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Strategic paperA suggested two-pronged approach for the successful electrification of PNG,

Solomon Islands & Vanuatu.

Pacific working group of the Energy for All Partnership (E4ALL)

V2. January 20th 2010Written by Marc Torra Griso

Executive summary:

The objective of this paper is to suggest a possible strategy for the rural electrification ofPNG, Solomon Islands and Vanuatu, three countries that share similar characteristics.

One aspect of the strategy is based on the understanding that basic electrification tohouseholds can be provided by the private sector, with technology currently available, andwithout any need for external funding. This approach is based on the assumption thatsmall lighting systems such as solar lanterns can be financed by the money previouslyspent by households on kerosene for lighting1.

The other aspect involves the use of donor funding to electrify schools or establishlearning centres2 on the outer islands. With internet access from the outer islands, thesoftware application RescoManager3 can be made accessible, thereby facilitating thefuture expansion of the installed capacity without any danger of jeopardising thesustainability of the rural electrification program4. Increasing the installed capacity meansgoing from the few watts of a solar lantern, to the hundreds of watts required by moresophisticated lighting systems and small appliances.

Objective:

To establish a model for the electrification of three Melanesian communities that can beeasily scaled up and replicated to other communities within the same targeted countries,with the aim of providing electricity tomost of their rural population within the next 5 years.

Context:

The three targeted countries share the following characteristics:

Cultural and linguistic diversity, something that makes the implementation of acentralised approach to rural electrification more difficult. Therefore, the strategy needsto empower linguistic communities, and be flexible enough to adapt to their traditions and

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1 According to the Regional Center for Technology and Innovation (RCTI) the average expenditure inkerosene for lighting in PNG is 1 Kina a day, equivalent to USD 12 a month. This is enough to pay back asolar lantern such as the one offered by TERI in just 6 months.

2 For example, learning centers similar to the ones set up by the People First Network in the SolomonIslands,

3RescoManageris a web based, freeware and open source software application for the technical, financialand logistics management of Renewable Energy Service Companies (RESCOs). Its aim is to make ruralelectrification easy. To do this, there must be internet connectivity available on any of the outer islands to

be electrified. The project has received support and funding from the European Commission, UNDP andPIGGAREP.

4This approach is already being implemented in Kiribati, RMI and FSM thanks to European Commissionfunding.

http://rescomanager.org/http://energyforall.info/http://rescomanager.org/http://rescomanager.org/http://www.peoplefirst.net.sb/http://www.peoplefirst.net.sb/http://energyforall.info/http://energyforall.info/

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ways of doing, while keeping a common thread that weaves them together in a searchfor synergetic interactions (networking),

Most of the rural areas still remain unelectrified. This can be an advantage because it iseasier to implement a new approach when there isnt an existing institutional structurealready in place,

Their rural economy is mostly based on non-monetary means of exchange, with littlecash available to pay for external goods and services. It is therefore necessary to offersolutions for the payment of the equipment through other means of exchange such ascash-crops, and the payment of services provided by the local entrepreneurs by usingeither these cash-crops or their traditional bartering system.

Good potential for solar PV, pico-hydro and coconut oil, with solar energy being a betteralternative in costal areas of the main islands and in the small outer islands, while pico-hydro is the ideal alternative in the highlands, and coconut oil having good potentialwherever abundant copra is available.

Furthermore, there are some extra characteristics that are common to most Pacific island

countries, such as: Different approach to the concept of ownership, with societies where the concept of

commons, community ownership, or the use of something by those ones who most needit (e.g. sevu sevu in Fiji or bubusi in Kiribati) still play an important role, as opposed tothe Western concept of private ownership,

Geographical isolation, which makes the supply of spare parts and the centralisation ofservices (e.g. maintenance) on the main urban centres difficult,

Marine environment, requiring the use of components that can withstand the high levelsof humidity and salinity.

Strategical approach:

I. For the household electrification:

1. to engage the private sector (local entrepreneurs) in the delivery of electricity,

2. to start with small lighting equipment as a catalyst (i) to involve the localentrepreneurs, and (ii)to build up the required skills in rural electrification with atechnology that:

is maintained easily,

poses low financial risk,

does not require internet connectivity or the use of special software,

is able to provide electricity at prices which reflect efficient costs, including anadequate return on investment,

3. to make use of an existing campaign (Lighting a billion lives) and itsaccompanying business model, for the supply of the small lighting equipment.The business model suggested by Lighting a billion lives is based on theestablishment of charging stations by local entrepreneurs, where households canswap their solar lanterns for fully charged ones in exchange of a small fee,

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http://labl.teriin.org/http://labl.teriin.org/http://labl.teriin.org/

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4. once households request an increase in their installed capacity, the chargingstations can be turned into full renewable energy service companies (RESCOs5).Expansion means the addition of new services to the small lighting devices, suchas larger renewable energy systems that requires the installation of generatingequipment (e.g. solar panels or a pico hydro generator) in the householdpremises or as a micro-grid in the village.

II. For the school electrification:

5. alongside with the small lighting equipment supplied to the household, electricityand internet connectivity is to be provided to schools, or learning centres need tobe established. In this way, an ideal opportunity is created for the young to usetheir talents, for their trend to migrate to the main urban centres to be reduced,and for RescoManager to assist in managing the administrative complexityinvolved in expanding the future range of services,

6. the electrification of schools (or establishment of learning centres) is financed withdonor funding. Potential sources of funding for Melanesian countries are:

a. Pacific Regional Infrastructure Facility PRIF (AusAID, NZAID, the AsianDevelopment Bank, and the World Bank Group) AU$200m for improvinginfrastructure in Pacific countries;

b. Second ACP-EU Energy Facility (EU) !200m for energy to all the ACPcountries;

c. Bilateral aid from the different governments (AusAid, JICA, FranceAid, ...)

7. local NGOs are involved in providing capacity building for training localentrepreneurs on the use of RescoManager;

Suggested project stakeholders:

Tata Energy Research Institute (TERI)and their campaign Lighting a billion lives. TERI isalready convenor of the solar lantern working group of the E4ALL initiative. Their suggested

business model is based on setting up charging stations and swapping old lanterns for new

ones. This model has the advantage, over the traditional distribution of solar lanterns, of

protecting owners from theft. In the GEF project Teachers Solar Lighting implemented in

PNG, theft was considered as one of the main risks. With solar lanterns that can only be

charged in designated charging stations and are distributed without PV panel (the most

expensive single component) this risk is minimised.

World Bank (WB): With the threat of theft reduced, another barrier is the reluctance of local

institutions to finance renewable energy equipment on affordable terms. The WB initiative

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5RESCO stands for Renewable Energy Service Company. The main characteristics of a RESCO are:

The household serviced does not usually own the generation equipment, which is owned by anexternal organisation such as a Government agency or the RESCO;

The user does not carry out maintenance, all maintenance and repair service is provided by theRESCO;

The user pays a service charge that covers the capital repayment requirement and the cost ofproviding for maintenance and repairs.

The concept is much like that of a conventional electric utilityin that the generation equipment is not ownedby the user and the electricity that is generated is made available to the customer for a fee. The feecharged to the user includes any required capital replacement cost and all operating, maintenance and

repair costs plus a profit for the operating organisation.

The model has had great success in the expansion of rural electrification in the Pacific and worldw idebecause it guarantees that equipment is properly maintained and components replaced by the RESCO,making sure that the service is not interrupted.

http://en.wikipedia.org/wiki/Electric_utilityhttp://www.worldbank.org/http://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://www.teriin.org/http://labl.teriin.org/http://en.wikipedia.org/wiki/Electric_utilityhttp://en.wikipedia.org/wiki/Electric_utilityhttp://www.worldbank.org/http://www.worldbank.org/http://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://www.gefweb.org/.../Papua_New_Guinea_-_Teachers_Solar_Lighting.pdfhttp://labl.teriin.org/http://labl.teriin.org/http://www.teriin.org/http://www.teriin.org/

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Sustainable Energy Finance Project (SEFP) is overcoming this barrier by giving the

required stimulus to the financial institutions and renewable energy dealers without requiring

them to deviate from their normal business practices or undermining their commercial

viability. Vanuatu, PNG & Solomon Islands are beneficiaries of the SEFP.

SOPAC/REEEP: With households having access to funding for the purchase of the solar

lanterns, the next main barrier to overcome is the need to offer non-monetary solutions forthe payment of the instalments (loans). A solution to this problem has been provided by the

SOPAC lead initiative Pacific Micro Energy Services Companies (PMESCOs), with trials

already implemented in Kiribati and the Solomon Islands. The project is designed to accept

payments in cash crops, making it easier for the receivers of the small lighting equipment to

return the loan. The current team responsible for energy at SOPAC is being transferred to

SPC, to take charge of energy in the Pacific. So it is important to have them involved in the

proposed strategy.

RescoManager: The acceptance of payments in cash crops increases the administrative

complexity, making difficult the scaling up of the PMESCO concept. Furthermore, when

households demand equipment of higher capacity than simple solar lanterns, it will be

difficult for the RESCOs to provide such equipment if they do not have an appropriate IT tool

for managing their business. This is why RescoManager has been engaged as the fourth

stakeholder. The team programming the software is already considering the addition of an

add-in for managing payments in cash crops. Further information can be obtained at http://

rescomanager.org/activities/activity/15/

The Secretariat of the Pacific Communities(SPC): Implementing RescoManager in the

outer islands requires internet access andlaptop computers. SPC is involved in two projects

that overcome these two barriers. One is PacRICS, a solution for low cost Internet access to

rural and remote areas. The second one is OLPC Oceania, for the distribution of smalllaptop computers that can be used to access RescoManager. Funding from the EC and

other donors is already being utilised to electrify schools, for example REP5 in RMI and

FSM, and EDF10 in Kiribati. Furthermore, the involvement of SPC is specially relevant if

taken into account that from January 2010 SPC is the CROP agency in the Pacific

responsible for energy.

Suggested next steps:

1. Contact all the suggested project stakeholders in order to (a) find out if they areinterested in being involved, (b) among those that are, finalise a common strategy.

2. Contact donors and other potential sources of funding for financing:

technical assistance for the project implementation,

capacity building for the initial deployment of the solar lanterns

3. Map all the rural locations in the three countries that fulfil:

have or are about to have internet connectivity (e.g. provided by PacRICS,PeopleFirst,...),

are surrounded by unnelectrified communities.

4. Identify local companies/entrepreneurs interested in deploying solar lanterns to each ofthe unnelectrified communities with internet access.

5. Start funding and resource mobilisation.

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