Solar Energy Implementation Model in Nepal and Way Forward for Scaling Up

Ram Prasad Dhital Assistant Director, AEPC and Program Manager, Solar Energy Sub Component, NRREP
Feb 6, 2013

PRESENTATION OUTLINE
Energy Situation of Nepal Why Solar Energy for Nepal? Major Initiatives on Solar Energy Existing Business Model; Concepts and Concerns
Utility Based Model CESP Model Vendor Sales Subsidy Model

Barriers to Upscale Way Forward

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ENERGY SITUATION OF NEPAL

HHs with access to electricity: 55% (45%Grid, 10% - Off-Grid) High dependence on traditional fuel High dependence on imported petroleum products Rich in water resources but an acute energy crisis Residential sector- 89% Industrial & Commercial4.6% Transport- 5% and Agri0.9%

Source: WECS, 2010

SOLAR ENERGY PROSPECTS IN NEPAL

Average solar radiation: 3.6 ~ 6.2 kWh/m2/day- 300 days, Grid extension is unfeasible due to

Difficult terrain and

Remoteness population

Scattered and Sparse

Lower load densities Lower lower
utilization rates

Source: AEPC

MAJOR INITIATIVES ON SOLAR ENERGY IN NEPAL

NEA supported/owned a few Mini Grid Systems (Not operational ) Danida, KfW, DFID,Norway supported Solar Energy Component of AEPC/ESAP (1999-2012) European Commission supported Renewable Energy Project (2006-2012) ADB supported Renewable Energy Project for a 10 kWp Solar Wind Hybrid Project (2009-2012) GoN supported Institutional PV systems (1999-to date) National Rural and Renewable Energy Program (20122017)
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MINI GRID SOLAR PV CONCEPT

Central distribution - micro utility unit operated by a renewable service company or community itself or cooperative etc. Distribution of energy relative to demand against fixed supply as in solar home system More energy for productive end use application Cost /watt lower due to larger size More control in the system Easy to monitor installation and system parameters Day time load and night time load can be categorized and size of battery bank can be reduced for day time load.
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BUSINESS MODEL FOR SOLAR ENERGY IMPLEMENTATION IN NEPAL

Existing Business models for rural power mini-grids and /or SHS
The utility-based model Community-based model (CESP Model) Private sector-based model (Vendor Sales Model)

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UTILITY BASED MINI GRID SOLAR PV

NEA has installed as part of a French government development project in 1989 three solar PV array systems in 30 kWp ,Kodari 50 kWp , Gamghadi 50 kWp , Simikot

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KEY ISSUES TO CONSIDER FOR SOLAR MINI GRIDS

Proper load assessment and design Sustainable financial model

Sustainable operation and maintenance plan Clarity in role of the private sector, tariffs and subsidies, and capacity building

Participatory approach for project implementation

NEA (Utility) owned model has been failed in Nepal because of non and/ or partial consideration of the above issues
Learning Maintenance is key to system longevity

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CESP APPROACH UNDER AEPC/EU/REP

REP facilitated CO to CESP

CO
Quality Energy Services/ Water

REP Provided PV-Equipment

CESP (Coop/ Pvt Com)

Repair & Maintenance

Social Institutions Business Organizations Other Users

Tariff
Source: REP project document
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ACHIEVEMENTS UNDER CESP MODEL (AS OF FEB 29,2012)

Sn PV package Far west

1 2 3 4 5 6
7 8

Local health post School package 1 School package 2 Community computer literacy Community entertainment Community communication centre PV agro-grinding mill Water pumping system Total

68 74 31 12 16 33
31 17 282

Number of systems Western & Mid west Eastern Central 39 42 57 45 47 72 29 34 46 6 11 0 17 21 5 20 38 33 50 7 213 22 4 219 4 2 219

Total

206 238 140 29 59 124

107 30 933

Source: REP
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COMMUNITY ENERGY SERVICE PROVIDER (CESP): CONCEPT AND CONCERNS

Concept Ownership lies with CESP CESP installs solar systems and charges the user a monthly fee for the energy it produces CESP is for maintenance and providing replacement parts over the life of the service contract
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Concerns Substantial TA for feasibility study and training for O & M Operation difficult in dispersed population, High costs of travel and equipment parts, Limited ability/willingness to pay regular installments Relatively low household prioritization of electricity 13 beyond lighting

VEND0R SALES SUBSIDIZED MODEL UNDER ESAP AND NRREP

Vendors are prequalified
Vendor creates demand, installs systems (at least 10 systems in one cluster), take photo, fill subsidy application form and conduct a simple operation and maintenance training

Return to vender

Vendor submits the subsidy form to the program

SEC (AEPC/NRRE P)assesses/ verifies the form

Rural Energy fund verifies and releases 90% of the subsidy Yes

The Rural Energy Fund releases the retention money (10%)

Monitoring report is a basis for performance evaluation and grading of companies including penalty and disqualification

The prequalified consulting firm (third party) verifies 10% of the installations in field

SEC selects no of sites randomly thru computerized program to be visited for physical verification and quality assurance

ACHIEVEMENTS UNDER VEND0R SALES MODEL (AS OF JAN,2013) AND PLAN FOR THE NEXT 5 YEARS
Achievements Solar Home Systems (SHSs) 300,000 Small Solar Home Systems (SSHSs)- 30,000 ISPS- 500 including two big systems
24 kWp, TU library 14 kWp, Presidents palace
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Tentative Plan (2013-2017) Solar Home Systems (SHSs) 600000 Large Systems- 1500

SUBSIDIZED DEMAND BASED VENDOR (PQ COMPANY) SALES: CONCEPT AND CONCERNS
Concept
Long term financing with a subsidy component Vendors are qualified and are responsible for installing systems and providing after sales service for one year from the date of installation. After one year, users need to take responsibility for operation and maintenance of their system. Users also need to pay for maintenance and replacement of the parts when required
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Concerns/Issues
Not cost effective as it requires strong quality assurance and monitoring mechanism. Issue of inflated pricing, reaching to the poorer segment of the society, administrating subsidy Unhealthy competition among vendors. Replacement of parts is of lower quality Battery management
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MINI GRID SOLAR PV BARRIERS TO UPSCALE

Financial Policy High investment cost Lack of innovative RE favored policy options Lack of access to credit Favor (Subsidy) to Ensuring tariff collection fossil fuel Ensuring productive end use No additional support application Technical for minigrid Limited expertise in solar mini grid systems Social Technology Majority of components are imported knowledge Lack of easily available spare parts Users System maintenance and operation expectations Lack of standard, codes and certification
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MINI GRID SOLAR PV and SHS: WAY FORWARD

Link capacity development activities with academic and vocational institutions Engage research institutes for cost reduction options Initiate some innovative RE favored policy options
FIT, Net Metering, Accelerated depreciation etc. Increase tariff for urban area and subsidies the equivalent increment in rural area Prepaid tariff meters for regular revenue Link with commercial banks and private company equity Promotion of productive end use - financing and market identification

Implement an appropriate business model

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UPSCALING STRATEGIES

Pilot In few places Lessons learned (19962003, 5 districts)

Expansion Based on lessons learned expansion in 2003-2007 25 districts

Mainstreami ng Policy formulation, government commitment (2006 RE policy)

Replication In other districts and region and neighboring countries

Upscali ng

Source: Adapted from RERL

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For further contact:

Ram Prasad Dhital Assistant Director AEPC and Program Manager, Solar Energy Sub Component NRREP Alternative Energy Promotion Centre Tel:+977-5548468,5539390,5539237 ext 324 Mobile: +977-98510-76005 Email: ram.dhital@aepc.gov.np Website: www.aepc.gov.np
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