Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electriﬁ Cation Programs

48643 Public Disclosure Authorized Maximizing theProductive Uses of Electricity to Increase theImpact of Rural Electriﬁ Formal Report 332/08

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Energy Sector Management Assistance Program

5036-COVR.indd ii 5/27/08 1:13:33 PM Energy Sector Management Assistance Program (Esmap)

Purpose The Energy Sector Management Assistance Program (ESMAP) is a global technical assistance partnership administered by the World Bank and sponsored by bi-lateral ofﬁ cial donors, since 1983. ESMAP’s mission is to promote the role of energy in poverty reduction and economic growth in an environ- mentally responsible manner. Its work applies to low-income, emerging, and transition economies and contributes to the achievement of internationally agreed development goals. ESMAP interventions are knowledge products including free technical assistance, speciﬁ c studies, advisory services, pilot projects, knowledge generation and dissemination, trainings, workshops and seminars, conferences and roundtables, and publications.

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5036-COVR.indd i 5/27/08 1:13:32 PM Formal Report 332/08

Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electriﬁ cation Programs

An Operational Methodology

Christophe de Gouvello and Laurent Durix

Energy Sector Management Assistance Program

ESMAP Reports are published to communicate the results of ESMAP’s work to the development community with the least possible delay. The typescript of the paper therefore has not been prepared in accordance with the procedures appropriate to formal documents. Some sources cited in this paper may be informal documents that are not readily available.

The ﬁ ndings, interpretations, and conclusions expressed in this report are entirely those of the author(s) and should not be attributed in any manner to the World Bank, or its afﬁ liated organizations, or to members of its board of executive directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries.

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5036-CH00_FM.indd ii 5/28/08 11:17:06 AM Contents

Acknowledgments v Abbreviations and Acronyms vii Executive Summary ix Introduction: The Need for a New Approach to Rural Electrifi cation to Ensure a Positive Impact on Communities 1 Waiting for Spontaneous Positive Effects of Electrifi cation Projects to Trickle-Down in Rural Areas Is Not a Satisfactory Option 1 Proposing an Alternative by Focusing on Productive Uses of Electricity: Scope and Structure of the Paper 2 1. Maximizing the Developmental Impacts of Rural Electrifi cation Programs: Two Approaches Building on Cross-Sector Cooperation 5 An Increased Awareness of the Necessity of Working Across Sectors 5 An Initiating Event that Provided High Level Buy-in: the Energy-Poverty Workshops 6 A Mind Shift, Reaching out to Other Sectors to Help Generate Their Outputs 7 From Political Will to Implementation: The Multisector Committee in Senegal 7 The Context of the Reform of Rural Electrifi cation in Senegal 9 National Background to the Senegalese RE Program 9 Poverty Reduction in Senegal 9 Earlier Attempts from the Energy Sector to Contribute to Poverty Reduction 9 The New Senegalese Rural Electrifi cation Strategy 10 Key Policy Decisions that Support the RE Program 10 The ASER, the FER, and the Private Sector: Key Players that Support the Drive for Rural Electrifi cation 12 Mechanisms for the Award of Concessions and the Support to Electrifi cation 12 Progress in the Implementation of the RE Concessions 13 Two Approaches Contained within the Rural Electrifi cation Strategy and Targeting to Increase the Impact on Rural Communities 14 The Systematic Approach: Identifi cation and Promotion of Productive Uses of Electricity 14 The Pragmatic Approach: Collaboration with Other Sectors’ Key Programs via the Multi-Sector Energy Investment Projects (MEC) 15 2. Identifi cation and Promotion of Productive Uses of Electricity: A Systematic Approach 17 A Generic Overview of the Systematic Approach to Promote Productive Uses of Electricity 17 Step 1: Identify the Type of Productive Activities Taking Place in Each Sector and Subsector of the Targeted Rural Areas 18 Step 2: Analyze the Production Process for Each Commodity and Identify the Areas of Improvement 19 Step 3: Assess When Electricity Can Contribute to Potential Gains; Identifying the Required Equipment 20 iii

5036-CH00_FM.indd iii 6/2/08 8:32:53 AM CONTENTS

Step 4: Establish the Economic Viability of a New Production Process and of the Conditions for Its Implementation 22 Step 5: Design and Implement Promotion Campaigns Tailored to Each Type of End Users 24 A Practical Application of the Systematic Approach: the Case of the Senegal Project 27 Identifi cation of the Activity Champion and Its Team 27 Categorization of Productive Activities 28 Electricity Contribution to Gains in Production Process, Identifi cation of Required Equipment and Determination of Basic Economic Viability 29 Program and Tools for Advocacy of Change 32 3. Methodology for the Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs) 35 An Opportunistic and Practical Method to Speed up the Delivery of Positive Impact of RE: The Multisector Energy Investment Projects (MECs) 36 Step 1: Inventory of Other Sectors’ Programs Whose Outputs Could Benefi t from Electricity and Joint Evaluation of Sectors’ Interest in Creating a MEC 36 Step 2: Localization, Design, and Costing of Electrical Components, Including after the Meter 39 Step 3: Decision to Collaborate, Defi nition of Each Sector’s Roles and Responsibilities, Establishment of Contractual Documents, and Implementation 40 How the MECs Were Developed in the Case of Senegal 43 Analysis of the Rural Development Priorities, Identifi cation of Sector Programs, Areas of Cooperation, Technical Design, and Costing 43 Who Does What? Establishing Effective Stakeholder Cooperation within the RE Concessions: Example of MEC Implementation in St. Louis–Dagana–Podor 44 Fostering Stakeholder Cooperation: Example of the Dairy and Cattle Feed MEC in St. Louis–Dagana–Podor 48 Conclusion 49 Annexes on CD-Rom CD List of ESMAP Formal Reports CD Figures Figure 1.1 Examples of Energy-Derived Outputs and Contribution to Other Sectors’ Outputs 8 Figure 1.2 Map of Rural Electrifi cation Concessions 11 Tables Table 2.1 The Sector-System Matrix 19 Table 2.2 Illustration of Sector-System Matrix, for Agriculture in Region A 21 Table 2.3 Example of Electricity Contribution to the Commodity Value Chain: Case of the Task Transformation for Peanut, Fish, and Dairy Commodities 23 Table 2.4 Example of Estimated Cost Reduction Obtained from the Use of Electric Equipment 25 Table 2.5 List of Stakeholders That Could Be Involved in a Promotion Campaign 26 Table 2.6 Type of Technologies Currently in Use in the Cottage Industry Sectors in Rural Senegal 29 Table 2.7 Sector-System Matrix for the St. Louis–Dagana–Podor Region Key Commodities and Tasks Currently Undertaken 30 Table 2.8 Estimated Cost Reduction, by Subsectors and Tasks, Brought by the Use of Electricity 31 Table 2.9 Cases Where Electricity Does Not Reduce Monetary Unit Costs But Increases Productivity: Cases of New Activities Without Original Baseline 32 Table 3.1 Possible Selection Criteria to Identify Sectors and Programs That Could Provide Anchor to MECs 38 Table 3.2 Example of Synthesis of First Generation MECs in a Given Area 41 Table 3.3 List of First Generation MECs Identifi ed in the Three Initial Concessions 45

5036-CH00_FM.indd iv 5/28/08 11:17:07 AM Acknowledgments

This paper was prepared and written by Christophe de Gouvello, senior energy specialist (AFTEG) and Laurent Durix (consultant, AFTEG). The World Bank funded activities discussed in this paper were conceived and managed by Christophe de Gouvello and Stephan Garnier for the World Bank project team, Aliou Niang (director) and Mustapha Fall for the Senegalese Rural Electrifi cation Agency (ASER). The detailed design was prepared by Exa Development, headed by Pape Papa Ibrahima Ndao, under a two-phase contract supervised by the World Bank (AFTEG) under joint funding from ESMAP and IDA through ASER. The detailed design of these activities also received comments and suggestions from fi rms and groupings of fi rms prequalifi ed under the bidding process of the rural electrifi cation concession of Saint-Louis-Dagana-Podor in Senegal. We also would like to thank Dominique Lallement and GVEP, for inspiring us to undertake this cross-sectoral approach to Rural Electrifi cation. We also would like to thank Mohua Mukherjee and Koffi Ekouevi for their thorough peer review comments and suggestion for improvements. Special thanks to ESMAP staff, Ananda Swaroop and Marjorie Araya for compiling, producing and disseminating the fi nal manuscript.

5036-CH00_FM.indd v 5/28/08 11:17:08 AM 5036-CH00_FM.indd vi 5/28/08 11:17:08 AM Abbreviations and Acronyms

AfDB African Development Bank AFDS Social Development Fund ASER Senegalese Rural Electrifi cation Agency CFA Franc African Financial Community Franc, 1 Euro = 656 FCFA CIMES/RP Senegalese Multi-Sector Committee that aims at reducing poverty by implementing synergies between the energy sector and other sectors. DSRP French for Poverty Reduction Strategy Paper (PRSP) ERIL Locally Initiated Rural Electrifi cation Project FER Rural Electrifi cation Fund GEF Global Environment Facility GoS Government of Senegal GVEP Global Village Energy Partnership IDA International Development Agency (part of the World Bank Group) IFIP Private Financing Institutions IRR Internal Rate of Return MEC Multisector Energy Investment Projects (also called PREM in French) OBA Output Based Aid PADMIR Support Program to Decentralization in Rural Areas PAOA Program Providing Support to Agro-industry PAPASUD Program Providing Fisheries in the South PAPEL Program Providing Support to Stockbreeding PDMAS Program Providing Support to Agriculture Markets and Agro-industry PERACOD Program Promoting Rural Electrifi cation and Use of Domestic Fuels PNIR Rural Infrastructure National Program PPER Priority Rural Electrifi cation Programs PPP Public-private Partnership PRAESC Program Providing Revival of Economic Activities in Casamanse PREMS French for Multisector Energy Investment Projects (see MEC) PSAOP Program Providing Support to Service Providers in Agriculture PTIP Triennial Public Investment Program RE Rural Electrifi cation REGEFOR Well Drilling Reform Program SAED Program Providing Activities Development in the Senegal River Delta

vii

5036-CH00_FM.indd vii 5/28/08 11:17:08 AM 5036-CH00_FM.indd viii 5/28/08 11:17:08 AM Executive Summary

Rural electrification programs are generally The systematic approach analyzes the motivated by the effective and lasting impacts technologies used in the production processes that they are expected to generate in the fi eld. of goods and services in a specifi ed rural area. While there may be some natural trickle down It identifi es the bottlenecks, sees whether the effect from the massive investments required use of electricity can contribute to diminishing to reach high rates of rural electrification, or removing the limiting factors, evaluates the spontaneous positive effects on social and costs and gains, and provides guidelines to economic development are generally limited by induce the proposed change in the processes. It a number of local bottlenecks. Two of the most is systematic in the sense that it entails a thorough important deterrents to the productive uses of review of all productive or social activities electricity are the lack of technical knowledge taking place in a designated area and requires and skills of potential users and the fi nancial substantial interaction with the anchor sectors in means to acquire the relevant equipment. which these activities take place. The systematic Waiting for electrification projects to approach proposes to follow fi ve key steps: generate spontaneous positive effects in 1. Identifi cation of the productive activities rural areas appears to be a very passive taking place in a project area and the attitude. This is especially undesirable when supporting sectors the budgetary resources of governments are 2. Careful analysis of the production processes seriously constrained, and when the multilateral involved, identification of possible and bilateral donor community requires serious improvements and limitations investments in the social sectors to meet 3. Review of the contribution of electricity to Millennium Developments Goals. these expected improvements and what This paper argues that to be successful, equipment is required rural electrification programs should target 4. Analysis of the technical and economic direct impact on livelihoods and revenue feasibility and the social viability of the generation beyond the provision of connections electrically based solution proposed and kilowatt-hours by implementing electricity 5. Targeted promotion campaign to potential projects that affect livelihoods and generate new users about the gains from the use of revenues. electricity for a new production process, The necessity and the modalities of this involving electricity services distributors, cooperation with other sectors are discussed relevant equipment providers, microfi nance and two approaches—the systematic approach institutions and any other relevant and the pragmatic approach—to foster such stakeholders, such as local governments, cooperation are described in this paper. Both cooperatives, or NGOs approaches target the same end result and provide complementary steps toward this The pragmatic approach follows an oppor- result. tunistic tactic, taking advantage of preexisting

5036-CH00_EXEC.indd ix 6/2/08 8:33:29 AM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

opportunities resulting from the ongoing or Both the systematic and pragmatic planned implementation of another project or approaches are being tested and implemented in program in a given area. It is implemented when Senegal, where they were initially developed and conditions are ripe for a quick-win project that implemented within the Electricity Services in would provide rapid revenue-enhancing gains, Rural Areas Project (ESRAP) co-fi nanced by the thanks to access to electricity. It is pragmatic in that World Bank. The case of Senegal provides a real- the focus is on existing projects or programs in world and practical reference, demonstrating other sectors, for which most of the identifi cation that the approaches are complementary and and preparation work has been completed. are generic enough to be applied in many The magnitude of the gain, while important, varied rural electrifi cation programs, and the matters less than the feasibility and rapidity of methods described are fl exible enough to be the implementation of the Multisector Energy adapted to each country’s or program’s specifi c Investment Projects (MECs) that will provide the situations. expected gains. The proposed method for their In Senegal, the overarching context in implementation follows three steps: rural electrifi cation included establishing rural concessions to be attributed to the private sector 1. Identify the sectors that have activities taking following a bidding process, and the creation of place in the area of the electricity project, and a new entity, the Senegalese Rural Electrifi cation evaluation of the impact electricity can have Agency, which assisted and oversaw the process. on the sector’s outputs. The implementation of the approach was 2. Design and cost out electric equipment adapted to the local setting, while introducing proposed, both before and after the meter. the concept of cross-sector collaboration and the 3. Secure formal agreement among stakeholders practice of including a livelihood component in on the MEC, respective duties, and modalities the country’s rural electrifi cation program. of cooperation. Establish contractual documents and coordination of teams for implementation.

5036-CH00_EXEC.indd x 5/27/08 1:09:48 PM Introduction: The Need for a New Approach to Rural Electriﬁ cation to Ensure a Positive Impact on Communities

Waiting for Spontaneous Positive wealthiest—while draining the resources of the Effects of Electrifi cation Projects states or utilities to build extensive networks. to Trickle-Down in Rural Areas Is To accelerate access coverage, large amounts of effort went into decreasing the costs of rural Not a Satisfactory Option electrifi cation projects through technical design, It is commonly agreed that access to modern institutional innovation, and adequate fi nancing or improved energy services is one of the options.1 In parallel, some work has also been necessary conditions to move societies up undertaken to better estimate the effective from a subsistence economy, but it is now also economic benefits derived from electricity understood that it alone is far from suffi cient to uses, including the evaluation of those usually move people out of poverty. When the energy considered intangible, such as improved health source in question is electricity, evaluating the or security.2 effective benefi ts of access is complex, especially Although the efforts mobilized to decrease in rural areas. The end results depend highly the costs of electrification and to increase on the type and structure of the program that the valuation of the end-user benefits are provides the platform for delivery. commendable, the conventional approach Among key factors are the techniques used to rural electrifi cation is no longer suffi cient. and the breadth of access to electricity of the Solely extending the networks (or installing different players (rich and poor households, minigrids and individual systems), connecting small business, etc.) in each electrifi ed village. customers to the meter (reaching either some In fact, while electrification has long been or all customers, using customer payments, sold to stakeholders as a central piece of the subsidies or other financing means), and development of rural areas conventional supply considering the job done and retreating to a driven approaches often have limited the pure activity of exploitation (principally billing positive impacts to the use of a few light bulbs and maintenance) is inadequate to ensure a and radios by a few households—often the positive impact on the recipients. The central

1 See, for example the review of such efforts in 10 countries: “Transformative power: Meeting the Challenge of Rural Electrifi cation,” ESMAP 2006. 2 For more on this, see Barnes, Domdom, “Rural Electrifi cation and Development in the Philippines: Measuring the Social and Economic Benefi ts,” ESMAP 2002.

5036-CH00_INTRO.indd 1 5/27/08 1:10:29 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

weakness of such an approach is that it does while there may be some natural trickle-down not address the basis of customer consumption effect from the massive investments required once the connection is enabled. It also does to reach a high rate of rural electrification, not address the question of who will benefi t proactive action is needed to ensure that funding from electrifi cation, the optimal conditions for rural electrifi cation is effectively funding rural these benefi ts to materialize, the time frame for development and not just the expansion of the effectiveness, and the projected true benefi ts. electricity sector. One factor that contributes to such defi ciencies in rural electrifi cation programs Proposing an Alternative by is that once the policy decision of expanding Focusing on Productive Uses access to the rural area is made, often at the highest levels of government, it becomes an of Electricity: Scope and end goal in itself rather than a mean toward a Structure of the Paper larger rural development goal. This is partly This paper argues that the most effi cient way because a physical electricity connection is a to deliver effective and lasting impacts when very measurable item, whereas the effect of the designing a rural electrifi cation (RE) scheme is connection is less palpable from a target-oriented to ensure that such programs provide a direct standpoint. It is easier for a policy maker or impact on livelihoods and revenue generation, a development organization to claim that the in addition to the more conventional impacts contribution helped raise the connection rate on standards of living. Increasing revenue in a given location and to cite some generic generation can be accomplished by improving benefi ts attached, such as cheaper lighting for productivity of an existing production process easier reading and increased productivity, than and by creating new lines of activities that will to target and quantify the effective development generate employment and local demand. impacts. Targeting positive impacts on revenue This even leads in some cases to misleading generation—beyond good faith statements that situations where the whole population of a such thing will happen spontaneously—requires village is counted as having access to electricity, that the specifi c activities to develop productive with the implied assumption that all can enjoy uses be included as a full component of the RE all the benefi ts of electricity, while in fact only a project. However, to do so, one needs a quantity few customers are connected and little to none of of information and knowledge of rural economy the connections are used for revenue generation. and social dynamics that are not often available All too often, only the wealthiest gain access to to the energy specialists driving such projects. grid electricity, a connection that may sometimes Therefore, it is necessary to initiate a specifi c only replace earlier access through personal activity to reach across sectors and collect the generators. relevant information. Such activity would Waiting for spontaneous positive effects on analyze the existing state of the production social and economic development to stem from process in rural areas and inform the RE the proximity of electricity appears to be a very project proponents of proactive actions that can passive attitude in contrast to the efforts to build maximize the economic and social development such infrastructure. This is especially regrettable impacts of their projects. where the budgetary resources of governments This paper proposes a methodology to are seriously constrained, and where the identify and analyze the needs of target sectors multilateral and bi-lateral donor community that would maximize the income-generation requires serious investments in the social sectors impact of access to electricity. The paper will not to meet Millennium Developments Goals.3 So, address the improvement of social services—

3 See www.un.org/millenniumgoals

5036-CH00_INTRO.indd 2 5/27/08 1:10:30 PM Introduction: The Need for a New Approach to Rural Electriﬁ cation to Ensure a Positive Impact on Communities

where a similar approach could nonetheless be the general rural electrifi cation context within used with comparable end results. The approach which the Senegal example is being developed. was originally designed and fi rst implemented It introduces the concepts and key outputs of in Senegal, so the lessons learnt from this country the systematic and pragmatic approaches that will be used as an illustration throughout the are then developed further in the two following document. By sharing lessons learned, we wish chapters. to demonstrate that such an approach and Chapter 2 describes the systematic approach: the its related methodology can be used in many identifi cation and promotion of productive uses of other countries to increase impacts of rural electricity. It describes the methods developed electrifi cation programs. to identify and assess the expected gain of The paper is structured around two access to electricity in key sectors for a given complementary approaches: a systematic area. It identifi es the conditions and the type of approach and an opportunistic approach intervention required to induce potential users called the pragmatic approach. We will alternate to adopt electricity in their production process. a conceptual description of the methodology For each step, the Senegal case is used to provide and a case-specifi c illustration using the Senegal a fi eld-tested illustration. experience. For easier reading, the Senegalese- Chapter 3 describes the pragmatic approach and specifi c sections are included in shaded boxes in the instruments designed to implement it. It describes order to better distinguish them from the more how the Multisector Energy Component (MEC4) conceptual parts of the text. is structured to quickly boost the impact of More specifi cally, the paper is composed of access to electricity to end users. It explains how three chapters: such MECs are identifi ed, appraised, and built, Chapter 1 describes the background that led to in the context of the collaborative work done the design of the proposed approaches and introduces with all benefi ciary sectors. Again in this case, the key concepts. It explains why and how the the generic method is illustrated with actual notion of cross-sector collaboration was raised examples from the Senegal project. and became a central activity. It introduces

4 The MEC concept was initially created in Senegal and named PREMs in French for “Programmes Energétiques Multisectoriels.” See annex 4 for more details in French.

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The two approaches, systematic and pragmatic, An Increased Awareness that will be introduced later in this chapter and developed further in Chapters 2 and 3, were of the Necessity initiated by taking advantage of the confl uence of Working Across Sectors of three dynamics: The goal of overcoming the Although it may be relevant for specialists sector silo thinking that tends to bog down focusing on the physical implementation of the the energy sector; an ongoing restructuring rural electrifi cation drive to see connections as of the Senegal rural energy subsector; and the an end result, those in charge of the design of the existence of a team open to new ideas both programs ought to keep a broader perspective on within the Senegalese government and within the question. For the power sector, this implies the World Bank. Knowing the specifi c dynamics reverting to the original function of provider of that led to the design of the systematic and services to electricity users. pragmatic approaches helps explain how some Such users will be in other sectors such as of the choices were made, and can also show agriculture, health education, small enterprises, how such an approach may be replicated in and industries. Some of these sectors may different circumstances. be considered a national priority, while the The chapter begins by describing the move electricity sector itself may not be. Not being to cross-sector collaboration, then describes considered a priority sector, but rather a sector the reforms taking place in the Senegal rural providing services to the priority sectors, does electrifi cation subsector, and then introduces not mean that activities and investments in the the two approaches that are developed and power sector should cease or even decrease. discussed in subsequent chapters. But it modifi es the driving force behind rural electrifi cation by forcing its practitioners to look into the impacts of their work, rather than only at the number or the quality of the physical connections they provide.

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An Initiating Event that Provided care thus improving the fi nal health impact. High Level Buy-in: the Energy- In such a case, while the claim that delivery of Poverty Workshops health services has improved cannot be directly linked to the energy sector as sole source of The realization of the value of cross-sector improvement, the energy sector can nonetheless collaboration was at the core of the discussions play a central, if indirect, role in enabling such between delegation members to the “Energy improvement. for Poverty Reduction”5 workshops. These Workshop participants found that the multisector regional workshops, held in Africa demand for energy services is not necessarily between 2002 and 2004, brought together expressed as such by other sectors specialists. representatives from 20 countries with the joint It is often articulated as a request for outputs support of the World Bank and UNDP on behalf that are derived from the use of energy of the Global Village Energy Partnership. services. This generates a diffi culty because Senegal was the host of the second of energy specialists often know how to offer these workshops, which was attended by proper technical answers to energy-related delegations of seven West African Francophone issues, but if the question expressing the countries. Each of these country delegations need is structured differently, the risk for was composed of ten members. It included two miscommunication is considerable. or three specialists from the energy sector and For example, issues such as “we have a the other seven representing sectors that use problem with delivering babies at night” in energy in order to deliver their own services, the health sector or “we can only make one such as education or health for the social sectors milking a day because of heat” in the dairy and agriculture or small enterprises for the cattle industry are not necessarily expressed in productive sectors. an energy-centered manner. But such energy- These sector specialists (agronomists, doctors, centered questioning in the fi rst case could be, teachers, small private business owners, as well “What are the reliable, cost-effective, and most as civil servants) took great care to inform energy readily available energy technologies for lighting specialists of the end use of their respective our operating room, as well as the outside of the sectors’ energy needs and mulled over the best building for safety of personnel and patients, ways to meet such energy needs in a manner as well as heating water in minutes?” In the that would enhance their own end products. The second case, it could be, “How can we provide delegates to the workshop collectively became cooling (and possibly basic transformation) of mindful of how proper access and use of energy milk between daily collections with suffi cient services can contribute to the availability and reliability that increasing the yield of cows milk effi cient delivery of quality outputs in social and will not backfi re?” productive sectors. Note that in examples provided, while For example, the health impact of modern electricity could technically answer all needs, it energies may not be easy to isolate, but may not necessarily be the most adequate means fi tting to the precise energy needs of health to answer all three issues put forward in this specialists’ daily activities, rather than simply example (lighting, heating, and refrigerating). fi tting dispensaries with a standard electric Heating may be faster and more reliably connection, will enable them to deliver better provided by gas, for example.

5 See ESMAP “Proceedings of multi-sector workshops”, East Africa 2002, West Africa 2003, Central Africa 2003. See also annex 3 for more details.

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A Mind Shift, Reaching out to enables mutual understanding and optimizes Other Sectors to Help Generate interactions. Their Outputs From Political Will to In the case of rural electrifi cation, reaching across sectors enables energy specialists working on Implementation: The Multisector project design to start viewing the whole derived Committee in Senegal demand for electricity. The derived demand model6 The approach of bridging gaps between sectors shows that electricity is never in demand for was embraced by the Senegalese delegation itself, but for the outputs derived from the use at the West African regional energy-poverty of electric appliances such as lighting, cooling, workshop. Its delegates agreed to keep working and pumping. These energy-derived outputs together after the closing of the event. In 2003, are used, in turn, by other sectors as an input their unique commitment to the concept of in their productive processes to generate their cross-sector collaboration led the Senegalese to own fi nal outputs such as medical care, classes establish a multisector committee to identify taught, and product transformed. synergies between the energy sector and other Figure 1.1 provides a few examples of sectors. This committee, called by the French energy-derived outputs, the electric appliances acronym CIMES/RP was an informal working that produce them, and how other sectors can group until was it rendered “offi cial” in 2005 by use them in the production process of their own ministerial decree. fi nal outputs. A large part of the description in The committee was instrumental in the coming chapters focuses on the shaded area determining how to move from the concept in Figure 1, which lies after the production and of cross-sector collaboration to effective distribution of electricity but before the delivery implementation on the field. It looked into of other sectors’ outputs. Since such work on maximizing the productive and social uses of electric appliances and their derived outputs is electricity to increase the positive impact of generally out of either sector’s focus, it tends to electrifi cation programs in rural areas. At the be neglected. national level, the committee is composed of The electricity sector is in a unique position, representatives from the key ministries involved because once it has produced and distributed in rural areas (energy, industry, economic its electricity, it has formally produced its fi nal planning, education, fi nances, health, agriculture, output, but this output becomes useful only and fi sheries), as well as from associations of when consumed by an appliance and produces rural councils, business bureaus, the national the derived output. This is why the energy- utility, the rural electrifi cation agency (ASER), derived outputs usually remain in the area and several NGOs. of knowledge of the energy specialists who Formally attached to the ministry of energy, are familiar with electric appliances and their the committee holds sessions monthly or requirements in electricity, both in terms of quarterly depending on the workload and quantity and quality. Considering the energy- creates subcommittees when needed to address derived outputs helps both the energy specialists, a specifi c region or a specifi c group of sectors. who know which appliance can produce them, The multisector committee can also meet at the and the sector practitioners, who know which of regional level, with a similar structure to tackle these energy-derived outputs are needed as an a region-specifi c issue. It also convenes with input for their production process. In this way, subject specialists and meets donors or fi nanciers they share a common ground of knowledge that to support its work whenever necessary.

6 See Barnes, Domdom, “Rural Electriﬁ cation and Development in the Philippines: Measuring the Social and Economic Beneﬁ ts,” ESMAP 2002.

5036-CH01.indd 7 5/27/08 1:11:01 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS expertise Education sector and own inputs own intermediate outputs Education sector Class schooling Adult literacy Citizen education etc. Education Services Health sector expertise Health Sector and own inputs own intermediate outputs Birth assistance Vaccination contamination Non-cross etc. Health Services expertise and own inputs Cottage industry Cottage industry own intermediate outputs Clothes Metal tools Cooked foo din cans etc. Flour, Cottage Industry Commodities expertise and own inputs Agriculture sector sector Agriculture own intermediate outputs (through Consumption, Use of Services, Revenue Generation etc.) (through

Communicating Entertainment Learning Electronics Radio Video TV, Computers Cell phones Lighting Spaces, For reading Cooking By pressure Sterilization Bulbs High/Low voltage Final Impact on Households Shaping By pressure Soldering, Smelting Agriculture Goods and Commodities Agriculture Milk Dried fruits Raw goods Milk Dried Cash crops Poultry etc. goods Transformed Cheese Examples of Energy-Derived Outputs Refrigeration Small quantity, quantity, Large Spaces expertise Energy sector and own inputs Altering Grinding, Threshing Examples of Energy-Derived Outputs and Contribution to Other Sectors’ Outputs Other Sectors’ to and Contribution Outputs Energy-Derived of Examples Grid Minigrid Stand alone Stand Grid Minigrid Electricity (Kwh, connections) Productive equipment and tools Productive

High power Air conditioner Cooling tank Small Fridge Low power Autoclave Welder Sterilizer Press Thresher Pump Grinder etc.

Pumping Pumping, Drinking, Irrigation

Contributes Final Output Final Appliances Contribution

to Which Energy Which to Energy Sector Sector Energy of Examples Example of Energy of Example

Final Outputs Final

(Final Energy Services) Energy (Final

Other Sectors’ Other Additional Intermediate and Derived Outputs Derived and Intermediate Additional Figure 1.1

5036-CH01.indd 8 5/27/08 1:11:02 PM Maximizing the Developmental Impacts of Rural Electriﬁ cation Programs: Two Approaches Building on Cross-Sector Cooperation

The multisector committee provided a reduction. Public policies, notably in the areas strong support to the defi nition and the practical of taxation and investment, do not provide implementation of the systematic and the suffi cient incentives and handicap growth by pragmatic approaches. It directed consultants slowing down private-sector development. in their identifi cation of sector needs and in the As a result, close to 60 percent of the national detection of possible cross-sector cooperation; Senegalese population is considered to be below it opened doors to identify and provide access the absolute poverty level,7 and this number can to the relevant specialists within each sector go up to 90 percent in some rural areas. In the and contributed to problem solving whenever electricity sector, it is estimated that less than possible. Given their duties and affiliations 4 percent of the villages in Senegal are electrifi ed, to their respective employers, the committee and that less than 30 percent of the population members were not expected to do the core of the of the electrifi ed villages effectively have access project identifi cation work; such responsibility to electricity. fell on the consultants. A new push toward poverty reduction was Such a multisector committee would have started in 2002 with the creation of the Senegal been effective in the context of the former Poverty Reduction Strategy Paper (PRSP, or vertically integrated structure of the power DSRP in French). The pillars of Senegal’s PRSP sector, but the reform undertaken by the are: (i) wealth creation; (ii) capacity building Senegalese authorities created an unprecedented and social services; (iii) assistance to vulnerable window of opportunity to test innovative groups; and (iv) implementation of the PRSP ways to apply a cross-sector approach to rural strategy and monitoring of its outcomes. electrifi cation. Earlier Attempts from the Energy Sector to Contribute to Poverty Reduction The Context of the In its early efforts to reduce poverty and redress Reform of Rural imbalances in development, the government of Senegal (GoS), with the assistance of various Electrifi cation in Senegal donors, undertook numerous initiatives aimed National Background to the at bridging the rural/urban energy divide Senegalese RE Program through the development of decentralized and renewable energy systems. Poverty Reduction in Senegal Several pilot projects, using both renewable Starting with the devaluation of the CFA franc (primarily solar) and conventional energies in 1994, Senegal undertook a successful series (grid extension, small diesel generators) and of economic adjustments that led to a period testing different technical and institutional of historically high growth rate. However, arrangements were implemented. Most of despite this good performance, Senegal still these pilot projects had positive results. They has a signifi cant portion of its reform agenda to confirmed the demand and interest of rural meet. The economic growth after the devaluation populations for consumption of energy services, had only a small impact on poverty especially as well as the interest of local and foreign private in rural areas. Income inequality is high. Social entrepreneurs to design business models for indicators—primary education, infant and delivery. Finally, it proved the technical and maternal mortality, access to clean water—still commercial feasibility of the new technologies lag behind income indicators. The lack of tested at the pilot level. key infrastructure—water, electricity, and However, these pilot operations could not transport—handicaps development and poverty be replicated at the larger scale of the whole of

7 In 2001, the last year when the poverty levels were effectively measured for the PRSP, 57 percent of the population nationwide was below the absolute poverty threshold at which an adult cannot meet the minimum nutrition levels of 2,400 calories per day.

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Senegal; were not fully taken up by the private establishment of rural electrifi cation concessions sector; and were not able to prove their long- allowing small-scale electrifi cation projects and term sustainability. Some reasons were the lack the application of technological neutrality in rural of a coherent RE strategy and the appropriate concessions. institutional and legal set-up, as well as the To be conducive to a truly successful public- limited availability of public fi nancing and a low private partnership, the GoS established an level of donor interest. ad-hoc institutional, legal, and regulatory Strict sector compartmentalization has framework. It removed the monopoly from prevented the development of a supportive the national utility, SENELEC, for providing environment that would nurture the electricity to rural areas, transferring this development of the productive and social use responsibility to private sector investors and of electricity. In fact, projects and programs operators. This created a favorable environment implemented by other sectors have suffered for a variety of private players to play an effective from the lack of appropriate and timely delivery role in rural electrifi cation, and thus increased of energy services. As a result, the previous the implementation capacity. To overcome the rural electrification operations only had a barrier of high up-front connection fees and very limited impact on rural poverty and have installation costs, and to ensure consistency with appeared largely disconnected from PRSP’s rural households ability to pay, the GoS also objectives. allowed the creation of a new tariff schedule for electricity (monthly lump sum payment) that The New Senegalese Rural incorporated prefi nancing of connection costs, Electrifi cation Strategy internal installation, and effi cient lamps. The government chose to resort to rural Learning from past experience in Senegal as electrifi cation concessions as the main vehicle well as in other countries, GoS has developed to implement Senegal’s rural electrification and adopted a new RE strategy that relies program. For the purpose of implementing on two strategic partnerships: a private- the RE program, the GoS divided the country public partnership (PPP) and a multisector into 18 geographical areas, the concessions8 partnership. (see Figure 1.2 below). These concessions were The PPP acknowledges that to scale-up rural designed to be compact and large enough to be electrifi cation in an effi cient manner requires the viable and attract large private sector players. participation of the private sector, which can Each concession has a minimum potential of increase the implementation capacity and bring 30,000 connections, defi ned as the estimated innovative ideas, new skills, and additional number of nonelectrified rural households. fi nancing. The multisector partnership aims at The GoS plans to contract these concessions maximizing impacts on rural development and to the private sector under a competitive and poverty reduction. transparent international bidding process with selection criteria maximizing the number of Key Policy Decisions that Support benefi ciaries. the RE Program In addition to the 18 primary concessions, To foster private-public partnerships, the the PPER program includes several multisector government of Senegal adopted a series of energy components (MECs9) to enhance the overarching policy decisions, including the linkages between electrification and small

8 The concessions are also called “Programmes Prioritaires d’Électriﬁ cation Rurale.” PPER. 9 The concept was initially created in French for Senegal as Programmes Energétiques Multisectoriels (PREMs).

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Figure 1.2 Map of Rural Electriﬁ cation Concessions

business productivity and improved social community-based associations, and private service delivery. These MECs will be discussed entities). To be eligible for a waiver, ERIL projects in detail in Chapter 3. have to be locally initiated, geographically Since it is expected to take more than limited (usually to a small area or a village), 10 years to award the 18 concessions to private and not part of an area targeted for rural operators, some communities facing socially electriﬁ cation in the short term. sensitive situations may require access to Finally, against usual practices, technology electricity without waiting their turn, as neutrality will be enforced for rural concessions. designated by the overall electriﬁ cation plan. To This means that, to the extent that they respect address such situations, small-scale concessions the minimum service requirements set in the (called ERILs10 in French) can be awarded tender documents, bidders for the concessions with a waiver from the larger concessions will be free to choose the technology—either when too long of a waiting period may not be grid extension, mini-grids or off-grid individual socially acceptable. Such small projects will be solutions—used to achieve the quantitative developed by capable local communities and objectives set in the contract documentation. stakeholders (local governments, consumer or To reinforce incentives for optimal mix of emigrant associations, village groups and other technologies, a GEF grant will be used by the

10 ERIL is the French acronym for “Electriﬁ cation Rurale d’ Initiative Locale.”

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GoS to level the playing fi eld for renewable A Rural Electrification Fund (FER) also technology. It will fi nance technical assistance was created and funded from resources and capacity building activities, and enable the provided by the national budget and as well as internalization of positive global environmental international donor organizations. Mobilization externalities through the use of some targeted of these resources is subject to specifi c and strict investment subsidies. procedures. Within FER, special accounts were opened by ASER allowing a separation of funds The ASER, the FER, and the Private Sector: allocated to investment in concessions from Key Players that Support the Drive for Rural funds allocated to other supporting activities, Electrifi cation an easier tracking of sources and disbursements The GoS has created a single, national, and of funds (national budget, donors, etc.) and autonomous entity, the Agence Sénégalaise de to meet some donors’ specifi c requirements. l’Electrifi cation Rurale, or ASER, to implement the Over time, it is envisioned that the fi nancing rural electrifi cation program. The agency was instruments may comprise direct subsidies; created in 1998 through the Electricity Reform refi nancing; guarantees backed up by the FER Law, and its principal mission is to promote or other instruments; interest-relief accounts; rural electrifi cation by providing the requisite and specifi c funding facilities for ERIL’s set-up technical and fi nancial assistance pursuant to costs. However, in the initial project phase, only the energy policy formulated by the minister of the subsidy account and the funds for ERILs will energy. ASER now has 25 staff members, and its be activated by ASER. capacity is being reinforced as part of the World Finally, the private sector is expected to Bank funded project. play a central role in the implementation of the More precisely, the missions of the program, and great care was given to ensure ASER are: this. Throughout the project preparation phase, special emphasis was placed on maintaining • Developing services relative to the RE; close contacts with private-sector stakeholders providing project evaluation, technical to assess their perception of the project and financial, and jurisdictional packaging their understanding and acceptance of its support; review of innovative technologies institutional, legal and regulatory framework. and of technical services to RE material and Several workshops were held in Dakar in equipment 2003, 2004, 2005, and 2006 that registered • Providing information to all partners on the attendance far beyond expectations. More options and available alternatives relative to than 200 representatives from over 60 fi rms, RE projects including 14 international fi rms, attended these • Providing supervision on behalf of the workshops. Ministry of Energy for the rollout of rural electrifi cation concessions Mechanisms for the Award of Concessions • Designing the concessions, supervising, and and the Support to Electrifi cation undertaking all steps for their attribution The award of concessions to private operators and providing required assistance to the is done internationally and competitively. concessionaire selected The selection criteria maximize the number • Managing the fi nancing of rural electrifi cation of beneficiaries, or connections, for a given by setting fi nancing policy and mobilizing amount of subsidy. The concession agreement the support for funding partners gives the concessionaire the right to generate, • Monitoring and evaluating the distribute, and sell electricity throughout the implementation of rural electrification concession area for a period of 25 years. This and checking the quality of equipment, right is exclusive when the chosen technology controlling the safety of operations, and is grid extension—because grid is a natural arbitrating confl icts among stakeholders monopoly—but is not when the concessionaire

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chooses individual photovoltaic (PV) systems the operation and maintenance costs, delivery or other technologies. costs, and replacement costs of systems, as The bidding process is designed to be results well as at least 20 percent of initial investment oriented. The concessionaire is chosen using a cost, assuming a 20 percent rate of return. two-stage international competitive bidding Therefore, the concession agreement requires the (ICB) process with prequalifi cation. The fi rm concessionaire to contribute at least 20 percent that offers to provide the maximum number of the total investment costs. This financial of connections within the first three years, commitment of the concessionaire will ensure for a preset subsidy amount, is awarded the service delivery throughout the concession concession. Such criteria maximize private funds term, since consumers’ monthly payments committed for a given subsidy and motivate remain the source of return on investment for the bidders to increase their contribution and the concessionaire. serve more clients. It also encourages bidders to seek a lower unit cost as a way of increasing the Progress in the Implementation number of clients served with a given amount of the RE Concessions of public resources available. The bidding process for the first concession In addition to the core investment subsidy in Dagana-Podor Saint Louis, Senegal, was allocated to the concession area, an additional launched in early June 2006 by ASER under subsidy, which targets exclusively renewable Phase I of an IDA-GEF project. The private sector energy solutions and is fi nanced under a grant welcomed the OBA subsidy tender, and eight received from the Global Environment Facility fi rms formally applied for prequalifi cation, either (GEF), is also made available to level the playing on their own or in consortium with other fi rms. field for renewables. The selection criteria These results were particularly encouraging, remain the maximum number of connections since these firms represent the full range of independently of whether or not bidders claim private participants being targeted by the PPER the GEF subsidy. To overcome the barrier of program: local private sector (EQUIP+ and CSI- high up-front connection costs, and to leverage Matforce), private sector from the region (ONE private fi nancial resources and ensure the quality from Morocco), as well as international fi rms of connections, the concession program uses (Electricite de France (EDF) and Total Energie output-based aid (OBA) type of capital subsidies. Dévelopement from France, and the National Under OBA subsidies, a signifi cant part of the Rural Electrifi cation Cooperatives Association subsidy is disbursed only after the connections (NRECA) from the United States). (including internal installations) are made and Out of the four applications received for verifi ed. A full ex-post OBA disbursement was prequalifi cation, two were prequalifi ed—ONE not deemed feasible, since it would entail a from Morocco and a consortium of EDF, Total high up-front capital fi nancing requirement on and CSI-Matforce. Final bids were received in concessionaires. In addition, it was determined August 2006 and the evaluation process was that private bidders would not be willing to completed in November 2006. take such a financing risk without a higher The winning bid led to a dramatic increase amount of subsidy. Hence, it was decided to in the number of connections compared to disburse the OBA subsidy in tranches following what was initially expected based on consultant predetermined milestones reached by the service simulation. The winning bid, by ONE from provider. However, to ensure that effective Morocco, proposed to more than double the connections happen, the fi nal 40 percent of the minimum 8,500 connections set in the tender subsidy is being paid only after the connections documents with a target of 21,800 connections. are made and verifi ed by ASER. To achieve such a fi gure, the winner brought The business plan model developed during US$9.6 million of private fi nancing (equity and the concession design phase has demonstrated commercial loans), which is far higher than the that the monthly user payments will cover 20 percent expected. Average cost per connection

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was estimated at US$725 and the average within the health and education sectors—to estimated subsidy per connection requested was ensure collective gain as well as to promote around US$286, representing 40 percent of total productive uses of electricity for income cost, far less than originally expected. generation that support gains at individual level. Around one-fourth of all connections will The productive uses of electricity—defi ned here be achieved through individual PV systems, as uses of electricity that support any activity that lowering the incremental GEF subsidy to only will generate revenue to the user—are the center US$1.03 /Watt peak or “Wp” (US$400,000 of this document. The uses of electricity that GEF subsidy for 389,000 Wp). These results are here defi ned as productive can vary widely demonstrate that the combination of international and are subject to interpretation. For example, competitive bidding with OBA can leverage lighting will be considered nonproductive if it significant amount of private resources and is used in a household to go about daily life at potentially deliver far better results than a night, but will be productive if used by a small traditional non-OBA-based rural electrifi cation grocer to attract customers after dark or if the approach. same household uses it to sew clothes to be sold The PPER program plans to launch at at a market. least three new concessions every year. The Each time, depending on the dominant prequalifi cation process for the next wave of economic activities found in regions affected by concessions was launched at the end of 2006, the rural electrifi cation project, a different group with two concessions being funded under of sectors will be targeted in order to identify Phase 1 of the IDA/GEF project and one under the most promising activities for livelihood an African Development Bank (AfDB) loan. improvement and social development. It could AfDB and KfW, the German Cooperation be small businesses in one region, craft in Agency, have committed 14 million euros and another, and support to agriculture and food 8 million euros, respectively, to finance two transformation in a third. additional PPER concessions each. The Systematic Approach: Two Approaches Identifi cation and Promotion Contained within the of Productive Uses of Electricity Rural Electrifi cation The systematic approach analyzes in a specifi ed rural area, the technologies used in the current Strategy and Targeting production chains. It identifi es the bottlenecks to Increase the Impact and sees whether the use of electricity can on Rural Communities contribute to diminishing or removing the limiting factors. Although innovative in many respects, the It is systematic in the sense that it entails Senegalese rural electrifi cation strategy did not a thorough review of all productive or social specifi cally address the issues of limited impact activities taking place in a designated area and on income generation and of lack of cross-sector requires substantial interaction with the anchor cooperation. Therefore, there was a risk that its sectors to ensure a good understanding of their fi nal impact on rural communities would end up specifi cities. being limited. To avoid such outcome, the work Although the methods are quite generic, was expanded to generate a demand for social the results will depend on each area studied. and productive uses of electricity in addition The implications for prioritization will also be to basic household uses that generally develop tailored to the specifi city of each area. The study following such rural electrifi cation project. will yield a list of activities that can gain from This meant identifying, assessing, and access to electricity. It uses the estimation of the promoting social uses of electricity—primarily magnitude of the gains—which vary according

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to each activity in each region—to prioritize the most of the identifi cation and preparation work level of effort to be put in promoting the use of has already been undertaken. In this case, the electricity for each type of activity identifi ed. magnitude of the gain, while important, matters less than the feasibility and rapidity of the The Pragmatic Approach: implementation of the identifi ed projects. Collaboration with Other Sectors’ Although quite different in design, scope, and targets, the systematic and pragmatic Key Programs via the Multi- approaches are complementary. The former Sector Energy Investment provides the frame of reference for potential Projects (MEC) users of electricity for productive purposes; it The pragmatic approach is opportunistic in convinces them of the role and value of investing the sense that it aims at taking advantage of in electricity-using equipment or appliances to preexisting opportunities in a given sector or improve their productive process. The latter in a specifi c rural area. It is implemented when provides an early case study with tangible real- conditions are ripe for a quick win project or an world results within a quick time frame. The two activity that would rapidly obtain large sectoral approaches were developed in Senegal, which gains from access to electricity. will be used as case study in this report, but they It is pragmatic in that it focuses on existing are applicable to almost any rural electrifi cation projects or programs in other sectors where project.

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As was briefly presented in Chapter 1, the A Generic Overview of systematic approach serves to develop an accurate picture of existing productive activities the Systematic Approach in order to direct energy investments in a manner to Promote Productive that will serve the goal of rural development. To Uses of Electricity this end, a multi-step approach is described in this chapter. It is fi rst explained in a generic Using the collaborative links established fashion and then illustrated by using the case with sector practitioners (see Cross-sector of the Senegal experience. Collaboration in Chapter 1) a series of data This chapter will focus on electricity. Other gathering and fact checking activities are sources of energy might provide as good undertaken both at central level and in the or better outputs depending on the type of field. This is done using sector specialists activity considered and in such case, this will networks, ministries and offi cial agencies, local be acknowledged and a swap to electricity government as well as NGOs resources. This will not be advocated. All types of sources of data gathering enables the decision makers to electricity are considered, whether it is provided understand the socioeconomic context within by a central grid, a mini-grid, or self-generated which the decision to bring access to electricity such as generators, solar, hydro, or wind. The is made and how it may contribute to increased source of the electricity matters less than how it economic activities and incomes in a given area. is used and how adequate it is to meet the end It is recommended that a dedicated consultant be users needs. hired to undertake or coordinate such activities, More specifically, the focus will be on because as one ventures into the periphery of productive uses of electricity, setting aside stakeholder knowledge, the risk of losing focus household uses as well as social uses for can be high. which a nonproductive label may not be fully The systematic approach to the identifi cation accurate but is widely accepted. The focus is and promotion of productive uses of electricity on productive activities primarily for their is to be implemented in fi ve key steps: revenue generation aspect, which is highly (i) Identify the productive activities and the needed in rural areas in order to move beyond sectors in which they currently take place a subsistence economy. However, a similar in the project area. approach could be undertaken in the case of (ii) Carefully analyze the production processes social use of electricity, looking into means to involved within the region of interest. increase their impact. Identification of the existing limitations

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and areas of possible improvement of these crops, food crops, fresh market crops, tree crops, processes. fi shing, timber, and livestock farming. Linked (iii) Analyze the role electricity can play and to these are cottage industries and home-based what equipment is required. activities in the small industry and services (iv) Analyze the technical feasibility and sectors and their subsectors. These could economic and social viability of the include agriculture products transformation electrically based solution proposed. such as bakeries, drink and juices making, dairy (v) Implement a promotion campaign to products, meat and fi sh transformation, tannery, communicate the gains that can be obtained. and woodwork. Support to production activities Based on the results of the earlier analysis, such as production and repairs of equipment, the campaign should target specifi c energy building, fertilizers and pesticides, and services users and promote a specifi c use of electricity to households and small businesses, for example, that can provide them with clear benefi ts. transport, markets and grocers, clothing, and restaurateurs could also be included. The fi rst two steps usually lay outside of All of these sectors and subsectors productive the usual sphere of knowledge of most energy processes are intertwined, making it diffi cult specialists, but they are nonetheless central to a to identify each activity’s contribution to the good identifi cation and analysis of the following whole and how energy can fi t as an enhancing steps, which are more energy-centered. tool. Furthermore, the range of knowledge of the sector specialist may only span a few of Step 1: Identify the Type the activities in consideration, and this may of Productive Activities Taking complicate the global review. One way to Place in Each Sector and Subsector address the complexity is to use the “Sector- System Matrix,”11 with examples shown in of the Targeted Rural Areas Table 2.1 and Table 2.2. Having identifi ed the region where an energy- The Sector-System Matrix shows the different related project is to be implemented, the rural commodities produced within each subsector. areas are scanned to identify major sectors and The rows list the different tasks required to subsectors. The mining sector, energy generation produce and transform these commodities into facilities, and large industries should be set fi nished products. Using a simplifi ed format, aside, since they are usually either self-suffi cient the matrix can provide an overview of the or large enough to be provided for by dedicated subsectors present in a region studied and of projects. the commodities produced in this region. A In rural areas, the regions are characterized more complex format of the matrix, would by the specifi c agricultural systems that adapt list carefully for each commodity each step of to local conditions, and by the related cottage activity required of its production and the key industries or artisan networks supporting players involved. productive activities. It is likely that most of It is useful to note that at that stage, identifying the other sector activities will revolve around and understanding the activities for which these various agricultural systems, which electricity does not yet bring a contribution emphasizes the importance of establishing a good is as important as for the ones where it does. collaboration with agricultural specialists. This is because that situation may change, and Examples of productive sectors found in rural understanding the full linkages can help avoid areas start with agriculture, which, depending electric investments that may seem useful but in on the area, may include subsectors such as cash fact would not improve the overall production

11 Adapted from “A Strategic Approach to Agricultural Research Program Planning in Sub-Sahara Africa,” Boughton et al., MSU International Development, working paper 49, 1995.

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Table 2.1 The Sector-System Matrix SECTOR X, in REGION A

Subsector Subsector COMMODITIES, TASKS and Commodity Commodity Commodity Commodity Commodity PLAYERS 1 2 3 4 5 Etc …

Task 1

Task 2

. . .

Task n

process. It may be, for example, that a specifi c specialists, local administrators, practitioners’ step of the process to produce a commodity could representatives, equipment producers, retails see its productivity greatly improved by using and grocers, and cottage industries. Working electricity but that investing in electricity would with rural development experts during this not make sense because the step immediately initial mapping exercise might help the energy before suffers from a non–electricity-related specialist keep focus. bottleneck. Although systematic, the approach does Step 2: Analyze the Production not necessarily need to be exhaustive. There Process for Each Commodity is a trade-off to be considered between the transaction cost of analyzing one additional and Identify the Areas of commodity or subsector and the benefit Improvement expected from the information generated Once all the productive activities taking place in terms of economic development. Priority in a targeted project region have been identifi ed should be given initially to existing or potential and mapped out by sectors and subsectors, the activities that are already acknowledged to be of following step is to analyze in detail each tasks of major importance for the region. The simplifi ed the production process in the subsectors that are version of the matrix maps out the activities active in the region. Depending on the similarity undertaken in each region and can help spot of productive tasks required, the analysis can be gaps (lack of one type of activity in a region done for groups of commodities by subsectors that could create a bottleneck) and identify (the threshing activity is common to most cross-dependency (between corn subsector and cereal plants for example) or commodity by livestock production, for example). commodity (watering needs differ among cash In addition to the agriculture system matrix, crops for example). Table 2.2 gives a theoretical other system matrixes could be developed illustration of a possible output in the form of a to cover the service industry and the cottage developed Sector-System Matrix for Agriculture industry, as well as nonproductive sectors, in an imaginary Region A. such as health, education, and administrative The matrix is developed both at the central services, if relevant to the goals of the project. and regional level in cooperation with sector At the end of this initial step, the productive specialists. It provides the list of individuals activities and their key outputs should be known, and entities involved in the tasks to produce and by extension, a list of the central stakeholders the commodities. Sector specialists will be to involve in the discussion should emerge. Such able to point out shortcomings or bottlenecks a list might be quite extensive; including sector in the productive activity, as well as the initial

5036-CH02.indd 19 5/27/08 1:11:41 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

explanation of it. Comparing the best-case but may be of little use if upstream tasks or matrix (with well functioning subsectors and commodities remain constrained. The review of a full set of tasks implemented) with the fi eld the production process might also help identify matrix (the reality as seen in the field) can new opportunities to exploit complementarities pinpoint areas of improvement on which the or similarities between commodities’ production study could concentrate. processes. For example, the illustration in Table 2.2 shows that the dairy and the river fisheries Step 3: Assess When Electricity only cater to local markets and do not provide Can Contribute to Potential transformation, transport, and storage. Looking into it, by fi eld investigation and interrogation Gains; Identifying the Required of the key players might provide different Equipment reasons explaining this. The situation could be Having identifi ed and investigated the areas due to lack of transportation infrastructure due of possible improvement, the nature of the to remoteness, coupled with a lack of market bottlenecks or ineffi ciencies should be examined. for the transformed commodities, and thus no Although some areas of improvement may lay transformations effort is deemed necessary. beyond the reach of the energy sector, in many Another possibility may be that a transportation cases access to electricity may bring increased network may exist (as for the peanut commodity) value, added competitiveness, improved quality, but not be used because no transformation of improved productivity, or even the creation of the raw commodity occurs, thus diminishing a new activity altogether. Thus, using the areas the relevance of the commodity to the outer of improvement identifi ed in collaboration with markets. This may be because the untransformed sector specialists, a closer look will be given to the commodity itself is not transportable. ones where electricity can provide improvement. In the first case—no existing transport During this step, energy specialists should take infrastructure—the fix may be well beyond back leadership of the process, which had been the reach of the energy sector and investing left to the other sector specialists during the energy resources may be wasted. In the second two previous steps. It is the energy specialists’ case—of the existing but unused transport technical knowledge that will be required in infrastructure—while the energy sector may identifying the level of expected gains, the type not be the primary responder to the problem, of electricity desirable, and the list of possible it may contribute to the solution. For example, equipment needed. Equipment refers both to the energy may help provide refrigeration or icing electricity generation or distribution equipment to provide conservation and enable transport before the meter and the productive equipment of fi sh to higher-valued markets, or it could using electricity after the meter. provide heating to kill bacteria in collected In many developing countries, for instance, milk, refrigeration for preservation, and further the harvesting and the initial processing processing into cheese or another product. (primarily threshing) can take up to 40 percent The analysis of the production process is also of the total time required for the commodity an occasion to review the cross-dependencies production. Often, these tasks need to be done in of the various commodities in the area of a short time frame, during which the commodity study. For example, would the local cottage is ripe. The lack of human resources creates industry be able to provide suffi cient nets and a bottleneck that can reduce the total output boats for the fi shermen if the demand for fi sh and increase losses dramatically. Although increased following downstream processing and the capacity of electricity to contribute to the opening to export to other markets? Investment harvesting is limited, its involvement in the in electricity may help boost productivity primary processing can free-up valuable human

5036-CH02.indd 20 5/27/08 1:11:42 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach

Table 2.2 Illustration of Sector-System Matrix, for Agriculture in Region A

COMMODITIES, AGRICULTURE SECTOR, REGION A (in lines) TASKS, (in Livestock Fishery Other columns) and Cash Crop Subsector Subsector Subsector Subsector PLAYERS, (in cells) Cotton Peanuts Etc. Dairy Meat Etc. River Fish Shellﬁ sh Etc. Etc.

Investment Farmers Nets, boats (seeds, blacksmiths, making, material, heads) grocers, cottage cooperatives industries, ﬁ shermen

Preparation Farmers, (tillage, tools, cooperatives fertilizer)

Inputs (seeds, Grocers, Feed feed) farmers providers, farmers

Caretaking Farmers, Farmer, (water, material, utility, local veterinary, pesticides) government aid groups

Harvest (crop, Farmers, Farmer, Fishermen, ﬁ sh, milk) cooperatives health health authorities, enforcement equipment providers

Initial Farmers, Only No further processing coop, minimal processing: (threshing, family, small processing: Sold live, icing, etc.) cottage Family, dried or industry small salted cottage industry

Transport and Trans- storage portation, cooperatives

Transformation Small (milling, cooking, cottage drying) industry, coop

Resale (Grosser, Direct in Direct in markets retail) markets markets

Intermediary Cottage consumption industries (use by another sector to produce its own goods)

Notes: The text in the shaded cell provides the list of key players or stakeholders that will have an inﬂ uence in how the task is performed and could provide clues on shortcomings or bottlenecks in the productive activity.

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resources and thus increase the overall quantity Thus, it is important to establish the link of commodity harvestable. Hence, the gain between the expected gains identified and brought by electricity would be the sum of the the behind-meter type of equipment or tools gain in time and quality of the processing, as well necessary, and then match them with the type as the gain in additional harvesting rendered of electricity source required. A variety of possible by the reallocation of manpower to equipment and tools will be identifi ed, some harvesting from processing. able to be produced locally, some needing A new matrix called “Electricity Contribution to be imported from urban centers or from to the Commodity Value Chain”12 may be abroad. Some production processes may need produced and used to organize the outputs of to be reorganized to make the best use of the this step. Table 2.3 provides an example, referring new equipment; some others may benefi t from to the possible contribution of electricity to the cost savings or increased speed with minimal peanut, dairy, and fi sh during the transformation disturbances, such as in the case of switching a task previously identified as missing or thresher from diesel to electric. incomplete in Table 2.2 for the theoretical Region A. This is given as a nonexhaustive Step 4: Establish the Economic illustration, as other steps and commodities Viability of a New Production could also benefi t from use of electricity in Table Process and of the Conditions 2.2. Table 2.3 provides the link between the commodities transformed and the intermediary for Its Implementation or fi nal products. It outlines the type of generic Following the completion of the earlier step, equipment required for this transformation, one should have gained a good overview of the as well as the required type of electricity contribution of electricity to some parts of the source (that will later need to be matched with production process. The current step will build available sources) and the potential providers the case for an adaptation of the production of equipment available in the region of study. It process, primarily by identifying the economic also provides a preliminary listing of the type of and financial gains expected from a switch support that will be necessary to encourage the to electricity. This step is also an occasion to acquisition, the correct use, and maintenance examine the competitiveness of electricity versus of the equipment by potential users as well as other production process and eliminate projects a listing of expected benefi ciaries and possible where a feasible alternative brings cheaper, providers of such support. easier, or better results. Great care should also be Before the meter, the type of equipment and taken when the electricity option is considered source of electricity should be evaluated both superior for social or environmental reasons but from availability and economic standpoints is not directly fi nancially viable. In other words, as well as from the standpoint of the type the aim is to advocate the benefi ts of electricity, of need in power and reliability. Although but not at all costs. renewable energies may provide practical This step should entail thorough field answers in many cases and seem logical due to work to collect production costs, labor costs, the remoteness of many project sites, they may intermediary input costs, market resale prices of not provide suffi cient power to be used with the commodity, and the processed product level, many productive tools and equipment. Solar, as well as market absorption capacity both at the hydro, wind, biomass, minigrids, and central region level or the nearby urban areas. There are grid electrify provide different levels of power, many thorough guides on the subject of creating quality, and cost-effectiveness that add up to business plans, so this will not be detailed much different electricity services for different tools further here. However, a preliminary level of and equipments. information should be created to encourage

12 Adapted from “A study to increase productive uses of electricity for in rural areas”, EXA Development, Senegal, April 2005

5036-CH02.indd 22 5/27/08 1:11:43 PM Identifi cation and Promotion of Productive Uses of Electricity: A Systematic Approach ow for equipment for purchase. support to local develop of producers equipment. help to users of with investment capacities. initial counter fl cash negative Example of of Example Support Required – Financial support – users of – Training and Training – training Business – Support to – ciaries and ciaries ciaries: Fishermen industries Equipment providers governments Benefi Support Providers Benefi Farmers/ – – Cooperatives coops – Women Small cottage – Support providers: – Cooperatives – institutes – Training providers – Finance – Unions centers – Research – Donor programs Local – – Utilities Local industries, industries, Local groups. International Examples: Temdo, Tanzania France Euromat, India Devraj, Local industries, industries, Local groups. International Examples: Marinas, Philippines India Jyoti, USA Lehman, India Narang, Brazil Petersime, industries, Local groups. International Examples: Udyog, India Senegal Sismar, Type of of Type Electricity Providers Equipment Grid, Mini Grid, Diesel set Grid, Mini Grid, Diesel set Grid, Mini Grid, Diesel set Mini Grid, Diesel set. Grid, Mini Grid, Diesel set Grid, Diesel set Grid, Mini Grid, Diesel set Type of Equipments sacking Sifter / Sifter / Shredder Autoclave / Sterilizer Churner / Skimmer / Packager Roaster / Roaster Grinder Masher- squeezer sh DrierGrid, Solar, our Transformed Transformed Good (Homogenized (Homogenized milk, yogurt, butter) cheese, Peanut paste or paste Peanut butter oilPeanut Sheller / Fish fl sh fi Frozen storage Cold Grid, Mini ransformation for Peanut, Fish, and Dairy Commodities Peanut, for ransformation Example of Electricity Contribution to the Commodity Value Chain: Case of the Task the Task of Chain: Case Value the Commodity to Contribution Electricity of Example T Commodity Peanut peanuts Salted / Roaster Fish Dried fi Dairy Dairy products Table 2.3

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practitioners to look further into the option of The work undertaken during this step should using electricity for their productive activities. provide a helpful tool to rural electricity projects Table 2.4 provides another theoretical managers in prioritizing the localization of new example of calculations and matrixes, using electricity investments. It may also be helpful the peanut commodity that could be used to to task managers in charge of orienting the engage stakeholders. It provides calculations electricity-related investments in a fashion that of the expected cost reduction when moving favors productive uses of electricity. Although from a baseline production process to the use this may be only one of multiple variables to of electricity. In this example, cost reductions consider, using productivity increase or level of have been calculated for the three tasks where cost reduction for each task may help pinpoint a potential gain had been identified in the areas where there are clusters of tasks that could earlier steps. In most cases, the baseline used to benefi t from a new electricity access or identify calculate the cost reduction was obtained from tasks and commodities that would benefi t most fi eld surveys or was calculated in cooperation from a selective access to electricity. with the given sector specialist. The information from Table 2.4 is to be used as a discussion basis with farmer unions, Step 5: Design and Implement cooperatives, and other stakeholders to Promotion Campaigns Tailored discuss the option of investment in electricity and productive equipment using electricity. to Each Type of End Users Depending on the level or receptiveness of the Prior to this fi nal step, the economic viability of stakeholders, further economic analysis will the change of production process to integrate then be undertaken, including valuation of electricity uses should be established; and sector volume increase and quality improvement that stakeholders should be convinced of the interest are not included in the current calculations of of the approach or at least view favorably cost reduction. trying it in a given area and subsectors. Then The primary focus is placed on these a promotional campaign or road show can be fi nancial and economic assessments because contemplated. Depending on the most effi cient they will indicate the cost recovery capacities of medium, such a campaign could be tailored the electricity users, and therefore their capacity to target subsectors, tasks, regions, or a mix to repay the investment, as well as face the of the three. Table 2.5 gives an overview of variable costs. This, in turn, will determine the potential stakeholders that could be engaged certainty of payment for electricity and therefore in the design and execution of the information the level of risk that electricity providers will campaign. bear for electricity purchase and investment in Not all stakeholders listed here are relevant distribution network. Some attention should to all information campaigns and it may be that, also be paid to the other nonfi nancial issues to keep a campaign well-focused and relevant to and conditions that will contribute to the end users, the number of stakeholders involved effective success of a production process change. can be narrowed to these immediately relevant Farmers’ training and cottage industries on to the subject discussed. effective equipment choice, use and maintenance Take, for example, the case of an information are examples. Other issues to keep in mind campaign for the use of a “jigger-screener” could be access to adequate fi nancing sources, electric machine. In the peanut commodity knowledge of market demand and competition, (see Table 2.4), such a machine was found transportation infrastructures, availability of to reduce costs of 76 percent from a manual trained operators, reliability of input providers, baseline by separating residues from the existence of support groups, government usable pieces while increasing the quantity incentives, and so on. processed daily and improving the quality of

5036-CH02.indd 24 5/27/08 1:11:44 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach cient rainfall, baseline baseline cient rainfall, Net cost against rainfall baseline. baseline. rainfall against cost Net if insufﬁ But, pumping, manual or diesel becomes of decrease cost is a net thus there respectively. percent, and 20 30 in increase baseline: rainfall Nb: With investment justify also yield may percent 47 Reduction electric engine manual to From percent 76 Reduction electric engine manual to From percent 76 Reduction electric engine manual to From percent 99.9 reduction Cost semi-industrial manual to From electric engine Estimated Gain in Percentage Gain in Percentage Estimated with baseline) (Compared If from rainfall baseline: baseline: rainfall If from Fc/h 55 cost of Increase manual baseline: If from 21 Fc/h cost of Decrease baseline: diesel If from 14 Fc of costs of Decrease Machine 40 Fc/ton Fc/ton Manual 75 reduction: Cost Fc/ton 35 Fc/ton Machine 30 Fc/ton Manual 125 reduction: Cost 90 Fc/ton Fc/h Manual 72.6 = 42.1 reduction Cost or Fc/h 280 Fc/ton Fc/t Manual 15.5 Fc/t = 15.4 reduction Cost activities. classic from be calculated gain to from, compare to No baseline, plan. business Estimated Value of Cost Cost of Value Estimated (Compared Reduction with baseline) /h 3 Hourly cost of of Hourly cost 55 Fc 6,5 to Additional from 10 ton/day manual baseline 20 Additional manual from t/d sifting 150 Kg/h Fc/h Machine 30.5 1 600 t/d Fc/t Machine 0.21 180 Kg/h transformation previous following possible rendered activity New Production Production Capacity 75 to 150 m to 75 Task “Caretaking” Task Task “Transformation” Task Task “Initial Processing” Task E = 8.55 to 11 Fc to E = 8.55 Fc M = 5.6 Fc 0.7 to E = 0.46 Fc M = 4.5 Fc E = 3.65 M = 1.5 Fc Fc E = 39 Fc M = 30 E = 1.2 M = 3 Estimated Yearly Yearly Estimated Costs Variable (Fictional currency, Fc) (D = Depreciation, costs E = Electricity M = Maintenance) M=Maintenance) 18 Fc D= 6 to 7 Fc E = 1.2 to 9 Fc M = 3 to 45 Fc45 D = 9 Fc 15 Fc D = 5 Fc Fc300 Fc D = 30 Fc30 D = 10 Estimated Estimated Costs Fixed (Fictional currency) 30 to 90 Fc to 30 = (Fc Fictional currency) Threshing 56 Fc Separating shells and D = 11.2 Fc residues Crushing and mixing paste into Oil Peanut extraction Conditioning and packaging Irrigation pumping Threshing Threshing machine 9 Kw) (7 to Jigger and screener (2 à 3 CV) Electric crusher for paste peanut (3 KW) Masher- squeezer semi industrial (40 kVA) Automatic measurer- (1 KW) bagger Equipment Equipment (Power) Function Electric motor-pump hp) 30 (5 to Table 2.4 Electric Equipment of the Use from Obtained Reduction Cost Estimated of Example

5036-CH02.indd 25 5/27/08 1:11:45 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

Table 2.5 List of Stakeholders That Could Be Involved in a Promotion Campaign Stakeholder Possible Role in Promoting Adoption of Electricity

Manufacturers, suppliers: Demonstration of equipment • Local distributors of targeted Possibly technical adaptation to local uses equipment Training of users • National manufacturers Develop retail network to facilitate local purchase of the • Local cottage industries targeted equipment • Maintenance service providers

Energy sector: RE targets; DSM; consumer awareness/support • Utilities Customer education and ‘training’; adherence to standards • Energy service providers Customer education and training and their associations Completing the energy infrastructure to adjust to the local • Retail technology vendors growth of energy demand

Financial institutions: Providing customized ﬁ nancing to potential users willing to • Private banks purchase the targeted equipment • Development banks Risk analysis • Micro-ﬁ nance and credit unions Sector awareness Customer education to loans

Sector-specifi c development Providing sector knowledge, fi eld presence, user confi dence, entities: networking and outreach capacities, demonstration capacity, • Agriculture and other institutes vocational training, etc. • Enterprises promotion centers Training of users • Donor-funded projects

Education sector Curriculum development • For vocational classrooms • For teacher training • For current practitioners

Policymakers, regulators: Adoption and enforcement of: Standards and quality review, • In the electricity sector productive uses adoption targets, support of adequate and • In other sectors central available electricity supply, price regulation to adoption of change of production process

the finished product (peanuts free of shells types of users. The electrician would explain and residues). Assuming that the production the electric requirements and installation of peanuts is done in very specifi c regions, a methods and would establish the link to series of meetings at the villages in production existing and forecasted electric availability areas, at markets, and possibly cooperatives in the areas visited. And fi nally, local fi nance would involve manufacturers-suppliers of such representatives would describe the range of machines, electricians, agriculture specialists, fi nancing options realistically available to cover and some local fi nancing entity. The agriculture the investment cost. These last participants specialist would explain the expected gains would be key to a successful campaign. Most for the growers and detail how they measure potential beneficiaries would need some against estimated investments and exploitation access to affordable credit to undertake the costs. The manufacturers would bring and necessary investment to seize the demonstrated demonstrate a range of machines suited to the opportunity to increase their productivity and quantity likely to be treated by the different their income generation.

5036-CH02.indd 26 5/27/08 1:11:46 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach

Although the design of a promotional be adapted to encompass electric equipment, campaign is not the subject of this work, a donor policies to be adapted, or private-sector few basic principles for such design can be lending to be modifi ed to take advantage of new mentioned. Whenever possible, bearing in opportunities. mind the feasibility factor, the design of the The use of communication media should be campaign should be participative, engaging adapted to habits, levels of literacy, and business both practitioners in the target sectors and the knowledge of end users. It may therefore range local authorities and populations. This will from general mass media messages (radio, local ensure that the proposed technical response to TV, newspapers, billboards, leafl ets, markets and a need effectively caters to and answers such fairs) to tailored information to target audiences need and is acceptable from a local and social (cooperative meetings, village assemblies, craft point of view. It should be integrative, taking and trade unions, peer meetings, etc). into account existing and past initiatives in the targeted sectors or areas to avoid duplication or repetition of past well-intended errors. It should A Practical Application be prospective, bearing in mind the impact of of the Systematic proposed changes of customs in the productive Approach: The Case fi eld, on the downstream tasks and the fi nal commodities or transformed goods. And it of the Senegal Project should be empowering, both at the individual As explained in Chapter 1, Senegal had put and the local level, avoiding catching end users substantial thought into, and invested time in a web of dependencies that they cannot master, in, finding the way to foster cross-sector and favoring local equipment manufacturers collaboration in order to obtain an effective and outfi tters whenever feasible. increase of productive uses of electricity. Similar In collaboration with stakeholders, thematic steps as the ones described in the generic meetings should be held in the regions. They overview were followed, but some steps were should involve suppliers, providers, and undertaken simultaneously, and this led to the manufacturers of electricity-powered productive following sequence: equipment to present, demonstrate, and obtain feedback on their materials, equipment, 1. Identifi cation of the activity champion and maintenance, capacities, after sale services, and its team policies. Possibly, energy specialists might have 2. Categorization of productive activities earlier undertaken a review of performance and 3. Electricity contribution to gains on production reliability of such products, within the specifi c process, identifi cation of required equipment, context of the tasks identifi ed, and can share and determination of basic economic these neutral reviews with end users. Also, viability centralized resource centers can be established 4. Program and tools for advocacy of change where individuals or cooperatives could fi nd year-round information on the techniques, Identifi cation of the Activity their availability, and their alternatives. Such Champion and Its Team centers could provide information in a very intelligible format, centered on the major tasks The work started with identifying the and commodities that have strong potential individuals or entities that could champion the for improvement. In collaboration with the implementation of the activity. The activity in anchor sector specialists, thematic meetings on Senegal benefi ted from the favorable conjunction fi nancing should also be held, helping to sort of World Bank task managers interested in out what support exists for individuals and cross-sector work, of the preexistence of the small nontraditional enterprises to invest. This multisector committee—the CIMES/RP—and of could be existing public support that could the keen involvement of the rural electrifi cation

5036-CH02.indd 27 5/27/08 1:11:46 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

agency ASER in the subject. Given its hands- international involvement. Consequently, on capacity and its central role, it was decided a longer-lasting effect was anticipated for that ASER would be the leading agency and the final results of the work, with possible that it would guide the work of the multisector replications in other sectors. committee. To kick-start the work, several meetings The next action was to hire a consultant to were held between the consultants and undertake most of the legwork, coordination, the World Bank representatives to discuss data collection, analysis, policy recommendation methodology and plan of action. It was and project identifi cation. Using World Bank followed, over a two-year period, by a series Trust Fund’s ESMAP as the source of funding, of workshops, numerous meetings, and fi eld a recruitment process was undertaken following investigations. Frequent meetings were held World Bank guidelines. It should be noted that also between the interministry committee the activity that we describe in this chapter was that has been set up to promote cross-sector not an isolated work but was bundled within activities, the consultant, local stakeholders a set of three major activities to be undertaken (central and local authorities, local rural by the same consultant: (i) the analysis and communities and local NGOs among others), promotion of productive uses of electricity, the ASER, and the private sector. discussed in this chapter; (ii) the identifi cation and development of the MECs, described in next Categorization of Productive chapter; and (iii) a review of the role of local government in RE projects, which is not included Activities in this paper. It was done this way because of The data collection work started with a desk the connection between the three activities, and review of the public triennial investment their results were expected to feed each other in program (PTIP) for the targeted rural areas, a timely fashion. covering all sectors both productive (cottage After technical and economic evaluation, and medium industries, commerce, farming and a local consultant company, the Senegalese agriculture, fi sheries etc.) and nonproductive Dakar-based EXA Development, was selected (health, education, social and administrative and hired. EXA Development provided a fully services, etc.). This was coupled with reviews of local team, with a wide variety of sector experts strategies and current levels of involvement of and a very good knowledge of Senegal’s rural the key central ministries and administrations, areas. The core consulting team included as well as interviews with their staff and project a rural electrification expert, a cottage and managers. This provided the start-up picture medium industry expert, and agronomist and of project planning, as well as the baseline machinist specialist, a local collectivities expert description of current fi eld conditions as viewed and a socio-economist. The secondary team by the central level. included a health and education specialist, The next step was to identify and list the type a project management expert, a training of technologies currently used in the productive specialist, additional energy and electricity sector. Table 2.6 provides the technology experts, and staff specialized in data gathering baseline for the cottage industry sector and and analysis. This variety provided a wide complements the Sector-System Matrix of the range of perspectives, experience, and fi eld St. Louis-Dagana-Podor regions, given later knowledge to the consulting team, as well in Table 2.7. These three regions are grouped as good access to strategic stakeholders and together because they constitute the fi rst Rural central administrative contacts. It also ensured Electrifi cation Concession to be attributed under defi nitive ownership of the work being done the concession program. in Senegal by Senegalese, with very little

5036-CH02.indd 28 5/27/08 1:11:47 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach

Table 2.6 Type of Technologies Currently in Use in the Cottage Industry Sectors in Rural Senegal Line of Trade, Occupation Type of Technology Used

Bakery—pastry shop Traditional wood oven

Wine and palm oil Rudimentary equipment (cask, barrel, bowls, wood ﬁ re)

Small dairy industry Traditional tools (Bowls, hand wood batter, etc.)

Drink production (juices, liquor) Rudimentary equipment (marmites, casks, stove, etc.)

Jam producer Rudimentary equipment (marmites, casks, stove, etc.)

Fish drying and smoking Wood stoves, sun drying by spreading on ﬂ oor

Clothing industry Sewing machine, manual or electric

Tanning, leather Simple tools only

Cobbler, shoe maker Small hand tools, sanders

Woodwork, joinery, millwork Small hand tools, multipurpose machines

Calabash transformation Small hand tools

Sawmill Manual or electric saws

Pottery—ceramics Small hand tools, traditional stoves

Small quarries Simple tools (hammers, pick ax)

Smelters Wood mold, simple coal oven

Metallurgy Spot welders, soldering irons, hand drills, small tools, etc.

Blacksmithing Anvil, hammer, pliers, etc.

Boiler making, pots pans, brassware Spot welders, soldering irons, hand drills, small tools, etc.

Tool making for agriculture Spot welders, soldering irons, hand drills, small tools, etc.

Masonry, stonework Spatula, clamp, etc.

Salt harvest and treatment Pick ax, shovel, casks, hand sorting, and sun drying

Soap factory Rudimentary equipment (cask, barrel, bowls, wood ﬁ re)

This review of the level use of technology Electricity Contribution to feeds into the mapping exercise that identiﬁ es, for Gains in Production Process, the region of focus, the major tasks undertaken Identiﬁ cation of Required to obtain and transform commodities and goods. The list of these tasks is shown in Table 2.7. Equipment and Determination The team identified that the major areas of of Basic Economic Viability improvement resided in the transformation Here, for practical reasons, the Senegalese tasks of products or commodities, and decided team grouped together steps 3 and 4 described to concentrate on these tasks during the earlier in the generic method. This exercise implementation step. was primarily intended to identify the areas

5036-CH02.indd 29 5/27/08 1:11:47 PM Diesel Diesel pumps Market Market Garden Produce None Clothing Industry ed hand By hand By allurgy Not locally Not locally Local Local mostly Cobbler, Cobbler, Leather Goods Met By hand hand By handBy By Limited hand By Simpliﬁ By handBy Limited hand By hand By Hand watering Limited, Limited, hand by Sub- sistence Crops Fisheries Poultry Dairy Sun drying, hand pressing Fruit Fruit Grower Crop SubsectorCrop Animal Subsector Industry Sector Cottage Other Hand threshing Diesel Diesel pumps By hand By or diesel Rice (seeds, (seeds, markets markets sh, milk, fruits) S

Undertaken Currently and Tasks Commodities Key Region Louis–Dagana–Podor the St. Matrix for ector-System

Initial processing Initial processing icing) (threshing, Caretaking material, (water, pesticides) Harvest (crop, ﬁ material, heads) material, Investment Investment Transformation cooking (milling, drying, milling) Resale (grosser, retail) Intermediary consumption Commodities, Tasks Tasks Commodities, and Players Preparation tools, (tillage, fertilizer) Inputs material) feed, (seeds, and storage Transport

by Cottage Industries Cottage by Tasks Usually Done Done Usually Tasks Table 2.7 Note: In shaded box, the type of technology used is mentioned when it relevant to future steps follow.

5036-CH02.indd 30 5/27/08 1:11:48 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach

and sectors that had needs, and then prepare classiﬁ es subsectors and tasks by the level of proposals to foster change of production productivity increase expected to derive from methods and advocate for their improvement. the use of electricity. The initial analysis was Once the generic step 3 (analysis of gains on done at the regional level and was then followed production process and required equipment) by thorough work to establish economic viability was completed, the focus moved rapidly to the at the project level. establishment of Multisector Energy Investment Table 2.8 provides the review of the level Projects (MECs, explained in details in the of cost reduction expected from a switch to Chapter 3) and to the practical implementation electricity for speciﬁ c tasks of the production of step 4 (economic viability and conditions process in agriculture and in the cottage and for implementation), rather than deepening its medium industries. The general ranking gives formal analysis as described earlier in the generic a sense of processes that should have a priority version. The process described in steps 3 and 4 for electricity investment. In this case, it points of the generic method was nonetheless followed, toward the need to focus the intervention at the and the details of the calculations are provided transformation level, which provides the highest in the CD-Rom attached in the Annex. levels of potential cost reduction. This sequence of work provided the Table 2.9 shows that to be complete, the information summarized in Table 2.8, which analysis should have required a more thorough

Table 2.8 Estimated Cost Reduction, by Subsectors and Tasks, Brought by the Use of Electricity Levels of Cost Reduction Agriculture Sector Cottage and Medium Industries

High Dairy and poultry inputs Fruit transformation (extractor, Ϫ97 (feed crusher, 69 percent, feed mixer, percent) Ϫ73 percent)*

Dairy harvest (milking machine, Fishery transformation (residue grinder, Ϫ75 percent) Ϫ98 percent)

Rice transformation (husking, Dairy processing (sterilizer/cookers +98 Ϫ84 percent, stone sorter, Ϫ75 percent) percent)

Fishery initial processing and storage (refrigeration, Ϫ98)

Subsistence crop initial processing and transformation (huller, Ϫ92 percent, miller, Ϫ64 percent, granulator, Ϫ98 percent)

Medium Rice initial processing (threshing, Leather initial processing and Ϫ47 percent) transformation (hydraulic press/sawing machine/splitter/stitcher, Ϫ33 percent, )

Market garden produce caretaking Clothing industry transformation (pumps, Ϫ21 percent) (embroider, Ϫ57 percent, Ironing, Ϫ42 percent)

Low Crops and rice caretaking (pumps, Ϫ7.5 percent) * The use of an electric feed crusher in the Dairy and Poultry Inputs task can help reduce the cost of the feed crushing task by 69 percent.

5036-CH02.indd 31 5/27/08 1:11:49 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

Table 2.9 Cases Where Electricity Does Not Reduce Monetary Unit Costs But Increases Productivity: Cases of New Activities Without Original Baseline Agriculture Sector Cottage and Medium Industries

Increased Poultry incubator (increases number of Clothing industry transformation Productivity eggs incubated and decreases losses) (sewing, whipping, embroider, ironing). Up to 2400 percent increase in monthly outputs

Fruit dryer (decreases time, evenness Leather transformation (hydraulic and decreases losses) press, sawing machine, and splitter). Up to 900 percent increase in monthly outputs

New Activity Storage and refrigeration of raw Conditioning, storage and refrigeration products (dairy, ﬁ shery, fruits and of transformed products (dairy, ﬁ shery, market gardens) fruits and market gardens)

Bagging/sacking (crops, rice, market Metallurgy transformation (welding, garden produce, fruits, ﬁ sheries) soldering, metal grinding, boring)

examination of the increase of productivity Program and Tools for Advocacy through increased quantities or quality of of Change products obtained by use of electricity, in addition to the analysis based on cost reduction. The results of this work were used, in part, to For example, in the clothing industry, no support the work of the MECs described in next monetary cost reduction per unit was found chapter, but also as a supporting tool to the ASER to come from the use of electricity in the (Senegalese Agency for Rural Electrifi cation) embroidery of Boubous, but using dressmaking for its “Program to Maximize the Impact of electric equipment provoked a dramatic increase Rural Electrifi cation.” This program focuses on in quantity produced, going on a monthly basis increasing productivity in productive sectors of from 4 pieces to close to a 100. Also, through rural areas, as well as creating and valorizing uses of electricity, new activities can be created new economic activities in these rural areas that did not exist before and therefore cannot by use of electricity. The scope of the program be valued from a cost-reduction standpoint. was defi ned in order to avoid duplicating other Electricity used for refrigeration or conditioning stakeholders’ existing initiatives and to avoid of transformed dairy products, for example, can pushing toward unjustifi ed or unsustainable help increase their life duration to a point where levels of use of electricity. There is, hence, a strong it becomes valuable to produce them, whereas adequacy with the spirit of the approach we just before, rapid decay would lead to little interest described in this subchapter, which involved in such products. The key question in the case substantial work across sectors as well as a of new activities then becomes whether they specifi c evaluation of the level of gain expected can fi nd a sustainable market at a profi table from the conversion to electricity for a given price. This is one of the limitations of the current task in a given subsector. Using the systematic work, which focused on removing bottlenecks approach decreases the risk of providing blanket or hourglass situations where a viable market statements on universal value of electricity that demand already existed for the commodity that are likely to mislead potential users. was being produced more effi ciently. The ASER used the information generated by this work to feed into its RE impact maximization

5036-CH02.indd 32 5/27/08 1:11:49 PM Identiﬁ cation and Promotion of Productive Uses of Electricity: A Systematic Approach

program and inform and enhance its realm to users for acquisition of material and of intervention. The program includes the equipment intended for productive uses. following goals: • Organize regional meetings and fairs to disseminate lessons learned and inform • Refi nancing support to the decentralized potential users, encourage manufacturers fi nancing organisms that target grassroots to improve their products and after-sale development in rural areas services, and foster local cottage industries’ • Support the availability, marketing and interest in producing electric materials and commercialization of relevant and viable equipment. electric equipment and materials • Create a centralized system, reachable in • Support the development of targeted rural a decentralized fashion that provides the agro-industrial projects type of information produced in this study • Creation of a sector-specific database in a comprehensive yet accessible format by documenting the benefits that can be region, productive activities, etc. generated from the use of electricity in productive activities These advocacy tools and activities are still being rolled-out today by the ASER. Future The ASER decided to fi nance or contribute projects are to expand the line of work beyond to the following actions and tools to be set up productive uses to include new sectors commonly by priority to support these goals: defi ned as nonproductive yet indispensable to the effective running of a successful local economy. • Participate in the financing of reliability These include an educational structures, health tests for small electric equipment and centers, commons (faith gathering premises, appliances used beyond the meter that markets, and association or co-op premises) were identifi ed in step 3 to validate their and administrative buildings (town halls, local effective hardiness in real-use conditions administration etc.). Finally, some resources will before making recommendations to sector be used to encourage the development of local practitioners. cottage industries catering to the new needs • Study and analyze structural hindrance to generated by these innovative electricity uses access to electrical equipment and appliances in order both to reduce dependency on foreign by potential rural users. equipment and to bring the producers closer to • Defi ne, create and implement a revolving fund the user, thus increasing the desired economic to assist existing decentralized fi nancing impact in the targeted regions. institutions in providing lines of fi nancing

5036-CH02.indd 33 5/27/08 1:11:50 PM 5036-CH02.indd 34 5/27/08 1:11:50 PM Methodology for the 3 Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs)

As was briefly presented in Chapter 1, the head-on any potential cross-sector coordination pragmatic approach is designed to both feed problems that could be met in the project life from and complement the results and impacts by moving very quickly to the implementation of the systematic approach described in an phase. Such an approach is also opportunistic in earlier chapter. The pragmatic approach is to the sense that it takes advantage of preexisting ensure that a series of quick response projects, opportunities in a given sector or in a precise the Multisector Energy Investment Projects rural area. It is implemented when conditions (MECs13), will be identified and quickly are ripe for a quick win project or an activity that implemented before the end of the design phase would rapidly obtain large sector gains, thanks of an overarching rural energy program and to access to electricity. the start of its implementation. This chapter Here again, the start point is to capture will once more focus on productive uses of a picture of the sectors at play in the areas electricity, setting aside household as well as in consideration in order to direct energy- social uses. related investments to effectively serve local The pragmatic way, while respecting the rural development. Only the overview need spirit of cross-sector work and preserving a not be as complete and as accurate as in the region-specifi c angle, ensures that projects are systematic method, and will target a different in fact identifi ed, made available for fi nancing, set of information tools that will allow a faster and implemented so as to demonstrate in a move to the implementation phase. Yet again, concrete fashion the soundness of the approach. the proposed Multisector Energy Investment It shows stakeholders that the whole exercise is Projects (MECs) approach will be described as not just a global brainstorming exercise running a multistep method, fi rst in a generic fashion to the risk of producing little real-life outputs at be later illustrated with the case of the Senegal the end. It also provides an occasion to tackle experience.

13 The concept was initially created in Senegal and named PREMs in French for “Programmes Energétiques Multisectoriels.”

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An Opportunistic or tackle it as a last resort and wind up with detrimental technical choices. and Practical Method This is where the MECs provide their added to Speed up the Delivery value by analyzing the need, proposing solutions, of Positive Impact of RE: and effectively building the energy interface between the power utility and the anchor The Multisector Energy sector project. Although this may intuitively Investment Projects (MECs) seem obvious and simple, the complexity of the undertaking soon appears and reveals the need The Multisector Energy Investment Projects for establishing a method as well as dedicating (MECs) can be defined as the energy means, both fi nancial and technical, to support subcomponent of another sector’s project such interface. A MEC team can be set up that, that has a strong need for energy (and more following the principles described in Chapter 1, specifi cally electricity in the case of this paper) would be led by a championing entity, and to function or provide its outputs. Therefore, supported by a group of specialized consultants a MEC does not exist alone; it is only part of a for the technical matters as well as the sector larger project or a sector’s activity to which it partners from the multisector committee. provides support. Since it is the other sector, The method for the design of MEC projects not the energy sector, that provides the de facto comprises three steps: anchorage for the MEC, it is referred to as the “anchor sector.” (i) Begin by identifying the sectors that have As mentioned earlier, the MEC concept is activities currently taking place or about opportunistic in that it relies on opportunities to take place in the area of the electricity provided by the existence of sector projects either project, and evaluate the impact electricity already in place or will be developed in the near could have on the sector’s outputs; future in the region targeted for electrifi cation. (ii) Next, design and determine the costs of the It then proceeds to tack on an electricity electric equipment needed to respond to component aimed at creating, supporting, or the needs, both before and after the meter; enhancing productive uses in the anchor sector’s and projects. By providing an interface between the (iii) Finally, secure agreement among the sector project and the electrifi cation activity, it stakeholders on the value of the MEC, aims at providing quick wins that show tangible decide on respective duties and modalities benefi ts to the rural communities. of cooperation, establish contractual In most cases, the sector specialists have documents and coordinate the teams for already done all the preparatory work from implementation. their sector’s standpoint for the reference project, to which an energy component may be added. They have mobilized the fi nancing and Step 1: Inventory of Other the sector specifi c expertise, have validated the Sectors’ Programs Whose Outputs project design and timelines, and engaged the Could Benefi t from Electricity sector specifi c support to ensure recipients will and Joint Evaluation of Sectors’ be trained and buy-in. However, as seen in the previous chapter, there are many instances where Interest in Creating a MEC the sector’s performance targets are limited or Although this initial step may seem similar to hampered by lack of access to electricity. This the one described at the start of the systematic is, in large part, because the sector specialists approach, there is a major difference in that are not well informed on the options, limits, we do not focus here on existing activities in and gains to be associated with electricity. They, the fi eld but, rather, on programs or projects therefore, either bypass the issue altogether from other sectors that support these activities.

5036-CH03.indd 36 5/27/08 1:12:21 PM Methodology for the Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs)

These can be existing programs and projects of supporting projects should be compared to or proposed ones. The identifi cation work is the areas to be covered by upcoming RE projects. phased, moving in sequences from the central The next step is to proceed to the selection of level to more decentralized and customer-user programs and sub-projects for which the idea of levels, at which the MECs will be designed, cross-sector cooperation makes sense and a MEC sized, and implemented. could be proposed. To help in decision making, The work starts in the central government these projects and programs need to be weighed by requesting that the major public and private against a number of preestablished criteria. planning agencies identify the country’s A list of possible criteria to be used is priorities. This data will provide public proposed below but it should be adapted to each investment plans, Poverty Reduction Strategies specifi c region targeted: (PRSs are especially found in less developed a. The level of value added by the sector program countries, IDA borrowers) and other national in terms of revenue generation for end documents that show what sectors currently users. are, or are expected to be, of top priority in the b. The expected impact of the access to electricity target areas over the coming years. as compared with the baseline without Once this preliminary identification has electricity. Here, information can be drawn been completed and the country’s priorities are from work done in the systematic approach well understood and listed, the next action is to or created for the circumstance by general confer with the priority sectors identifi ed and estimations. ascertain their approach to implementing their c. The scale and breadth of intervention of the own plan to achieve their specifi c goals. This is sector project and the expected replication done by meeting with the sector ministries, the options. Sector projects that are too dissimilar implementing bodies both at headquarters level from the RE project in size or reach, or that and in the regions, and the local administrations. are unlikely to provide replication effects, Other players may be included to capture a more may be less attractive. complete picture, maybe with a different bias or d. The level of investment and the quantity experience, such as donors and development of equipment required for the electricity banks, users unions, and sector NGOs. component respective to the rest of sector One will then notice that even at the highest project. Too large and it may require a levels, when sector specialists are asked about stand-alone energy project, too little and the how they intend to implement the energy incentive to cooperate becomes minimal. component or deal with energy requirements e. The effective schedule and advancement of the of their projects, they usually have not given sector projects, both in terms of fi nancing much thought to it and often intend to tackle the and implementation. A very advanced problem as it arises. This is no criticism of these project with fi nalized fi nancing and tight practitioners, simply the refl ection of the time schedule might generate as many problems consumed by the other demands of their work, as one still at the rough-idea stage with no often more in line with their core competencies concrete fi nancial backing. and interests. However, the experience shows f. The readiness to collaborate by sector that when specialists from the energy sector raise stakeholders at every level of the project. the issue ahead of time and show a willingness Although this is a very subjective to contribute in shaping a response to the issue, criterion, it can make a big difference at the reaction is overwhelmingly positive. the implementation stage and for the fi nal Having identifi ed four or fi ve priority sectors success of the cross-sector collaboration. and determined through discussion with their g. The level of experience of the sector project, practitioners how the sector’s targets are being whether pilot, mainstream, extension of met or planned to be in the near future, the list existing or new line of activity. Here, there is

5036-CH03.indd 37 5/27/08 1:12:22 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

no clear positive or negative situation. A pilot within reach of the RE project, can be created as may be more receptive to collaboration but shown in Table 3.1. may not be replicated; mainstream projects From Table 3.1, we could conclude that may have more experience and provide more further collaboration with sector C would be security but might not want to accommodate proﬁ table. It has two major programs oriented necessary changes for integrating electricity toward revenue generation, with significant for fear of loosing their known dynamics. expected impact from electricity and good h. Additional criteria may be added, depending cross-sector receptivity. The main point of on local circumstances or on the focus of concern would be the lack of experience and the overarching RE project. Some could be the associated risks of delays or failure. At the linked to minorities, sustainable energy, same time, sector A may be put aside with little gender, social impacts, and so on. relevance of its programs for revenue generation and multiple risks of failure, primarily due to A summary table, linking these criteria to lack of cross-sector receptivity. Programs 3 and the various sectors and their eligible programs 5 of sector B could also be of interest. Program

Table 3.1 Possible Selection Criteria to Identify Sectors and Programs That Could Provide Anchor to MECs

Sector A Sector B Sector C Other Sectors

Criteria, Anchor Sectors and

Programs 1 Program 2 Program Etc. 3 Program 4 Program 5 Program 6 Program 7 Program 8 Program Etc.

a. Revenue ** * **** * *** * **** **** Generation

b. Expected Impact of * **** *** **** ** ** **** Electricity

c. Similitude of Programs * **** *** * * **** **** ** (Area, scale etc.)

d. Relative Level of Investment ** ** ** * * **** **

e. Level of **** * ** **** ** ** *** Advancement

f. Cross-sector * ** ** * *** **** ** Receptivity

g. Cumulative **** * ** * *** ** ** * Experience

h. Other criterion

Notes: Level of criterion intensity: No star = criterion not met, * = low intensity, ** = Medium intensity, *** = High intensity and **** = maximum intensity. Other criteria evaluation tools can be substituted to intensity when it is more relevant.

5036-CH03.indd 38 5/27/08 1:12:22 PM Methodology for the Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs)

5 has a risk brought by a different type of electric equipment could be used after the meter organization but it could be compensated by a to provide the required output and what type of strong expected impact of electricity and a keen electric investment is needed before the meter interest in cross-sector collaboration. to supply electricity to the MEC. Having selected a series of programs (here The case of the fi sheries, where storage and it would be programs 3, 5, 7, and 8) with which initial processing were identifi ed in an earlier further collaboration may be contemplated, the chapter as good sources of gains, can provide an next step is to engage their respective teams illustration. Should a fi shery program exist in an in designing the MECs and demonstrate their area earmarked for rural electrifi cation, it would effective value added to both the sector program have identifi ed specifi c ports due for renovation and the RE project. of docks and fish conditioning in order to improve outputs from fi shermen. The fi shery Step 2: Localization, Design, sector would have earmarked funds for civil and Costing of Electrical engineering, training, boat and fi shing techniques modernization, and would have a project for Components, Including transformation, but would not have a clear idea after the Meter of the type of electricity source required, as well This step is where the potential project becomes as the equipment alternatives. This is where the specifi c, aggregating the information from all MEC project would provide support, helping stakeholders into a real project in the fi eld. The size the equipment to the demand and quantity team will identify specifi c locations in the regions treated while keeping in mind the real costs. It targeted by RE that are likely to benefi t from would help identify option for energy equipment the sector programs. It will develop a proposal (using cold chambers, sifters, shredders, driers synopsis (see the examples in Annexes 6C and and possibly autoclaves) that would provide the 6D) that outlines the reasons for the proposed expected outputs (conservation, fl our, dried fi sh) project, its expected socioeconomic impacts, in the most effi cient and adapted manner. In such the type of equipment proposed, the expected a case, after providing the rationale for the MEC costs for the whole anchor sector project, the involvement, the synopsis would list the type costs of the MEC itself (both before and after the and cost of transformers needed, the amount of meter), the expected fi nancing plan (including medium or low voltage cabling, the necessity the expected rate of return), and the expected or not for back-up generation depending on roles and duties of each party. the quality of the supply at the given area, and The information on the desired localization, would provide help in identifying the most as well as the expected benefi ts, is to be provided adequate provider of cold chambers and other by the sector experts who should provide equipment. proof of their sector’s intent to invest in the The MEC could also help in creating designated area. This is because, following a bridge to other sectors likely to provide the principle that the MEC will only provide enhancement of fishery outputs subject to the additional amount of funding necessary to access to electricity. Following an example seen include an energy component in a sector project, recently in India, a bridge to the telecom sector the validity of the energy investment will rest could be made, providing electricity to power a largely on whether the anchor project actually cell phone tower, as well as charge batteries of happens. Once the potential sector project is fi shermen users, thus ensuring that fi shermen delineated, with an explanation of the type of could check prices offered for their catch in contribution or output expected from the energy several potential unloading docks. Fishermen source, the energy sector specialist checks the could also be informed, should the maximum technical feasibility on the ground. If deemed capacity of the storage and transformation unit feasible, it provides a proposal for what type of be reached in a given dock, thus limiting the

5036-CH03.indd 39 5/27/08 1:12:23 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

losses but redirecting the fi shermen to another costs by avoiding redundancy. For example, a dock. dairy unit could be teamed up with a leather At that stage, the degree of advancement in processing and transformation cottage industry. the creation of the MEC and the speed at which This would enable an evening milking and each MEC is likely to be implemented should overnight cold storage for the dairy, awaiting start to be clear. This opens the option of creating the morning collection for outside processing— several waves or generations of MECs according practically doubling the milk output—while to their level of preparedness and likelihood of enabling day use of electric machinery for the swift implementation: cottage industry. In such a case, it is unlikely that the anchor sector providing support to the • The fi rst generation will regroup the MECs dairy farm would cooperate on its own with that are located in the areas of national the one providing support to cottage industries priority, where the technical-economic work over little-known issues such as electricity is fi nalized for the project from the anchor access or sizing of electric equipment. The MEC sector standpoint, where an existing source could provide a real added value and make an of fi nancing is committed and the anchor informed connection between all stakeholders. sector’s practitioners are cooperative. The information produced could be • The second generation will regroup the MECs summarized in Table 3.2, used for decision where some of the conditions just listed are making and to follow-up on implementation not yet met or need further work to warrant with the anchor sectors. The sample synthesis the full commitment from the energy shown in Table 3.2 is extracted from real sector. potential MECs using a fi ctional currency but • And fi nally, the MEC pipeline will regroup keeping the respective ratios. It provides an idea promising projects that need further of the relative costs of the MECs in the context of investigation and are unlikely to reach a the total investment for each project earmarked decision point in the short term, but could by the anchor sector. provide big gains and impacts if they can be developed. Some of these potential MECs will prove too complex to remain within Step 3: Decision to Collaborate, a pragmatic approach and might need to Defi nition of Each Sector’s be dropped or transferred to another type Roles and Responsibilities, of structure for development. Others will Establishment of Contractual develop favorably and turn into a new Documents, and Implementation generation of MEC. New candidates will also appear as conditions change in the fi eld and In Table 3.2, one can notice that the MEC usually will be added to the pipeline. only represents a small portion of the project cost; it ranges from 3 to 10 percent in the sample One additional reason for establishing a presented. In a “business as usual” project, the MEC, which has not been addressed here, would sector would set aside on its own the funds for be the existence of several electricity-sensitive the costs behind the meter (here amounting to activities within a specifi c town or village that, less than 2 percent on average) and would ask while not being viable alone from the standpoint the local utility for the electricity connection to of their respective anchor sector, could become the project. viable by teaming up on the electricity uses. It Depending on the responsiveness of the could be that the combination of several types utility, the connection may or may not be of uses help reach the level of consumption that established, in large part because the connection renders the investment in electricity distribution request becomes one among many others. The lines viable. Or, it could be that such uses are speed and adequacy of the connection will complementary, thus decreasing investment also depend on the incentives at play for the

5036-CH03.indd 40 5/27/08 1:12:23 PM Methodology for the Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs) State, donors, donors, State, and users unions State, donors, donors, State, and users unions donors, State, and users unions local State, communities, emigrant remittance Potential Potential Financing for Sources the the after Electric Meter Equipment of pumps, pumps, of dripping machines. driers sifter, sifter, driers shredder back-up generators, churner, sterilizer husking and sorting machines, Type of after after of Type the Meter Electric Equipment 1,21 Fc 1,21 Fc types Different 0.23 Fc Fc 0.23 chambers; Cold Fc 1,52 tank, Cold Fc 0.62 Threshing, After the After Meter Electric Equipment Costs transformers transformers 25/50kva ; 25/50kva and public lighting AT; lines transformer and public lighting grid (no available). Type of of Type Electric Equipments the before Meter Electricity Electricity Related Costs (Fictional Currency) Costs of the MECS (Fictional Currency) 99 Fc 99 Fc Fc 4,52 Fc 13,9 3 Fc voltage Low Fc 1,62 1 Fc Generators Total Project Project Total to Costs Anchor Sector (Fictional Fc) Currency, Dairy, Dairy, husbandry Agro- industry Hydraulic Fc 73,4 2,80 Fc Fc 1,59 Generators; Fisheries Fc 19,9 Fc 0.56 Fc 0.33 Transformers Anchor Subsector sh Example of Synthesis of First Generation MECs in a Given Area in a Given MECs Generation First of Synthesis of Example MEC2: MEC2: Electric component dairy and for feed cattle MEC3: Transforma- rice tion of MEC4: Irrigation system MEC1: Electric MEC1: for component and ﬁ docks processing Type of MEC of Type Table 3.2

5036-CH03.indd 41 5/27/08 1:12:24 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

utility, which may concentrate on easier and part of the MEC close to their core competency. less costly ones and possibly perceived with If such a situation should arise, the MEC may lower nonpayment risks. At the same time, if work to provide alternative sources of fi nancing, the funding for the equipment costs after the either by bridging the funding from one sector to meter connection is not clearly earmarked, the other or by getting a new source of funding the temptation may be high to use it during altogether. Specifi c repayment schemes would the course of the construction to offset other need to be designed, discussed, agreed upon unexpected sector-specifi c costs that would be and contractually accepted by all stakeholders. more palatable to the sector specialist. Either It may be, taking for example the case of the complication would derail the gains expected dairy MEC, that the energy sector rather than the by the end user from the use of electricity. agriculture sector would have a better capacity to This is where the MEC approach changes fund the generators, dairy tanks, and processing the dynamics by creating a team dedicated to material. The corresponding loan repayments this subcomponent of the global project that from the users (say, a cooperative) would be will provide the information to all parties and directed to this sector rather than the agriculture coordinate their respective involvement. As sector. Specifi c examples are described next in described in the earlier step, the MEC will MEC case study in Senegal that helps to further estimate the costs, provide a technical design, and illustrate this situation. validate it with the stakeholders. It will ensure Other issues tackled by the MEC team could that the corresponding funding is set aside and include training of users, suppliers or contractors will coordinate the writing and the agreement on that would operate and maintain the material necessary implementation documents. This will behind the meter; establishment of repayment go from the technical design, to the issuance of schedules, collection methods and, if necessary, bidding documents for construction and even its nonpayment enforcement; resolution of confl icts; supervision, if needed, through the establishment and other miscellaneous issues. Whenever of a convention among participants, clarifying possible, the operation of the behind-the-meter each party’s roles and duties. equipment and the electricity distribution or These actions, while seemingly simple, can generation material would be contracted to an be very time consuming and require a strong outside entity. If resorting to the MEC was found commitment, as well as good negotiation skills, necessary or useful for the anchor sector project to navigate the various sectors’ bureaucracies to include the energy component, it is unlikely and players, their different procedures, targets, that the anchor sector practitioners will have and set of funding partners. suffi cient interest, time available or knowledge Whenever possible, the MEC will try to to give adequate attention to the operation of ensure that sector partners directly fund the the energy component. Having the option of area of the MEC the closest to their core activity, using a specialized outside contractor could help letting the MEC play purely the role of interface. alleviate problems while creating or providing In other words, the anchor sector would fund the support to a viable productive activity in the after-the-meter equipment, and the energy sector target area. would fund all materials necessary to bring Once they are agreed upon, all these issues electricity to the meter, including the meter. In and decisions are combined in a contract or a such a case, the value added of the MEC resides convention signed by all stakeholders. It clarifi es in coordination and possibly in the supervision each partner’s role, duties, and rights, and it of the implementation by the contractors on closes the door to damaging misunderstandings behalf of both sectors. or last-minute changes in course by any partner. However, it might happen that either or both This is also required to ensure suffi cient fi nancial sectors may meet with diffi culties to fund the stability and to secure fi nancing for the MEC that

5036-CH03.indd 42 5/27/08 1:12:24 PM Methodology for the Implementation of the Pragmatic Approach: The Multisector Energy Investment Projects (MECs)

may be running over a period of 5 to 20 years, (better inclusion of energy components in new depending on the type of equipment at stake. sector projects), in terms of effective viability Finally, a monitoring and dissemination of the MECs and in terms of contributions to tool should be carefully put in place to track improvement of life in the rural areas, especially the impact of the MEC in the ﬁ eld. One should with regard to income generation. look for impacts in terms of change of minds

How the MECs Were Analysis of the Rural Developed in the Development Priorities, Case of Senegal Identifi cation of Sector Programs, Areas of Cooperation, Technical As mentioned in Chapter 1, both the concept of Design, and Costing the MECs and their effective implementation are closely associated with the development of In Senegal, the design of the MECs happened rural electrifi cation in Senegal. Its specifi c context simultaneously with the systematic identifi cation has been described in that chapter, so we will of productive uses of electricity if developed focus here on how the MECs were pragmatically in the rural areas. Therefore, the activity was developed to deliver the desired impact of rural championed by the same team, led by the ASER, electrifi cation. Again, we will focus on productive supported by the consultant EXA Development uses even though some social MECs were also and the CIMES-RP multisector committee. developed to improve social and communal The team reviewed the key Senegal offi cial services through access to electricity. national documents, the DSRP (Poverty The approach taken in Senegal follows the Reduction Strategy) and PTIP (Triennial Public general approach described earlier. However, it Investment Program), to identify the key was tailored to fi t the ongoing restructuring of productive sectors (as well as social services the rural distribution sector and the creation of which are not referred to in this document) the concession program described in Chapter 1. in the national priorities. These priorities are This program infl uences the structure of the agriculture, rural irrigation, stockbreeding, MECs, constraining them to fi t the boundaries of fi shing, and rural cottage industries. the concessions while opening new opportunities The team then looked into these sectors to of sources of fi nancing. The MECs were put identify their key implementation programs. together following the same approach as At the national level, some key programs described in the generic case but combined into are the PNIR (Rural Infrastructure), the two steps to fi t with the fi eld realities: PADMIR (Support to Decentralization in Rural Areas), AFDS (Social Development Fund), (i) Determine national priorities, contact the REGEFOR (Well Drilling), PAOA and PDMAS sectors implementing the priorities, and (support to Agro-industry), PAPEL (support to identify the areas of collaboration, followed stockbreeding), or PSAOP (support to services by the design and costing of proposed to agriculture). Other programs target specifi c electric equipment necessary to respond to areas such as PAPASUD (fi sheries in the south), the need, both before and after-the-meter. PRAESC (revival of economic activities in (ii) Agreement among stakeholders, and Casamanse region), or SAED (activities in the especially the potential concessionaires, on delta of the Senegal River). the MECs to be implemented, respective The number of programs, with which duties and modalities of cooperation, cooperation would be both feasible and the creation of all contractual documents, use of electricity provide value-added, was and ensure coordination of teams for fi eld narrowed by using the method described earlier implementation. in the generic approach. Discussions were then

5036-CH03.indd 43 5/27/08 1:12:25 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

held with the program representatives that led to depends largely on determining the appropriate the identifi cation of nearly to 20 MECS, of which equipment before and after the meter, as well as 16 were linked to income generation through in the timely implementation of their set-up and productive uses of electricity. Nine of these maintenance, the MEC will attempt to ensure that were with programs suffi ciently advanced and all these aspects are handled. Ideally, the anchor collaborative to be developed as fi rst generation sector should be the lead in bearing all costs MECs, while the rest should be considered relative to their sector-specifi c equipment and second generation or MEC pipeline. training. When it comes to electric equipment Following the pragmatic principle, the behind the meter and its related training, the activities were delineated to follow the preferred fi nancing source remains the anchor concessions’ boundaries and the work focused sector, followed by the concessionaire and in the on MECs located in the fi rst three concessions to last resort, the MEC, which draws and catalyses be attributed to the private sector as part of the money from the earlier two, as well as public rural electrifi cation restructuring program. The money such as donors or RE Funds. summary table of the MECs initially identifi ed is provided in Table 3.3. For all MECs identifi ed, the project fi nancing Who Does What? Establishing was fully covered by the anchor sectors except Effective Stakeholder Cooperation for the very fi rst one, the dairy project, which within the RE Concessions: had obtained only 70 percent of its fi nancing at the time of the cross-sector discussions. Example of MEC Implementation This project was nonetheless kept in the list of in St. Louis–Dagana–Podor prospective MECs given the high level of added Following the first round of identification, value expected. the dimensioning and the costing of the fi rst However, prior to the MEC discussions, generation of potential MECs, the next step while the overall anchor projects were generally was to move from agreement in principle well funded, including all their sector-specifi c between all stakeholders to effective contractual technical components, allocations for their commitment and joint implementation. energy components were less well accounted for, We will illustrate this step using the example if at all. Table 3.3 shows that with 1.5 billion CFA of the first rural electrification concession Francs over a total cost of 85.2 billion CFA francs, to be established: St. Louis–Dagana–Podor, the MECs’ costs represent only a small fraction located in the north of the country near the of the total sector project cost: 1.8 percent on Mauritanian border (see Figure 1.2). As explained average. This confi rms that sectors’ tendency of earlier in this document, the MEC concept has not integrating energy component in the design been developed in Senegal to accompany of their project is most of the time due to lack of the movement toward the creation and the knowledge of options and benefi ts, rather than attribution of rural electrifi cation concessions lack of affordability. to the private sector through a bidding process. Table 3.3 also shows that on average a little Therefore, cooperation with the MECs was more than two-thirds of the MEC additional logically included in the conditions and criteria costs come from the before-the-meter side, while for bidders to obtain a concession. Although one-third comes after the meter. Typically, in a the MECs would represent only a small fraction usual project this two-thirds would be fi nanced of the set of data and issues to consider for the by a utility and the remaining would be at the potential bidder, opening this option to the expense of the project. Since the effectiveness private sector required an advanced and well of the total energy component in delivering documented case corroborating the viability of the output desired by the anchor sector project such MECs.

5036-CH03.indd 44 5/27/08 1:12:25 PM ( continued ) National State, National State, ASER, UE, AFD, IFIP COVAPE, PNIR, PNIR, COVAPE, ASER KFW, State, State, KFW, , IFIP ASER ASER, REGEFOR, IFIP Potential Potential Financing for Sources behind the Electric Meter Equipment National State, National State, IFIP, ASER, BID, REGEFOR Cooling Cooling rooms, hybrid (sun/ driers; electricity), mills Cooling Cooling tanks; buildings, storage, cold sterilizer, skimmer, churner. Small productive instruments Mills; threshers Type of of Type Electric Equipment behind the Meter Mills; refrigerator vaccines; for wood carving equipment € € / / / / / 35 k 46 k € 152 k € 152 184 k € 232 k 23 MFCA 30 MFCA 30 121 MFCA 100 MFCA 259 MFCA 53 MFCA (81 kÐ) Behind the Behind Electric Meter Equipment Costs € ) (MCFA/k 480 MFCA k € ) (731 Transformers Transformers 25/50kva. Transformers, MV Transformers, lighting, lines, generators Generators users to lines LV Electric pumps; Electric pumps; sets; generator lighting. Type of Electric of Type Equipments the Meter before Electric pumps; Electric pumps; sets; generator transformers € € € € ) / / / / / 78 k 50 k € 419 k € 419 242 k 305 k 51 MFCA 51 33 MFCA 33 159 MFCA 159 275 MFCA 200 MFCA 200 84 MFCA kÐ) (128 Electricity Electricity Costs Related (Million CFA Francs/k 634 MFCA k € ) (966 € € / / / / / 85 k 123 k € 123 427 k € 427 457 k 844 k € 81 MFCA 56 MFCA 554 MFCA 554 300 MFCA 300 280 MFCA 280 137 MFCA 137 kÐ) (209 Costs of the MECS (Million CFA/ thousand € ) 1,132 MFCA 1,132 k € ) (1,723 ed in the Three Initial Concessions Initial Concessions ed in the Three

€ ) / / / / / 7,893 k € 7,893 3,032 k € 3,032 8,633 k € 8,633 11,242 k € 11,242 15,091 k € 15,091

5,178 MFCA 5,178 1,989 MFCA 1,989 7,375 MFCA 7,375 9,900 MFCA 9,900 5,663 MFCA 5,663

(10,925 kÐ) (10,925 Total Project Project Total to Costs Anchor Sector (Million CFA / k Francs MFCA k € ) (34,966

Anchor Anchor

Dairy Energy Irrigation Irrigation Fisheries cation of of cation List of First Generation MECs Identiﬁ MECs Generation First of List

sh treatment areas areas sh treatment Electric component Electric component the program to and domestic for of uses productive PERACOD energy, (ENE1/DP). Electriﬁ drinking water (HYD1/ distribution DP). Electric component and harbor docks for ﬁ (PEC1/MB). Type of MEC of Type of Provision dairy to electricity feed and cattle (MILK1/DP) centers and Reinforcement the of extension electric connection well the rural of drilling program (HYD1/ REGEFOR. MB).

St-Louis Name

Concession Concession Podor-Dagana Mbour Subtotal MFCA 7,167 Subtotal 22,338 Table 3.3

5036-CH03.indd 45 5/27/08 1:12:26 PM AFDS, ASER, IFIP ASER, AFDS, Potential Potential Financing for Sources behind the Electric Meter Equipment National State, National State, IFIP ASER, PNIR, ASER, IFIP ASER, PNIR, Fridge for for Fridge vaccines; room cold Type of of Type Electric Equipment behind the Meter Mashers, oil Mashers, extractors, bagging material Fridge for for Fridge vaccines; room cold € € / / / 24 k 95 k € 20 k 13 MFCA 16 MFCA 62 MFCA 62 91 MFCA k € ) (139 MFCA624 k € ) (951 Behind the Behind Electric Meter Equipment Costs / k € ) (MCFA Generator sets; sets; Generator transformer lighting 25/50kva; Generator sets; sets; Generator et installations electric engines and accessories Type of Electric of Type Equipments the Meter before Generator sets; sets; Generator transformer lighting 25/50kva; € ) / / / 63 k € 46 k € 152 k € 152 41 MFCA 41 30 MFCA 30 100 MFCA 171 MFCA k € ) (261 MFCA 889 k € ) (1,355 Electricity Electricity Costs Related (Million CFA / k Francs € ) € / / / 87 k 66 k € 247 k € 247 57 MFCA 57 43 MFCA 162 MFCA 162 262 MFCA k € ) (399 MFCA 1,533 k € ) (2,337 Costs of of Costs the MECS (Million CFA/ thousand ed in the Three Initial Concessions ( continued ) Initial Concessions ed in the Three

€ ) / / / 1,112 k € 1,112 8,633 k € 8,633 42,530 k € 42,530

1,390 MFCA 1,390

27,900 MFCA 27,900 25,800 MFCA 25,800 Total Project Project Total to Costs Anchor Sector (Million CFA / k Francs (83,979 k € ) (83,979 k € ) (129,870

industry

Anchor Anchor industry Cottage Cottage industry Cottage Agro- List of First Generation MECs Identiﬁ MECs Generation First of List

Equip and modernize and modernize Equip the communal infrastructures (INF2/KV). Type of MEC of Type transformation Corn (MAI1/KV). and modernize Equip the communal (INF1/ infrastructures KV).

Name

Kolda -Velingara -Velingara Kolda Concession Concession Subtotal TotalGrand MFCA 55,090 MFCA 85,195 Table 3.3

5036-CH03.indd 46 5/27/08 1:12:27 PM In St. Louis–Dagana–Podor, three possible to check and confi rm the technical choices made MECs had been identifi ed (see Table 3.3): by the MEC team within a given time frame. Together with the client and with support from • MILK1/DP Provision of electricity to dairy the anchor program, it negotiates the request and cattle feed centers for subvention to the FER (Rural Electrifi cation • ENE1/DP Electric component of PERACOD, Fund) that can cover part of the MEC investment. program to enhance domestic and productive It then drafts and negotiates its supply contracts uses of energy with the client, both for the installation of • HYD1/DP Electrifi cation of drinking water the material and equipment as well as for its supply network maintenance, describing levels of services, payments, and ways to solve disputes. The MEC team started building the case for Following the concessionaire-client these MECs by fostering thorough exchanges contracting, the concessionaire implements between all parties involved. Using the the MEC. It issues tenders and purchases the preliminary proposals established for each electric material and equipment on both side of of the three MECs identifi ed, comprehensive the meter, it installs the electricity distribution exchanges were done between: equipment, delivers, and installs the material after the meter that the sector program will • the ASER use to produce its products. It also ensures • the three sectors’ anchor programs (COPAVE the initial start-up of all electricity related for the dairy, PERACOD for the cottage equipment and trains the sector program industry productive uses and REGEFOR for staff in basic maintenance that they need to irrigation) provide, while preparing to undertake the • technical advisors (agronomists, local heavier maintenance schedule. It is highly development experts, etc.) recommended to require the concessionaire • the users (private individuals, unions, to undertake the maintenance, including after cooperatives) the meter—which is unusual since utility • the fi nancing institutions (World Bank, KfW, responsibility usually ends at the meter. Such AFD, IFIP for private investment) after-the-meter tasks may be subcontracted if • suppliers (both of electric material and it differs substantially from usual tasks that the of electricity) using equipment, such as concessionaire staff are used to do. This ensures EquipPlus, Afriwatt) that the life of the equipment after-the-meter is not diminished by lack of maintenance because It should be mentioned that in this case, the the project staff on the anchor sector side is not private sector concessionaire was not involved, aware of such needs, does not have time for since the attribution of the concession had it because of its other sector-related duties or not yet happened; but in future MECs in the does not have the adequate training to answer concessionaire is expected to play a prominent them. role. These discussions helped clarify and During the exploitation phase, the con- provide agreement among all participants on the cessionaire provides the billing for the electricity conditions that would be required from each to and the services according to the contract have the MECs move from concept to reality. and within the framework of the concession Once the respective sources of fi nancing agreement with the ASER. It agrees with the are agreed upon, an agreement is signed by sector project served on repayment modalities all implementing parties that spells-out the and collection mechanisms in case of nonpayment respective responsibilities and supports that or delayed payments. In some cases, it may each will provide or receive. The implementing provide advice to the sector project in case of the party, in this case the concessionaire, is expected generation of excess electricity on how to supply

5036-CH03.indd 47 5/27/08 1:12:28 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

other users. In the long run, the concessionaire whole fi nancing for the equipment components ensures the delivery of electricity with quality situated after the meter (cold storage, sterilizer, of service agreed upon in the contract, provides skimmer, churner), as well as for all the the maintenance, stocks necessary replacement civil construction work, including buildings parts and reports periodically to the ASER to surrounding the necessary electric equipment. give feedback on the operation of the MEC. The costs relative to sizing and providing the The St. Louis–Dagana–Podor Concession electric equipment itself (transformers, medium was open to bids in June 2006. In the end, the and low voltage lines, back-up generators and bidding documents included two compulsory consulting services) would be funded by the MECs, the dairy MEC and a social health MEC concessionaire. If we exclude the non-MEC not discussed here. In addition, the information related civil construction work, that bears a on the two other productive uses MECs listed in high price tag (2 billion CFA francs); the total Table 3.3 was provided to the bidders, who were MEC cost is 554 million FCFA, roughly divided free to choose to implement them in addition to in half before and half after the meter. This the two compulsory ones. The initial reaction unusually high level of cost after the meter is due both on the concept and on the feasibility of the to the high quality and complexity of the dairy implementation of the MECs among the four equipment required in the six locations to ensure bidders for the concession has been very positive suffi cient reliability to farmers and coops. and the dairy and health MECs are expected to Providing fi nancing support: It was also agreed be implemented shortly after awarding of the that the concessionaire could benefi t from a grant concession. subvention from the FER (Rural Electrifi cation Fund) of up to 85 million FCFA, to cover part Fostering Stakeholder of its 275 million FCFA investment costs. This Cooperation: Example of the Dairy was proposed as part of the global architecture of the RE concession program that guarantees and Cattle Feed MEC in St. Louis– a maximum IRR (internal rate of return) of 20 Dagana–Podor percent to the concessionaire over a 10-year The MEC Goals. The Dairy and Cattle Feed period. Thus, the concessionaire would have to Multisector Energy Investment Project supports cover the remaining 190 million FCFA of the cost the construction and the electricity supply of through capital investment or loans. four dairy collection and transformation centers Respective responsibilities for the implementation: as well as two cattle-feed processing plants. A tripartite agreement (see CD-Rom in annex) The project also provides veterinary services. was prepared to be signed between the It is intended to increase production (better concessionaire, the client (the cattle farmers’ feed, increased milk collection using cooling for association), and the ASER. It spells out the preservation) and increase value locally rather investments expected from the concessionaire than at the town level (transform and package and from the client to ensure that each meets its raw milk into dairy products) by reaching 10,000 end of the arrangement. The agreement explains farmers and 25 cooperatives. the contract responsibilities for provision Agreement on fi nancing. It was agreed that of electricity and its payment, as well as the the COPAVE, the sector anchor program, relationship with the ASER and the FER. would include in its project and provide the

5036-CH03.indd 48 5/27/08 1:12:28 PM Conclusion

Having outlined the philosophy behind the are numerous low-hanging fruit that can systematic and the pragmatic approaches, increase the impacts of rural electrifi cation demonstrated how they complement each other, projects as well as the outputs of projects and described their practical implementation in implemented in other sectors. This paper Senegal, it is hoped that this paper will convince presented how opportunistic win-win readers of the usefulness of working across situations can be developed between the sectors and the validity of including a livelihood energy sector and the anchor sectors. component in future rural electrification • Large pockets or reserves of productivity programs. can be tapped by using electric-powered In conclusion, the key lessons learned during equipment. A careful analysis of production the design process of these approaches and from processes is generally required to reveal fi eld experience include: these gains and to pinpoint where they may be the most effective. The systematic approach • Working across sectors can seem daunting presented in this paper provides a practical and time consuming, but if initiated method to identify, select, and generate these early during the preparation phase of the benefi ts. The importance of access to credit project, no additional delay is introduced. that is affordable, customized, and available Such activities also can be developed as in remote areas in order to see such benefi ts a continuous process during the long materialize should be noted. operational phase of rural electrifi cation. • The issue of market and demand for products And when well defi ned, interaction with and commodities that are impacted by use sector specialists can create energy projects of electricity is not treated in this work better targeted to livelihood improvement, since for the MECs, this aspect is normally which will enhance the final impact of addressed by the anchor sectors as part of electricity on rural populations. the normal project analysis. It remains a • It is strongly recommended that dedicated complex issue that can have direct impact in funding be set aside at the onset of new the fi eld, especially when dramatic increases rural electrifi cation projects to ensure that in production occur such as in the clothing sufficient time and thought be put into industry. One may consider adding some exploring cross-sector synergies with all market analysis to the TOR of the consultant stakeholders; and to ensure that once a plan as part of the last phase of the systematic has been devised these synergies materialize approach. and deliver in the fi eld. • By targeting the development of specifi c • Lack of coordination between the energy social and/or productive benefi ts, both the sector and other sectors and lack of means systematic and the pragmatic approach of others sectors to address energy issues monitor the specific impacts of rural on their own are very common situations electrification projects. The systematic in developing countries. As a result, there approach can help establish the baseline and

5036-CONC.indd 49 5/27/08 1:12:58 PM MAXIMIZING THE PRODUCTIVE USES OF ELECTRICITY TO INCREASE THE IMPACT OF RURAL ELECTRIFICATION PROGRAMS

the pragmatic approach, through its direct paid consultant, the risk is high that no one cross-sector involvement, can facilitate the will be committed to identify bottlenecks post-project impact data collection. and propose pragmatic solutions. However, • Cross-sector cooperation requires the strong supervision is required to keep the work involvement of a local champion—preferably focused. connected to the government—to ensure • Effective implementation of either approach cooperation from other sector officials, should be customized to the local context. but not necessarily from ministries. An For example, the approach was tailored to fi t electrification agency can provide such in Senegal’s concession program but could support. Also, a contracting phase should very well be adapted to a very different follow the goodwill discussions and initial environment. agreement, to shield all partners from • There is no requirement to be exhaustive possible setbacks following unexpected in the systematic approach or perfectionist changes in priorities. in the pragmatic approach. Rather, being • Using a consulting team for the fi eldwork— cognizant of the reality in the fi eld and the preferably local—is usually required to constraint of the project timetable, while ensure that the specific requirements of keeping an open mind to new linkages such cross-sectoral activities are properly between electricity and productive activities, identifi ed and ad hoc solutions are effectively may bring the chance to have greater impacts implemented. Without the support of such a on livelihoods.

5036-CONC.indd 50 5/27/08 1:12:59 PM Annexes on CD-Rom

All annexes are contained on a CD-Rom inserted 3D—Note on a subsequent workshop on the inside cover page of the paper version of the in Asia using a similar design. report. It contains the electronic version of this report, In French: the World Bank PAD relative to the project described Annex 4: 4A—ESMAP Technical Paper 109/07 in this paper, original reports in French, and FR, “Maximisation des retombées de conceptual documents associated to the organization l’électricité en zones rurales, Application of multi-sector meetings and their follow-up, as well au cas du Sénégal.” Mai 2007. This as documentation linked to the implementation of the technical paper groups, summarizes Multi-Sector Energy Investment Projects (MECs). and provides contextual information to the original consultant reports In English: provided in the annex 3B. Annex 1: Electronic version of this paper: 4B1 to B5—Original Consultant “Maximizing the Productive Uses of Reports (5 volumes). Electricity to Increase the Impact of Rural Annex 5: Details of the calculations to Electriﬁ cation Programs: An Operational establish the anticipated levels of Methodology” cost reduction through productive Annex 2: Project Appraisal Document “Senegal uses of electricity. Electricity Services for Rural Areas Annex 6: Other documents relative to the Project,” World Bank. This is the World implementation of the MECs: Bank funded project described in the 6A—Official decree creating the chapter 1 of this paper. multisector committee, CIMES/RP. Annex 3: Documents related to the Energy- 6B—Tripartite convention (ASER/ Poverty Workshops held in Africa Concessionaire/MEC) for the dairy in 2002/2004 and mentioned in and cattle feed MEC in Dagana– beginning of Chapter 1. Podor–St. Louis concession. 3A—Sample brochure, agenda and 6C—Detailed information, convention proceedings, Addis Ababa workshop and sector commitment for the Health 3B—Sample brochure, agenda and MEC. proceedings, Dakar workshop (in 6D—Detailed information, convention French) and sector commitment for the Dairy 3C—Notes proposing methods to MEC follow-up on the regional energy Annex 7: ASER PowerPoint presentation on the poverty workshops and establish MEC concept cross-sector consultative groups.

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Maximizing the Productive Uses of Electricity to Increase the Impact of Rural Electriﬁ caiton Programs

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