Rural Energy Development in Asia : Livelihoods, Equity

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Rural Energy Development in Asia Livelihoods,
Equity Empowerment
Nandita Mongia ,Ph.d UNDP Regional Centre,
Bangkok Presented at Conference on China Rural
Energy Development Nov 22, 2007
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Rural Development and Access to Energy

• Access to energy services has the power to bring
  about rural development is critical for
  attainment of MDGs
• Reduce not just income poverty but improve
  quality of life if energy services can be
  improved for rural areas through consistent
  supply , increased access and quality
• Approximately 1.6 billion people in the world do
  not have electricity about 2.4 billion rely on
  traditional fuels grid based electricity does
  not reach many rural poor urban areas , access
  to gas or other heating fuels very limited in the
  region .

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The hidden impact of Oil price rises on the poor
in Asia Limited visible macro impacts case for
alternate fuels for decentralised development
Survey of 500 households in 14 poor rural and
urban communities in China, India, Indonesia and
Lao PDR

• What do poor households use
• Kerosene - for lighting and cooking
• Liquefied petroleum gas - mainly for cooking
• Diesel - transport, agricultural equipment, power
  generation
• Gasoline - less important, mainly private
  transport
• Chemical fertilizers - agriculture

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Impact of Oil Price Rises on the Poor Price
increases faced by poor communities
Between 2002 and 2005, the amount each surveyed
household spent for its energy needs increased by
74 percent

• 171 percent more for cooking fuels
• 120 percent more for transportation
• 67 percent more for electricity
• 55 percent more for lighting fuels
• 33 percent more for petroleum-based fertilizers
  and other agricultural inputs
• What is taking place among the poor could well
  be a portent of more widespread setbacks to whole
  economies if oil prices continue on their present
  trajectory
• Can RE help ?

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(No Transcript)
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Financing for Renewable Energy in Rural
development Spread of RET investments Study
Findings

• Most renewable energy and biofuels investments
  are in OECD countries and large rapidly
  developing countries (China, India, Brazil).
• Fast growth in grid-intertied RETs (solar, wind,
  biomass, mini-hydro).
• Biofuels growing in China, India, Japan,
  Malaysia, the Philippines, and Thailand.
• Off-grid renewables growing in a few markets,
  mainly in South Asia through commercialization
  based on public / private partnerships (RERED Sri
  Lanka, REREDP Bangladesh, AEPC Nepal).

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Asian Countries with RE Targets
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Drivers of Investment into RETs

• Energy security is the main driver of current
  investment trends in RE initially in OECD
  countries and now in Asia / Pacific region
  China, India, Thailand, Malaysia, Sri Lanka
• Recent oil price volatility has accelerated this
  trend, with prices at 95/bbl in November 2007
  greater scope
• Climate change / CDM is not yet a significant
  driver for RET investments among developing
  countries in Asia Pacific, but its importance is
  increasing. China and India dominate this
  market.
• MDGs remain a minor driver for RET investments.
• Why is increased livelihood not yet a driver for
  widespread upscaling of RE for development in
  rural areas?

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Barriers to access

• 1st generation barriers
• Lack of awareness of the technology and its
  applications,
• Lack of understanding of sustainable operation of
  RET systems (technical capability for
  maintenance, collection of tariff to cover costs.
• Most countries in the Asia Pacific have overcome
  these barriers, but they persist in many of the
  pacific island states and countries that have
  recently gone through conflict (Afghanistan,
  Cambodia).

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Barriers to Investment

• 2nd generation barriers Most Asian countries
  are in this group
• Inability to scale-up substantially through a
  commercial market mechanism due to lack of clear
  policies, government support and investment, or
  financing.
• Projects in a few countries have shown how these
  barriers can be overcome through public-private
  partnerships. Public investments training,
  awareness, subsidies, standards, quality control
  Private companies market technologies to users.

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Barriers to Energy Access and Poverty Reduction

• 3rd generation barriers inability to increase
  the incomes of large numbers of the poor through
  the use of RETs. Examples exist where RETs have
  played a key role in increasing the incomes of
  the poor. Barriers stand in the way of scaling up
  these examples.
• The barriers are
• lack of understanding by the development
  community of the role of RETs in increasing
  income and reducing poverty
• insufficient investment in demonstrating the
  scale up to increase this awareness
• unavailability of well engineered packages of
  products that include the energy supply and the
  full link to the productive end uses that are
  easy to use to maintain.

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Access to the Poor Community Based Systems

• Community systems can reach the poor
• REDP Nepal
• Micro-hydro in Philippines (pro-poor NGOs YAMOG,
  UNDP/GEF Small Grants)
• Poorly designed systems can generate more burden
  than benefits to the community (IRRI hydropower
  project in Solomon Islands).

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Role of RETs in improving access to the poor
(from case studies)

• ? Successful commercialization models are result
  of public private partnerships
• RERED Sri Lanka 100,000 solar home systems,
• Biogas Support Program Nepal 150,000 digesters,
• REREDP Bangladesh 50,000 solar PV home systems
• Cambodia Fuel Wood Savings Project - 95,000 ICS
  in three years
• Khmer Solar in Cambodia (with no public support)
  has sales of only a few hundred systems
• Lessons learned from earlier Indonesian WB/GEF
  solar PV commercialization project
• lack of flexibility in program design to respond
  to Asian Economic downturn yielded only 8,000 of
  projected 200,000 systems
• Commercialization of solar PV and biogas is not
  reaching the poor.

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Barriers to Energy Access and Poverty Reduction

• Affordability remains a persistent barrier for
  the poor to access RETs in rural and peri urban
  areas
• The provision of micro-finance has enabled a
  limited number of the poor to access systems but
  unless their incomes can be increased through the
  use of energy, large numbers of poor can not
  access RETs

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Key Conclusions Poverty Implications

• Grid-connected RETs have few direct poverty
  reduction impacts models remain to be developed
  for possible passing through of profits to
  suppliers of feed materials (eg farmers producing
  rice husk) or sharing of royalty for hydropower
  or wind,
• Despite enthusiasm, models remain to be developed
  and demonstrated for generating
  hoped-for-benefits to the poor, or energy
  security at the local level
• Poverty reduction or access to the poor are not
  yet priorities of ongoing RET commercialization
  programs and they have had minimal impacts in
  this
• Community-based energy supply from
  micro-hydropower is available to the poor and
  also has sufficient power for productive end uses
  and employment. (Social cohesion)

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Key Conclusions MDG Impacts

• Access to energy through RETs was found to
  contribute to education, health, gender, and
  environmental MDGs (2, 3, 4, 5, 6, 7) in varying
  degrees.
• Sufficient models and critical mass of experience
  are not available to reduce poverty (MDG 1) in a
  systematic manner through the use of RETs.

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Key ConclusionsEstablishing cross-sectoral
linkages

• Health, education, and entrepreneurship programs
  typically lack a modern energy component
  especially in rural areas
• Poverty reduction through RETs in rural areas
  requires working with the larger poverty
  reduction community to link energy with programs
  in agriculture, forestry, SMEs, education and
  health.

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Establishing and strengthening cross-sectoral
linkages for delivering rural energy

• Promising Integrators on the ground are
• Micro Finance Institutions
• Agencies promoting SMEs and micro-enterprises
• NGOs/ CBOs working with a holistic development
  approach
• RET vendors
• Community based energy projects
• Local and national government
• Development Banks partners

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Strategic Recommendations(to increase private
investments into RETs, increase access to the
poor, reduce poverty, and meet MDGs)

• Substantially increase investments into
  grid-intertied RETs (and increase rural
  electrification, and share benefits with local
  residents, particularly the poor),.
• Increase investments into biofuels, but
  cautiously (and increase employment through
  community production of oil crops and biofuels to
  power multi-functional platforms and local
  transportation as well as for external sales),
• Expand access of the poor to off-grid RETs
  through community-based mini-grid systems and a
  commercialization plus approach for household
  technologies like biogas and solar PV,
• Expand high value applications of RETs in
  education, health, microenterprise, and
  telecommunications to benefit the poor.

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Strategic Recommendations (contd)(to increase
private investments into RETs, increase access to
the poor, reduce poverty, and meet MDGs)

• Integrate commercially available RETs into a wide
  range of ongoing income generation and
  development activities aimed at reducing poverty
  - being carried out by government, NGOs/CBOs,
  micro-finance institutions, and donor financed
  projects,
• Increase access to financing so that the poor can
  afford to access commercially available RETs,
• Facilitate the development of CDM projects to
  provide carbon financing to renewable energy
  projects with the largest MDG impacts (e.g.,
  community carbon finance initiatives),
• Develop new procedures for monitoring the
  poverty, gender and MDG impacts of renewable
  energy projects.

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Policy Recommendations(to increase private
investments into RETs, increase access to the
poor, reduce poverty, and meet MDGs)

• Feeding in renewable electricity to the grid
• Policy and Legislation
• Set national targets and timetables for
  renewables
• Put in place Renewable Portfolio Standards,
  establish feed-in tariff, net-metering,
  interconnection agreements, standardized power
  purchase agreements.
• Enact laws for sharing royalty from hydropower,
  wind with local residents for benefit of poor.
• Require green IPPs to distribute portion of power
  for rural electrification.
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for green IPPs.
• Reduce import duties, VAT on equipment for green
  IPPs
• Public Investments
• Increase awareness of policy makers, utility
  officials,
• Technical support and training to investors and
  utility officials
• Pilot benefit sharing with local suppliers of
  inputs (e.g rice husk)

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Policy Recommendations(to increase private
investments into RETs, increase access to the
poor, reduce poverty, and meet MDGs)

• Sustainable development of biofuels
• Policy and Legislation
• Implement mandates for blending biofuels into
  diesel and petrol
• Set standards for biodiesel
• Make legal provisions for poor and landless to
  grow jatropha and other biofuel crops under
  leasehold forestry
• Limit use of food crops for biofuels (e.g.,
  recent China policy)
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for biofuels
  investors.
• Reduce import duties, VAT on equipment for
  biofuels investors.
• Public Investments
• Invest in RD to maximize yields
• Examine the potential impacts of large-scale
  biofuels production on land, water, nutrient
  runoff..
• Invest in RD of small-scale seed press and
  esterification units for community production of
  biofuels

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Policy Recommendations(to increase private
investments into RETs, increase access to the
poor, reduce poverty, and meet MDGs)

• Off-grid RETs
• Policy and Legislation
• Announce targets and timetables for universal
  access to electricity and non-electricity
  services (milling, cooking fuels) through
  off-grid RETs complementing rural electrification
• Fiscal and Financial Incentives
• Provide direct investment subsidies, production
  tax credits, income tax holidays for
  manufacturers and suppliers of RET equipment
• Reduce import duties, VAT on equipment on
  off-grid RETs
• Public Investments
• Map renewable resources of the country and
  increase awareness
• Invest in public private partnerships for
  market-based supply of off-grid RETs
• Standardize equipment, provide training and
  quality control
• Provide additional grant support to complement
  commercialization such that the poor, women, and
  marginalized can access RETs

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Policy Recommendations for Case Study Countries
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Policy Recommendations for Case Study Countries
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Policy Recommendations for Case Study Countries
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Categories of Countries to extend recommendations
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The time to act is now, before affordable
energy access for development becomes a
distant Memory Thank you