drinking water and irrigation, as well as with irrigation to the national interest and therefore may only be operated channels. In all, the country presently has about 20 by the responsible state-owned power utility EGEHID. hydropower plants in the medium-output range from 3 to 100 MW. All the plants now in operation have a total Wind Energy capacity of 534 MW.88 Additional sites with an approx- Until now, the substantial wind resources have gone un- imate composite potential of about 500 MW could still utilised. The U.S. National Renewable Energy Laboratory be developed. (NREL) performed an initial assessment of the wind energy potentials that could serve as a point of departure for major wind-power projects. The main goal of the study was to map the wind resources in all regions of the Domin- ican Republic and to compile the results in a wind atlas.90

87 Proyecto Fomento de las Energías Renovables en la República Dominicana– PROFER. 88 Including 452 MW in connection with impounding reservoirs. Fifteen of the Dominican Republic’s 34 reservoirs are also used for generating electricity. 89 Micro hydropower plants are understood as including the relevant generating systems. 90 To consult the wind atlas, go to www.rsvp.nrel.gov/pdfs/wind_atlas_dominican_republic.pdf. Dominican Republic

The analysis showed the best wind conditions to be failed, as did the renegotiation of a 30-year power situated in the extreme south-west (in the provinces of purchase agreement that was signed in connection with Pedernales and Barahona) and north-west (in the prov- the sectoral reform in 2001. inces of Puerto Plata and Monte Cristi), and in exposed inland areas at elevated altitudes, where suitable sites In the absence of a separate code of practice for wind could be used for providing non-grid electricity (rural power projects, all such projects will have to continue electrification). Additionally, some other coastal regions to be guided by the existing regulations for the elec- also have good wind conditions. tricity sector.

All in all, some 1,500 km2, or 3% of the total land area, Biomass were identified as having good or very good wind poten- The main source of energy from biomass utilisation is tial. Together, this would suffice for more than 10,000 MW bagasse, or cane waste from sugar production, which is of power generating capacity. Twenty provinces have a already in use for generating heat and electricity in sugar potential of at least 100 MW, and three provinces even factories. However, many of the facilities are outdated, more than 1,000 MW. However, further studies will be frequently yielding no more than 20 kWh per ton of necessary in order to more closely investigate the power ground bagasse, so no electricity is left over for feeding transmission routes and to determine the extent of acces- into the public grid. Increasing plant efficiency to the sibility. If the locations with wind conditions that are technically achievable level would – based on an annual moderate but sufficient for the purposes of rural electrifi- sugar production rate of 550,000 tons – yield between cation are included, the potential rises beyond 30,000 MW, 470 GWh and 575 GWh of electricity per year in or 60 TWh per year. In that case, there are 12 provinces modern combined heat and power stations in the sugar with a wind potential of at least 1,000 MW each. industry. This would correspond to roughly 5% of the Dominican Republic’s current power generation rate. Plans for wind farms There are also expectations regarding the production of For some time now, implementation plans for large- ethanol from sugar as a substitute for fossil fuel that scale wind-power projects have been available, but no would be easier to market than cane sugar, which is such project has been implemented to date. The wind difficult to export. farm project in Cabo Engaño, which is being carried out by the power provider Consorcio Energético Punta Cana Further organic materials for use in generating power (CEPM),91 is nearing completion. This 15MW project include, in particular, agricultural residues, most nota- has already been licensed for generating electricity. The bly for producing biogas from banana trees and from the same enterprise also has plans to install a wind farm with husks and leaves of rice. Biogas could also be produced up to 100MW in Juancho in the province of Pedernales, from cattle farming as well as from urban wastes, which and another one in Matanzas in Peravia province. SIE contain a large percentage of organic material. Other has already issued power-generating licences to Unión materials with high energy potential include such Fenosa for its 100 MW wind farm and to Parques Eólicos oleiferous produce as coconuts and peanuts, the planting del Caribe (90 MW) in 2001. It has not yet been possible and marketing of which have drastically declined over to finish any of the installations on time. the past 20 years due to the availability of cheaper imported oils. Peanut farming in particular is seen as Additional plans are being pursued by TROC Inter- having good potential as a source of starting material for nacional (40 MW) in the community of Oviedo in Peder- the domestic production of biodiesel fuel. nales province and by the AXOR Group (100 MW). In mid-2003, York Caribbean Windpower (115 MW), a subsidiary of U.S.-based York Research, pulled back from a project in which it had already invested three years of preliminary work, because attempts to secure a financial guarantee from the Dominican Government

91 Endesa, Spain's biggest power provider and wind-farm operator, holds shares in CEPM, a private-sector enterprise that primarily provides electricity for the tourism infrastructure in Punta Cana. Solar Energy National Electrification Plan According to the available meteorological data for 1970 A national rural electrification plan (Plan Nacional de to 1972, the mean daily solar irradiation in the Domin- Electrificación Rural – PER) was presented in June ican Republic is between 4,250 and 5,100 kcal/m2. As 2003. The plan was drawn up by the rural electrification such, the conditions for the harnessing of solar energy department at CDEEE with the technical assistance of are favourable. NRECA and financial assistance from USAID. In addition to expanding the existing grid, the plan also ex- The total number of PV modules now in use for the elec- plores the potentials of renewable-energy technologies trification of rural areas has been estimated at more than for application in remote regions, including the relevant 20,000 units. Most of the systems were installed on the financing. The electrification plan is intended to help basis of funds provided by non-governmental organisa- bring grid electricity to 95% of the rural population tions and financial assistance from USAID, UNDP and within the next 15 years. USAID has concluded a co- other international donors. Since 2000, the programme operation agreement with NRECA for US$ 1.4 million for non-conventional energy sponsored by the Ministry to be spent helping CDEEE implement some of the of Industry and Commerce (SEIC) alone has put some identified high-priority projects. 600 PV systems in service for rural schools and health care centres, military and police facilities, drinking- Rural electrification projects involving water chlorination systems, computer-science labora- renewable energy sources tories, observation posts in national parks, and rural In the past, the non-governmental organisations homes. In early 2004 another 2,000 small PV systems REGAE, NRECA and Fondo Pro Naturaleza (PRONA- were installed in rural households, with financing pro- TURA) have already implemented a number of projects vided by the Promotion Fund for National Interests. in the field of renewable energy sources and rural electrification (solar home systems and small wind power Geothermal Energy systems for the basic electrification of rural households The Dominican Republic has no geothermal potential and community facilities, and micro hydropower for power generation. systems for decentralised village power supplies), all in close cooperation with rural regional development programmes (e.g. Plan Sierra) and village cooperatives. Rural Electrification Most of the financing for those programmes came from GEF (small projects fund) and USAID. It is assumed that some 350,000 households across the country, most of them in rural areas, still have no access Soluz Dominicana to the national power grid. Most of these households Soluz Dominicana, a subsidiary of U.S.-based Soluz Inc., have to get by without any electricity at all. has been in the market since 1994 as a power service provider of PV systems based on a fee-for-service model. CDEEE Department of Rural Electrification The solar home systems in question serve basic-electrifi- Following the establishment of the special department cation purposes and are financed either by way of fixed for rural electrification within CDEEE (Unidad de Elec- monthly payments or short-term loans. Soluz installs trificación Rural y Suburbana), gradual elimination of the equipment and provides the requisite maintenance. the still considerable deficits within the sector is expected. In April of 2000, Soluz Dominicana had already installed The associated tasks are to be financed in part from the more than 3,500 solar home systems, some 1,700 of regular revenues of the privatised distribution com- them with a fee-for-service contract. In addition to small panies and generating plants. Twenty percent of the stand-alone PV systems, a limited number of wind total resources from the relevant fund (Fondo Patrimo- energy conversion systems for rural households and nial) are earmarked for this purpose. small business establishments also have been put in service.92

92 More detailed information on the work being done by Soluz Dominicana is available in: National Renewable Energy Laboratory (NREL), Renewable Energy for Microenterprise, November 2000. See also: Eric Martinot (GEF), Making a Difference in Emerging PV Markets; Experience and Lessons from a Workshop in Marrakesh, Morocco, September 2000, Washington, November 2000. Dominican Republic

PV electrification by SEIC • PROFER Informe No. 7, Estudio básico sobre With financing from Fondo de Interés Nacional, SEIC potenciales, proyectos y actores en el área de energías has implemented a number of rural electrification meas- renovables en la República Dominicana, ures with PV systems in recent years. At the end of Santo Domingo, Diciembre del 2003

2003, SEIC advertised a competitive contracting project • Proyecto de Ley de Incentivo al Desarrollo de for equipping an additional 2,000 homes in 14 different Fuentes Renovables de Energías, draft, provinces with solar power installations rated at 75 W Oktober 2003 each, in addition to 23 cultural centres. Técnicas Ener- géticas Solares (Tecsol), representing the Spanish manu- • Reglamento para la Aplicación de la Ley General de facturer Isofoton, was chosen to supply the equipment. Electricidad, Decreto del Poder Ejecutivo No. 555-02 del 19 de julio 2002

• Secretaria de Estado de Medio Ambiente y Recursos Naturales, Primera Comunicación Nacional ante la Exchange rate (5 March 2004): 100 Dominican pesos = € 1.74 Convención Marco de las Naciones Unidas sobre Cambio Climático, 2003

Information Sources • Superintendencia de Electricidad, Ley General de Electricidad, No. 125-01, República Dominicana,

• Elliott, D., M. Schwartz, R. George, S. Haymes, Julio 2001

D. Heimiller, and G. Scott, Wind Energy Resource • Superintendencia de Electricidad, Proyección de la Atlas of the Dominican Republic, National Demanda de Energía y Potencia y Balance de Renewable Energy Laboratory (NREL), Golden, Energía, Informe final, 25 Marzo 2003 Colorado, October 2001 • USAID, Análisis de la Sostenibilidad del Sector • Energy Information Administration (Department of Eléctrico, Republica Dominicana, Febrero del 2003 Energy, USA), Caribbean Fact Sheet, June 2003 • Paper presented by Rafael Abréu • KfW, Projektkurzbeschreibung, Kleinwasserkraft- (Presidente de la Comisión de Energía, Cámara de werke Nizaito + Canal Santana, 16.Jan.2002 Diputados) und Antonio Almonte (Director

• Reports from Listín Diario.com.do, INDOTEC) on the occasion of ‘Seminario de www.listin.com.do Energía Sostenible para Islas A.C.P. en el marco de la Cooperación para el Desarrollo de la Comisión • Reports from Perspectiva Ciudadana.com, Europea’, Sto. Domingo, Junio 2001 www.perspectivaciudadana.com

• Modificación al Reglamento para la Aplicación de la Ley General de Electricidad, Decreto del Poder Ejecutivo No. 749-02 del 19 de Septiembre 2002

• Organismo Coordinador del Sistema Eléctrico Interconectado de la República Dominicana, Estadísticas, www.oc.org.do

• Organismo Coordinador del Sistema Eléctrico Inter- conectado de la República Dominicana, Memoria Anual y Estadísticas de Operación 2002 Contact Addresses Corporación Dominicana de Empresas Eléctricas Estatales (CDEEE) Secretaría de Estado de Industria y Comercio CEO: César Sánchez Programa de Energía No Convencional Director of Rural Electrification Programme: William Rodriguez Director: Milton Morrison, engineer Head of ‘Transmission’ division: Martín Robles Calle Oloff Palme Esq. Núñez de Cáceres, Edificio INDOTEC ([email protected]) Ensanche San Gerónimo, Santo Domingo Head of ‘Generadora Hidroeléctrica’ division: Tel. (001809) 227-4006 Máximo D’Oleo Ramírez ([email protected]) Fax (001809) 548-6510 Av. Independencia E-mail: [email protected] Centro de los Héroes, Santo Domingo www.seic.gov.do Tel. (001809) 535-11 00 Fax (001809) 533-72 04 Comisión Nacional de Energía E-mail:[email protected] Executive director: Ing. Antonio Almonte www.cde.gov.do ([email protected]) Hydropower: www.hidroelectrica.gov.do Director of Renewable Energy Sources and Rational Use of Energy Department: Arq. Doroteo Rodriguez Instituto Dominicana de Tecnología Industrial – ([email protected]) INDOTEC Director of Planning Department: Lucas Vicens Energy Department (Divisón Recursos Energéticos) ([email protected]) Manager: Bolivar Rodriguez Ave. Gustavo Mejía Ricart No. 73 Apartado Postal 392-2 Ensanche Serrallés, Santo Domingo Calle Oloff Palme Esq. Núñez de Cáceres, Edificio INDOTEC Tel. (001809) 732-2000 Ensanche San Gerónimo, Santo Domingo Fax (001809) 547-2073 Tel. (001809) 566-81 21 Fax (001809) 227-88 08 Superintendencia de Electricidad E-mail: [email protected] Chairman: George Reinoso www.indotec.gov.do Ave. Gustavo Mejía Ricart No. 73 Ensanche Serrallés, Santo Domingo Renewable Energy Growth Assistance Entity – REGAE Tel. (001809) 683-25 00 and –27 27 Luis Guillermo Fax (001809) 683-33 04 Local PRONATURA E-mail: [email protected] Paseo de Los Periodistas No. 4 www.sie.gov.do Ensanche Miraflores, Santo Domingo Tel. (001809) 688-6092 Fax (001809) 688-8774 E-mail: [email protected]

Instituto Nacional de Recursos Hidráulicos (INDRHI) Centro de los Héroes Edificio Nuevo del INDRHI Santo Domingo Tel. (001809) 532-32 71 www.indrhi.gov.do Dominican Republic

National Rural Electric Cooperative Association (NRECA) Director: Danilo Carranza Calle Rafael Augusto Sánchez No. 51A Ensanche Piantini, Santo Domingo Tel. (001809) 541-4825 Fax (001809) 6838608 E-mail: [email protected] www.nreca.org

Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Proyecto ‘Fomento de Energías Renovables en la República Dominicana’ – PROFER Dr. Bernhard Boesl (Asesor Principal) Anyelina Troncoso (Asistente de Proyecto) Apartado Postal 2960 Calle Oloff Palme Esq. Núñez de Cáceres, Edificio INDOTEC Ensanche San Gerónimo, Santo Domingo Tel. (001809) 227-4006, ext. 2036 Fax (001809) 227-3464 E-mail: [email protected], [email protected] www.gtz.de/dominican-republic

German-Dominican Chambers of Industry and Commerce Director: Thomas Kirbach Centro-Dominicano-Alemán Calle Isabel la Católica No. 212 Zona Colonial Santo Domingo Tel. (001809) 688-6700 Fax (001809) 687-9681 E-mail: [email protected] www.ahkzakk.com/repúblicadominicana Jamaica

Jamaica

Electricity Market Power generation and power consumption Net power generation by JPS plus additional power pur- 90% of Jamaica’s primary energy supplies are dependent chases from independent producers totalled 3,525 GWh on petroleum imports. This results in an accordingly in 2002, an increase of 4.9% over the preceding year. heavy burden on the national budget and the balance of trade.93 Domestic renewable energy resources account In 2002, (paid-for) electricity consumption by the over for 10% of the contribution to energy supply. 500,000 customers amounted to some 2,900 GWh (not including consumption by industrial self-generators). Installed capacities Average consumption by residential customers was very The capacity of the power stations feeding into the inter- high, at 2,430 kWh. Over the coming years, average connected grid, those belonging to the power utility growth rates of 4,5% per annum are anticipated. Jamaica Public Service Co. (JPS) and independent power producers (IPPs) with a contractual commitment, pres- 1998 1999 2000 2001 2002 ently amounts to almost 800 MW, with a peak load of GWh GWh GWh GWh GWh

593 MW (December 2003). Power-plant units newly Residential 926 1.007 1.047 1.065 1.103 brought on line in 2003 increased the reserve to approxi- Small commercial 589 606 598 604 618 mately 30%. In order to meet growing demand, accord- (< 25 kVA) ing to JPS projections an additional capacity of 200 MW Large commercial 517 521 573 583 597 would have to be built in the next five years. As well as (25 - 500 kVA) this, a capacity of around 600 MW is installed at indus- Major customers 359 383 464 474 510 trial self-generators in Jamaica (in particular in the (> 500 kVA) bauxite and aluminium industry), making Jamaica’s total Others 55 59 57 66 68 capacity approximately 1,400 MW. Total 2,446 2,576 2,739 2,793 2,896

Increase over 7.2 % 5.3 % 6.3 % 2.0 % 3.7 % Shortfalls in power supply previous year In recent years there have often been power failures because of the inadequate and unreliable generating Table 20: Electricity consumption by end customers; Jamaica; 1998–2002; GWh96 plants. The shortfalls in the power supply system became particularly apparent at the time of the national Because of the energy-intensive bauxite-extraction and collapse in October 2001. As a result of a 120 MW aluminium industry, the demand for energy in Jamaica combined-cycle power plant being brought into service is comparatively high. An indicator of inefficient energy stage by stage and the associated increase in reserve conversion is the fact that energy intensity has risen capacity, power failures were reduced to a fifth in 2003 greatly in the past 10 years. Between 1987 and 2003, in comparison with 2001.94 gross national product grew by 20% and energy consumption by 112%. Power grid and losses The power grid, which has 1,200 km of transmission Electricity prices lines and 12,000 km of distribution lines along with 53 Especially because of higher oil prices and the devalu- transformer substations, currently suffers from losses of ation of the Jamaica dollar, electricity prices have increased more than 18%. Of these, half are of non-technical origin considerably in recent years. In 2003 the average and can be explained by illegal electricity tapping revenue for JPS from the sale of electricity was approxi- among the population. In the tariff structure, however, mately 8.8 J$/kWh (11.9 € cents/kWh). The fuel costs it is possible to make allowances for losses of no more alone (including IPP electricity purchases) made up than 15.8%, which means that there is an incentive for 41% of the total costs of JPS. JPS to make improvements in this regard.95

93 Expenditure on imported petroleum amounted to US$ 635 million in 2002. 94 Whereas in 2001 the length of power failure per customer was still recorded as 3,000 minutes, in 2003 this figure had fallen to about 550 minutes. 95 It is intended to reduce the losses to 16.5% by 2009. 96 Source: OUR, Annual Report 2002/2003. The electricity consumption statistics from JPS are not broken down according to commonly used consumption groups. The category of “Small commercial” corresponds to “Rate 20–General Services” in the JPS classification. The category of „Large commercial” reflects “Rate 40–Power Services”. "Major customers" are customers fitting into the category of “Rate 50–Large Power”. The group of “Others” comprises public lighting and self-generators who draw electricity from the public grid over and above that which they generate themselves. Households pay a monthly standing charge of Some companies generate electricity for their own needs. J$ 58 (€ 0.78)97 and a fixed basic price per kilowatt-hour These include bauxite/aluminium producers, sugar fac- of about J$ 4.1 (5.5 eurocents) for the first 100 kWh98 tories and a cement manufacturer. and about J$ 5.8 (7.8 eurocents) for all subsequent kilowatt-hours. This is then supplemented by a fuel price of Petroleum Corporation of Jamaica (PCJ) roughly J$ 2.8 (3.8 € cents/kWh), which is subject to The Petroleum Corporation of Jamaica (PCJ) was foun- regular adjustment and which takes account both of the ded by the Jamaican government as a corporation under purchase prices for the fossil energy sources and the pay- public law in 1979, and was entrusted with the exclusive ments made to the independent power providers. Tariff task of ensuring the supply of oil to the country. Reducing increases planned for the summer of 2004 envisage an the dependency on imported oil is a crucial objective of increase in the standing charge to J$ 87 (€ 1.18) and in PCJ, and explains its enhanced commitment to renewable the basic prices to J$ 6.1 and 8.7 respectively (8.3 and forms of energy. PCJ was given the task of developing 11.7 € cents/kWh), which would signify a real price and using alternative energy sources by the government increase of more than 13% for residential customers. in 1995.101 Not only will PCJ act as the operator of a large wind farm that is currently being built, it also has experience in the hydropower, biomass and solar energy sectors. Market Actors Office of Utilities Regulation (OUR) Jamaica Public Service Co. Against the background of the increasing privatisation The utility company responsible for a large proportion of Jamaican state-owned enterprises, the cross-sectoral of electricity generation and for the transmission and regulatory authority Office of Utilities Regulations distribution of electricity is the Jamaica Public Service (OUR) was called into existence on the basis of the Co. (JPS). The previously state-owned enterprise was to Office of Utilities Regulation Act of 1995. Its central have been privatised in 1996, although the correspond- tasks in respect of the electricity sector are the creation ing regulatory framework conditions were not in place. of a competitive environment, the monitoring of elec- A public tendering process to bring this about failed. tricity tariffs and consumer protection. Expansion of the use of renewable energy, however, is also supposed to be Following direct negotiations with interested investors, supported by the OUR. since March 2001 JPS has been 80%-owned by the US company Mirant99 and has operated on the basis of a Responsibility for the energy sector licence issued within the scope of privatisation. In accord- Since October 2002 the ministry responsible for the ance with this licence, JPS will function as a single energy sector is the Ministry of Commerce, Science & buyer on the electricity market until the year 2021 and Technology. enjoy a monopoly in transmission and distribution.

Independent power producers and Legal Framework self-generators In addition to JPS, a further three independent power The legal basis for the electricity sector is provided by producers contribute to public supplies with a capacity the Electric Lighting Act of 1893 (with a series of sub- of 145 MW. The following companies have a licence for sequent amendments) and the Electricity Development power generation and supply contracts with JPS: Jamaica Act of 1974. At the end of the 1990s a start was made Energy Partners (since 1995, 74 MW), Jamaica Private with formulating a new electricity act, but it was then Power Company (since 1994, 60 MW) and Jamalco– postponed again. A new draft is now expected to be sub- Alcoa Minerals of Jamaica (since 2000, 11 MW).100 mitted in 2004.

97 All figures relate to April 2003. 98 This charge, referred to as a "lifeline rate”, is a cross-subsidised tariff for poorer members of the population. 99 Further interests are held by the Jamaican state or are in widely spread holdings. 100 The contract with a fourth producer, EAL/ERI Cogeneration Partners, was terminated in December 2003. 101 Because of a lack of specific political powers, the influence exerted by PCJ on energy policy is limited. Jamaica

Another provision that is equivalent to a statutory regu- Clean Development Mechanism lation is the licence issued in April 2001 (All-Island The Kyoto Protocol was adopted in June 1999 but has not Electricity Licence 2001) on the basis of which JPC is yet been ultimately ratified. authorised to generate, transmit and distribute electricity for private and public purposes for a period of 20 years. The licence grants JPS the exclusive right to Policy for Promoting Electricity expand its power station base up until April 2004. After Generation from Renewable that date the expansion of power generating capacity Energy Sources will be achieved through public tendering processes, in which JPS can participate. Other private generators are To date, very few or only inadequate measures have been permitted to sell electricity to JPS, with such transactions taken at the political level in Jamaica to exploit the poten- being monitored by the regulatory authority OUR. tial of renewable energy sources. A lack of awareness of the advantages of renewable energies, not only among political Energy Policy Paper decision-makers but also within the dominant power The fundamental direction of energy policy was last set utility, in industry, commerce and generally throughout in the Energy Policy Paper published in 1997. A out the population, constitutes a significant barrier. new edition of the policy paper is expected to appear at the beginning of 2004. Among other things the energy In 2003, though, against the background of the massive policy targets the development of domestic energy sources, burden on the budget from imported oil, the government provided this is economically and technically feas- announced greater support for renewables. To bring this ible. It is also planned that combined heat and power about, a department responsible for energy efficiency generation should be expanded by the private sector, and was set up in the competent Ministry of Commerce, clear rulings on the purchase of electricity from such Science and Technology; this department will also take plants are demanded. Tax privileges for solar-electric care of the promotion of alternative energy sources. systems are supposed to be retained. Electricity supply companies will also be allowed the possibility of appor- Focus on energy saving tioning special expenditure on improving energy effi- The main focus in relation to a sustainable energy policy ciency to the electricity tariffs. is placed on the promotion of efficiency measures. One important promotion programme aimed at increasing Energy policy objectives energy efficiency was the Demand Side Management The Jamaican government expects to achieve efficiency Demonstration Project, which was implemented in the gains in the electricity sector through the privatisation second half of the 1990s with GEF assistance. Solar- and liberalisation measures (now introduced) that are thermal and solar-electric installations were also brought aimed above all at steering private capital into building into use within this framework. At present the govern- the required power plants. A reduction in the heavy ment is planning to institute an energy fund amounting dependence on oil imports is to be achieved through the to US$ 100 million. The intention is that households diversification of energy provision, including that from and companies should be assisted through this fund not renewable sources. There is also considerable interest on only in implementing energy-saving measures but also the part of the state in making (imported) liquefied in the installation of solar-thermal installations. It is not natural gas available for power generation in particular. known that the planned energy fund will provide any Environmental pollution from fossil energy sources and appreciable support for renewable energy technologies firewood is to be held in check. designed to generate electricity.

JPS is obliged to submit a Least Cost Expansion Plan for The Energy Policy Paper of 1997 lists various incentive cost-effective expansion of the supply sector over the mechanisms for the promotion of renewable energy long term. A new plan covering a time span of 11 years was sources. Some of these measures, however, were cut submitted to the OUR for review in October 2003.102 when the national budget for 2003 was drawn up.

102 In addition, in 2003 the OUR commissioned a Generation Market Study in which the various options for the future expansion of power-station capacity will be examined. This will explicitly take account of renewable energies. In comparison with the average remuneration for gener- below 5 MW. The additional economic potential available ation from fossil sources, a higher purchase price (up to over and above present use is estimated at 60 MW. 15% more) is offered for electricity from renewable energy sources. Installed plants The installed nominal capacity currently totals almost GTZ-UNDP/GEF programme 24 MW. The capacity of plants in working order and In order to reduce the heavy dependence on oil imports feeding electricity into the grid amounts to 21.4 MW. and to boost the use of renewable energy resources in a However, no new plants have entered operation for the total of 16 island states in the Caribbean, the GTZ and past 15 years. Hydropower thus contributes between 2 UNDP/GEF set up the Caribbean Renewable Energy and 3% to today’s electricity resources for public supply. Development Programme (CREDP). The project is All of the plants are in the ownership of JPS and have scheduled to run for ten years, with its initial phase only recently been reconditioned with financial assis- extending from 2002 to 2007. The executing institution tance from KfW. is CARICOM (Caribbean Community). The programme is based on four components: Plant location Date of commissioning Installed capacity Upper White River 1945 3.8 • assistance with the drafting of political guidelines, Lower White River 1952 4.9 laws and regulations that are intended to establish Roaring River 1949 3.8 the framework for the expansion of renewable Rio Bueno A 1949 2.5 energy use Maggotty Falls 1966 6.3 • the introduction of innovative financing methods Constant Spring 1989 0.8 and dissemination of these methods to companies Rams Horn 1989 0.6 with the aid of demonstration projects Rio Bueno River 1989 1.1 • support for promoters of renewable energies and Total 23.8 institutional capacity building Table 21: Capacity of hydropower plants; Jamaica; • establishment of an improved regional information MW (nominal) 103 network for renewable energy sources The reasons for neglecting expansion are to be found in the high capital costs, high interest rates and the low Status of Renewable feed-in tariffs offered by the national power utility JPS Energy Sources in recent years. As far as JPS is concerned there are no plans to expand electricity generation from hydropower. In 1998 the proportion of renewable energy sources in primary energy generation amounted to some 9%, within Wind Energy which bagasse accounted all in all for a share of 5.5%, According to various estimates, wind power could con- firewood 2.6% and hydropower 1%. There was no distribute between 45 and 70 MW to electricity supplies cernible upward trend in the use of alternative energy by 2010. This would be roughly equivalent to 4.5 to 7% applications apparent over the preceding years. of the projected electricity generating capacity or 3 to 5% of electricity production (public supply only) for Hydropower that point in time. The total economic potential is esti- The hydrological and geomorphological conditions in mated at 110 MW. Locations with favourable wind con- Jamaica almost exclusively permit the use of small-scale ditions are found above all on the coastal strips in the hydropower installations. The technical potential is put parishes of St. Thomas, Clarendon, Manchester, at approximately 100 MW. Apart from one possible St. Elizabeth, St. Ann, St. Mary and Portland. hydroelectric power station in Black Rio Grande with a capacity of 50 MW, all potential new plants would have a capacity of less than 10 MW, and most of them in fact

103 Source: Petroleum Corporation of Jamaica. Jamaica

Previous use Biomass To date, wind energy has played almost no role in gener- In principle the following resources lend themselves to ating electricity in Jamaica. The first wind power plant use for the recovery of energy in Jamaica: of modern design was built as a demonstration project in 1995 in the parish of St. Elizabeth (Munro College), and • agricultural residues (especially Bagasse) feeds electricity into the grid with an output of 225 kW. • agro-industrial waste and residential waste Erection of the system was preceded by wide-ranging • aquatic biomass, aquatic plants wind measurements in the vicinity of the subsequent • green wood and wood residues site. One organisation involved in the measurements was the Department of Renewable Energy within the Bagasse Institute for Physics at the University of the West Bagasse arises as a residue in sugar factories, and until Indies, which since then has been investigating the now along with hydropower has been the most import- implementation of further schemes. ant renewable energy source in Jamaica. Bagasse is incinerated in combined heat and power stations on-site Wind measurements at the processing facilities, and makes a contribution to A substantial increase in the significance of wind energy the provision of electricity and heat. In 1998 the total is expected to be seen in 2004. Commissioning of the electricity generating capacity of the eight sugar factories 20.7MW (23 x 900 kW) Wigton wind farm in the amounted to 30 MW. At the times of year when there is interior of the country (Manchester Parish) is scheduled no harvest, the power stations are fired by coal. A project to take place in the second quarter of 2004. Wind meas- implemented by PCJ is investigating how to make more urements were conducted at this and other locations efficient use of bagasse in two sugar factories. from 1995 onwards for the purpose of yield forecasting. The six-year data series obtained at the Wigton site Wood as a fuel revealed an average wind velocity of 8.1 m/s. Wood, and charcoal obtained from wood, are popular fuels in households, where they are predominantly used Wigton wind farm for cooking. One problem in this connection is seen to The initiators of the project are PCJ and a British com- be the increasing rate of clearances and wood removal, pany, while the operator will be a subsidiary of PCJ. The which runs counter to a sustainable system of forest man- wind farm will contribute an estimated 2% of present-day agement. Since 1995 PCJ has run timber plantations for electricity production for public supply. research and demonstration purposes, four of which it is still looking after at the moment, in order to make a con- The investment costs of the Wigton wind farm will tribution to the provision of firewood in the long term. amount to approximately US$ 25 million. In addition to financial support from the Dutch Government104 and Biogas projects and GTZ promotion participation by PCJ, a loan was raised from the National In the early 1990s a biogas programme was imple- Commercial Bank of Jamaica. In the first five years the mented under the auspices of the Ministry of Mining electricity supply company JPS will pay a feed-in tariff and Energy, as it was at the time. 41 biogas plants were of 5.6 US cents/kWh, and from the 6th to the 20th year built as part of that scheme. The GTZ has promoted about 5.1 US cents/kWh. The possibility of selling biogas projects run by the Department for Waste Man- emission certificates is also under investigation at agement at the Scientific Research Council (SRC). present.105 Among others these have included the further processing of slurry on two pig farms and the subsequent use of the gas in households. The SRC is an important state research and development institution which focuses on the agro-industrial sector.106

104 In addition to an export credit to the tune of US$ 5.8 million, the Dutch Government has also granted subsidies within the framework of the Dutch export and environmental programme ORET/MILIEV. 105 The project has been placed on the shortlist for the Dutch CERUPT system. 106 The SRC is also responsible for the Caribbean Energy Information System (CEIS), which gathers information about the energy sector in the Carib- bean and makes it generally available. The College of Agriculture, Science and Education (CASE) also looks after projects in the field of wastewater treatment and biogas, and uses the projects for educational purposes oriented towards practical use. The additional economic potential of solid waste is esti- Rural Electrification mated at 20 MW, and that of bagasse and firewood together at 35 MW. According to a poll conducted in 2001, an estimated 86% of the population has a connection to the main Solar Energy electricity supply. With a daily solar irradiation rate of between 4.1 and 5.6 kWh/m2, the natural conditions for the exploitation REP of solar energy in Jamaica are very good. In order to accelerate the electrification of rural areas the Rural Electrification Programme Limited (REP) was set Whereas solar-thermal applications are seen relatively up in 1975, the primary task of which is to expand the frequently, the distribution of photovoltaic applications electricity grids. REP concentrates mainly on non-com- is still in its infancy. Apart from about 220 solar-powered mercial projects, and in the long term is pursuing a goal street lights, 50 localised individual systems for resi- of almost one-hundred-percent electrification. In order dential users (solar home systems) have been installed in to achieve a hundred-percent mains connection rate and two villages by JPS as part of an energy efficiency pro- to be able to supply electricity to the remaining 25,000 gramme. A small number of on-site PV systems have households, REP states that approximately 1,360 km of also been set up by commercial actors. new transmission lines would have to be erected. Plans to expand the power grid are coordinated with the Among non-governmental organisations, the Jamaica national electricity supply company (JPS). The latter is Solar Energy Association (JSEA), which was founded in also obliged to purchase the newly erected infrastructure. 1999, is particularly active in the solar sector. Its members In the event of disputes, the regulatory authority OUR comprise manufacturers, dealers, and representatives of acts as a mediator. The targeted objective for the the relevant trades and the scientific community. 2002/2003 financial year was to connect 5,000 houses, and according to the OUR this was 80% achieved.107 The Renewable Energy Studies department within the Approximately 3,000 houses are due to be connected in Institute for Physics at the University of the West Indies the 2003/2004 financial year. (UWI) is looking into the efficiency of solar cells and modules. It is also investigating the economic efficiency Building up localised supply of tracking systems. In order to ensure a reliable power In addition to expanding the grid, in future REP would supply for laboratory instruments, a PV system with an also like to concentrate more on building up localised output of 700 W was installed. There are plans to energy systems. The Demand Side Management De- expand this installation considerably. monstration Project implemented under the aegis of the World Bank and with GEF funds from 1992 to 1999, Geothermal Energy which was primarily oriented towards energy efficiency Geological warm-water reserves have been discovered in measures, focused on thermal applications in the solar the Blue Mountains. According to experts’ estimates, sector, but it also included a small component involving the temperatures are sufficient for the provision of heat the electrification of off-grid households in two commu- but not for the generation of electricity. nities by means of solar home systems. In future the management of REP intends to call upon financial support primarily from European countries or the EU.

Exchange rate (11 March 2004): 100 Jamaica dollars (J$) = € 1.35

107 According to information from the management of REP, the objective was achieved in full. Jamaica

Information Sources Contact Addresses

• CREDP – Caribbean Renewable Energy Develop- Jamaican Embassy in Germany ment Project: Volume II, Country Report Jamaica. Schmargendorfer Strasse 32 12159 Berlin Projekt-Consult GmbH. March 2000 Germany • Inter-American Development Bank, Privatization Tel. 0049 (30) 85 99 45 11 and Regulation – Challenges in Jamaica, July 2003 Fax 0049 (30) 85 99 45 40 E-mail: [email protected] • Jamaica Power Service, JPS rate submission 2004, www.jamaican-embassy-berlin.de Volume I, March 1st 2004 German Embassy in Jamaica • Ministry of Commerce, Science & Technology: 10 Waterloo Road Performance of the Rural Electrification Programme Kingston 10 for the 2002/2003 Financial Year and Focus for the Jamaica Tel. (001876) 926 67 28 2003/2004 Financial Year, July 2003 Fax (001876) 929 82 82 E-mail: [email protected] • Ministry of Mining and Energy: All-Island Electri- city Licence 2001 for Jamaica Public Service Ministry of Commerce, Science and Technology Company Limited. 2001 PCJ Building 36 Trafalgar Road • OECS Natural Resources Management Series, Kingston 10 Identification of Policy Framework Options for Tel. (001876) 929-8990-9 Enhanced Efficiency of Energy Use in the OECS Tel. (001876) 754-5501-4 States, Technical Paper No. 1, January 2001 Fax (001876) 960-1623 E-mail: [email protected] • OUR – Office of Utilities Regulation: www.mct.gov.jm Annual Report & Financial Statements 2001–2002 Jamaica Public Service Company Limited • OUR – Office of Utilities Regulation: 6 Knutsford Boulevard Annual Report & Financial Statements 2002–2003 P.O. Box 54 Kingston • UNDP/GEF: Caribbean Renewable Energy Devel- Tel. (001876) 926-3190 opment Programme. Project Brief, Draft 2.0, 2002 Fax (001876) 926-6710 www.jpsco.com • World Bank/GEF: Jamaica – Demand Side Manage- ment Demonstration Project. Project Document, Office of Utilities Regulation (OUR) March 1992 PCJ Resource Centre Third Floor • Wright, Raymond M.: Jamaica’s Energy. 36 Trafalgar Road Old prospects, new resources, 1996 Kingston 10 Tel. (001876) 929-3635 • Wright, Raymond M.: Jamaica – alternative energy Fax (001876) 929-6672 and the energy balance. University of Technology E-mail: [email protected] Journal, 2004 www.our.org.jm Petroleum Corporation of Jamaica University of Technology (U-Tech) 36 Trafalgar Rd, 237 Old Hope Road Box 579 Kingston 6 Kingston 10 Tel. (00876) 927 / 1680-8 Tel. (001876) 929-5380/9 Fax (00876) 977 / 4388 Fax (001876) 929-2409 www.utech.edu.jm E-mail: [email protected] www.pcj.com The College of Agriculture Science and Education GTZ-CREDP Programme Passley Gardens Thomas Scheutzlich P.O. Box 170 Projekt-Consult GmbH Port Antonio Limburger Str. 28 Portland 61462 Königstein/Ts. Tel. (00876) 993-5436-8 Germany Fax (00876) 993-5546 Tel. 0049 (6174) 24031 E-mail: [email protected] E-mail: [email protected] www.case.edu.jm

United Nations Development Programme, Jamaica 1–3 Lady Musgrave Road Kingston 10 Tel. (001876) 978-2390-9 Fax (001876) 946-2163 E-mail: [email protected] www.undp.org/fojam/index.html

Caribbean Energy Information Service (CEIS) c/o Scientific Research Council P.O. Box 350 Kingston 6 Tel. (001876) 927-1779 Fax (001876) 977-1840 E-mail: [email protected] www.comnet.mt/ceis

Jamaica Solar Energy Association (JSEA) Secretary Ms. Karlene Russel Petroleum Corporation of Jamaica 36, Trafalgar Road Kingston 10 Tel. (001876) 929 / 5380-9 Fax (00876) 929 / 2409

The University of the West Indies (UWI) Mona Campus Kingston 7 Tel. (00876) 927 / 1660-9 Fax (00876) 927 / 0997 E-mail: [email protected] www.uwimona.edu.jm/ Colombia

Colombia

Electricity Market a wind farm with just under 20 MW that was commissioned in late 2003. In addition, several gas-fired power Colombia is in the comfortable position of still being plants of medium size (150–250 MW) are still at the able to generate most of its electricity without need of planning stage. According to present planning, new imported raw materials. Colombia is South America’s hydroelectric generating capacities (600 MW and biggest producer and exporter of coal and is also a net 78 MW) as well as new gas-fired CHP plants (totalling exporter of oil, especially to the USA. In the medium 650–750 MW) are anticipated for the period between term, though, Colombia will have to become a net 2007 and 2011. The long-term plans extending up to importer due to its limited reserves of natural gas and 2011 include scenarios providing for the construction of petroleum. a 150MW coal-fired power plant.

At the end of 2002, the country’s total installed gener- Power generation ating capacity on the interconnected grid amounted to After declining nearly 5% between 1998 and 1999 (to approximately 13,500 MW. the 1995 level), net power generation remained fairly stable in the year 2000. In 2001 and 2002, power pro- 14000 duction increased by 2.9% and 4.8% respectively over 12000 the previous years. Thanks to well-filled reservoirs, the 10000 hydroelectric plants contributed 77% of the generated 8000 power, thus remaining the chief source of electricity. MW 6000

4000 45000

40000 2000 35000 0 30000 1991 1998 1999 2000 2001 2002

Hydropower plants Gas-fired plants Coal-fired plants Others 25000

GWh 20000

Figure 2: Generating capacities on the interconnected grid; 15000 108 Colombia; 1991, 1998–2002; MW 10000

5000

Despite a major increase in gas-fuelled power plants, 0 1998 1999 2000 2001 2002 Colombia’s overall power generating capacity is still Hydropower Natural gas Coal Others clearly dominated by hydropower, the climatic dependence of which has substantial impacts on the supply- Figure 3: Net power generation in the interconnected grid, according to primary energy source; Colombia; 109 side and pricing situation. While the power-plant 1998–2002; GWh110 mix shifted most noticeably in favour of gas-fired power plants between 1991 and 1998, no major changes have At 7.6 GWh, imported electricity was at a negligible since taken place, because new hydroelectric power level in 2002, while exports totalling 618 GWh plants have been added in the interim. In all, 32 large accounted for as much as 1.4% of gross electricity pro- hydropower plants and 30 thermal power plants, some duction. Moreover, the technical and non-technical power comprising multiple units, feed electricity into the losses in 2002 again reached a very high level at 24.2%. interconnected power grid. Transmission network Addition of new power plants The Colombian transmission network comprises three The power plants scheduled for commissioning by 2007 voltage levels (110 kV, 220 kV and 500 kV). Totalling include several small to medium-size hydroelectric facil- approximately 15,000 km in length, the network links ities that are already under construction and will pro- the western part of the country with Bogotá.111 A new vide some 30 MW additional generating capacity, plus transmission line with a length of approximately 1,000 km

108 The numerical data for hydropower includes small, decentralised power plants (2002: 226 MW). The ‘Others’ category includes fuel oil for 1991 and combined heat and power plus self-generation from 1998 onwards. 109 Colombia’s dependence on hydropower, which still amounted to about 78% in the early 1990s, has since considerably decreased. 110 The hydropower statistics also include power generated by small, decentralised power plants (2002: 1,130 GWh), and, for 1998, power generated by oil-fired power plants, plus, for 1999, power from combined heat and power plants and industrial self-generation. 111 The following continental regions have not yet been linked to the public transmission grid: Amazonas, Antioquia, Arauca, Caquetá, Casanare, Cauca, Chocó, Guainía, Guaviare, Meta, Nariño, Putumayo, Vaupés and Vichada, and the two islands Andrés and Providencia. is to be built and operated by private investors by 2005 Market Actors to link Bogotá with the Atlantic coast. Colombia has tie-lines leading into Venezuela and Ecuador. A new At the end of 2002 the actor structure on the Colombian connecting line between Ecuador and Colombia went electricity market was as follows: there were 57 power into service in January 2003 as part of an agreement generating companies, and 55% of all generating cap- between the five Andes countries Bolivia, Colombia, acity was privately owned. 113 companies were involved Ecuador, Peru and Venezuela that have decided to in power trading, and 31 in power distribution. integrate their respective electricity markets into a supraregional electricity market. Transmission network STN The supraregional transmission network Sistema de Power consumption Transmisión Nacional (STN) is divided up between the The demand for electricity in Colombia did not follow a twelve companies that emerged from the old power util- consistent trend between 1998 and 2002. While power ities in the course of the vertical disintegration process, consumption in 1998 and 1999 declined as a result of including Interconexión Eléctrica S.A. (ISA), which economic recession, it increased again since then, holds 73%.113 ISA, 59% of which was still state-owned reaching 35 TWh at the end of 2002. That increase is in 2002, is responsible for the coordination, operation mainly attributable to reactivation of the industrial and administration of the interconnected network sector. system, as it was the former central grid operating company. Some of the co-owners of STN are also ISA share-

35000 holders (for example, Empresas Públicas de Medellín –

30000 EEPPM – holds 10.6%). In 2001 and 2002, two tranches

25000 of state-held shares were sold off to strategic investors

20000 and to the public at large (approx. 24% by the end of GWh 15000 2002). The transmission companies are excluded from

10000 all forms of involvement in the generation or distribution

5000 of electricity. The regional and local networks are allo-

0 cated to the various distribution companies, in which 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Households Industry Commerce Public Sector power generators are allowed to hold up to 20% capital interest. Figure 4: Power consumption according to user group; Colombia 1993–2002; GWh112

With an available interconnected-grid capacity of nearly Legal Framework 13,500 MW at the end of 2002, peak load in December 2002 amounted to only 8,077 MW. The existing spare In 1992 the Colombian electricity industry experienced capacity could, however, decrease sharply in the event of one of its most difficult years, when the hydroelectric a drought, so if there is a further rise in the demand for plants failed because of a persistent drought and electri- electricity it is even possible that supply bottlenecks city rationing was the order of the day. could occur. Power consumption is expected to increase to 59–73 TWh by 2011, depending on which scenario Restructuring actually materialises. Subsequently, a sectoral reform was introduced with enactment of the Law on the Organisation of Public Ser- vices (Law no. 142, dated 11 July 1994, Régimen de Servicios Públicos Domiciliarios) and the Electricity Law (Law 143, dated 11 July 1994, Ley Eléctrica). The generation, transmission, distribution and marketing of electricity were separated, and the previous regional monopoly of utility companies was broken up. Free

112 Source: Comunidad Andina (CAN), 2004. 113 The other owners are: Empresa de Energía de Bogotá – EEB, Corelca, Empresas Públicas de Medellín – EEPPM, Empresa de Energía del Pacífico – EPSA, Electrificadora de Santander – ESSA, Distasa S.A., Central Hidroeléctrica de Caldas – CHEC, Centrales Eléctricas de Norte de Santander – CENS, Central Hidroeléctrica de Betania – CHB and Electrificadora de Boyacá – EBSA. Colombia

competition was introduced in areas where there is no sale market (Mercado de Energía Mayorista – MEM) that natural monopoly, i.e. in the generation and marketing was established in 1995 (per Resolution CREG-054 of of electricity, while the other areas are still regulated and 1994).115 The power generators must address hourly monitored by the state. offers for the next day to the national dispatching centre in Medellín, where they are entered in the load distri- The operators of the interconnected grid system, the bution list in accordance with their quotations. There is regional transmission companies (Sistema de Transmi- no preferential treatment for certain types of power sta- sión Regional – STR) and local power distribution com- tions in that context. In order to prevent them from gain- panies (Sistema de Distribución Local – SDL) therefore ing a dominant position on the market, electricity have to open their networks to every user and generator suppliers are not allowed to provide more than 20% of the (non-discriminatory access)114. Moreover, wide-ranging total generated quantity, including their capital involve- privatisation was introduced. This has affected all areas ment in other generating companies. Customers are not of the electric power industry and has not yet been com- allowed to address offers directly to the pool. The pool pleted. Any economic actor is free to build additional operator compares the offers with the estimated demand power generating capacities, as long as the framework of as a basis for setting the hourly pool prices. other legal provisions is adhered to. Further distributors and large-scale consumers are allowed Regulatory commission and planning unit to enter into bilateral agreements with power gener- A national commission (Comisión de Regulación de ators, as long as the agreements are registered with the Energía y Gas – CREG) was set up to regulate the elec- pool operator for invoicing purposes. tricity market. This body regulates the general conditions for the efficient supply of electricity, the step-by- Power trading in 2002 was based primarily on long- step liberalisation of the electricity market, the stand- term contracts; the spot market accounted for only about ards to be applied to the wholesale market, free network 34% of trading. The Colombian electricity exchange access, the transmission and distribution charges, the is characterised by uncertainty and widely fluctuating tariffs for regulated end consumers, protection of the price situations resulting from the country’s heavy consumers’ interests, and matters pertaining to the dependence on hydropower and, in turn, the latter’s vertical disintegration of the electricity industry. dependence on sufficient precipitation. Hence, the average price of long-term contracts in dry years regularly Otherwise, the state’s tasks are essentially restricted to drops below the exchange (pool) prices. Due to the good planning functions. The Unidad de Planeación Minero- water situation in 2003, the mean price stated in bilateral Energética (UPME), organised within the Ministry of agreements nonetheless amounted to 72 pesos/kWh Mining and Industry, is responsible for analysing future (2.25 € cents/kWh) in August, making it higher than energy requirements and the corresponding supply the pool price which then amounted to 65 pesos/kWh situations and for drawing up the National Energy Plan (2.03 € cents/kWh) on average. (Plan Energético Nacional) as well as the Plan to Expand the Electricity Sector (Plan de Expansión del Sector Non-regulated consumers Eléctrico). However, this planning is now only of an ana- Since 2 January2000 there has been no regulatory binding lytical nature and is no longer a binding stipulation for for any end consumers with a power demand of at least the expansion projects. 100 kW or electricity consumption of at least 55 MWh/month. By the end of September 2003, the Wholesale market: mandatory pooling number of unregulated consumers who had entered into Generating companies whose plants supply power to the free contractual commitments with their own suppliers national interconnected grid system and have a capacity or who had been able to meet their electricity require- of at least 20 MW are obliged to participate in the whole- ments from the exchange with the help of an electricity

114 The conditions of access for power generating companies are related in resolution CREG-030 of 1996. General information on the legal requirements for regional power transmission companies and local distributors is given in Resolution CREG-003 of 1994 and CREG-099 of 1997. 115 All electricity traders who supply electricity from the interconnected grid directly to end consumers are obligated to purchase the electricity via the MEM. Operators of plants with ratings between 10 and 20 MW can participate in the MEM voluntarily, while those with less than 10 MW generating capacity are automatically excluded from the MEM. Autonomous suppliers can use the interconnected grid to obtain replacement power or additional power. Operators of combined heat and power plants (cogenerating facilities) can supply themselves or others with electricity and heat for industrial or commercial purposes. trader had reached 3,640, thus accounting for more than unelectrified fringe areas or rural and isolated settle- 30% of total electricity demand. ments. The latest national energy plan, i.e. the one for 2003, does nothing to change the situation. Indeed, it Current power-sector problems favours even more than before the use of natural gas and For several years now, the Colombian power utility ser- coal and, with regard to renewable energy sources, con- vices sector has been having to contend with guerrilla fines itself to recommending the development of mini attacks on the interconnected power grid, and this has hydropower and pilot projects dealing with other resulted in some substantial supply problems. In 1999 renewable energy sources. and 2002 there were between 250 and 450 attacks on high-tension towers each year. The interconnected grid Law on the Promotion of Renewable was seriously damaged at several points, and it was Energy, 2001 necessary to split the system into a number of isolated Despite the above, some initial steps toward the system- islands of supply. Several power-exporting regions were atic development of renewable energy sources have cut off from their consumer markets. This disturbing been taken since the autumn of 2001: with Law 697, turn of affairs continued in 2003. The persistent power dated 3 October 2001, the Government of Colombia supply problems have contributed to the interruption of created a framework for promoting the use of renewable more than one planned privatisation project. energy sources. According to this law, it is planned to set up a programme for the rational use of energy and the Clean Development Mechanism use of renewable forms of energy (Programa de Uso Via Law 629 of November 30, 2001, Colombia adopted Racional y Eficiente de la Energía y demás formas de the provisions of the Kyoto Protocol and has already Energía No Convencionales – PROURE) under the aus- incorporated them into national law. The Protocol itself, pices of the Ministry of Mining and Energy. It is also however, has not yet been ratified. As of this writing, a intended to develop political guidelines and strategies Colombian wind power project was already profiting along with instruments to promote non-conventional from this form of financial assistance. energy sources, with the main emphasis being placed on regions that do not have access to electricity. Companies that manufacture or import components for use in Policy for Promoting Electricity exploiting renewable energy sources are to receive spe- Generation from Renewable Energy cial assistance. Sources Tax exemption A development plan for alternative energies (Plan de One concrete assistance measure in connection with Desarrollo Nacional de las Energías Alternativas) dating PROURE is a provision of Law 788, dated 27 December from 1995 proposed measures intended to help promote 2002, according to which the sale of electricity from the use of renewable energy sources. In practice, however, wind energy, biomass or agricultural waste is to be these announcements did little more than pay lip service exempted from income tax for 15 years, as long as the to the problem and had no discernible impact. following criteria are satisfied: participation in CO2- permit trading in accordance with the Kyoto Protocol, National energy plans and reinvestment of at least 50% of revenues from the The National Energy Plan of 1997 (Plan Energético sale of permits in social projects situated within the area Nacional) underscores the importance of renewable served by the utility. energy while emphasising the fact that, thus far, only very inadequate use has been made of it, at least in Other incentive programmes focussing specifically on connection with power generation. Nevertheless, the the use of renewable energy sources are not yet in force, 1997 National Energy Plan assigns little more than a because the government is giving first preference to a niche existence to renewable energy sources – with the competition-oriented policy in the development of the exception of major hydropower stations – for urban and electricity industry. Colombia

Draft law for the promotion of renewable Grid-coupled renewable energy sources energy sources, 2003 A quota model has been proposed for electricity from Draft bill 170/2003, which specifies the promotion of renewable sources of energy within the national inter- renewable energy sources within the entire territory of connected grid (Sistema Interconectado Nacional Colombia, was submitted in the spring of 2003. To S.I.N.). Twenty per cent of all electricity sold by the begin with, the bill stipulates the exact definition of the companies signed up to this model must be generated term ‘renewable energy sources’, which covers solar from renewable energy sources, and another 10% must energy, wind energy, geothermal energy, biomass and consist of ‘clean electricity’ (from generating facilities in hydropower (continental as well as oceanic). However, compliance with certain emission standards). Which no precise power rating limits are stated for hydropower, group of market actors is to be contractually engaged so the roughly approximated boundary lies somewhere (power producers or power traders) remains unclear. between 10 MW and 20 MW. Adherence to the quota commitments is to be investigated for the first time six years after the quota model Also, the Ministry of Mining and Energy is obligated to: has entered into force. The quotas are to remain valid for 20 years but may be raised after the first 10 years, • take an inventory of all available domestic depending on developments. conventional and renewable sources of energy at two-year intervals Basically, the proposed bill gives autonomous generators • analyse the production costs of the various power of electricity, including those using renewable sources of generating processes energy, the right to tie into the interconnected grid. • ascertain and forecast the current and future Power producers relying on intermittent sources, such national power consumption levels as wind, run-of-river power plants, and solar facilities, • draw up a new national energy plan based on and are to be afforded preferential market referral. In add- duly taking into account the above information ition to promotion within the framework of the quota model, electricity generated from renewable sources of energy is also supposed to enjoy a 30% discount on Renewable sources of energy in remote areas transmission charges for a period of 15 years. In some of its essential sections, the bill differentiates between areas serviced by the interconnected power grid Further provisions and more remote areas with no grid access. Apart from these specific assistance devices, the draft law also envisages more tax incentives than those pro- With regard to the chosen model of promotion for renew- vided for in Law 788/2002 (Exemption from Income able-source power generation in remote areas, the draft Tax) for electricity generated from solar energy, biogas, bill remains unclear. According to the draft of a further- mini hydropower plants (up to 20 MW) and geothermal ranging decree from April 2003, the remuneration paid installations. for renewable-source electricity generated in areas remote from the grid must take into account the initial cost of investment as well as the costs of administration, Status of Renewable Energy Sources operation and maintenance of a corresponding (power generating) system, in addition to a certain profit margin. Apart from the use of hydropower, even on a relatively Neither the exact amount nor the method of calculation small scale, the penetration of technologies based on is specified in the bill, which merely states that they are renewable energy, including for the electrification of to be established by mutual agreement with the power rural regions, remains considerably lower in Colombia industry. than in other Latin American countries. The government’s lack of financial leeway has been a contributing factor to this development, as has the central authority’s partial lack of control over large rural areas of the country. Statistical records on the use of renewable energy in isol- installed capacities ranging from 8.5 kW to 125 kW. ated networks and for autonomous supply are broadly Also, the construction of three other facilities with lacking, so no precise details of the extent to which the ratings of 17 kW, 23 kW and 125 kW is being planned corresponding technologies are in use can be given here. without GTZ assistance. On the other hand, the national energy plan of 2003 does contain at least a brief assessment of the renewable Beyond the hydropower plants that are presently feed- energy sources available for use in Colombia. The following into the interconnected power grid, there are some ing information is based in part on that assessment. 250 mini hydropower plants with capacities of less than 10 MW that would be suitable for future upgrading in Hydropower order to increase their outputs. In 2002, hydroelectric power was by far the most important source of energy in the field of electricity Wind Energy generation, both in terms of installed capacity (67%) Colombia’s only wind power project to have been com- and as regards power production (77%). The use of hydro- pleted to date is the Jepírachi project by the generating power for generating electricity in Colombia dates back and supply company Empresas Públicas de Medellín to about 1920, when it was first employed as a means of (EEPPM) in the Alta Guajira Region on the Caribbean supplying electricity to villages along the Atlantic coast, which was implemented with support from the Coast. By the 1960s, most large, upland communities GTZ. The site is located near the coal port Puerto had begun to meet their demand for electricity by Bolívar and therefore has access to the national high- installing and operating their own mini hydropower tension grid. plants. Then, in the 1970s and ’80s, numerous large- scale projects were implemented, often with profound Jepírachi Wind Farm social and ecological impacts – and a need for foreign Wind measurements show average wind velocities of capital. This, coupled with the progressive connection more than 9 m/s and relatively homogeneous wind dis- of towns and cities to the interconnected power grid, led tributions, such that an availability of about 40% can be to the decommissioning of most small hydropower assumed. Along with these favourable factors, however, plants, because they were no longer profitable. the very high daytime temperatures and the considerable salt content of the air also had to be taken into account The fact that the power sector accounts for a large pro- when implementing the plants. Moreover, the wind portion (40%) of Colombia’s foreign debt, coupled with farm is situated within the territory of the Wayúu Indi- increased costs of electricity transmission and distribu- ans, who only agreed to the project after EEPPM pro- tion and greater efforts to broaden rural electrification, mised them extensive ecological and social compensa- has led to the revitalisation of mini hydropower now tion, particularly in the form of a sea water desalination being targeted. plant.

PESENCA programme under the auspices of GTZ The Jepírachi Wind Farm entered service in December The Colombian-German energy programme for the 2003. It is rated at 19.5 MW (comprising 15 N60 Atlantic coast (Programa Especial de Energía de la Costa turbines from the German company Nordex). An Atlántica – PESENCA) was launched in 1984 under the annual yield of 68 million kWh is anticipated, and the aegis of the GTZ and in cooperation with the power pro- farm is supposed to cut CO2 emissions by some 800,000 vider CORELCA and the Colombian Institute for Agri- tons by 2012. culture and Livestock, I.C.A., one purpose of which was to promote the use of mini-hydropower. Five projects in EEPPM invested US$ 27.8 million to build the wind the mini-hydropower sector have already been imple- farm. The World Bank is contributing US$ 3.2 million mented under the PESENCA programme: the revitalis- to the project within the framework of the Prototype ation of a 1,090kW plant and the exploration, planning Carbon Fund (PCF) in order to achieve the 800,000-ton 116 and construction of four micro-hydropower plants with CO2 emission reduction target until 2012. The

116 In this respect, UPME and Colombia’s Ministry of the Environment performed the necessary calculations for the sale of tradable emission permits and submitted them to PCF, which subsequently approved both the employed method of calculation and the resultant reduction volumes. Colombia

subsidy is being paid out in regular instalments subject Solar Energy to the presentation of tradable emission permits to PCF Colombia enjoys excellent solar-irradiation conditions, by EEPPM in accordance with the Clean Development experiencing levels of 4.0 to 4.25 kWh/m2d in the south- Mechanism. Despite the good wind conditions, the cost westerly regions and 5.5 to 5.75 kWh/m2d in the Guajira of power generation is estimated at about US$ 49 per region. This corresponds to between 58% and 84% of MWh, partly because the tie-in to the grid requires a the insolation levels that are recorded in Saudi Arabia, trunk feeder with a length of 8 km. In order to enable the country with the highest solar irradiation levels of cost-effective operation of the wind farm, Colombia’s all. Nevertheless, the use of solar energy for obtaining Institute for the Development of Science and Technol- electricity from solar home systems or for heating water ogy COLCIENCIAS recognised it as a ‘technical innov- with the aid of solar collectors has remained marginal, ation project’, thus allowing EEPPM to deduct the even in remote areas. A relatively large photovoltaic initial investment from its taxable gains. This reduced system was installed in the district of Vichada in 1995 the taxes on earnings by an estimated US$ 8.5 million. to supply electricity for a small settlement with a school and a health care unit. According to the National GTZ activities within the scope of the TERNA programme Energy Plan of 2003, only around 2 MW of photo- Preparations for the scheme, which has been in planning voltaic capacity is in place in Colombia. In October 2003 since 1998, are being supported by the GTZ within the the power provider Empresa Antioqueña de Energía framework of the TERNA programme. Since May 2000, S.A. (EADE), a subsidiary of Empresas Públicas de EEPPM has been operating a wind monitoring station Medellín (EEPPM), launched a competitive contracting near the intended site. After three years of monitoring, programme for 60 solar home systems (SHSs) for village an exploitable wind potential of 5,000 MW was deter- schools situated within its own service area. Each such mined for the Guajira region. The GTZ helped EEPPM system can be purchased for 500,000 pesos (roughly select the site, perform the wind surveys, and evaluate € 156). EADE intends this measure to help stimulate the technical and financial possibilities via wind-yield interest in solar home systems. and feasibility studies. Proposals for adapting the legal framework were submitted to the appropriate ministries Geothermal Energy responsible for energy and the environment, as well as to Despite multiple preliminary studies on the use of geo- the regulatory authority CREG. The extent to which thermal energy over the past 35 years, in addition to existing sets of regulations for small electricity gener- exploratory drilling performed by Geoenergía Andina ating plants and run-of-river power stations can be S.A. (GESA) in 1997, Colombia’s geothermal potential applied to wind energy was also a matter for consideration. is still largely untapped, mainly because other domestic sources of energy, coal in particular, are so plentiful. In Biomass fact, in the year 2000, the only instance of any geother- The (documented) contribution of biomass to the mal resource being put to use at all in Colombia was hot- generation of electricity in Colombia has been quite spring water used for heating 38 medicinal baths in 27 small. The main raw material for such applications is communities. All of these facilities together had a total bagasse, from sugar cane, usually for use as fuel in installed capacity of some 13.3 MW, corresponding to combined heat and power facilities. The accumulated an annual energy output of 266 TJ. output of all such plants amounts to approximately 25 MW. If the biomass used as an additional fuel in power generation (for example bagasse in coal-fired power plants) is included, the overall capacity increases to about 100 MW. In addition, various agro-industrial residues such as marc or the husks of rice and other grains are used for heat-generating purposes. Rural Electrification • González, Fabio y Rodríguez, Humberto (Universi- dad Nacional de Colombia), Manual de Radiación Between 1998 and 2001 the percentage of the rural Solar en Colombia, Bogotá, n.d. population with access to electricity rose from 81% to • Instituto de Ciencias Naturales y Energías Alterna- 88%. In urban zones the percentage of grid-connected tivas (INEA), Plan de Desarrollo de Energías Alter- electricity users stood at 92% in 2001, compared with nativas 1996–1998, Santafé de Bogotá, 68% in rural regions. Febrero 1995

In 1999 the Ministry of Mining and Energy initiated • Interconexión Eléctrica S.A. (ISA), the implementation of 93 rural electrification projects Informe anual 2002 via the Institute for the Investigation and Application of • Interconexión Eléctrica S.A. (ISA), Informe Mercado Energy Solutions (Instituto de Investigación y Promo- de Energía Mayorista 2002 ción de Soluciones Energéticas – IPSE). These projects concentrate on the expansion of existing networks and • Interconexión Eléctrica S.A. (ISA), Informe Mercado the establishment of stand-alone solutions, mainly de Energía Mayorista, Agosto de 2003 through the installation of diesel generators. • International Geothermal Association, iga.igg.cnr.it/colombia.php

Exchange rate (30 October 2003): 1,000 Colombian pesos = € 0.304 • Korneffel, Peter: Großer Bruder Wind. In: Neue Energie, 2003 (8), pp. 80–84

• Larsen, Erik; Dyner, Isaac; Bedoya, Leonardo; Information Sources Franco, Carlos Jaime, Lessons from deregulation in Colombia: successes, failures and the way ahead, in: • Academía Colombiana de Ciencias Exactas Físicas y Energy Policy 2003, article in press Naturales, Portafolio Colombiano de Proyectos para el MDL – Sector Energía, Bogotá 2000 • Ministerio de Minas y Energía, proyecto de ley No. 170 de 2003 • Atlas de Radiación Solar de Colombia • Ministerio de Minas y Energía, Proyecto Decreto • British Petroleum (BP), BP Statistical Review of URE, por el cual se reglamenta la ley 697 de 2001 World Energy, June 2003 • Rankin, Adam J., Macrodiagnóstico sobre Energías • Congreso de Colombia, Ley 788 de 2002 Alternativas, 2000

• Darstellung der GTZ zum TERNA-Vorhaben • Rodriguez M., Humberto (Universidad Nacional de ‘Kolumbien’, Eschborn 2000 Colombia), Generación de Energía Eléctrica en la

• Electrificadora de Santander, ESSA en cifras Costa Atlantica con Aerogeneradores, Bogotá, n.d.

Año 2000 • UPME, Colombia, Energía y Desarrollo, Bogotá,

• Empresa Antioqueña de Energía S.A., Policitación Diciembre 1999

No Compromisoria Nº 17 de 2003 • UPME, Estadísticas Minero Energéticas

• Empresas Públicas de Medellín, Aprovechamiento 1991–2002, www.upme.gov.co

de Energía Eólica en la Alta Guajira, Medellín, • UPME, Informe de Avance del Plan de Expansión Agosto de 2001 de Generación, Septiembre 15, 2001 and

• Energy Information Administration (US Depart- Octubre 15, 2001

ment of Energy), Country Analysis Briefs Colombia, • UPME, Manual de Aplicación de la Energía Eólica May 2003 Colombia

• UPME, Plan de Expansión de Referencia Empresas Públicas de Medellín E.S.P. (EEPPM) 2000 – Generación Transmisión 2000–2015, Unidad Planeación Generación Eléctrica Bogotá 2000 Carrera 58 No. 42-125 Medellín • UPME, Plan Energético Nacional 1997–2010 Tel. 0057 (4) 380 42 30 Fax 0057 (4) 380 67 95 • UPME, Plan Energético Nacional 2003–2020 E-mail: [email protected] www.eeppm.com/ • UPME, Versión préliminar del Plan de Expansión 2003–2011 Universidad Nacional de Colombia Grupo de Energía Solar y Energías Renovables • W. Teplitz-Sembitzky, Wind Park Upper Guajira – Prof. Humberto Rodríguez Murcia Colombia, Findings of TERNA-Mission (September E-mail: [email protected] 10–21, 2000), Final Report, October 2000 http://sky.net.co/energia/Principal.htm (internal GTZ-Bericht) Academía Colombiana de Ciencias Exactas Físicas y • World Bank, Colombia-Jepirachi Carbon Off-Set Naturales (ACCEFYN) Project, PID 11182, September 2002 Transversal 27 No. 39A-63 Santafé de Bogotá, D.C. • Yezid Orlando Perez Alemán: Die Umstrukturie- Tel. 0057 (1) 268 03 65 rung des kolumbianischen Elektrizitätsmarktes. In: Fax 0057 (1) 244 31 86 ; 268 28 46 Elektrizitätswirtschaft, 1999 (13), pp. 51–58 E-mail: [email protected] www.accefyn.org.co

German-Colombian Chambers of Industry Contact Addresses and Commerce Cámara de Industria y Comercio Colombo-Alemana Unidad de Planeación Minero-Energética (UPME) Mailing address: Apartados Aéreos 91 527, 91 528 Av. 40 A, No. 13-09 Office: Carrera 13 No. 93 - 40, piso 4 Edificio UGI Santa Fé de Bogotá Bogotá Tel. 0057 (1) 623 33 30 Tel. 0057 (1) 338 30 50 Fax 0057 (1) 623 33 08 und 623 33 75 Fax 0057 (1) 288 74 19 E-mail: [email protected] E-mail: [email protected] www.upme.gov.co Embassy of the Republic of Colombia Kurfürstenstrasse 84 Comisión de Regulación de Energía y Gas (CREG) 10787 Berlin Calle 73 No. 7-06 Germany Bogotá Tel. 0049 (0)30 2639610 Tel. 0057 (1) 347 06 11 Fax 0049 (0)30 26396125 Fax 0057 (1) 310 59 70 E-mail: [email protected] E-mail: [email protected] www.creg.gov.co/

Interconexion Electrica S.A. E.S.P (ISA) Calle 12 Sur No. 18-168 Medellín Tel. 0057 (4) 325 22 70 Fax 0057 (4) 317 08 48 E-mail: [email protected] www.isa.com.co Mexico

Mexico

Electricity Market From 1994 to August 2003, 232 licences were issued in the power sector for a total capacity of 19,410 MW. Generating capacity Only approximately half of the licensed capacity has so The total capacity of all power producers in Mexico at far been installed. Capacity growth in the last ten years the end of 2002 amounted to 45,674 MW. The state is due largely to the market entry of independent pro- utilities Comisión Federal de Electricidiad (CFE) and ducers that are almost entirely foreign-owned. Luz y Fuerza del Centro (LFC) account for 81% and 2% respectively, independent power producers 7%, self- Power generation generators 6%, combined heat and power stations117 Gross power production in the public sector in 2002 3%, and others118 1%. Self-generation facilities include amounted to 201 TWh (including 20 TWh from inde- about 400 MW at sugar factories using bagasse and pendent power producers).120 CFE alone generated 16 MW in photovoltaic systems largely operated by 199 TWh (including supplies from independent power private rural users and as stand-alone systems. producers) in 2002, around 72% powered by diesel, heavy oil and natural gas, 5% by nuclear energy and 8% Public supply by coal. Hydropower contributed about 12% to power The generating capacity for public supply at the end of generation, and geothermal energy and wind power 2002 came to 41,178 MW, distributed between 181 together approximately 3%. The contribution of power station locations. Independent power producers gas-fired combined-cycle power plants in particular to with power purchase agreements contributed 9% to electricity generation has increased substantially in this. Generating facilities were made up of the following recent years (from 9% in 2000 to 22% in 2002). types: 43% hydropower stations, 10% gas-fired combined-cycle power stations, 42% other thermal power Power transmission stations and 5% geothermal and wind power taken The high-voltage grid for power transmission together. In 2002 alone, total capacity increased by (> 150 kV) spanned over 41,000 km at the end of 2003. 2,660 MW, with independent power producers con- Together with the distribution grid, it is 96%-owned by tributing over 2,000 MW. Peak load in the integrated CFE and 4% is in the hands of LFC. public grid system in 2002 amounted to 26,150 MW. Electricity exports and imports 2000 2001 2002 Electricity is exchanged with the US states of Califor- Steam power plants 14.283 14.283 14.283 nia, Texas and Arizona in the north and with Belize in CCGT power plants 3.398 5.188 7.343 the south. Another connection with Guatemala is Gas turbines 2..360 2.381 2.890 under construction. Trade in electricity was almost Engines 116 143 144 balanced in 2002 with exports of 344 GWh and CHP stations 2.100 2.100 2.100 imports of 531 GWh. Due to high domestic power Hydropower 9.619 9619 9.608 demand in Mexico, exports declined sharply between Geothermal energy 855 838 843 1992 and 1998. Wind power 2 2 2 Nuclear power 1.365 1.365 1.365 Power consumption Coal 2600 2.600 2.600 CFE and LFC together sold about 160 TWh of electri- Total 36.698 38.519 41.178 city in 2002. The average annual rise in electricity consumption (public supply) from 1993 to 2002 amounted Table. 22: Generating capacity – public power supply (CFE, LFC to 5.1%, well above the average annual growth in gross and independent power producers); Mexico; 2000–2002; MW 119 domestic product of 2.7%. While the 23 million or so private households consumed less than a quarter of power demand, some 60% of electricity went to meet the consumption of only 140,000 industrial customers,

117 Combined heat and power stations are also generally used for self-generation or for the direct supply of electricity and heat to industrial users, but they are recorded in separate statistics. 118 ‘Others' denotes ‘usos propios continuo’, power producers with old concession agreements for self-generation. 119 Source: SENER. 120 Altogether 216 TWh of electricity was produced at national level in 2000, including 28 TWh by private producers. nearly 8% to the commercial sector and about 5% to the Electricity rates farming sector. Electricity tariffs for final customers are set by the Secre- tariat of Economy (economics ministry) and adjusted Customers Electricity Average Average monthly for inflation and fuel prices. In mid-2002 they sales consumption prices averaged 5.1 € cents/kWh. The price decline in the Number in TWh % kWh/ €-cents/ 1,000 Customer kWh 1990s came to a halt at the beginning of this decade. Particularly high prices have to be paid for electricity in Households 22,784 39.0 24.4 145 5.5 commerce and services. In contrast, households with low Trade 2,751 12.5 7.8 388 9.8 consumption and agriculture (irrigation) enjoy conces- Services 139 6.0 3.7 3718 8.9 sionary rates. Household tariffs are graded progressively Agriculture 99 7.6 4.8 6480 2.4 and range between 3.7 and 13.1 € cents/kWh, depend-

Medium-scale ing on consumer zone and climatic zone (November 139 55.8 34.8 34723 5.0 industry 2003). Different tariffs are charged for industry depend-

Large-scale ing on region. There are also different charges for power 0.582 39.2 24.5 5,726,180 5.7 industry consumption in the course of the day, and these differ in Total 25,913 160.1 100.0 525 5.1 turn by region.

Table 23: Electricity consumption and average prices of public In response to poor earnings by power suppliers, a new supply; Mexico; 2002; TWh, %, € cents/kWh121 scale of tariffs was adopted in February 2002. Al- Future power demand and installation together, tariff income is still insufficient for cost recovery, of additional power so that the power sector is heavily subsidised from The Secretariat of Energy (energy ministry) forecasts government funds, which primarily benefit poorer sec- average annual rates of increase in power demand be- tions of the population and the rural population. tween 2003 and 2012 of 4.2% to 6.2%. Requirements Despite tariff rises, the cost recovery ratio for households for 2012 in the mean planning corridor (annual increases in 2002 for example came to only 50% for CFE and as of 5.6%) thus amount to 298 TWh, with public util- little as 34% for LFC. Altogether, CFE income covered ities having to supply 271 TWh. To keep up with this only 74% of the costs, and the figure for LFC was 52%. development, power generating capacity for public To offset this, approximately 62 billion pesos supply in the same period would have to increase by (€ 4.4 billion) in subsidies was paid out from the govern- about 21.5 GW or 50% on 2002. To meet increased ment budget in 2002, 60% into the household con- demand and substitute for power station closures sumer segment. 25.6 GW would have to be added in the next 10 years, including 10,800 MW in gas-fired combined-cycle power stations and some 3,000 W in hydropower Market Actors plants.122 In 2003, projects under construction or just about to start operation had a total capacity of only Power utilities CFE and LFC 12,100 MW, making it unlikely that the specified Since nationalisation in 1960 almost the entire power reserve margin of 27% of peak load will be reached. sector in Mexico has been dominated by the state pro- Consequently, during this and the next decade, supply viders Comisión Federal de Electricidiad (CFE) with bottlenecks with resultant partial outages are possible. presently about 21 million customers and Luz y Fuerza del Centro (LFC) serving about 5.6 million users. CFE Losses and LFC either own the power stations themselves or Technical losses in transmission and distribution alone conclude longer-term power purchase agreements with are heavy, approximately 10% in August 2003. For private operators. In the last ten years, industrial con- LFC, total losses (i.e. including non-technical losses due sumers have also installed generating plants to meet to theft and unpaid power supply) of more than their own needs. 26% were recorded in 2003.

121 Data source: CFE, SENER. 122 Mexico’s energy policy foresees further conversion of numerous power stations from petroleum to natural gas. New capacity will largely be operated with natural gas. By current forecasts, the share of natural gas in total electricity generation will increase to 52% by 2010. Added to this is an increase of approximately 4,300 MW from self-generators and cogeneration of power and heat. Mexico

As the main supplier for the public sector, CFE’s total All plant belonging to self-generators and independent capacity including independent producers at the end of producers must be approved by the regulatory authority September 2003 amounted to about 43,727 MW spread for energy (Comisión Reguladora de Energía–CRE), over 163 power stations altogether.123 which is subordinate to the Secretariat of Energy and is also responsible for the gas sector.124 Power plants Installed capacity Number MW % The main research work and studies are conducted by the Thermal power stations (fuelled 87 29,421.4 68 Instituto de Investigaciones Eléctricas (IIE) in the Division by petroleum or natural gas) de Energías Alternas, which has a subdivision for geother- Coal-fired power stations 2 2,600.0 6 mal energy (Gerencia de Geotermia) and one for non-con- Nuclear power stations 1 1,364.9 3 ventional energies (Gerencia de Energías No Convencion- Hydropower 64 9,378.8 21 ales). The latter is concerned primarily with wind energy, Geothermal power stations 7 959.5 2 biomass use and rural electrification using photovoltaic Wind farms 2 2.2 0,01 technology. Total 163 43,726.7 100

Table 24: Generating capacity of CFE; Mexico; Legal Framework September 2003; MW, %

CFE produces approximately 92% of aggregate national The amendment of the law on public power supply of power demand; with most of its customers in the capital, 1992 and the related regulations confirmed the sole LFC accounts for less than 1%. At the end of August right of state enterprises to supply electricity.125 The 2003, LFC only had 834 MW in generating capacity transmission and distribution of electricity and the sale with annual gross power generation of 1,450 GWh, but it of electricity to final consumers is the sole right of the supplies more than one fifth of all electricity consumers two state suppliers. in the country in Mexico City and the neighbouring regions (29.4 TWh from 1 Sept. 2002 to 31 Aug. 2003). Participation of private sector The requisite additional power is purchased by CFE. For the first time, the amendment permitted investments by the private sector in power generation, after The remainder is provided by the state petroleum com- a substantial decline in public investment in the power pany Petróleos Mexicanos (Pemex) with approximately sector at the end of the 1980s. Private enterprises 4% and private producers (3%). were exempted from public supply and are therefore able to engage in the following activities:126 self-gener- Besides the two state suppliers, which are vertically ation, cogeneration of power and heat, as small pro- integrated, the only other actors on the Mexican electri- ducers (≤ 30 MW), as independent power producers, city market are engaged in generation for the public supply to remote municipalities with power demand of grid, the supply of outlying municipalities and for less than 1 MW, electricity exports, and electricity export. imports for private use.

Government institutions Self-generation The guidelines on energy policy and future strategies It is also possible for several enterprises to found a joint and projections for the power sector are drawn up by the subsidiary for the purposes of self-generation. Munici- Secretariat for Energy (Secretaría de Energía–SENER), palities or federal state governments can take part under which has a separate department for electricity and also these regulations in tandem with local private enterprises. oversees tariff policy. Specific expansion plans for the As with power supply, the sole purchaser of surplus elec- electricity sector are drafted for implementation by tricity from independent producers is CFE, which sets CFE, which is answerable to the Secretariat. the terms and conditions for this. Conversely, the self-

123 Independent producers operated 14 power stations with a total capacity of 6,755.7 MW. 124 The tasks are defined in the Ley de la Comisión Reguladora de Energía of 31 Oct. 1995. 125 Ley del Servicio Público de Energía Eléctrica, Diario Oficial de la Federación de 23 de diciembre de 1992; Reglamento de la Ley del Servicio Público de Energía Eléctrica, Diario Oficial de la Federación de 31 de mayo de 1993. 126 Cogeneration of power and heat is largely employed in the Mexican petroleum industry. generators are obliged to purchase power reserves from approval must be obtained from the Comisión Nacional CFE in the event of failure of their plant. de Inversiones Extranjeras (National Commission for Foreign Investments). Public grid feed-in and power purchase agreements Clean Development Mechanism Under new provisions from May 2001, self-generators Mexico joined the Framework Convention on Climate with capacity above 40 MW are entitled to feed up to Change in 1994 and ratified the Kyoto Protocol in 50% of their capacity into the public grid. Operators September 2000. The prerequisites are therefore in with less than 40 MW can provide up to 20 MW for place for it to participate in the Clean Development public supply.127 CFE must purchase electricity at 85% of Mechanism (CDM). An initial precursor project on short-term marginal costs of the most efficient generating trading with emission permits in the field of renewable unit in the system. energy was launched under the US Initiative for Joint Implementation (USIJI). A separate municipal mini All plans to expand CFE supply capacity must be ap- grid for power supply has been set up in southern Baja proved by the Secretariat of Energy. It can issue directives California. There are plans to introduce a system to for a call to tender to include independent power produ- assess emission-reduction projects to international cers with a minimum capacity of 30 MW. Power standards by 2005 with assistance from CONAE. purchase agreements issued under the invitations to tender are for terms of 20 to 25 years. Almost all new capacity in this decade is expected to be constructed by Policy for Promoting Electricity private enterprises. Generation from Renewable Energy Sources Small producers sell their electricity solely to CFE or LFC and receive no reimbursement for assured delivery. For lack of priority status and separate regulations, non- Up to 1 MW, small producers can also supply power to conventional renewable energies have not found wide- isolated grids.128 spread use in the past. Major constraints here are the monopolistic position of the state suppliers and the Role of private sector statutory obligation to purchase or produce at minimum There is agreement that investment capital for further costs and only from ‘secure’ generating sources. Due to expansion of the power sector can only be raised with ill-defined or absent provisions in building and planning the help of the private sector. A set of bills to reform legislation and lack of experience on the part of authorities the power sector and open the market wider for pri- and developers, larger projects failed to get off the vate electricity generation was tabled to the Senate by ground. The prices offered did not usually permit the government in August 2002. They also aim at economical operation, particularly as deductions were reorganising the tasks of the regulatory authority. The made for non-secured power delivery. present government rules out the privatisation of the two state utilities, but CFE is, however, expected to be COFER converted into a holding company and largely be in In support of government policy an advisory board on charge of the transmission grid and the remaining the use of renewable energy sources was set up in 1997 power stations, while serious consideration is being (Consejo Consultivo para el Fomento de las Energías given to licensing private companies at the distribu- Renovables–COFER) with members from all the major tion level as well. government and non-governmental institutions. The advisory board is overseen and coordinated by the Participation of foreign companies National Commission for Energy Savings founded in Foreign companies can acquire 100% ownership in the 1989 (Comisión Nacional para El Ahorro de Energía– segments of the power sector that do not belong directly CONAE) in conjunction with the National Association to public power supply. For more than 49%, though, for Solar Energy (ANES). Alongside regular working

127 See Diario Oficial de La Federación of 24 May 2001 and the press release of the Secretariat of Energy dated 17 June 2001. 128 Small producers were taken up separately to stimulate the use of renewable energies in particular. Due to the otherwise unfavourable parameters, this expectation, however, proved to be mistaken. Mexico

sessions, the advisory board has appointed various spe- Licenses for RE projects cialist teams on individual topics. At the end of 2002, 71 licences for power generating projects based on renewable energy sources were registered Pilot plan for renewable energy with CRE. Of these approved projects, 54 were in oper- In 2000, the Secretariat of Energy and the Mexican Elec- ation, 16 were under construction and building work was tric Research Institute (IIE) reached an agreement on about to begin on one. implementing a pilot plan for renewable energy. The plan foresees the further development of commercial Projects with international assistance projects (rural electrification, biogas from landfills and A GEF-assisted project entitled Large-Scale Renewable sewage plants, wind farms) and pilot and research pro- Energy Development Project, whose first three-year phase jects (grid-linked PV, parabolic mirrors, etc.). The is due to begin in 2004, is now in preparation. The project intention is to identify and remove existing barriers, aims to develop tender schemes for large-scale projects in expedite projects and promote domestic technology. electricity generation from renewable energy to be run by independent producers, and to set up a fund to subsidise Provisions for intermittent electricity from the power generated over an initial period of five years. At renewable energy least 70 MW in generating capacity is set to be installed In September 2001, the regulatory authority CRE pub- using the requisite US$ 17 million. The plan is to reduce lished special rules on setting transport charges and other the maximum subsidy of 1.5 US cents/kWh in Phase I to specific issues relating to feeding and transmitting inter- about 0.8 US cents/kWh in the subsequent phase. In the mittent electricity from renewable forms of energy first phase the project will concentrate on wind power pro- (hydropower, solar and wind energy). They require CFE to: jects and then also include small hydropower and biomass later on. • give priority to feeding the electricity generated into its grid GTZ-assisted project to open the market for • grant discounts for electricity transport and grid wind energy and solar thermal energy connection of between 50% and 70% for operators As of autumn 2004, the GTZ will assist the Mexican of plants with a capacity of more than 500 kW government with a new project to step up the use of • supply self-generators with the same quantity of renewable energy sources. The aim here is to build up an electricity at another time if the power fed into the efficient and self-sustaining market. Cooperation focuses grid is not needed immediately on two major theme clusters:

As part of its national development strategy for the cur- 1. Advice will be given to the centre for wind energy in rent term of office of the president, the government Oaxaca to be set up with funds from GEF in published a sector paper at the beginning of 2002 on designing and operating the pilot wind farm developing the Mexican energy market till 2006. To scheduled there. Parallel to this, the project will attain the aims set, this paper calls for the creation of an collaborate in drafting suitable curricula for the annual programme to promote renewable energies, the regional educational establishments. amendment of the legislative framework and the foun- 2. To promote the use of thermal solar energy, dation of a national development fund. Up to 2006, the initiatives will be supported in some federal states to target is to double the use of renewable energy in the improve the quality of locally manufactured power sector as compared with 2000. Non-conventional collectors (e.g. through certification) and their use in renewable energy is supposed to contribute to the CFE the household and productive sectors. expansion plan with a total capacity of 1,000 MW in addition to the 1,776 MW to come mostly from large In all activities, close cooperation will be sought with hydropower stations that are already scheduled as power German and European industry to involve it directly in generating capacity from renewable energies. these new markets. The project is initially scheduled to last three years.129

129 For more details see also www.gtz.org.mx./bcs/index.htm. Status of Renewable Energy whole country using only the best locations is esti- Sources mated at a minimum of 5,000 MW.131

Despite favourable climatic and geographic conditions, Experience to date renewable energy sources currently contribute less than The Electric Research Institute (Instituto de Investiga- 4% to Mexico’s primary electricity output. ciones Eléctricas–IIE) began to gain practical experience with small systems in 1977 at the wind test station of El To improve the identification and assessment of local Gavillero near Huichapan in the federal state of supplies of renewable energies, the department for non- Hidalgo. Plans for developing its own larger systems conventional energies within IIE is setting up a GIS- were not put into practice. assisted database (Sistema de Información Geográfica para read Energías Renovables–SIGER). In mid-1984, CFE put the demonstration project La Venta into operation with 7 wind turbine generators Hydropower from Vestas and a total capacity of 1.6 MW in the south Unused water resources are estimated at 11,500 MW, of the Isthmus of Tehuantepec 30 km north-east of including an estimated 3,250 MW in locations with a Juchitán in the state of Oaxaca. Wind measurements capacity of less than 10 MW.130 Previously there were have already been carried out by IIE since 1984 at this many small hydropower stations with up to 30 MW, but location.132 these were gradually abandoned due to problems with statutory approval procedure or for other reasons. CFE Another individual 600kW plant from the Spanish firm has no longer been engaged in this sector for 30 years. Gamesa Eólica was put into service by CFE at the end of 1998 at Guerrero Negro in the federal state of Baja At the end of 2000 only seven small hydropower sta- California Sur. This plant is run in a separate urban grid, tions were operating, with a total capacity of 84 MW. which is supplied otherwise by diesel generators. The first of four joint public-private projects was put into operation in August 2001. Another 17 privately Assorted experience has also been gained with hybrid financed projects with about 190 MW are under devel- (wind/PV) or multivalent (wind/PV/diesel) systems in- opment or have already secured finance. stalled in the last decade. For example, a multivalent wind/PV/diesel system began operation in Othón P. The national water law (Ley de Aguas Nacionales) ge- Blanco in the state of Quintana Roo in 1992, consisting of nerally provides for private investors to acquire water several wind generators with a total capacity of 60 kW, a rights. The national water authority (CNA) issues con- PV system with 11 kW and a 125kW diesel generator. In cessions to hydropower projects for self-supply to use San Juanico in the federal state of Baja California Sur in water for 25 years. 1999 a similar combination was installed comprising 10 wind generators, each with a capacity of 7 kW, a PV Wind Energy system of 17 kW and a diesel generator rated at 80 kW. Mexico has a number of regions with good to excellent wind conditions. Substantial resources are available in Planned wind farms particular in the federal states of Oaxaca in the south, Other large-scale projects are in preparation. Their Zacatecas in the highlands, Tamaulipas and Veracruz implementation depends largely on establishing a suit- on the coast of the Gulf of Mexico, along the Pacific able framework to improve the competitiveness of wind coast of the Baja California peninsula, along the shore- power. The federal state of Oaxaca in the south of the line of Quintana Roo on the Caribbean, and in the country has shown particular interest in making greater federal state of Hidalgo north of Mexico City. For La use of this energy option. Ventosa region in the federal state of Oaxaca alone, with mean wind speeds of 7 to 10 m/s, the exploitable potential is put at 2,000 MW, and the capacity for the

130 CFE even estimates a total potential of 52,000 MW. 131 Other estimates put the figures far higher. CFE in contrast cites a national wind potential of 2,900 MW. 132 Wind measurements have been carried out by IIE at five other locations in the region: Juchitan, Salina Cruz, Tehuatepec, La Venta and Unión Hidalgo. Mexico

Project Capacity Mode Location Status of the regulatory framework, training of decision- (MW) makers and technical personnel by setting up a regional Fuerza Eólica del 150 Self- Oaxaca Finance wind technology centre, ongoing assessment of wind Istmo generation secured resources, and the compilation of feasibility studies to Cozumel 2000 30 Self- Quintana Development prepare for three commercial wind farms of 15 to 20 MW. generation Roo GEF assistance amounts to US$ 4.7 million. Baja California 2000 60 Self- Baja Development generation California A subsidy from a fund for renewable energies could give Fuerza Eólica de 300 Export Baja Development a boost to implementing wind projects with the partici- Baja California California pation of private investors, scheduled as part of the Fuerza Eólica de 5 Small-scale Baja Cali- Development Large-Scale Renewable Energy Development Project Guerrero Negro production fornia Sur also planned with GEF assistance. Eléctrica del Valle 180 Self- Oaxaca Development de México generation Biomass Parques Ecológicos 100 Self- Oaxaca Development de México generation Biomass could be put to far greater use than is presently the case, which is limited to the use of farm residues. Total 825 CRE had registered two permits for power generation Table 25: Selected wind power projects by private investors in from sewage gas by the end of 2002. Permits had also planning; Mexico133 been issued for 44 installations for the bivalent combus- Most advanced is the planning for a wind farm by Fuerza tion of fuel oil and bagasse totalling 391 MW. Eolica in Oaxaca, which is scheduled for a total capacity of 150 MW in two phases. In a first step, 51 MW will Biomass potential be installed and power supplied for the cement firm IIE estimates the potential for electricity from sugar cane Cruz Azul. The project has been granted all the requis- bagasse at 1,000 MW. Moreover, at least 150 MW could ite approvals and will receive equity finance from the be generated by using landfill gas from domestic Deutsche Bank Scudder Latin American Power Fund. refuse.134 The first such project in Mexico and the whole Negotiations are under way for other loan finance with of Latin America, an 8MW facility on a landfill site near a number of different institutions (including BANOB- Monterrey, was brought into service in September 2003 RAS) and export credit agencies. Fuerza Eolica is also with US$ 5 million funding from GEF. The electricity developing a 30MW wind farm in Cozumel for self- in this case is intended for self-supply of urban facilities generation, which is due for completion in the next two and enterprises. Other projects of this kind are being years, and wind projects in Baja California largely for examined. electricity export. Solar Energy The French wind project developer SIIF and Mexico’s Mexico has very high mean irradiation. Aggregate Deproe are developing a 67MW wind farm in Oaxaca to installed photovoltaic capacity was estimated to be more supply electricity directly to several municipalities; this than 16 MW at the end of 2002, 1.2 MW of this in- is planned to be enlarged at a later stage. Other projects stalled in 2002 alone. Almost 13 MW is used in gridless particularly involving Spanish project developers and households and another 3.2 MW in non-household plant manufacturers are in the preplanning stage. applications. Of the systems installed in 2002, about 50% of the capacity was dedicated to the household GEF assistance sector.135 A GEF project to support the objectives in the wind power sector entitled Action Plan for Removing Barriers Individual grid-linked photovoltaic systems each with a to the Full Scale Implementation of Wind Power in capacity of up to 2 kW have been installed by IIE in Mexico, Phase I, was approved in August 2003 and is recent years in a pilot project. Total capacity at the end now being implemented. The project comprises revision of 2002 amounted to only about 10 kW, however.

133 Source: CRE/SENER. 134 With a better collection and landfill quota, it would be as much as 400 MW. 135 The remainder was distributed among stand-alone systems in the commercial and service sector, e.g. for telecommunications, oil rigs, as cathode protection for pipelines, for street lighting, for traffic facilities, water pumps and other applications. The sectoral strategy for power expansion between 2001 currently amounts to 35 MW. Recently, the Los and 2006 indicates that in the programme for the rural Azufres II power station with 107 MW started operation electrification of 1,200 mainly indigenous municipal- in 2003, the largest to date; its geothermal sources are of ities approximately 860 could receive a basic PV supply, volcanic origin. Installed electrical capacity at this loca- meaning that a total capacity of 22 MW would have to tion thus totals 188 MW. be installed. Additional sources with estimates of over 1,500 MW In 2002 about 7.6 million pesos (€ 540,000) was avail- could be exploited in the current decade, but no further able for research and development in the PV sector. expansion is planned by the government in the medium There is no independent cell or module manufacture in term up until 2012. Mexico. The Japanese manufacturer Sanyo has, however, announced the construction of a 10MW production line for PV modules in Tijuana, largely for export. Rural Electrification

Solar-thermal electricity generation At the end of August 2003, 95% of the total population A combination of a 240MW gas-fired combined-cycle of some 100 million, or 98% of the urban inhabitants plant and a solar-thermal generating plant, which is and 86% of the rural population, were connected to the planned to make a minimum contribution of 25 MW, is mains supply. The remaining 5 million are distributed in preparation with assistance from the World Bank. among approximately 74,000 small settlements, each with fewer than 2,500 inhabitants in gridless or remote Geothermal Energy regions.137 Coverage is particularly inadequate in com- Geothermal sources with sufficiently high temperatures munities with fewer than 100 inhabitants and a large for electricity generation can be found at various loca- proportion of scattered properties. In 2002, about an- tions in the country. In 2002 about 5,400 GWh was gen- other 32,000 households were connected to the power erated from geothermal sources. All current installations supply system by CFE and 18,000 by LFC. are run by the government utility CFE. Generating costs are put at 4 to 7 US cents/kWh. Solar home systems Mexico has gained extensive experience in the use of Baja California photovoltaic systems for basic electrification. Particu- In Cerro Prieto in the federal state of Baja California, larly in the last decade, this type of power supply in where the first geothermal power station started oper- gridless areas has made great headway in catching up ation in 1973, the electrical capacity presently available with the traditional use of diesel generators. To date, is 720 MW, which generated almost 5 TWh in 2002 20,000 solar home systems (SHSs) have been sold to pri- alone.136 Geothermal energy from this source therefore vate users with no government assistance at all. met more than 50% of the power demand of Baja Cali- fornia, whose grid is operated separately from the rest of Improvement of rural infrastructure the country. Altogether, more than 90 TWh of electri- As well as this, since the beginning of the 1990s the city has already been generated in Cerro Prieto. At Tres government has also implemented measures to provide Vírgenes, also in Baja California, two 5MW generators power supplies under a number of programmes to have been running since mid-2001, supplying the improve infrastructure in poor rural municipalities. In neighbouring towns in isolated operation. various parts of the country, gridless municipal buildings and households with no prospect of connection Los Azufres and Los Humeros and further expansion were equipped with PV systems for basic supply Other geothermal potential of at least 380 MW has been (lighting/communications).138 Altogether, about 90,000 proven in Lo Azufres in the federal state of Michoacán SHSs have been installed in this way and hundreds of and in Lo Humeros in Puebla state. Humeros started other systems for pumping water, for social purposes and producing electricity in 1990. Installed capacity there for supplying mini electricity grids.

136 For more details see http://iga.igg.cnr.it/mexico.php. 137 Including about 4,200 localities with 100 to 2,500 inhabitants and 70,000 with a population of fewer than 100. 138 The percentage of these households is particularly high in the agrarian federal states Oaxaca, Chiapas, Tabasco and Zacatecas. Mexico

Renewable energies in agriculture • Instituto de Investigaciones Eléctricas (IIE), Boletín, Electrification through the use of renewable energy Octubre-Diciembre del 2003: Generación sources in agriculture is also supported by central distribuida government through its Alianza para el Campo pro- • Jorge Islas, Ubaldo Jerónimo, The financing of the gramme. Subsidies are granted for the acquisition of Mexican electrical sector, in: Energy Policy 29 water pumps and drives for farm equipment. The (2001), 965–973 GEF-assisted project Renewable Energy for Agricul- ture has recently begun to remove the relatively large • International Energy Agency (Cooperative obstacles to implementing this programme, which Programme on Photovoltaic Power Systems), aims in particular at raising the productivity of National Survey Report of PV Power Applications approximately 600,000 farming enterprises with no in Mexico 2002, July 2003 electricity supply. • Jorge M. Huacuz, RE in Mexico – Barriers and Strategies, in: Renewable Energy Focus, 18–19, Exchange rate (10 Feb. 2004): 1 Mexican peso (MXN) = € 0.071; Jan./Feb. 2001 € 1 = MXN 14.08 • Mexico – 2a Comunicación Nacional ante la Convención Marco de las Naciones Unidas sobre el Information Sources Cambio Climático, Julio 2001

• Secretaría de Energía, Balance nacional de energía • Comisión Federal de Electricidad CFE), Informe de 2002, México 2003 Labores de la CFE 2001–2002 • Secretaría de Energía, Programa sectorial de energía • Comisión Reguladora de Energía (CRE), Guia para 2001–2006 solicitar permisos de generación, exportación e importación de energía eléctrica, undated • Secretaría de Energía, Segundo Informe de Evalua- ción de Resultados del Programa Sectorial de • Comisión Reguladora de Energía (CRE), including Energía, 2003 two different bimonthly bulletins (‘info-CRE’) ) of the regulatory authority CRE, • Secretaría de Energía, Prospectiva del sector www.cre.gob.mxwww.cre.gob.mx eléctrico 2003–2012, México D.F. 2003

• Energy Information Administration (US-Depart- • Secretaría de Energía, Statistics on the Power Sector

ment of Energy), Country Analysis Brief Mexico, • Secretaría de Energía, Tercer informe de labores February 2003 (1.9.2002–31.8.2003), México D.F. 2003

• GEF Project Concept Paper: Plan of action for re- • Various contributions to the conference: ‘Best moving barriers for the full-scale commercial imple- Practices on Renewable Energy: Sharing Experiences mentation of wind power in Mexico, March 2001 for Market Development’, 21–22 June 2001,

• GEF Project Brief, Large-scale Renewable Energy Cuautla/Morelos, Mexico Development project, February 2003

• Geothermal Resources Council (GRC), 30 Years of Geothermal Electric Generation in Mexico, in: GRC Bulletin September/October 2003

• Instituto de Investigaciones Eléctricas (IIE), Informe Anual 2002 Contact Addresses Consejo Consultivo para el Fomento de las Energías Renovables (COFER)

Asociación Nacional de Energía Solar A.C. (ANES) Ing. Odón de Buen Rodríguez Presidente del COFER, Director General CONAE Edificio Cenidet 4o. Piso Insurgentes Sur 1582 Prolongación Av. Palimira s/n. Col. Palmira Col. Crédito Constructor, 62050, Cuernavaca, Morelos 03940 México, D.F. Tel./Fax 0052 (777) 310 16 50 Tel. 0052 (55) 5322 1000 E-mail: [email protected] and [email protected] E-mail: [email protected] www.anes.org www.conae.gob.mx/cofer/cofer.html

Comisión Nacional para el Ahorro de Energía (CONAE) Secretaría de Energía (SENER) Insurgentes Sur No. 1582 Dr Francisco Barnés de Castro Col. Crédito Constructor Subsecretario de Política Energética y Desarrollo Tecnológico 03940 México, D.F. Delegación Benito Juárez Insurgentes Sur No. 890 Tel. 0052 (55) 5322 1000 Col. Del Valle Fax 0052 (55) 5322 1003 03100 México, D.F. www.conae.gob.mx Tel. 0052 (55) 5448 6012

Comisión Reguladora de Energía (CRE) Fax 0052 (55) 5448 6013 [email protected] www.cre.gob.mx www.energia.gob.mx

Comisión Federal de Electricidad (CFE) Centro de Investigación en Energía (CIE-UNAM) www.cfe.gob.mx www.cie.unam.mx New Energy Sources Unit

GTZ Project Office in Mexico Luz y Fuerza del Centro (LFC) Peter Hauschnik Melchor Ocampo 171 Av. San Antonio 256 Colonia Tlaxpana Col. Ampliación Nápoles, 03849 Delegación Miguel Hidalgo México, D.F. 11379 México, D.F. Tel. 0052 (55) 5482 3048 www.lfc.gob.mx Fax 0052 (55) 5482 3000, ext. 1614, 1615

Instituto de Investigaciones Eléctricas (IIE) [email protected] Gerencia de Energía No-Convencionales German-Mexican Chamber of Industry and Commerce Av. Reforma 113 Cámara Mexicano-Alemana de Comercio e Industria, A.C. Colonia Palmira Bosque de Ciruelos 130 - 12° Piso 62490 Temixco, Morelos Col. Bosques de las Lomas Tel. 0052 (73) 318 38 11 11700 Ciudad de México, D.F. Fax 0052 (73) 318 98 54 Tel. 0052 (55) 5251 40 22 genc.iie.org.mx/genc/index2.html Fax 0052 (55) 5596 76 95 Head: Jorge M. Huacuz V., E-mail: [email protected] E-mail: [email protected] Wind experts: www.camexa.com.mx Raúl González G., E-mail: [email protected] Marco A. Borja D., E-mail: [email protected] Oscar Jaramillo, E-mail: [email protected] Mexico

Mexican Embassy in Germany Klingelhöferstr. 3 10785 Berlin Tel. 0049(30) 269 323-0 Fax 0049(30) 269 323 325 E-mail: [email protected] www.embamex.de

Germany Embassy in Mexico Lord Byron No. 737 Colonia Polanco 11560 México, D.F. Tel. 0052 (55) 5283 2200 Fax: 0052 (55) 5281 2588 E-mail: [email protected] www.embajada-alemana.org.mx Morocco

Morocco

Electricity Market All told, 14,085 GWh of electricity was consumed in Morocco in 2002 (2001: 13,451 GWh). The Govern- Generating capacities ment of Morocco is forecasting a rise in total power con- As of the year 2002 Morocco possessed installed power sumption to 25,000 GWh by 2010. generating capacities totalling some 4,400 MW. Of that total, thermal power plants accounted for 72%, hydro- 2001 2002 Change power for 26%, and wind energy conversion systems for roughly 2%. Jorf Lasfar Power Station, a coal-fired plant GWh GWh % owned by a Swiss-American consortium, has a power ONE customers 6,544 6,857 4.8 rating of 1,356 MW, making it the largest privately High and medium voltage 4,340 4,501 3.7 owned and operated power plant in all of Africa. In - services 410 436 6.3 2002, 60% of all electricity produced in Morocco came - industry 3,062 3,213 4.9 from Jorf Lasfar. - agriculture 695 676 -2.7 - administration 167 166 -0.6

Power generation Low voltage 2,204 2,356 6.9

A total of 14,147 GWh of electricity was injected into Local distribution 6,908 7,228 4.6 the Moroccan power grid in 2002. Most electricity in companies Morocco is generated by plants fired with imported coal Total 13,452 14,085 4.7 (primarily from South Africa) or oil (from Saudi Arabia, Iran, Iraq and Nigeria), and some electricity is imported Table 27: Power consumption according to end-users; Morocco; 2001 – 2002; GWh, % from Spain (1,355 GWh) and Algeria (37 GWh).139 Hydropower and wind energy contribute 5% and 1%, Cost of electricity respectively, to the country’s power supply. Existing The price of electricity for end-users, excluding plans call for expansion of power imports over the next independent power providers, is fixed by the Govern- few years.140 ment of Morocco. Between 1997 and 2000, the tariffs for medium-voltage and high-voltage electricity were 1998 1999 2000 2001 2002 lowered by 28% overall. GWh GWh GWh GWh GWh

Thermal 9,936 10,571 10,771 12,091 13,068 Hydropower 1,760 817 705 856 842 Market Actors Wind 2 4 65 207 194 Imports 715 1,846 2,363 1,564 1,392 Office National de l’Electricité (ONE) Total 12,413 13,643 13,904 14,718 15,496 Office National de l’Electricité (ONE), the most important company on the Moroccan electricity market, Table 26: Power generation by source; Morocco; is owned by the Government of Morocco. In the field of 1998–2002; GWh renewable energy sources, ONE is most active in the Demand for electricity areas of hydropower (owning, as it does, all hydroelectric Demand for electricity in Morocco has been expanding power plants) and wind energy (one 3.5 MW wind rapidly since the mid-1980s. The growth in peak-load farm). The construction of new hydropower plants and demand between 1986 and 2002 averaged 6% per year. wind farms is planned. ONE is also responsible for the Despite a slight drop in indigenous power production, supply of approximately 50% of all electricity produced the deficits in demand coverage registered during the in Morocco. Local power providers supply the other half. first half of the 1990s, which caused frequent power outages, were practically eliminated by importing electricity. Since then, there have mostly been no appreciable power outages.

139 In May 1998, Morocco tapped into the Spanish power grid by means of a 350 MW high-voltage transmission line that can handle up to 2.5 TWh annually. Morocco also has an agreement with Algeria to receive peak-load coverage via two high-voltage tie-ins. 140 The capacity of Morocco’s power connection to Spain is to be doubled to 1,400 MW. Compagnie Eolienne de Détroit (CED) Planned liberalisation Compagnie Eolienne de Détroit (CED) owns and operates The Government of Morocco is planning to further liber- a 50MW wind farm. CED is owned by Electricité de alise the electricity market in the years to come. In that France (EDF, 49%), Paribas Merchant Bank (35.5%) connection, ONE is to be unbundled into independent and Germa Consulting (the initiator of the project; enterprises responsible for the generation, transmission 15.5%). and distribution of electricity. The question of which (major) customers will be allowed to purchase electricity Morocco has a number of small- and medium-size enter- from which providers is also to be decided. In addition, prises populating the solar-energy sector. According to the power grid is to be opened up for independent power the Moroccan solar industry’s association (Association producers (IPPs) who will then be able to market their Marocaine des Industries Solaires, AMISOL), some 20 electricity without necessarily having an individual con- companies assemble simple PV systems from bought-in tract with ONE. imported components. There are also several companies that import complete solar systems and sell them on the Clean Development Mechanism Moroccan market. Morocco adopted the Kyoto Protocol in January 2002. That ratification opens up new sources of financing for Solar enterprises projects geared to the promotion of renewable energy The leading solar enterprise in Morocco is Afrisol SA. sources. The Tangier wind farm project has already been Established in 1987, Afrisol sells American-made earmarked for possible promotion by the World Bank’s Solarex solar energy systems. Since 1998 Afrisol has Prototype Carbon Fund (PCF). been operating in the Maghreb/West Africa region and other African countries as Solarex’s master distributor. As of this writing, Afrisol was in the process of imple- Policy for Promoting Electricity menting a solar project with a financial volume of Generation from Renewable US$ 1,000,000 for the Photovoltaic Market Transformat- Energy Sources ion Initiative (PVMTI). Afrisol is planning to build a factory for solar modules in the vicinity of Tangier sometime National Strategy Plan for the Development of within the next few years. Other major solar enterprises in Renewable Energy Sources Morocco include SunLight Power Maroc (SPM), Noor In 2001 the Moroccan Ministry of Energy and Mining Web (also involved in PVMTI) and Total Energie Maroc. defined the energy policy guidelines for the promotion of renewable energy sources in Morocco in the National Strategy Plan for the Development of Renewable Energy Legal Framework Sources. According to that plan, the government has resolved to increase the share of power generated from Office National de l’Electricité (ONE) renewable energy sources to 10% by 2010 and to 20% Office National de l’Electricité (ONE), a public-law by 2020.142 By promoting the use of renewable energy company answering to the Ministry of Energy and sources, the Government intends to reduce Morocco’s Mining, has been responsible for the generation and dependence on imported energy while completing the transmission of electricity in Morocco since 1963. ONE electrification of rural areas, creating new jobs, and operates as a single buyer. Since 1994, however, power lowering the country’s CO2 emissions. plants with ratings above 10 MW can also be built and operated by private enterprises141, if the project was subject Centre de Développement des Energies to open tendering and all power produced is sold to Renouvelables (CDER) ONE. Depending on the region, the actual supply of Established in 1982, the Centre for the Development of electricity to ultimate consumers is attended to either Renewable Energy Sources (Centre de Développement by ONE, by the local government, or by a private enter- des Energies Renouvelables, CDER) is directly subordin- prise (as in the cases of Casablanca, Agadir and Rabat). ate to the Ministry of Energy and Mining. CDER’s

141 Opening of the electricity market is governed by law no. 2-94-503 dated 23 September 1994. 142 These objectives are essentially to be achieved by expanding wind-driven power generation to 1,000 MW, constructing a solar power plant (solar fraction: 30 MW), expanding the use of biomass to an extent of the order of 50 MW, and advancing rural distributed electrification, particularly with PV systems (source: Département de l’Energie et des Mines, CDER, Plan Stratégique National pour le Développement des Energies Renouvelables, 2001). Morocco

activities include conducting studies, disseminating Mini-hydropower knowledge, performing quality-control checks on equip- It is most notably in the category of mini hydropower ment (PV systems in particular), and training specialists that Morocco has large potential. One 200kW mini in the field of renewable energy sources. hydropower plant located in Askaw was commissioned in May 2002, and a 300 kW station for installation in No power-infeed law Agadir Aït Mehamed has been advertised for competitive Morocco has no laws prescribing a legal obligation to contracting. Together, these two plants are intended to purchase and pay for electricity generated from renewable supply electricity for 63 villages in the Assif Tifnout energy sources. The prices for electricity from privately Valley (Souss River). The initial costs will be carried operated power plants (for example from the Al Koudia jointly by the newly electrified households, the local wind farm) are negotiated between ONE and the respect- communities, and ONE. Additional mini hydropower ive operator as ONE’s contract partner. In such contracts, plants are planned, and ONE and CDER are in the process ONE pledges to purchase all electricity produced by the of evaluating the economic efficiency of various locations. power plant in question. Morocco has substantially reduced (to 2.5%) its import duties on certain components A 470MW pumped-storage power plant for peak-load for use in harnessing renewable energy sources. No other coverage is planned for installation near Beni Mellal/ tax incentives or remissions are planned for the time being. Afourer. The project is receiving financial assistance from the European Investment Bank (EIB) and the Arab Fund Maisons de l’Energie et de l’Environnement for Economic and Social Development (FADES). The The Government of Morocco recently began promoting plant will be built by Alstom (France/Morocco) and the establishment of ‘Maisons de l’Energie et de l’Envi- SGTM (Morocco) and is scheduled for commissioning ronnement’. These ‘Maisons’ are small, rural enterprises by the end of 2004. Another hydropower plant with a that help local residents plan their own energy supplies. rating of roughly 100 MW is nearing completion in CDER and the United Nations Development Pro- Dchar El Oued-Ait Messaoud. gramme (UNDP) provide technical and financial assistance in the setting up of these enterprises. As of this Wind Energy writing, some 100 such enterprises had been established. Morocco has good to very good wind conditions, with mean wind speeds exceeding 11 m/s in some places, so the country’s exploitable wind potential is substantial. Status of Renewable CDER estimates Morocco’s total wind power potential Energy Sources at 6,000 MW. The Government of Morocco is planning to increase the share of electricity generated with wind Of all the Maghreb Countries, Morocco is the one that power to 4% by the year 2010. has done the most to develop its renewable energy sources for generating electricity. With the anticipated adoption Wind power potential of new energy policy guidelines for renewable energy Between 1991 and 1994, CDER conducted measurements sources, continuing political support for the dissemin- to determine the wind potential along the Atlantic coast ation of these technologies in Morocco can be expected and in the north-east part of the country, with financial in the years to come. assistance from GTZ.143 Then, in a second phase from 1997 to 2000, the wind potential of selected sites along Hydropower the Atlantic coast was investigated. Now, the final phase Morocco’s technically exploitable hydroelectric power (2001 to 2010) is geared to the evaluation of wind potential is estimated at 2,500 MW, only some 37% of potential in the mountainous Atlas and Rif regions. which has been developed to date. Due to pronounced variation in precipitation rates, hydropower’s overall The data gathered to date confirms that Morocco has contribution to national power production varies several areas with excellent potential for exploiting wind between 5% and 20%. energy, particularly in the greater Tangier, Ksar Sghir

143 CDER published the initial findings in a report entitled ‘Le Gisement Eolien du Maroc’ in March 1995. and Tétouan areas (where average annual wind speeds at to build an additional 60 MW wind farm in the south a height of 10 m range from 8 m/s to 11 m/s) and in the of Morocco, near the town of Tarfaya, have been tem- Dakhla, Laâyoune, Tarfaya and Essaouira areas (where porarily shelved by ONE. average annual wind speeds at a height of 10 m range from 7 m/s to 8.5 m/s). The Sahara Wind Project has The planned Tangier wind farm will comprise two sites: also conducted wind surveys and investigated the possi- Sendouk, with 65 MW, and Dhar Saadane, with 75 MW. bility of erecting a high-voltage power transmission line In the wake of a fruitless international tendering process, between Morocco and Western Europe.144 ONE decided in February 2003 to erect the Tangier wind farm on its own account and is now looking for Wind farms ways to finance the project.

Wind farm Capacity Year Financing Operator A second 60MW wind farm is to be installed some 15 km MW built south of Essaouira on the Atlantic coast. The € 83 million

Al Koudia 3.5 2000 KfW ONE project will be receiving assistance from several sources, including a € 50 million loan from KfW. The wind Al Koudia 2 50 2000 EDF/Paribas/ CED Germa farm is expected to produce 210 GWh of electricity per year and is intended to be operated by ONE. An inter- Tangier 140 2006 n.D. ONE national call for tenders on construction of the wind Essaouira 60 2006 KfW ONE farm is expected to take place during the first half of 2004. According to ONE, both wind farms, Tangier and Table 28: Installed and planned wind farms; Morocco; MW Essaouira, are to be completed by 2006.

A 3.5MW wind farm was erected at the Al Koudia Al Decentralised exploitation of wind energy Baïda site (Tlat Taghramt in Tétouan Province, 40 km To some extent, wind energy is also being exploited for east of Tangier) in late 2000 at a cost of approximately the purposes of distributed rural electrification. For € 6 million. The Kreditanstalt für Wiederaufbau (KfW) example, a pair of 25 kW wind energy conversion provided a low-interest loan of € 4.35 million for this systems and a 15 kW unit were recently installed in the scheme with German turbine technology (Enercon). The province of Essaouira. Together, those systems are sup- wind farm is being operated by ONE. posed to generate enough electricity for 123 households. According to CDER, Morocco presently has some 300 Another wind farm at the same location, this one with a off-grid wind power plants and roughly 5,000 wind- rating of 50 MW, entered service in August 2000 with driven pumps. the help of a € 24.4 million loan from the European Investment Bank. The cost of generating the electricity Biomass was calculated at 0.40 to 0.60 DH/kWh (3.7 to 5.5 € Nearly one third of Morocco’s total energy requirement cents/kWh). Eighty-four wind turbines from Vestas, is met by biomass, mostly by traditional means, i.e. by each rated at 600 kW, were erected by Compagnie Eoli- the use of biomass in the form of fuel wood or charcoal enne de Détroit (CED) for approximately € 45.7 million. for heating and cooking purposes. Morocco has approxi- This scheme is a purely private project based on a BOT mately 5 million hectares of forested area. The country’s contract with ONE, to the ownership of which the wind rapid consumption of wood as a source of energy farm will be transferred in toto after 20 years. (approx. 11 million tons annually) is not indefinitely sustainable. Indeed, the country is losing more than Tangier and Essaouira 30,000 hectares of forest each year. The Government of Other wind farms with capacity totalling 200 MW are Morocco is therefore promoting the introduction of planned and intended to exploit wind potentials in the technologies for the efficient use of fuel wood and for its greater Tangier area in the north of Morocco and in an substitution by other energy sources. Atlantic coast region near the town of Essaouira. Plans

144 For more information, go www.saharawind.com. Morocco

Biogas Solar-thermal power plant Every day, Morocco produces approximately 8,000 tons With the help of a loan from GEF, a 200MW solar- of domestic waste and 1.1 million m2 of waste water that thermal energy system in combination with a gas tur- could be put to use for generating landfill gas/digester bine is to be erected in the eastern part of Morocco, near gas. The same is true of animal and vegetable wastes Aïn Beni Mathar, some 90 km south of Oujda.146 The fuel produced in the agricultural sector. With GTZ assist- for the gas turbine is to be taken from the pipeline between ance, several kinds of appropriate biogas plants have Algeria and Europe. According to a feasibility study that been developed in Morocco. CDER estimates the number was completed in 1998 and financed by the European of biogas plants presently installed in Morocco at 300. Investment Bank (EIB), the project is expected to cost US$ 200 million. Tendering for the plant was invited in Solar Energy July 1999, but no contracts have yet been signed. Com- Despite excellent solar irradiation conditions (with daily pletion of the power plant is planned for 2008. average insolation of 5 kWh/m2), the use of solar energy for grid-coupled electricity generation is still at an early Geothermal Energy stage of development in Morocco. The only pilot plant Morocco’s geothermal potential is still largely unexplored. and model installation in the country is a 1kWp photo- The country’s geothermal resources are confined to the voltaic system. north-eastern region and parts of the Sahara. The resources are relatively minor in magnitude but, according The electrification campaign with solar home systems to the International Geothermal Association (IGA), (SHSs) is making good progress. Some 50,000 solar energy could be used for heating purposes. systems were installed in 2002. The total power generating capacity of all PV systems now in service in

Morocco is estimated at 7 MWp. CDER is postulating a Rural Electrification market volume of some 10 MWp for the years 2001 through 2006. Degree of electrification Over the past few years Morocco has made great progress Photovoltaic Market Transformation Initiative (PVMTI) in providing grid power to its people. After 18% in 1995, The Photovoltaic Market Transformation Initiative the degree of rural electrification rose to 55% by 2002, and (PVMTI), an important solar energy programme devoted even villages situated long distances from the power grid to developing national markets for PV systems in India, now also have electricity – thanks to renewable energy Kenya and Morocco, was launched by GEF and the sources. International Finance Corporation (IFC) in 1998.145 The programme envisages an investment volume of According to data provided by ONE, 9,812 villages, or US$ 5 million for Morocco. Part of those resources has 829,000 households, had gained access to electricity by already been allocated to two companies: the Moroccan the end of 2002 within the scope of the national electri- financing company Salafin SA, which in June 2002 fication programme. The Government of Morocco hopes received US$ 1 million for a lending programme designed to achieve full electrification of the country by 2007. to promote solar energy systems to be supplied, installed and maintained by Afrisol SA; and Association Al Programme for rural electrification Amana, to which the IFC is providing US$ 720,000 in ONE is responsible for rural electrification in cooperation the form of guarantees and loans for a microfinancing with the relevant local authorities. Until 1995 rural project that is offering small-scale loans for the purchase electrification was carried out within the framework of of solar energy systems in the Taroudant region. In this the national electrification programme Programme case, the Moroccan PV enterprise Noor Web is supply- National pour l’Electrification Rural (PNER), always in ing the solar energy equipment. the form of grid connections. Then, in August 1995, ONE presented a revised national electrification programme – Programme pour l´Electrification Rurale

145 For details, go to www.pvmti.com. 146 Some 30 MW of the output is to be generated solely by solar energy systems. Général (PERG) – to the governing council and launched tract with ONE. SHSs with ratings of 50 W, 75 W and it in 1996. Funds amounting to € 147.7 million 100 W are being promoted. The household in which the annually are being provided to achieve the programme’s SHS is installed then repays the remainder to the imple- goal of near-complete rural electrification by the year menting contractor over a period of 10 years. 2007. PERG is also supposed to integrate decentralised generating technologies. The local authorities, ONE The SHS itself remains the property of ONE for the and the users are jointly financing the electrification duration of that 10-year period, after which its owner- measures: ship passes to the household in question. Up until that time the solar contractor is responsible for installing and • The local communities are contributing DH 2,085 servicing the solar home system. (€ 192) for each participating household, which can be paid in 5 annual instalments of DH 500 (€ 46). In the course of the past two years, ONE has entered into • The households themselves can choose between a two agreements with solar contractors for the installation one-off payment of DH 2,500 (€ 230) or monthly of SHSs on a fee-for-service basis. In May 2002, ONE instalments of DH 40 (€ 4) over a seven-year period. signed a contract with a consortium comprising Total • ONE is bearing the remaining costs amounting to Energie (France)/EDF/Total Energie Maroc for the instal- 55% of the overall expenditure.147 lation of 16,000 solar home systems. The contract has a financial volume of € 12 million for a four-year period. Decentralised electrification In contrast to its predecessor programme, PERG also The other contract was signed in September 2003, this includes the off-grid electrification of communities and time between ONE and Apex-BP Solar. It covers the villages situated too far away from the existing distri- installation of 20,000 solar home systems in the Province bution networks. This part of the programme for decen- of Chichaoua in southern Morocco, again according to the tralised electrification began in 2000 and is promoting fee-for-service supply model. Additional solar-project ten- the use of solar home systems (SHSs) as well as mini- dering is planned for the rural electrification sector in the hydropower plants and small wind energy conversion years to come. systems. These technologies are supposed to help supply electricity to some 200,000 households in approxima- Exchange rate (26 Oct. 2003): 10 Moroccan dirhams = €0.92 tely 6,000 villages (or between 7% and 8% of all rural households). Rural electrification in the form of solar home systems installed in connection with PERG is being supported by a KfW loan.

Solar home systems and fee-for-service contracts The private sector’s role in connection with decentralised rural electrification has been expanding from year to year. At the same time, ONE has been gradually pulling out of the business. Within the scope of its new fee-for- service approach, ONE has now completely surrendered the technical side of rural electrification to privately owned enterprises.

Financially, ONE is continuing to subsidise each installed SHS with contributions ranging from DH 4,320 to 17,760 (€ 397 to 1,634), the one precondition being that the respective company enters into a pertinent con-

147 35% of this is to be covered by an electricity service fee amounting to 2.25% of the respective electricity tariff. Morocco

Information Sources • KfW: Neue Energie für eine Entwicklung mit Zukunft. Jahresbericht über die Zusammenarbeit

• Abramowski, Jasper; Posorski, Rolf (GTZ): mit Entwicklungsländern; 2002.

Wind Energy for Developing Countries; in: • Lambert, Benoit: Le Parc Eolien de Koudia Al DEWI Magazin; Februar 2000 Baida: prémisse d’un Eole Dorado marocain?; in:

• Berdai, Mohamed: PV project experiences in Etat de la Planete Magazine; Morocco; in: Njeri Wamukonya (Hrsg.): January–February 2003

Experience with PV systems in Africa; 2001 • Projektübersicht der KfW: Windpark Tanger;

• BP Solar (press release): BP awarded major solar 6. Juni 2001

power contract in Morocco; 16 September 2003 • Projektübersicht der KfW: Ländliche Basiselektrifi-

• Centre d’Information sur l’Energie Durable et zierung Photovoltaik; 2. Oktober 2001

l’Environnement: Les Energies durables au Maroc, • PVMTI News, August 2002 et bilan de nos emissions en GES; March 2000 • Renewable Energy World: Rural Electrification for • DECON, Study Report: CDM in the Field of Morocco; September-October 2000 Renewable Energies in Morocco, January 2001 • Total (press release): De l’Electricité pour 16 000 • Département de l’Energie et des Mines: L’Energie Foyers Marocains. Le Maroc choisit Total Energie, au Maroc; June 2002 TotalFinalElf et EDF; 21. Mayx 2002

• Département de l’Energie et des Mines: Energie: • U.S. Department of Energy, Energy Information Stratégie de Développement; June 2002 Agency: Country Analysis Briefs: Arab Maghreb

• Département de l’Energie et des Mines, CDER: Union, January 2003

Plan Stratégique National pour le Développement • Wiekert, Martin: Good prospects for wind power. des Energies Renouvelables; December 2001 Morocco wants to reduce its dependence on imports

• Direction de la Statistique: by developing alternative energy options; in: New Le Maroc en chiffres; 2002 Energy; April 2003

• Enzili, Mustapha; Nayysa, Abdelmoula; Affani, Fathallah (CDER); Simonis, Philippe (SEP Morocco): Wind Energy in Morocco, Potential – State of the Art – Perspectives; in: DEWI Magazin; February 1998

• Hirshman, William P.; Afrisol signs first PVMTI project in Morocco; in: PHOTON International; May 2002

• IFC (International Finance Corporation), Environmental Projects Unit (CESEP), Project Report: India, Keya, Morocco –Photovoltaic Market Transformation Initiative (PVMTI), August 1998

• Inman, Nick: Morocco shortens the short list; in: Windpower Monthly; June 2002 Contact Addresses PVMTI Morocco Country Manager Mr. Jimmy Royer c/o Resing 17 Rue de Yougoslavie, No 13 Office National de l’Electricité (ONE) Gueliz-Marrakech 65, Rue Othman Ben Affane Tel. 00212 (4) 43 77 002 21000 Casablanca Fax 00212 (4) 43 76 25 Tel. 0212 (2) 22 41 65 E-mail: [email protected] Fax 0212 (2) 22 00 38 www.one.org.ma Embassy of the Kingdom of Morocco Niederwallstr. 39 Ministère de l’Industrie, du Commerce, de 10117 Berlin l’Energie et des Mines (MEM) Germany La Direction de l’Energie Tel. 0049 (30) 20 61 24-0 Rue Abou Marouane Essaadi – Haut Agdal – Fax 0049 (30) 20 61 24 20 Rabat E-mail: [email protected] Tel. 00212 (7) 68 88 30 www.marokko-botschaft.de Fax 00212 (7) 68 88 31 E-mail: [email protected] www.mem.gov.ma

Centre de Développement des Energies Renouvelables (CDER) Rue El Machaar El Haram Quartier Issil BP 509 Marrakech Tel. 00212 (4) 30 98 14/ 30 98 22 Fax 00212 (4) 30 97 95 E-mail : [email protected] www.cder.org.ma

Association Marocaine de Gestion et d’Economie d’Energie (AMGEE) Route Cotière SAMIR Mohammedia Tel. 00212 (3) 31 22 40/ -41/ -42 Fax 00212 (3) 31 22 66

Association Marocaine de l’Industrie Solaire (AMISOL) 5, Rue de Midelt, Rabat Tel. 00212 (7) 76 89 61 Fax 00212 (7) 76 89 64

German Chambers of Industry and Commerce in Morocco 8, Bd. de Khouribga 20 000 Casablanca Morrocco Tel. 00212 (2) 44 98 22 /3 Fax 00212 (2) 44 96 93 E-mail: [email protected] Senegal

Senegal

Electricity Market Electricity consumption Electricity consumption in Senegal has risen at an Capacities average of 6% per annum over the past 10 years. The Electricity supply in Senegal is based primarily on pro- projected annual rate of growth for the next 10 years duction in thermal power stations. In 2002 the total is even higher, namely an average of 10%. installed capacity in Senegal amounted to 380 MW. Of this, 138 MW was accounted for by steam power stations, In 2001, electricity sales totalled 1,295 GWh. 90% of 99 MW by diesel generating stations and 92 MW all electricity consumption was concentrated in the west by gas-turbine power plants. A private American com- of Senegal, or the regions of Dakar, Kaolack and Saint- pany (GTI) operates a combined-cycle power plant rated Louis. The difference with respect to electricity produc- at 51 MW. All of the oil required for power generation tion is explained by high transmission losses (caused is imported.148 A proportion of the capacity of the by a dilapidated network infrastructure) and from the Manantali hydroelectric power station in Mali, amount- illegal consumption of electricity without payment. ing to 60 MW, is available to Senegal, making the total available capacity in Senegal approximately 440 MW. 1998 1999 2000 2001 Production 1,304 1,348 1,476 1,652 Electricity generation and imports Sale 1,074 1,063 1,149 1,295 of electricity - High voltage 163 165 185 202 Electricity production within the interconnected grid - Medium voltage 384 384 389 418 run by the monopoly power utility Société Nationale - Low voltage 528 514 575 675 d’Electricité (SENELEC) reached about 1,652 GWh in 2002. Since July 2002 Senegal has been importing a Table 29: Electricity production and consumption in the interconnected grid; Senegal; 1998–2001; GWh149 third of the electricity that is produced in the Manantali hydroelectric power station (200 MW capacity) in Mali. Generating costs and electricity prices The power station is managed by the Manantali Water In 2002 the average electricity generating costs in Management Company (SOGEM). SENELEC power stations were 5.8 € cents/kWh. There are however wide differences between the individual Time and again over the past years, the power industry power stations: the costs vary between 3.8 € cents/kWh in Senegal has been unable to satisfy the demand for (modern diesel generating station) and 9.8 € cents/kWh electricity in the country. Firstly the existing capacity is (old steam power station). In contrast, the production insufficient to meet this demand, which is continuing to costs for electricity from the Manantali hydroelectric grow, while secondly many of the power stations are power station amounted to only 2.6 € cents/kWh. obsolescent, and consequently have to be shut down at frequent intervals in order to allow essential repairs to be The average electricity purchase costs for Senegalese end carried out. consumers were 11.3 € cents/kWh in 2001. Compared with 1992, electricity prices had risen by roughly 30%, Power transmission which corresponds to an average annual increase of 3.4% The interconnected grid (225 kV) operated by per year. SENELEC is concentrated in the west of Senegal. As well as this there is a new link for purchased power from 1998 1999 2000 2001 the above-mentioned hydroelectric power station in CFA francs 72.27 73.75 74.10 73.30 Mali. The majority of Senegal is not connected to the €-cents 11.12 11.35 11.40 11.28 public power grid. Table 30: Average electricity prices for end consumers150

148 Senegal does however have its own oil resources (offshore), which are estimated at 700 million barrels. Extraction is supposed to begin in the next few years. Senegal also possesses deposits of natural gas (32.3 billion m3); these are already being used in electricity production. 149 Source: SENELEC, Annual Report. 150 Source: SENELEC, Annual Report. Market Actors Other market actors in the renewable energy field SENELEC produces most of the electricity in Senegal. Other important market participants in the field of Following two failed attempts at privatisation, the renewable energy sources are the consultancy company enterprise is presently back in state ownership.151 Another SEMIS,154 the solar enterprise Total Energie Afrique de targeted date for privatisation has been set for the end of l’Ouest (TEAO), Matforce, Equip Plus, Buhan & Teis- 2004/2005. seire, Secom Afrique, Synergies and S.3.A,155 along with the Senegalese company AME Solar, which sells, installs The American company GTI has been operating a com- and maintains solar collectors.156 EIC, a company from bined-cycle power plant with a capacity of 50 MW at Saint-Louis, produces wind-power-operated water pumps Cap de Biches since 1999. It is the first power station for the local market. operated by an independent power producer in Senegal. The term of the operator agreement with SENELEC The Société Africaine des Energies Renouvelables extends for 15 years. (SAER) is active in the fields of both wind and solar energy. SAER works mainly for the Senegalese Renew- Three large private industrial enterprises – the chem- able Energies Association ASERA, but in the past it has icals company Industries Chimiques du Sénégal (ICS), also participated in various projects funded by bilateral the sugar producer Compagnie Sucrière du Sénégal (CSS) and multilateral donors (World Bank, UNDP, the and the agro-industrial firm (peanut processing) Société Netherlands). Nationale de Commercialisation des Oléagineux du Sénégal (SONACOS) – operate their own electricity generating facilities with a total capacity of 90 MW, Legal Framework most of which is used for their own requirements.152 Reform of the electricity sector Solar energy companies The Senegalese Government began reforming the elec- About 20 small companies and non-governmental organ- tricity sector and opening it for private investors in isations market solar home systems (SHSs), low-powered 1998. Two laws in that year (98–29157 and 98–06) cre- photovoltaic systems designed to supply electricity to ated a state regulatory authority for the electricity sector individual households. Most of these companies have (Commission de Régulation du Secteur de l’Electricité, joined forces in the Fédération des organisations pour la CRSE) and converted the state-owned SENELEC into a Promotion des Energies Renouvelables (FOPEN). In joint-stock company. addition to its role as a trade association and coordination mechanism for the solar energy sector, FOPEN At the same time the electricity production sector was also offers energy consultancy services and takes care of opened up for private investors and operators (IPPs).158 the installation and maintenance of SHSs.153 In its strategy paper on the development of the energy sector, the Senegalese Government declared that preference should be given to new power plants being built by private companies. The reason for this is above all SENELEC’s chronic shortage of capital.

151 SENELEC currently has almost 400,000 customers. As the company has been a chronically loss-making operation for many years now, the government had to increase the equity capital several times between 2000 and 2001 in order to be able to make the necessary investments in the electricity sector. 152 In 2002 these companies sold only 73 GWh of electricity to SENELEC compared with 311 GWh in 2001. 153 Other trade associations and non-governmental organisations in the field of photovoltaics are the Association Sénégalaise des Energies Renouvelables et Alternatives (ASERA) and the Association Sénégalaise d’Energie Solaire (ASES). 154 Services de l’Energie en Milieu Sahélien (SEMIS), founded in 1987, compiles studies and expert reports on the subjects of hydropower, electrification, traditional forms of energy and irrigation. 155 The addresses of the above-named companies are listed at http://www.areed.org/country/senegal/contacts.pdf. 156 AME Solar is planning to set up production facilities for solar collectors in the coming years. The company is receiving financial assistance in the form of a loan from the African Rural Energy Enterprise Development Program (AREED) amounting to US$ 41,000. 157 Loi d’orientation relative au secteur de l’électricité (skeleton law for the electricity sector). 158 To this end, the IPPs enter into build-own-operate (BOO) agreements with SENELEC. The details are governed by a series of decrees: Décret n° 98-334 fixant les conditions et modalités de délivrance et de retrait de licence ou de concession de production, de distribution et de vente d’énergie électrique; Décret n° 98-335 relatif aux principes et procédures de détermination et de révision des conditions tarifaires; Décret n° 98-336 relatif aux prises de participation entre entreprises du secteur de l’électricité. Senegal

SENELEC’s tasks Policy for Promoting Electricity However, even in the next few years, until the electricity Generation from Renewable sector is fully liberalised, SENELEC will retain its Energy Sources monopoly over the purchase (as a single buyer) and distribution of electricity. SENELEC also has sole responsi- The paramount objective of today’s Senegalese energy bility for the transmission of electricity at the high-volt- policy is to ensure secure provision of sufficient energy age level. to the population. At present the government’s efforts are concentrated on expansion of the national power sta- Areas of responsibility tion inventory, preferably with the involvement of inde- The Energy Directorate within the Ministry of Mining, pendent power producers, and on rural electrification. Energy and Hydropower (Ministère des Mines, de l’En- In this context the government is mostly placing its ergie et de l’Hydraulique) is responsible for elaborating faith in conventional thermal plants. Renewable energy Senegalese energy policy. Until privatisation is com- sources are only given consideration in relation to the plete, the Ministry holds the authority to issue instruc- electrification of rural areas of Senegal. tions to SENELEC. There are no direct financial assistance measures on the CRSE is responsible for among other things the grant- part of the Senegalese Government aimed at promoting ing of licences and concessions159 (and for monitoring the use of renewable energy. That said, imports of com- these), establishing competition on the electricity market, ponents for photovoltaic systems and of solar collectors setting electricity tariffs for all end customers, and pro- are exempted from customs duties and from value-added viding advice on planned new legislation. tax. Furthermore, as long ago as 1981 a law was passed that allows an exemption from tax amounting to 30% of The state-owned Senegalese Agency for Rural Electrifi- the investment costs for solar and wind energy cation (Agence Sénégalaise d’Electrification Rurale, systems.160 Within the framework of various GTZ pro- ASER) is responsible for electricity transmission and jects, investigations are currently in progress to examine distribution in the rural regions only. how the government can be assisted in the creation of appropriate general conditions for producing electricity Energy policy strategy paper of April 2003 from renewable forms of energy. The strategy paper on development of the energy sector (Lettre de Politique de Développement du Secteur de l’Energie) of 9 April 2003 identifies the problems of the Status of Renewable Energy Senegalese energy sector (i.e. above all the shortfall in Sources electricity generating capacities and the lack of electrification for the majority of the population) and lays down Hydropower the energy policy framework for the coming years. This Although Senegal possesses an estimated hydropower framework includes in particular the provision of potential of 700 MW, to date not a single hydroelectric modern forms of energy as a tool in the fight against power plant has been built. Since July 2002, however, poverty (especially within the context of rural electrifi- 60 MW of output has been available to the national elec- cation) and the restructuring of the energy sector (in tricity market from the Manantali hydroelectric power connection with a greater role for the private sector). station on the Senegal River in Mali (equivalent to one third of the total electricity production from the power Clean Development Mechanism station). Senegal, together with Mali and Mauritania, The Senegalese Government adopted the Kyoto Protocol participates in the management of the Manantali dam in January 2001, although it has yet to finally ratify it. and power station through the organisation of the ripa- rian states utilising the Senegal River (Organisation de la Mise en Valeur du Fleuve Senegal, OMVS).

159 Licences for electricity production and concessions for the electrification of rural areas are subject to a public tendering process. 160 Loi 81-22 du 25 juin 1981 instituant des avantages fiscaux pour investissements dans le domaine de l’utilisation de l’énergie solaire ou éolienne. Wind Energy Biomasse Senegal’s wind power potential is concentrated along the More than 50% of Senegal’s energy provision is based on coast, and in particular the section of coast between the traditional utilisation of biomass in the form of fire- Dakar and Saint- Louis. In a study carried out by the wood or charcoal. The country has reserves of peat that Senegal Meteorological Service, wind velocities of are estimated to amount to 52 million m2; this could be 3.7–6.1 m/s were observed in the 50km-long coastal used as a substitute for wood and hence call a halt to the strip between Dakar and St. Louis. In inland areas wind advancing destruction of Senegalese forests.161 The velocities of 2 to 3 m/s are the norm, and are therefore potential for using peat or also industrial, agricultural or of no interest for exploitation for energy generation. No municipal wastes to generate electricity or produce heat comprehensive scientific survey of wind data has taken has so far been insufficiently researched. place to date. Two companies involved in agri-industry, Compagnie Traditional use of wind power Sucrière du Sénégal (CSS) and Société Nationale de At present, wind power is primarily utilised in Senegal Commercialisation des Oléagineux du Sénégal in the form of small installations for operating water (SONACOS), currently generate about 40 MW of elec- pumps. There are estimated to be 200 serviceable wind- tricity from organic residues from sugar production and powered water pumps installed at the moment. The peanut production respectively, primarily for their own Senegalese-Mauritanian non-governmental organisation power needs. Alizés promotes the installation of wind pumps, and receives assistance from the European Union and French In addition to the industrial use of biomass there are also development cooperation to do so. a few small biogas plants for supplying energy to households. These were developed by Enda-TM and the Agri- Electricity generation cultural Research Centre (CNRA). So far no grid-coupled wind power plants have been installed. The Canadian consultancy company Helimax Solar Energy drew up a study on behalf of the Canadian Foreign Mini- Senegal has very considerable potential for solar energy. stry in 2002 in which it investigated the possibility of Average daily solar irradiation is of the order of 5 kWh/m2. building a wind farm with a capacity of 50 MW. This Around this figure, the solar energy potential varies project is not currently being pursued further, however. between the sunnier north (5.8 kWh/m2 in Dakar) and the less sunny south (4.3 kWh/m2 in Ziguinchor). Instead, the Senegalese Ministry of Mining, Energy and Hydropower would like to locate a wind farm with an Solar energy is mainly exploited in Senegal with the aid output of at least 10 MW in the coastal region between of small-scale photovoltaic systems, solar home systems Dakar and Saint Louis. It is intended that the generated (SHSs). The output of all PV systems installed at present electricity should be fed into the interconnected grid. is estimated to be approximately 1 MWp. Solar home systems are playing an ever greater part within the GTZ support with wind measurements government’s rural electrification programme. In this connection, an appraisal mission conducted as part of the GTZ TERNA programme at the end of 2003 Geothermal Energy came to the conclusion that electricity generation from According to data from the International Geothermal wind energy can be undertaken economically in Senegal Association, no use is made of geothermal energy in as of wind velocities of 5.3 to 6.3 m/s (depending on the Senegal either directly or for electricity generation. No provision of low-interest loans or of an investment sub- information is available about the country’s geothermal sidy). The GTZ will possibly carry out wind measure- potential. ments at two to three locations in order to obtain reliable data for potential wind projects.

161 It is estimated that 80,000 hectares of forest are destroyed in Senegal every year. Senegal

Rural Electrification Supply of solar home systems Initial supply contracts for SHSs were agreed between Despite the investment of CFAF 20 billion (some € 30 ASER and international companies in the solar energy million) in rural electrification between 1995 and 2002, industry over the past two years. In August 2002 the only 268 of the 13,000 villages (settlements with a Spanish company Atersa, a subsidiary of the American population of below 1,000) have an electricity supply. firm AstroPower Inc., was commissioned to install PV The overall electrification rate in the rural regions of systems for 227 villages. Within the scope of this pro-

Senegal is presently no higher than 8%. ject a total of 425 kWp will be installed to supply electricity to schools, health centres and other public facil- Electrification programme up until 2015 ities. The total financial volume of the project amounts The Senegalese Government is aiming to achieve a rural to € 7.5 million. electrification quota of 15% by 2006. In the second phase of the rural electrification programme (2007 to 2015) Since the 1980s the installation of SHSs in Senegal has the target is to reach 30%. A budget equivalent to € 259 been promoted as part of rural electrification projects by million is earmarked for rural electrification for the foreign donors, above all from Japan, Germany, France, period from 2003 to 2007 alone. In the coming years a Italy and Spain. A relatively large project by the GTZ, greater emphasis is to be placed on the involvement of the Senegalese Government and the non-governmental the private sector. organisation Enda-TM, for example, enabled the installation of a total of 2,300 SHSs in the 1990s. The project Senegalese Agency for also played a part in the founding of the trade associ- Rural Electrification – ASER ation FOPEN. The Senegalese Agency for Rural Electrification (Agence Sénégalaise d’Electrification Rurale, ASER), GTZ PERACOD programme which was founded in 2000, is responsible for the supply In the next few years the GTZ will provide additional of electricity to rural areas of Senegal. The rural regions support for the installation of electricity supplies in of Senegal as a whole have been divided into a total of rural regions of Senegal as part of a new project on ‘Pro- 18 licence areas.162 The electrification of these areas is motion of Rural Electrification and the Sustainable Pro- put out to public tender by ASER and is undertaken by vision of Domestic Fuels’ (Promotion de l’Electrification private-sector enterprises. ASER merely takes over the Rurale et de l’Approvisionnement Durable en Combust- financing and provides technical and advisory support. ibles Domestiques – PERACOD). Within this, the focus will be partly placed on the provision of advisory The process of rural electrification by ASER also receives services on general legal conditions and national strat- financial assistance from various international donors in egies for renewable energies and on support for ASER addition to the Senegalese Government. The donors with the organisation and implementation of its rural include the GTZ, the Kreditanstalt für Wiederaufbau electrification programme. These measures will further (KfW), the World Bank, the African Development Bank strengthen the energy-policy capacities already available (AfDB) and the Islamic Development Bank.163 to the Senegalese Government and thus create a basis for the broader dissemination of renewable energies in Contribution of renewable energy sources Senegal. Renewable forms of energy are also increasingly being used for the electrification of peripheral rural areas. ASER assumes that photovoltaic systems will account Exchange rate: 1,000 CFA francs = € 1.52 (the CFA franc is linked to the euro at a fixed rate) for 20% of the total budget for rural electrification in the coming years. A study produced by the Japan Inter- national Cooperation Agency (JICA) estimates total demand at 83,000 SHSs within the framework of the rural electrification programme.

162 SENELEC is responsible for the electrification of all other areas, i.e. primarily the towns and cities. 163 KfW is financing the electrification of the regions of Fatick, Gossas, Kaolack and Nioro. Information Sources • République du Sénégal: Lettre de Politique de Déve- loppement du Secteur de l’Energie; April 2003 • Ambassade de France au Senegal: L’Electricité au

Senegal; Octobre 2001 • Republic of Senegal, UNEP: Economics of Green- house Gas Limitations. Country Studies Series; • African Rural Energy Enterprise Development (AREED): Country Report Senegal; 2000 2001

• Sarr, Sècou: Dissemination of family photovoltaic • Carnevale, Bruce: Senegal’s new rural electrification project will include PV; in: PHOTON systems in rural Senegal; in: Njeri Wamukonya International; January 2003 (Hrsg.): Experience with PV systems in Africa. Summaries of selected cases; 2001 • Dabo, Bacary: Electrification rurale au Sénégal: la Banque mondiale visite l’expérience des Îles du • Société Africaine des Energies Renouvelables Saloum; in: Sud Quotidien; 30 Septembre 2003 (SAER): Company Profile

• Société Nationale d’Electricité (SENELEC): Rapport • Fall, Alioune: Integration of Social and Environ- mental Concerns into Power Sector Reform: Annuel. Mouvements d’Energie. Année 2002; 2003

Senegal’s Experience; in: Power Sector Reform and • United Nations Development Programme (UNDP): Sustainable Development. Brainstorming Meeting. Charging up: Senegal; in: UNDP: Sharing IEA Headquarters, Paris, France; 21–22 May 2002 Innovative Experience; July 2003

• Fall, Alioune: Les partenariats publics privés en • US Department of Energy, Energy Information matière de développement énergétique. Le cas du Administration: Country Analysis Brief Economic Sénégal; in: Table Ronde Préparatoire n°1 pour le Community of West African States (ECOWAS); Symposium sur l’accès aux financements internatio- June 2003 naux; 18–19 Septembre 2003 • Wamukonya, Njeri: African power sector reforms: • Krampitz, Iris: Atersa to supply PV systems for 227 some emerging lessons; in: Energy for Sustainable villages in Senegal; in: PHOTON International; Development; March 2003 September 2002 • Youm, I. et al.: Renewable energy activities in • Kumasi Institute of Technology and Environment Senegal: a review; in: Renewable and Sustainable (KITE): Status of Renewable Energy and Energy Energy Reviews; March 2000 Efficiency Systems in West Africa; June 2003

• Lund, John: Status Geothermischer Energie im Jahr 2000; in: Geothermische Energie; March 2000

• Owsianowski, Rolf: The Senegalese Organisation ASER; VPaper at the 2nd European PV-Hybrid and Mini-Grid Conference; September 2003

• Platts: Country Profile Senegal; October 2003

• République du Sénégal: Etude de Faisabilité d’une Valorisation des Residus Agricoles et Agro- Industriels comme Combustibles Domestiques au Sénégal; Septembre 1998

• République du Sénégal, GTZ: Du Charbon bio à partir des Coques d’Arachide au Sénégal. Déscrip- tion succinte du projet; March 2001 Senegal

Contact Addresses Fédération des Organisations pour la Promotion des Energies Renouvelables (FOPEN) B.P. 630 Dakar Ministère de l’Energie et des Mines (MEM) Fax (00221) 822 07 02 / 821 19 29 Building Administratif E-mail: [email protected] B.P. 4029 Dakar Tel. (00221) 849 70 00 / 823 87 16

Projet Alizés Société Nationale d’Electricité (SENELEC) Quartier Ndioloffène 28 Rue Vincens B.P. 740 Saint-Louis B.P. 93 Dakar Tel. (00221) 961 49 47 Tel. (00221) 839 30 00 Fax (00221) 961 49 46 Fax (00221) 823 12 67 E-mail: [email protected] www.senelec.sn www.alizes-eole.com

Commission de Régulation du Secteur GTZ Office de l’Electricité (CRSE) 6 Passage Leblanc B.P. 11701 Dakar B.P. 3869 Dakar Tel. (00221) 849 04 59 Tel. (00221) 821 61 85 E-mail: [email protected] Fax (00221) 822 93 15 E-mail: [email protected] Agence sénégalaise d'électrification rurale (ASER) B.P. 11131 Dakar Association Sénégalaise d’Energie Solaire (ASES) Tel. (00221) 849 47 11 B.P. 2027 Dakar Fax (00221) 849 47 20 Tel. (00221) 827 63 13 Fax (00221) 822 97 64 / 822 45 63 Association Sénégalaise des Energies Renouvelables et Alternatives (ASERA) Embassy of the Republic of Senegal Rue D x 1 Point E Pavillon Usima Argelanderstrasse 3 B.P. 15462 Dakar 53115 Bonn Tel. (00221) 864 26 49 Tel. 0228 / 21 80 08 Fax (00221) 824 35 42 Fax 0228 / 21 78 15 E-mail: [email protected]

Embassy of the Federal Republic of Germany Centre d’Etudes et de Recherches sur les Energies 20, av. Pasteur Renouvelables (CERER) B.P. 2100 Dakar Université Cheikh Anta Diop Tel. (00221) 889 48 84 B.P. 476 Dakar Fax (00221) 822 52 99 Tel. (00221) 32 16 92 E-mail: [email protected] Fax (00221) 32 10 53 www.ambassade-allemagne.sn E-mail: [email protected]

Service de l’Energie en Milieu Sahélien (SEMIS) B.P. 652 Dakar Tel. (00221) 822 73 97 Fax (00221) 822 61 895 www.semis.sn

Environnement-Développement du Tiers Monde (Enda-TM) B.P. 3370 Dakar Tel. (00221) 822 24 96 Fax (00221) 821 75 95 E-mail: [email protected] www.enda.sn South Africa

South Africa

Electricity Market

200000 Capacities 180000 160000

In 2002 South Africa’s total installed power generation 140000 capacity amounted to approximately 43 GW. The South 120000 African utility company Eskom is one of the world’s 100000 GWh 80000 largest electricity providers, with an installed net cap- 60000 acity of 39,810 MW (2002). Private electricity producers 40000 (chiefly industrial owner-operators, accounting for some 20000 0 836 MW) and local government utilities (2,436 MW) 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Coal Hydropower Pumped storage Nuclear have additional generating capacities. Peak demand in Eskom’s integrated network reached 31,621 MW in Figure 5: Net electricity generation by Eskom; South Africa; 2002. Eskom’s total gross capacity amounts to about 1993–2002, GWh165 42,000 MW, of which 90% is accounted for by coal- fired power stations, 5% by nuclear power stations, and There is relatively little importing and exporting of 5% by hydroelectric power stations and gas turbines. electricity, and figures fluctuate. For instance in 2000 The construction of a gas pipeline from Mozambique to there were net imports of 1.3 TWh (imports: 5.3 TWh South Africa means that in future natural gas will also and exports: 4.0 TWh), while in 1997 a total of 6.6 TWh be established as an important energy source for gener- was exported and no electricity was imported. ating electricity. Electricity consumption The prevailing surplus in supply and resulting excess In 2001 electricity consumption totalled 181.2 TWh. capacities are expected to last until 2007. According to Between 1990 and 2001 the average rate of growth in estimates, South Africa will require additional power electricity demand was 3.1%. station capacity of 20,000 MW up to the year 2025. The largest sector in terms of power consumption is Transmission grid industry, in particular mining companies and alumin- Eskom both owns and operates the transmission grid. ium producers, accounting for roughly two thirds in the The transmission grid encompasses voltage levels between year 2000. 132 and 785 kV and most of the infrastructure is over 60 years old, indicating that maintenance investment is likely to be necessary in the near future. In addition to 160000 the domestic grid, the grid infrastructure for transmitting 140000 120000 electricity to neighbouring countries is also to be ex- 100000 panded in future. South Africa is an important member 80000 GWh of the Southern African Power Pool (SAPP) and thus has 60000 access to low-cost and secure supply sources in the 40000 164 neighbouring countries. 20000

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 Electricity generation Industry Households Crafts & trades Agriculture Transport As is to be expected from its installed capacity, Eskom dominates the power generating market with 95%. In 2002 net electricity generation reached almost 200 TWh. Figure 6: Electricity consumption according to sector; South Africa; 1992–2000; GWh166

164 Eskom and other African electricity suppliers plan to build hydroelectric power stations on the River Congo. This river, which has the largest water volume in Africa, has an estimated energy potential of 100 GW. The project includes a 3,000km-long power transmission line through to South Africa. 165 Source: Eskom, Annual Report 2002, and also Digest of South African Energy Statistics available at www.dme.gov.za/energy/pdf/energy_digest_stats.pdf. 166 Source: Digest of South African Energy Statistics, 2002. Department of Minerals and Energy. Electricity prices Distribution sector Even if electricity generating costs are among the lowest The distribution sector, which comprises Eskom and in the world thanks to the low-cost domestic coal resources municipal utilities, is characterised by a large number of available, there are still substantial differences in tariffs actors. However, many of the 237 municipal distribution between the distribution companies and the various companies are unable to operate efficiently and cover consumer groups. costs due to the fact that they have only small numbers of customers and low tariffs. In future the distribution sector In 2001 Eskom and municipal utilities charged the fol- is to be restructured by means of far-reaching reforms. lowing average prices to their customers:

ZAR-cents/kWh € cents/kWh Legal Framework Agriculture 30.00 3.95 Households 29.49 3.88 Department of Minerals and Energy (DME) Trades & crafts 23.10 3.04 The Department of Minerals and Energy (DME), as the Transport 17.73 2.33 responsible ministry, is the most important political Industry 12.57 1.65 institution for the electricity sector. Mining companies 13.40 1.76 Others (‘General’) 167 39.03 5.14 National Electricity Regulator (NER) 17.86 2.35 Average The National Electricity Regulator (NER), an institution (volume-weighted) established in 1987, is responsible for regulating the electricity sector in South Africa. The NER managing Table 31: Average electricity prices; South Africa 2001, board appointed by the DME works independently. The ZAR cents/kWh, € cents/kWh168 core task of the NER is to issue licences for electricity transmission, distribution and generation169 and to monitor Market Actors and authorise tariffs. As of mid-2004 the authority will be responsible not only for the electricity sector, but for Eskom all sources of grid energy, in other words for oil and gas too. Eskom is the dominant electricity supply company on the African continent. It is responsible for almost all electricity generation in South Africa, for 100% of elec- White Paper on Energy Policy tricity transmission, and for a large part of electricity The White Paper on Energy Policy presented by the distribution. government in December 1998 sets out the most important energy policy goals and is at the same time the fun- Independent power producers damental strategy paper for liberalising and privatising Independent power producers still operate on the side- the electricity sector. Its core points are the free choice of lines at present. Their share in total electricity generation electricity supplier by customers, the introduction of amounts to only about 3%. Producers using renewable competition, especially in the generating sector, greater energy sources in particular have hardly made any head- participation of the private sector, and open, non-discrim- way in the past due to Eskom’s low electricity prices and inating access to the transmission system. the lack of any government support. However, the South African Government has announced greater support in Reform of Eskom the coming years, especially for those private producers The privatisation and unbundling of Eskom is set out in who obtain electricity from renewable energies. a legal framework plan of the Ministry of Public Enter- prises170. Since July 2002 Eskom has been operating as a joint stock company, in which electricity generation, transmission and distribution form separate business divisions. In a next step Eskom is to dispose of 30% of

167 This category also includes street lighting and exports by the distribution companies. 168 Source: National Electricity Regulator: Electricity Supply Statistics 2001. 169 Electricity producers need a licence if they sell more than 5 GWh of electricity per year or have a plant capacity in excess of 500 kW. 170 ‘Policy Framework: An Accelerated Agenda towards the Restructuring of State–Owned Enterprises’, August 2000. South Africa

its generating capacity by 2006 and will not be permit- Policy for Promoting Electricity ted to build up any new capacities for the time being171. Generation from Renewable In the long term the transmission grid is to be transferred Energy Sources to an independent, state-owned enterprise. Since 1994 there has been notable promotion of renew- Sapex trading platform able energy sources for electricity generation, chiefly The electricity sector is to be characterised by a multi- within the framework of electrification programmes for market model in future, in which transactions between rural areas in conjunction with off-grid applications. At electricity generators, traders and buyers can take place present there are no special rules for supplying and on several platforms. It was announced that the SA paying for electricity from renewable energy sources. Power Exchange (Sapex) will be created for this in 2004. In addition to direct electricity transactions between White Paper on Renewable Energies generators and buyers (over the counter), Sapex will also According to the White Paper on Energy Policy, the support other forms of trading, for instance via brokers. South African Government aims to introduce focused promotion for the development, demonstration and im- Reform of the distribution sector plementation of renewable sources of energy for applica- According to a decision taken by the government cabinet tions on a small and a large scale. These plans are set out in May 2001 the distribution level will be restructured, in concrete form in the White Paper on Renewable Energies so that in future only six Regional Electricity Distributors that was adopted in November 2003. Here the Govern- (REDs) with a uniform tariff structure will distribute ment has set itself the expansion target of producing electricity to final customers. As a result of differences of 10 TWh of electricity from renewable energy sources by opinion, especially regarding participation and/or com- 2013. In addition to announcing financial incentives to pensation of municipal utility companies, implementation be provided by national and international programmes, of the reform has come to a halt for the time being. The the Paper calls for development of a comprehensive final version of the Electricity Distribution Industry Bill regulatory framework including appropriate tariff struc- can only be submitted to the cabinet for signature after tures. It is expected that a strategy paper for implemen- the parties have reached an agreement. tation will be published in 2004.

Clean Development Mechanism The White Paper envisages a tendering model with South Africa joined the Kyoto Protocol in July 2002, long-term power purchase agreements as a promotion but has not yet ratified this finally. The great signifi- system for generating electricity from renewable energy cance of coal in electricity generation and the resulting sources. The NER is to devise the specific framework. emissions offer good conditions for CDM projects. The Department of Environmental Affairs and Tourism Market for green electricity (DEAT), which is responsible for climate policy, and the The NER as the regulator has announced that it will national CDM authority within the Department of develop a ‘green electricity market’. Producers will be Trade and Industry (DTI) are showing great interest in awarded certificates to distinguish electricity generated deploying CDM as an incentive mechanism for foreign from renewable energy sources.172 The electricity can be investment. Promising potential applications are seen purchased voluntarily by authorised customers who are above all in small-scale projects in the area of renewable willing to pay the additional charge compared with electricity generation. normal electricity tariffs. However, international experience shows that no sustainable market growth can be created by voluntary demand for ‘green’ electricity.

171 10% of the generating capacity is to go to enterprises owned by black South Africans within the framework of ‘black economic empowerment’. 172 www.ner.org.za/gwatts/green_watts_certificates.htm. SABRE-Gen Programme ation’ (REMT). In addition to institutional empower- In 1998 Eskom launched a programme to investigate ment, this focuses on grid-coupled electricity generation the potential applications of renewable energy sources for and electricity production in the sugar and paper indus- grid-coupled electricity generation on a large scale and tries for in-plant use. A large proportion of the financial to test these in demonstration projects. The South African resources is to come from the Prototype Carbon Fund Bulk Renewable Energy Generation (SABRE-Gen) (PCF).175 Programme has four components:

• use of biomass (SABRE–Gen – BioEnergy) Status of Renewable • generation of solar thermal electricity Energy Sources (SABRE-Gen – Solar Thermal Electric) • use of offshore wave energy (SABRE–Gen – Wave) Renewable energies currently account for approximately • use of wind energy (SABRE–Gen – Wind). 10% of South Africa’s primary energy production. The most significant element within this is the traditional use of biomass (for example firewood) as fuel for cooking Central Energy Fund and support by and heating. international donors In addition to international financial donors such as the Renewable forms of energy (mainly hydropower) only World Bank and GEF, financial aid also comes from the contribute just under one per cent to the country’s elec- national level. The funding offered by the Central tricity generation. In South Africa renewable energy Energy Fund is to be focused more on renewable energies sources are used primarily in off-grid installations. The in this connection. The Central Energy Fund (CEF), set up lack of a promotion culture and the low cost of generating in 1997, aims in particular to establish universal access electricity from coal have proved to be the main obs- to modern forms of energy, to increase the use of renew- tacles preventing the use of grid-coupled systems. able energies, and to develop a local gas market.173 Further financial aid is offered by the DME, the Devel- Hydropower opment Bank of Southern Africa, the Industrial Devel- In 2001 the installed capacity amounted to 668 MW, of opment Corporation, and the Department of Trade and which Eskom produced 661 MW. Of the six small Industry. hydroelectric power stations (< 10 MW) with a total capacity of 15 MW, two were owned by Eskom and Danish-South African programme three by municipal utilities. The only private small The four-year Capacity Building Project in Energy Effi- hydroelectric power plant has a capacity of 3 MW.176 ciency and Renewable Energy (CaBEERE) was launched The total installed capacity of mini hydropower systems in August 2001 in cooperation between the South African is estimated at 0.4 MW. and Danish governments. In addition to developing strategies for disseminating renewable energies and pos- Hydropower potential sible implementation measures on a policy level, the Low precipitation, often only seasonal watercourses and programme focuses on implementing concrete projects, frequent droughts and flooding restrict the potential for building up a database with service enterprises, and pre- hydropower.177 The realisable potential for hydroelectric paring fundamental sector studies.174 power plants with a capacity of less than 50 MW is approximately 9.9 TWh. Potential locations for micro Prospects of a World Bank project hydropower systems, which are chiefly located on the An application has been submitted for a World Bank Eastern Escarpment, are quantified at 3500–5000.178 project entitled ‘Renewable Energy Market Transform-

173 For further information see www.cef.org.za. 174 For further information see DME under www.dme.gov.za. 175 The financial volume amounts to US$ 165 million. Of this, US$ 103 million is to be provided by private sources, US$ 6 million each by GEF and the South African Government, and US$ 50 million by the PCF. 176 This private plant is located in Nelspruit in the province of Mpurnalanga and has proved to be a cost-effective, profitable project. 177 Further information on potentials and resources is available in the South African Renewable Energy Resource Database (SARERD): www.csir.co.za/environmentek/sarerd/index.html. 178 Source: DME: Green Power-Business Opportunities in South Africa for Renewable Energy Independent Power Producers. 2003. In the White Paper for Renewable Energies the potential is stated as 11 TWh. South Africa

At present there are no special promotion programmes hybrid operation with PV or diesel systems, is also being for hydropower. In isolated cases small plants are pro- investigated.183 moted within the context of rural electrification. It remains to be seen to what extent the strategy announced Promotion for 2004 of promoting renewable energies contains spe- With the exception of the SABRE-Gen Programme, cific hydropower components. which focuses on researching the integration of large wind power plants into the national electricity grid, there are Wind Energy currently no notable national promotion programmes or The potential for wind energy is good, especially in the incentive systems for wind power plants. area of the long coastal strip and inland escarpments. DME published a wind atlas for the first time in 1995. UNDP/GEF wind energy programme Measurements were conducted in Eastern Cape Province The use of wind power in South Africa is accordingly with EU support at the end of the 1990s. An average still at the pilot or demonstration phase. With the aid of wind velocity of 6 m/s was measured at a number of dif- international organisations a promotion framework for ferent locations. At Cape Point average peak wind grid-coupled wind power plants is now to be developed. speeds of 9 m/s were recorded. A new wind atlas based This is the approach being taken by the UNDP/GEF’s on detailed data is being drawn up by Eskom within the South Africa Wind Energy Programme (SAWEP) that is framework of the SABRE-Gen Programme. The annual being implemented in cooperation with the Danish wind energy potential is estimated at 26 TWh.179 organisation DANCED (Danish Cooperation for Envir- onment and Development). It focuses on policy consult- Installed and planned wind farms ancy in respect of a regulatory environment for inde- At present only one Eskom pilot wind farm in Klipheuwel, pendent electricity generation, the development of 50 km from Cape Town, consisting of three wind turbines financing mechanisms, and support for local project from different manufacturers (rated at 660, 750 and developers. 1,750 kW) feeds electricity into the integrated network.180 Otherwise wind power plants are used to Biomass generate electricity in small village grids (total approxi- Measured against total primary energy production, bio- mately 45 kW) and off-grid individual systems mass in the form of fuel wood, wood wastes, dung, (altogether roughly 500 kW).181 bagasse and charcoal ranks very high. These energy sources contribute 60% to the energy consumption of A first relatively large pilot wind power project near private households. Darling (on the west coast) with a capacity of 5.2 MW is at an advanced planning stage. With a mean wind So far only sugar cane bagasse is of any relevance in elec- speed of 7.5 m/s at an elevation of 50 m and a capacity tricity generation. In 2001 it accounted for 300 GWh or factor of 30%, annual electricity production is estimated 0.15% of total electricity generation. Bagasse is used to to be 13 GWh. A power purchase agreement with the fuel combined heat and power stations directly in the city of Cape Town was signed in December 2002. Prelim- sugar factories. The electricity produced here is largely inary investigations are also being conducted at a former used within the plants and only a small part is fed into military location on Langefontain Farm. It is being con- the grid. In 2001 five bagasse-fired plants with a total sidered whether to install 50 turbines of the 2.3MW capacity of 105 MW had licences; all were owned by class there.182 In addition to these major projects the use independent power producers. of small wind power facilities in mini grids, often in

179 Source: Database SARERD, www.csir.co.za/environmentek/sarerd/index.html. 180 See also: Smit, Riaan: Eskom’s first wind energy experiences at Klipheuwel, 2003. 181 Traditionally wind energy is mainly used in windmills for pumping water. Currently over 20,000 such installations are in operation and with approx. 12 MW account for three quarters of the installed capacity. See DME-Department of Minerals and Energy: Baseline Study on Wind Energy in South Africa; Final Report; Capacity Building in Energy Efficiency and Renewable Energy Program; February 2003. 182 See also DME: Baseline Study on Wind Energy in South Africa; Final Report; Capacity Building in Energy Efficiency and Renewable Energy Program; February 2003; or also Winkler, Harald: Renewable energy policy in South Africa: policy options for renewable electricity; Energy Policy; online version 2003. 183 This includes the Lubisi Dam Community Project, in which two imported 2.2kW small wind power systems were installed in combination with PV systems. In the Hluleka Nature Reserve two 2.5kW wind power installations together with PV systems and diesel generators support the electricity and water supplies to a small settlement. Biomass potential Over and above the GTZ activities, isolated biomass At present only about a quarter of the electricity gener- applications are promoted within the framework of the ation potential of bagasse is exploited.184 In addition, state support for rural electrification, such as sewage- wastes from sawmills and paper factories could contribute based biogas recovery in rural schools. Resource potentials 7,600 and 4,500 GWh respectively to electricity and possible applications of biomass technologies are supply. The annual energy potential of harvest resi- being determined within the framework of the SABRE- dues is 341 GJ, and residues from livestock breeding Gen Programme by Eskom. could contribute some 5,600 GWh to electricity production.185 Solar Energy With average daily solar irradiation of 4.5 to 6.5 kWh/m2, The White Paper on Renewable Energies discusses South Africa is excellently equipped for solar energy implementing a promotion framework for biogenic applications. The solar radiation values were recorded in fuels. A 30% tax rebate for bio-diesel is being considered. a database and published on a map.188

Biogas The total installed PV capacity is approximately 12 MWp, So far there has been hardly any production of biogas of which only about 150 kW is attributable to grid- from waste water or solid wastes, but this option certainly connected systems. In addition to solar home systems has potential. The energy content of the domestic and (SHSs), distributed facilities are used for telecommunica- industrial solid wastes generated in 1990 amounted to tions and water pumps as well as for schools and hospitals. 40.5 PJ. Methane gained from sewage could contribute 36 MWh annually to electricity supplies. The provision of small PV systems for isolated supply units in areas that cannot be cost-effectively connected The portfolio of the World Bank’s Prototype Carbon Fund to the national grid represents an essential element of (PCF) includes a South African landfill gas project. In the the promotion programme for the electrification of rural city of Durban CO2 certificates will be earned following regions. successful completion of a project converting methane gas from three landfill sites into electricity, and sale of these Concession programme and 350,000 solar home systems certificates to the PCF has been agreed contractually. At the beginning of 1999 a promotion programme was Turbines with a rating of up to 10 MW are to be used.186 launched to install a total of 350,000 SHSs. In each of seven regions, 50,000 systems are being installed and GTZ ProBEC programme serviced by a private concessionaire for each region who The GTZ programme for saving biomass (ProBEC) has will be identified through a call for tenders. Half of the also been in operation in South Africa since 1998. The investment costs are being covered by subsidies. goal of ProBEC is to meet the energy requirements of low-income population groups in a socially sustainable One of the concessionaires is the Shell-Eskom joint ven- and environmentally sound manner. For instance, ProBEC ture.189 In a first phase this joint venture tackled the elec- supports private-sector activities for producing and trification of 6,000 households in Eastern Cape Province marketing energy-efficient technologies and techniques during 1999 and 2000. Of these 6,000 systems, 4,700 for cooking and heating.187 On the basis of the success were still in operation in 2002. The ‘Powerhouse Sys- achieved to date, further international donors are provid- tems’ are made available to the households for a one-off ing additional funds for the project. payment of ZAR 150 (€ 19.75). The users have to buy a magnetic card costing about € 7 to activate the system. The credit volume on the card is used up after

184 Each year some 7 million tons of bagasse are produced. Given an output of 200 kWh/t achieved using modern combined-cycle power plants, the calculated potential would be 1,400 GWh. 185 See SARERD, www.csir.co.za/environmentek/sarerd/index.html. 186 See United Nations Industrial Development Organization (UNIDO): CDM Investor Guide South Africa, 2003. 187 Sub-components of the programme comprise the use of more energy-efficient technologies, cost-effective production and marketing of such items of equipment, the use of alternative, renewable sources of energy, more efficient fuelwood management, and improved kitchen management. For further information see www.probec.org. 188 www.csir.co.za/environmentek/sarerd/index.html. 189 The other concessionaires to date are: Electricité de France – Total Fina Elf Consortium, Nuon-Raps (Netherlands, South Africa), Solar Vision (PTY) Ltd and Renewable Energy Africa (Pty) Ltd. South Africa

about 30 days and the card has to be recharged. The fees Rural Urban Total include complete maintenance of the system, including Population 21,565,933 23,888,278 45,454,211 battery changing. However, socio-economic and technical Households 4,436,604 6,547,045 10,983,650 190 factors have impeded smooth running of the system. Electrified households 2,231,924 5,225,063 7,456,987 50.3% 79.8% 67.9% KfW is contributing € 15.9 million to the investment Non-electrified households 2,204,680 1,321,982 3,526,663 costs for 27,000 SHSs in the areas of Eastern Cape and 49.7% 20.2% 32.1%

North West Province. The concessionaire will be selected Table 32: Electrification, South Africa; 2002; absolute and %192 in an international call for tenders to be conducted at the beginning of 2004. 2.5 million connections in 5 years Following the end of apartheid, one of the world’s most Eskom plans to carry out non-grid-coupled electrification ambitious and successful electrification programmes of 16,400 schools and some 2,000 hospitals by 2005. was started in South Africa. A National Electrification The schools are to be equipped with an average PV Forum (NELF), set up by the new government in 1993, rating of 500 W, while larger systems are planned for formulated the goal of creating 2.5 million new house- rural hospitals.191 Financing will be realised via national hold connections between 1994 and 1999, as well as of and international promotion. electrifying all schools and hospitals. A large proportion of the electricity provision close to conurbations was to GTZ solar cooker field test be effected by connecting households to the grid, while The GTZ conducted a pilot project on solar cookers in localised solutions on a large scale were envisaged above South Africa between 1998 and 2003. The core task of all for rural regions. Within the framework of the the project was to clarify possibilities and conditions for Reconstruction and Development Program (RDP) these using selected solar cookers, and to achieve greater clar- figures were even exceeded. ity about how this new cooking option was accepted by potential target groups (field test). The results of the INEP field test were supplemented by a broad-based market The Integrated National Electrification Programme potential study conducted in cooperation with UNDP- (INEP) unites the electrification measures of NER and GEF, which confirms that market potential is substantial. Eskom. It has been running since 2001, with the DME The results and a business case were presented to various taking over responsibility in April 2002. The aim is to organisations, including the Central Energy Fund provide all households with access to electricity within (CEF). CEF thereupon took a decision in favour of inten- a period of 10 years. The electrification programme is sifying activities on the way to commercialisation. being financed by international donors and via the National Electrification Fund, which is fed directly from the national budget and is watched over by the DME. Rural Electrification Free basic electricity supply Degree of electrification On the basis of pilot projects and studies, Eskom is While only one third of households enjoyed electricity reviewing whether to introduce a free basic electricity supplies in 1994, by the end of 2002 the share had risen supply in rural areas, currently dimensioned at 50 kWh to two thirds. However, some 7.3 million South African per household and month. households are currently still without access to electricity. Most of the non-electrified households are located in the provinces of KwaZulu Natal and Eastern Cape. Exchange rate (02 Dec. 2003): 1 rand (ZAR) = 100 cents = € 0.132

190 The many thefts and a lack of willingness to pay have proved problematic. Furthermore, the prepaid card technique proved to be complicated and liable to faults. Shell is considering a new distribution model (Neue Energie, 09/2003, p. 110). 191 The electrification programme for rural hospitals with renewable sources of energy is being headed by the Independent Development Trust (IDT). 192 Source: National Electricity Regulator: Lighting up South Africa 2002. Information Sources • NER – National Electricity Regulator: Electricity Supply Statistics 2001 for South Africa.

• CDM Executive Board: The Clean Development • NER – National Electricity Regulator: Mechanism. A guide for potential participants in Lighting up South Africa 2002 South Africa. September 2002 • Pew Center on Global Climate Change: • DME – Department of Minerals and Energy: Climate Change mitigation in developing countries. Baseline Study on Wind Energy in South Africa. October 2002 Final Report. Capacity Building in Energy Efficiency and Renewable Energy Program. • Schäffler, Jason: Wind Energy in South Africa. Time February 2003 to implement? South Africa Wind Energy Association • DME – Department of Minerals and Energy: Green Power – Business Opportunities in South • Spalding-Fecher, R: Indicators of stustainiability for Africa for Renewable Energy Independent Power the energy sector: a South-African case study. Energy Producers. 2003 for Sustainable Development (Journal of the Inter- national Energy Initiative), Volume 1, Issue 1, • DME – Department of Minerals and Energy: March 2003 White Paper on the Promotion of Renewable Energy and Clean Energy Development. Part One – • United Nations Industrial Development Promotion of Renewable Energy. Draft. Organization (UNIDO): CDM Investor August 2002 Guide South Africa, 2003

• Eberhard, A.: The political, economic, institutional • Winkler, Harald: Renewable energy policy in South and legal dimensions of electricity supply industry Africa: policy options for renewable electricity. reform in South Africa. At Conference Energy Policy. Online version 2003 ‘The Political Economy of Power Market Reform’, Standford University, CA, US, February 2003. + Business Report (www.busrep.co.za): ‘2004 will usher in rival to Eskom’, 21 Decembre 2003.

• EIA – Energy Information Administration: South Africa. September 2002. www.eia.doe.gov

• Eskom: Annual Report 2002

• EU Synergy Programme: Accelerating the Market Penetration of Renewable Enery Technologies in South Africa, Action Plan Summary. March 2001

• Fossil Energy International: An Energy Overview of the Republic of South Africa. Last updated on October 20, 2003

• Karottki, Schäffler, Banks: Wind Energy in South Africa – time to implement. Renewable Energy World, May-June 2001

• NER – National Electricity Regulator. Annual Report 2002/2003 South Africa

Contact Addresses Tel. 0027 (11) 800 8111 Fax 0027 (11) 800 4338 E-mail: [email protected] Department of Minerals and Energy www.eskom.co.za/ DRC Synodal Centre 234 Visagie Street Central Energy Fund (CEF) Private Bag X59 6 Protea Place Pretoria 0001 Sandown Tel. 0027 (12) 317-90 00 PO Box 786141 Fax 0027 (12) 322-34 16 Sandton 2199 www.dme.gov.za Tel. 0027 (0)11 535-7000 Fax 0027 (0)11 874-0472 National Electricity Regulator NER www.cef.org.za PO Box 40343 Arcadia 0007 Solar Energy Society of Southern Africa (SESSA) Tel. 0027 (12) 401 4600 PO Box 152 Fax 0027 (11) 401 4700 La Montagne 0184 E-mail: [email protected] Tel. 0027 (12) 804 3435 www.ner.org.za Fax 0027 (12) 804 5691 E-mail: [email protected] GTZ Office Pretoria www.sessa.org.za/ PO Box 13732 Hatfield 0028 Southern African German Chamber of Commerce Tel. 0027 (12) 3420181 and Industry Ltd. Fax 0027 (12) 3420185 PO Box 1272 E-mail: [email protected] Cape Town 8000 www.gtz.co.za/ Tel. 0027 (21) 422 3311 Fax 0027 (21) 422 5577 SAWEA South African Wind Energy Association E-mail: [email protected] P.O. Box 837 www.sagc.co.za Sunvalley 7975 Tel. 0027 (21) 789 2009 Development Bank of Southern Africa E-mail: [email protected] PO Box 1234 www.icon.co.za/~sawea Halfway House, Midrand, 1685 South African National Energy Association (SANEA) Tel. 0027 (11) 313 3911 Suite 121 Fax 0027 (11) 313 3086 PostNet RAU Private Bag X12 www.dbsa.org Melville 2109 Tel. 0027 (11) 489 2173 Industrial Development Corporation Fax 0027 (11) 489 2153 PO Box 784055 Sandton 2146 Energy and Development Research Centre (EDRC) Tel. 0027 (11) 269 3000 University of Cape Town Fax 0027 (11) 269 3116 Private Bag www.idc.co.za Rondebusch 7701 Tel. 0027 (21) 650 3230 Department of Trade and Industry Fax 0027 (21) 650 2830 Private Bag X84 E-mail: [email protected] Pretoria 0001 www.edrc.uct.ac.za/edrc/ Tel. 0027 (11) 254 9405 Fax 0027 (11) 254 9406 ESKOM E-mail: [email protected] Megawatt Park www.dti.gov.za/ PO Box 1091 Johannesburg 2001 Tunisia

Tunisia

Electricity Market attributable to consumption by private households. In 2002 the rate of rise declined compared to the pre- Generating capacity and peak load vious year, down to about 3.5%. At the end of 2002 the installed power station capacity in Tunisia totalled roughly 2,900 GW. Only 60 MW of According to projections in the 10th development plan, this was provided by hydroelectric power plants and which sets out infrastructural measures for the period 10 MW by wind power, while the rest of the capacity from 2003 to 2007, demand will increase to 14,140 GWh was entirely accounted for by thermal power stations. by 2007.195 The intention is to satisfy this growth in The petroleum and natural gas used in the thermal consumption by building an additional 770 MW of power stations has until now mostly originated from power station capacity. The total required capacity by Tunisian sources.193 The peak load in 2002 was 1,890 MW. 2011 is expected to be 4,400 MW.

Transmission and distribution grid Electricity tariffs Tunisia has a well-developed electricity grid across the The electricity tariffs for end customers are state-regu- country, especially in the northern and central areas. In lated and are set by the Ministry of Energy on the basis 2001 the transmission system comprised approximately of proposals from STEG. By international standards, the 1,300 km of 225kV lines, 1,500 km of 150kV lines and electricity tariffs are low. The tariffs are broken down in almost 1,000 km of lines carrying 90 kV. The system is two ways: according to voltage level and according to interconnected with Algeria and Libya at the 400kV the time of use. In the low-voltage sector the tariff struc- level. The distribution system has been expanded over ture has a progressive component. wide areas, particularly in the course of rural electrification. Daytime tariff Night tariff €-cents/kWh €-cents/kWh Power generation High-voltage sector 2.53 1.72 In 2002, 11,281 GWh of electricity was produced in Medium-voltage sector 3.95 3.95 Tunisia and 9,085 GWh was supplied to end customers, Low-voltage sector who numbered some 2.3 million. Electricity generation 0 – 50 kWh / month 3.82 3.82 is based almost exclusively on petroleum (55%) and > 50 kWh / month 5.37 5.37 natural gas (44.6%). Hydropower and wind accounted for a share of less than half of one per cent. Table 34: Electricity tariffs (not including taxes); Tunisia; 2002; € cents/kWh196

1998 1999 2000 2001 2002 Production 8,656 9,525 10,096 10,853 11,281 Market Actors Consumption 7,015 7,650 8,153 8,751 9,085 Ministry of Industry and Energy; Table 33: Electricity production and consumption; Tunisia; CSPIE and CIPIE 1998–2002; GWh194 The Ministry of Industry and Energy or its General Electricity consumption Directorate for Energy draws up plans for expanding In 2002 the industrial sector consumed 47% of the the energy infrastructure and implements the energy electricity, households 25% and the service sector policy adopted by the government. Most of the state 22%. On account of economic growth and the con- actors in the energy sector are answerable to the minis- tinuous improvement in the population’s living stand- try. That also includes two commissions: the ‘Com- ards, the demand for electricity has constantly risen mission Supérieure de la Production Indépendante in recent years. Between 1997 and 2001, electricity d’Electricité’ (CSPIE) and the ‘Commission Inter- consumption increased by an average of 7.7% each départementale de la Production Indépendante d’Elec- year. A disproportionate amount of this growth was tricité’ (CIPIE), which were both set up in 1996.

193 In view of the rising energy consumption overall and stagnating domestic oil and gas output, the country could in future be more heavily dependent on imports of fossil energy sources. 194 Source: Tunisian Statistical Office. 195 Direction Générale de l’Energie, Ministère de l’Industrie; Prévision de la demande d’éléctricité en Tunisie; May 2001. 196 Source: Tunisian Ministry of Industry and Energy. The Ministry of Agriculture, Environment and Water At the end of March 1999 the licensing agreement was Resources is responsible for the exploitation of hydro- signed for a 20-year BOT (build-own-transfer) model, power. according to which STEG commits itself to purchase the generated electricity for the duration of the agreement. The CSPIE decides on the procedures and selection cri- The power station was brought into service in 2002. teria for public tender processes and awards contracts to Another 27MW gas-fired power station began oper- independent power producers. It also passes rulings on ation in November 2003. There are plans for further the granting of tax incentives for investors. The inter- gas-fired power stations to be built by foreign firms; ministerial CIPIE carries out preliminary work for the among others, British Gas is intending to begin con- CSPIE by selecting projects for tendering, preparing struction of a 500MW power station in the third quar- bidding procedures, evaluating offers, flanking the con- ter of 2004. Commissioning is scheduled for 2006. tractual negotiations between the independent producers and the Energy Ministry, and securing the ANER granting of public subsidies on a case-by-case basis. The Tunisian National Agency for Renewable Energies ANER (Agence Nationale des Energies Renouvelables) STEG was established in 1985.199 It, too, is subordinate to the The Société Tunisienne d’Electricité et du Gaz (STEG) Ministry of Industry and Energy. The Agency concerns is a state-owned enterprise that is responsible for the itself both with the promotion of renewable energy supply of gas and electricity, and like the commissions it sources and with raising energy efficiency. also reports to the Ministry of Industry and Energy. It was founded in the 1960s in the course of nationalisa- In the renewable energy field the role of ANER is pri- tion, and since then has had sole responsibility for elec- marily to manage and provide back-up support for rele- tricity transmission and supply to end customers. vant projects. Alongside this, ANER is also responsible for training matters, awareness-raising and information STEG has no longer enjoyed a monopoly over electricity campaigns and research and development.200 Responsi- generation since 1996, when private producers were bility for the expansion of the use of wind energy also allowed to enter the market. IPP projects have been per- lies partly with ANER.201 mitted since Decree 96-1125 was issued, although they must be awarded within the framework of an inter- Other institutions national tendering process. Since 1999 it has also been per- 1996 saw the founding of the Centre International de mitted for gas extraction companies to operate gas-fired Technologies de l’Environnement de Tunis (CITET), power plants without a preceding bidding procedure which has the task of disseminating and promoting and to sell the generated electricity to STEG.197 Despite environmental technologies. One of the areas of activity the opening of the generating market, even in 2002 it of CITET is the development and promotion of renewable was still the case that 73% of national electricity gener- forms of energy. The Centre offers a range of training ating capacity belonged to STEG, while only 19% was and upgrading opportunities. In 2003, in connection operated by independent producers and 8% by self- with the decision to expand wind energy, an ad hoc com- generators. mittee on national wind energy development was formed with the purpose of identifying legal and insti- IPP gas-fired power stations tutional obstacles and coming up with proposals to The construction and operation of a natural-gas-fired eliminate them. power station (Rades II with a capacity of 471 MW) was put out to international tender in 1997. A consortium of international corporations was awarded the contract.198

197 Law No. 99-93 of 17 August1999: Portant promulgation du code des hydricarbures. 198 The members of the consortium were the US company PSEG, Sithe Energies (US subsidiary of the French company Générale des Eaux) and the Japanese company Marubeni. In the meantime PSEG and Marubeni have taken over the interests held by Sithe Energies. 199 Its predecessor was the Agence de Maîtrise de l’Energie (AME). 200 For example, ANER oversees the introduction of energy officers in public administrative bodies and companies, and the holding of a national energy-saving day. 201 Responsibility for technical aspects (connection to the grid) lies with STEG, while an IPP department within the Ministry of Industry and Energy is responsible for negotiations with investors and handling bidding rounds. Tunisia

Legal Framework gramme covers renewable forms of energy – specifically solar energy – and their use for generating electricity. Law 96–27 The door to private-sector involvement in the electricity In 2001 about 20 presidential decrees were issued on the sector was opened with the adoption of the law on demon- use of renewable energy, one of them being a resolution opolisation of the state-owned power utility Société on the obligatory use of solar-thermal energy in all Tunisienne d’Electricité et du Gaz (STEG) of 1996 newly constructed public buildings. The expansion of (No. 96-27). Fundamentally this allows private com- grid-coupled wind energy was declared a national re- panies to generate electricity if they have been success- sponsibility. In addition, it was announced that incentive ful in a bidding process, and to sell that electricity to mechanisms would be introduced for the recovery of STEG as a single buyer. The detailed terms and pro- energy from waste, geothermal energy and small and cedures for the granting of concessions to private gener- micro hydropower. Two commissions were called into ating companies were laid down in ordinance no. being in March 2003 to work out in detail proposals for 9661125 of 20 June 1996. institutional capacity-building and changing the regulatory framework conditions. Despite these initial steps in the direction of opening of the market, the electricity sector in Tunisia is still largely Fiscal and other incentives subject to state control and only geared to competition As yet there are no specific systems in place in Tunisia to to a limited extent. To date, as is the case with con- promote electricity production from renewable energy ventional power stations, electricity from renewable sources. Investors can, however, generally benefit from energy sources can only be fed into the STEG grid on the tax and customs duty relief. Customs duties can be re- basis of tendering processes and individual contracts duced to the minimum rate of 10%. Value-added tax can between private producers and STEG. be reclaimed entirely in the case of imported goods if they cannot be manufactured in Tunisia, and for locally Clean Development Mechanism produced capital goods. As well as this, in specific cases Tunisia ratified the Framework Convention on Climate income taxes can be remitted for up to five years and Change in July 1993, and a first national climate report investment subsidies can be granted. The Tunisian state was presented in October 2001. The Kyoto Protocol was can also contribute to the costs of expanding the infra- signed in June 2002. ANER has been given the respon- structure. If a project is considered to be particularly sibility for balancing Tunisia’s greenhouse gas emissions. important on account of the magnitude of the amount A first portfolio of potential CDM projects has been invested or the number of jobs created in Tunisia, the prepared by ANER, and alongside schemes in the fields state can also make the required land available at a sym- of energy efficiency and transport it also includes invest- bolic price.202 Decisions on concessions of this nature are ment opportunities in the areas of wind energy, biogas taken by CSPIE. exploitation and solar-thermal energy. All in all, the eight potential projects could contribute to a saving of

16 million tons of CO2. Status of Renewable Energy Sources

Hydropower Policy for Promoting Electricity Approximately 235 GWh of electrical energy was gener- Generation from Renewable ated by hydropower in Tunisia in 2000. The Sidi Salem Energy Sources dam has been in operation since 1982, and is the most important hydroelectric power installation in Tunisia. In 1977 the Tunisian Government launched a national With an installed capacity of 36 MW, the amount of research programme (Programme National de Recherche– electricity it produces every year is 40 GWh. The govern- PNR) in order to bring all the relevant actors in the ment is pursuing a target that it has set for 2010 of energy field around a single table. One area of the pro- increasing electricity generation from hydropower to

202 Large-scale wind power projects, for example, can benefit from this arrangement. about 330 GWh/a by building new plants. To bring this Site analyses about, particular focus is supposed to be placed on Various organisations (STEG, GTZ, private companies) small-scale hydropower plants. A 1.5MW power plant have conducted measurements to investigate further is currently under construction. It is part of an irrigation possible locations for wind farms in Tunisia, and are con- project, and is intended to be used in peak-load operation. tinuing to do so.204 The GTZ together with ANER has examined three locations in more detail to determine Wind Energy their suitability for siting wind farms. The locations in Although the wind power potential in certain regions of question are Enfida on the east coast, Zargis south of the Tunisia is good, with average wind velocities often over island of Djerba, and Cap Negro on the north coast. 7 m/s, and initial experience with small installations was With support from UNDP, locations were evaluated on gathered as long ago as the early 1980s, the commercial the Cap Bon peninsula, a plateau south of Thala in the use of wind power for generating electricity is still in its centre of the country, and a site near to Kebeli in southern infancy. In the past, wind energy has mainly been used Tunisia. The results of the measurements are scheduled on a decentralised basis, for example for pumping water to be published in 2004. as part of field irrigation schemes in remote regions and for the desalination of brackish water. A series of provi- International projects sional studies estimates wind potential at around An international project aimed at strengthening technical 1,000 MW. Wind power plants with a capacity of some capacities in the wind power sector was launched in 250 MW could be installed in the northern part of the 2001; it is supported financially by ANER, UNDP, country alone. CIDA205 and IEPF206. The purpose of this project is to develop grid-coupled and off-grid wind power installa- Sidi Daoud wind farm tions (including a partial investigation of wind potentials) Until now only one wind farm has been built, in Sidi and to throw light on the regulatory framework condi- Daoud (Gouvernement Nabeul) near Cap Bon. It has tions. In this connection, the Canadian consulting com- been in operation since 2000. Average annual wind pany Hélimax together with a local partner began draw- velocity at this location is 8.4 m/s at a height of 30 m. ing up a strategic study into the expansion of wind The project was put out to tender in 1996 on the basis power in 2003. Before that, too, Hélimax also compiled of a feasibility study that was drawn up between 1990 an economic study into the possible establishment of a and 1992.203 The contract for the turnkey construction wind industry in Tunisia, a training manual on wind of the wind farm, valued at US$ 9.7 million, was awarded energy and a baseline study for a CDM project in the to the Spanish manufacturer MADE. The wind farm is wind sector. operated by STEG, and with 32 turbines each rated at 330 kW it initially had a generating capacity totalling Future wind power plans: 100 MW by 2006 10.6 MW. In 2002 this was used to generate 30 GWh As part of its 10th development plan (2003–2007) the of electricity. In 2003 the wind farm was expanded by Tunisian Government is planning the construction of the addition of 12 turbines with a capacity of 8.7 MW wind farms with a capacity of about 100 MW as BOO for US$ 8.2 million. It now has a total generating projects. A prequalification round for the subsequent capacity of almost 20 MW. According to STEG, the bidding process was initiated at the beginning of 2004, generating costs including maintenance amount to and the wind farms are due to enter operation no later 2.65 US cents/kWh. This compares with avoided fuel than 2007. The construction of a further 200 MW by costs of 2.9 US cents/kWh. private investors on a purely competitive basis is envisaged for the period from 2008 to 2011 under the 11th development plan.

203 The feasibility study was drawn up jointly by STEG, AME and INM (Institut National de la Météorologie) in collaboration with the American company US Windpower. 204 For example at the Jebel Sidi Abderrahmane location in the region of Cap Bon, where STEG measured average wind velocities of over 10 m/s at a height of 45 m, and at Metline in the region of Bizerte, with an average of 9 m/s at a height of 30 m. 205 Canadian International Development Agency. 206 Institut de l Énergie et de l’Environnement des Pays de la Francophonie. Tunisia

UNDP/GEF project in cooperation with GTZ Biomass In November 2003, UNDP decided to implement a There are hardly any plants in Tunisia for the direct con- project with GEF assistance under the title ‘Develop- version of biomass into electricity. In Hammam Sousse a ment of On-Grid Wind Electricity in Tunisia for the plant has been run since July 2000 under Tunisian- 10th Plan’, which is designed to run for eight years. The Chinese cooperation which produces biogas from waste project began in 2004 and is being executed in co- from poultry breeding on an industrial scale, and con- operation with the GTZ. Within the framework of this verts the gas into electricity. The plant can process three project, which targets the large-scale exploitation of tons of poultry manure per day, and from this it pro- wind energy, it is planned that private investment of duces approximately 200 m3 of biogas, which it converts more than US$ 100 million should be funnelled into the into 300 kWh of electricity. A small biogas plant was set wind sector. The funds provided by GEF amount to up at a cattle breeding farm in Sidi Thabet for training US$ 10.25 million. purposes. In its portfolio of potential CDM projects, ANER proposes the construction of 15 biogas plants for Alongside strengthening of the institutional, regulatory landfill sites and farm enterprises, requiring the invest- and operational capacities of the key institutions ment of US$ 5.1 million. This would enable the saving through technical assistance, the generating capacity of of 322,000 tons of CO2. 100 MW that is to be built in the coming years is to be granted production-dependent financial assistance in Solar Energy the first five years of operation. Based on avoided costs The number of hours of sunshine in Tunisia is of 0.037 TD/kWh and 35% availability of the wind 2.800–3.200 h/a. The average annual irradiated energy farm, at present the additional costs are expected to be 2 is in the region of 2,000 kWh/m2. Despite these excel- to 3 US cents/kWh, about a quarter of which are to be lent conditions, there is currently little use of solar borne by GEF funds. The Tunisian Government antici- energy for generating electricity. Photovoltaic systems pates that private investors will be in a position to are mostly used for decentralised power supply for finance the remaining additional costs through subsidised border posts, lighthouses, water pumps, water desalin- export credits or emissions certificates. The government ation plants and telecommunications facilities. intends to provide only tax concessions as its own contribution to meeting the funding shortfall. In 2002, solar home systems were fitted to 1,200 remote households which were not planned to be connected to GTZ support the STEG grid for the foreseeable future. 15 schools The share of assistance from the GTZ within the project were also provided with electricity in the same way. as a whole will be used for site analysis, consultancy ser- Electricity generation from solar energy is supposed to vices to the Tunisian Government on matters relating to account for 3% of the further electrification of rural grid integration, tariff structuring and preparation of regions in the course of this decade. and back-up support for the bidding procedure. In addition, the GTZ aims to help ensure that a high quota of Geothermal Energy local value added is achieved by providing technical The geothermal springs occurring in the south of the assistance to domestic manufacturers. country have a relatively low temperature of between 30°C and 80°C. They are therefore used for therapeutic Wind energy within the framework of CDM thermal baths or for heating greenhouses. In 2000 a ANER has included the construction of wind power total of 55.8 GWh of thermal energy was obtained. Geo- installations with a total capacity of up to 155 MW in thermal energy plays no part in generating electricity. the portfolio of possible CDM projects. An expansion of this nature would require an investment amount of about US$ 155 million and could save 8.2 million tons of CO2 in the course of 20 years. Rural Electrification Information Sources

Whereas in 1994 only just under 86% of Tunisian house- • Agence Nationale des Energies Renouvelables, holds were connected to the electricity grid, by 2002 the Annual Report 2002 proportion had already reached 96%. All urban centres • Agence Nationale des Energies Renouvelables; are classed as being fully electrified. The Tunisian Energy Statistics 1999 Government plans to provide all of its citizens access to electricity by 2010. In 1999 the African Development • Ahmed Ounalli, Director Group for Strategic Bank granted Tunisia a loan of US$ 65 million to Studies, STEG: The evolution of the electricity and expand its electricity grid. gas sector in Tunisia, 2003

• bfai, Länder und Märkte/Tunesien; Tunis setzt neue A programme promoting decentralised rural electrifi- Energiepolitik um; April 1999 cation that was launched in 1995 on the basis of national and international assistance provides solar home systems • Direction Générale de l’Energie, Ministère de

(SHSs) rated at 100 Wp to households in rural areas. l’Industrie; Prévision de la demande d’éléctricité en In order to maintain the functionality of the systems and Tunisie; May 2001 the supply infrastructure in the long term, training • Global Environment Facility: Portfolio of Projects measures were implemented at the same time, covering for Reducing Greenhouse Gas Emission in Tunisia: the fields of service, maintenance and system An Overview, January 2002 monitoring.207 • Loi n° 99-93 du 17 août 1999, portant promulga- As a demonstration project, the community of Ksar tion du code des hydricarbures Ghilène in a desert area in southern Tunisia was electri- • Ministry of International Cooperation and Foreign fied with a central photovoltaic system. In this case solar Investment; Investment Incentives Code and Imple- energy is used for pumping water, operating telephones mentation Decrees, March 2000 and for lighting. • Platts: Country Profile Tunisia; February 2002

• République Tunisienne, Communication Initiale de Exchange rate (23 Nov. 2003): 1 Tunisian dinar (TD) = € 0.617 la Tunisie à la Convention Cadre des Nations Unies sur les Changements Climatiques, Octobre 2001

• United Nations Development Programme, Global Environment Facility: Project Brief, Development of Ongrid Wind Electricity in Tunisia for the 10th Plan, September 2003

• US Department of Energy (Energy Information Administration), Country Analysis Briefs Tunisia, January 2003

207 For further information see: www.citet.nat.tn/english/energies/sources.html. Tunisia

Contact Addresses Ministère de l’Industrie et de l’Energie Immeuble Nozha, Monplaisir CP 1002, Tunis Société Tunisienne d’Electricité et du Gaz (STEG) Tel. 00216 (71) 79 11 32 38, Rue Kemal Ataturk, B.P. 190 E-mail: [email protected] 1001 Tunis Tel. 00216 (71) 34 13 11 Ministère de la Coopération Internationale Fax 00216 (71) 34 99 81 et de l’Investissement Extérieur www.steg.com.tn 98, Avenue Mohamed V 1002 Tunis Belvédère Agence Nationale des Energies Renouvelables (ANER) Tel. 00216 (71) 79 85 22 3, Rue 8000 Mont Plaisir E-mail: [email protected] 1002 Tunis Belvédère Tel. 00216 (71) 78 77 00 Ministère du Développement Economique Fax 00216 (71) 78 46 24 Place Ali Zouaoui E-mail: [email protected] 1000 Tunis Tel. 00216 (71) 35 15 15 GTZ Project ANER E-mail: [email protected] 3, Rue 8000 Mont Plaisir 1002 Tunis Belvédère Embassy of the Federal Republic of Germany in Tunisia Tel. 00216 (71) 728 03 55 1, Rue el Hamra, Mutuelleville E-mail: [email protected] 1002 Tunis Belvédère Tel. 00216 (71) 78 64 55 Centre International des Technologies Fax 00216 (71) 78 82 42 de l’Environnement de Tunis (CITET) www.tunis.diplo.de Boulevard de l’Environnement 1080 Tunis Embassy of the Republic of Tunisia Tel. 00216 (71) 77 02 85 Lindenallee 16 Fax 00216 (71) 77 22 55 14050 Berlin www.citet.nat.tn/ Germany Tel. 0049-30-30 82 06 73/74 GTZ Office Tunisia Fax. 0049-30-30 82 06 83 Centre Babel, Entrée Olivier 12, rue du Lac Turkana German-Tunisian Chamber of Commerce and Industry 2045 Berges du Lac de Tunis, Tunisie 6, rue Didon Tel. 00216 (71) 860 320; 860 935; 861 741 1002 Tunis-Notre Dame Fax 00216 (71) 860 719 Tel. 00216 (71) 78 59 10, 78 52 38 E-mail: [email protected] Fax 00216 (71) 78 25 51 E-mail: [email protected] Ministére de l’Environnement et de www.ahk.net/de/tn l’Aménagement du Territoire (MEAT) Centre Urbain Nord 1080 El – Menzah Tel. 00216 (71) 70 40 00 Fax 00216 (71) 70 43 40 E-mail: [email protected]

Ministère du Commerce 37, Av. Kheireddine Pacha 1001 Tunis Tel. 00216 (71) 89 09 70 E-mail: [email protected] Albania

Albania

Electricity Market 4500

4000

3500 Generating capacities 3000

Electricity supply in Albania is based almost entirely on 2500 water power, which accounts for 87% of all installed GWh 2000 generating capacity and 95% of all generated power. 1500 1000 The total installed power generating capacity amounts 500 to 1,670 MW, including 1,446 MW from hydroelectric 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 power plants and 224 MW from thermal power plants. Households Industry Services Farming Other Three large power plants along the Dini River contribute most of Albania’s electricity (80% of the installed Figure 7: Inputs to electric power grid; Albania; 1985–2002; GWh 208 hydropower), but there are also numerous small storage power plants and run-of-river power plants. One large Power supply problems oil-fired steam power plant with a rating of 160 MW is Nearly every day in recent years, particularly during the still in service, but its outdated technology and a lack of winter months, there have been hours-long interruptions maintenance only allow part-load operation (approx. in the supply of electricity. Several factors have contrib- 60 MW). Most small-scale coal-fired power generating uted to this development: the power-generating infra- facilities are no longer in operation and probably destined structure is very outdated, relying on plants that were for permanent decommissioning. built in the late 1950s or 1970s, with no replacement or expansion of capacity to any appreciable extent since then – New combined-cycle power plant near Vlore among other things because of a lack of spare parts. In A new thermal power plant to be located near Vlore, a addition, the situation further deteriorated in 2001, when coastal town in south-western Albania, is intended to a long drought caused the water in the reservoirs to recede expand Albania’s power-generating capabilities. An oil- to levels not seen in a century. Consequently, nearly one fired combined-cycle power plant with an initial rating third of Albania's electricity had to be imported that year. of 136 MW (gas turbine with downstream steam process) will be equipped for conversion to natural gas on an The distribution networks and transformer substations availability basis. The plant may eventually be expanded were not designed to cope with today’s loads, and due to to a total rating of 400 MW. lack of maintenance, they are also in very poor condition. Hence, there have been substantial transmission losses Power generation and intermittent power failures. Moreover, grid loading Figure 7 shows how much Albania's own power pro- is rendered even heavier due to poor power factor cor- duction fluctuates as a function of annual precipitation rection (and, hence, high reactive power levels). volumes. Intensive rainfall in 1996, for example, produced a peak yield of some 5,500 GWh and even made it Changing consumption patterns possible to export some electricity. In addition to problems with power generation, the past decade has seen a marked change in consumption patterns, and the post-transition years were marred by mismana- gement in the energy sector. Albania’s infrastructure draws its character from the erstwhile planned economy, which focused on heavy industry and agriculture. Accor- dingly, major industrial plants enjoyed first priority for the supply of electricity. As long as the country was under communist rule, rural-to-urban migration was forbidden, but after the old government collapsed, a very heavy rural exodus set in between the mountainous regions and the coastal cities.

208 Chart based on ‘National Strategy of Energy’. Large settlements appeared, many of them ‘informal’, is the (KfW-promoted) construction of a 400kV connect- with total dependence on electricity for the heating of ing line with which to synchronise Albania’s power grid homes and water. That development produced a tenfold with the European UTCE network and reduce transmis- increase in household low-voltage power consumption, sion-capacity shortages. from approximately 0.25 TWh in 1990 to 2.5 TWh in 2002. At the same time, industrial demand for electricity, Electricity tariffs i.e. for medium-voltage and high-voltage power, During the planned-economy era, electricity tariffs were declined steeply. extremely low, rarely even sufficing to cover the production costs. This was financed by massive state sub-

4500 sidies. After transition and the introduction of a market 4000 economy system, the rates increased only marginally, 3500 resulting in major financial constraints for the Albanian 3000

2500 electricity supply company KESH. A split-tariffs system GWh 2000 was introduced in the autumn of 2001, and the elec- 1500 tricity prices have been raised several times since then.

1000

500 Customer Electricity price 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 (€/kWh) Households Industry Services Farming Other High voltage 0.065 Medium voltage 0.072 Figure 8: Electricity consumption by sector; Albania; 1985–2002; GWh209 Low voltage 0.086 Households: consumption < 300 kWh/a 0.029 Technical and non-technical losses Households: consumption > 300 kWh/a 0.086 The technical losses attributable to the dilapidated supply system are accompanied by a substantial share of ‘non- Table 35: Electricity prices; KESH; 4th quarter 2002; €/kWh technical losses’. Primarily, this refers to the illegal tapping of electricity and to inadequate measuring instruments for registering consumption data. Many electricity Market Actors meters are completely obsolete, and some of them are hardly functional, if they are still in place at all. Together, Monopolist KESH all these technical and non-technical losses added up to The only actor on the Albanian electricity market to 56% of all electricity injected into the power grid in 1998. date is the state-owned enterprise KESH (Korporatëa By 2002, however, upgrading of the supply system, Elektroenergjitike Shqiptare), which is a completely coupled with the accelerated installation and better vertically integrated power utility. KESH was transformed reading of electricity meters, had reduced the overall into a state-owned joint-stock company in 1995. Origin- loss level to 33% (input to network in 2002: 5,650 GWh, ally, three pilot firms were supposed to be spun off from technical losses: approx. 1,210 GWh, non-technical losses: the KESH combine and privatised. However, with the approx. 675 GWh). collapse of the financial system in 1997, the privatisation of KESH and those three firms – the local utilities in the Expansion of supply infrastructure Elbasan, Vlore and Shkoder districts – was put aside indefi- The planned measures will focus on the establishment nitely, and the pilot firms were re-integrated into KESH. and expansion of supply infrastructure. Several relevant promotion programmes have been launched with inter- Unbundling of KESH national assistance (World Bank, EBRD). Their main It is intended that will KESH be unbundled into generat- purpose is to improve the supply network infrastructure ing, transmitting and distributing divisions in accord- while reducing losses and improving energy efficiency ance with EU directives. Restructuring began in 2001 on the supply side. One important step in that direction but will initially be restricted to the completion of

209 Chart based on ‘National Strategy of Energy’. Albania

internal reform structures designed to improve the Energy strategy financial basis. Completion of the process is planned for Based on that data, the National Energy Agency (which 2006. was founded in 1997) drew up a strategy paper entitled ‘Energy Strategy for Albania’, in which various scenarios First sale of mini hydropower plants for the future development of the energy sector were The sale of 36 mini-hydropower plants by auction investigated. This strategy paper is also intended to serve (advertised in February 2003) constituted an initial step as a basis for negotiations on further decisions within the toward the privatisation of KESH. Earlier attempts to energy-policy context. auction off mini-hydropower plants had to be postponed for lack of potential buyers. The core statements and requirements for Albania’s future energy policy are: • improving energy efficiency, primarily by replacing Legal Framework electric home heating systems with systems that use alternative sources of energy, such as oil, gas or solar The institutional framework of the Albanian energy energy; sector was realigned in 1997 in the wake of Albania’s • systematically developing the distribution network crisis of state, and new reform projects were launched. while reducing technical losses; • developing alternative sources of energy for electrifi- Responsibility for the energy sector cation in order to reduce the strong dependence on The Ministry of Industry and Energy (formerly the hydrological conditions while adapting the gener Ministry for Public Economy and Privatisation) is resp- ating capacities to meet increased demand. onsible for the entire energy sector (oil, gas, electricity and renewable energy sources). Its principal task is to Basic laws for the energy sector push forward the process of reform in the energy sector The legal foundation for the energy market consists while opening the energy market for private investors mainly of the laws enacted in 1995: Law 7962 on Energy, and adapting it to satisfy European directives. Law 7970 on Regulation of Electric Energy Sector, and Law 7973 on Concessions and Participation of Private National Energy Agency Sector in Public Service and Infrastructure. The National Energy Agency, NEA, which serves as an advisory institution, has prepared a number of studies Law on Energy and scenarios on the Albanian energy sector. NEA also According to the Law on Energy, market actors partici- designed the national energy strategy (approved by the pating on the Albanian energy market must obtain a government in July 2003), which forms the basis for new licence from the regulatory authority. The law also spe- negotiations on the future orientation and structuring of cifies that the state-owned monopolist KESH is to be the energy market and provides recommendations for restructured and privatised. However, the law does not action in the energy sector. state how a future energy market should be designed. (Several decisions of central importance are being left to Albania-EU Energy Efficiency Centre; ministerial committees or being made dependent on Energy Sector Study decisions by the regulatory authority.) In 1993, in order to contend with technical problems, the Albania-EU Energy Efficiency Centre (CEE) was Article 13 of the Law on Energy mentions that local established within the framework of the European SYN- electricity supply companies are obligated to purchase ERGY Programme. CEE began work in 1995. The Alba- electricity from combined heat and power plants and nian Energy Sector Study, which analyses the entire Alba- from renewable energy sources. However, no further nian energy market, was completed in the spring of 2003. details are defined; for example, nothing is said of prices. In this respect, decisions made by the regulatory authority are to be considered binding. Law on Regulation of Electric Energy Sector ment and rehabilitation of the distribution network and The Law on Regulation of Electric Energy Sector pre- to the economic consolidation of the utility companies. scribes the establishment of a regulatory authority for monitoring and regulating the market. This led to the Clean Development Mechanism creation of an Electricity Regulatory Authority (ERA), Albania signed the Kyoto Protocol as a non-Annex I which officially began work in 1999.210 The ERA func- country, but has not yet ratified it. Within the scope of tions as an independent authority financed by way of fees flexible emission-reduction mechanisms, Albania there- levied for power-injection licences (formerly the sole re- fore could be a candidate for Clean Development sponsibility of KESH). The authority is presently still in Mechanism projects. the process of becoming established and therefore will not be able to fully exercise its assigned functions until the energy-sector reform process has made more pro- Policy for Promoting Electricity gress or perhaps even been completed. The law on regu- Generation from Renewable lation describes in detail matters of membership, fi- Energy Sources nancing and responsibilities. No specific promotion programmes The duties of the regulatory authorities are designed in In principle, the Law on Energy envisages preferential analogy to those of other European regulatory institutions. treatment for electricity generated from renewable The regulatory authority issues licences, specifies elec- energy sources. However, as yet there are no specific, tricity tariffs and is intended to serve as mediator in the appropriate promotion programmes or further-ranging event of disputes between customers and electricity supply fundamental statutory regulations in place. companies. The creation of a law on renewable energy sources is being The law on regulation contains many formulations with deliberated in connection with the current restructuring contradictory statements regarding jurisdiction between and reorganisation of the Albanian energy market, but the regulatory authority and the state. Grid access for no actual draft bills have yet been presented. independent electricity supply companies is allowed in principle, but the details are lacking, and the responsibilities are unclear. Status of Renewable Energy Sources Law on Concessions and Participation of Private Sector Hydropower Finally, the Law on Concessions and Participation of Pri- Nearly 95% of all electricity generated in Albania is vate Sector in Public Service and Infrastructure is intended hydroelectricity. The geography and climate in the north- to govern the handling of energy-market concessions in ern and eastern parts of the country are very conducive general. However, the awarding criteria in connection to the exploitation of water resources for energy gener- with the Law on Regulation of Electric Energy Sector ation. The country's in part very rugged mountains have are in part contradictory and/or unclear. an average useful gradient, or head, of 600m and receive precipitation at an annual rate of 1,500mm/m2. Legal framework being revised All in all, restructuring of the energy market has not yet According to information provided by the National been completed, though the aforementioned crises in Energy Agency, only 35% of the exploitable water re- recent years have produced a shift in policy toward a sources have been developed, so the remaining potential higher status for the energy supply sector. Substantial is enormous. The hydropower yield can be increased changes in the framework conditions can be anticipated both by developing new sites and by rehabilitating or for the near future as a result of the national energy strat- upgrading the old, mostly outdated plants. Together, egy, with priority likely to be attached to the develop- the replacement of obsolete plants and the construction

210 At first, the problem was that a newly established ERE was supposed to regulate a market with a largely undefined structure. Moreover, it was poorly financed and understaffed. Consequently, it never actually began its institutional work. In 1999, the ERE was dissolved and replaced by the ‘Electricity Regulatory Authority’ (ERA). Albania

of new ones could provide additional installed capacities Solar Energy totalling 3,000 MW, or an annual yield of some 10 TWh. Albania has a Mediterranean climate with solar irradiation levels between 3.2 kWh/m2d in the northern parts Wind Energy of the country and 6 kWh/m2d in the southern regions, With the exception of a few small historical wind mills averaging out to 4 kWh/m2d. for the country as a whole. used for grinding grain and driving water pumps, the The mean number of hours of sunshine ranges from country has no means of exploiting wind energy, at least 2,000 to 2,800 per year. not in the form of modern wind turbines for generating electricity. It follows that Albania is basically very well suited for exploiting solar energy. Until now, though, only a small The lack of measured data makes it difficult to assess the number of thermal systems have been put to use, and wind energy potential, but good wind conditions may there is accordingly little technical know-how available be presumed for the Adriatic coast, and also for parts of in connection with solar energy; what is more, no regional the interior. insolation data has been collected.

Likewise, the lack of measured data for siting purposes, GEF pilot project for PV-based drinking water supply and, even more so, the low prices paid for electricity are The National Energy Agency, however, is interested in impeding the further exploitation of wind energy in expanding the use of solar energy. In cooperation with Albania. UNDP and GEF it has initiated a relevant pilot project devoted to establishing and expanding rural drinking Biomass water supply systems employing solar power installa- Biomass in the form of wood is, by tradition, the principal tions. Following an initial feasibility study in 2002, a source of energy, particularly in the mountainous regions. number of sites were to be selected in 2003 for the There are no significant projects under way that deal installation of solar-assisted water pumps. No final with the exploitation of biomass for energy recovery on documentation of the project is yet available. The pro- a sizeable scale or in any connection other than the burn- ject work also includes the surveying of local solar ir- ing of wood for heat. radiation data in certain parts of the country. Again, no results have yet become available. Assessing the biomass potential It is difficult to assess the given potentials for harnessing Geothermal Energy the energy content of biomass. While Albania is still Albania has a few geothermal springs, but most of them characterised by industrial agriculture as a result of the have water temperatures that reach only about 35°C. In erstwhile planned economy, that sector underwent par- one stretch of land extending from the Kruje region on tial collapse following the political transition. (Albania the Adriatic Coast north-west of Tirana all the way has since become dependent on food imports.) The ab- down to Greece, there are springs with higher tempera- sence of data recording means that no reliable figures are tures (>65°C at a depth of 3,000 m). The highest tem- available on biomass resources. peratures of all (106°C) are found in the Peshkopi area near the Macedonian border. In terms of standing forest (36% of the land area), the energy-generating potential of wood could be estimated Until now, virtually the only use to which geothermal at approximately 12.8 GWh, and that of rural livestock springs have been put is to feed thermal baths. There are production, i.e. of biogas, at roughly 3.5 GWh211 (both no local or district heating networks or electricity gener- figures based on 1995 inventories). ating installations in operation.

Considering the moderate temperatures of the spring waters, the use of geothermal energy in the future can be expected to remain restricted to direct thermal applica-

211 Source: EBRD, Renewable Energy Country Report, Albania. tions, i.e. for heating buildings or for agricultural uses • Platts, Energy in East Europe, Issue 19; (greenhouses). There are no specific promotion pro- The McGraw Hill Company; London, 07.2003 grammes for the development of geothermal energy. • Power Transmission and Distribution Project, Implementation Completion Report; World Bank; Washington D.C., 07.2003 Rural Electrification • Renewable Energy Country Report, Albania; Projects such as the one promoting the use of solar European Bank for Reconstruction and Develop- pumps for the supply of drinking water in rural regions ment; London, 09.2002 indicate that there is certainly potential for stand-alone • Republik Albanien, Information der deutschen installations based on renewable energy sources in cer- Botschaft; Deutsche Botschaft, Tirana, 02.2003 tain areas. • Review of the Legal and Regulatory Framework; South eastern Europe Electrical System Technical Information Sources Support Project SEETEC; Montreal, 05.2002

• The Energy in Albania, EEC Newsletter; Issue No. • Albania - Stabilisation and Association Report 21 (12.2002), No. 22 (03.2003), No. 23 (06.2003), 2003; Commission staff working paper; No. 24 (09.2003); Albania EU Energy Efficiency Brussels, 03.2003 Centre; Tirana

• Albania at a Glance, Key Data Albania; • The Sources of Geothermal Energy in Albania; World Bank, Washington D.C., 08.2003 Worlds Geothermal Congress 2000; Kyushu -

• Albania License Application; Electricity Regulatory Tohoku, 05.2000 Authority; Tirana, 1999

• Albanian Electrical Regulatory Authority, Yearly Report, Year 2000: Tirana, 03.2001

• Albanien Bericht; Osteuropa Institut München; Munich 2002

• Black Sea Energy Review Albania; Black Sea Regional Energy Centre, The Energy Charter Secre- tariat; Sofia / Brussels, 04.1999

• Energy Tables; Albanian Institute of Statistics; Tirana, 2003

• National Strategy of Energy, Summary and Action Plan for the Implementation of the National Strategy of Energy; National Energy Agency; Tirana, 07.2003

• Needs Assessment Report, South eastern Europe Electrical System Technical Support Project SEETEC; Montreal, 02.2002

• Overview, Albania EU Energy Efficiency Centre Homepage; www.eec.org.al/Overview.html Albania

Contact Addresses UNDP Country Office Desh Moret E4 Embassy of the Republic of Albania in Germany Shkurtit Street 35 Friedrichstrasse 231 Tirana 10969 Berlin Albania Germany Tel. 00355-4-233-122 Tel. 0049-30-25 93 05-0 Fax 00355-4-232-075 Fax 0049-30-25 93 05 99 E-mail: [email protected] E-mail: [email protected] URL: www.undp.org.al

Embassy of the Federal Republic of Germany in Albania Korporata Elektroenergjitike Shqiptare KESH Rruga Skènderbeu 8 Blloku Vasil Shanto Tirana Tirana Albania Albania Tel. 00355-4-27 45 05 Tel. 00355-4-232 046, 234 888, 234 886 Fax 00355-4-23 34 97 Fax. 00355-4-232 046, 234 886 E-mail: [email protected] E-mail: [email protected] URL: www.kesh.com.al Ministry of Industry and Energy Deshmoret e Kombit Boulevard Tirana Albania Tel. 00355-4-227 617 Fax 00355-4-234 052 URL: mepp.gov.al

Ministry of Environment Rruga e Durresit 27 Tirana Albania Tel. 00355-4-225 134 Contact: Besnik Baraj E-mail: [email protected]

National Energy Agency Blv. Deshmoret e Kombit 2 Tirana Albania Fax: 00355-4-271 559 Contact: Besim Islami, Chairman Tel. 00355-69-2149 127 E-mail: [email protected]

Albania-EU Energy Efficiency Centre ‘Zhan D'Ark’ Blvd P.O. Box 2426 Tirana, 2 Albania Tel. 00355-4-233835 Fax 00355-4-233834 Contact: Edmond Hido, Director E-mail: [email protected] URL: www.eec.org.al Bosnia-Herzegovina

Bosnia-Herzegovina

Electricity Market gramme for reconstruction of the energy infrastructure in Bosnia and Herzegovina. The objective of the Power Energy sources III Programme, which is scheduled to continue until Electricity supplies in Bosnia and Herzegovina are March 2005, is to recommission the high-voltage net- essentially based on coal-fired steam-turbine power sta- work (especially the 400skV lines) and to establish the tions and the exploitation of hydropower. The reserves of institutional capacity of an independent national system brown coal in Bosnia and Herzegovina are estimated at operator. almost 3.9 billion tons. In 2001, 78% of the extracted brown coal was used for power generation. Imports of oil Bosnia and Herzegovina’s electricity infrastructure was and natural gas largely meet the needs of industry, trans- built up after the Second World War and in 1955 was port and heat generation for space heating. Natural gas integrated into what was then the Yugoslavian electri- is imported exclusively from the Russian Federation (via city grid. Whereas the high-voltage network was con- a pipeline through the Ukraine, Hungary, Yugoslavia trolled from Belgrade from that time on, generation and and Montenegro). At present, annual demand is at distribution remained under regional management. roughly one third of pre-war consumption levels, at 150 to 200 million m3. Supply areas Following independence in 1992, the entire energy Generating capacity and electricity generation infrastructure was divided up into three separate supply In 1990 the installed power station capacity amounted areas according to the ethnic majorities of the popula- to approximately 4 GW. As a consequence of the war in tion, the area of the Bosnian utility Elektroprivreda the 1990s, about 56% of the generating capacity and Bosne i Hercegovine (EPBiH), the area of the Croatian 60% of the transmission and distribution grid were utility Elektroprivreda Hrvatske Zajednice Herzeg- heavily damaged. The previous power-station capacity Bosne (EPHZHB) and the area of the Serbian utility levels were attained once more in 2002. Some of the Elektroprivreda Republike Srpske (EPRS). coal-fired power-station units in Tuzla and Kakanj also supply local district heating networks. The EPBiH transmission grid is mostly back up to the pre-war level, extending to 2,166 km in the 110kV and 1990 1997 2002 220kV range; it is only in the 400kV range that certain Total installed MW 3,994 n.D. 3.842 important links to neighbouring countries are still miss- capacity ing. The distribution network has a total length of some Coal-fired power stations MW 1,957 (49%) n.D. 1,790 (47%) 30,000 km. EPHZHB operates 1,060 km of high-voltage

Hydroelectric plants MW 2,037 (51%) n.D. 2,052 (53%) lines and a distribution network of about 12,000 km. EPRS maintains 2,395 km of transmission lines and a dis- Electricity generation GWh 13,090 9,300 10,795 tribution network of roughly 78,000 km. Electricity GWh 11,822 6,974 9,257 consumption The major consumption centres are Sarajevo, Mostar, Table 36: Installed capacity, electricity generation and Tuzla and Trebinje. The location of the coal-fired power consumption; Bosnia and Herzegovina; 1990, 1997, 2002; MW, GWh212 stations and hydropower plants and the unfavourable subdivision of the supply areas mean that complex and At 10,795 GWh, electricity production in 2002 was costly electricity transit settlements are needed between about 82% of pre-war production in 1990. the three electricity suppliers.

Electricity grid Electricity consumption Since 1996 the electricity grid has been rebuilt and Electricity consumption in 2002 was 9,257 GWh, renewed with international support. A central role has roughly 78% of the figure from 1990. Bosnia and Her- been played in this by the World Bank, which is cur- zegovina along with Slovenia are the only net electricity rently accompanying the third stage of an aid pro- exporters among the former Yugoslav republics.

212 Source: Platts – Energy in East Europe 2003; US Department of Commerce 1998. Tariff structure for end customers The precise graduation of prices applied by the utility The three power utilities submit proposals for the tariff company EPBiH in 2001 is shown in Table 37. A structure to the responsible energy ministries, or in the distinction is drawn between high-voltage tariffs (110 kV, case of EPHPHZ to the administrative authority of the 35 kV and 10 kV) and low-voltage tariffs, and the low- relevant canton. The prices are set by the political insti- voltage range is further broken down into households, tutions. In 2001 and 2002 there were standardised commercial users and public lighting. In addition, the tariffs for both of the power utilities in the Federation of price groups are divided into low, high and peak tariffs Bosnia and Herzegovina, which is why in the table according to the time of year and time of day. below the only differentiation is between the Federation and the Republika Srpska. Market Actors

Electricity prices In 1992/93 the supply of electricity was divided up into In 2002 the net electricity prices for industrial cust- three separate companies along the dividing lines omers worked out at an average of 2.6 € cents/kWh in between the ethnic population groups: EPBiH and the Federation and 4.9 € cents/kWh in the Republika EPHZHB in today’s Federation of Bosnia and Herzego- Srpska. The net prices for smaller commercial customers vina, and EPRS in Republika Srpska (RS). were in the region of 10 € cents/kWh in the Republika Srpska and between 6.9 and 13.7 € cents/kWh in the Elektroprivreda Bosne i Hercegovine (EPBiH) Federation of Bosnia and Herzegovina, thus making EPBiH, which has its head office in Sarajevo, is the them comparable to German prices. The net electricity largest of the three power utilities, with about 600,000 price for private households was significantly below the customers and an installed power station capacity of equivalent prices in Germany, at 5.9 € cents/kWh in 1,790 MW. Almost 79% of the 5,474 GWh generated the Federation and 5.2 € cents/kWh in the Republika in 2002 was produced in the two coal-fired power sta- Srpska. tions in Tuzla and Kakanj, with the remaining 21%

High and medium voltage Low voltage

Tariff rate Households Other Public consumers lighting

Season Day 110 kV 35 kV 10 kV Groupe l Group ll Group lll Group lV Group V Group l Group ll

Capacity (€/kW) High 8,70 9,66 11,60 2,30 2,30 2,30 0,28 0,28 10,35 10,35 * Low 5,80 6,44 7,73 1,53 1,53 1,53 0,18 0,18 6,90 6,90 *

Energy (€-ct/kWh) High High 3,32 3,99 4,95 6,14 7,67 7,67 6,14 7,67 8,28 13,68 9,20 High Low 1,66 1,99 2,47 * 3,83 2,56 * 3,83 4,14 6,84 * High Peak * * * * * * 12,27 12,27 * * * Low High 2,22 2,66 3,30 4,09 5,11 5,11 4,09 5,11 5,52 9,12 6,14 Low Low 1,11 1,33 1,65 * 2,56 2,56 * 2,56 2,76 4,56 * Low Peak * * * * * * 8,18 8,18 * * *

Table 37: Net electricity tariffs of EPBiH, as at 1.4.2001, € cents/kWh213

213 Data source: compiled on the basis of information from EPBiH. Bosnia-Herzegovina

coming from the three hydropower plants in Grabovica, Legal Framework Jablanica and Salakovac. As consumption in 2002 was only 3,070 GWh, it was possible to export approxi- State Enery Regulatory Commission SERC mately 2,030 GWh. The bulk of the exported electricity Legal jurisdiction over energy policy in Bosnia and was routed to the EPHZHB supply area. Smaller quan- Herzegovina lies largely with the two entities, the Feder- tities were also exported to Croatia and Slovenia and to ation of Bosnia and Herzegovina and Republika Srpska. Serbia and Montenegro. According to the law on liberalisation of the electricity market adopted in April 2002 (Law on Electricity Elektroprivreda Hrvatske Zajednice Transmission, System Regulator and Operator in BiH), Herzeg-Bosne (EPHZHB) which was supplemented in both entities by a corres- EPHZHB, which is based in Mostar, is the second power ponding law on electricity generation and distribution utility in the Federation of Bosnia and Herzegovina and (Law on Electricity of the FBiH and RS), in future a state has 130,000 customers. It operates five hydropower commission (SERC) is to take over regulatory tasks for plants (Rama, Capljina, Jajce I, Jajce II and Mostar) the transmission grid, whereas generation, distribution with a total output of 1,086 MW. In 2002 EPHZHB and trading are to be the responsibility of the regulatory generated 1,175 GWh, and was therefore unable to commissions of the individual areas (ERCFBiH and meet the demand in its own supply area itself, which ERCRS) separately. amounted to 2,987 GWh. Unbundling the electricity supply companies Elektroprivreda Republike Srpske (EPRS) In order to bring this about, it is planned to unbundle EPRS is the power utility for Republika Srpska, and has the three previous electricity suppliers into separate 370,000 customers. EPRS operates two large lignite- parts for transmission, distribution and generation. On fired power stations in Gacko and Ugljevik, and three the basis of the study produced by the PA Consulting hydropower plants in Bocac, Trebinje and Visegrad. It Group in December 2001, ‘Bosnia and Herzegovina: also has smaller hydropower plants and owns holdings Power Sector Restructuring and Privatization Analysis in hydropower plants outside the country. Altogether and Action Plan’, the entities have envisaged that this this brings EPRS to an installed capacity of 1,361 MW. unbundling should take place in four stages. In 2002 production amounted to 4,080 GWh, while consumption in its own supply area totalled 3,200 GWh. The redistribution of resources and personnel to the areas of generation, distribution, transmission and Central coordination system management is scheduled to take place in the In 1998 the Joint Power Coordination Centre (ZEKC) first stage. During the second stage it is intended that was founded with assistance from the World Bank; this the future generating and distribution companies is a body in which the three power utilities coordinate should begin to operate as separate units, and new invoic- the reconstruction and operation of the 400kV grid. At ing systems will be introduced. In the third stage the the same time it constitutes the first step towards set- newly formed generating and distribution companies ting up an independent system operator (ISO) within will operate as a consortium and produce performance the framework of the privatisation process. reports for potential investors. The fourth and last stage will comprise the privatisation of the individual companies. In the generation sector it is recommended that four separate companies should be formed for the coal- fired power stations and three companies for the hydropower plants. Privatisation of energy supply Policy for Promoting Electricity Whereas at the legislative level the liberalisation process Generation from Renewable Energy has already progressed a relatively long way, the utility Sources companies are still at the initial stages of unbundling. Action plans for the privatisation of energy supply were The serious damage caused by the war meant that until adopted in both constituent republics in July 2003. Full now efforts have concentrated on rebuilding the energy privatisation is planned for the period from 2004 to 2006. infrastructure. The traditional use of hydropower and the fact that there is still considerable unused potential Independent system operator is leading at present to work being focussed on an expan- At the higher state level an independent system operator sion of hydropower. (ISO) is to have the task of guaranteeing trouble-free operation of the system. In order to achieve this, a national Remuneration for infeed of renewable energy transmission grid operator is to be created. The laws to In 2002 the government adopted a resolution to pro- bring this about214 were passed in October 2003 by the mote the generation of electricity from renewable Council of Ministers of Bosnia and Herzegovina and still energy sources. In this, the electricity suppliers or grid have to be confirmed by parliament. operators are obliged to accept electricity from renewable energy sources in their grids and to pay a fixed rate Electricity wholesaling for it. The level of remuneration for the infeed of electri- As far as electricity wholesaling is concerned, a distinc- city from renewable energy sources with a maximum tion is drawn between three categories of customers: quali- installed capacity of 5 MW is coupled to the amount of fied consumers (QCs) such as energy-intensive industries, the medium-voltage tariff (10 kV; 4.95 € cents/kWh). regional electricity traders (RETs) and independent retail This tariff is multiplied by a correction coefficient depend- traders (IRTs). Whereas the RETs represent the indepen- ing on the type of renewable energy involved in order to dent trading departments of the electricity distribution obtain the applicable infeed tariff. companies, the IRTs are supposed to be new, autonomous market participants. As the electricity market is opened Energy source Correction Feed-in-tariff coefficient (€ cents/kWh) step by step, initially only qualified consumers are to be able to purchase their electricity freely. Small-scale hydropower plants 0.80 3.96 Landfill-gas and biogas plants 0.77 3.81

Clean Development Mechanism Wind and geothermal 1.00 4.95 Bosnia and Herzegovina ratified the UN climate change power plants agreements in September 2000; it has not yet signed or Photovoltaic installations 1.10 5.45 ratified the Kyoto Protocol. The latter step is a prerequisite for participation in the Clean Development Table 38: Infeed remuneration and correction coefficients, Federation BiH215 Mechanism (CDM), by means of which industrialised countries could transfer parts of their obligation to The definition of the term “renewable energies” in the reduce greenhouse gases to Bosnia and Herzegovina. Bosnian regulation governing electricity infeed differs Austria has already expressed its interest in this connec- from the EU directive on the promotion of electricity tion to undertake projects in the country. from renewable energy sources in the internal electricity market. Furthermore, the sections on 'national indicative targets' and 'guarantee of origin of electricity produced from renewable energy sources' stated in the EU directive are not taken into account in the regulation adopted by the Federation of Bosnia and Herzegovina. Discussions are therefore currently in progress to produce an infeed directive that would be standard for the whole of Bosnia and Herzegovina and in conformance with EU policy.

214 Law on the BiH Company for the Transmission of Electrical Energy; Law on Independent Service Operator for Electrical Energy. 215 Compiled on the basis of the resolution on the method of determining the level of remuneration for electricity from renewable energy sources with an installed capacity of up to 5 MW by the Government of the Federation of Bosnia and Herzegovina of 2002. Bosnia-Herzegovina

Status of Renewable Energy Sources Small-scale hydropower plants The potential for small-scale hydropower plants is put at Hydropower 2,500 GWh/a.217 At present there are about ten plants The theoretical potential of hydropower in Bosnia and with a total capacity of 31 MW; two other plants are Herzegovina is stated as being 8,000 MW, the technical under construction, and 20 plants with a total capacity potential 6,800 MW and the economic potential of 28 MW are planned. In addition, a study by the Feder- 5,600 MW. With an installed capacity of 2,052 MW ation of Bosnia and Herzegovina lists a further 42 loca- (53% of electricity generation), hydropower is highly tions for small-scale hydropower plants with a total significant in Bosnia and Herzegovina, although its capacity of 51 MW which could be built at existing potential is far from being fully exploited yet (37% of weirs. the economic potential). The majority of the installations are more than 30 years old. Various projects there therefore currently in progress to modernise and expand existing plants.216 Table 39: Hydropower plants; Bosnia and Herzegovina, status 2001218

Power River Commis- Type of plant Type of Head Design Mean mass Installed sioned turbine (m) mass flow flow capacity plant (m3/s) (m3/s) (MW)

Trebinie 1 RS Trebisnjica 1968 Storage Francis 86,5 3x70 81 2 x 54+1 x 60 Dubrovnik 1 RS Trebisnjica 1965 Storage Francis 270 2x45 94 2 x 108 Trebinie 2 RS Trebisnjica 1981 Run-of-river Kaplan 20 1x45 94 1x8 Capljina F Trebisnjica 1979 Pumped storage Francis 220 2 x 112,5 29 2 x 215 Rama F Rama 1968 Storage Francis 285 2x32 33 2x80 Jablanica F Neretva 1955 Storage Francis 93,7 6x30 112 3 x 25+3 x 30 Grabovica F Neretva 1982 Storage Kaplan 34 2 x 190 136 2x58,5 Salakovac F Neretva 1982 Storage Kaplan 42 3 x 180 183 3x70 Mostar F Neretva 1987 Storage Kaplan 21,5 3 x 120 194 3x25

Jajce 1 F Pliva 1957 Run-of-river Francis 88,4 2x30 40 2x30 Jajce 2 F Vrbas 1954 Run-of-river Francis 42,5 3x27 72 3x10 Bocac RS Vrbas 1982 Storage Francis 52 2 x 120 78 2x55 Visegrad RS Drina 1989 Storage Kaplan 43 3 x 267 342 3 x 105 Total BiH 2064

EPBiH is currently building a 126MW hydropower Foreign investors in the hydropower sector plant at Konic; the work should be completed by the Currently there are two projects funded by foreign end of 2003. EPRS is planning to build five new hydro- investors (the Swiss company Geva and the Austrian power plants. By 2008 there are supposed to be two company Small Hydropower Tirol) which envisage the plants with a capacity of 450 MW built at Buk Bijela construction of one and four small hydropower plants and Srbinje, by 2010 a further two plants at Krupa and respectively in Central Bosnia, with a total capacity of Banja Luka and in the longer term a 160MW plant at 5.4 MW. Both investors have concluded contracts with Dabar. EPHZHB planned to complete two relatively EPBiH to feed electricity into the grid for a period of small hydropower plants at Pec Mlini (30 MW) and 20 years. Small Hydropower Tirol has also entered into Mostarsko Blato (60 MW) by the end of 2003. a DBOT (Design–Build–Operate–Transfer) agreement with the Central Bosnian canton of Srednjbosanski according to which the plant is to pass into the ownership of the canton after 20 years.

216 Source: Energy Country Renewable Profiles, EBRD, http://projects.bv.com/ebrd/renew_profile.htm. 217 Source: Energy Country Renewable Profiles, EBRD, http://projects.bv.com/ebrd/renew_profile.htm. 218 Data source: EPBiH. Plants with a capacity of less than 8 MW are not included. There is presently an ongoing initiative launched by canton level at all, the results are not accessible. It can be Austria to invest € 350 million in up to five hydro- assumed, however, that there is considerable potential power plants in Bosnia and Herzegovina with the inten- for the use of biomass for energy generation in the for- tion of using these to achieve part of the CO2 reduction estry sector (roughly 50% of the land area of Bosnia and targets for the Kyoto Protocol. To that end, however, Herzegovina is wooded) and in agriculture. Bosnia and Herzegovina would first have to ratify the Protocol. Utilisation of residual wood According to a study conducted by Innotech HT GmbH, Wind Energy Berlin, in 2003 on behalf of the GTZ, there is an unex- Up to now there have been insufficient measurements ploited potential of approximately 1 million m3/a of available to produce an estimate of the potential for residual wood, wood waste etc. which could be used to wind energy across the whole of Bosnia and Herzego- provide heat to 130,000 residences or 300,000 inhab- vina; for the time being, therefore, only a qualitative itants. assessment can be made. In a similar pattern to that in Germany, the wind blows more strongly in autumn and One field where wood is already used in Bosnia and Her- winter and less strongly in the summer. The infrastruc- zegovina is where wood waste is converted into electrical ture offers adequate conditions for connecting possible energy in steam power plants, such as in the state-owned locations to the grid, as the high- and medium-voltage Krivaja factory in Zavidovici, manufacturing furniture network is well developed and the damage has been and timber houses. With a maximum thermal output of largely repaired. 15 MW, peak electricity outputs of 4.5 MW are generated for the factory’s on-site power needs. There are also plans In a preliminary study carried out on behalf of the GTZ with the local authority for a group heating scheme in it was established that there is an economic potential of the locality, but because of a lack of funding it has so far approximately 600 MW that could be developed by not been possible to put these into practice. 2010, on the assumption that an appropriate incentive system to build wind power installations is set up. Suf- Use of landfill gas ficiently suitable geographical locations appear to be Near Sarajevo a landfill gas plant with a 350kW gener- available. For example, there are promising wind values ator has been built with Austrian support; its capacity is shown by measurements taken before the war for the due to be doubled in the near future. The electricity is region of Trebinje through Mostar to Bogojno, and more fed into the urban grid. The remuneration for electri- up-to-date measurements from meteorological stations city generated from biomass, as set by the government and airports which reveal large areas of the country with decree of 2002, is low in the Federation of Bosnia and wind velocities of over 10 m/s at a height of 10 m on Herzegovina at 3.81 € cents/kWh. 150 days in the year. 1.5.4 Solar Energy The first systematic wind measurement project in the With regard to solar irradiation, Bosnia and Herzego- region of Mostar was planned for 2002, but a lack of vina can be counted among the more favourable loca- funding meant that it was not possible to implement it. tions in Europe with solar irradiation figures of The supply company EPHZHB does remain interested, 1,240 kWh/m2/a in the north of the country and up to however, in making progress with such schemes. 1.600 kWh/m2/a in the south. Despite this, the use of solar energy can only be described as insignificant. Biomass Apart from the traditional use of firewood and the recyc- The thermal exploitation of solar energy with flat-plate ling of wood waste in the wood-processing industry, collectors is also practised to only a limited extent. there is no reliable data on the exploitation of biomass in Bosnia and Herzegovina. If studies have been carried out in the Federation of Bosnia and Herzegovina at the Bosnia-Herzegovina

Photovoltaics Information Sources One of the first PV installations is being fitted on the roof of an orphanage in Trebinje with assistance from the • Bosnia and Herzegovina – Regulatory framework, GTZ. The installation is also intended to be used for Southeast Europe Regulatory Forum, Bucharest, training purposes for the local electrical trade. In view of 12.2000 the relatively high cost involved, the introduction of • Bosnia and Herzegovina Country Brief, The World photovoltaics on the market beyond very small-scale Bank Group, 2003 consumers far from the utility grid is dependent on promotion programmes and international projects. • Bosnia and Herzegovina Dataprofile, World Development Indicators Database, The World Geothermal Energy Bank Group, August 2002 According to the available studies, Bosnia and Herzego- • Bosnia and Herzegovina Energy Sector, Central vina has a geothermal potential of 33 MWth. It must be Eastern Europe Business Information Centre, said, though, that the temperature at the three known US Department of Commerce, 1998, www.mac.doc. locations in Bosanski Samac (85°C), Kakanj (54°C) and gov/eebic/countryr/bosniah/market/bihenerg.htm Sarajevo (58°C) is too low for electricity generation, which is why the reserves are currently only under con- • Bosnia and Herzegovina Project Performance sideration for thermal exploitation. Before the civil war Assessment Report, Emergency Power Reconstruc- there was an initial pilot project for a 1-MW plant near tion Project – Second Electric Power Reconstruction Sarajevo, which was designed with a volume flow of Project, Report No. 26472, The World Bank, 240 l/s with water at a temperature of 58°C. The project 7.2003 was not completed, however. 219 • Development Strategy Bosnia and Herzegovina – PRSP Second Draft for Public Discussion, Ministry Geothermal use near Sarajevo of Foreign Trade and Economic Relations, Sarajevo, Current activities relating to geothermal energy con- 3.2003 tinue to be limited to exploitation for thermal use. For example, a group of buildings in Llidza (a suburb of • Energy Country Renewable Profiles, Bosnia and Sarajevo) is to be heated with geothermal energy. If Herzegovina, Version 0.6b, NV Consultants on higher temperatures are discovered in the course of the behalf of the European Bank for Reconstruction and exploratory drilling, there are also plans for partial con- Development, Cyprus, 9.2002 version to electrical energy. The project is being handled • Geothermal Resources in the Balkans; Liz by a German-Bosnian company with the participation of Battocletti, Bob Lawrence & Associates, inc.; EAN-Nord GmbH from New Brandenburg, Germany. April 2001 At present the company is attempting to obtain promotional funds for further exploratory drilling. • Investment Opportunities in Bosnia and Herzego- vina, South East Europe Investment Conference, paper given by the Foreign Investment Promotion Rural Electrification Agency of Bosnia and Herzegovina, Zürich, 9.2003

• Laying the foundations for clean development: With a distribution network extending to a total length preparing the land use sector, a quick guide to the of about 120,000 km, Bosnia and Herzegovina has a Clean Development Mechanism, International Insti- well developed electricity grid. It can be assumed that tute for Environment and Development, 3.2002 the rural areas of Bosnia and Herzegovina are also for the most part connected to the electricity grid. • National Environmental Action Plan, Federal Ministry of Physical Planning and Environment and Ministry of Physical Planning, Civil Engineering and Ecology, Bosnia and Herzegovina, 3.2003

219 Source: Geothermal Resources in the Balkans; Liz Battocletti, Bob Lawrence & Associates, inc.; April 2001. • Platts – Energy in East Europe, Issue 19, Contact Addresses The McGraw Hill Companies, London, 25 July 2003

GTZ – Deutsche Gesellschaft für • Principles of elaboration of strategy of Energetic Development in Bosnia and Herzegovina Technische Zusammenarbeit Federation; Faculty of Mechanical Engineering, Splitska 6 University of Sarajevo, June 2003 71 000 Sarajevo Tel. 00387-33-206 307 Fax 00387-33-206 307 URL: www.gtz.de E-mail: [email protected]

Embassy of Bosnia and Herzegovina Ibsenstrasse 14 10439 Berlin Germany Tel. 0049-30-814 71 210 Fax 0049-30-814 71 211 E-mail: [email protected]

Embassy of the Federal Republic of Germany PP488 71000 Sarajewo Tel. 00387- 33-27 50 00 Fax 00387- 33-65 29 78 E-mail: [email protected]

Foreign Investment Promotion Agency of Bosnia and Herzegovina Branilaca Sarajeva 21/III 71000 Sarajevo Tel. 00387-33-278 080 Fax 00387 33-278 081 URL: www.fipa.gov.ba E-mail: [email protected]

Office in Banja Luka Kneza Milosa 15 51 000 Banja Luka Tel./Fax 00387-51-310 135 E-mail: [email protected]

Investment Guarantee Agency Fra Andjela Zvizdovica 1, 71000 Sarajevo Tel. 00387-33-262 720 Fax 00387-33-262 730 URL: www.igabih.com Bosnia-Herzegovina

Federal Ministry of Energy, Mining and Industry Elektroprivreda Bosne i Hercegovine Ltd Alipasina 41 Vilsonovo Setaliste 15 71000 Sarajevo 71000 Sarajevo Tel. 00387-33-663 779 Tel. 00387-33-751 000 Fax 00387-33-220 619 Fax 00387-33-751 008 E-mail: [email protected] URL: www.elektroprivreda.ba General Manager: Enver Kreso Republic of Srpska Ministry of Energy and Mining Tel. 00387-33-751 002 Trg Srpskih Junaka 4/3 Fax 00387-33-751 003 78000 Banja Luka E-mail: [email protected] Tel. 00387-51-215 118 Fax 00387-51-213 433 JP Elektroprivreda HZ Herceg-Bosne d.o.o. E-mail: [email protected] Ulica Mile Budaka 106a Mostar Chamber of Commerce of Bosnia and Herzegovina Tel. 00387-36-323 216 Branislava Durdeva 10 Fax 00387-36-326 779 71 000 Sarajevo URL: www.ephzhb.ba Tel. 00387-33-663 631 E-mail: [email protected] Fax 00387-33-663 632 URL: www.komorabih.com OHR – Office of the High Representative Emerika Bluma 1 Chamber of Commerce of Federation BiH 71000 Sarajevo Branislava Durdeva 10 Tel. 00387-33-283 500 71 000 Sarajevo Fax 00387-33-283 501 Tel. 00387-33-663 370 URL: www.ohr.int Fax 00387-33-663 635 URL: www.kfbih.com WB – The World Bank Resident Mission in BiH Hamdije Kreaevljakovica 19 Chamber of Commerce of Republika Srpska 71000 Sarajevo Dure Danicica 1/II Tel. 00387-33-440 293 78000 Banja Luka Fax 00387-33-440 108 Tel. 00387-51-310 908 URL: www.worldbank.ba Fax 00387-51-303 273 E-mail: [email protected] URL: www.pkrs.inecco.net EBRD – European Bank for Reconstruction FIA – Foreign Investors Association and Development Tel. 00387-33-230 719, 230 720 Obala Kulina Bana 4 Fax 00387-33-230 721, 230 722 71000 Sarajevo Chairman: Ekrem Dupanovic Tel. 00387-33-667 945 Fax 00387-33-667 950 URL: www.ebrd.com Georgia

Georgia

Electricity Market Transmission grid Georgia’s electricity grid consists of a transmission grid Installed capacities (500 kV, 220 kV, 110 kV and 35 kV) about 6,200 km Electricity generation in Georgia is based 80% on long, a distribution network (10 kV and 6 kV) that is hydropower and the remaining 20% on gas-fired steam 20,500 km long, and a low-voltage network (0.4 kV) turbine power stations. Of the installed power station with a length of about 53,000 km. capacity of approximately 4,800 MW, only at most 2,400 MW was in operable condition in 2003. The The 576km-long 500kV line forms the backbone of the output available at any specific time was generally transmission grid and links Georgia with Russia and lower, however, depending on precipitation and the Azerbaijan, as well as the generating regions in the west availability of flowing water. with the electricity consumption centres in the east. It crosses Abkhazia and was frequently the cause of The hydroelectric power station capacity of 2,843 MW nationwide power cuts, attributable partly to high snow is shared between 23 large-scale plants and about 80 loads in winter and partly to sabotage and insufficient small generating plants of less than 10 MW each. The maintenance. largest power plant is the Inguri power station with an installed capacity of 1,300 MW. In 2003, however, oper- Electricity generation and consumption able capacity was only 650 MW. The plant is to be dis- In 2002 total electricity consumption was 7,215 GWh, connected from the grid completely for three months for of which 750 GWh was imported from Russia. repair works in spring 2004. Operable capacities of below 60% are assumed for the other hydroelectric 14000 power stations too. 12000

10000 The statistics list two gas-fired steam power stations, 8000 6000

Gardabani (1,850 MW) and Tkvarcheli (220 MW), and GWh 4000 a combined heat and power plant in Tbilisi (18 MW, of 2000 which 10 MW is in operation) with a totalled installed 0 capacity of 2,088 MW. However, the Tkvarcheli power -2000 -4000 station is irreparably damaged and no longer contributes 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 to electricity generation. Only one of the two largest Generation Imports Exports Grid losses Consumption 300 MW units of the formerly ten-unit Gardabani power station operates regularly. The other has been Figure 9: Development of electricity generation and consumption in Georgia; 1992–2002; GWh220 under repair since a serious incident in December 2001. Three other units are only brought onto load in emer- Especially in winter there are bottlenecks when supply gency cases since the electricity generating costs are too from hydropower is low and household consumption high for regular operation. peaks.

The Ministry of Energy is pursuing plans for the con- Electricity losses struction of a new 250 MW coal-fired power station High technical and non-technical losses cause major near Tkibuli. A foreign investor is being sought for the problems for Georgia’s electricity supply system. Total project. The coal is to come from the nearby mines losses including internal use by the power stations are whose reserves are quantified at 268 million tons. estimated at 55–60% of gross electricity generation for the year 2003.

220 Source: GNERC 2003. Technical transmission losses amount to 15%. The main Tbilisi Other regions load dispatching centre in Tbilisi is obsolete: for example €-cents/kWh €-cents/kWh it does not allow remote control of switching operations up to 100 kWh 3.93 up to 75 kWh 2.61 or automatic adaptation of electricity generation to load 101 - 200 kWh 4.43 76 –150 kWh 2.74 demand. Switching instructions are issued by telephone 201 - 400 kWh 4.93 over 150 kWh 2.90 and are carried out manually. over 400 kWh 5.44

As much as 40% of losses are accounted for by electri- Table 40: Net electricity tariffs for low-voltage consumers; Georgia; January 2004; €-cents/kWh221 city distribution, including a substantial share of electricity consumption that is not recorded due to defective or lacking measuring equipment and theft. Market Actors

The distribution companies only receive payment for Market structure about 30% of the electricity supplied to final customers, Up to 1995, electricity supply in Georgia was provided and in turn only pass on about 10% of revenues to the by the government-owned and vertically integrated Georgian Wholesale Electricity Market (GWEM) for utility company Sakenergo. Within the framework of electricity supplies. 12% of all electricity is consumed in the liberalisation and privatisation process, work started the provinces of Abkhazia and South Ossetia, but is not on unbundling Sakenergo in 1996. For this the govern- paid for. So far the Georgian Government has only ment enterprise was divided into divisions for gener- covered about 10% of losses due to unsettled billings for ation, transmission and distribution, and privatisation these supplies. was started step by step in the fields of generation and distribution. According to a study by the U.S. firm PA Consulting, total electricity supplies delivered in 2001 were worth US$ 404 million. Of this amount only US$ 91 million was recovered from consumers settling bills, with most of this remaining with the electricity distributors.

As a consequence, most of the market participants are highly indebted, which is why there is no capital available for infrastructure investments in the fields of transmission and distribution. In the field of electricity generation this leads to the Georgian power station operators not paying their gas bills to Russian importers, for 222 example, which, in turn, results in supply interruptions, Figure 10: Structure of the electricity market; Georgia and thus to shutdowns of the steam power plants. Fur- thermore, investment funds are lacking for maintenance Wholesale market and repair of the power stations. The Georgian Wholesale Electricity Market (GWEM) was set up as a legal entity for electricity trading and Electricity tariffs commenced its work in July 1999. It constitutes a Electricity tariffs have risen rapidly since the electricity pooling of all licensed market participants and bulk market was liberalised in 1997. Whereas households customers. In 2000 about 60–65% of electricity con- had to pay 1.54 €-cents for one kilowatt-hour of elec- sumption was traded via GWEM, while the remain- tricity in 1996, since January 2004 (tariff decision of ing 35–40% was sold through bilateral contracts. In 14 August 2003) the electricity price in the capital city January 2002 a consortium consisting of the Spanish has risen to as much as 5.44 €-cents/kWh in accordance energy supplier Iberdrola, the Spanish electricity trad- with the progressively staggered tariff schedule. ing market OMEL, and the British consulting firm

221 Source: GNERC. 222 Figures in brackets show the number of licensed participants in the market. Georgia

IPA took over management of GWEM for a period of Georgian Takla GmbH) and the Ajara Distribution five years. Company (100% state-owned) in the region of Adzha- riya. Electricity generation In January 2001 there were 46 licensed electricity Telasi, as the electricity supplier to the capital city, is the generators in Georgia. These have either been privatised most important distribution company in Georgia, already or are being managed by the government-run meeting 44% of total national electricity demand in 2000 Sakenergogeneratsia until they are privatised. Since (a further 35% was distributed by the other companies September 2003 the most important private electricity and 21% was supplied directly to industrial firms). On generator has been the Russian energy holding company 23 May 2003, PA Government Services Inc. entered Unified Energy System of Russia (RAO UESR). It owns into a management contract for GUDC with the task of two 300MW units of the Gardabani power station and preparing the distribution company for privatisation. holds leasing contracts for 25 years for the hydroelectric The Ajara Distribution Company is still state-owned. In power stations Khrami I and II (223 MW), giving it view of the special situation of Adzhariya, privatisation total generating capacities of 823 MW. is not likely to be imminent.

The Tbilisi combined heat and power station has also Electricity imports and exports are controlled by GSE, been privatised and belongs to Sakgazi AG, which is JSC Sakrusenergo (50% RAO UESR) and Transenergy owned by the Russian gas trader Itera. Among the (50% RAO UESR). small and medium-sized hydroelectric power plants, facilities with a capacity of 270 MW have already been privatised or leased under long-term contracts. In Legal Framework 2002 the Greek firm Terna entered into a three-and-a- half-year management contract for the Vartsikh hydro- In Georgia the Ministry of Fuel and Energy is the au- electric power station. The plant is to be overhauled thority responsible for the energy sector and for developing with the aid of a KfW loan and the capacity expanded and implementing a national energy policy, as well as for to 184 MW. ensuring secure supplies.

Electricity transmission The Georgian National Energy Regulatory Commission The LLC Georgian State Electric System (GSE) is Geor- (GNERC) is an independent, public-law body and is gia’s state-owned transmission grid operator and com- responsible for setting electricity and gas tariffs for prises two business divisions, transmission and system generation and feeding power into the grid, as well as for operation. The Irish company ESB International took consumer tariffs. In addition the GNERC issues licences over management of GSE for five years in March 2003. for the generation, transmission, distribution, import- The Georgian transmission grid itself is owned by three ing and exporting of electricity, and is the dispute-set- companies: GSE, JSC Sakrusenergo (50% RAO UESR) tling body for the various market participants. Finally, and Telasi (75% RAO UESR). it is also responsible for supervising electricity trading (GWEM). Electricity distribution Electricity distribution for the 1.1 million electricity Electricity market law of 1996 customers in Georgia is divided between five licensed Liberalisation and privatisation of Georgia’s electricity distribution companies: the Georgian United Distribu- market began in 1996 with Presidential Decree #437 of tion Company (GUDC, 100% state-owned) with 4 July 1996 ‘On Restructuring of the Electricity Sector’, 630,000 customers, Telasi (Tbilisi Distribution Com- which governs the unbundling of the state electricity pany; 75% RAO UESR) with 340,000 customers, supplier Sakenergo into the segments of generation, Relasi (Rustavi Distribution Company; 75% Telasi), the transmission and grid operation, and distribution. Kakheti Distribution Company (owned 75% by the Law on Electricity and Gas of 1997 A UNDP project on ‘Promotion of the use of renewable The Georgian electricity sector is governed above all by energy sources for local energy production’ funded by the Georgian Law on Electricity and Gas of 1997 and GEF and KfW is set to start. The objective is to dis- amendments of 1999. This law defines liberalisation of mantle administrative obstacles and promote free com- the electricity and gas market and thus above all the petition, as well as to set up a promotion fund for hydro- tasks and objectives of GNERC and GWEM, and lays power and geothermal energy. down the conditions for issuing licenses and pricing.

Clean Development Mechanism Status of Renewable Energy Sources Georgia ratified the UN climate change agreements in 1994, established a National Climate Protection Pro- Hydropower gramme in 1996, and acceded to the Kyoto Protocol in The hypothetical hydropower potential is estimated at 1999. Consequently the conditions for participating in 194 TWh a year (about 40% of this from power plants measures within the framework of the Clean Develop- rated at less than 30 MW) and the annual economic ment Mechanism are in place. Initial proposals for CDM potential at 32 TWh. This corresponds to more than projects in the wind sector are already on hand. four times Georgia’s current total electricity consumption. So far there are some 100 hydroelectric power stations with a total installed nominal output of 2,843 MW. Policy for Promoting Electricity Due to the poor condition of the plants only about Generation from Renewable Energy 5.6 TWh was generated in 2001 instead of the expected Sources 10 TWh. The six largest hydroelectric power stations are undergoing repairs. Renewable energy sources are not considered explicitly in the existing law on electricity and gas. However, Small hydropower plants there are two presidential resolutions on renewable or The installed capacity of the 80 or so smaller hydroelectric ‘non-traditional energy sources’‚ dating from 1997 and power plants (output below 10 MW) totals 110 MW. In 1998 in which the goal of promoting renewable energy addition about 80 possible new locations for such plants is formulated in general terms. At present, though, there have been defined, with a total capacity of some 350 MW. are no special regulations or tariffs relating to feeding As in the case of large-scale hydroelectric power stations, electricity from renewable energy sources into the grid. many projects and plans have been drawn up for expanding and building smaller hydroelectric power plants, Tax legislation but these have not yet become reality due to a lack of In the field of tax legislation, imported equipment de- funds. signed to exploit renewable energy sources is exempted from value-added tax. In addition, revenues from the Promotion fund for small hydropower production and installation of equipment designed to The project on ‘Promotion of the use of renewable exploit renewable energy sources are also exempted from energy sources for local energy production’ supported by value-added tax. Furthermore land for systems exploiting the UNDP and funded by GEF and KfW is to contain a renewable energy sources is exempted from land tax. promotion fund for refinancing loans for rehabilitating small hydropower plants as of 2004, which is intended Internationally promoted projects to benefit private power station operators, helping them In 1997 a GEF-financed study project was implemented to repair and expand non-operative small hydroelectric on how to achieve the CO2-saving goals set on the basis of power plants rated at below 10 MW. the UN climate change agreements. The greenhouse gas emissions from 1980 to 1997 were registered and pilot projects in the fields of wind power, geothermal energy, hydropower, biomass and solar energy were suggested. Georgia

Wind Power use in rural areas and quantified the biomass potential

In the Russian study ‘Masterplan of Wind Power Devel- at over 600 MWth. opment of the USSR till 2010’ of 1989 the technical potential of wind power in Georgia is estimated at 41% of Georgia’s territory is wooded. Firewood is very 83 TWh a year. With mean annual full-load hours total- widely used, especially in rural regions. As a result of the ling 2,500 h, this would result in a technical potential collapse of the gas and district heating networks in the of 33,200 MW. cities, the demand for firewood has soared there too. The Georgian State Office for Statistics quotes the Extensive wind measurements demand for firewood in 2001 as 8.6 million m3. Extensive wind speed measurements at a height of 30 m were conducted for this study and a rough map of windy Project proposal for biogas plants areas in Georgia was drawn up. According to this the A biogas project was proposed for Georgia within the most promising areas lie in the South Caucasus north of framework of the Eastern Climate Change Network Mleta, the Kura River Valley near Tbilisi and Khashuri, (ECCN). The proposal includes the condition that a pro- the south Georgian Uplands around Lake Paravani (in motion fund for small loans € 1,000 to € 1,200) be set the area bordering on Turkey and Armenia), and the up for constructing 100 biogas plants in 46 villages in southern coast of the Black Sea. The categorisation of the district of Akhaltsikhe. The project is to be imple- wind speeds can be described as very rough. At locations mented by the Energy Efficiency Center Georgia in mapped with over 6 m/s at a height of 30 m, wind cooperation with Bioenergy. speeds of 8 to 10 m/s were measured at a height of 10 m in some cases. Solar Energy Georgia has considerable potential for exploiting solar The Karenergo Wind Energy Scientific Center is cur- energy. Direct and global radiation reaches daily values rently engaged in producing a wind atlas with the help of 4.5 to 7 kWh/m2 at the most promising locations, of international participation. For this purpose wind corresponding to annual values of 830 kWh/m2 to measurements at 10 to 12 locations are being correlated 1,670 kWh/m2. with the data from about 40 meteorological stations and then evaluated. The measurements for the wind atlas are Zone Global radiation Direct radiation Number of clear due to be completed in spring 2004. days per year kWh/m2 May–Nov. kWh/m2/a kWh/m2 Plans for two wind farm projects Two wind projects with CDM financing were proposed A 1,400–1,670 530–560 830 65–85 for Georgia within the framework of the Eastern B 1,360–1,450 500–530 780–800 55–65 Climate Change Network (ECCN) project (1998 to 2002) C 1,330–1,400 470–500 750–780 50–55 that was implemented with support from the EU Com- D 1,250–1,330 440–470 720–750 40–50 mission’s Synergy Programme. Under these projects a E 1,250–1,400 390–440 690 30–40 40MW wind farm could be constructed in the Batumi region and a 20MW wind farm in the Potii region. Table 41: Global and direct radiation in various zones; Georgia; kWh/m2;223 Both locations are on the southern coast of the Black Sea. The project partner in both cases is the Karenergo Wind Energy Scientific Center. The solar energy sector was already researched in Georgia during Soviet Union times and there are comprehensive Biomass scientific studies on photovoltaics available, especially No comprehensive studies estimating Georgia’s bio- in the field of gallium-arsenide solar photovoltaic cells. mass potential have been presented so far. In 2000 the Georgian non-governmental organisation Bioenergy devised a national programme for developing biomass

223 Source: Kekelidze 1999, where a cartographic presentation is also available. Solar-thermal energy in the urban district of Saburtalo in Tbilisi and to drill Experience in the practical use of solar energy is available an injection borehole to feed the water back. In the in Georgia in the solar-thermal sector in particular. The preliminary study the total annual potential of locally total capacity of the installed facilities for hot-water prep- available geothermal resources in Tbilisi is estimated at aration amounts to about 4–5 MW. 1.4 TWhth, corresponding to 40% of the capital city’s heating energy demand. PV isolated systems for remote consumers In the photovoltaic sector installations have so far been Plans for geothermal electricity production restricted to small systems serving to supply small-scale At temperatures above 90°C it is possible to install an off-grid consumers. In November 2003, in the moun- additional electricity generating facility upstream of the tain region of Dusheti the seven-family village of thermal use. For example the spring at Kindghi-Okhu- Ukanapshavi (which has no access to the grid) was com- rei with a water temperature of 105°C and a flow rate of pletely equipped with PV systems for lighting and oper- 350 kg/s could be used to achieve an output of 4 MWel. ating a radio and television set. The project was organised All in all, sites of a similar structure with a total output by the non-governmental organisation Sun & Earth. of 10 to 15 MWel have been explored. It is planned to build a geothermal power station with a rating of

Geothermal Energy 500 kWel by 2005. Georgia’s geothermal energy resources have been well researched and already developed to a considerable One of the purposes of the promotion fund for hydro extent for thermal use. There are some 250 natural and power and geothermal energy resources proposed within man-made hot-water springs in Georgia.224 The geo- the framework of the said UNDP-GEF-KfW project is thermal water has a very low salt content (1–3 g/l), to pave the way for the use of geothermal energy for pro- which is why there are hardly any deposits in pipes and viding hot water and space heating for private or local pumps. So far thermal water has only been pumped out; government undertakings. there are no injection boreholes for feeding it back.

Geothermal energy for heat production Rural Electrification The data on the capacities used in 1998 varies between

250 and 400 MWth. The main fields of application are Some of the many mountainous regions in Georgia have greenhouse and swimming pool heating, fish and live- insufficient access to electricity. Furthermore there are stock breeding, drying of agricultural produce, and to a problems regarding secure electricity supply in many lesser extent industrial process heat and domestic parts of the country. heating. The geothermal water temperatures lie between 30 and 108°C.

Activities in the field of geothermal energy have declined steeply since 1990 due to shortage of capital. Between 1995 and 1999 only one single borehole was drilled for development.

Geothermal water sources have been used to provide hot water in Tbilisi since 1975. So far water has not been fed back, which leads to a reduction of the flow rate. As a pilot project within the scope of the UNDP project on ‘Promoting the use of renewable energy sources for local energy production’, plans have been developed to expand the central hot-water supply to 20,000 residents

224 A map of the main geothermal resources in Georgia can be found in: EBRD 2002. Georgia

Information Sources • N.P. Kekelidze et al., Solar Energy Resources and Their Application Perspectives in Georgia (Using

• Allison Ekberg, Unravelling the energy web, Semiconductive Photovoltaic Cells), Tbilisi State Magazine of the American Chamber of Commerce in University, Physics Faculty, Georgia, 1999

Georgia, December 2003 • Promoting the Use of Renewable Energy Resources

• Assessment of Present Institutional Setup of the for Local Energy Supply, UNDP, Ministry of Fuel and Energy of Georgia, GEO/01/G31/1G/99, 2002

The Strategic Research Centre, Tbilisi, May 1998 • UNECE: Environmental Performance Review –

• EBRD: Strategic Renewable Energy Assessment – Georgia, Switzerland, 2003

Central Eastern Europe / Former Soviet Union, • USAID E&E Office Newsletter, March 2003 Georgia, by BV International, September 2002 • World Bank Working Paper N° 8: Private Sector • Energy Sector Organizational Assessment, Participation in the Power Sector in Europe and USAID/CAUCASUS – Georgia Strategic Technical Central Asia, Lessons from the Last Decade, Assistance for Results with Training, Task Order V. Krishnaswamy and G. Stuggins, Washington, No. OUT-EE-I-00-00016-00, Final Report, D.C., 2003 Washington D.C., 2002

• Georgian National Energy Regulatory Commission (GNERC), Annual Report 2000, approved by GNERC, Decision #22, March 20th, Tbilisi, 2001

• Guram Buachidze et al., Country Update from Georgia, Proceedings World Geothermal Congress 2000, Kyushu – Tohoku, Japan, 28 May–10 June, 2000

• Guram Kutelia, Elena Chomakhidze, On the state of Affairs in the Sphere of using Renewable Energy Sources in Georgia, Informational and Analytical Review, International Energy Centre ENECO, Tbilisi, 2001

• John W. Lund et al., Worldwide direct uses of geothermal energy 2000, World Geothermal Congress 2000, Kyushu – Tohoku, Japan, 28. May–10. June, 2000

• Laying the foundations for clean development: preparing the land use sector, a quick guide to the Clean Development Mechanism, International Insti- tute for Environment and Development, 3.2002

• Member Profiles of the Energy Regulators Regional Association (ERRA) and Regulatory Exchange Newsletters, Energy Regulators Regional Association, Budapest, 2003 Contact Addresses Georgian National Energy Regulatory Commission (GNERC) Embassy of Georgia 45 Kazbegi Ave. Heinrich-Mann-Strasse 32 380077 Tbilisi 13156 Berlin Tel. 00995 (32) 25 33 92 Tel. (030) 48 49 070 Fax 00995 (32) 25 39 61 Fax (030) 48 49 07-20 E-mail: [email protected] E-mail: [email protected] URL: www.gnerc.org URL: www.botschaftvongeorgien.de GTZ Office Georgia Embassy of the Federal Republic of Germany Shartava Str. 41 David Agmashenebeli Prospekt 166 0160 Tbilisi 380012 Tbilisi Georgia Tel. 00995(32) 95 33 26, 95 09 36 Mr. Heinrich-Jürgen Schilling 00995 (32) 00 11 30 (Satellite) Tel. 00995 32 201800 Fax 00995 (32) 95 89 10 Fax 00995 32 201801 00995 (32) 00 11 31 (Satellite) E-mail: [email protected] UNEP Country Office Georgia UN House Ministry of Fuel and Energy of Georgia 9 Eristavi Str. Lermontov Str 10 380079 Tbilisi 380007 Tbilisi Resident Representative: Mr. Lance Clark Tel. 00995 (32) 99 60 98 Tel. 00995 (32) 25 11 26/28/29/31 Fax 00995 (32) 99 60 90 Fax 00995 (32) 25 02 71/72 E-mail: [email protected] E-mail: [email protected] URL: www.minenergy.ge URL: www.undp.org.ge/

Department of Electricity and Licensing The Georgian – European Policy and Director: Mr. Nikoloz Okreshidze Legal Advice Center (GEPLAC) Tel. 00995 (32) 98 91 50 42, Al. Kazbegi Avenue E-mail: [email protected] 380077 Tbilisi Tel. 00995 (32) 53 71 40 Ministry of Environment Fax 00995 (32) 53 71 38 ul. Kostava 68a E-mail: [email protected] 380015 Tbilisi URL: www.geplac.org/index.html Tel. 00995 (32) 23 06 64 Fax 00995 (32) 33 39 52; 94 36 70 USAID Caucasus/Georgia E-mail: [email protected] 20 Telavi Street, 5th Floor URL: www.parliament.ge/gov/enviro/Parliament/Ministry.htm Sheraton Metechi 380003 Tbilisi Tel. 00995 (32) 92 25 47, 77 85 40/1/2 Fax 00995 (32) 00 10 13 URL: www.usaid.org.ge Georgia

PA Consulting Group Georgia Deutsch-georgisches Kontaktbüro für Wirtschafts- 34, Barnov Street, und Forschungskooperationen GmbH 380008 Tbilisi Dariali Str. 2/17 Tel. 00995 (32) 92 14 /86, 87, 88, 89, 90, 91 380062 Tbilisi Fax 00995 (32) 94 06 47 Represented by: Dr. Nino Manvelidze E-mail: [email protected] Tel. 00995 (32) 22 74 33 URL: www.pageorgia.com Mob. 00995 (99) 17 18 61 E-mail: [email protected] Energy Efficiency Centre (EEC) URL: www.forschungskoop.de/geo_infos1.htm 10, Lermontov Street 380007 Tbilisi Bioenergy Scientific Co-ordinator: Teimuraz Gochitashvili Stanislavsti street N 5 Tel. 00 995 (32) 943076, 921640, 921699 380019 Tbilisi Fax 00995 (32) 921508 Tel. 00995 (32) 34 43 59 E-mail: [email protected] Mob. 00995 (77) 45 35 78; 43 39 97; 46 52 71 URL: www.eecgeo.org/index.htm E-mail: [email protected] URL: www.bioenergy.gol.ge Karenergo Scientific Wind Energy Centre 380092 Tbilisi Caucasian House Director: Archil Zedginize 20 Galaktion Tabidze Street Tel./Fax 00995 (32) 35 15 51 0105 Tbilisi E-mail: [email protected] Head of Office: Ms. Naira Gelashvili, Director Person to contact: Mr. Micheal Beroshvili, Deputy Director Sun & Earth (Photovoltaic projects in Georgia) Tel. 00995 (32) 93 62 93 6, K. Chachava Str. Fax 00995 (32) 93 62 93 380059 Tbilisi E-mail: [email protected] Person to contact: Nana Chkhenkeli Tel./Fax 00995 (32) 525 696 E-mail: [email protected] URL: se.iatp.org.ge

International Solar Energy Society Georgia c/o Green Earth Foundation 4 v Mazniashvili Street 380002 Tbilisi President: Mr. Nugzar Meladze Fax 00995 (32) 958 420 E-mail: [email protected]

Energy Efficiency Fund 7 microregion 13/33 383040 Rustavi Person to contact: Vakhtang Zarkua Tel. 00995 (32) 12 11 81 E-mail: [email protected] Croatia

Croatia

Electricity Market

14000 Generating capacities 12000 Croatia’s overall power generating capacity is split 10000 almost evenly between coal-, gas- and oil-fired steam 8000

power plants and hydroelectric power plants. In 2002 GWh 6000 the total installed capacity amounted to approximately 4000 4,800 MW. 2000

0 The large share of hydropower necessitates some means 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Hydropower Hard coal Lignite Gas / oil Nuclear power Diesel Imports of compensating for seasonal peaks, but Croatia’s troubled relationships with neighbouring countries often make that difficult to achieve. For example, unsettled ownership Figure 12: Gross power generation according to energy source; Croatia; 1990–2002; GWh227 issues concerning Krsko nuclear power station in Slovenia keep giving rise to new disputes.225 Due to conflicts with neighbouring states, the supply of electricity from lignite-fired power plants in the erstwhile successor republics ceased after 1991. Disputes 4500 over payments and unsettled ownership issues regarding 4000

3500 Krsko nuclear power station also caused deliveries to

3000 halt in 1998.

2500 MW 2000 Power grid 1500

1000 Croatia has a quite closely-knit, well-developed national 228 500 power grid. However, the destruction of substations

0 90-92 93 94-95 96-97 99 00 01 02 during the war still impairs the transmission of power to Hydropower Hard coal Lignite Gas / oil Nuclear power Diesel neighbouring countries. When the Osijek and Zagreb transformer substations are repaired and returned to ser- Figure 11: Generating capacities according to energy source; vice in 2003/2004, though, Croatia’s power grid will Croatia, 1990–2002; MW 226 once again be fully integrated in the European inter- Croatia’s single largest addition to its overall power connected network. generating capacity since gaining independence was the newly built Plomin 2 power station, a coal-fired thermal Trends in power consumption power plant with a capacity rating of 210 MW. Jointly War in Yugoslavia led to a marked reduction in electri- owned by Germany’s RWE Power and the state-owned city consumption in 1991 and 1992. After the war, the power provider Hrvatska Elektroprivreda d.d. (HEP), economy was slow to recover. Then, the change of gover- each of which holds 50%, Plomin 2 was one of the first nment coupled with the opening of the economy in early major projects to be undertaken by a foreign investor in 2000 produced a steep rise in gross domestic product, the Croatian energy sector. mostly attributable to increased domestic demand and to the revitalisation of tourism, all of which meant that Power generation more electricity was needed. The country’s own power Gross power generation in 2002 totalled approximately generating capacities cannot meet the full demand, so 14.8 TWh, of which roughly a quarter was imported. some power has to be imported. Due to a lack of transmission capacity in the grid structure, however, access to inexpensive electricity from Eastern and Central Europe remains limited.

225 Due to disputes over payments, Croatia stopped purchasing electricity from Krsko nuclear power station at the end of 1998. 226 The chart includes thermal power plants located outside Croatia (650 MW lignite-fired plants in Obrenovac, Tuzla, Kakanj and Gacko) and Krsko nuclear power station in Slovenia, in connection with which Croatia has lodged claims of ownership. The respective annual averages are shown for multi-year periods. 227 Source: HEP. 228 A map of the Croatian electricity system can be found at www.hep.hr/publikacije/ElectricityData2002.pdf. Hrvatska Elektroprivreda – HEP (electricity) and Indus- 14000 trija Nafte - INA (gas and oil supplies). Despite meas- 12000 ures taken to liberalise and privatise the energy market, 10000 no other providers have yet gained much of a foothold.

8000 GWh 6000 With a view to introducing market-economy principles 4000 while harmonising the electricity market with EU

2000 directives, HEP was unbundled in January 2002. Among

0 other things this involved establishing separate divisions: 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Households Industry Services, commerce, transport HEP Generation, HEP Transmission and HEP Distri- bution. Figure 13: Electricity consumption by sector; Croatia; 1990–2002; GWh229 Privatisation of the energy market This sectoral power consumption chart clearly shows HEP has no private shareholders to date. According to how household power consumption has been increasing, information provided by the Ministry of Economy, the while the industrial sector still is not consuming infrastructural rehabilitation programme should be anywhere near as much electricity as it was before the war. completed first, and the actual privatisation process is planned to begin in 2004. A privatisation law was enacted Cost of electricity in March 2002, according to which the state is to retain Electricity prices are graduated according to voltage. 51% ownership of HEP pending Croatia’s ultimate Studies produced by the European Bank for Recon- accession to the European Union. In addition, CROISMO struction and Development (EBRD) place the ratio (Croatian Independent System and Market Operator) between the selling price (meter rates) and the mean was spun off as a separate enterprise which will remain long-term marginal costs at 0.9. entirely under public ownership.

Voltage level/ 1994 1995 1996 1997 1998 1999 2000 2001 The electricity market is still under development, and consumer the market is still practically devoid of alternative pro- 110 kV 3.61 3.94 3.59 3.65 3.73 3.50 3.38 3.21 viders and competitive structures. Additional indepe-

35 kV 4.88 4.90 4.91 4.74 4.88 4.72 4.51 4.25 ndent market participants are envisaged for the future in the areas of power generation, transmission and distri- 10 kV 7.12 6.95 6.84 6.864 6.96 6.79 6.57 6.09 bution. Households 5.32 5.22 5.30 5.30 5.14 5.41 5.74 6.99

Services 9.82 9.41 9.42 8.23 9.04 8.84 8.92 7.94 sector Legal Framework Public lighting 7.17 7.11 7.19 7.02 7.030 7.01 6.87 6.45

Average 6.00 6.24 6.43 6.13 6.11 6.15 6.20 5.82 Institutional and legislative framework selling price The PROHES programme (Development and Organ- isation of Croatian Energy Sector) was devised in 1994 Table 42: Average electricity supply prices according to to bring about the restructuring and privatisation of the voltage; Croatia; 1994–2001; € cents/kWh excluding taxes230 energy market and to work out various measures designed to improve energy efficiency and promote the use of renewable energy sources. That position paper paved the Market Actors way for the establishment of a legal framework, the design and development of consolidation and promotion State monopolies HEP and INA programmes, and the drafting of a long-term strategy The energy market in Croatia is dominated by the state- paper for developing the energy sector. The scientific owned public utilities and erstwhile monopolists organisation Energy Institute Hrvoje Pozar (EIHP) was

229 Source: HEP. 230 Source: Energy in Croatia, Annual Energy Report. The turnover tax amounted to 22% in 2003. Croatia

set up in that same year to carry out work in this field Emission taxes while serving as a coordination and management centre No CO2 or emission tax exists yet, but the introduction and providing scientific backstopping for the pertinent of such a tax is planned for January 1, 2004. The tax rate activities. will be based on CO2, SO2 and NO2 emission volumes and is to be paid on a calendar-year basis. Energy laws A legal framework for the liberalisation and privatisation Clean Development Mechanism of the energy market was drafted; this was ratified in Croatia ratified the UN Climate Change Agreements and June 2001 and came into force in January 2002. The signed the Kyoto Protocol in 1996. Ratification of the package comprises five individual laws: the Act on latter was still pending at the end of 2003. As an Annex Energy, the Act on Energy Service Regulation, the Act I country under the United Nations Framework Con- on Electric Power Market, the Act on Gas Market, and vention on Climate Change, Croatia is undertaking to the Act on Petroleum Products Market. Both the Act on reduce its greenhouse gas emissions to five per cent less Energy and the Act on Electric Power Market attach than their 1990 levels in the period between 2008 and special importance to the use of renewable energy sources 2012. Due to the country’s rapid economic recovery and for building up the energy sector. It is planned for the projected growth, that limit is expected to be surpassed future to make the purchase of power generated from as soon as 2004, and a subsequent trend reversal will be renewable energy sources mandatory, with compensation very difficult to achieve. provided for possible differences in price compared to conventionally generated power. Policy for Promoting Electricity The Croatian Energy Regulatory Council (CERC) was Generation from Renewable established in 2002 for the purpose of monitoring and Energy Sources supervising the energy market. Since commencing its work in January 2003, CERC has been responsible for Payment for electricity from renewable energy issuing licences to access the power grid, setting the sources rates to be paid by general customers, and monitoring The only fully elaborated payment models for electricity the electricity, gas and oil market. produced from renewable energy sources relate to small wind farms and mini hydropower plants. According to All power producers wishing to participate on the Croa- law, CROISMO is supposed to purchase electricity from tian market must acquire a licence to supply electricity operators of renewable energy conversion systems. For via the transmission grid. Special regulations apply to that, however, the electricity has to be provided at a the operators of power-generating facilities fuelled with transmission voltage of 110 kV. According to the envis- renewable sources of energy. aged financing model, pollution taxes paid by the industry together with a ‘renewable energy levy’ paid by regular Partial opening of the electricity market rate customers would even out differences in the prices An initial step toward opening up the market was taken of renewably and conventionally generated electricity. in the form of an ordinance that allows customers with an annual consumption above 40 GWh/a (approximately Following a series of studies conducted by the Energy 10% of the market) to freely choose their electricity sup- Institute Hrvoje Pozar (EIHP) into various areas of the plier and to negotiate their own conditions of supply economy, an array of programmes was initiated by the (Article 23 of the Act on Electric Power Market). That government in 1997 under the heading of the National consumption threshold is supposed to be lowered some- Energy Programmes (NEPs). The NEPs deal with a total time in the future to let ‘smaller’ consumers also freely of ten key sectors for which targeted promotion is planned. choose their suppliers and to gradually open up the electricity market entirely. Promotion programmes for renewable The use of hydropower is recognised as traditionally energy sources well developed. Additional potentials could be developed The NEP promotion programmes of direct relevance to by upgrading old (large-scale) power plants and/or by renewable sources of energy are listed below: installing new mini hydropower plants. The power-producing potential of the latter has been estimated at • MAHE for the promotion of small hydropower 100 MW installed capacity. The Small Hydropower plants Plants Construction Programme (MAHE) is promoting • SUNEN for the promotion of solar energy the development of this potential. exploitation • BIOEN for the use of biomass Payment for electricity from hydropower • ENWIND for developing the use of wind energy Operators of mini hydropower plants (with installed • GEOEN for the exploitation of geothermal energy capacities < 5 MW) are offered access to the power grid • KOGEN for the promotion of cogeneration and a fixed supply remuneration rate based on the ‘aver- • CROTOK, which focuses on the provision and age selling price’ of electricity on the market. expansion of electricity supplies on the islands off Croatia’s Adriatic coast Wind Energy Despite some good wind velocities, particularly along In early 2000, international organisations such as the the Dalmatian coast, the installed electrical output of World Bank and UNDP (United Nations Development wind generators remains negligible. Programme) were contacted with a view to the co-financing of projects in the fields of renewable energy sources Potential and beginnings of development and energy efficiency. In May 2002, this led for example Estimates of Croatia’s technically exploitable wind to a pledge of assistance for the GEF-sponsored Renew- energy potential place the achievable power generating able Energy Resource Project. The Croatian Bank for capacity at 1,300 MW. Consequently wind energy, Reconstruction and Development (HBOR) also provided along with biomass, will play an important role in the financial resources for the project. The purpose of the GEF programme for developing Croatia’s renewable project is to perform economic analyses of renewable energy sources. energy sources and to devise framework programmes for the promotion and financing of renewables, the overall No wind atlas exists for estimating potentials and deter- goal being to establish a well functioning market for the mining sites. Measurements conducted by EIHP at a use of such energy sources in Croatia. The Croatian height of 25 m at several locations indicate an average Ministry of Economy, HBOR and HEP have been wind velocity of 7 m/s. The most promising locations charged with implementing and monitoring the project. for wind energy conversion systems are the numerous Proposals for typical implementations were accepted inhabited islands along the Dalmatian coast, most of until May of 2003. which have very good wind conditions. In addition to supplying local-grid electricity, it is primarily the potential for desalinating sea water in reverse-osmosis Status of Renewable processes that holds the most promise, since the current Energy Sources cost of supplying drinking water is as much as € 5/m2.

Hydropower Promotion of wind energy conversion systems Croatia derives roughly one-half of its electricity from After the electricity market was opened up and the wind hydropower. The country has four major storage power energy promotion programme ENWIND initiated, plants, several small run-of-river power plants and three however, several projects entered the planning stage. pumped-storage power plants, all owned by HEP. The goal of the ENWIND programme is to increase the installed capacity to 400 MW by 2030. Projects with capacities totalling 156 MW are presently in planning, Croatia

and a roughly 6MW wind farm on Pag Island is in its of sunshine can be expected, yielding irradiated energy initial phase of construction.231 on the horizontal plane of 1,450 to 1,600 kWh/m2a.

ENWIND promotes wind power installations with a Applications for solar energy maximum capacity of 5 MW per wind farm by offering Solar energy is primarily used for generating heat in the a fixed supply remuneration of 5.7 € cents/kWh. Also, coastal regions. Especially in tourism (hotels, restaurants, local authorities do not charge licensing fees for the con- etc.) there is considerable demand for hot water. Another struction of new wind power plants, as is the practice for problem is that the islands are not connected to the gas thermal power stations. grid, so fuel prices are accordingly high. Further rapid The uncertainty surrounding remuneration rates for large- growth in tourism is anticipated for years to come. scale wind farms acts as an impediment to the operation According to some estimates, this will result in a doubling of wind power plants. Individual negotiations with HEP of the demand for energy in that sector by the year 2020. are required for such projects. Although the use of solar energy on the islands makes Obtaining the requisite power-infeed licenses and per- economic sense in view of their lack of access to the mits is often a difficult, time-consuming process, be- supply network, it is neglected by the GEF project because the competences are still unclear in many areas. cause most of the implementation schemes (energy sup- Particularly on the islands, the land-tenure situation is plies for individual buildings or hotels) are too small frequently unclear and many of the electricity grids are (below the minimum limit), and the projects are not inadequately developed. being combined in an organised manner (for example in the tourism sector). Biomass The recovery of energy from biomass, primarily in the Geothermal Energy form of wood and waste wood, plays a significant role, On the south-western fringes of the Pannonic plain in accounting for more than 5% of overall primary energy northern Croatia, the ground temperature gradient of consumption. Most wood is used as fuel for heating pur- 0.049°C/m is well above the European average.233 Here, poses (particularly in rural areas). Very little biomass is low-temperature geothermal springs are traditionally used for generating electricity, but this field is targeted used to feed thermal baths, but no other form of technical for development to a total output of 51 GWh by 2020. exploitation has taken place to date. Only two of ten geothermal reservoirs discovered in connection with oil Potentials exploration are actually in use. Due to differences between vegetation zones and in land usage, the potentially useful biomass volumes vary The total installed thermal output at present adds up to widely from region to region.232 While the coastal regions approximately 114 MW, some 75% of which is used for (Dalmatia in particular) have only meagre biomass poten- heating swimming pools and thermal baths, while the tials due to sparse vegetation, the interior regions have remaining 25% is used for space heating purposes. ample biomass resources. The BIOEN programme was launched with the aim of expanding the use of biomass, The GEOEN promotion programme aims to help greatly including the utilisation of wastes. The defined object- expand the use of geothermal energy for such purposes ive is to meet 15% of total energy consumption with as heating residential buildings and, in the agricultural biomass by 2030. The main thrust will be to expand the sector, greenhouses. As well as this, the construction of thermal exploitation of solid waste (pelletisation). a geothermal power plant is planned for 2005.

Solar Energy The use of high-temperature reservoirs (above 120°C) The meteorological conditions for solar energy exploit- offers an estimated installed power potential of some ation are very good, particularly on the islands along the 48 MW. Adriatic coast. On average between 2,500 and 3,000 hours

231 Adria Wind Power, the planner and future operator, is a joint venture between German and Croatian enterprises. 232 A general overview of biomass utilisation potentials can be found at: www.eihp.hr/english/bioen/Program/1.htm. 233 A map of Croatia’s geothermal resources is provided in Jelic, Kresimir, et al. at http://iga.igg.cnr.it/pdf/0824.PDF. Information Sources • Kroatien – Wachstum zu Lasten der Stabilität, Bank Austria, CEE Report, Walter Puschedl,

• CEEBICnet Market Research, Energy Sector in Wien, 3.2003

Croatia; U.S. Department of Commerce; • Law on Electricity Market, Narodne Novine – Washington, 10.2003 Official Gazette of the Republic of Croatia; Zagreb,

• Croatia – Country Report; Ministry of Economy; 7.2001

Zagreb, 11.2000 • Law on Regulation of Energy Activities, Narodne

• Croatia Data Profile; World Development Indicators Novine – Official Gazette of the Republic of database, 8.2003 Croatia; Zagreb, 7.2001

• Croatia Renewable Energy Resources Projekt; • National Energy Program BIOEN – Biomass for World Bank Office Memorandum; Washington Energy in Croatia; Domac, Julije, Energy Institute D.C., 3.2002 Hrvoje Pozar; Zagreb, 1998

• Electricity Data 2002; Hrvatska Elektroprivreda • Preparation of Croatia Renewable Energy Resource d.d.; Zagreb 2003 Project; Republic of Croatia, Ministry of Economy; Zagreb, 2002 • Energy in Croatia 2001, Annual Energy Report; Ministry for Economy, Zagreb 2002 • Promoting REES in Croatia as a Part of Energy Reform, REEEP Regional Meeting, Zoran Stanic, • Energy Law, Narodne Novine – Official Gazette of Budapest, 7.2003 the Republic of Croatia; Zagreb, 7.2001 • Questionnaire of the European Commission, • Energy Sector Development Strategy for the Antworten zum Fragenkatalog der EU zum Repuplic of Croatia; Strategic planning office of the Beitrittsgesuch Kroatiens, Zagreb, 9.2003 Republic of Croatia; Zagreb 1.1999 • Renewable Energy Country Profile, 0.7, Croatia, • Framework for Energy Market and Croatian Energy European Bank for Reconstruction and Develop- Sector Regulation; Croatian Energy Regulatory ment; London, 9.2002 Council – CERC, 3rd Southeast Europe Forum Budapest; Zagreb, 4.2002 • SUNEN – Croatian Solar Energy Utilization Program; Energy Institute Hrvoje Pozar, University • Geothermal Energy Potential and Utilization in the of Rijeka; Zagreb, 1998 Republic of Croatia, Proceedings World Geothermal Congress 2000, Jelic, Kresimir et al., Kyushu – • Transition Report 2001– Energy in Transition; Tohuka, Japan, 2000 European Bank for Reconstruction and Develop- ment; London, 5.2002 • Geothermal Resources in the Balkans; U.S. Depart- ment of Energy; Battocletti, Liz; Lawrence, Bob; • Wirtschaftliche Lage Kroatiens am Jahresanfang Washinton, 4.2001 2003; Deutsche Botschaft Zagreb; 2.2003

• In der Warteschleife: Transformation des Energie- marktes in Kroatien steht an; Dr. Berthold Hannes, Michael Weiß; vwd energy weekly, Eschborn, 4.2003

• Kroatien – Lösungen für neue und alte Probleme stecken im Stau, Bank Austria, CEE Report, Walter Puschedl, Wien, 4.2002 Croatia

Contact Addresses EBRD Office Croatia Petrinjska 59 Croatian Embassy in Germany 5th Floor Ahornstrasse 4 HR-10000 Zagreb 10787 Berlin Tel. 00385 (1) 4812 400 Germany Fax 00385 (1) 4819 468 Tel. ++49 (0)30 21 91 55 14 / 21 91 55 16 Fax ++49 (0)30 23 62 89 65 / 23 62 89 66 World Bank Office Croatia URL: www.kroatische-botschaft.de Trg. J.F. Kennedya 6b, III Floor E-Mail: [email protected] HR-10000 Zagreb Tel. 00385 (1) 23-87-222 Embassy of the Federal Republic of Germany in Croatia Fax 00385 (1) 23-87-200 Ulica grada Vukovara 64 E-mail: [email protected] 10000 Zagreb URL: http://www.worldbank.hr Croatia Tel. 00385 (1) 615 8105 HEP - Hrvatska Elektroprivreda Ltd Fax 00385 (1) 615 5536 Ulica grada Vukovara 37 URL: www.deutschebotschaft-zagreb.hr HR-10001 Zagreb E-mail: [email protected] Tel. 00385 (1) 632 2302 Fax 00385 (1) 6322 143 Ministry of Economy URL: www.hep.hr Ulica Grada Vukovara HR-10000 Zagreb Energy Institute Hrvoje Pozar URL: www.mingo.hr Savska cesta 163 E-mail: [email protected] PP 141 HR-10001 Zagreb Croatian Bank for Reconstruction and Development Tel. 00385 (1) 6326 119 Strossmayerov trg 9 Fax 00385 (1) 6040 599 HR-10000 Zagreb URL: www.eihp.hr URL: www.hbor.hr E-mail: [email protected] Ministry for European Integration Ulica grada Vukovara 62 ISES Croatia HR-10000 Zagreb Contact Person: Mr. Miroslav Kamenski Tel. 00385 (1) 45 69 335, 45 69 336 Jabukovac 4 Fax 00385 (1) 63 03 183 HR-10000 Zagreb E-mail: [email protected] Fax 00385 (1) 42 24 24 URL: www.mei.hr E-mail: [email protected]

Minister of Environmental Protection and Physical Planning Ulica Republike Austrije 20 HR-10000 Zagreb Tel. 00385 (1) 3782 444 Tel. 00385 (1) 3782 143 Fax 00385 (1) 3772 555 China

China

Electricity Market 75%–80% of electricity production is based on coal in thermal power stations supplemented by oil-fired Capacities systems. Hydroelectric power contributes at least 15% In 2003 the installed electricity generating capacity in to overall production, even in weak hydropower years. the PR China was over 380 GW, meaning that it had Nuclear energy accounts for a share of about one per more than doubled since 1993. cent. Other energy sources such as wind power and natural gas are relatively insignificant so far. Even if the Capacity is currently being expanded at a fast rate. It is average efficiency of coal-fired power stations has been expected that the electricity demand trends will con- distinctly improved, environmental pollution caused by tinue for a few years, resulting in a need for additional SO2, NOx and particles remains substantial, since the power stations. A secure supply situation is not expected power stations are only partly equipped with anti-pollu- until 2006 when the new power station capacities will tion facilities. be in place. The Chinese Government stands by coal as the basis for According to the goals of the current (2001–2005) and electricity production. However, thermal electricity forthcoming (2006–2010) five-year plans and expert production is being relocated primarily to the mining appraisals, electricity generating capacity will be ex- regions in order to reduce emissions in conurbations and panded to about 420 GW in 2005 and 550 GW in 2010. replace coal transport by electricity transmission (‘Coal by Wire’ programme). As a new natural gas pipeline is In the course of the 1990s the size structure in the being installed, the aim is to increase the share of gas power station landscape shifted in favour of small plants used for electricity generation in conurbations. producing less than 50 MW and large-scale plants with a capacity of over 300 MW. Low-capacity power stations Electricity transmission and distribution were built primarily by independent electricity produ- Massive investments are being made to link the five cers on the basis of local permits. New large-scale power large regional transmission grids and a large number of stations have block capacities of 600 MW. smaller transmission networks, as well as to create a single national interconnected grid by the year 2006.234 400 2000 The government also plans to improve the efficiency of 1800 350 1600 transmission and distribution networks in coming years. 300 1400 Internal consumption at the production facilities and 250 1200 network losses currently account for about 15% of gross

200 1000 TWh

GW 800 150 electricity generated. 600 100 400 50 200 Isolated networks 0 0 Generating capacity in isolated networks has declined 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Capacity Production steeply in recent years, since these have increasingly been integrated into the regional integrated networks. Figure 14: Electricity generation and capacity, China; However, there are still small settlements in remote 1990–2002; GW, TWh areas that cannot be reached with overland lines and in Electricity generation which isolated systems powered by diesel generators or Electricity generation has almost tripled since 1990, hydroelectric power therefore still frequently exist. and by 2003 production totalled 1,900 TWh. This makes China the world’s second largest electricity pro- Electricity consumption ducer. Lower growth rates in power demand as of the mid 1990s were partly the consequence of the Asian crisis. Increases of 8–15% a year have been registered again since the year 2000. Up to 2020 the average

234 In September 2003 the world’s largest electricity grid was formed by joining two regional networks between the provinces of Hebei and Henan. annual growth in power consumption is expected to Market Actors be over 5%. Up to the time of the electricity sector reform in 2003, It is often the case that electricity demand cannot be met the State Power Corporation of China (SPC), created in at peak load times. Supply problems and power cuts 1997, was the dominant company with about half the have become worse since summer 2003, especially in the production capacity, 90% of the transmission lines growth centres in the east and the south of the country. above 220 kV, and a majority of the distribution networks. The unbundling of SPC led to the creation of By far the most important consumer groups are industry 11 state-owned enterprises, including two network and craft & trades (secondary sector), which together operators, five generating companies and four other account for 72% of electricity consumption (in 2000), companies providing supporting services (for example followed by domestic households with 13%, services engineering). with 11%, and the primary sector (agriculture and forestry, mining) with 4% of consumption. The effect of New generating companies the sustained high economic growth is that there is The five electricity producers evolving from SPC were increasing power demand not only for production but each assigned a capacity of 30,000–37,000 MW and also by private households as incomes rise. It is expected hence 45% of total capacity. A large share of the wind that private households and the service sector will power capacity was allotted to one of these five enter- account for a growing share of electricity demand. prises, the Guodian Group, which in turn concentrated these in its subsidiary Long Yuan. There are some 40 Electricity prices other electricity producers in addition to the companies In 2001 the regulated average consumer prices for mentioned. Industrial self-generators own power station electricity were in a range between about 4 and capacity totalling roughly 30 GW. Foreign investors 7 € cents/kWh. In some cases, foreign-financed have so far been able to build plants with a total capacity BOT/BOO (Build-Own-Transfer, Build-Own-Operate) of about 33 GW on the basis of BOT/BOO contracts; in facilities belonging to independent power producers future these will participate in competition in the same received secured purchase prices of over 5 € cents/kWh way as other producers. within the framework of electricity purchase contracts. Such purchase prices, often higher than the final con- New grid companies sumer tariffs, to which costs of transmission, distribution, The two newly created grid operators are the State Grid sales etc. must be added, can only be explained against Corporation (SGC), which will control five new, com- the background of the enormous electricity shortages bined regional grids with over 20 provinces, and the prevailing at the time the contracts were signed. These South China Grid Corporation, which is responsible for pro-producer agreements have mostly been cancelled five provinces. SGC will take over management of the and are being converted to normal, long-term purchase Lhasa Power Grid in Tibet. contracts with lower prices. A new, transparent price system that specifies separate tariffs for production, Responsibility for rural electrification transmission and distribution is being prepared. In addition to the large state-owned grid operators, the Ministry of Water Resources (MWR) in particular operates with small hydroelectric power plants, frequently based on isolated networks. In the meantime MWR is also engaged in the field of wind energy. China

Legal Framework New regulation authority A separate regulatory authority was set up for regulating During the last two decades China’s electricity sector the electricity sector, namely the China Electric Power has gone through major changes. Triggered by the eco- Regulatory Commission (CERC). Its functions are yet to nomic boom since the 1980s, supply bottlenecks and be defined in relation to those of the NDRC. The increasing environmental problems, the production CERC’s general tasks are supervision of the reform pro- market has been cautiously opened for foreign capital, cess and consistent regulation of enterprises in the and monopoly structures and planned economy have power sector.235 gradually been replaced by competition. Energy research Restructuring of the electricity sector The Energy Research Institute (ERI) is formally at- After the political responsibility was separated from tached to the NDRC. However, it shows great independ- operational responsibility in 1998, the reforms of 2003 ence in its research strategy and its role in the debate on again paint a completely different picture. Experts energy policy. The Ministry of Science and Technology expect that the existing system will be transformed fur- (MOST) participates actively in formulating and ther and that in 2005, following successful implemen- implementing the energy policy with research and tation of the present reforms, the Electricity Act of 1996 demonstration projects. Among the institutions allo- will be amended. cated to MOST are the Tsinghua University with several energy institutes. The Academies of Science, Engineer- The reforms that have been ongoing since 2003 are set ing and Social Studies also have a series of research out in the Document No. 5 adopted by the State Coun- institutes investigating energy matters. cil in April 2002. The plans essentially encompass the splitting of regulatory and commercial functions, the Foreign investment in the energy sector separation of electricity production and transmission, A range of measures were taken in the past to promote and new rules for pricing. investment of foreign capital in China’s energy sector.236 Since the mid 1990s the Chinese Government has Institutional landscape 2003 allowed direct investment of foreign capital for electri- In 2003 the People’s Congress set up a new body, the city generation. State Asset Supervision Administration Commission (SASAC), to supervise the assets, performance, finances Clean Development Mechanism and senior executive staff of the state-owned enterprises; The Chinese side places great hopes in the Clean Devel- it is thus responsible for the major enterprises in the opment Mechanism (CDM) within the framework of the electricity sector. Other new bodies were the Ministry of Kyoto Protocol as a further possibility of obtaining

Commerce (MOFCOM) and the National Development finance. As the world’s second largest CO2 emitter, and and Reform Commission (NDRC), both of which evolved in view of the rising demand for energy, China presents from departments of the former State Development and a broad field for action. The GTZ is cooperating with Planning Commission (SDPC), the State Economic and the World Bank and Switzerland in having a national Trade Commission (SETC) and the Ministry of Foreign CDM study drawn up by Chinese experts. The Climate Trade and Cooperation (MOFTEC). The new MOFCOM Change Office in the NDRC and the Ministry of Science is responsible for foreign trade, including issues of equal and Technology are the contact bodies for CDM meas- treatment of foreign and Chinese enterprises. In addition ures in China. to responsibility for price supervision and approval of investments, the NDRC was allocated total political responsibility for the energy sector, including renewable energy sources. An Energy Office was set up within the NDRC with the rank of a Division.

235 The regulating authority will also be responsible for licensing enterprises in the electricity sector. The ‘Provisions on the Regulation of the Power Industry’ are to enter into force in 2003/2004. 236 The ‘Regulation for Utilization of Foreign Capital in China’s Power Sector’ of 1997 is particularly important here. Following China's accession to the WTO in December 2001, further steps to liberalise trade and investments are also expected. Policy for Promoting Electricity Law to promote RE in preparation Generation from Renewable Energy The dissemination of renewable energies in China was Sources largely driven by international programmes in the Without government steering, large-scale technical use past.239 Support for renewable energies, which was of renewable energy sources will not be competitive hitherto only provided in isolated cases, is to be boosted considering the production costs of less than by a comprehensive promotion act. The National Peo- 3.5 € cents/kWh for electricity produced from coal. ple’s Congress (NPC) therefore commissioned the draft Exceptions to this are small hydroelectric power plants, of a ‘Renewable Energy Development and Utilization electricity production from wind or photovoltaic facil- Promotion Law’ in August 2003. The Energy Office of ities in remote areas, and the use of agro-industrial the National Development and Reform Commission wastes in combined heat and power stations (cogener- (NDRC) was nominated as the responsible body in the ation plants). executive and has in turn commissioned the Center for Renewable Energy Development (CRED) of the Energy Regulation on infeed of electricity from Research Institute (ERI) with technical coordination. wind energy The GTZ is supporting CRED, partly within the frame- A set of rules for linking wind power plants to the grid work of the TERNA programme, in evaluating experi- was put in place some time ago, in 1994.237 According ence with internationally implemented promotion to this, grid operators are obligated to buy all electricity instruments. Parallel with this the NPC is obtaining generated in such facilities and to pay for it on the basis consultancy services from experts at Tsinghua Univer- of uniform pricing principles. The price negotiated from sity and others. It is expected that the law will be imple- case to case is made up of the gross electricity produc- mented in 2005. tion costs, the taxes and charges to be paid, and an ‘appropriate’ profit of about 12-15%. The extra costs GEF project: Capacity Building for the resulting from wind-based electricity for the distribu- Rapid Commercialisation of Renewable tion company can be apportioned fully to the connected Energy (CCRE) consumers throughout the province. The high costs of In 1999 the Capacity Building for the Rapid Commer- wind power resulting from these tariff rulings have led cialisation of Renewable Energy (CCRE) project, pro- to the responsible province governments adopting a moted with GEF funds, was set up by UNDP. It aims to refusal attitude. In practice, therefore, this incentive build up commercial industry sectors in the field of mechanism has only produced results in isolated cases. renewable energies.240 With financial support from the Australian and Dutch Governments, the project contrib- In 1996 the SDPC launched the Cheng Fengi (‘Ride the utes to institution building and implementing demon- Wind’) programme to promote local production of large stration projects. The Chinese Renewable Energy Indus- wind power plants.238 The Shuang Jiai (‘Double- tries Association (CREIA) was established within the Increase’) programme, also launched in 1996, chiefly pro- scope of the project. This body sees itself as an inter- motes the construction of large-scale commercial projects. mediary between industry and public authorities and in this role aims to bring national and international project In order to support the financing of wind power pro- developers and investors together. Further measures also jects, the government provides low-interest loans pro- include training of technical staff, policy consultancy, vided that the plants originate from domestic production. demonstration plants and product certification. Furthermore, in 2002 the value-added tax for wind- generated electricity was halved from 17% to 8.5%. Wind energy concessions were put out to tender for the first time in 2003.

237 ‘Regulation on the Management of Grid-Connected Windfarms’. 238 One result of the programme is the joint venture between the German wind power plant manufacturer Nordex and a Chinese partner. 239 One organisation that has been prominent in this connection is KfW, which has promoted about one third of the wind energy capacity. Other bilateral donors such as Denmark and Spain are also active in this field. The World Bank and ADB have only just started to finance renewable energy installations for electricity generation (apart from hydropower plants). GTZ, UNDP, the World Bank (both with GEF funds) and the American Energy Foundation lead the way in technical cooperation. 240 Consideration is given to PV and wind hybrid systems for municipal networks, biogas from industrial and agricultural residues, solar thermal applications and grid-coupled wind power plants, as well as bagasse-fired CHP schemes. China

Cooperation with Germany Status of Renewable Energy Sources Financial and technical assistance from German institutions for the use of renewable energy is largely to be The development status of the use of renewable energy found in China’s rural regions. Since the beginning of sources for electricity generation in China is well ad- the 1990s the Federal German Ministry for Economic vanced in some fields, but distinctly lagging in others. Cooperation and Development (BMZ) has been focusing more on photovoltaics. Grid-coupled installations As far as grid-coupled electricity generation on the basis One GTZ project aims to reinstate small village hydro- of renewable energy sources is concerned, small-scale electric power systems, irrigation methods and vocational hydropower (installations rated at < 25 MW) is by far training in Tibet. Since the end of 2001 the GTZ has the most significant type. Small hydropower plants with also been conducting a programme entitled Renewable a total capacity of 25 GW have been installed. So far Energies in Rural Areas to disseminate solar power wind energy has not achieved any notable share (around systems and small hydropower plants in the provinces of 470 MW), nor has grid-coupled electricity generation Qinghai and Yunnan together with the SDPC (now from biomass, geothermal or solar energy. NDRC), and supporting the Township Electrification Program by training teaching staff to coach local oper- Off-grid application and isolated networks ators, by quality assurance methods and other inputs. As regards non-grid-coupled applications, there are cur- This project, building on experience gained in Inner rently more than half a million plants for providing Mongolia, will soon be expanded to the provinces of energy to individual households in China, powered one Gansu and Tibet. Within this framework KfW is third each by small wind energy units, photovoltaics contributing to the installation of approximately and micro hydropower plants. 300 hybrid PV/diesel village electricity units in the provinces of Xinjiang, Qinghai, Yunnan and Gansu A relatively large number of users in small settlement with Financial Cooperation funds. centres obtain electricity generated from renewable energy sources in isolated schemes, chiefly small hydro- Comprehensive programmes to finance wind farms (in power plants, and to a lesser extent wind hybrid plants Hainan, Zhejiang, Guangdong, Inner Mongolia and and biomass plants, as well as more recently from PV Xinjiang) are currently being implemented. KfW is hybrid plants to an increasing extent. supporting the implementation of these with government Financial Cooperation funds, as well as with its Hydropower own market means. China has the world’s largest hydropower potential, chiefly concentrated in the West of the country. The The creation of a national wind energy centre focusing on large distances between those areas that are rich in training, consultancy and applied research is currently hydropower and the industrial conglomerations in being prepared. This centre will be set up by the China which electricity is needed make it more difficult to utilise Long Yuan Power Group and the China Electric Power these resources and increase the power transmission Research Institute (CEPRI) together with the GTZ. requirements towards the east and south coasts.

Installed capacity and expansion planning At the end of 2002 the total installed capacity of all hydropower plants in China was 84 GW. The technically utilisable hydropower potential is quantified at 676 GW. It is planned to increase the installed hydropower capacity to 95 GW and 125 GW by the years 2005 and 2010 respectively. A long-term plan envisages hydropower achieving a share of over 25% of total electricity production by 2015. The capacity of large hydropower plants is to be ex- situation is to be improved at regional level. A wind atlas panded in future. In addition to the gigantic Three for South East China was drawn up as part of the SWERA Gorges Power Station on the Yangtze, that alone will programme.243 The GTZ supported wind measurements have a capacity of 18.2 GW after it is completed in the in Hubei province under the TERNA wind programme year 2009, it is planned to use five further river courses between 2000 and 2002. for power stations with a total capacity of 50 GW. Previous wind energy use Small and micro hydropower units Up to the end of 2002, wind farms and individual plants In China small hydropower stations are generally oper- were erected with a total capacity of 468 MW. However, ated in isolated networks by the Ministry of Water developments are characterised by a fluctuating annual Resources (MWR). At present there are about 40,000 rate of additional installation. small and micro hydropower plants with a total capacity of 25 GW in operation. When the isolated networks are 500 468 450 connected up, many small hydropower plants will be 403 400 taken out of service. On the other hand, once again there 344 350 is now a distinct trend in central and west China towards 300 268 250 building new plants that feed electricity into the grid. MW 224 200 167 150 109 100 China manufactures the largest number of micro hydro- 76 58 57 67 36 57 45 50 power plants in the world, and thanks to their low price 7 21 0 these are exported too. However, the product quality, 1995 1996 1997 1998 1999 2000 2001 2002 Additional construction Total often judged as being in need of improvement, presents an obstacle to wider distribution in foreign markets. Figure 15: Installed capacities and annual additional construction of grid-coupled wind power Wind Energy installations; China; 1995–2002; MW244 Topping the world league with an estimated onshore wind potential of 250 GW241, China shows great prom- The provinces of Liaoning on the east coast with about ise for the exploitation of wind energy. Windy locations 110 MW and Xinjiang in the north-west with some are to be found above all in the steppe and desert areas 90 MW are ranked highest in terms of installed cap- in the west and north of the country, and in coastal acity. These are followed by Inner Mongolia in the north regions. The technical potential for offshore locations and Guangdong on the south-east coast, each with has been quantified at as much as 750 GW by the approximately 80 MW. Chinese Wind Power Association.242 Expansion targets Wind measurements According to the targets set in the 10th five-year plan Within the framework of a UNDP/GEF project, wind (2001–2005), 1,200 MW is to be installed by the year measurements are currently being taken at ten locations in 2005, and according to the 11th five-year plan order to survey the local conditions more precisely. These (2006–2010) a total of 3,000 MW of wind power capa- locations are considered as pilot projects within the frame- city by the year 2010.245 The concession projects opera- work of the National Wind Development Plan and are to ted by the NRDC provide for 100 MW to be set up at receive state promotion as a priority when wind farms are each of selected locations. Altogether 20 development realised. China is also participating in the multi-national plans in the provinces are to contribute to implemen- Solar and Wind Energy Resources Assessment (SWERA) ting two projects per province in the next two years. project, supported by UNEP, with which the general data In the past, announced and certainly realistic planning

241 According to information supplied by the Chinese Wind Power Association, the potential of 250 GW refers to wind resources at a height of 10 m. According to the Association, the potential doubles at a height of 50 m and more. 242 The wind data obtained from over 900 meteorological stations does not always satisfy international standards, however. This applies in particular to the identification of specific locations for wind power projects. 243 For more information on SWERA see http://swera.unep.net. The Wind Resources Atlas for South East China is available under www.rsvp.nrel.gov/wind_resources.html. 244 Data source: Chinese Wind Power Association, 2003. 245 Projections for medium- and long-term expansion of wind power vary substantially. The Chinese Wind Power Association considers a wind power capacity of 4 GW to be realistic for 2010, and a capacity of 20 GW for 2020 (including 4 GW offshore). China

targets set by the Chinese Government have not been (7.7 to 10 € cents/kWh). This means that it would be met and have been revised in the course of time. A large more expensive to operate the wind farm than coal-fired proportion of the installed wind power capacity is based power stations, which produce electricity at costs of on bilateral or multinational promotion programmes 0.2 to 0.6 RMB/kWh (2.0 to 6.2 € cents/kWh). The and funding, and less on the country’s own commit- planned wind farm is not being realised at present. The ment.246 reasons for this lie not only in the electricity production costs, but also in the changing framework conditions in Obstacles to expanding wind power the Chinese electricity market. Expansion of the wind power sector has been faced with a series of obstacles in the past: REDP The Renewable Energy Development Programme • lack of transparency in permit-issuing procedures (REDP) of the World Bank and GEF supports the • slow decision-making and approval processes construction of two wind farms with 20 MW each • sub-optimal legal framework near Shanghai by providing low-interest loans of • high import duties US$ 13 million. • the local content requirement stating that wind turbines and their components must largely Calls for tender for large projects originate from Chinese production247 On the one hand investors are to be guaranteed long- • major frictional problems between institutions term feed-in tariffs by two government-run calls for • frequent, often annual, renegotiations of power tender for large 100MW projects on a concession basis; purchase agreements on the other hand the power generating costs are to be kept low. When the bidding procedure was completed in September 2003, the Huarui Group250 was awarded National manufacturers of wind power plants the Rudong wind farm in Jiangsu province, and the Relatively large plants with a capacity of 100 kW or Yuedian Electric Power Group gained the contract for more have only been built during the last ten years, the Huilai wind farm in Guangdong province. Conces- either within the framework of joint ventures or under sions for 25 years were granted for the wind farms, licence. There are presently six national manufacturers which are set to join the grid no later than the end of of turbines in the 600 to 660 kW class with a high share 2005. The feed-in tariff is made up of two phases: of local components.248 Demand for these turbine types for the first 30,000 full-load hours the best price of was relatively low in the past, however, since imported 0.5 RMB/kWh (5.2 € cents/kWh) determined in the plants are generally cheaper and have a reputation for call for tenders will be paid for the Yuedian project and better quality.249 Recent agreements, for instance between 0.43 RMB/kWh (4.4 € cents/kWh) for the Huarui pro- the German company REpower and the Tianjin Hi-Tech ject. After this, remuneration will be based on a market Group, also provide for production of relatively large price which is currently estimated at 0.55 to 0.60 plant units. RMB/kWh. Consequently the realisable starting price is about 10% below the wind power prices that have been GTZ wind energy project in Hubei province customary so far. Further calls for tender are planned In a feasibility study the GTZ determined total invest- for 2004. ment costs of € 22.2 million for a 19.2 MW wind farm with 600kW turbines. The plants satisfy the local content requirement of Chinese authorities and could be serviced by local specialists. The purchase costs for wind power were calculated at 0.75 to 0.97 RMB/kWh

246 About one quarter of the total capacity in China was made possible with German support. 247 China intends to build up a competitive wind power industry. In addition it would like to avoid excessive dependence on imports in the provision of energy resources and facilities. 248 Three manufacturers are engaged in mass production, the other three manufacturers have developed prototypes. These also include Nordex, which has a production plant in Xian, and Goldwind, which produces plants designed by the German manufacturer REpower under licence. 249 At the end of 2002, 11% (54 MW) of the total installed capacity originated from domestic production. In 2002, 28 MW of the total of 67 MW of newly installed plants was purchased from local production. 250 The largest private investor in energy projects in China, who so far operates two small wind farms in Helanshan (Ningxia province) and near Beijing. Small off-grid plants provided for on-site electricity supply up to the The total capacity of small, off-grid wind power systems year 1999) (< 3 kW) is about 42 MW. About 250,000 small wind • the low level of remuneration for electricity fed into power plants (0.1–3 kW) were installed in the off-grid the grid sector up to the end of 2002. With 22 producers (end of • the lack of a standardised set of rules on electricity 2002), China is the world’s largest manufacturer of such supply and remuneration plants, but these are mainly deployed in the domestic • the seasonal nature of sugar production (and hence market. of bagasse availability), which only runs for about 5 months a year Biomass The considerable biomass resources for energy purposes, Biogas plants and their promotion chiefly in the form of harvest residues, firewood, forest China is the world leader in the application of anaerobic timber residues and organic wastes, were estimated at biomass gasification plants. In addition to millions of over 5,500 TWh for the year 2001. Only one third of this small and micro plants, which chiefly help to minimise potential is used, and this chiefly for thermal purposes. slurry problems on farms, there are some 700 larger plants including about 150 in which the organic com- Biomass, which has been used as an energy source in ponent of industrial waste water (from paper, sugar and small stoves and furnaces since time immemorial in all pharmaceutical industries and from alcohol and food rural areas of Asia, can be developed to generate electri- production) is gasified. city in China. Two processes chiefly enter into consideration for larger-scale applications: the use of organic Energy production from biogas is supported in materials (mainly bagasse) in combined heat and power China’s agriculture by low-interest credits totalling stations with steam turbines, and the conversion of US$ 33 million, committed by the Asian Development biogas into electricity in gas motors. Bank (ADB) at the end of 2002.

Converting bagasse into electricity Within the framework of the current five-year plan For many years now China’s sugar industry has been (2001–2005) and a promotion programme for high using bagasse in relatively large factories to produce its technology251, the focus is on developing biomass plants own electricity. Over 800 MW of capacity is installed in for electricity generation. Substantial market potential the sugar provinces of Guangdong and Guangxi alone. is seen in this segment. However, this branch of industry does not generally feed surplus power into the grid. According to estimates in a Use of landfill gas World Bank report, a potential of 700 to 900 MW of With support from the UNDP-GEF project Promoting electrical energy that could be exploited with clear Methane Recovery and Utilisation from Mixed Munici- financial profit would be available in the above areas and pal Refuse, landfill sites in several municipalities are Yunnan alone. being examined for their suitability for converting landfill gases into electricity. The relevant studies are to be However, a series of impediments hamper expansion of completed by mid-2004. A first pilot plant in Ansham bagasse-generated electricity for feeding into the grid: has already been completed and is also scheduled to begin full operation by mid-2004. • the currently poor economic situation of the Chinese sugar industry that leaves no scope for Enterprises and research institutes investment In the meantime there are 200 enterprises that produce • partial lack of insight on the part of sugar mill biomass plants and components. The Biomass Develop- managers ment Center (Beijing) is very important in the research • the lack so far of low-interest, long-term loans sector; it brings together a large number of technical (low-interest loans with a term of 3 years were only institutes as members. There is a network of political

251 This is the scheme known as the 863 Research Programme. China

and scientific institutions and enterprises for developing, about a sustainable improvement in the quality of local demonstrating and disseminating biomass technologies. production through greater cooperation with the German solar industry.252

Solar Energy According to NDRC plans and the rural electrification China’s potential for solar energy applications is large. programmes it has initiated, some 80 MW of PV capacity The average energy quantity per day is above 4 kWh/m2. should be installed by the end of 2005. This capacity The sun often shines for over 3,000 hours a year, espe- could increase to over 200 MW by 2010.253 cially in the west of the country. Grid-coupled solar systems Although the high plant costs are a constraint limiting Only a few individual larger systems are connected to rapid dissemination through the market in the near the electricity grid. In May 2002 there was a call for future, conversion of solar energy into electricity can tenders to install a 1MW system. Further calls for have a long-term future in China in large-scale photo- tenders for plants with capacities of 70–300 kW are voltaic and solar thermal plants. In the near future, expected. 254 however, medium-size plants (10–100 kW) will first be used for decentralised supplies to villages, and micro Obstacles to further development plants (solar home systems, SHS) with a capacity of However, the following obstacles stand in the way of 20–100 W for basic electrification of households in faster growth in the number of installed systems: remote regions of China. • only state-supported system suppliers enjoy Market for photovoltaics public-sector promotion; generally loans are rare for At present the driving force behind this comes above all system suppliers and installers. from government-promoted programmes for improving • poor maintenance and service provision reduces the rural energy supply. An estimated 150,000 solar home service life of the systems. systems and 80 photovoltaic school systems were in- • there is no institutional basis for granting loans or stalled in 2001. In 2002 alone some 20 MW of PV cap- financing solar home systems. acity was installed, representing almost half the total capacity of 43.5 MW at the end of 2002. Geothermal Energy Despite substantial resources, there has been virtually Local production of PV equipment no development of electricity generation from geother- In 2001 seven companies produced solar cells with a mal sources in China so far. The potential that can be capacity of 4.5 MWp and thus twice as much as in 1998 used directly to generate electricity due to high tempera-

(2.1 MWp). At the end of 2003 there were 11 cell manu- tures (> 150°C) is estimated at 5.8 GW. Potentially facturers, some of whom also produce modules. The largest utilisable resources are located along the eastern coast manufacturer is the Chinese-Australian joint venture facing Taiwan (Taiwan Geothermal Zone) and in the Wuxi Suntech Power with an annual production cap- Yunnan Geothermal Zone in the Autonomous Region of acity of 25 MWp. This is followed by the Japanese firm Tibet.

Kyocera that started up a production line for 12 MWp in Tianjing in October 2003. So far all other manufac- The installed capacity is only 30 MW, shared between a turers produce only small volumes. 25MW geothermal power station in Yangbaijing in Tibet and a number of smaller demonstration projects. Other components for PV systems, such as charging 255 locations suitable for geothermal electricity pro- regulators and pumps, are also produced in China. duction have been identified in China, and by 2010 ten Within the scope of the GTZ rural electrification pro- of these are to be developed with a power generation ject already described, there are initiatives to bring potential of 300 MW. According to the government’s

252 See GTZ: ‘Solarenergie: Strom für ländliche Gebiete – Kooperationsmöglichkeiten für die deutsche Solarindustrie im Rahmen der Technischen Zusammenarbeit in den Provinzen Qinghai und Yunnan’ [Solar energy: electricity for rural areas – cooperation options for the German solar energy industry within the scope of Technical Cooperation in the provinces of Qinghai and Yunnan] in: Sonne, Wind und Wärme, June 2003. 253 Chinese Renewable Energy Industries Association (CREIA) (2001): New and Renewable Sources of Energy in China – Technologies and Products. 254 According to a report (www.chinaview.cn of 26.09.2003) the largest PV plant with a capacity of 150 kW was installed in Xinjiang province and supplies a farm with 600 households in isolated operation. long-term development plan, the installed capacity in While the first programme phase covers over 1,000 2010 should be about 75–100 MW. communities, about 20,000 further communities are to be included in a second phase during the period 2005–2010 (Village Electrification Program – Song Rural Electrification Dian Dao Cun) and receive PV village systems with a total capacity of 100–150 MW. Funding of some Degree of electrification US$ 1.2 billion is planned for this. By 2010 it is Approximately 98% of the population can now be sup- intended that as many as 23 million people will receive plied with electricity thanks to grid expansions and electricity supplies. rural electrification programmes. Of the remaining 30 million people without electric power, especially in The GTZ and KfW are supporting the Township Elec- the provinces in the west and north of the country,255 trification Program. In the long term the aim is that about 23 million are to be provided with basic electricity sustainable and self-supporting electricity supply supplies by 2010 within the framework of the highly systems should develop on a commercial basis. The GTZ ambitious Brightness Program. is transferring expertise to local teaching staff, who in turn are then to train local technicians responsible for In the peripheral territories renewable energies repre- operating and maintaining the installations. sent an economic alternative to grid supply and a more appropriate and environmentally sound option than Because of the extremely tight time-frame within which conventional diesel-fuelled facilities. The energy de- the demanding target figures had to be achieved when mand in remote areas correlates particularly well with the generating and grid systems were installed, some of their potential for solar and wind energy as well as micro the equipment chosen was of poor quality and inad- hydropower, so that these alternative forms of energy equately dimensioned. In order to identify technical appear predestined to electrify rural areas in China. The problems as soon as possible, when the first signs appear, high concentration of supply in some regions even and to determine the influence of electrification on the makes it possible to harness the potential of renewable users’ living and working conditions, a comprehensive energies for grid energy production. This applies espe- technical and socio-economic monitoring system is cially to wind energy. being set up, also with GTZ support.

Township and Village Electrification Program REDP – PV component At present several national promotion programmes to The second most important programme for renewable improve rural electricity supplies are being imple- energies in off-grid areas is the Renewable Energy mented, some with bilateral and multinational support.256 Development Programme (REDP) with support from the World Bank and GEF. Financial and institutional One of the most ambitious programmes on a global scale support for local firms is provided so that they can procure, is the Township Electrification Program (Song Dian install and maintain off-grid PV facilities with a total

Dao Xiang), which is an implementation measure of the capacity of 10 MWp. These systems are then to be sold National Brightness Program. Based on a financial to households in rural regions in six north-west prov- volume of US$ 240 million, 20 MW of PV systems and inces. Altogether a subsidy of US$ 27 million has been hybrid PV/wind systems as well as 200MW micro agreed. However, up to the end of 2002 it had only been hydropower plants were installed and connected to mini possible to install 2% of the proposed systems. electricity grids in just 20 months up to June 2003. Exchange rate (28 Oktober 2003): 100 Renminbi (RMB) = € 10.30

255 Tibet is the province in which by far the largest proportion of households (approx. 80%) have no access to electricity. 256 Including a GTZ project to improve general conditions, a KfW promotion scheme worth € 18.2 million for building village electricity systems, and the Silk Road Illumination Project promoted by the Dutch government worth € 13.8 million with the participation of Shell. China

Information Sources • Suding, Paul: Zur aktuellen Reform des Chinesi- schen Elektrizitätsmarktes. Zeitschrift für Energie-

• bfai – Bundesagentur für Außenwirtschaft: Markt in wirtschaft; 27 (2003), 2.

Kürze, VR China, Windenergie, 2003. • Wen-Qiang, Liu; Lin, Gan; Xi-Liang, Zhang: Cost-

• DoE-EIA, Country Analysis Brief, China, June competitive incentives for wind energy development 2003. in China. Institutional dynamics and policy changes. Energy Policy, 30 (2002), 753–765. • Haugwitz, F.; Müller, Hj.: Solarenergie: Strom für ländliche Gebiete – Kooperationsmöglichkeiten für • World Bank: China: Renewable Energy Scale-Up die deutsche Solarindustrie im Rahmen der Techni- Program (CRESP) – Submission for Work Program schen Zusammenarbeit in den Provinzen Qinghai Inclusion. March 2001.

und Yunnan. In: Sonne, Wind und Wärme; • World Bank Report No. 24896: PAD on a proposed Juni 2003. loan in the amount of US$145 Million to the

• Hirshman, William P.: Solaraktivismus in China. People’s Republic of China for Yixing pumped Photon, Sep. 2003. storage project, February 2003.

• Hong Yang, He Wang et al.: Status of photovoltaic • Wu Libin; Reng Hong; Chen Lian: Historical industry in China. Energy Policy, Review & 2001–2002 Status on Renewable Energy 31 (2003), 703–707. in China. World Renewable Energy Congress VII, 2002. • KfW, DEG: Neue Energie. Jahresbericht über die Zusammenarbeit mit Entwicklungsländern, 2002. • Yang Jianxiang: Large Scale Market closer in China. Windpower monthly, January 2004. • Ku, Jean; Lew, Debra; Shenghong Ma: Sending electricity to townships. Renewable Energy World; • Yanrui Wu: Deregulation and growth in China’s Sep.-Oct. 2003. energy sector – a review of recent development. Energy Policy, 31 (2003), 1417–1425. • Li, Francis: Hydropower in China. Energy Policy, 30 (2002), 1241–1249 • Yuan Zhenhong; Wu Chuangzhi; Ma Longlong, Jiang Jianchun, Chen Dongmei; Zhu Weidung: • Ma Shenghong: Fight to Achieve the Goal of Town- Biomass Utilization and Technology Development ship Electrification Program. 2. Internationales in China. 2. Internationales Symposium Zukunfts- Symposium Zukunftsenergien für den Süden. April energien für den Süden. April 2003, Gelsenkirchen 2003, Gelsenkirchen (www.solartransfer.de). (www.solartransfer.de).

• Martinot, Eric: Case Study, UNDP/GEF Project for • Zhu Li: Photovoltaics Made in China, in: Renewable Commercialization of Renewable Energy in China. Energy World, January-February 2004. June 2003.

• Ming Yang: China’s rural electrification and poverty reduction. Energy Policy, 31 (2003), 283–295.

• REEEP: Accelerating the Use of Renewable Energy and Energy Efficiency Systems in East Asia. Back- ground Paper for East Asia Renewable Energy and Efficiency Partnership (REEEP) Regional Consult- ation Meeting. August 2003.

• Sieg, Klaus: Im Kleinen Topp – im Großen Flopp. Neue Energie; 05/2002. Contact Addresses National Development and Reform Commission (NDRC) Energy Bureau 38 Yuetan Nanjie Chinese Wind Energy Association Beijing 100824 No. 3 Huayuan Road Tel. 0086 (10) 68 50 1262 Beijing 100083 Fax 0086 (10) 68 50 1443 Tel. 0086 (10) 62 01 70 09 / 62 18 01 45 www.sdpc.gov.cn/ Fax 0086 (10) 62 01 28 80 / 62 18 01 42 E-mail: [email protected] / [email protected] Ministry of Water Resources www.mwr.gov.cn/english/index.htm Chinese Renewable Energy Industries Association (CREIA) State Grid Corporation of China (SPCC) A2107 Wuhua Mansion No.86, Xichang'an Avenue A4 Chegongzhuang Dajie Beijing 100031 Beijing 100044 Tel. 0086 (10) 66 59 75 71 Tel. 0086 (10) 68 00 26 17 Fax 0086 (10) 66 59 75 94 Fax 0086 (10) 68 00 26 74 E-mail: [email protected] E-mail: [email protected] www.sp-china.com/ www.creia.net/uk/home-uk.html

China Electricity Council (CEC) Center for Renewable Energy Development 1 Lane Two Energy Research Institute of NDRC Baiguang Road 1418 Guahong Mansion Xuanwu District A 11, Muxidi Beili, Beijing, P. R. China 100761 Beijing 100038 Tel. 0086 (10) 63415213 Tel. 0086 (10) 63908473 Fax 0086 (10) 63415213 Fax 0086 (10) 68002674 E-mail: [email protected] www.cec.org.cn Ministry of Agriculture (MOA) Energy Division Delegiertenbüro der Deutschen Wirtschaft in Peking 11 Nongzhanguan Nanli Delegate of German Industry and Commerce – Beijing Beijing 100026 Beijing Landmark Tower Tel. 0086 (10) 65 00 34 78 8 North Dongsanhuan Road Fax 0086 (10) 65 00 24 48 Chaoyang District Beijing 100004 Ministry of Commerce (MOFCOM) Tel. 0086 (10) 65 01 19 26 2 Dong Changann Jie Fax 0086 (10) 65 08 63 13 Beijing 100731 www.ahk-china.org (addresses of the offices in Hong Kong, Tel. 0086 (10) 65 12 19 19 Guangzhou and Shanghai are also shown there) Fax 0086 (10) 65 19 81 73 english.mofcom.gov.cn/ China General Chamber of Commerce No. 45 Fuxingmennei Dajie Ministry of Science and Technology (MOST) Licheng District 15b Fuxing Road Beijing 100801 Beijing 100862 Tel. 0086 (10) 66 09 55 68 Tel. 0086 (10) 68 51 26 18 / 68 51 55 44 Fax 0086 (10) 66 09 54 98 Fax 0086 (10) 68 51 50 04 www.china-retailers.com/english www.most.gov.cn/English/index.htm China

China Chamber of International Commerce (CCOIC) China Council for the Promotion of International Trade (CCPIT) No.1 Fuxingmenwai Street Beijing 100860 Tel. 0086 (10) 68 02 02 29 Fax 0086 (10) 68 01 33 44 E-mail: [email protected] www.ccpit.org/infosystem/home.jsp

Embassy of the People’s Republic of China Märkisches Ufer 54 10179 Berlin Germany Tel. 030 – 275 88 - 0 Fax 030 – 275 88 – 221 www.china-botschaft.de

GTZ China Division: Environmental Protection and Energy Management Landmark Towers 2 , Unit 1011 8, North Dongsanhuan Road Chaoyang District Beijing 100004 Tel. 0086 (10) 6590 6805 Fax 0086 (10) 6590 6783 www.gtzchina.com India

India

Electricity Market Power generation More than 80% of electricity is generated in thermal Installed capacity power stations, most fired by domestic coal. Based on In August 2003, installed power generating capacity in extensive expansion plans, the share of hydropower in India amounted to some 109 GW, 59% coming from the power mix is expected to increase again in the next coal-fired power stations, 25% from hydropower, 11% few years. from gas, 2.5% from nuclear power, 1.7% from wind power (1,870 MW) and 1% from diesel-fired generation. 1999 2000 2001 2002 Thermal 353,800 386,226 408,208 422,001

2720 Hydropower 82,619 80,533 74,346 73,992 2860 100000 1840 1840 Nuclear power 11,987 13,252 16,896 19,278 2225 26261 25142 80000 22443 23627 Total 448,406 480,011 499,450 515,271 21891

60000 Table 43: Power generation; India; 1998 – 2002; million kWh260 MW

40000 73628 75936 68585 69475 64151 Transmission grid 20000 Originally, there were five separate regional grids in

0 India. Under the aegis of the Powergrid Corporation of 1998 1999 2000 2001 2002 Thermal Hydropower Nuclear power India Ltd. founded in 1998, the separate grids were linked, forming a national interconnected grid system.261 257 Figure 16: Power generating capacity; India; 1998-2002; MW Line losses are a problem, with official figures at 24.5% in 1997 and 27.8% in 2002. Expansion plans Running counter to the demand situation, annual cap- While electricity consumption in 1990 still amounted acity growth declined from 8% in the 1980s to about 3% to 291 TWh, it had risen to as much as 502 TWh by towards the end of the last century, and has only risen 2002. slightly up to the present. Capacity growth did not even reach half of the target of more than 40 GW as envisaged Power consumption in the IX Five Year Plan (1997–2002).258 Since neither The distribution pattern of electricity consumption India’s central government nor the individual federal amongst the various user groups has changed consider- states have sufficient funds for new investments, private ably in the last ten years. While the household and agri- power suppliers have had market access for several years cultural sector has recorded a growing percentage, now.259 Lengthy approval procedures and lack of finance industrial consumption has declined in comparison. In have been identified as the reasons why many private the financial year 2001–2002, households made up a projects have not been implemented. share of about 22%, agriculture 29%, industry 29%, and other sectors 20% (including trade and transport). Up to 2012, i.e. within the term of the present and next five-year plans, the Ministry of Power plans to have The Indian electricity market has problems meeting installed 100 GW of capacity. peak load requirements (2002: about 12% deficit) and satisfying the demand for electricity (deficit: 7.5%). With growing power demand and insufficient capacity expansion, the quality of power supply has not improved in recent years.

257 Source: Ministry of Power, Annual Report 2002/2003. The statistics from the Ministry of Power include no figures on other types of generation, such as wind power. Of general note is that balance sheets and statistical years in India largely span the period from 1 April to 31 March of the following year. 258 In the current five-year plan for 2002–2007 an additional capacity of 41,000 MW is planned, with experts anticipating an actual rise of 28,000–29,000 MW. 259 The Indian government requires independent power producers to take part in invitations to tender (except for projects based on non-conventional energy sources). 260 Source: Ministry of Power, Annual Report 2002/2003. 261 Information on installed capacity, expansion plans and inter-regional connections of the national transmission grid are available at www.cercind.org/ powergrid.htm. Electricity prices The Powergrid Corporation is in charge of power trans- Lack of efficiency and profitability on the part of nati- mission between the federal states. Electricity trading onal and federal state power suppliers are partly due to for independent power producers that supply electricity distorted and cost-ineffective pricing in favour of the to more than one federal state is in the hands of the agricultural sector. Excessive electricity prices on the Power Trading Corporation founded in 2001. other hand put the commercial and industrial sector at a disadvantage. Generation In August 2003 the federal state suppliers accounted for 9 59% of total generating capacity, the central govern- 8 ment sector 30%, and the private sector 11%. 7

5 Since 1991 the Indian electricity market has been open

_-cent/kWh for private national and foreign investors. Import duties € 3 and taxes were reduced for independent power producers 2 and they were also offered secure returns. Although the 1

0 integration of more independent power producers is 1999 2000 2001 2002 Households Trade Agriculture Industry Transport Average viewed as essential for supply security, they have played only a subordinate role until now. The precarious finan- Figure 17: Electricity tariffs by consumer groups; India, cial situation of SEBs and the resultant refusal to pay 1999 – 2002; € cents/kWh262 adequate prices for electricity along with obstacles to Also, electricity use is often not paid for. This is attrib- obtaining legal permits have deterred reputable in- utable to the provision of electricity free of charge for vestors in the past. some clientele, a lack of consumption records and illegal power tapping. It is estimated that no more than 55% of power generated is billed and only 40% is correctly Legal Framework accounted for. The main responsibility for the power sector at national level is borne by the Ministry of Power (MoP); the Minis- Market Actors try of Non-Conventional Energy Sources is responsible for renewable energies. The Ministry of Power is assisted The major actors in the Indian power sector are the federal in technical and economic matters by the Central Elec- states, where power supply is run by 17 State Electricity tricity Authority. Boards (SEBs) and 12 Electricity Departments (EDs). SEBs and EDs control 90% of power distribution263 and are also Reforms in the power sector responsible for distribution in 25 of the 28 federal states The power sector in India has proved to be resistant to and in part also for power transmission. In 9 federal states, reform for decades. New legal provisions in 1991 and a the responsibilities for generation and grid operation have reform of the electricity laws of 1910 and 1948 to open been unbundled. Power distribution has so far been pri- the market for foreign investors have not proved to be vatised in Orissa and Delhi.264 very successful. As a result of federalism in India and the resultant autonomy of the federal states, the reforms Central government sector were only implemented in some states with the help of The central government power sector is made up of large the World Bank and the Asian Development Bank.265 enterprises, including in the generating sector the National Hydroelectric Power Corporation (NHPC), The Minimum National Action Plan for Power was National Thermal Power Corporation and Nuclear adopted at the end of 1996 as a fundamental strategy Power Corporation, which sell electricity to the SEBs. paper for reforming the federal state power sectors

262 Source: Planning Commission, 2002. 263 The remaining distribution services are performed by private enterprises and municipalities. At the end of the 2000/2001 financial year, 64 private enterprises were licensed for electricity distribution, including 32 rural cooperatives. In addition, 3 electricity distribution licences were in the hands of municipal utilities. 264 Current information on progress in reforms in the individual federal states is available on the web site of the Ministry of Power: http://powermin.nic.in. 265 In the federal state of Orissa, the Electricity Reform Act entered force in April 1996. This split up the SEBs into two independent power producers for thermal (OPGC) and hydropower stations (OHPC), a grid operator (GRIDCO) and four distributors. Moreover, large parts of the distribution sector were privatised. India

aimed at securing the economic viability of the federal SEBs are subject to considerable pressure to adapt, as state power utilities and their independence of political they could lose a large part of their clientele due to the institutions. Ultimately, the aim is to set up a regulatory new law. Particularly because of the need of the federal and operational framework to enable broad private state electricity suppliers to adjust, it is anticipated that investments. the legal requirements will be implemented step by step.

Regulatory authorities Clean Development Mechanism Especially to introduce the urgently needed tariff reform India officially adopted the Kyoto Protocol in August and render the payment of subsidies transparent, an 2002. The provisional national focal point for the Clean ordinance was issued in April 1998 for the appointment Development Mechanism is the Ministry of Environ- of central and federal state commissions to regulate elec- ment and Forests. The GTZ is supporting India in build- tricity.266 The central body established in response to ing institutions for the recognition of CDM projects and this, the Central Electricity Regulatory Commission laying down an official recognition procedure. The bila- (CERCs), sets the tariffs for state power producers, regu- teral project was launched in October 2003 and it is also lates nationwide power transmission and distribution planned to implement specific emissions reduction pro- and advises the government on tariff and competition jects with partners in India. Initially, seven projects will policy. The State Electricity Regulatory Commissions receive support, including a 100MW wind farm in (SERC) set up at federal state level are tasked with regu- Tamil Nadu and two small hydropower projects of lating the generating and distribution market in the 6 MW and 9 MW.268 regional setting. One aim of the EU-assisted project is to bundle small Electricity Act 2003 CDM projects that would not obtain recognition indi- The Electricity Act that came into force in June 2003 vidually due to high transaction costs.269 replaces the preceding legislation and aims at doing away with the SEBs’ monopolistic position. Self-generators and actors in the rural regions in particular benefit Policy for Promoting Electricity from the law: Generation from Renewable Energy Sources • Self-generators no longer require permission for power production and transmission. Along with As early as 1982, a department for non-conventional industry, commercial enterprises (e.g. hotels and energy sources was set up in the then Ministry of Power. hospitals) and cooperatives can generate electricity This department was upgraded in 1992 to become an for their own use. independent ministry (Ministry of Non-Conventional • Power producers and traders can obtain open access Energy Sources – MNES). MNES is responsible for wind to transmission and distribution grids against power, biomass (including biogas), solar energy, small payment.267 hydropower stations (< 25 MW), geothermal energy, • With immediate effect, power generation no longer energy from the sea, biofuels, hydrogen energy storage requires licensing (apart from hydropower). and energy production from waste. No licences are required for trading, transmitting and distributing electricity. MNES’s tasks include: • For locally active organisations in rural areas (municipalities, cooperatives, concessionaires, non-govern- • heading the Commission for Additional Sources of mental organisations, etc.), electricity generation Energy (CASE) but also transmission, distribution and trading all • implementing a programme for rural energy supply do not require a licence. (IREP) • steering the Renewable Energy Programme

266 The Electricity Regulatory Commission Act of 25 April 1998. 267 Both central and federal state governments can require a mark-up on transport fees for power transmission. 268 Further information on Indo-German cooperation under CDM: www.cdmindia.com. 269 For more details see www.cdmpool.com. • overseeing the Indian Renewable Energy Develop- • iIn power generating projects up to 100% foreign ment Agency (IREDA) equity capital is permitted (provided permission has been granted by the Foreign Investment Promotion Indian Renewable Energy Development Board - FIPB) Agency (IREDA) • power generating projects are supported along Largely to administer finances for the various program- build-own-operate lines mes for promoting research and applications, an inde- • limited-term income tax exemption pendent authority was set up at national level in 1987, • faster depreciation IREDA. Up to 31 December 2002, IREDA approved • concessionary import duties on certain components development loans at concessionary rates from national • investment/interest subsidies and international sources from a fund amounting to over € 1 billion. € 570 million was disbursed to the projects, and the following at the federal state level: approximately € 223 million of this going to the wind power sector. Included here was also a loan from the • facilitation of electricity sales to state power World Bank for wind energy projects amounting to suppliers US$ 78 million. KfW is also supporting IREDA with • enabling of cheaper electricity transmission via an long-term syndicated loans. Working as counterparts at interconnected grid system270 federal state level, so-called State Nodal Agencies are • preferential consideration for demand at peak load primarily concerned with selecting and promoting times (freedom from power cuts) renewable energy projects and circulating information • possibilities for banking271 on them. • pPreferential treatment with sales taxes (e.g. by deferment) Under the new Electricity Act of 2003, the federal states • exemption from electricity tax for self-generators are obliged to specify rules for rates charged for power • capital subsidies from renewable energies. MNES has not succeeded in its demand for stipulating obligatory quotas and preferen- In 1994, MNES published a plan of action for renewa- tial tariffs for generating electricity from renewable ble energy. This plan contains guidelines on how the energy sources. Experts nevertheless expect the law to federal states should design their market incentive pro- give a boost to electricity generation from renewable grammes for renewable forms of energy in detail.272 The energies, in particular for small municipal grids, as from following table provides a general picture of the different now on rural cooperatives and associations may organise federal state development provisions, taking wind their own power supply without applying for a licence. energy as an example.

Renewable Energy Programme MNES directs the Renewable Energy Programme, which includes expansion projects for wind power, small hydropower, biomass, biogas and photovoltaic technology. A bundle of development measures is implemented by central and federal state governments. Commercial investment projects, research and development and the implementation of demonstration projects have been facilitated with subsidies, loans and fiscal incentives. The forms of financial and tax-related assistance available include the following at the central level:

270 This is called 'wheeling' in India. A certain percentage of physical electricity is charged. If the wheeling rate is 5%, for example, 100% of the contractual quantity is fed in, but the grid operator passes on only 95% to the recipient. 271 In banking, (surplus) electricity is supplied to the local power suppliers for resale. The supplier may then take out an equally large amount of energy from the grid within a certain period, as the need arises. 272 Guidelines for Promotional and Fiscal Incentives by State Governments for Power Generation from Non-Conventional Energy Sources. India

Andra West Madhya Tamil Pradesh Karnataka Bengal Pradesh Maharashtra Rajasthan Nadu Gujarat Kerala

Wheeling273 % 20 20 2 2 2 2 5 4 5

Banking months 12 2% p.m. for 6 - 12 12 5% (12 6 9 (June- 12 months months) Feb.)

Rs Tariff /kWh 2,25 2,25 Case- 2,25 3,50 3,30 2,70 2,60 2,80 specific

Annual % 5 5 Case- - 0,15 RS/kWh 5 - 0,05 RS/ 5 tariff specific for 13 years kWh adjustment

Electricity sales Not Allowed Not Allowed Allowed Allowed Not Not Not to third parties allowed allowed allowed allowed allowed - Capital Max. 20% Max. Rs - As for max. 30% - - - subsidies (Rs 2.5 2.5 million other (max. million) industries 2 Mio. Rs)

Other systems No electri- - - - No Assi- No electricity of incentives Industry city tax for electricity stance to tax for 30% status274 5 years tax for 5 the textile of installed. years industry275 capacity

Table 44: Federal state assistance provisions for electricity generated from wind power; India276

Renewable Energy Plan 2012 Assistance by international donors According to a government proposal, the Renewable The GTZ is supporting India in building institutions Energy Plan for 2012, which is largely geared to provi- for the recognition of CDM projects. The bilateral pro- ding basic supply to rural areas, includes the following ject was launched in October 2003 and it is also planned objectives: to implement specific emissions reduction projects with partners in India. Initially, seven projects will receive • 10% share (about 12 GW installed capacity) of support, including a 100MW wind farm in Tamil Nadu national power supply from renewable energy and two small hydropower projects of 6 and 9 MW.278 sources277 • electrification of at least 4,500 rural settlements MNES is presently implementing a GEF-assisted pro- (25% of the 18,000 non-electrified villages) ject on ‘Optimising Development of Small Hydro • installation of 5 million solar-powered lanterns and Resources in Himalayan and Sub-Himalayan Regions’. 2 million solar home systems for lighting This project will promote 20 demonstration facilities • supply of optimised wood-burning ovens to and the extension of 100 existing systems. 30 million households • installation of small biogas facilities for 3 million families

273 As a percentage of the amount of electricity fed in. 274 The conferral of ‘industry status’ gives an entitlement to certain other forms of assistance. 275 Based on state assistance for investment in the textile industry in the federal state of Tamil Nadu, this production segment invests more in wind power projects. 276 Source: MNES, Annual Report 2002/2003, Wind Power Monthly, 11/2003. 277 Shares of the individual sectors: wind power 6,000 MW, biomass 3,500 MW, small hydropower 2,000 MW, energy generation from waste 400 MW, thermal solar systems 250 MW and photovoltaic technology 30 MW. 278 Further information on Indo-German cooperation under CDM: www.cdmindia.com. Status of Renewable Hydropower potential Energy Sources Studies on hydropower potential have been conducted by MNES and the state Central Electricity Authority. The installed power generating capacity of renewable The potential for small hydropower stations (< 25 MW) energy systems amounts to more than 3,700 MW is estimated at over 15,000 MW, and that for mini (excluding large-scale hydropower), which makes up (< 3 MW) and micro hydropower stations (< 100 kW) 3.5% of total installed capacity. Only a fraction of the at a total of 10,000 MW. A MNES database contains available potential in India has been harnessed, however. over 4,200 potential locations with a capacity of over Wind power has been able to establish itself in recent 10,000 MW. So far, projects have been carried out with years as the leading technology after hydropower and is a total capacity of about 1,500 MW. expected to consolidate its position in the coming years. Expansion of mini hydropower and incentives systems Potential Installations Micro and mini hydropower stations are usually an eco- Wind power 45,000 MW 1,702 MW nomical option for electricity generation in remote and Small hydropower (< 25 MW) 15,000 MW 1,519 MW mountainous regions beyond the reach of transregional Biomass 19,500 MW 468 MW supply grids. Thanks to effective government assistance, Biogas 12 Mio facilities 3,4 Mio facilities so far mini hydropower stations have been installed in Photovoltaics 20 MW/km2 India with a capacity of some 240 MW. Electricity gener- Street lighting 41,000 facilities ation from these systems has therefore quadrupled in the Lighting in households 177,000 facilities last 10 years. In the past, government has been the main Lanterns 279 384,000 units builder of small hydropower stations. Assistance measures

Power stations 1,17 MWp aim at stepping up involvement by private investors. Besides various systems of incentives at federal state Table 45: Potential and construction progress of power level,281 the following support components are provided generating installations based on renewable energies, 31 Dec. 2002280 by central government under the leadership of MNES and IREDA: In the past, the expansion of renewable energy capacity has often fallen short of the targets set in the five-year • Financial assistance for studies and reports plans or these have been amended in the course of time. • Financial assistance for detailed project appraisals In the current economic plan (2002–2007), the expan- and reports sion target has been lowered from 4,200 to 3,000 MW. • Investment promotion This includes 1,500 MW of additional wind power • Interest subsidies for commercial projects capacity, 600 MW small hydropower, 700 MW bio- • Subsidies for altering, modernising, rehabilitating mass, 50 MW biogas, 140 MW thermal solar energy and extending installations and 5 MW photovoltaics. Manufacturers and traders Hydropower The manufacturer and trader network in India is well Although installed hydropower capacity has kept developed and provides the market with complete increasing up to now, its share of total capacity has de- systems as well as construction components and spare clined in the last 40 years from over 50% to 25%. To parts. There are 8 manufacturers for small hydropower counter this trend, responsibility for small hydropower station turbines alone. projects (3 – 25 MW) was transferred at the end of 1999 from the Ministry of Power to MNES, which was already in charge of mini hydropower (< 3 MW) as of 1989. Today, the Ministry of Power is only involved in large-scale projects (> 25 MW).

279 Unlike fixed lighting in households (solar home systems) and street lighting, solar lanterns are portable. 280 Source: National Development Council, 10th Five-Year Plan 2002–2007; MNES Annual Report 2002/03. 281 Thirteen federal states have issued or announced ordinances on promoting small hydropower projects with some considerable privileges, triggering large demand among private investors. In these states, 760 locations with approximately 2,000 MW potential capacity have already been placed on offer and for the most part have already been assigned. India

Wind Energy Federal state Total Technical Installed Due to state assistance and the active involvement of the potential potential capacity private sector, wind energy use has increased by a large margin between 1994 and 1997. Expansion slowed MW MW MW down markedly towards the end of the 1990s, however, Andhra Pradesh 8,275 1,750 93 even coming to a standstill at times. The market did not Gujarat 9,675 1,780 173 start to revive again until 2000. Electricity trading by Karnataka 6,620 1,120 141 private firms under the Electricity Act of 2003 affords Kerala 875 605 2 favourable conditions for wind power. Madhya Pradesh 5,500 825 23 Maharashtra 3,650 3,020 401

Rajasthan 5,400 895 73 1800 Tamil Nadu 3,050 1,750 1,004 1600

1400 West Bengal 450 450 1

1200 Other 2,990 - 2

1000 Total 45,195 12,875 1,912 MW 800

600 Table 46: Wind power potential and installed capacity by 400 federal state; India; 2003; MW283 200

0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Assessment of wind resources Additional capacity Capacity An extensive investigation into wind resources was carried out with the help of the Wind Resource Assessment Figure 18: Installed wind power capacity and additional Programme (WRAP) under the aegis of MNES. An capacity; India; 1993-2003; MW282 appraisal of data from about 1,000 measuring stations Installed wind power capacity at the end of August identified 208 suitable locations.284 Total potential is 2003 amounted to 1,912 MW, the fifth largest world- estimated at 45,000 MW, with about 13,000 MW in wide, although the availability of some installations is technically viable potential. A nationwide wind atlas is in likely to be restricted due to technical defects. Almost planning, with data already available on wind resources. 90% of wind power facilities have been installed in only The Centre for Wind Energy Technology (C-Wet) is the four federal states. Approximately 80% of the energy central institute for research and development tasks and generated by wind power stems from self-generators, for measures under WRAP. largely enterprises seeking to avoid excessive electricity prices charged by the federal state power suppliers. Promotion of wind energy Depending on the federal state, the price charged for electricity from wind power ranges at the moment between 4.3 and 6.7 € cents/kWh, with an annual markup normally allowed for price adjustment. These rates are largely regarded as unattractive and only used by private investors to a limited degree.

The wind power programme coordinated by MNES comprises several areas, such as wind potential studies, research and development projects and demonstration wind farms. These receive subsidies of up to 60%, with a maximum of 6 MW promoted per state. Loans are also granted for private projects via the government agency IREDA.

282 Source: Indian Wind Energy Association, 2003. 283 Source: www.windpowerindia.com. 284 The selection criterion for suitable locations is a wind density of more than 200 W/m2 at a height of 50 m. Local system manufacture these systems are in operation. They are mostly fed with In the past few years, India has been able to establish organic waste from animals and households and make a itself as a major production location for plant and com- substantial contribution to reducing environmental pol- ponent manufacturers. Around 15 enterprises are now in lution. The gas generated replaces wood for heating, but operation, some in cooperation with international enter- it can also be used for electricity generation. prises as joint ventures or manufacturing under licence, increasingly for export. Suzlon Energy now numbers Solar Energy amongst the ten largest wind plant manufacturers Approximately 750,000 photovoltaic systems with a worldwide and is the market leader in India. Alongside total capacity of about 60 MW are now in use in India. development centres in Germany and the Netherlands Most are used in rural regions remote from grids, for branches have been established in the USA and China. lighting houses and streets and for pumps and irrigation The company has a workforce of more than 1,200 and systems. Nationwide there are over 20 grid-linked PV produces systems with a capacity of 350–2,000 kW. systems in operation with a total capacity of about

2.5 MWp. The majority of these installations were pro- Biomass moted by MNES. PV stand-alone systems, solar The potential for electricity generation from biomass is lighting systems and solar home systems (SHS) are as- put at almost 20,000 MW. Of this, combined heat and sisted by the MNES PV programme. power stations run on bagasse account for 3,500 MW. To localise and place a more exact figure on the potential, a Mathania solar power station detailed survey was started in the ninth five-year plan The natural conditions on the Indian subcontinent are (1998-2002). Altogether, about 500 studies were sched- very favourable to thermal solar power stations. Desert- uled by the end of 2003 in 23 federal states. The data like regions with large unused and unoccupied areas of obtained will be compiled in an extensive resource atlas. land are particularly suitable. In Mathania in the federal state of Rajasthan the construction of a combined At the end of 2002, the capacity of biomass power sta- solar/gas power station for a total electrical capacity of tions based on bagasse and farm residues was about 140 MW is in preparation. Two thirds of the develop- 500 MW, with the same capacity under construction. ment funds for the project come from German development cooperation (€ 60 million), market funds of the Under the MNES Biomass Power/Co-generation Pro- Kreditanstalt für Wiederaufbau (€ 68.1 million) and a gramme, grid-linked systems and industrial self-gener- financial contribution by the Global Environment Facil- ating plants with a minimum capacity of 1 MW are given ity (US$ 49 million). Funds to pay the remaining assistance. Research and development is also supported, investment costs of about US$ 242 million have been for example covering state-of-the-art gasification plants raised by Indian institutions. The construction contract and engines. Assistance is provided in the form of interest was offered for tender by KfW at the end of 2001 and subsidies, grants, fiscal incentives, feasibility studies the plant is scheduled to start operation in 2005. and further training measures. PV industry In 10 federal states various other incentive mechanisms Various types of PV cells with high efficiency grades are are provided, such as wheeling, banking, higher infeed produced in India. Solar cells with a total capacity of tariffs and the option of selling electricity to third parties. 22 MW and modules with a capacity of 23 MW were manufactured in the 2002-2003 financial year. The Biomass gasification plants export of cells and modules amounted to a total of 15 MW. In India relatively large biomass gasification plants are built with a capacity of 3–500 kW. Approximately 1,800 gasification systems with a capacity of 54 MW have been in operation to date. Small biogas systems are widespread in rural areas. At present, over 3.5 million of India

Geothermal Energy PV systems are operational in the long term based on Geothermal energy has so far only been used in India for sustainable maintenance and upkeep. heating but not for commercial electricity generation. The power generating potential is estimated at MNES is contributing to rural electrification with 10,000 MW. several sectoral programmes. The Integrated Rural Energy Programme (IREP) aims at strengthening per- The Geological Survey of India285 has identified over sonnel and organisational capabilities at the local level 300 locations for geothermal power stations and pub- in order to involve local actors in planning power lished its studies in a resource atlas. Since then, a network supply. Grants are also offered for pilot plants and tech- of research institutes has been investigating ways of nical assistance is provided. exploiting the potential and has installed small demonstration facilities for electricity generation. The Rural Electrification Corporation (REC) is answerable to the Ministry of Power. It provides financial The initial geographical focus of the investigations is on assistance for all measures to improve rural power geothermal fields in Chhattisgarh and Jammu & supply, including renewable energy sources. Under the Kashmir. In the federal states of Himachal Pradesh, national strategy ‘Mission 2012 – Power for all’, all Uttaranchal and Jharkhand, though, too, high tempera- villages are supposed to be supplied with electricity by tures have been recorded in strata that would be suitable 2007 and all households electrified by 2012.288 for power generation.

Exchange rate (5 Nov. 2003): 100 Indian rupees (INR) = € Rural Electrification 1.93; 1 rupee = 100 paise

Lacking electricity still are 96,000 villages with 77 million households, which makes for a nationwide electrification of approximately 80%. Due to their remote locations and difficult access, at least 18,000 villages will not be able to be linked to a grid in future either. Local- ised power systems from renewable energy sources are Information Sources an obvious option here. In the Electricity Act of 2003 the Indian government pledges to electrify all rural • ADB – Asian Development Bank: Report and settlements. Guidelines intended to bring this about are recommendation of the president to the board of to be drawn up in cooperation with the federal states.286 directors on a proposed loan to the Power Finance As well as small-scale individual systems (such as SHS), Corporation Limited, India, for the state power separate municipal grids will also be set up. sector reform project. November 2002

• Hayes, David: India progresses power sector reform National activities alongside private power initiative. Energy Econo- Ambitious electrification programmes by the govern- mist. Issue 261, July 2003 ment are intended to make a large improvement to rural power supply in future. For example, a programme was • Fossil Energy International: An Energy Overview of adopted in September 2001 to electrify a region along India. March 2003 (www.fe.doe.gov) the border with Tibet with 170,000 inhabitants using • International Energy Agency, India Power Sector, PV systems within 5 years.287 On a fee-for-service basis, 2002 the systems are leased to the residents for a monthly charge, which is also used to pay local service personnel. • Ministry of Power: Annual Report 2002–2003 Programme success will not be assured until the (powermin.nic.in/report/ar02-03.pdf)

285 See also www.gsi.gov.in. 286 The Ministry of Power’s Discussion Paper on Rural Electrification Policies of November 2003 describes the pending reform tasks, provides a short summary on rural electrification in India and explains alternative supply schemes at municipal level. 287 Altogether, 24,000 SHSs, 12,000 solar lanterns and over 2 MW of PV systems are planned for installation in 5 years. The first phase to install 10,000 SHSs and 6,000 lanterns was completed in the summer of 2002. 288 See www.recindia.com. • Ministry of Power: The Electricity Act 2003. Back- Contact Addresses ground and salient features of the Act (mnes.nic.in) German Embassy in India • Ministry of Power: Discussion Paper on Rural No. 6/50G, Electrification Policies, November 2003 Shanti Path, Chanakyapuri New Delhi 110 021 • MNES – Ministry of Non-Conventional Energy Tel. 0091 (11) 2687 18 31 to 37 Resources: Annual Report 2002/2003 (mnes.nic.in) Fax 0091 (11) 2687 31 17 E-mail: [email protected] • MNES – Ministry of Non-Conventional Energy www.germanembassy-india.org Resources: Renewable Energy in India,

Business Opportunities, 2001 Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH • National Development Council: 10th Five-Year Dr. Gisela Hayfa Plan (2002–2007) 21, Jor Bagh New Delhi 100 003, India • Padmanabhan, S.: Electricity Act – Winners and Tel. 0091 (11) 460 3832-36 Losers, 2003 (www.renewingindia.org) Fax 0091 (11) 460 3831

• Planning Commission: The Working of State Elec- E-mail: [email protected] tricity Boards and Electricity Departments. Annual Internet www.gtz.de/india Report 2001–2002, May 2002 Indian Embassy in Germany Tiergartenstr. 17 • Reddy, Dr. B. Sudhakar: Barriers to the Diffusion of 10785 Berlin Renewable Energy Technologies – A Case Study of Germany the State of Maharashtra. Indira Gandhi Institute of Tel. (030) 2579-5505 Development Research, Mumbai 2001 Fax (030) 2579-5520 E-mail: [email protected] • Sunil Saraf: New Indian power law changes the www.indianembassy.de ground rules for renewables. Renewable Energy Report, Issue 52, June 2003 Indo-German Chamber of Commerce Maker Tower ‘E’, 1st floor, Cuffe Parade • TERI – Tata Energy Research Institute: Survey of Mumbai (Bombay) 400 005 renewable energy in India. TERI Project Report, Tel. 0091 (22) 56 65 21 21 No. 2000RT45, 2001 Fax 0091 (22) 56 65 21 20 E-mail: [email protected] • Winrock International, Renewable Energy State of www.indo-german.com the Industry Report, No. 9, April – June 2003 Ministry of Power • World Bank: Energy strategies for Rural India: Shrama Shakti Bhavan Evidence from six states, ESMAP Paper 258, New Delhi 110 001 August 2002 Tel. 0091 (11) 371 74 74 / 371 14 81 Fax 0091 (11) 371 75 19 • Windpower monthly: India gears up to new powermin.nic.in realities, 11/2003 MNES (Ministry of Non-Conventional Energy Sources) Block 14, C.G. O. Complex Lodhi Road New Delhi 110 003 Tel. 0091 (11) 24 36 14 81 Fax 0091 (11) 436 27 72 E-mail: [email protected] mnes.nic.in India

IREDA (Indian Renewable Energy Winrock International India Development Agency Ltd.) 1, Navjeevan Vihar, New Delhi – 110017 India Habitat Centre Complex Tel. 0091 (11) 2669 3868 Core 4A, East Court, 1st Floor Fax 0091 (11) 2669 3881 Lodi Road E-mail: [email protected] New Delhi 110 003 www.renewingindia.org Tel. 0091 (11) 460 13 44 Fax 0091 (11) 460 28 55 Rural Electrification Corporation Limited E-mail: [email protected] Core-4, SCOPE Complex, 7, www.iredaltd.com Lodhi Road, New Delhi – 110003 Tel. 0091 (11) 436 51 61 Central Electricity Regulatory Commission – CERC Fax 0091 (11) 436 06 44 Core 3, 5th Floor, Scope Complex, 7 Institutional Area www.recindia.com Lodi Road New Delhi – 110 003 Indian Wind Energy Association Tel. 0091 (11) 436 48 95 E-mail: [email protected] Fax 0091 (11) 436 00 10 / 436 00 58 www.inwea.org E-mail: [email protected] www.cercind.org/index.htm Centre for Wind Energy Technology R-8, North Main Road State Electricity Regulatory Commissions – SERC Anna Nagar West Extension The addresses of SERCs can be obtained from the CERC Chennai – 600 101 website under ‘Links’: www.cercind.org Tel. 0091 (44) 2615-1522 Fax 0091 (44) 2615-1588 State Electricity Boards – SEBs E-mail: [email protected] The addresses of the SEBs can be obtained from the CERC www.cwet.tn.nic.in/ website under ‘Links’: www.cercind.org

UNDP Office India Post Box No. 3059 55 Lodhi Estate New Delhi – 110 003 Tel. 0091 (11) 24 62 88 77 Fax 0091 (11) 24 62 76 12 www.undp.org.in

TERI – The Energy and Resources Institute Darbari Seth Block Habitat Place Lodhi Road New Delhi – 110 003 Tel. 0091 (11) 24 68 21 00, 24 68 21 11 Fax 0091 (11) 24 68 21 44, 24 68 21 45 E-mail: [email protected]

Central Electricity Authority Sewa Bhavan, R.K.Puram New Delhi – 110 066 Tel. 0091 (11) 6108476 / 6105619 E-mail: [email protected] www.cea.nic.in Yemen

Yemen

Electricity Market 2000 2001 2002 2003 Gross electricity generation (GWh) 3,387 3,654 3,813 4,090 Generating capacity Net electricity generation (GWh) 3,130 3,380 3,539 3,809 The state-owned utility company, the Public Electricity Electricity sold to end 2,079 2,244 2,477 2,736 Corporation (PEC), operates 50 individual generating consumers (GWh) plants, three of which are steam turbines fuelled with Losses (technical and 31.3 31.4 27.4 26.3 non-technical) in % oil. All of the other plants are diesel generators, around Average revenue 9.2 10.9 11.9 12.2 40 of which are operated in isolated grids. The total (rials/kWh) capacity of the steam turbines (in Ras Kanatib near Al- Cost-covering tariffs 13.9 16.7 17.8 18.1 Hodeidah, in Al-Mukha and in Hiswa near Aden) is (rials/kWh) 450 MW, that of the diesel generators supplying the interlinked power system something over 200 MW, and Table 47: Electricity generation and sales, losses and electricity tariffs; Yemen; 2000–2003; GWh, %, Rials/kWh that of the off-grid diesel generators 235 MW. The contribution made by grid-coupled diesel generators to elec- Transmission grid tricity generation is considerably lower, however. The transmission grid operated by PEC mainly supplies Numerous plants, even those with a relatively large the western part of the country, while extensive areas in capacity, are unavailable at times because of breakdowns the eastern provinces are not within reach of the central and repairs, to the extent that availability overall is no supply system. A high-voltage transmission route, carry- higher than roughly 60%. ing 132 kV and about 2,000 km long, connects the regions around Sana’a with Aden in the south, passing Apart from PEC, other bodies operating generating longitudinally through the relatively densely populated capacity include local authorities and in particular indus- uplands. However, only a total of 580 MW is fed into trial and commercial self-generators. The total installed this line, and even this is only 60% available. Another capacity of all generating sectors amounted to 1,234 MW main line connects the seaports of Hodeidah and Al- in 1998. Mukah to Sana’a and Taizz, and runs parallel to the Red Sea coast. A further short high-voltage transmission route, The generating capacity provided at the moment is well separate from the others, runs near Al-Mukalla on the below the level of demand, which means that power cuts Gulf of Aden. are an everyday occurrence in many towns and cities. The Ministry of Electricity estimates the need for new New 400kV transmission lines which would extend the power station capacity at about 1,650 MW by 2020. grid to the east and north are currently at the planning stage. It is not foreseeable at present, however, whether Power generation these extensions will really come to fruition. An extension Gross power generation by PEC totalled more than in the direction of Marib is the most likely as a gas-fired 4,000 GWh in 2003 and has also grown substantially in power station with a capacity of 300 to 400 MW is recent years. Peak load is likely to be about 700 MW at planned in this region. present. Electricity consumption and losses Electricity consumption grew at an average rate of more than 6% per year in the 1990s. In view of the low level of industrialisation in the country, consumption is largely concentrated on (urban) households and trade. Despite the high rates of growth in demand, per capita consumption is very low, at less than 150 kWh per year. The reason for this is the low income of the population and the large number of households which until now have had to manage without regular power supplies. Accord- On average the electricity tariffs for PEC customers in ingly, electricity consumption is very largely concentrated 2003 were around 12.2 rials/kWh, and therefore still on the conurbation around Sana’a, Aden, Hodeihad and well below the level that would be needed to cover costs, Taizz. which is about 50% higher. The difference is currently made up directly from the national budget. One particu- Although there has been a relative reduction of losses in lar problem is the poor payment behaviour, which also recent years, the absolute quantities of electricity for applies to government agencies and facilities. which no payment was made have remained almost the same. High technical losses are compounded by financial shortfalls due to theft or refusal to pay. All in all, losses Market Actors are presently still at a level of over 26%. The Yemeni electricity sector is composed of four different Tariff system segments: The tariff system for households has a progressive structure. In addition, standing charges have to be paid, which • public sector, which is served by the state-owned for households with a single-phase power supply, for Public Electricity Corporation (PEC) example, come to 200 rials/month (approximately € 0.9). • autonomous supply by local authority units, which Consumers who obtain electricity at a high voltage level in the past was supported by a state assistance have to pay supplementary demand prices. programme (GAREW) • self-financed electricity generation in industrial and commercial enterprises Tariff (rials/kWh) • private households and independent power supply Households (urban) for government buildings with their own 1–200 kWh 4 diesel generators 201–350 kWh 7 351–700 kWh 10 PEC > 700 kWh 17 PEC is a vertically integrated public utility company Households (rural) that serves most of the larger cities and urban centres in 1–100 kWh 7 Yemen. It arose from the amalgamation of two independ- > 100 kWh 17 ent public electricity supply companies following the Industry 15 unification of North and South Yemen. In addition to Craft & trades 18 the major generating plants, PEC also operates the State facilities 18 interconnected grid and several isolated supply systems in rural regions. Table 48: PEC electricity tariffs by customer groups; Yemen, from August 2001; rials/kWh Low electricity tariffs led in the past to the financial and Rural consumers pay a far higher price than urban technical collapse of the generating sector. PEC had to customers. However, compared with most local authority cope with substantial and rising operating losses after units with self-contained supplies, which ask their the two utility companies in the north and south of the customers to pay about 20 rials/kWh (9 eurocents), the country were merged in 1991. Insufficient financial re- PEC tariff is actually low. Because of the tariff structure, sources made it more difficult to purchase spare parts the relative attractiveness of low diesel prices and the and led to a lack of investment in the modernisation and negative impacts of daily power failures, in recent years expansion of plants. Most of the required capital expend- a number of commercial and industrial consumers have iture was financed by the state. As a consequence the chosen to go down the route of generating their own quality of supply declined to such an extent that power electricity. failures, load shedding and considerable fluctuations in voltage are everyday occurrences. The electrification of Yemen

rural regions has been only partly implemented, with connection, in 2002 among other things a fund was set more than half of power supplies being provided by co- up for the initiation of rural electrification projects on operatives, the private sector and self-generation. the basis of renewable energy, under the auspices of the department for renewable energy. A first call for tenders was issued in 2003 for the supply of 80 PV systems to Legal Framework provide electricity for households and for pumping water, and for three small wind generators for the rural The implementation of a comprehensive reform pro- electrification of a village in Abyan Governorate. In add- gramme in the electricity sector has been in progress ition, in 2003 MEW instructed the utility company PEC since 1997, but to date this has produced only few sub- to invest at least 10% of its annual budget for rural elec- stantial changes. In recent years the government’s efforts trification in technologies designed to exploit renewable have primarily concentrated on improving efficiency by energy sources. As a result, more than US$ 1 million reducing the high levels of losses, and on strengthening per year is currently available for such applications. the financial position of the PEC by adjusting the tariff structure and improving the collection of payments A new Ministry of Electricity (MoE) was created in from customers. Several reform approaches have been 2003. Both it and the Department for Renewable Energy examined during the past few years, with consideration emerged from the Ministry of Electricity and Water. being given among other things to privatisation of part of the state power supply facilities. Fundamentally some In recent times the Ministry of Tourism and, within the form of participation by the private sector in the field of context of climate protection activities, the Environment power generation for public supply is possible and ex- Protection Authority, have become active in the dissem- pressly desired, although until now it has not proved ination of technologies utilising renewable energy. possible to bring any such scheme to fruition. Proposals for a new electricity law and a reform implementation Preparations are under way to set up a national renewable programme were submitted to the cabinet for consult- energy council with a membership made up of minis- ation, and are currently under discussion in ministerial tries, the supply sector, scientific institutions, the private committees. sector and non-governmental organisations.

Clean Development Mechanism International projects Yemen ratified the Framework Convention on Climate Under its Energy Sector Management Assistance Pro- Change in February 1996, and in October 2001 it pre- gramme (ESMAP), the World Bank is currently con- sented a national climate change report. So far the country ducting a study into the development of a rural energy has not acceded to the Kyoto Protocol, so for the time strategy aimed at alleviating poverty. The study will also being no emissions trading under the CDM will be pos- look closely at the feasibility of utilising renewable sible either. energy sources. The project has funding of US$ 200,000 and is due to be completed in 2005.

Policy for Promoting Electricity In 2001 the Economic and Social Committee for West Generation from Renewable Asia (ESCWA) published a study entitled ‘Potentials Energy Sources and Prospects of Electricity Generation using Renewable Energy Sources’. The survey was devoted in particular to A department for renewable energy was established the economic conditions for greater use of photovoltaics in within the Ministry of Electricity and Water (MEW) in rural regions. 1991. With the adoption of a cabinet resolution on the electricity strategy of 1999 (No. 199), MEW and PEC A request for financial assistance was submitted to the were called upon to pay greater attention to the devel- Japan Climate Change Initiative Grant to develop a opment and use of renewable forms of energy. In this wind and solar atlas, but also to build technical capabilities at the department for renewable energy within or 2 years, presumably because the wrong location was MEW and to design a suitable legislative framework. chosen. More recently a relatively small experimental The project was supposed to commence in mid-2003. wind generating plant that was donated by Jordan was erected by PEC at the Al-Mukha power station. GTZ project In a new advisory project that is to be implemented be- GTZ investigation into potential sites tween 2004 and 2007, the GTZ is assisting the Ministry As part of a GTZ mission, several sites for wind farms of Electricity (MoE) with the provision of improved were surveyed near Dhamar, Aden and Al-Mukha in energy services in rural areas. The project has been granted August 2001. These locations were chosen first and fore- funding of some € 1 million, and is being implemented most on the basis of favourable wind data, the possibility in the MoE in close collaboration with a CIM specialist of connecting them to the central transmission grid and adviser. the nature of the topographical features. According to the Yemeni Civil Aviation and Meteorological Authority (CAMA) there are other suitable locations for the exploit- Status of Renewable ation of wind energy with larger installations on the Energy Sources island of Socatra and near the city of Al-Mukalla.

Despite various announcements and recommendations, A common feature of all of these sites is that the available it is still the case at present that no national plan for the sets of wind measurements, some of which are incom- exploitation of renewable energy resources on a broad plete, are of only limited informative value as to the basis has been completed. So far, the use of such technol- actual wind resources because the data was not recorded ogies has been sporadic, and barely extends beyond in accordance with usual practices. Pronounced seasonal individual pilot schemes and limited commercial areas fluctuations are always a conspicuous characteristic. In of application. No specifically targeted dissemination addition, particularly in the regions near the coast of the activities or information campaigns by the government Red Sea and the Gulf of Aden periodic sand and dust or state institutions have taken place to date. Obstacles storms occur which are likely to make special technical to practical implementation and broader application, precautions a necessity. Not only that, in the immediate especially in rural regions, have been hardly investigated vicinity of the sea high air temperatures coupled with a up to now, the private sector is only partially involved, high moisture and salt content make conditions for the and the market situation is not sustainable. exploitation of wind power more difficult. The trans- portation of plant parts on the roads, on the other hand, Hydropower is only likely to pose certain logistical problems for loca- Yemen is a country with a marked lack of water re- tions in the uplands. sources. The running water in the mountains is mostly taken for irrigation or for drinking-water supplies, and Nevertheless, fundamentally there appears to be a possi- because of the distribution of rainfall it is not available bility for large-scale use of wind power following evalu- throughout the year, either. Under these circumstances, ation of the available data at least in the lowlands near the use of water for energy extraction is possible to only the coast, whereas in the uplands the wind conditions a very limited extent. are subject to considerable local variations, especially because of the topographical influences. Wind Energy Experience with the exploitation of wind power is very Biomass limited, apart from the use of windmills for water de- Yemen possesses a biomass potential that has not been salination near Aden a number of decades ago and for recorded in numerical terms, although there is no doubt pumping water near Al-Hudaidha in the more recent that it could also be developed for power generation. past. A small wind turbine installed on the university However, the resources are likely to remain limited to campus in Aden about 20 years ago ran for only about 1 residual products from agriculture and food processing, Yemen

as the utilisable agricultural area is finite and is already with dealers selling complete PV systems to financially being used intensively for growing foods and luxury well-to-do customers in rural parts of the country. All in products, and consequently opens up little additional all, however, the installed capacity of SHSs is not likely potential for energy use. What is more, the overall volume to be more than 100 kWp. of timber is small. Previous experience with the use of biomass for energy generation is restricted to a number Bilateral projects of small plants for producing biogas, most of which were Other PV schemes intended to promote rural electrifi- set up in the 1980s as part of a scheme promoted by the cation for private households and social facilities have United Nations. been supported by individual donor countries. The Netherlands, for example, supported the installation of Solar Energy four school systems and a hybrid PV/wind installation Average daily solar irradiation is around 4,500 to for a cultural centre in Hadramaut with a subsidy. 5,500 kcal/m2. The average daily length of sunshine However, these schemes too were not sustainable, ranges between 7.3 and 9.1 hours. because of a lack of knowledge of how to operate and maintain the systems and because of incorrect use. Experience with solar applications for electricity generation is very limited in Yemen. The main users are to be Geothermal Energy found in the telecommunications sector for telephone The topography of Yemen is of volcanic origin. Natural systems and for TV and radio transmitters. The first hot-water springs emerge at more than seven locations. photovoltaic installations were put in place in the early The geothermal heat profiles appear to be sufficient to 1980s by Yemen Telecom. A few individual irrigation power installations for electricity generation. projects with solar-operated pumps were supported by international assistance funds, including a small water In 1984 the exploitability of geothermal sources in the pump rated at 600 Wp that was financed by the GTZ as region of Dhamar was investigated by Geothermex Inc. part of an agricultural project. Health centres and a with financing by the World Bank. The potential for few educational establishments have also been equipped power generation from geothermal energy at that location with PV modules for basic electrification (total capacity was put at 125 to 250 MW. approximately 20 kWp). It is reported of most of these early projects, however, that they broke down after only a short time in service because of poor management and Rural Electrification a lack of spare parts. According to statistics from 1998, almost 89% of urban ESMAP project from 1990 onwards households but only 13% of rural properties, in which Rural electrification with solar systems began in 1990 roughly three quarters of the Yemeni population live, within the framework of an ESMAP-financed project by are connected to the public electricity grid. Altogether the World Bank. This project envisaged the involvement the coverage of public supply is no more than about of the private sector and the preparation of business 25%, but even those members of the rural population plans and marketing plans. On account of financial and who do have a connection to the grid have to live with administrative problems, however, it was not possible to widespread deficiencies, such as unscheduled power cuts implement the project as planned. Activities were there- and limited supplies, normally for only a few hours per fore ultimately limited to training courses and the in- day. stallation of 14 solar home systems, although most of these ceased operation after a few years.

Despite these setbacks, solar home systems (SHSs) on the basis of private initiatives have proved successful in some areas. Recently a domestic market has developed Source of lighting Households (%) GAREW 1994–2001 Public grid 13.2 In 1994 a separate department for rural electricity gener- Local communal grid 4.2 ation and distribution was set up under the responsibility

Electricity Private local grid 6.0 of the Ministry of Electricity (GAREW – General Aut- Own generator 2.6 hority for Rural Electricity and Water)290. GAREW was

Kerosene 59.6 active until the beginning of 2001. It invited tenders for

Gas lamp 14.2 generators, imported them and installed them in various

Other 0.2 parts of the country, on a donation basis; altogether it installed 119 diesel generators with ratings between 50 289 Table 49: Sources of lighting for rural households; Yemen; % and 1,000 kW and with a total capacity of roughly 55 MW. In addition, mini-grids were set up to distrib- Degree of electrification ute electricity. Subsequently, the local authorities and Including those with their own supplies, the degree of municipal cooperatives merely had to secure the operation electrification in rural areas is approximately 26%. and maintenance of the plants. In total about 156,000 Some 10 million people have no access to any form of households benefited from this scheme. regular electricity supply. In 1998 more than 55% of the total population did not even have electricity available A range of projects were implemented with considerable for such an elementary energy requirement as lighting. delays and/or with substantial cost overruns. The pro- In rural areas this figure was even as high as 70%. Most gramme was finally discontinued in 2001, because the of these households rely on kerosene or gas lamps for municipalities did not have the funds for spare parts or lighting, and use batteries for elementary electrical needs repairs and the availability of most plants is very low.291 (such as radios or torches). A sizeable percentage of the Given both high diesel prices and inefficient motors, the rural population also uses rechargeable car batteries for cost of the electricity is normally far in excess of that stationary lighting purposes. from the state-owned power utility. The survival of many of these isolated grids and generating plants is Isolated supply and autonomous generation anything but certain. Apart from those rural households that are connected to the national power grid and at least have basic electricity PEC – Rural Electrification Department supplies for a number of hours in the evening, grid Despite only recently having been given responsibility access is focused on a small number of decentralised for rural electrification and for establishing a separate generating plants that are in the ownership of local au- department in charge of that (Rural Electrification thorities, PEC or private individuals and companies. Department – REPD), the strategy of PEC is primarily These operators, working on a small scale, usually only geared to grid expansion and the security of (urban) maintain supplies during the hours of the evening. A supply.292 Because of the limited available capacity of the very small number of households with high incomes existing power stations, this task is difficult to carry out. operate their own generators, which as a rule are also only started up when needed, for example for lighting Rural electrification with renewable energy their houses or watching television. Given the existence of natural renewable energy resources such as sun and wind, there is a possibility of providing Private supply in the 1980s sustainable energy supplies and achieving at least a partial From the early 1980s onwards, private companies reduction in dependence on fossil fuels. One obstacle became successfully involved in the field of electricity that still applies at present is the relative lack of experi- production and distribution in rural regions of North ence with such technologies and the absence of adequate Yemen. Most of these companies were relatively small structures for financing, trading, operation and main- and supplied only a small number of adjoining house- tenance. holds.

289 Source: Household Budget Survey 1998. 290 A similar initiative to GAREW also existed in South Yemen during the nineteen-eighties. 291 To some extent the problem can be attributed to the extremely drastic devaluation of the national currency, which has made all imported goods considerably more expensive. 292 In some cases rural supplies are also taken care of by the Department of Secondary Towns Electricity, which has the task of providing connections for the areas in the vicinity of small towns. Yemen

A preliminary study into the use of solar energy for rural Information Sources electrification in the Governorates of Taiz, Hodeidah, Lajh and Abyan was carried out in 1998 and was financed • Al-Ashwal, A.M., Renewable Energy Potentials and by the French Government. A rural electrification strat- Applications in Yemen, 2003 egy, likewise with PV applications as a key component, • Environment Protection Authority (EPA), is currently being drawn up at the World Bank. GEF-Proposal (draft): Disseminating Photovoltaic Technologies for Rural Electrification Applications With regard to the small-scale utilisation of distributed in Yemen, July 2001 wind power plants (as battery chargers or in hybrid diesel/wind systems), the lack of organisational structures • GTZ, Options to Promote the Generation of is likely to be further compounded by the absence of Electricity from Wind in Yemen, Mission Report, technical experience, so the establishment of intensive April 2002 training measures for the installation and operating per- • Republic of Yemen, Initial National Communi- sonnel is essential for this to come about. cation under United Nation Framework Convention of Climate Change, April 2001 Call for tenders within the framework of the fund for rural electrification • Sufian, T., Report on the Consultancy Work Within the framework of the fund for rural electrification, completed for UNIDO/GEF/MSP Renewable a new start is being attempted at present to bring renew- Energy Priority Projects Workshop and Project able forms of energy into use. The first call for tenders Proposal Finalization in Yemen, February 2003 issued in 2003 is combined with an obligation on the • US Department of Energy, Yemen Country Analysis part of the users to pay an initial charge of 5,000 Rials Brief, May 2003 (about € 22) for the offered service and then an amount of 500 rials every month. This revenue is intended to be • Worldbank/ESMAP, Energy Access for Poverty used for monitoring, maintenance and system expansion. Reduction: Background Paper for Steering Group, 2003

Exchange rate (9 March 2004): €1 = 225 Rials; 100 Rials = €0.44 Contact Addresses Embassy of the Republic of Yemen in Germany Rheinbabenallee 18 Ministry of Electricity 14199 Berlin Mr. Ahmend Alaini – Deputy Minister Tel. 030-897305-0 PO Box 11422 Fax 030-897305-62 Airport Road Sana'a E-mail: [email protected] Tel. 00967-1-326-197/206 www.botschaft-jemen.de Fax 00967-1-326 210 www.yemen.gov.ye Germany Embassy in Yemen Near Hadda Road Public Electricity Corporation PO Box 2562 + 41 PO Box 178 Tel. 00967-1-413 174 Sana’a Fax 00967-1-413 179 Tel. 00967-1-260 133 E-mail: [email protected] Fax 00967-1-263 115 www.germanembassysanaa.org E-mail: [email protected]

Environment Protection Authority (EPA) PO Box 19719 Sana’a Tel. 00967-1-257 548 Fax 00967-1-257 549

GTZ Office Villa No. 19, Street No. 21 PO Box 692 Sana'a, Republic of Yemen Tel. 00967-1-417 411 and – 412 726 Fax 00967-1-414 110 E-mail: [email protected]

Kreditanstalt für Wiederaufbau (KfW) PO Box 2562 Sana'a Tel. 00967-1-32 36 68 Fax 00967-1-32 11 54

The World Bank Office in Sana’a Hadda, Street No. 40 Sana’a PO Box 18152 Tel. 00967-1-413 710 Fax 00967-1-413 709 www.worldbank.org.ye Pakistan

Pakistan

Electricity Market HydropowerThermal Nuclear Total MW % MW % MW % MW Generating capacities 1990/91 18,343 44,7 22,354 54,4 385 0,9 41,082 Between 1990/91 and 2001/02, Pakistan’s total installed 1997/98 22,060 35,5 39,669 63,9 375 0,6 62,104 power generating capacity increased twofold, from 1998/99 22,449 34,3 42,669 65,3 284 0,4 65,402 8,776 MW to 17,759 MW. Thermal power plants con- 1999/00 19,288 29,3 46,064 70,1 399 0,6 65,751 tributed 69% of that total, while hydroelectric power 2000/01 17,194 25,3 48,926 71,8 1,997 2,9 68,117 plants accounted for 28%, and Pakistan’s two nuclear 2001/02 18,941 26,1 51,174 70,7 2,291 3,2 72,406 power plants produced 3% of the total.293 Table 51: Power generation by energy source; Pakistan; 1990/91, 1997/98-2001/02, GWh, %295 Hydropower Thermal Nuclear Total MW % MW % MW % MW Pakistan has little commercially exploitable oil of its 1990/91 2,898 33.0 5,741 65.4 137 1.6 8,776 own. Consequently, more than 55% of the country’s oil 1997/98 4,826 30.9 10,655 68.2 137 0.9 15,618 needs were met by imports in the fiscal year 2001/02. 1998/99 4,826 30.8 10,699 68.3 137 0.9 15,662 The imports were used for such purposes as firing ther- 1999/00 4,825 27.7 12,436 71.5 137 0.8 17,398 mal power plants. Plants fuelled with natural gas, 2000/01 4,826 27.6 12,169 69.7 462 2.7 17,457 however, operate almost exclusively on domestic re- 2001/02 5,009 28.2 12,288 69.2 462 2.6 17,759 sources. This also applies to most of Pakistan’s few coal- fired power plants.296 Table 50: Power generating capacities by energy source; Pakistan; 1990/91, 1997/98–2001/02, MW, %294 Power transmission losses Power generation The safe and reliable transmission and distribution of The electricity market in Pakistan has been characterised electricity remains a major problem in Pakistan. Due to in recent years by marked changes in the primary energy weak grid infrastructure and substantial theft of electri- sources used for producing electricity. In the fiscal year city, losses from the transmission and distribution net- 1990/91, hydropower still accounted for nearly 45% of work totalled some 30% in 2001. all electricity generated in the country, but by 2001/2002 that share had dropped to only 26%. Simul- Power consumption taneously, the share of thermally generated electricity With the sole exception of fiscal year 1998/99, power increased from 54% to 71%. Most of that increase is the consumption has grown steadily in recent years. Between result of capacity expansion since the early 1990s in res- 1990/91 and 2001/02, total consumption increased by ponse to power shortages and the resultant frequent more than 61%, from 31 TWh to 51 TWh. Again with power outages. a single exception - fiscal year 1990/91 – the domestic sector was the consumer group with the largest proportion of consumption, followed by industry and agriculture.

293 The nuclear power plant in Karachi has been in service since 1971, and a second NPP located in Chashma was commissioned in 2001. 294 Source: Hydrocarbon Development Institute of Pakistan, HDIP. 295 Source: HDIP. 296 Pakistan’s commercially exploitable gas reserves were estimated at approximately 28.3 billion cubic feet in April 2003. Additional resources are suspected in the Province of Balochistan and in the coastal waters. At the same time, the demand for natural gas is expected to double by 2006. Since some substantial new deposits of brown coal (lignite) have been located in the Thar Desert in the Province of Sindh, Pakistan is planning to increase the share of coal used for generating electricity. Households Industry Agriculture Public Trade / Street Total institutions commerce lighting

TWh % TWh % TWh % TWh % TWh % TWh % TWh

1990/91 10.4 33.1 11.2 35.7 5.6 17.8 2.2 6.7 2.1 6.7 - - 31.4

1997/98 18.8 42.1 12.3 27.6 6.9 15.5 3.9 8.7 2.3 5.2 0.4 0.9 44.6

1998/99 19.4 44.9 12.0 27.8 5.6 13.0 3.6 8.3 2.4 5.5 0.2 0.5 43.2

1999/00 21.4 47.2 13.2 29.1 4.5 9.9 3.6 7.9 2.5 5.5 0.2 0.4 45.3

2000/01 22.8 47.0 14.3 29.5 4.9 10.1 3.5 7.2 2.8 5.8 0.2 0.4 48.5

2001/02 23.2 45.9 15.1 29.8 5.6 11.1 3.5 6.9 3.0 5.9 0.2 0.4 50.6

Table 52: Power consumption by ultimate user; Pakistan; 1990/91, 1997/98–2001/02; TWh, %297

The demand for electricity will continue to rise in the Market Actors years to come. An average annual increase of 4.8% has been postulated. The main public-sector actors in Pakistan’s electricity sector are WAPDA (Water and Power Development Expansion of generating capacities Authority), KESC (Karachi Electric Supply Corpor- By reason of the projected increase in the demand for ation) and the operators of the two nuclear power plants electricity by some 10,000 MW by the year 2010, the KANUPP (Karachi Nuclear Power Plant) and Government of Pakistan has launched a large-scale CHANUPP (Chashma Nuclear Power Plant). Beyond expansion programme. Nevertheless, power shortages these, a number of independent power producers (IPPs) are anticipated, beginning in 2006. To keep that from have become established in the power generating sector happening, or at least to minimise future supply def- since 1994. icits, Pakistan has adopted a systematic development plan called ‘Vision 2025’ that targets a long-term capa- Vertical unbundling of WAPDA city increase of around 35,000 MW by the year 2025. The vertical disintegration of WAPDA was begun in the That would be nearly twice as much power as was avail- year 2000 as part of the country’s new electricity market able at the end of 2002. Around two thirds of the add- restructuring and liberalisation programme. WAPDA itional power (22,563 MW) is slated to come from was broken down into twelve separate units: three hydroelectric power plants. New gas-fired power plants generating companies, eight distribution companies, are supposed to contribute 13% (4,680 MW), the same and the national transmission and distribution company percentage as that to be generated by coal-fired power NTDC. However, the envisaged privatisation of these plants (4,350 MW). New nuclear power plants with a independent generating and distributing companies is total installed capacity of 1,800 MW (5%) are planned.298 proving difficult, because they often operate at a loss due Finally, renewable sources of energy are supposed to to unpaid bills and submarginal electricity tariffs. For account for more than 4% (1,500 MW) of the overall the time being, hydropower will continue to be excluded newly installed capacity. from the privatisation process and will therefore remain in WAPDA’s possession. The planned expansion will cost approximately US$ 30 billion. In view of Pakistan's high national debt WAPDA, as Pakistan’s largest power producer by far, and persistent budget deficit, the government is inten- held more than 55% of the country’s power generating sifying its efforts to attract private investors. capacities in March 2003. Those capacities were split almost evenly between hydroelectric and thermal power plants. At the same time, the government-owned KESC controlled somewhat more than 10% of overall capacity (almost exclusively thermal), while the two nuclear power plants contributed 3% and the independent

297 Source: HDIP. 298 In early December 2003 the Government of Pakistan announced plans to purchase a new nuclear power plant from China. With a rating of 600 MW, the facility will house the second nuclear reactor at the Chashma site, some 225 kilometres north of the capital city Islamabad. Pakistan

power producers already owned 33% of the electricity power sector and to standardise the conditions of invest- generating capacities. ment for independent power producers. It covers the following measures in particular: Independent power producers The 17 largest independent power producers in Pakistan • standardisation of contracts with regard to all operate thermal generating plants only.299 The two implementation agreements, contracts of supply for largest privately owned power producers are the HUB primary sources of energy, and power consumption Company (HUBCO) and the Kot Addu Power Com- contracts pany (KAPCO). HUBCO belongs to a consortium • remuneration for all electricity amounting to formed by National Power (Great Britain), Xenal (Saudi 5.7 US cents/kWh, coupled to the exchange rate Arabia) and Mitsui Corporation (Japan) and possesses between the Pakistani rupee and the US dollar, just under 1,300 MW of generating capacity. KAPCO, including allowance for the US inflation rate and with more than 1,600 MW of power generating cap- potential fluctuations in raw-material prices300 acity, was privatised in 1996 and now also belongs to the • surrender of decision-making powers to the British enterprise National Power. project’s implementing institution with regard to size, technology, energy source and siting of the Between 1994 and 1997, 19 IPP projects amounting to power plant an overall capacity of 3,158 MW and a total investment • power-grid connection and supply guarantee for the volume of some US$ 4 billion were awarded competi- required primary energy sources tive-bidding contracts. By the end of March 2003, • exemption of independent power producers from 2,728 MW of the total had already been installed. The numerous forms of taxation (capital-gains tax, power-producing volume was so large that the Pakistani income tax and turnover tax) and duties electricity market began to exhibit intermittent over- • guaranteed acceptance of supplied power and capacities. delivery of required primary energy sources

The city of Karachi receives all its electricity from KESC, while WAPDA serves the rest of the country. In Creation of PPIB the medium to long term, though, the sale of electricity Also, with a view to improving investment incentives in is also supposed to be liberalised. the Pakistani power sector, a new state-owned consulting institution was established in 1994 – the Private Power and Infrastructure Board (PPIB). This instru- Legal Framework mentality is primarily dedicated to serving as a one- window facility to investors in Pakistan’s private power The Ministry of Water and Power (MoW&P) is respon- sector. Acting in the name of the Pakistani Government, sible for formulating Pakistani energy policy. Due PPIB provides advice and guidance for the implementa- mainly to the shortage of electricity in the 1980s and tion of power plant projects. Its main task is to negotiate early 1990s, a strategy plan geared to restructuring the the implementation agreement and provide support in Pakistani electricity sector was adopted in 1992. negotiating fuel supply agreements and power purchase agreements. PPIB also provides guarantees to private Private-sector power law of 1994 investors for the performance of government entities Full implementation of the strategy plan has suffered (WAPDA, KESC, etc.), monitors litigation and inter- multiple delays already – for example, it has not yet been national arbitration for and on behalf of the Government possible to establish a wholesale market – but that goal of Pakistan, and, finally, assists the regulatory authority is still being pursued. A new energy law adopted in in determining and approving tariffs for new private 1994 (Policy Framework and Package of Incentives for power projects. Private Sector Power Generation Projects in Pakistan) aims primarily to attract private capital to the Pakistani

299 In addition to the 17 major IPPs, numerous small-scale IPPs with total installed capacities of 100 MW or less each have been active in Pakistan since 1994. By mid-2002, 15 small IPPs had received operating licences from NEPRA for capacities totalling approximately 240 MW (NEPRA 2002). 300 In addition, a bonus of 0.25 US cents/kWh was offered for power plant projects commissioned by the end of 1997. Regulatory authority NEPRA depends on the output of the respective plant (capacity The sectoral National Electric Power Regulatory Au- purchase price, CPP), and the rest is a function of the thority (NEPRA) was created under the NEPRA Act in sources of energy employed for producing the electricity 1997. NEPRA’s main purpose is to ensure fair competi- (energy purchase price, EPP). The latter is supposed to tion and consumer protection. account for at least 34 to 40% of the total remuneration.

NEPRA’s primary responsibilities include the issue of licences for power production, transmission and distri- The new provisions from 2002 give preference to pro- bution (including the stipulation of licensing fees), speci- jects involving the use of domestic energy resources, i.e. fication of electricity tariffs, both with regard to remu- mainly water, coal and natural gas. This manifests itself neration of producers (NTDC purchase price) and in primarily in the exemption of all such power plant pro- terms of consumer-side pricing. With respect to tariff- jects from income taxes, turnover taxes and capital gains ing, NEPRA is also responsible for approving the tariffs taxes on imports (with oil-fired power plants constitut- negotiated in connection with bilateral agreements ing an exception). Moreover, import duties on plant between individual power producers and the NTDC, components have been reduced to a mere 5% of the distribution companies and major customers. standard rate.

NEPRA also defines the licensing requirements and can Wholesale market impose fines for non-compliance with the relevant regu- Regarding the creation of a wholesale market, a so- lations. In the summer of 2003, all restructured power called ‘single buyer plus’ model was established in July companies and twelve of the 17 largest IPPs received 2002. In that model, the NTDC functions as the sole their requisite operating licences from NEPRA, and the purchaser of all electricity generated by all producers latter was poised to issue licences to three additional together. Beginning in mid-2009, major consumers are existing IPPs. to be allowed to purchase electricity from producers of their own choice by way of bilateral supply agreements. Vertical unbundling of WAPDA in 2000 The introduction of a wholesale market is envisaged for Another step taken in the restructuring of Pakistan’s mid-2012. power sector was the formal disintegration of WAPDA, which was completed in 2000. The medium- to long- Clean Development Mechanism term objective is to privatise the public power pro- As a signatory to the United Nations’ Framework Con- ducing and distributing companies. vention on Climate Change, which Pakistan ratified in June 1994, and as a member of the World Bank, Pakis- Power Law of 2002 tan is entitled to participate in Global Environment A new power law was enacted in 2002. Basically, it Facility (GEF) projects. Since Pakistan has not yet recog- closely resembles its predecessor dating from 1994, but nised the Kyoto Protocol, Clean Development Mechan- it has a broader range of application. Entitled “Policy for ism projects are not yet possible. Power Generation Projects – Year 2002”, the new power law applies both to private investment projects and to public-private partnerships and public-sector power plant projects. The law also makes it possible for investors not only to participate in public tendering, but also to propose power plant projects on their own.

Now, the respective provincial governments are responsible for approving plants with ratings below 50 MW. A two-component system of remuneration has been defined for power providers: part of the remuneration Pakistan

Policy for Promoting Electricity National Environment Action Plan – Generation from Renewable Support Programme (NEAP-SP) Energy Sources The Support Programme (NEAP-SP) for implementing the National Environment Action Plan (NEAP) of 1997 Pakistan’s first promotion measures for renewable was signed by the Government of Pakistan and UNDP energy sources were implemented in the early 1980s. in October 2001. The NEAP-SP includes six different For example, the sixth Pakistani energy plan (1983–1988) sub-programmes, one of which concerns the field of devoted approximately € 14 million to the areas of re- energy conservation and renewable energy sources, and growable energy crops, biogas and a feasibility study for concrete projects are to be implemented over the next the commercial exploitation of solar energy. five years.

First activity between 1975 and 1992 Alternative Energy Development The Pakistan Council of Appropriate Technology Board (AEDB) (PCAT, established in 1975) and the National Institute The Alternative Energy Development Board (AEDB) of Silicon Technology (NIST, established 1981) were was founded in May 2003 for the purpose of supplying jointly responsible for implementing the measures. wind- and solar-generated electricity in remote regions While PCAT focused its attention primarily on the areas of Pakistan. AEDB is also responsible for developing the of mini-hydropower, biogas plants, solar cookers and country’s medium- and long-term promotion policy for small wind energy conversion systems for driving water renewable energy sources. In addition, its functions pumps, NIST was more involved in the research, devel- include the coordination of joint ventures with the aim opment and commercialisation of solar energy with of having foreign technologies in the field of alternative focus on photovoltaics. For lack of concrete promotion energies fabricated in Pakistan. The AEDB answers instruments, the output of all solar and wind energy directly to the Prime Minister. systems plus mini-hydropower plants together amounted to less than 5 MW at the end of the 1980s. Targets for renewable energy sources up to 2020 The 1990s also saw some isolated instances of promotion At the legislative level there still are no concrete meas- measures for renewable energy sources in Pakistan, but ures in place for the promotion of renewable energy they were all very limited in their financial scope. In this sources in Pakistan, but the 2002 Power Law does at connection, mention could be made of the 1992 National least formulate the target of creating some 500 MW of Pakistan Conservation Strategy (PNCS) which was subse- new power generating capacities based on renewable quently integrated into the ninth Pakistani energy plan energy sources by the year 2015 and an additional 1,000 (1993-1998). Altogether, PNCS spent some 63 million MW by 2020. The establishment of AEDB also defined rupees (€ 900,000) on introducing biogas, wind power the goal of gradually expanding the share of renewable and mini-hydropower facilities. energy sources used for generating electricity (excluding major hydropower) to 10% by 2015. Pakistan Council for Renewable Energy Technology (PCRET) GTZ and KfW projects The latest alternative energy promotion activities in In addition to the World Bank/GEF, various German Pakistan again encompass institutional measures and and other development organisations are contributing define target objectives. In May 2001, the two separate financial and technical assistance to the Pakistani research institutions NIST and PCAT merged to power sector. For example, the Kreditanstalt für Wie- become the Pakistan Council for Renewable Energy deraufbau (KfW) and GTZ are sponsoring projects in Technology (PCRET), the main goal being to better the hydropower sector. The purpose of the GTZ pro- coordinate research activities and avoid overlaps. ject is to expand the use of renewable energy sources, hydropower in particular. The latter, it is hoped, will eventually constitute a significant, macroeconom- ically efficient contribution to Pakistan’s future Dhabi Development Fund is providing credit to the supply of electricity. Social and ecological problems amount of US$ 150 million for implementing the pro- are to be minimised in the process. jects. Pakistan itself is raising additional funds.

Micro hydropower potential Status of Renewable In northern Pakistan alone there is an estimated poten- Energy Sources tial of 300 MW for micro hydropower plants with installed capacities below 100 kW each. As of 2003, Hydropower only about 4 MW of that potential had been tapped by Pakistan’s total hydropower potential has been esti- a total of some 250 projects co-financed by PCRET mated at up to 40,000 MW, some 24,000 MW of which and/or its predecessor institutions. Now, with the as- could be harnessed, and approximately 5,000 MW of sistance of the Asian Development Bank and within the which is actually being exploited. By reason of anticipated scope of a rural development project, 100 micro hydro- growth in demand and of the fact that only about 20% power plants with ratings ranging from 5 to 50 kW are of the available hydropower potential is being utilised, being installed in and around Malakand in North-West the ‘Vision 2025’ development plan provides first and Frontier province. foremost for the vigorous, multi-stage development of hydroelectric power. Wind Energy By the end of 2003 not a single wind energy conversion Run-of-river Ghazi-Barotha Power Plant system with a generating capacity above 500 W had Ghazi-Barotha Power Plant, a run-of-river plant that is been installed in Pakistan. There are only a small presently being commissioned in successive stages, con- number of micro-plants (300–500 W) for generating stitutes an initial large-scale project in this sector. Located electricity, and roughly 30 wind power installations are on the upper reaches of the Indus and built for a total in use for pumping water in the coastal regions of output of 1,450 MW, its first stage (290 MW) went into Balochistan and Sindh provinces.301 Most notably along service last July. The plant’s full and final commission- its 900km coastline and in a number of North-West ing is scheduled for mid-2004. The project is being Frontier valleys, Pakistan possesses some 2,000 to implemented under the auspices of state-owned 3,000 MW of economically exploitable wind-power WAPDA. At present, the total cost is situated at roughly potential. With the help of PCRET, Pakistan has plans US$ 2.1 billion. The project is being financed by the to install an additional 100 micro plants with a high World Bank, the Asian Development Bank, the Japan domestic content by 2003/2004. Bank for International Cooperation (JBIC), the Euro- pean Investment Bank, the Islamic Development Bank, Unimplemented wind farms and resources from German Financial Cooperation There have been numerous past attempts to harness (KfW). WAPDA is contributing approximately wind power on a large scale: In response to investment US$ 1 billion, or nearly half of the overall cost. Fully incentives provided by the 1994 Electricity Act, two utilised, the power plant is supposed to lower CO2 American investors planned to build two large wind emissions by approximately 5.5 million tons annually. . farms in cooperation with Pakistani contractors. However, those two projects – the 100MW Kenetech wind power GTZ assistance for medium-size hydropower projects project in Balochistan Province and the 150MW In addition to the aforementioned large-scale project, Omega-Zond wind farm in Sindh province – have not three additional hydroelectric power plants of medium yet been implemented. size – the high-pressure plants Allai Khwar (121 MW), Khan Kwar (72 MW) and Duber Khwar (130 MW) – have been prepared with GTZ assistance in recent years. The GTZ conducted the feasibility studies and generated the tendering documents for all three projects. The Abu

301 The installation of, initially, 100 small wind turbines in Pakistan’s coastal regions by mid-2004 is envisaged as the next step in the form of a cooperation project between PCRET and the Chinese Academy of Agriculture Mechanism Science. With the exception of the generators, which are to be imported from China, all plant components are supposed to be manufactured in Pakistan. Pakistan

UNDP/GEF project ‘Commercialization of Wind Power In August 2003 AEDB also announced the impending Potential in Pakistan’ construction of a 1.2MW wind power installation near The first official initiative to stimulate the use of wind Karachi. power in Pakistan was launched in November 2002. With the financial support of UNDP and GEF, the Biomass Pakistani Environment Ministry initiated a project en- In Pakistan, where, according to the last census from titled ‘Commercialization of Wind Power Potential in 1998, approximately two out of three people live in Pakistan’. That project included a study aiming to iden- rural areas, the rural residents in particular rely almost tify the existing impediments to the use of renewable exclusively on biomass in the form of fuel wood or char- energy sources in Pakistan, probing suggestions on how coal for cooking and heating. Indeed, the majority of to overcome them302 and conducting the requisite plan- Pakistan’s urban population (58%) also takes recourse to ning for an initial demonstration project. those traditional sources of energy. According to official data, the country’s total wooded area expanded from Possible location for Pakistan’s first wind park: 34,600 km2 to 38,100 km2 (i.e. by about 10%) between Pasni on the Makran Coast 1990/91 and 2001/02, but each year local residents Pasni, on the Makran Coast, in western Balochistan, was remove some 1.2 million m2 of wood from the country’s selected as a potential site for a 15MW wind farm com- forests for use as fuel. In Balochistan, this practice has prising 25 wind energy conversion systems, each with a reduced the total area of standing forest by 70%. rating of 600 kW. Between January 2002 and March 2003, wind data was collected on two masts at a height The Government of Pakistan started a biogas propaga- of 50 m. The results showed an average annual wind tion programme in 1974, and by 1987, 4,137 biogas speed of 5.5 m/s. That would be enough to produce elec- plants had been installed in the course of the pro- tricity at a rate of some 23 GWh per year. The estimated gramme’s several phases. However, since the last phase total cost of the project is approximately US$ 24 million. no longer offered any official financial assistance, no Since this would be Pakistan’s first major wind power more such systems were installed. project, it was recommended that the wind farm be implemented in two phases of construction, i.e. an Then, in May 2003, PCRET announced a new bio- initial phase of 5 MW and a second phase of 10 MW. mass/biogas programme designed to promote the instal- That way, experience gained during the first phase of lation of 1,200 additional installations within the construction could be put to use during the second following four years. It is hoped that, by the end of the phase. The first phase of construction is scheduled for project, the annual production of biogas for household 2007, and its commissioning is planned for 2009. The purposes will amount to 1.2 million m3. second phase could begin in the year 2010. Whether or not the project will ultimately be realised is uncertain Solar Energy because of the low anticipated number of full-load hours Pakistan has a very good overall solar-energy potential. (1,500 per year). The average daily insolation rate amounts to approximately 5.3 kWh/m2. Especially the south-western pro- In early 2004, the Alternative Energy Development vince of Balochistan offers excellent conditions for harn- Board (AEDB) advertised a competitive contracting essing solar energy. There, the sun shines between 8 and project for the implementation of a 100MW wind farm 8.5 hours daily, or approximately 3,000 hours per annum. on the premises of the stated-owned company Pakistan Steel located west of Karachi. This wind farm is sup- Despite these favourable prerequisites, the use of solar posed to be completed in three phases – two units of energy for generating electricity or for heating is still in 30 MW plus one of 40 MW – in the period 2004–2005, its beginnings. Photovoltaic systems are used primarily and would primarily meet the company’s own electricity for producing electricity in rural areas. As far back as the needs. Its implementation would entail the local manu- early 1980s, the Government of Pakistan had 18 PV facture of key components. systems with a composite output of 440 kW installed in

302 The most important recommendations covered a technology-specific system of remuneration, assumption of the grid connection costs by the responsible power utility in each case, the creation of coherent political framework conditions at the national level for projects involving renewable energy sources on a scale up to 50 MW, consideration of the environmental benefits of renewable energy sources in the planning of additional wind farms, and streamlining of the licensing procedures for projects based on renewable energy sources. various parts of the country. Due to the lack of technical Information Sources know-how about their operation and maintenance, though, no further systems were installed. For the same • Alexander‘s Gas & Oil Connections: Pakistan on the reason, seven other PV systems with a total output of road to renewable energy technologies, 234 kW, which were installed in the Pakistani part of 13 June 2003 the Hindu Kush in the late 1980s, are no longer in oper- • Asia Times (Internet): Pakistan’s big power play, ation. 9 July 2003

Two solar-powered sea water desalination facilities with • Bakht, Malik Sikander: An overview of geothermal a daily throughput of 22,710 l are in use in the province resources in Pakistan. Proceedings World of Balochistan. Geothermal Congress 2000, Japan

• Bari, Faisal: The Power Sector in Pakistan, In July 2003, with the establishment of AEDB, the August 2001 measures planned for the field of renewable energy sources for the fiscal year 2003/04 were publicised. Most of the • Bundesagentur für Außenwirtschaft (bfai): Großes activities concern solar energy. According to that data, Potenzial für Wasserkraft in Pakistan, July 2003 5,000 solar home systems (SHSs) are to be provided in • DAWN (Internet): First wind power plant shortly, each of the country’s four provinces by mid-2004. 17 August 2003, Nepra grants licences to 12 IPPs, 6 September 2003, Prospects for wind-power Geothermal Energy generation, 10 November 2003 Although there are numerous hot springs with temperatures ranging from 30°C to 170°C to be found in • Frankfurter Allgemeine Zeitung (FAZ): various parts of Pakistan, for example in the vicinity of Ein Atomkraftwerk für Pakistan, Karachi and in the Pakistani part of the Himalayas, 5 December 2003, p. 8 there has been no attempt to make use of geothermal • Gesellschaft für technische Zusammenarbeit (GTZ) energy in Pakistan yet. GmbH: Wirtschaftsentwicklung und Energie- bedarf in Pakistan, 2003

Rural Electrification • Government of Islamic Republic of Pakistan – Ministry of Environment: Pakistan’s Initial Pakistan’s increasing demand for energy is due in part to National Communication on Climate Change – efforts designed to promote the process of rural electri- November 2003 fication. Until 1995/96, the number of villages with • Hagler Bailly Pakistan: Commercialization of Wind access to grid power grew by 9 to 11% annually. Since Power Potential in Pakistan. Financial and then, however, the increasing connection costs have Economic Evaluation – Final Report / Identification driven the growth rate down to about 2% per year. As of of Policy Framework and Potential Sponsors for March 2003, approximately 73,000 (59%) of Pakistan’s Wind Power. Identification of Existing Barriers to roughly 125,000 villages were receiving electricity Wind Energy Use – Final Report, July 2003 (UN (compared with approximately 46,000 villages, or 37%, Office for project services, Malaysia) in mid-1993).303 • Kreditanstalt für Wiederaufbau (KfW): Wasser- Exchange rate: 100 Pakistan rupees (PKR) = € 1.5 kraftwerk Ghazi-Barotha – Projektkurzdarstellung, März 2002 • Kreditanstalt für Wiederaufbau (KfW): Pakistan – A Country in Transition, September 2002

303 In the year 2000, Pakistan’s mean electrification level, at 53%, was still below the average for southern Asia. Pakistan

• Mirza, Umar K. et al.: Status and outlook of solar Contact Addresses energy use in Pakistan, in: Renewable and Sustain- able Energy Reviews; December 2003, p. 501–514 Ministry of Power and Water www.pakistan.gov.pk • North-Western Frontier Province (NFWP) Forest Department: Desk Study on National Woodfuels Water and Power Development Authority (WAPDA) and Energy Information Analysis, June 2002 WAPDA House Sharah-e-Azam • Pakistan Ministry of Finance; Economic Survey Lahore 2002/03. Chapter on Energy Tel. 0092-42-920 22 11 Fax 0092-42-920 24 54 • Pakistan Ministry of Finance; Economic Survey www.pakwapda.com 2002/03. Chapter on Environment and Housing National Electric Power Regulatory Authority (NEPRA) • Pakistani American Business Executives Associ- OPF Building, 2nd Floor, Shahrah-e-Jamhooriyat, G-5/2 ation: Pakistan forms Alternative Energy Develop- Islamabad ment Board Tel. 0092-51-920 52 94, 920 72 00 Fax 0092-51-921 02 15 • Platts: Renewable Energy Report/Issue 54/8 E-mail: [email protected] August 2003 www.nepra.org.pk

• Private Power and Infrastructure Board (PPIB): Private Power and Infrastructure Board (PPIB) PPIB functions (www.ppib.gov.pk) www.ppib.gov.pk

• Private Power and Infrastructure Board (PPIB): Pakistan Council of Renewable Policy for Power Generation Projects Year 2002 Energy Technology (PCRET) Street 10-A, Block 4 • Sustainable Development Networking Programme Gulshan-e-Iqbal Pakistan (SBDP): Alternative Energy Board formed, Karachi http://lists.isb.sdnpk.org/pipermail/ecolist/ Tel. 0092-21-924 37 86 2003-August/003674.html Fax 0092-21-924 37 86

• United Nations Office for Project Support Alternative Energy Development Board (AEDB) (UNOPS): PAK/97/G42/Project Development of Room No 344-B, Prime Minister’s Secretariat Technical Specifications Government of Pakistan Islamabad • US Department of Energy (Energy Information Tel. 0092-51-900 85 04, 900 83 13 Administration), Country Analysis Brief Pakistan, Fax 0092-51-922 34 27 May 2003 E-mail: [email protected] www.aedb.org • Water and Power Development Authority (WAPDA), Hydel Generation/Power Generation – Hydrocarbon Development Institute of Pakistan (HDIP) IPPs (www.pakwapda.com) www.hdip.com.pk

• World Energy Council: Renewable Energy in South GTZ Office in Pakistan Asia – Status and Prospects – November 2000 GTZ Office Islamabad F 8/3 Street 5, House 63-A Tel. 0092-51 2264161, 2255563, 2260131-2, 2250187 Fax 0092-51 2264159 E-mail: [email protected] Embassy of the Islamic Republic of Pakistan in Germany Schaperstrasse 29 10719 Berlin Germany Tel. 0049-30-212 440 Fax 0049-30-212 442 10 E-mail: [email protected]

German Embassy in Pakistan Ramna 5, Diplomatic Enclave, Islamabad Tel. 0092-51-227 94 30 – 35 Fax 0092-51-227 94 36 E-mail: [email protected] www.german-embassy.org.pk Philippines

Philippines

Electricity Market It is intended that the country’s dependence on imported coal and oil should be reduced in future mainly Capacities and generation by the development of domestic gas reserves.306 There At present the installed power generating capacity in are no grid-connected imports of electricity. the Philippines totals some 14,000 MW. According to estimates by the Department of Energy, the surplus Electricity consumption capacity currently available will be sufficient only The geography of the Philippines, which comprises until 2005. Expansion plans envisage the construc- some 7,000 islands, has a decisive influence on the tion of new power stations with a capacity of about nature of mains-borne power supplies. As well as three 7,700 MW by 2013. large, separate national electricity transmission grids (Luzon, Visayas and Mindanao), there are regional 2000 2001 supply systems on smaller islands. Under the Transmis- Total capacity (MW) 13,264 13,459 sion Development Plan (TDP) the power grids are to be MW % MW % considerably expanded in the coming years.307 Oil 5,173 39 5,114 38 Coal 3,847 29 3,769 28 Electricity consumption Hydropower 2,255 17 2,557 19 Electricity consumption in 2002 amounted to approxi- Geothermal 1,990 15 1,884 14 mately 38,500 GWh. Of this, 36% was attributable to households, 35% to industry and 26% to trades and Table 53: Power station capacities according to energy source; crafts (‘Others’: 3%). This ratio has barely changed in Philippines; 2000–2001; MW, % 304 the past five years. Electricity generation in 2002 amounted to roughly 48,500 GWh. The most important primary energy Electricity tariffs resources used for this were coal (37%), geothermal In comparison with certain neighbouring countries, the energy (26%) and hydropower (17%). After the Asian Philippines has high electricity tariffs. The reasons for crisis was overcome at the end of the 1990s, the growth this include the high costs of loan capital for the state- in generation gained momentum once again. owned power utility National Power Corporation (NPC or NAPOCOR), considerable network losses at the distribution level, and the dispersed location of the many 50000 islands – making power supply difficult. Comparatively 45000

40000 high tariffs have had to be paid in the past by electricity 35000 customers on the main island of Luzon and by industrial 30000 customers across the country. 25000 GWh

20000

15000 US cents/kWh Households Trades and crafts Industry

10000 Philippines 8.49 10.94 10.07 5000 Malaysia 8.95 10.53 10.53 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Thailand 7.10 7.10 6.77 Indonesia 4.56 5.59 4.34

Table 54: Average electricity tariffs; Philippines, Malaysia, Figure 19: Electricity generation; 1993–2002; Philippines, GWh305 Thailand, Indonesia; July 2003; US cents/kWh308

304 Source: Department of Energy, 2003. 305 Source: National Statistical Coordination Board Philippines, 2003. 306 In particular the country has been able to considerably reduce its dependence on imported petroleum in recent decades. While in 1973 as much as 92% of primary energy consumption was still met by imported oil, this figure has now dropped below 50%. 307 The TDP is part of the Power Development Plan 2004-2013. DOE–Department of Energy: Highlights on the Implementation of Republic Act No. 9136, Electric Power Industry Reform Act of 2001 For the Period May 2003–October 2003. 308 Source: Department of Energy, 2003. Market Actors Legal Framework

The Electric Power Industry Reform Act that came into The most important institution determining energy force on 26 June 2001 will change the market structure policy is the Department of Energy (DOE), as it is res- as it is implemented step by step. Before the reform, ponsible for drawing up plans, laws and programmes. electricity was generated by NPC and several independent It underwent a reorganisation in August 2002 as part power producers. In the meantime the latter contribute of the power sector reform. Since then, the newly cre- over 50% to power supplies, with the largest IPP being ated Electric Power Industry Management Bureau Southern Energy. Power transmission and the direct sale (EPIMB) has been part of the DOE; among other of electricity to large industrial customers were also part things it has the task of monitoring the reform process of NPC’s remit. Responsibility for electricity distribution and elaborating strategies and plans for rural electrifi- was shared between Manila Electric Company cation. (MERALCO), 16 private providers, 7 municipal utilities and 119 rural cooperatives. Regulatory functions are taken care of by the newly established, independently operating Energy Regula- Privatisation tory Commission (ERC).311 These include the main- Following the restructuring of the sector, the construc- tenance of competition, supervision of tariffs and tion of additional power stations and expansion of the monitoring compliance with regulations in the dis- grids is supposed to be carried out primarily by private tribution and transmission sector and on the spot actors. Privatisation of the NPC power stations is one of market. the functions of the state-owned Power Sector Assets and Liabilities Management Corporation (PSALM). At the end of the 1980s the Philippines was shaken by a power supply crisis persisting for several years, which There is a formal requirement that by June 2004 70% of had a seriously damaging effect on the economy and the NPC power stations connected to the Luzon and public life. The consequence of this was that laws were Visayas transmission grids must have been sold. The passed in the early 1990s that were designed to encour- start of the public tendering processes was scheduled for age the urgently required foreign investment in the December 2003.309 NPC’s sphere of activity will hence- electricity sector. forward be restricted to responsibility for the Small Power Utilities Group (SPUG), which is responsible for Reform Act of 2001 a large proportion of power generation in regions not The Electric Power Industry Reform Act (EPIRA), connected to the grid.310 which entered into force in June 2001, was a mile- stone in the restructuring of the electricity sector.312 The transmission grid was taken over by the National The Reform Act creates a new legal and regulatory Transmission Corporation (TRANSCO) and is due to framework for the electricity sector, and in addition pass into the hands of a private concessionaire. Due to a to opening access to the power grids it paves the way lack of appropriately qualified prospective clients, the for the unbundling of electricity generation, trans- first two sales rounds have failed. mission and distribution. The most important objectives are to reduce the high costs in the electricity sector, to privatise state-owned enterprises, to attract foreign capital and to expand domestic resources. By June 2004 at the latest there is supposed to be guaranteed free access to distribution networks and free choice of power supplier by end customers with a monthly average peak demand of

309 The power stations are formed into groups before being sold. In this way about seven new power generating companies are set to be formed. 310 For further information see: DOE–Department of Energy: Highlights on the Implementation of Republic Act No. 9136, Electric Power Industry Reform Act of 2001 For the Period May 2003–October 2003, www.doe.gov.ph. 311 Support for the establishment of the regulatory authority is guaranteed within the framework of technical cooperation, in particular by the Asian Development Bank. 312 Republic Act No. 9136. Further-reaching regulations were agreed in March 2002 to spell out the law in concrete terms: the Implementing Rules and Regulations. Philippines

1 MW.313 The opening of the market does not come Policy for Promoting Electricity into force for electricity supply cooperatives until Generation from Renewable Energy June 2006. 314 Sources

New tariff system New & Renewable Energy Programme and The Reform Act also aims to increase the transparency Executive Order 462 of the tariff system, because a separate price has to be The current New & Renewable Energy Programme was specified for each service in the electricity supply chain initiated by the Department of Energy (DOE) when it (generation, transport, distribution, sale). The examin- adopted executive order EO 462 in 1997. In particular ation and approval of the disagreggated tariff structures the aim was to strengthen the commitment of private by the regulatory body, the ERC, is in the process of actors in the field of renewable energy sources; this also being implemented.315 Cross-subsidies are also to be applies to large-scale application systems. The key mo- abolished. Another element of tariff reform is what is tives for supporting renewable forms of energy are the referred to as the ‘universal charge’, a fixed charged to reduction of energy imports and the supply of energy to be paid by the final electricity customer that serves the the rural population. purpose among other things of financing the debts of the former electricity supply company NPC and electri- According to executive order EO 462, private actors are fication measures. Socially balanced tariffs are to be granted the right to launch alternative energy pro- granted to poor sections of the population. jects.318 Along the same lines as when exploration rights for fossil energy sources are awarded, in the case of renew- Wholesale market able energies, too, a contract must be concluded with In order to intensify competition at the generator level the state according to which a share of the net profits is it was decided to set up a Wholesale Electricity Spot paid to the state (‘production sharing contract’). The Market (WESM). The computer-based system is cur- level of this levy is determined by tender or by direct rently being put in place with assistance from the Asian negotiation. Criticism of the executive order led to a Development Bank. The launch of the test system was modification in 2000 according to which projects with envisaged for December 2003, with the first trial runs of a capacity of below 1 MW are now exempt from the levy the full WESM due for June 2004.316 and the levy is limited to a maximum of 15%. Further- more, support was promised from the DOE with project Clean Development Mechanism development and financing, for example with the devel- The Kyoto Protocol was ratified by the Philippines in opment of locations and drawing up feasibility studies. October 2003. It is likely that the existing Inter-Agency Committee on Climate Change will assume the status of Regional programmes the national CDM authority. The potential for CDM In order to address problem areas and individual needs projects, especially in the electricity sector, is considered in the provinces, regional programmes, known as Area- to be high.317 Based Energy Programmes (ABEPs), are being advanced as part of the New & Renewable Energy Programme. The ABEPs are implemented by partner institutions (Affiliated Non-Conventional Energy Centers – ANECs) such as universities.

313 The threshold of 1 MW applies to the first twelve months. In the subsequent twelve months the threshold drops to 750 kW. In the long term the market is to be opened completely, to the extent that households will also be able to choose their electricity supplier freely. Setting the date for this final step in the opening of the market is incumbent upon the regulatory authority. 314 The DOE is obliged to report on the status of the reforms twice yearly. This occurred most recently in the form of the report entitled ‘Highlights on the Implementation of Republic Act No. 9136, Electric Power Industry Reform Act of 2001, for the Period May 2003–October 2003’, available on the DOE web site: www.doe.gov.ph. The addressee is the Joint Congressional Power Commission (JCPC), which acts as a supervisory body during implementation of the electricity sector reform. 315 In October 2003, of the 141 applications for disaggregation of tariffs submitted to the regulatory authority a total of 38 had been approved, including among them those from NPC and NPC-SPUG. 316 The launch of the WESM is behind schedule, because according to the legal situation the electricity trading market ought to have begun operation in June 2002. 317 The first CDM projects currently under discussion are two combined heat and power stations fuelled with bagasse, with a total electrical capacity of 80 MW. 318 Executive Order No. 462, ‘Enabling Private Sector Participation in the Exploration, Development, Utilization and Commercialization of Ocean, Solar and Wind Energy Resources for Power Generation and Other Energy Uses’. Important additions were made in Executive Order No. 232, which came into force in 2000. Electric Power Industry Reform Act 2001 and Status of Renewable Energy Sources new law on renewable energy resources The central legal code for the electricity sector adopted in In 2002, renewable sources of energy accounted for a 2001 emphasises the expansion of renewable energy share of over 43% of primary energy consumption. The sources. The liberalisation of the market associated with most significant part of this is the traditional thermal this legislation, along with the free access to the power utilisation of firewood and agricultural wastes in house- grids, opens up opportunities in particular for large appli- holds and trades or crafts. cation systems such as wind farms which can produce electricity cost-effectively and sell it to major customers. One particular feature of the portfolio of renewable energies used to generate electricity in the Philippines is the Smaller systems using alternative energy technologies, intensive use of geothermal energy. While more than a on the other hand, will find it difficult to gain a foothold quarter of the electricity generated in 2002 was produced in the liberalised market. This is where a new law on the in geothermal power stations, 17% was apportionable to promotion of renewable energy resources is to take hydropower. No other methods of generation on the effect, which shall specify that power generating com- basis of renewable energy sources, for example wind panies must use a fixed proportion of renewable energy power, have played any part to date. sources. It is also envisaged that electricity generated from renewables should be identified as such (‘green Ambitious expansion targets pricing’) and that existing and possibly also new invest- The DOE has defined ambitious expansion targets for ment incentives should be locked in. the next 10 years. The aim is to become the world number one in the exploitation of geothermal energy Investment incentives and the number two in Southeast Asia in the use of wind Renewable energy sources were included in the govern- energy, and to more than double hydropower capacity. ment’s Investment Priorities Plan. As a result, investors The exploitation of marine energy is supposed to contrib- can apply for certain concessions from the responsible ute to power supplies in the long term. authority, the Board of Investments (BOI). Such concessions include: Installed Target for Installed capacity additional capacity 2002 construction 2013 • deferring payment of income tax for 4 to 6 years Geothermal 1,931 1,200 3,131 • exemption from tax and customs for imported goods Hydropower 2,518 2,950 5,468

• tax concessions on purchase of local goods Wind power 0 417 417 • employment of foreign personnel Solar, • simplification of customs clearance biomass, 0 131 131 marine energy

Total 4,449 4,698 9,147 GRIPP The Green and Renewable Independent Power Project Table 55: Installed capacity of renewable energy sources and planned expansion; Philippines; 2002, 2013; MW319 Programme (GRIPP), which was developed by non- governmental organisations and later taken over by the DOE, also includes the expansion of private-sector Hydropower activities, especially in areas remote from the grid. Inves- Hydropower is the second most important domestic tors are offered projects and are given support in bring- energy source for electricity generation. In addition to ing them to fruition quickly. The promotion takes the large hydroelectric installations, at present there are 53 form of fiscal incentives, such as a ten-year exemption small (mini) plants (100 kW–10 MW) in operation from income tax, and the easing of contractual and with a total capacity of 89 MW and over 100 micro permit-related legal procedures. hydropower systems (< 100 kW).320

319 Source: Department of Energy, 2003. 320 Classification of hydropower plants in the Philippines: (i) micro hydro: 1 to 100 kW; mini hydro: 101 kW to 10 MW; and large hydro: over 10 MW. Philippines

Several organisations from the Philippines and else- Wind Energy where have conducted site analyses and investigated the Virtually no wind power plants have been installed in unexploited potential for small-scale hydropower instal- the Philippines to date, whether small turbines or large lations:321 it is estimated that 1,850 MW of capacity in grid-coupled installations. Nevertheless, it is precisely mini hydropower plants and 27 MW in micro hydro- wind power that appears predestined to be used as a new power systems could make an additional contribution to energy source for the Philippines: considerable wind power supplies. potential and the dispersed geography of thousands of islands make wind power seem not only a cost-effective The capacity currently in place is due to be more than alternative to diesel motors in island systems but also an doubled by 2013. The great majority of this will com- economic option for feeding power into the grid. prise large hydroelectric schemes. However, there is also seen to be highly promising growth potential for small- A study conducted by the National Renewable Energy scale installations, especially for supplying power to Laboratory (NREL) of the US identified wind power remote regions. According to forecasts by the Depart- potential with a total capacity of 76,000 MW. Using ment of Energy, the capacity of small-scale plants will this data as a basis, and with the aid of a computer-assisted increase to 160 MW by the end of 2009 and to 457 MW geographical information system, the Department of by 2025. Science & Technology later brought out a wind atlas.323

In cooperation with the National Electrification Admin- istration, the DOE is also promoting a scheme to repair No grid-connected wind farms have been built in the and increase the efficiency of installations. So far Philippines so far. The most commonly seen use of 7 hydropower plants have been identified that are set to wind power is for water pumps, driven by windmills. be modified with the aid of private investment. According to information from the DOE, 368 such systems were in place at the end of 2001, whereas only Mini Hydroelectric Power Incentive Act and 12 small wind power generators were used for electri- other promotion city generation. The Philippine Government spelled out its objective of promoting the involvement of the private sector in mini Expansion plans hydropower projects in a law that came into force in The Energy Development Corporation of the Philippine 1991.322 Project developers can take advantage of National Oil Company (PNOC-EDC), which is primar- various privileged tax rates as well as tax and customs ily active in the field of geothermal energy, intends to exemptions. Because of complex approval procedures, concentrate more on advancing the construction of grid- however, only a small number of projects have been connected wind farms, and has conducted preliminary implemented in recent years. investigations at several locations. On the north coast of Luzon, a 40MW wind farm is expected to enter oper- Technical and/or financial cooperation for small-scale ation in 2004 with financial assistance from JPIC (Japan hydropower projects is also offered by the Development Bank for International Cooperation). The available wind Bank of the Philippines (loans) and the Renewable resources and the network provision already made allow Energy Project Support Office (REPSO-Philippines) in a total capacity of 120 MW to be installed at this loca- the form of feasibility studies and schemes for participation. A 25MW wind farm on the main island of Luzon tion in equity capital. being built by a Danish project developer is also far advanced.

321 These include the National Electrification Administration (NEA) and the National Power Corporation (NPC), which has identified over 1,000 locations, and the US National Renewable Energy Laboratory (NREL). The Department of Energy will be responsible for a central database that will be accessible to project developers. 322 Republic Act No. 7156, ‘An Act Granting Incentives to Mini-Hydro-Electric Power Developers and for Other Purposes’. Assistance can only be claimed by enterprises or organisations that are 60%-owned by Philippine citizens. Installations with a capacity of between 101 kW and 10 MW are promoted. 323 Within the Department of Science and Technology (DOST) the Council for Industry and Energy Research and Development (PCIERD) is responsible for the wind atlas: www.pcierd.dost.gov.ph. The wind atlas can also be downloaded from the Internet from NREL: www.nrel.gov/villagepower/pdfs/wind_atlas_philippines.pdf. The SPUG (Small Power Utilities Group) is planning to Solar Energy convert several diesel systems currently installed on According to investigations by the US National Renew- islands to hybrid use in combination with wind power. able Energy Laboratory (NREL), which has prepared a solar atlas for the Philippines, the average daily solar KfW assistance irradiation is 5.1 kWh/m2. In October 2003 the Kreditanstalt für Wiederaufbau (KfW) announced that it was increasing its support for The dispersed geography of the numerous islands pres- wind power projects in the Philippines. Altogether ents good opportunities for the use of PV systems. € 20 million was promised for the promotion of renew- Accordingly, until now the applications that have found able energies, a large proportion of which is to be use are mostly decentralised, such as for telecommuni- directed towards wind energy projects. An initial step cations facilities, water pumps, lighting and battery will comprise financial assistance for potential studies chargers, for example.325 and feasibility studies. Bilateral cooperation Biomass A large proportion of the projects for rural electrification Hardly any use has been made of biomass for generating on the basis of isolated PV systems are based on bilateral electricity in the Philippines so far. Predominantly it is limit- development cooperation. The GTZ has supported rural ed to its traditional uses as fuel for cooking and heating. solar projects in the Philippines in the past. These included one of the first solar projects in the Philippines The main forms of biomass that lend themselves to in the early 1980s, which following a demonstration power generation are bagasse, rice husks and coconut phase comprised the installation of 100 solar home residues. Small power stations with a capacity of at least systems (SHSs). In addition to further SHS projects, the 540 MW could be run with the bagasse that arises from GTZ also initiated the installation of solar-powered the processing of sugar cane. The use of rice husks could water pumps. The Netherlands is also promoting the make a contribution of 360 MW to power generation. use of solar energy as part of the PNOC solar home Coconut residues would allow the operation of com- system project, which intends to provide energy sup- bined heat and power stations with an output of 20 MW. plies to 15,000 households.326

A first step towards exploiting this potential is shown in Grid-coupled solar power plant the form of two BOO (Build-Own-Operate) projects on The largest grid-coupled solar power system in a devel- the island of Negros, currently at the planning stage. Two oping country, with a capacity of 950 kW, is expected to of the largest sugar producers will use the bagasse for begin operation in the north of Mindanao in 2004. The cogeneration stations with capacities of 30 and 50 MW scheme is being supported by the World Bank/GEF. respectively, thereby not only securing their own self-suf- The pilot installation will supply electricity in hybrid ficiency in electricity and steam but additionally enabling operation in conjunction with a hydropower plant. them to feed surplus electricity into the local grid. 324 Production location for solar technology At present around 650 biogas systems of various sizes According to the government’s intentions, the Philip- are in use, allowing animal dung for example to be put pines is to become a significant location for PV technol- to environmentally benign use. A small industry sector ogies. The construction of the first production facility comprising nine suppliers of relevant technologies has for silicon wafers in Southeast Asia was announced by a been formed to serve this need. The Philippine National US company at the end of 2003. The starting material Oil Company is currently researching the possibility of for PV cells is primarily intended for export. The annual launching large-scale projects. production volume of the factory, situated in the south

324 The projects are also intended to earn emission rights within the framework of the Kyoto Protocol. 325 According to information from the DOE, to date approximately 3,500 SHSs have been installed. The commercial potential is estimated to be for 500,000

systems. 119 systems with a capacity of 94 kWp have been installed for supplying power to telecommunications facilities, and some 130 systems (180 kWp)

for water pumps and irrigation. Other applications, such as for battery chargers, together account for a capacity of roughly 50 kWp. 326 Other bilateral solar power projects: the Solar Power Technology Support project (SPOTS) in 30 rural communities in Mindanao, the Alliance for Mindanao Off-Grid Renewable Energy programme (AMORE) with US support, and the Philippine Rural Electrification Service project (PRES), through which the French government is supporting the provision of electricity to 18,000 households in Masbate. Philippines

of Manila, will initially be 25 MW but is subsequently the operators of the two new geothermal power stations scheduled to be expanded to 125 MW. are free to choose their own customers.328

Geothermal Energy Geothermal heat is the most important domestic Rural Electrification resource used for generating electricity, and has been used since 1977. The installed capacity of 1,931 MW is Although great efforts to develop rural electrification supposed to be boosted by a further 1,200 MW in the have been made in recent years, 4,600 of the total of next 10 years. The potential, as yet undeveloped, is esti- 42,000 villages (barangays329) still have no electricity mated at 2,600 MW. supply. Because of their peripheral location, a large proportion of these villages will not be able to be connected The development of geothermal potential has so far been to a supraregional electricity grid in the future either. the reserve of only two companies: the Energy Develop- ment Corporation of the Philippine National Oil Com- Electrification programmes pany (PNOC-EDC), and Philippine Geothermal Incorp- Under the O’ Ilaw Programme (‘gift of light’ pro- orated (PGI), a subsidiary of the American company gramme) that ran from January 2000 to March 2003, Union Oil of California (UNOCAL). the objective was stated that all villages should be electrified by 2006. The Expanded Rural Electrification Act on Exploration of Geothermal Resources Programme was launched as a follow-on programme in Presidential Decree No. 1442 governs the involvement April 2003. 1,500 settlements are supposed to be elec- of private actors in the geothermal energy sector.327 An trified between July 2003 and June 2004. In addition, investor is granted exploration rights for geothermal several bilateral and international assistance pro- fields by being issued with a service contract. The inves- grammes are contributing to the provision of rural tor must, however, pay at least 60% of the net proceeds electricity supplies in the Philippines.330 accruing from the enterprise to the state. The DOE itself finds fault with this overly restrictive ruling, which to The Missionary Electrification Development Plan date has prevented any far-reaching involvement by pri- (MEDP) for 2004–2008 will serve as a future strategy vate investors. Even the incentives granted by the paper for the electrification of regions that can mainly be decree, such as the exemption from all taxes (with the supplied only by localised energy systems. exception of income tax), have not been able to stimulate the willingness of private investors to invest. Institutions The National Electrification Administration (NEA) is a The DOE envisages access by foreign companies to the key organisation in execution of the electrification pro- Philippine geothermal energy sector being gained above gramme. Its primary task is to provide financial, technical all in joint ventures with PNOC-EDC and PGI, as these and institutional support to the Rural Electric Co- companies have secured the development rights for operatives (RECs), which are the bodies that are chiefly many attractive locations. responsible for electricity supplies in rural areas.

Building of new power stations According to the Reform Act EPIRA, the Small Power At the beginning of January 2004 it was announced that Utilities Group (SPUG) of the NPC will assume a major two power stations would be built whose operation role in the provision of electricity in areas where there is would be subject to the rules of the new Electricity Act no grid connection. and would therefore be run as ‘merchant plants’: Whereas previously all independent power producers were forced The supply of electricity to previously unelectrified to sell their electricity to the state-owned NPC, communities is to be facilitated by private actors to a

327 Presidential Decree No. 1442 ‘An Act to Promote the Exploration and Development of Geothermal Resources’. 328 One power station (40 MW) is situated on Mount Kanlaon in the province of Negros Occidental, and the second power station in the city of Palinpinon (26 MW). The orders for building the power stations were awarded to a Japanese company by PNOC-EDC. Japan Bank for International Cooperation (JBIC) is supporting the construction of the Kanlaon power station with a loan amounting to US$ 82 million. 329 Barangays are the smallest administrative bodies at the local level and generally comprise 100 to 500 households. 330 The World Bank and the Asian Development Bank (ADB), in particular, are supporting the Philippines in rural electrification. greater extent than before. The opening of the market Information Sources for third parties under the Reform Act of 2001 will contribute to the opening of the rural supply areas. • ADB – Asian Development Bank: Report and recommendation of the president to the board of directors on a proposed loan to the NPC for the elec- Model region Negros Occidental tricity market and transmission development The island province of Negros Occidental is intended to project and technical assistance grant to the Repblic become a model region for the use of renewable forms of of the Philippines for the transition to competitive energy and thus serve as an example for other regions. In electricity market. RRP: PHI 36018-01, addition to the construction of a 30MW wind farm November 2002 there are plans for micro hydropower installations, bat- • ADB – Asian Development Bank: Technical Assist- tery charging stations and a combined heat and power stance to the Republic of the Philippines for the plant fuelled by bagasse. rehabilitation of renewable energy projects for rural electrification and livelihood development. TAR: PHI 36561, September 2003

• ADB – Asian Development Bank: Technical Assistance to the Republic of the Philippines for promoting good governance in the restructured power sector. RRP: PHI 36554, July 2003

• DOE – Department of Energy: Guidebook for Developing Sustainable Rural Renewable Energy Services, April 2001

• DOE – Department of Energy: Highlights on the Implementation of Republic Act No. 9136, Electric Power Industry Reform Act of 2001 For the Period May 2003–October 2003, www. doe. gov.ph.

• DOE – Department of Energy: Philippine Energy Plan (PEP) 2003–2012

• DOE – Department of Energy: Renewable Energy Policy Framework

• DOE – Department of Energy: State of the Philip- pine Energy Sector. 30 July 2003

• Edge, Gordon: The Philippines reaches out to exploit renewable potential. Platts Renewable Energy Report 46, 12/2002

• EIA – Energy Information Agency: Philippines – Country Analysis Briefs. www.eia.doe.gov, August 2003 Philippines

• Electric Power Industry Reform Act of 2001 Contact Addresses (EPIRA). Republic Act 9136. Further rules and regulations pertaining to the act: Department of Energy (DOE) ‘Rules and Regulations to Implement Information Center / Information Technology & Act. No. 9163’. Management Services Energy Center, Merritt Road • ESMAP – Energy Sector Management Assistance Ft. Bonifacio, Taguig Programme (UNDP/World Bank): Strengthening Metro Manila the non-conventional and rural energy development Philippines 1201 Tel. (0063) (2) 8401401 program in the Philippines: a policy framework and Fax (0063) (2) 8402231 action plan, ESMAP Paper 243, 08/2001 E-mail: [email protected] www.doe.gov.ph • Sharp, Tim: CDM may transform Asian geothermal power prospects. Platts Renewable Energy Report National Power Corporation (NPC) 41, July 2002 Quezon Avenue corner BIR Road, Diliman, Quezon City Tel. (0063) (2) 921-3541 • Sharma; Madamba; Chan: Electricity industry Fax (0063) (2) 921-2468 reforms in the Philippines. Energy Policy, PO Box 10183 Online Article, 2003 E-mail: [email protected] www.napocor.gov.ph • Toba, Natsuko: Welfare Impacts of Electricity

Generation Sector Reform in the Philippines. Manila Electric Company (Meralco) The Cambridge-MIT Institute. CMI Working Lopez Bldg., Meralco Center, Ortigas Ave. Paper 23, 2003 Pasig City 0300 Tel. (0063) (2) 16220, 631-2222 • UNDP/GEF: Capacity Building to Remove Fax (0063) (2) 1622-8501, 632-8501 Barriers to Renewable Energy Development E-mail: [email protected] (CBRED). October 2001 www.meralco.com.ph

• Weingart, J.; R. Ganga, R. Huttrer, P. Hoover. Energy Regulatory Commission (ERC) Opportunities and Constraints for Accelerating and Pacific Center Building, San Miguel Avenue, Ortigas Center Expanding Renewable Energy Applications for 1600, Pasig City, Metro Manila Grid-Connected Power Generation in the Tel. (0063) (2) 631-7287 Fax (0063) (2) 631-5816; Philippines. Winrock International. March 1998 E-mail: [email protected] www.erc.gov.ph • World Bank: Philippines Rural Power Project. Sub- mission for Work Programme Inclusion. The addresses of the electricity supply companies including March 2002 the rural cooperatives can be retrieved from the Web page of the Energy Regulatory Commission: www.erc.gov.ph/power- industry.asp.

National Electrification Administration (NEA) No. 57 NEA Building, NIA Road, Government Center, Diliman Quezon City Tel. (0063) (2) 929-1909 Fax (0063) (2) 929-2161 E-mail: [email protected] www.nea.gov.ph Philippine National Oil Company – European Chamber of Commerce of Energy Development Corporation (PNOC-EDC) the Philippines (ECCP) PNOC Building 5, Energy Center, Merritt Road, 19/F Axa Life Center Fort Bonifacio, Taguig, Metro Manila, Philippines Sen. Gil Puyat Avenue corner Tindalo Street Tel. (0063) (2) 893-6001 to 47 Makati City, Metro Manila, 1200 Fax (0063) (2) 815-2747 Tel. (0063) (2) 845 1324, 759 6680 www.pnoc.com.ph Fax (0063) (2) 845-1395 to 97, 759-6690 to 91 E-mail: [email protected] Power Sector Assets and Liabilities Management www.eccp.com Corporation (PSALM) 2nd Floor SGV II Building, Ayala Avenue, Embassy of the Federal Republic of Germany Makati City 6/F PS Bank Center Tel. (0063) (2) 8938202 777 Paseo de Roxas, Makati City E-mail: [email protected] 1226 Metro Manila www.psalm.gov.ph Postal adress: PO Box 2190, Makati CPO National Transmission Corporation (TRANSCO) Makati City Head Office 1261 Metro Manila Power Center BIR Road, cor. Quezon avenue Diliman, Tel. (0063) (2) 892 4906 to –10 or 892 1001 to -02 Quezon City Fax (0063) (2) 810-4703 Tel. (0063) (2) 9816300 E-mail: [email protected] E-mail: [email protected] www.germanembassy-philippines.com www.transco.ph Land Bank of the Philippines Preferred Energy Incorporated (PEI) 1598 M.H. Del Pilar cor. Dr. Quintos Sts Renewable Energy Project Support Office Malate, Manila (REPSO-Philippines) Tel. (0063) (2) 551-2200, 450-7001 Unit 1703 Centerpoint Building www.landbank.com Garnet Street, cor. Julia Vargas Avenue, Ortigas Center Pasig City 1605 Development Bank of the Philippines Tel. (0063) (2) 631-2745, 635-9688 PO Box 1996 Makati Central Post Office Fax (0063) (2) 635-9686 1200 Makati City E-mail: [email protected] Tel. (0063) (2) 818-9511 bis 20, 818-9611 bis 20 www.pei.net.ph E-mail: [email protected] www.devbankphil.com.ph/ GTZ Office Manila 9th floor PDCP Bank Center Corner V.A Rufino & Leviste Streets Salcedo Village, Makati City Philippines Tel. (0063) 2-8123165 Fax (0063) 2-7531441 E-mail: [email protected] www.gtz.de/philippines

Winrock International – Office Philippines 2401, 24th Floor, Jollibee Plaza Building Emerald Avenue Ortigas Center 1600 PO Box 12736 Pasig City Tel. (0063) (2) 6321233, 6327323, 6872071 and 2072 Fax (0063) (2) 6312809 E-mail: [email protected] www.winrock.org/where/philippines.cfm Sri Lanka

Sri Lanka

Electricity Market 1200

Dependence on imports for fossil 1000 energy sources 800

Sri Lanka has no deposits of natural gas or oil of its own; 600 MW it does, however, have very small coal reserves. The 400 domestic coal deposits are not exploited, though; instead, 810,000 t of coal was imported in the year 200 2000. Until now, coal has only been used in the fields of 0 2000 2001 2002 transport and industry.331 For the future there are also Hydropower Thermal plans to use coal to generate electricity. No natural gas 332 is used on the island. Petroleum and petroleum products Figure 19: Generating capacities; Sri Lanka; 2000–2002; MW are mainly used in the transport sector and for gener- The available capacity, however, was considerably lower ating power. The imports originate primarily from the than the above figures because of low rainfall and power Middle East. Sri Lanka’s oil companies, until then under station failures as a consequence of maintenance defi- British and US ownership, were nationalised in 1963, and ciencies. All of the large hydroelectric plants are owned have remained consolidated in the state-owned Ceylon by the Ceylon Electricity Board (CEB). In contrast, Petroleum Corporation ever since. Between 1991 and about a quarter of the thermal power generating cap- 2000 the demand for oil in Sri Lanka doubled on acity is provided by private investors on the basis of account of higher consumption by the electricity sector. build-Own-Operate (BOO) contracts. In addition, in 2002 the CEB had to lease 300 MW of generator output at short notice from foreign firms in order to counter Development of the electricity market supply shortages.333 Since the 1950s the aim was that Sri Lanka’s growing demand for electricity should be met primarily by Electricity generation hydropower plants. As new large-scale projects kept 6,810 GWh of electricity was generated in Sri Lanka in being implemented through until the 1980s, hydropower 2002. Of this, 4,114 GWh (approx. 60%) was from remained the dominant energy source in the electricity thermal generation, 2,692 GWh (approx. 40%) from sector, despite thermal generating capacities having hydropower and only 4 GWh (0.1%) from wind energy. been expanded in the meantime. It was only in recent years that initial steps were taken to increase thermal electricity generating capacities significantly, in res- Outlook ponse to supply shortages and frequent power failures or The CEB anticipates an annual increase in electricity power cuts of over two hours per day. demand of 7 per cent during the period from 2002 to 2010. This gives rise to the need to create 1,160 MW of Power station capacities new generating capacity in the present decade. For the In 2002 the installed power station capacity totalled future, Sri Lanka is mainly relying on building thermal 2,231 MW, of which 47% was accounted for by thermal power stations (including coal-fired power stations) plants and 53% by hydroelectric installations. with the assistance of private investors, who until now have owned a stake of roughly 10% of power station capacity.

Electricity prices Sri Lanka has higher-than-average electricity prices by South Asian standards, at 7.5 US cents/kWh.334 Sri Lan- ka’s central bank sees the high electricity prices and the

331 In addition to diesel locomotives, steam locomotives are still used in Sri Lanka. 332 Source: CEB, ESC. 333 The generators used are grid-coupled diesel generators of various output ratings, mainly used to stabilise electricity supplies to the capital Colombo and also to improve supplies to the Jaffna peninsula. 334 The prices for consumers are set on a graduated scale by the CEB according to the amount consumed. n August 2002 normal consumers paid LKR 3/kWh for the first 30 kWh, and LKR 15.8/kWh for consumption of over 180 kWh. lack of security of supply as presenting a serious risk to Legal Framework investor confidence in Sri Lanka. The legal framework in place up until the present was established by the Electricity Act of 1950 and the Ceylon Electricity Board Act of 1969. These made the Market Actors CEB into a monopoly operator that governs access to the grid, tariffs and cooperation with private-sector partners The Ceylon Electricity Board (CEB) itself. Against the background of the situation on the The Ceylon Electricity Board (CEB) is Sri Lanka’s state- electricity market with supply shortages and high elec- owned electricity supply company. In the past the CEB tricity prices, the Electricity Reform Act and the Elec- was responsible for the generation and distribution of tricity Supply Act were passed in 2002. electricity and for supply to end customers, apart from customers of Lanka Electricity Company (LECO), in the Electricity Reform Act whole of Sri Lanka.335 It was formed by an act of law in The provisions of the Electricity Reform Act state that 1969 from a predecessor organisation, the Department the fields of electricity generation, transmission and dis- of Government Electrical Undertakings, and various tribution, for which previously the CEB or LECO had local authorities which at that time mostly took care of been responsible, shall in future be separated. The inten- end supply. The CEB operates the majority of all power tion is that the tasks of the CEB and LECO in these stations in Sri Lanka, but also purchases electricity from fields are to be transferred in part or possibly even en- private producers. Contracts to generate electricity on a tirely to individual or several private companies. The BOO or BOT basis are put out to tender by the CEB and granting of electricity-generating licences to private licences are awarded to operators of small-scale plants. companies is to be taken over by the independent Public It is also possible for purchase contracts to be concluded Utilities Commission, which has already been set up, with the operators of small-scale plants. and which also deals with the state water sector in addition to the electricity sector. The Act also provides for As a state-owned enterprise, the CEB also performs the repeal of the Ceylon Electricity Board Act of 1969 in other tasks such as the advancement of rural electrifica- the future, which could lead to the complete dissolution tion, the maintenance of electrical installations in public of the CEB. The Electricity Reform Act does not govern buildings and the operation of street lighting. the generation of electricity from renewable sources.

As a result of the planned reform of the energy sector in Sri Lanka, the Board’s tasks and position will be consid- Electricity Supply Act erably different in the future. The Electricity Supply Act led in March 2002 to the appointment of an Energy Supply Committee (ESC), Lanka Electricity Company (LECO) which took over some of the powers of the CEB. The The Lanka Electricity Company (LECO) is also a state- tasks of the ESC include planning the reform of the owned utility company, which supplies electricity to energy sector and the way it is to be regulated in future, end consumers in the Colombo area. It was established advancing the development of coal-fired power projects in 1983 and now supplies over 300,000 customers. and mini hydropower schemes336 bringing about a LECO does not have any power stations of its own; it reduction in transmission losses in the CEB inter- operates solely as an electricity distribution company. connected grid system, and implementing the develop- With the aid of loans from the Asian Development ment of a plan for renewable energy sources. The mem- Bank, LECO has above all tried to improve the electri- bers of the Committee include the ministers responsible city grid in its trading area and also sees the improve- for finance, energy and industry, among others. The ment of supply as its task for the future. chairman of the CEB and representatives of the authority responsible for petroleum are also members of the Committee.

335 In the meantime the CEB also awards contracts for these purposes to private investors on a BOO or BOT basis. 336 Tendering procedures are currently still in progress for both fields. Sri Lanka

Clean Development Mechanism Status of Renewable Energy Sources Sri Lanka ratified the Kyoto Protocol in September 2002. So far the Government of Sri Lanka has endeav- Hydropower oured to create capacity for participation in the CDM For a long time hydropower was the most important by setting up a department for climate change in the energy source for generating electricity in Sri Lanka. Environment Ministry, establishing centres to investi- The order for the first major dam project, the Laxapana gate climate change at two universities and drawing up Project, was placed in 1951. As the project progressed, framework guidelines for the CDM. Feasibility studies electricity from hydropower accounted for as much as for specific projects are also to be commissioned. At the about 90 per cent of total electricity generated by 1963. same time all of the projects are supposed to serve the Other dam projects followed in the 1960s (Wimalasu- purpose of poverty alleviation and the generation of rendra in 1965 and Samanalawewa in 1969). Because of employment, and preference is to be given to the use of supply shortages arising from the great dependence on new technologies. hydropower, it was decided in the 1970s to push the expansion of thermal power stations339, as a result of Policy for Promoting Electricity which the significance of hydropower fell. The Maha- Generation from Renewable Energy weli Project, with four large hydropower plants, two Sources small ones and one mini plant, brought about a renewed increase in the significance of hydropower. In 1987 the Purchasing electricity from small- proportion of hydroelectricity exceeded 80 per cent once scale power plants more. Again, this was followed by the construction of Beyond the measures pursuing the electrification of thermal power stations, and today it is official govern- rural areas there has so far been no specific policy to pro- ment policy to complete the changeover from an electri- mote renewable forms of energy. To all producers of city market predominantly determined by hydropower renewable electricity from plants rated at less than to a hydrothermal system with private participation. 10 MW, the CEB offers to purchase that electricity on the same terms as those applying to electricity from small- Apart from the fact that relying on electricity produc- scale hydropower plants. Once a suitable location has tion based one-sidedly on hydropower cannot provide been found for a small-scale unit337, an application can Sri Lanka with sufficient security of supply, due to the be submitted to the CEB for it to take the generated dependence on the amount of precipitation, the poten- power. The CEB examines the technical and financial tial for large-scale hydropower plants that can be de- feasibility and, if the assessment is positive, issues a veloped has already largely been exhausted in the mean- ‘letter of support’. This is required in order to obtain all time.340 the necessary permits338 within the following six months. In addition, a feasibility study is drawn up by Small-scale grid-coupled hydropower plants the CEB during this same period. If the application to In contrast, there are still many opportunities for the feed power into the grid is finally approved, a Standard- construction of small-scale hydropower plants (< 10 MW). ised Small Power Purchase Agreement (SPPA) is con- The CEB offers all operators of such plants that it will cluded between the CEB and the applicant. The cost of purchase all their electricity under a Standardised Power making the connection to the grid system must be borne Purchase Agreement (SPPA). This governs all technical by the plant operator. details. The remuneration for the electricity is dependent on the avoided costs, which include both avoided fuel Renewable Energy Framework costs and other factors such as the reduction of trans- State promotion of renewable forms of energy is ex- mission losses in the CEB grid. Because of the climatic pected to be provided in connection with the development influence on the generation of electricity from hydropower, of the Renewable Energy Framework by the ESC. With a distinction is also made between the rainy season and the a view to the work carried out by the ESC, the CEB dry season. Between February and April (dry season) 2000, refers to its arrangements to date as interim measures. the tariff was LKR 3.11/kWh (approx. € 0.027/kWh).

337 Studies on potential sites can be acquired through the CEB or drawn up by the applicants themselves. 338 Various permits need to be obtained, both technical and relating to environmental and water law, depending on the project. 339 Further dam projects were however completed in 1974 and 1981. 340 The only exception is on the River Kotmale, where there is still a 150 MW potential. Small-scale hydropower for isolated operation In each of the years 2000 to 2002 the wind farm sup- Small hydropower plants that are not connected to the plied between 3.4 GWh and 3.6 GWh of electricity, grid system are used for the electrification of remote vil- thus falling below expectations. One other wind farm lages. To this end, the village inhabitants usually found project is now at the preliminary planning stage. cooperatives which build the hydropower plants with contributions from their members and loans. The Biomass Energy Service Delivery credit programme by the Biomass makes a considerable contribution to the gener- Government of Sri Lanka promotes village hydropower ation of primary energy in Sri Lanka. As a rule the fuel plants of this type. The aim of the programme is to involved is non-commercially utilised biomass, such as bring about the electrification of 20 villages with a total firewood or animal and vegetable waste from agriculture. of 2,000 households by this means. By March 2001, So far, though, biomass plays no part in the generation 13 villages with 365 households had been connected to of electricity. Its use is almost exclusively reserved for such supply grids341. In some cases industrial enterprises the heat-generation sector. also use small-scale hydropower plants to supply their own electricity. Solar Energy There are no grid-coupled solar power installations in use in Sri Lanka. Instead, non-grid-tied solar home Wind Energy systems (SHSs) used for the electrification of individual There has been little development of the exploitation of houses or huts are very successful in areas where connection wind energy in Sri Lanka. From 1988 to 1992 the CEB to the grid system is not planned for a long time to come arranged for investigations to be conducted into the or makes no economic sense. With the aid of microcredit potential for wind power in the south of the country. programmes, villagers are given the means to purchase a The studies were produced with technical and financial solar system for a one-off down payment and subsequent assistance from the Netherlands and covered a geograph- instalments over several years. ical area of 1,500 km2; they revealed a potential of 200 MW of wind-generated electricity for the south- ESD load programme with GEF support east of the island. The results already took account of In 1997 the Government of Sri Lanka with financial nature reserves and land used for agricultural purposes. support from the World Bank and the GEF set up an Energy Service Delivery (ESD) credit programme amount- The Hambantota wind power pilot project ing to US$ 49 million to promote projects in the field To gather experience, the CEB decided to construct a of renewable energy, including loans for SHSs. In add- 3MW wind farm as a pilot project in Hambantota on the ition, funds were made available to promote the solar south-east coast of Sri Lanka. This wind power project, so energy industry (for example the financing of feasibility far the only one, consists of five 600kW wind power studies or supporting the founding of a solar industry plants with an expected annual electricity production of association). The loans were granted via local banks. up to 4.5 GWh. The project was commissioned in 1999, Within two years it proved possible to sell more than with one third of the financing being met by the CEB and 3,200 SHSs through the ESD programme. In the mean- two thirds by the World Bank and the Global Environ- time the programme has come to an end. The RERED mental Facility (GEF). The total costs amounted to programme was launched as a successor scheme. LKR 280 million (approx. € 2.5 million). The experience and data gathered from the project are to be made Support from provincial government accessible to the public and are intended to facilitate the Further assistance for SHSs was provided by government planning and implementation of future projects. agencies. For example, the authorities of Uva province granted subsidies of LKR 10,000 (roughly € 90) per household in order to increase the number of SHS units.

341 On that date it was planned to connect 296 households to existing projects. Sri Lanka

At the end of September 2003 Shell Solar Lanka, a sub- Information Sources sidiary of Shell Solar, was able to announce the sale of a total of over 20,000 units in Sri Lanka. The number of • Ceylon Electricity Board (2003): people now employed by the company in the country Statistical Digest 2002 has grown to 450. • Ceylon Electricity Board (2002): Statistical Digest 2001

Rural Electrification • Ceylon Electricity Board (2000): Annual Report 1999 Success with electrification • Sri Lanka Business Development Centre: Gamta Sri Lanka has made considerable progress in the field of Light. Energy Services for Villages, April 2001 electrification. Whereas in 1972 only 10% of all households were connected to the electricity grid, by 2001 the • William P. Hirshman: World Bank may provide proportion had reached 62% and by 2002 even 65%. $25 million for Sri Lanka renewables project, The CEB plans to increase the electrification rate to Photon International, April 2002 between 75 and 80% by 2007. • U.S. Department of Energy, Energy Information Agency: Country Analysis Briefs: South Asia ESD and RERED Regional Overview, June 2002 In July 2002 the central government with the aid of the World Bank342 and the GEF launched another rural • U.S. Department of Energy, Energy Information electrification scheme under the title of Renewable Agency: Country Analysis Briefs: Sri Lanka, Energy for Rural Economic Development Project February 2002 (RERED). It is intended that RERED should build on the success of the ESD credit programme that came to an end in 2002 by setting up medium- and long-term financial assistance for private investors, NGOs and village cooperatives and providing microcredit programmes to implement projects aimed at exploiting renewable forms of energy. RERED will primarily concentrate on non-grid-tied electrification, as did its predecessor scheme.

The ESD programme in its time led to the installation of 18,600 SHS units and the building of 56 non-grid- tied village hydropower plants, which supply power to 2,900 households.343 The new RERED programme, which was launched in July 2002, is projected to supply electricity to 100,000 rural households and 1,000 small- and medium-sized rural enterprises through local non- grid-coupled generating plants. In addition, 85 MW of output, generated by hydropower, wind power, biomass or solar energy, is to be fed into the national grid.

Exchange rate (28 Octobre 2003): 100 Sri Lanka rupees (LKR) = € 0.90

342 The World Bank approved the US$ 75 million that it is providing on 20 June 2002. 343 For further details see also www.lanka.net/esdp/solar_power.html or www.gefweb.org/ResultsandImpact/Experience_and_Lessons/ GEF_Sri_Lanka_case.pdf. Contact Addresses

Ministry of Power & Energy 80, Sir Earnest de Silva Mawatha, Colombo 07. Tel. 0094-1-564363 Fax 0094-1-564474 www.priu.gov.lk/Ministries/Min_Power&Energy.html

Ceylon Electricity Board (CEB) No. 50, Chittampalam A Gardiner Mawatha, PO Box 540, Colombo 02, Sri Lanka Tel. 0094-1-324471-8 www.ceb.lk

Lanka Electricity Company (Private) Limited (LECO) 411, Galle Road, Colombo 3, Sri Lanka Tel. 0094 1 574428 / 074 718994 Fax 0094 1 574429 E-mail: [email protected]

Energy Supply Committee (ESC) 13th Floor BOC Merchant Tower Building 28, St Michael’s Road Colombo 3 Tel. 0094 1 391006/7 Fax 0094 1 391008 www.esc.gov.lk E-mail: [email protected]

German Embassy in Sri Lanka No. 40, Alfred House Avenue, Colombo-03, Sri Lanka. Tel. 0094 1 2580431 Fax 0094 1 2580440

Embassy of Sri Lanka Niklasstrasse 19 14163 Berlin Germany Tel. 0049 (030) 80909749 Fax 0049 (030) 80909757 E-mail: [email protected] Vietnam

Vietnam

Electricity Market Transmission grid EVN subdivides its transmission grid into four geograph- Installed capacity and electricity production ical units, with a 500kV north-south backbone. There are The installed capacity of the state-owned power utility, plans for transmission lines to the neighbouring coun- Electricity of Vietnam (EVN), and independent power tries, Cambodia and Laos. producers increased between 2000 and 2002 from 6,172 MW to 8,860 MW. Availability in many power Long-term trend in electricity consumption stations is, however, low due to age. From 2000 to 2002, From 2000 to 2002, electricity sales to end customers electricity generation rose from 26.6 to 35.8 TWh. rose from 22.4 to 30.3 TWh. With annual per capita sales at approximately 370 kWh (2002), electricity consumption is very low. Demand in the Hanoi and Ho Chi Installed Share of Generation Share of capacity total total Minh City conurbations is far above demand in rural capacity areas. Power consumption in the central area of the (MW) (%) (TWh) (%) country in particular lags well behind that in other Year 2001 2002 2001 2002 2001 2002 2001 2002 parts. The annual growth in consumption averaged Hydropower 4.145 4.187344 50,5 48,0 18,21 18,19 59,5 50,8 11.8% in the 1990s, thus far outstripping the rise in Coal 645 1.245 8,0 14,0 3,21 4,88 10,5 13,6 gross national product. The latest estimates forecast an Petroleum 198 198 2,4 2,0 1,11 1,01 3,7 2,9 increase in annual demand for electricity in the coming (thermal power stations) years of between 13% and 15%. EVN anticipates domestic

Gas turbines 2.322 2.322 28,0 26,0 5,84 9,50 19,1 26,5 demand amounting to 50–53 TWh as soon as 2005. By (natural gas + 2010, this is expected to rise to 88–93 TWh, and by petroleum) 2020 to 200–225 TWh. The intention is to meet these Diesel 296 296 3,5 3,0 0,10 0,10 0,3 0,3 growing needs by building planned power stations Independent 612 612 7,5 7,0 2,13 2,10 6,9 5,9 producers earlier than scheduled. 8.227 8.860 30,6 35,8 Power losses Table 56: Installed capacity and power production by source; Despite considerable progress within the last decade, Vietnam; 2001, 2002; MW, TWh, %345 substantial savings could still be made by offsetting the Planned expansion of capacity sizeable technical transmission losses, which are of the In response to ongoing robust economic growth, the order of some 14% at present. These losses could be fur- power sector is looking to expand production capacity ther reduced to below 10% by improving power factors, further. The Ministry of Industry estimates that national transformers and transmission cabling.347 power station capacities will have to be increased by 1,000 MW per year until 2010, entailing annual invest- Electricity prices and generating costs ments of between US$ 1.8 and US$ 2 billion. The min- Present electricity prices may, however, hamper planned imum total requisite outlay by 2010, also including the upgrading as they cover only two-thirds of long-term cost of new transmission grids, is put at US$ 21 billion. marginal costs. In 1999 the average tariff for end consumers amounted to the equivalent of 5.1 € cents/kWh Hydropower is expected to play a leading role in future (excluding VAT), for example, while marginal costs for as well, although it is likely to account for a lower pro- generation, transmission and distribution came to portion, perhaps 40%, as the entire potential that can be approximately 7.5–8.5 € cents/kWh.348 exploited in the medium term amounts to only about 10,000 MW. In contrast, coal is likely to play a greater The widely differing consumer tariffs make a distinction part in power generation in the north and natural gas in above all in the production and service sector between a the south.346 standard tariff and a (high) peak and a (low) off-peak rate. The peak rate is about three times higher than the

344 Installed capacity of grid-connected small hydropower stations amounted to about 46 MW in 2001 but rose to 79 MW in 2002. 345 Source: Electricity of Vietnam (www.evn.com.vn/LVKD/csd_e.asp). 346 The coal deposits are concentrated mainly in Quang Ninh Province. 347 World Bank: SEIER–PID (February 2002), Project Information Document – System Efficiency Improvement, Equitization & Renewables Project, World Bank Report No. PID10127. 348 See: Renewable Energy Action Plan – Vietnam (March 2002), Esmap Technical Paper 021. off-peak rate. A comparatively small difference is made Market Actors between the purchase of high-voltage and low-voltage current. The tariffs for a number of applications outside Independent power producers private households average 5 to 6 € cents/kWh. These The state-owned enterprise EVN was founded in 1995 are progressively graded depending on the quantity con- as a nationwide power supplier after the transmission sumed. Special rates are charged to foreign companies, grids in the north and south were linked up. Seven service providers and households (including foreign regional subsidiaries with their own spheres of activity tourism), which all have to pay much higher prices than manage the distribution and sale of electricity: Power domestic users. Company (PC) Hanoi, PC Ho Chi Minh City, PC1 (North), PC2 (South), PC3 (Central), PC Dong Nai and Consumer group Tariff PC Hai Phong.350 In seven provinces, above all in the VND/kWh €-cents/kWh south, there are also distribution companies at the pro- 351 General production and vincial and district level. EVN is answerable to the manufacturing Ministry of Industry (MOI), which is in charge of energy 110 kV and above policy and planning. Standard 785 4.4 Off-peak load 425 2.4 Commercialisation of the power sector Peak load 1,325 7.5 The government is aiming to commercialise more of the Under 6 kV power sector in future. Individual segments of EVN Standard 895 5.0 have already been separated out into operationally au- Off-peak load 505 2.9 tonomous profit centres (and several generating centres). Peak load 1,480 8.3 The plan to set up an independent transmission com-

Public services pany as well has not been implemented so far, however. 885 5.0 (> 6 kV) Since April 2001, though, there has been a separate pri- Households cing system for power transmission. First 100 kWh 550 3.1 + Next 50 kWh 900 5.0 In 2001, 11 purchase agreements were in place with in- + Next 50 kWh 1,.210 6.8 dependent power producers. The government intends to + Next 100 kWh 1,.340 7.5 approve at least 30 more projects by independent pro- + As of 301 kWh 1,400 7.9 ducers between 2003 and 2010. Sector policy also foresees greater involvement by local and foreign joint-stock Table 57: Excerpt from the EVN electricity tariffs; Vietnam, companies in utilising renewable energies, particularly since 1 Oct. 2002; VND/kWh, € cents/kWh the installation of small hydropower plants. Private capital investments have been hampered in the past by Electricity prices in rural areas protracted, complicated and intransparent approval pro- Rural municipalities that obtain power from the public cedures, shortcomings in development of the legal power grid pay a standard nationwide rate of VND 700 system (particularly with regard to contractual provi- per kWh (4.0 € cents/kWh). To cover distribution costs, sions), disadvantages as compared with state enterprises however, the government allows for a certain leeway up in obtaining loans, for example, and an unfavourable or down.349 In isolated municipal grids, regional distribu- position in negotiating rates charged, etc. tors sold electricity at a price set by government of 2.6 US cents/kWh in 1999, below average generating costs.

349 According to EVN, 97% of rural municipalities obtain electricity at a price below VND 700 per kWh. 350 A map of the geographic allocation of distribution companies is available at www.evn.com.vn/LVKD/ldpp_e.asp. 351 EVN plans to create a national integrated power grid by 2020 by connecting the individual regional power grids. Vietnam

Legal Framework Clean Development Mechanism Vietnam ratified the Kyoto Protocol in September 2002. New power sector law Clean Development Mechanism (CDM) affairs are the In the past, necessary decisions on the electricity sector responsibility of the Vietnam National Office for Climate were taken by the Prime Minister through ad hoc direct- Change & Ozone Protection (NOCCOP), which is answer- ives. A new power sector bill has been drafted which able to the Ministry of Natural Resources and Environ- has the particular purpose of defining the conditions for ment (MONRE). A UNEP project supported by the competition in production and trade as well as safeguard- Dutch government (Capacity Development for CDM) ing consumer interests. The bill was presented to the aims at promoting an understanding and acceptance of government in November 2003 and a decision could be CDM in relevant institutions. It is also expected to im- taken by the National Assembly in 2004; the earliest prove the management of CDM activities. With help that it could enter into force is 2005. from the World Bank and the Australian government a strategic study is in preparation to look amongst other Initially the law will reportedly stipulate EVN as the things into the scope for reducing greenhouse gases, sole purchaser of electricity (as in the past) and allow for relevant costs and possible projects. competition at the generator level. In the long term, large-scale consumers will be permitted to purchase electricity directly from producers. There are also plans Policy for Promoting Electricity to divide the tariffs into units for generation, transmission, Generation from Renewable distribution and sale. Energy Sources

To contribute to greater competition and raise efficiency With Decision No. 22 in 1999,354 the Vietnamese on the electricity market, the Prime Minister issued a government established the first policy framework for decree on electricity activities and use (No. 45/2001/ using renewable energies for power generation and rural ND-CP) in August 2001 that opened the way for setting electrification. This decision assigns a special role to the up a National Load Dispatching Centre independently use of renewable energy sources (whether or not the facil- of EVN. To date, however, there are no provisions for ities are connected to the grid) according to the principle licensing new actors on the electricity market. of minimum cost.

Participation of foreign investors Responsibility for power development plans A government ordinance (Decree No. 95/2001/QD-Ttg) Drafting power development plans and making provision in June 2001 gave foreign investors the opportunity to for renewable energies is the responsibility of planning acquire financial interests in the power generation sector commissions at the provincial level.355 Stipulations have (up to 20% of total capacity). The first foreign capital also been made on cost allocation for network expansion. investments in two large-scale power generation pro- These state that the medium-voltage grid is supposed to jects were approved in May and September 2001.352 For- be financed largely from public funds and the low-voltage eign participation is welcome in the shape of IPPs, BOT network from local revenue. The government provides contracts or joint ventures with national companies, and for subsidies to the poorest areas. The cost of household includes both thermal and hydropower stations.353 Of connections must be paid for by the customers themselves. the planned added capacity of 7,250 MW from 2001 to 2005, 37% will be installed through BOT (1,512 MW) Renewable Energy Action Plan or IPP projects (1,220 MW). Until the law is finally An essential basis for developing renewable energy sources adopted, considerable uncertainties as to numerous pro- in the electricity sector is the Renewable Energy Action visions will remain, particularly for prospective foreign Plan (REAP), a key planning and strategy paper jointly investors. prepared by EVN and the Ministry of Industry with financial and technical assistance from the World Bank

352 These are Blocks 2.2 (expected to go on line in 2005) and 3 (in operation by 2003/2004) of the Phu My combined-cycle power complex in the southern province of Ba Ria-Vung with 720 MW each. 353 The first joint ventures with only local companies have also already been set up without the participation of EVN. 354 Decision No. 22-1999/CP-TTg by the Prime Minister. 355 Prior to this all responsibility for rural electrification was borne by EVN. and other donors in 1999/2000. To improve the applica- Status of Renewable tion of renewable energies in the power sector, REAP iden- Energy Sources tifies five components requiring national and international finance for their improvement or implementation: The following table shows that large-scale but also and above all small-scale hydropower plants have come into • renewable energy policy and institutional develop- operation in Vietnam, followed by biomass facilities. ment The potential is also greatest for small-scale hydropower • individual systems for households and institutions plants. Wind power currently plays a marginal role; the (including social institutions or also small manufac- potential for this form of energy has not yet been deter- turing enterprises) mined with any precision. • isolated municipal grids based on hydropower • power supply through grid-linked renewable energies • technology/market development and resource assessment356

REAP envisages a 10-year programme divided into two phases, coordinated by the Ministry of Industry. In an initial step, the necessary political and legal foundations will be laid, a fund set up for the use of renewable energies in remote areas and the requisite personnel and technical capabilities strengthened.

In a second step specific projects will then be implemented, such as the installation of pico hydropower and photovoltaic systems for households and municipalities, of small-scale hydropower installations for supplying whole villages and grid-linked facilities using renewable energies. Altogether, REAP estimates the costs of all the individual measures at about US$ 240 million, of which some US$ 180 million is to be allocated to grid-connected facilities.

REAP assigns renewable energies a major role in supplying power from small-scale generating companies to the EVN grid or the regional distributors' networks. These small power producers could be public-owned enterprises (provincial government, municipalities) or come from the private sector. A general guideline for the payment of these small suppliers (Small Power Purchase Agreements) has not, however, entered force yet, so that individual agreements have to be made.

356 Detailed reviews were prepared on the five individual aspects based on numerous background studies. Vietnam

Potential Current utilisation

Ressource MW Households MW Households Geographic focus (1,000) (1,000)

Hydropower 800–1,400 110–155 North and central

Pico 90–150 200–250 30–75 100 North and central

Small isolated grids 300–600 300 20 North and central Small-scale grid- 5 North and central linked hydropower 400–600 60

Stand-alone PV South and central systems 2 50 0,6

Bagasse 100–200 50 South and central

Rice husks, etc.357 150–200 0 South and central

Geothermal ~50–200 0 Central Wind power

Small facilities not def. not def. 0,2 1 Central coastal region Grid-linked not def. not def. 0 Islands and central coastal region

Table 58: Potential and present use of renewable energies; Vietnam; MW, in 1,000 of households358

Hydropower distributed between 48 locations, is fed into the central Vietnam’s hydropower potential is estimated at approxi- grid from (commercially run) small-scale hydropower mately 300 TWh/year. Of this, some 80 TWh p.a. could plants with capacities ranging from 100 to 7,500 kW. 360 be put to economic use, equivalent to a capacity of 18 to 20 GW. Accordingly, only approximately a quarter of the Approximately 20% of these latter facilities, which are feasible potential has been exploited so far. The plan is to financed solely by government and are still in operation double capacity installed in 2000 to 8,000 MW by 2010, for the most part, were installed in connection with irri- making for power generation of more than 30 TWh. gation projects. The number of these is likely to increase According to an announcement in June 2002, this in the coming years under government targets.361 increase will be primarily based on the installation of 24 new large hydropower stations, which is, however, likely Isolated grids to give rise to ecological and social conflicts that run In future, the expansion of hydropower use in the lower counter to the recommendations of the World Com- capacity range is primarily intended to promote the con- mission on Dams. struction of isolated networks run by small providers, cooperatives or municipalities, and which in addition to Small and micro hydropower general power supply will help to speed up expansion in The current applications span a broad range from micro the productive sector in particular. hydropower systems to supply individual consumers to large-scale hydropower stations. Wide experience has Municipal small-scale hydropower already been gained in micro and small hydropower in So far, municipal small-scale hydropower has been in- Vietnam and there are many manufacturers available, stalled at more than 300 locations with an aggregate although product quality is in need of improvement.359 capacity of about 70 MW, while individual plants of At present, 100,000 to 150,000 households are supplied between 5 and 200 kW are largely situated in the northern from micro hydropower systems. Another 20 MW is and central parts of the country. However, about 200 of available to supply isolated grids, while about 60 MW, these systems, largely serving isolated grids, are not in

357 Aggregate technical potential for rice husks amounts to 450 MW. About two thirds is already being used as feed and as fuel for cooking. Other resources include coffee residue, waste wood and coconut shells. The energy-efficient use of wood in Vietnam was already examined in 1992 in the FAO project, Regional Wood Energy Development Programme in Asia: Tropical Forestry Action Programme Vietnam–Fuelwood and Energy Sector Review (Field Document No. 33). 358 Source: Renewable Energy Action Plan, 2002. 359 The following sizes of plant are distinguished: pico hydro: 100 to 1,000 W; micro hydro: 1,000 W to 5,000 W; mini hydro: 5 to 100 kW; small hydro: 100 kW to 10 MW. Some other classifications are used internationally; for example, pico and micro systems are often used to mean the same thing. 360 Above all in Ha Giang, Cao Bang, Quang Nam and Quang Ngai Provinces. 361 Six out of 48 systems were in operation in 2001 and functioned smoothly. Source: World Bank: Renewable Energy Action Plan-REAP. Esmap Technical Paper 021, March 2002. operation due to quality and maintenance problems and Expansion of hydropower in REAP a lack of financial resources. Many of these facilities were REAP envisages two phases for expanding municipal financed with foreign assistance without accounting for hydropower supply: supplying 10,000 to 40,000 house- responsibility for operation and maintenance to assure holds at 20 to 80 locations with facilities of 2 to 6 MW sustainability. Only a few municipal plants also feed total capacity in a first phase, and supplying another electricity into the grids operated by EVN or the regional 110,000 households at about 160 to 220 locations from distributors. Estimates of the potential for municipal plants with a total capacity of 14 to 19 MW in a second use range between 300 and 600 MW. phase.

Technical potential for small-scale hydropower Wind Energy Various sources put the technical potential for small- Thanks to its geography – a 3,000 km-long coastal strip scale hydropower with a plant capacity of up to 10 MW and its location in the monsoon belt – Vietnam can draw at between 0.8 and 1.8 GW. There are presently only a on large wind power resources, although so far these few hundred mini and small-scale hydropower plants have been barely harnessed at all. with capacities of 5 kW to 10 MW. The potential for grid-linked small hydropower plants alone is estimated Wind data at 0.4 to 0.6 GW and can in part be tapped by improving A relatively rough picture of the regional distribution of existing generating facilities. wind power resources is provided by the Wind Energy Resource Atlas of South Asia, published in 2001. The Micro and pico hydropower study, which is largely based on meteorological data in Micro and pico hydropower systems with a capacity of conjunction with a simulation model and not on individ- less than 5 kW have proliferated greatly since the 1990s, ual site measurements, identifies suitable windswept in particular, due to improved trade relations with China, regions primarily in the mountainous terrain on the where these facilities are produced cheaply. This is espe- border with Laos and in the coastal provinces south of cially so in the northern provinces. Micro-class systems Da Nang and north of Ho Chi Minh City. Altogether, (1–5 kW) are manufactured by various companies in for approximately 30% of the land area wind energy Vietnam.362 potential is assessed as sufficient (6–7 m/s mean wind velocity at a height of 65 m) and for another 8.6% it is Vietnam has one of the world’s largest sales markets for rated as good to very good (over 7 m/s). pico systems with an output of up to 1 kW, approximately 100,000 to 150,000 having been sold commercially Meteorological data, including wind measurements, is to date. Currently some 40,000 systems are sold each provided by the National Institute for Hydrology and year, about half to replace existing facilities, and are Meteorology and the US National Oceanic and Atmos- mainly used to supply individual households or small pheric Administration (NOAA). Since 1994 NOAA has production centres. Approximately 90% of these been operating 24 weather stations in Vietnam, provid- systems, which according to REAP are sold at prices of ing hourly figures. Wind data from other meteorological US$ 50 to US$ 100 for capacities from 100 to 500 W, stations is of only limited value, however, due to fre- are imported from China. However, these systems quently uncalibrated or wrongly positioned measuring require a high operative input, lack electrical controls devices. and have an operating life of only 1 to 3 years. A number of them are also used as battery chargers in interconnected Site measurements were taken in the course of project neighbourhoods. The total market is estimated at planning on the south-eastern coast near Nha Trang and approximately 200,000 systems.363 on two islands close to Haipong (Bach Long Vi) and Ho Chi Minh City (Thanh An). A study by the Institute of Energy identifies nine islands with wind speeds of 4.1 to 7.1 m/s at a height of 10 m.

362 Advisory services for grid-connected small-scale systems are provided by the Hydro Power Centre, which belongs to the Vietnam Institute for Water Resources Research. The centre manufactures both small and pico systems itself. 363 In the short term, therefore, about 50% to 75% of the market volume has already been exhausted. Due to the short lifetime of the systems, however, there will continue to be a corresponding demand in future as well. Vietnam

Wind energy use Bagasse, rice husks and biogas So far, only a small number of relatively large wind or Most of the 43 existing sugar mills, only three of which wind-diesel systems have been installed in localised feed electricity into the public grid365 under individually systems. Smaller wind energy facilities are more broadly negotiated agreements, are situated south of Da Nang. disseminated. In the past, small-scale wind power facilities More power generating capacity could be created by have been developed in particular by the Research converting more mills. Expanding some mills and Center for Thermal Equipment and Renewable Energy building 12 new ones would enable a surplus capacity of (RECTERE) at the Technological University of Ho Chi approximately 120 MW, which would be available to be Minh City. About 700 to 1,000 battery chargers rated at fed into the grid. 200 W have been built so far and sold to private customers for about US$ 400. According to a report dated July Rice husks have not been used for power production so 2003, the provincial administration of Haiphong has far. The potential, however, is estimated at 150 to 200 MW commissioned the construction of a wind power instal- in south and central Vietnam. The dispersal of this waste lation at an estimated cost of VND 20 billion makes it much more difficult to use. Altogether, Vietnam (€ 1.13 million). has more than 100,000 rice mills, although only approximately 50 are located in the main growing region of the Grid-linked wind farms Mekong Delta with a throughput of more than 5 tonnes Grid-linked wind energy systems have not been installed per hour. This would be enough for the economic operation so far for lack of technical know-how and the requisite of power generating sets of 500 kW or more.366 regulative framework. Erection of the first large-scale wind farm with a capacity of 15 MW on the Phoung The 3,000 or so biogas installations that are mostly oper- Mai peninsula (Binh Dinh Province) was begun in 2003. ated in the region of the Red River (north Vietnam) and The project, costing US$ 14 million and led by a corporate in the Mekong Delta are only used to a relatively small syndicate of five,364 is expected to go on line at the end of extent for off-grid low-output power generating sets. A 2004. On successful execution, an expansion to 50 MW major barrier cited is the cost factor, which is said to pre- is planned. The electricity will be sold to EVN. vent rural households from purchasing these facilities without subsidies. Also, biogas can mostly be used more Biomass efficiently in productive sectors for direct thermal purposes. Sixty to sixty-five per cent of national primary energy needs are met with bioenergy. In private households, the Apart from the Institute of Energy, those mainly in- share of biomass in the form of fuelwood, charcoal, volved in designing, producing and installing biomass straw, farm residues and other organic waste amounts to facilities have been the Vietnam Boiler Company as much as 80% to 90%. These sources of energy are (Hanoi), the Research Centre for Thermal Equipment largely used for cooking and heating water. Thermal use and Renewable Energy (Ho Chi Minh City) and the Can is also made of biomass in the industrial sector, for example Tho University in the Mekong Delta. rice husks in brickmaking. Solar Energy Further biomass resources could also be developed in South and central Vietnam have good and constant solar particular for combined heat and power plants, using irradiation conditions with 4.0 to 5.9 kWh/m2 per day, sugar-cane bagasse and residue and rice husks. According while the north is subject to pronounced seasonal fluc- to the Institute of Energy, an estimated 2.5 million t of tuations (2.4 to 5.6 kWh/m2). Under REAP, 5,000 to bagasse and 3.8 million t of rice husks are available for 10,000 solar home systems, each rated at 30 to 40 Wp, energy recovery. The additional technical power gener- are scheduled for installation between 2002 and 2007. ating potential is estimated at 250 to 400 MW.

364 The project owner is Phuong May Wind Power Shareholding Co., made up of the following five enterprises: Construction Engineering Corp., Clean Power Shareholding Co., Binh Dinh Industrial Assembling, Electricity Co. 3 and Vietnam Wind Power Shareholding Co. 365 The sugar mills that do this are: Bourbon, which sells 12 MW for 4.35 US cents/kWh, Son La with 1 GWh/a for VND 400 to 440/kWh (2.26 to- 2.49 € cents/kWh), and La Nga with 1.5 GWh/a for VND 400/kWh (2.26 € cents/kWh). 366 For more information see www.aseanenergy.org/pressea/vietnam/biomass/prospects.htm. Solar energy use EVN for introducing a system on a fee-for-service basis, Photovoltaic panels began to be used as early as the where the systems need not be purchased by the users. mid-1980s, when the National Center for Scientific Research installed several systems near Ho Chi Minh A key role is also played here by the Vietnamese Women's City. Today’s total installed capacity amounting to Union, which has been actively engaged from as early as approximately 650 kW is spread over three market 1993 in harnessing solar energy for households not segments: professional applications, for example run- connected to the mains supply. By the beginning of ning telecommunications systems (50%); institutional 1997 it had put about 240 systems into operation with systems for supplying hospitals, community centres technical assistance from Solarlab and financial support and battery charging stations (30%); and home from the American Solar Electric Light Fund (SELF).367 systems (20%). An estimated 1,000 solar home systems with capacities of 20 to 50 Wp each are in use, Besides the institutions already mentioned, the Re- primarily in south Vietnam. Altogether, the number of search Center for New and Renewable Sources of Energy PV systems in operation is estimated at 5,000. and Technology Transfer at the Institute of Energy and the Renewable Energy Research Center at Hanoi Uni- The only larger PV system so far is a 100kW facility versity of Technology are also involved in disseminating installed with Japanese assistance and combined with a solar systems. 25kW hydropower plant. Several off-grid PV/diesel projects are being considered by KfW. Geothermal Energy The geothermal potential in Vietnam has hardly been Sixty-five battery charging systems run by municipalities explored to date. The geological conditions in the centre were installed in recent years by the Solarlab of the Insti- of the country could permit the use of geothermal power tute for Physics in Ho Chi Minh City. Proceeds from stations with a capacity of 100 to 200 MW. electricity sales are not sufficient to cover costs, however. Solarlab, with cofinancing from France, has also set up about 400 systems in 50 villages to supply community Rural Electrification facilities, as part of a programme under way since 1991. At the end of 2001, some 85% of urban and 77% of Solar home systems rural households were connected to the mains supply. The equipping of rural households with solar home Up to now, a total of 4 million households with approxi- systems is mainly promoted by Selco-Vietnam, a subsid- mately 20 million people lack access to grid electricity. iary of the American Solar Electric Light Company, The government is seeking to increase the level of cover- which has been engaged in Vietnam since 1998 and age for the rural population to 90% by 2010 and has plans to install 12,000 of these systems with assistance commissioned EVN with executing a general electrifi- from the World Bank and GEF. The systems are sold on cation plan to achieve this. Even after the plan is imple- the basis of credit purchases with loans granted by the mented, more than 1,000 remote communities and vil- Vietnam Bank for Agriculture and Rural Development lages with about 500,000 households and another

(VBARD). For 42Wp systems, users make a one-off pay- 2.5 million households in scattered rural settlements ment equivalent to US$ 123 and then pay monthly will still be without a grid connection. instalments of about US$ 10 for four years so that the systems are refinanced in full. Policy guidelines Policy guidelines on rural electrification were adopted Experience gained so far, though, is not very promising as by the Ministry of Industry at the beginning of 2000. the loan approvals are slow and the financial burden for These specify the principles for diversified participation rural households is relatively heavy, even compared with of new (foreign and local) power suppliers through creating traditional energy sources. This is why an alternative incentives for local power supply and the promotion of approach is being considered of a licensing agreement with localised electricity generation. The intention is to both

367 For more information see www.self.org. Vietnam

expand networks and install off-grid systems for rural One component of the project is also the development of supply according to the principle of minimum costs. institutional capabilities for using renewable energies.

Opportunities for renewable energies In the field of individual systems, REAP places the main Some of these households can only be served cost-effi- emphasis on pico hydropower and small photovoltaic ciently by using localised renewable energy sources systems for stand-alone applications with low electricity (US$ 400 to 500 per connection). Potential has been consumption. Of 750,000 households that are not ex- identified in particular in the expanded use of pico hydro- pected to be connected to the EVN grid in the next power systems for single houses or settlements in the 10 years, approximately 200,000 lend themselves to supply northern mountain regions and the central coastal zones of from such facilities. There are additional needs in schools, the country, and in the dissemination of photovoltaic health centres, water supply and communications. Par- systems in the central highlands and the Mekong Delta. ticular interest is shown in increasing the share of domes- tically produced pico hydropower systems and in sta- Aims of the master plan bilising the commercial supplier and service infrastructure. The current master plan for developing the power Altogether there is expected to be a total installed cap- sector368 sets the following targets to be achieved by 2010: acity of 4 – 12 MW in the first 5 years and another 15 to 33 MW in the second 5 years. • additional supply of 1,500 municipalities through grid expansion SEIER project • electrification of a further 400 remote municipal Working on the basis of REAP, and partly for the pur- ities, primarily in the northern mountain regions pose of implementing its first phase, the System Effi- and in the central highlands, with localised ciency Improvement, Equitization and Renewables pro- systems using renewable energies and diesel ject (SEIER) is being implemented by EVN and the Ministry of Industry with financial assistance from the Isolated supply of municipalities World Bank and GEF from 2002 to 2007. This project About 300 municipalities that will not be electrified by combines energy-efficiency measures with the use of EVN by 2005 are promising candidates for econom- renewable energies in the power sector.370 It envisages ically and technically feasible island-mode supply based the renewal of small hydropower plants belonging to on hydropower. The total requisite capacity for this is EVN, the construction of a small wind-diesel system on put at 16 to 25 MW. A detailed study on these munici- the island of Phu Quoc, and the installation of 20 separate palities in the north of the country was conducted with municipal grids using renewable energy sources (hybrid assistance from the Japan International Cooperation power supply). Flanking this is the general development Agency (JICA) and completed in mid-2002 (Renewable of a policy favouring renewable energy. Energy Master Plan in the Northern Part of the Socialist Republic of Vietnam). The study envisages the use of Rural Energy II project micro hydropower systems rated at 5 kW to supply A follow-on project is to be launched to implement the approximately 100 households, and considers a state second REAP phase as of 2004 – the World Bank project subsidy of approximately 50% of the investment costs to Rural Energy II – to improve or install power supply to be an economically viable burden for power consumers. a million households. Besides overhauling the national power grid in 1,000 rural municipalities, it is also planned Rural Energy I project to connect a further 200 municipalities for the first Implementation of the Renewable Energy Action Plan time. In addition, localised village networks are to be (REAP) in rural areas is substantially supported by the installed in 100 municipalities with no connection to World Bank. This was carried out initially as part of the the grid. The institutional and regulatory framework for Rural Energy I project, in progress since 2000, which rural power supply is also set to be reformed. foresees supplying an additional 450,000 households in rural regions through grid expansion by mid-2004.369 Exchange rate (27 Oct. 2003): VND 10,000 = € 0.565

368 Master Plan of Power Development for 2001 to 2010. 369 The project has been granted an IDA loan of US$ 150 million. 370 Contracts for a US$ 225 million loan with IDA were signed in October 2002. Another US$ 4.5 million will be contributed to the total costs of US$ 352.4 million by GEF, earmarked for the development of renewable energies. Information Sources • Solar Energy Subsector Review Mission of Vietnam (Jan. 1997), Draft Final Report, Unops,

• ASEAN Centre for Energy, Promotion of Renewable Kopenhagen

Energy Sources in South East Asia (PRESSEA), • UNEP Collaborating Centre on Energy and Envr- Information on Vietnam (www.aseanenergy.org/ onment, Economics of Greenhouse Gas Limitations pressea/vietnam/vietnam.htm) (1999). Country Study Series: Vietnam. Risø

• CADDET Centre for Renewable Energy National Laboratory, Denmark

(IEA/OECD), Vietnam Women’s Union Promotes • Wind Energy Resource Atlas of Southeast Asia Photovoltaic Systems in Remote Areas, (September 2001), Prepared for The World Bank Technical Brochure No. 28, 1996 Asia Alternative Energy Program by TrueWind

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Electricity of Vietnam – EVN SOLARLAB 18 Tran Nguyen Han Vietnam National Center for Science and Technology Hanoi Phan Vien Vat Ly Tel. 0084-4-82 49 509 1 Mac Dinh Chi Fax 0084-4-82 49 462 Ho Chi Minh City E-mail: [email protected] Tel. 0084-8-822 20 28 www.evn.com.vn Fax 0084-8-829 59 05 E-mail: [email protected] Institute of Energy – EVN 6 Ton That Tung World Bank Dong Da –- Hanoi 63 Ly Thai To. Tel. 0084-4-852 37 30 Hanoi Fax 0084-4-852 93 02 Tel. 0084-4-934 66 00 www.evn.com.vn/ioe/english/index_eng.html Fax 0084-4-934 65 97 E-mail: [email protected] National Load Dispatching Center 18 Tran Nguyen Han German Embassy in Vietnam Hanoi 29 Tran Phu Tel. 0084-4-824 37 45 Hanoi Fax 0084-4- 824 31 82 Tel. 0084-4-845 38 36/7 www.evn.com.vn/nldc/english/index_en.html Fax 0084-4-845 38 38 E-mail: [email protected] National Office for Climate Change and www.germanembhanoi.org.vn Ozone Protection Ministry of Natural Resources and Environment GTZ Office in Vietnam 57 Nguyen Du 41 Ly Thai To Street Hanoi Hanoi Tel. 0084-4-822 89 74 Tel. 0084-4-934 49 51/2/3 Fax 0084-4-826 38 47 Fax 0084-4-934 49 50 E-mail: [email protected] www.gtz.de/vietnam Renewable Energy Research Center Hanoi University of Technology Delegate of German Industry and Commerce 1 Dai Co Viet 41, Ly Tahi To Hai Ba Trung - Hanoi Hanoi Tel. 0084-4-869 26 56 Tel. 0084-4-825 14 20 Fax 0084-4-868 11 85 Fax 0084-4-825 14 22 E-mail: [email protected] E-mail: [email protected] www.ahk.org.hk Research Center for Thermal Equipment and Renewable Energy – University of Technology 268 Ly Thuong Kiet District 10 – Ho Chi Minh City Tel. 0084-8-865 43 55 Fax 0084-8-865 43 55 E-mail: [email protected] www.hcmut.edu.vn

SELCO Vietnam Company Limited 239 Tran Hung Dao, Dist. 1 Ho Chi Minh City, Vietnam Tel. 0084-8-836 82 62 Fax 0084-8-837 74 08 E-mail: [email protected] www.selco-intl.com The electricity markets and their respective actors are investigated for 21 countries in various regions: Latin The potential of renewable sources of energy in developing America – Caribbean, Africa, Europe – Caucasus and and emerging countries is often considered high. Obstacles Asia – Pacific. The country reports analyse the energy- to their exploitation and foreign investors’ engagement policy framework conditions and closely examine the often include a lack of knowledge of framework conditions status of and promotion policy for electricity generation in the energy industry and insufficient transparency with on the basis of hydropower, wind power, solar power, regard to the prior experience and interests of the national biomass and geothermal energy. The chapters on each actors. These are barriers which this third, updated and country are rounded off by information about rural expanded new edition intends to overcome. electrification.

Dag-Hammarskjöld-Weg 1-5 Postfach 5180 65726 Eschborn Germany Telefon: +49 (0)6196 79-1303 Telefax: +49 (0)6196 79-7144 Internet: http://www.gtz.de