TABLE OF CONTENTS PART 1. SITUATION ANALYSIS ...................................................................................................................................... 4 1. CONTEXT AND GLOBAL SIGNIFICANCE: ENVIRONMENTAL, POLICY AND INSTITUTIONAL.......................................................... 4 2. ENERGY SOLUTIONS AND BARRIER ANALYSIS ............................................................................................................. 7 PART 2. PROJECT STRATEGY ..................................................................................................................................... 13 3. PROJECT DESIGN PRINCIPLES AND STRATEGIC CONSIDERATIONS ............................................................................... 13 4. PROJECT OBJECTIVE, OUTCOMES AND OUTPUTS ......................................................................................................... 14 5. POLICY CONFORMITY AND COUNTRY OWNERSHIP ....................................................................................................... 21 6. KEY INDICATORS, RISKS AND ASSUMPTIONS ............................................................................................................... 22 7. GEF INCREMENTAL REASONING; COST‐EFFECTIVENESS; .............................................................................................. 24 8. SUSTAINABILITY AND REPLICABILITY ......................................................................................................................... 29 9. STAKEHOLDER ANALYSIS AND COORDINATION ............................................................................................................ 30 10. PROJECT RESULTS FRAMEWORK .......................................................................................................................... 34 11. BUDGET AND CO‐FINANCING ............................................................................................................................. 42 12. MANAGEMENT ARRANGEMENTS ........................................................................................................................ 49 13. MONITORING AND EVALUATION ......................................................................................................................... 50 14. LEGAL CONTEXT .......................................................................................................................................... 54 PART 3. ANNEXES................................................................................................................................................... 55 ANNEX A. EMISSION REDUCTION CALCULATION .......................................................................................................... 56 ANNEX B. TERMS OF REFERENCE ............................................................................................................................. 64 ANNEX C. CO‐FINANCING LETTERS ........................................................................................................................... 70 ANNEX D. LIST OF BY‐LAWS AS ENVISAGED BY THE LAW ON THE USE OF RENEWABLE ENERGY SOURCES ................................. 76 ANNEX E. THE ROLE OF THE NATIONAL TRUST FUND FOR RES AND EE ........................................................................... 77 Page 2 ACRONYMS ADB Asian Development Bank CAIR Community Action Investment Project CDP Community Development Programme CP Country Programme CP Communities Programme (UNDP project) CPAP Country Programme Action Plan CO2 carbon dioxide EE energy efficiency FSP Full-Size Project GBAO Gorniy Badakshan Autonomous Oblast GEF Global Environment Facility GHG Greenhouse gas emissions GDP Gross Domestic Product GoRT Government of the Republic of Tajikistan HPP hydropower plant JCPS Joint Country Partnership Strategy kW kilowatt IPP Independent Power Producer MDG Millennium Development Goals SHP mini (and micro) hydropower MSDSP Mountain Society Development and Support Programme MoIE Ministry of Industry and Energy MoU Memorandum of Understanding MW megawatt O&M operation and maintenance O&M&M operation, maintenance and management PMU Project Management Unit PPA Power Purchase Agreement RE renewable energy RES renewable energy sources SCF Swiss Cooperation Fund SDC Swiss Agency for Development and Cooperation SME small and medium enterprises SIDA Swedish International Development Agency SHP small hydropower CO2 tonne of carbon dioxide ktCO2 kiloton of carbon dioxide UNFCCC United Nations Framework Convention on Climate Change UNDAF United Nations Development Assistance Framework UNDP United Nations Development Programme USAID United States Agency for International Development USD United States dollar Page 3 Part 1. SITUATION ANALYSIS 1. CONTEXT AND GLOBAL SIGNIFICANCE: ENVIRONMENTAL, POLICY AND INSTITUTIONAL Energy and electricity situation After the breakdown of the Soviet Union and subsequent civil war in Tajikistan in the early 1990s, grid extension has come to a virtual standstill. Moreover, in the absence of proper maintenance and repair works on the generation, transmission and distribution facilities, the condition of the existing grid has in many rural areas deteriorated to the point where electricity supply is either not possible at all, or only with low quality and frequent outages. At the same time rural dwellers (over 70% of the population) have moved to more remote locations and previously uninhabited valleys without grid supply in the search for additional farmland. Tajikistan has great hydropower potential, and has focused on attracting investment for large-scale hydropower projects, such as the Nurek and Sangtuda-1 (670 MW) hydroelectric power stations. More hydropower projects are at the development stage, such as the Rogun power plant (3,400 MW). However, as these large power plants are oriented to power exports and large industrial estates, these form only a partial solution for rural energy supply. Today over 95% of Tajikistan’s power generation capacity is based on large hydro power plants, with strong seasonal variations in power production, the lowest occurring during the winter (October – April/May) season when the demand is at the highest. The electricity grid of Tajikistan is currently divided into a northern and southern network, with both networks connected to Central Asian Network. This divided system has led to inconsistent power supply especially to remote areas. During the winter period, the problem is linked with the seasonal disruption of the electricity supply (due to deficits in the electricity production of large hydropower plants). Furthermore, the problem is exacerbated by the condition of the power supply systems in Tajikistan, characterized by voltage instability, service interruptions, poor dispatch and communication systems, low cost recovery and high losses. As a result, while the vast majority of the villages are connected to the grid, electricity is only supplied for 2 to 6 hours per day during the winter months (1 to 3 hours in the morning and evening each). In summer, power supply is generally more reliable. However, a significant number of remote, non-connected rural communities remain without any electricity supply throughout the year. Fossil fuel resources are relatively limited and poorly developed in Tajikistan. Although coal reserves are abundant in certain mountainous areas, they are hardly utilized due to a lack of access roads and high development costs. As such, the country relies on imported fossil fuels, and this reliance on importations has a negative bearing on the energy security of Tajikistan. Besides bad roads, a limiting factor is the high costs of imported fuels, which rural residents and public institutions in most cases are unable to afford. Access to reliable energy continues to be one of the critical development issues facing Tajikistan. Almost every winter, as a result of Tajikistan’s dependence on unreliable electricity imports, the country is faced with an energy crisis, where rural areas have access to only a few hours of electricity per day. LPG (liquefied petroleum gas) stoves and diesel generators serve the energy needs of a tiny minority of the rural rich. It is estimated that over 1 million people, out of Tajikistan’s population of 7.1 million, live primarily in rural areas, and have little or no access to an adequate energy supply. An unreliable electricity supply constrains income‐generating activities and has severe environmental consequences. The situation described above has forced the rural population to at least partially substitute for the lack of access to modern electricity by exploiting alternative local energy resources for cooking, lighting, and commercial use (i.e. to meet its basic energy needs, including deriving a livelihood). These Page 4 energy sources include primarily traditional biomass (fuel wood, dung, cotton-plant seeds, and shrubs) and occasionally - fossil fuels (diesel oil and coal) as illustrated in Figure 1. Figure 1 Model of energy supply and demand in Tajikistan since 1920s1 From the environmental perspective, this situation has been disastrous since the unsustainable felling of highly valuable mountain forests has contributed to a loss of forest cover, biodiversity and of GHG emissions. According to recent studies in selected location 70 to 80% of the forest cover has been lost during the last 20 years mainly due to the high demand for energy2. The deforestation and forest degradation has also resulted in soil erosion