institutional framework for implementing myanmar’s nep interim options and recommendations
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Institutional Framework for Implementing Myanmar’s NEP Interim Options and Recommendations. Alex Sundakov, March 2014. Myanmar’s electrification challenge is immense…. The electrification rate is estimated at 29 %. - PowerPoint PPT PresentationTRANSCRIPT
Institutional Framework for Implementing Myanmar’s NEP Interim Options and Recommendations
Alex Sundakov, March 2014
2012 For universal electrification by 2030
59,000
440,000
130000
Source: MOEP (2011-2012), ESE, YESB data and Castalia estimationsAssumes 6.5 people in a household 2
ESE
YESB
Required189,000
New
hou
seho
ld c
onne
ction
s per
yea
r
Need to connect over 2x as many households per year to reach universal electrification by 2030…
Myanmar’s electrification challenge is immense…
The electrification rate is estimated at 29%...
3
Key Features :
It is impossible to meet this challenge without a programmatic, sector-wide approach…
Countries that have achieved rapid electrification have relied on Programmatic, Sector-wide approach
Stakeholders
Government
Development Partners
Utility
Regulatory Authority
Local Government
Sector Ministries
Private Stakeholders
Consumers
Coordinated least-cost technical and investment planning
Sustainable financing policy
Stable flow of funds
Results focused
Donors pledged US$225 million for first slice of program (2009-2013)
Cost per new connection substantially lower
Rwanda is one of the few countries that had to scale up electrification as rapidly as Myanmar, and this is how it was achieved…
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Sector-wide Program Features Results
Tbc—here I will use exhibits or numbers
Other countries that have adopted this approach include Kenya, Ethiopia, Nepal, Uganda…
Target: Increase electrification from 6% in 2009 to 16% by 2014
Anchored by an integrated technical, financial and implementation plan
National Electrification Program Management Department established
Connections (Target and Actual)
2008 Actual
2009 2010 2011August
2014 Target
New connections
< 5,000 32,995 43,733 40,419 On track
Households connected to electricity
110,896 143,891 187,624 228,043 350,000
On track to achieve electrification targets:
The flow of funds is currently fragmented, increasing costs of national electrification…
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Existing Flow of Funds
Mini-grid operators
Union Budget
MOEP
DRD/MOI
YESB
Private IPPs
ESE
SHS Customers
Customers
Donors
Electrification using a programmatic sector-wide approach, will require institutional reform…
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National grid
National grid expansion
Tariff from electricity sales
Donor funding/ financingUnion budget
Isolated mini grid expansion
Household-level expansion (SHS)
Funds flow to entities responsible for:
Coordination and allocation of funding on sector-wide basis, based on plan
There are sufficient funds and predictable financing flowing through the entire electrification program
There is coordination and management of funding such that it is reaching projects which have been prioritized in a least cost manner
Projects are being built efficiently and are achieving social objectives
Institutions would ensure…
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Resulting in a more streamlined flow of funds…
Programmatic Sector-wide Approach
ESE
YESB
Mini-grid operators
SHS operators
Donors
Union Budget
Customers
Roll-out coordinator:• Subsidies• Finance
What specifically will the reform need to address?
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National grid
Tariff from electricity sales
Donor funding/ financingUnion budget
Isolated mini-grid
Individual Household-level (SHS)
Funds flow to entities responsible for:
Coordination and allocation of funding on sector-wide basis, based on plan
Program-level management and coordination
1
Barriers related to…
Efficient operation of utilities and their ability to scale-up
Need for coordinated implementation of mini-grids
Sustainability and efficiency of individual household-level solutions
2
3
4
First step is to integrate the program…
Program level management and coordination 1
Barriers: Limited mechanism to coordinate funding and financing flows from
different streams into program No institutional structure to link tariffs and costs of providing
electricity services No institutional home to administer least-cost sector wide roll out plan Coordination committees do not work: not able to make decisions
about priorities and funding allocation Project-by-project approval process for external loans may undermine
overall plan
This can be achieved by…
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Program level management and coordination 1
Recommendation: Create/Assign an entity to manage and coordinate the NEP. This entity would also take ownership of the geospatial, least cost plan and maintain and update it on an ongoing basis
Two options for the NEP program manager…
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Program level management and coordination 1
Option 2: MOEP to act as NEP program manager
Option 1: Create and empower an Executive Secretariat under REPWC to act as NEP program manager
Pros ConsAllows ministries with different focus to concentrate on their areas of responsibility (e.g. on-grid vs rural electrification)
Problematic for a secretariat to hold a budget and allocate funding to Union Ministries.
Allocation and coordination of funds within a single ministry, in line with Myanmar practice and procedures
Risk that off-grid electrification projects will be “second class citizens” within MOEP
Second step is to ensure efficiency and capability of utilities…
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Efficient operation of utilities and their ability to scale-up2
Barriers: ESE/YESB are not able to operate as efficient utilities, because:
– Limited operational flexibility and ability to plan—utilities run as government departments
– Limited performance incentives– No ability to access finance on own balance sheet
No instrument for setting cost-reflective tariffs and making rational decisions about the incidence of subsidy
Recommendations: Corporatize ESE and YESB Set up independent utility
regulator for economic regulation (tariffs and standards)
Split up ESE into more utilities Finance new connections on
utility balance sheet
This can be done by…
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Efficient operation of utilities and their ability to scale-up2
…essential but will take time to implement…
Short-term Recommendation:Develop a five-year budget for ESE & YESB, but should not delay reform
A further step could be to…
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Efficient operation of utilities and their ability to scale-up2
Further Recommendations: Involve private sector strategically to improve efficiency
Level of private participation depends on the incidence of the subsidy…
ConcessionManagement contract
System loss reduction contract
Third step is to create an institutional basis for mini-grid projects…
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Need for coordinated implementation of mini-grids3
Barriers: No ministry “ownership” for mini-grids. Hence, no
instrument for channelling Union budget to mini-grids No standard format/processes to develop mini-grids No instrument for linking mini-grid proposals to roll-out
plan
• Whether an entity within MOEP or DRD becomes the “implementing and coordinating ” entity for mini-grids depends on who the NEP program manager is…
1. Option: Where will the institutional home be?
• Different approaches have worked around the world.
• A more or less centralized approach can be used...
2. Option: What will be the role(s) of the entity?
This can be done by…
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Need for coordinated implementation of mini-grids3
Recommendation: The Union Govt will have a role with respect to mini –grids, even if implementation is decentralized. There is need for an institutional “home” for this role
A more centralized approach to mini-grid development…
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Need for coordinated implementation of mini-grids3Function Who What/ How?Funding and Financing Support
Union Govt through a dedicated agency
Union Govt. Agency purchases service from private contractors. It would finance construction as part of the national program, and would contract with private parties so that tariff revenue provides reasonable cost recovery to private developers
Project Prioritization Union Govt, with support from Regional Govt and/or VECs
Actively decides where to build, based on some clearly defined criteria. Could use the support of Regional Government
Detailed Project Design Union Govt
Procurement of Materials, Construction
Union Govt Union government agency will procure private contractors
Regulation Regulator Tariffs set before bidding of projects
Option 1: Centralized approach
A more decentralized approach to mini-grid development…
18
Need for coordinated implementation of mini-grids3
Option 2: Decentralized approach
Function Who What and How?Funding and Financing Support
Union Govt through a dedicated agency
Union Govt. Agency purchases service from private contractors. It would finance construction as part of the national program, and would contract with private parties so that tariff revenue provides reasonable cost recovery to private developers
Project Prioritization Union Govt, with support from Regional Govt and/or VECs
Actively decides where to build, based on some clearly defined criteria. Could use the support of Regional Government
Detailed Project Design Union Govt
Procurement of Materials, Construction
Union Govt Union government agency will procure private contractors
Regulation Regulator Simplified process for mini-grids
Fourth step is to make the household-level program sustainable…
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Sustainability and efficiency of individual household solutions4
Barriers: Risks to sustainability of SHS program Need to ensure incentives for maintenance
Recommendations:The program implementing agency should: Provide financial incentives that promote cost-recovering business
models to flourish Provide clear guidelines for entities that will benefit from incentives Encourage scaling up where SHS is economical Provide training support/ incentives for technicians Closely monitor program’s progress
This can be done by…
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Sustainability and efficiency of individual household solutions4
Bangladesh: IDCOL Model
Lao PDR: OGS-PESCO-VEM Model
Sustainable SHS Models:
Two options for the SHS implementing entity are…
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Sustainability and efficiency of individual household solutions4
Option 1: Combined Govt Agency for mini-grids and SHS program
Pros Cons Better understanding and
coordination of technical plans in the entire space outside ESE and YESB (mini-grid + SHS)
Can combine delivery models more easily if under same entity (e.g. role of VECs)
Simpler for private entities if it is a one-stop-shop
Mini-grid development might overshadow SHS program, which would be smaller in size
More targeted approach for SHS possible, since program design might not have much overlap with the mini-grid program
Easier to monitor progress with single focused entity
Competition and/or lack of coordination between the two entities could lead to duplication and waste of resources
Higher transaction costs
Option 2: DRD continues to develop SHS program on stand-alone basis
To summarize…
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National grid
Tariff from electricity sales
Donor funding/ financingUnion budget
Isolated mini-grid
Individual Household-level (SHS)
Funds flow to entities involved in:
Coordination and allocation of funding on sector-wide basis, based on plan
Create program manager: Could be entity within MOEP or Executive Secretariat under
REPWC/NEMC
1
Strengthen ESE/YESB, through traditional utility reform program, in phases. Include private sector
Create entity to guide mini-grid development. Level of centralized decision-making depends. Where entity sits, depends on level-1 decision
Alter current program design to include ……financial incentives.
Options: DRD continues, or combined entity for off-grid formed
2
3
4
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Need to create a coherent framework, that addresses the entire institutional challenge
Institutional structure needs to be tightly integrated with budgeting and finance flows
The electrification program must be anchored by the technical least-cost expansion plan that includes grid and off-grid
The program needs a credible manager, with ability to allocate/channel resources
Institutional reforms will be essential to the success of the electrification program
Conclusions
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