kathmandu | apr-15 | interactions between productive use of energy and access to markets
TRANSCRIPT
Interactions Between Productive Use of Energy
and Access to Markets
What is Productive Use Of Energy (PUE)“Agricultural, commercial and industrial activities involving energy services as a direct input to the production of goods or provision of services” PRODUSE
“Activities that involve the utilization of energy – both electric, and non-electric energy in the forms of heat, or mechanical energy - for activities that enhance income and welfare. These activities are typically in the sectors of agriculture, rural enterprise, health and education.” World Bank
Rationale for PUE Promotion
• Energy projects with productive use components are more likely to lead to rural economic development.
• Rural electrification projects with a productive use component are more likely to achieve economic sustainability: 1.Enterprises that generate profits through
electricity use have a higher ability to pay for energy services than private households who use electricity for purely consumptive purposes.
2.PUE produces a more even demand profile3.Obtaining financing may be easier if rural
financing agencies see that productive investments materialize from their credits.
Electricity access
provided
Enterprises take up and use
electricity access
Enterprise incomes and/or profits increase
Incomes rise = poverty reduced
Households take up and use
electricity access
Time made available by
electricity use is employed for work
activities
PUE Impact on Poverty:
Energy for PU necessary but not sufficient: Knowledge and skills are needed to use energy
for profitable enterprise. Access to credit is needed to finance productive
tools and equipment. A policy and institutional environment conducive
to business development is required. Complementary infrastructure services, such as
transport, water supply and ICT services also needed.
Access to markets for additional or new products or services enabled by access to energy is critical.
Need for Access to Markets for Energy-Enabled Products:
Research indicates that without access to external markets: demand in rural areas is unable to absorb
additional production => new and newly electrified enterprises simply competing with existing and un-electrified firms for the same overall “pool” of value.
additional labour freed-up by electrification is likely to simply drive down wages and the prices of goods and services produced informally so that even those able to use additional time productively may well not see any increase in incomes.
Need for Quality & Continuous Supply of Goods
For a Market System to Function Smoothly: Enterprises that use electricity need to produce
quality goods and also need to continuously supply the goods in order for market to function smoothly and as a result for the enterprise to be sustainable in the long run.
It is very important to reach an Equilibrium point between Production and Consumption
Need for Use of Electricity throughout the day
For a minigrid system (MHP) to be economically sustainable: Demand (and hence revenue) from users
must be sufficient to cover costs => need for productive use of electricity through the day.
Hence…
For all the stakeholders to be sustainable in the Energy Supplier & Enterprise value chain it is essential that: There is regular supply of electricity All enterprises have access and
linkages with external market. Enterprises supply quality and
continuous goods to markets. Enterprises use electricity throughout
the day (not just at peak times).
PUE in Case of Micro Hydro
Sustainability is the primary concern of all MHPs in Nepal
CausesPolicy• Procurement
based approach rather than end use approach
Institutional• Grid and off
grid divorce• High
potential consideration
• Highly subsidy based
Financial• Utilization
(25-40%)• Lower
demand based tariff
• 10% PUE criteria
Technical• Repair &
Maintenance• Capacity
building• Quality of
workmanship and equipment
Practical Action’s Approach to Address Sustainability Making Micro Hydropower Plants
(MHPs) Sustainable by Improving supply reliability Realising sustainable energy-based rural
enterprises Achieving Impact at Scale through
influencing the government programme (NRREP) adopt process and tools of the approach for promotion of energy-based rural enterprises
What we are Doing
Reliable Electricity
Supply
RegularPayment
of Electricity
Bill
Why are we Doing it?
Majority of MHP installed in Nepal (2,500+ in number) are not able to ensure reliable supply due to weak cash-flow performance and hence poor access to electricity.
Rural IGA and enterprises has very low productivity and efficiency because of lack of proper technical, management skill and lack of access to modern energy.
How are we doing it
Making MHP management aware of opportunities of better income by selling reliable electricity to ABC clients and hence sustainable MHP
Help establish or strengthen rural enterprises with proper analysis of market system (shift from production focus).
Project Focus Market mapping to understand &
design intervention to strengthen market systems of Micro Hydro Projects and Rural Enterprises
Ensure churning of three wheels of change through various activities
Help network & interaction among market actors
Leverage funds from NRREP for capacity building & funding partial initial investment for rural enterprises
Project Constraints
Generic constraints:
– Policy, geography, socio-economic, economic, among others
Structural constraints: Project required to focus on two market systems
– Market system of MHP electricity– Market system of sub-sectors that use
electricity from MHP
MHP and Energy-Based Rural Enterprises Interrelationship
MHP market system
Processing 1End Market
Supporting Actors
Market system of MHP is one of service provider for other market system of subsector
Raw material supplier - 1
Raw material supplier - 2
Policy environment
Tax regime
Subsidy and Grants
Quality Standards
Processing 1
Raw material supplier - 2
Addressing the Issue of Access to Markets
Participation Wider range of relevant stakeholders comprising
government officials, local bodies, private sectors and their associations, Micro hydropower management committees, Local enterprise development committee, local entrepreneurs, teachers, political representatives, potential beneficiaries etc. participated and provided their inputs in different stages of project.
Alternative Energy Promotion Center (AEPC) actively participated in design, implementation and monitoring of project activities.
Addressing the Issue of Access to Markets
Preparation Training on PMSD: 28 participants from AEPC (9),
Practical Action and local partner organization (Sr. Mgmt.) to develop them as Champions of PMSD.
Business Counselling and PMSD training to Enterprise Development Officers and Local Enterprise Development Facilitators. Total 86 participants participated.
ToT on Enterprise Development for Local Resource Persons. Total 18 people selected as trainer. They went on to train LEDC members (400) at village level
Addressing the Issue of Access to Markets
Preparation District Project Advisory
Committee formed at project districts
Project inception meeting at district level to inform relevant stakeholder about project.
Brainstorming among AEPC, Practical Action and local project partners for pre-selection of MHPs and possible market systems
Addressing the Issue of Access to Markets
Sub-Sector or Market
Identification in MHP cluster areas
Subsector having potential to drive village economy
– Lokta (Nepali Paper)– Stone– Milk – Herbs: Essential oil
Other enterprises that supply to local marketFurniture, mobile repair, computer institutes, bakery, photo studio, masala industry, metal industry, cold store, huller/grinder, water pumping
Addressing the Issue of Access to Markets
ImplementationEmpowering Marginalized Actors for Engagement
Financial and Organizational Management training to MHPs managers, operators and accountant
Repair and Maintenance Training to Operators of MHPs
Addressing the Issue of Access to Markets
ImplementationEmpowerment for EngagementBusiness startup and business plan development
Village level mass gathering to provide information on project, government policies on rural energy and enterprise
Discussion with potential entrepreneurs on their business ideas and how they are planning to implement it.
Addressing the Issue of Access to Markets
Implementation
Hands-on skill development
Empowerment for Engagement
Addressing the Issue of Access to Markets
Implementation
Interaction of Key Actors for TransformationRight EffortInteraction among MHP management committee and electricity buyer (next villagers and entrepreneurs) making them realize and understand benefits to both parties by developing interdependence
Addressing the Issue of Access to Markets
ImplementationInteraction of Key Actors for Transformation
Facilitating market actors to collectively identify obstacle opportunity affecting their market system
Sub-sector analysis with relevant stakeholders (buyers, entrepreneurs, technical experts, local bodies etc.)
Addressing the Issue of Access to Markets
ImplementationInteraction of Key Actors for Transformation Interaction between local entrepreneurs and
regional and national buyers to make a business deal.
Lokta buyers dealing with local entrepreneurs on quality and price at Santada, Accham
Addressing the Issue of Access to Markets
Implementation Interaction of Key Actors for Transformation
– Interaction among Nepal Telecom, AEPC and MHP management committee to sell MHP electricity to Telecom tower
– Interaction between AEPC and Department of Irrigation to support MHP operated lift irrigation System.
– Interaction between dairy cooperation and villagers– Interaction between local saving and credit
cooperative and entrepreneurs– Interaction between District Forest Officials, Natural
Conservation Officials and entrepreneurs that are based on NTFP and natural resources
