Annual Meeting of CLUB-ER Bamako, 8th to 12th April, 2008

1.  Annual Meeting of CLUB-ER Bamako, 8th to 12th April, 2008 GHANA: The National Electrification Scheme (NES) By Clement G. AbavanaTechnical Advisor,Ministry of Energy, Accra, GHANA

2. April 2008 cgabavana 2 PRESENTATION FORMAT General Statement on Rural electrification Background of Ghana National Electrification Scheme Implementation Strategy Goals & Objectives The SHEP Rationale & Criteria for the SHEP Summary of Achievements Some Facts and Figures Funding of the NES and SHEP Key Challenges Best Practices in Rural Electrification Way Forward Key Activities for 2007 & beyond

3. 3 General Statement on Rural Electrification It should be pointed out that rural electrification has not been a highly profitable business, and worldwide experience has demonstrated that the private sector generally is not interested in rural electrification. In some countries, the electrification process started on the basis of private initiatives. These were commonly transferred into public ownership as the quality of supply often did not live up to required standards.

4. 4 BACKGROUND In 1989 Ghana Government took a conscious and bold decision that for any meaningful development and for harmony in the country electricity should extended to all parts of the country; As such the National Electrification Scheme (NES) was instituted as Government�s principal instrument to achieve its policy of extending the reach of electricity to all parts of the country over a 30-year period from 1990-2020; 64 out of 110 administrative District Capitals (at that time) were without grid electricity supply; By 1996 an additional 41 District Capitals had been connected to the grid; Last batch of 23 District Capitals (Districts had then been increased to 130. They are now 160) were connected between 1996-1998.

5. 5 GOALS AND OBJECTIVES Poverty reduction, especially in the rural areas; Increasing the overall socio-economic development of the nation; Increasing people�s standard of living and enhancing the quality of life, especially in the rural areas; Creating small-to-medium-scale industries in rural areas; Enhancing activities in other sectors of the economy, such as Agriculture, Health, Education, Tourism etc; Creating employment and wealth in the rural areas and thus reducing the rate of rural to urban migration.

6. 6 NATIONAL ELECTRIFICATION SCHEME A National Electrification Planning Study (NEPS) was done with a grant from Canadian Government; The Study was carried out by Acres International of Canada for the establishment of the National Electrification Master Plan; Study considered alternative sources of providing power to communities i.e. solar, wind, biomass, small hydro etc. Implementation of National Electrification Programme : Six 5-year phases spanning the 30 years of implementation.

7. 7 MAIN COMPONENTS OF NES Main Components of the NES: District Capitals Electrification Project National Electrification Programme (NEP) Self Help Electrification Programme (SHEP) System Re-enforcement Programme

8. 8 IMPLEMENTATION STRATEGY Phasing of the NES: The 1st phase covered the connection of all District Capitals and all towns/villages en-route to the District Capitals; To ensure efficient Government business Provide electricity for local industry, commercial activities and domestic use The subsequent phases of the electrification of communities was based on most economically viable projects.

9. 9 SELF-HELP ELECTRIFICATION PROGRAMME (SHEP) The Self-help Electrification Programme was introduced as a complementary activity to the National Electrification Programme (NEP).

10. 10 Rationale for the SHEP Accelerate grid connection for communities which felt their proposed projects on the programme of implementation were too far into the future; Reduce overall cost on Government; Introduce community ownership.

11. 11 CRITERIA FOR JOINING THE SHEP Community must be within 20km of an existing 11kV/33kV network; Interested Communities must apply to be included in the programme; Community must be willing and able to procure and erect all the Low Voltage distribution poles required for the works; A minimum of one-third of houses in the community should be wired and ready to be serviced as soon as electricity supply is connected to the communities.

12. 12 Government Contribution to SHEP Government will provide all materials required for extension of the HV lines, transformers, conductors etc. and installation and supervision costs. Households will be connected for a token fee of US$5.00 if connection is requested within eighteen (18) months after the commissioning of the project in that community.

13. 13 SUMMARY OF ACHIEVEMENTS UNDER THE NES Before the commencement of the NES in 1989, 4,175 communities were identified as having population of 500 or more. Of this number only 478 were supplied with electricity. Completed Projects (1990-2000) � NES Phases 1&2 Project package # of Towns NEP 430 Other Projects 405 SHEP1 50 SHEP2 250 SHEP3 Phase1 280 SHEP3 Phase2 494 Total 1909

14. 14 SUMMARY OF ACHIEVEMENTS Projects (Oct 2001-2005) � NES Phase 3 Project Package # of towns SHEP3 Phase3 - 573 SHEP4 Phase1 - 46 Volta Lake Resettlement Townships- 144 EU Funded Electrification - 108 (W. R.) Elect of Nyinahin & 23 other towns- 24 Electrification in Amansie West - 10 Other NEP Projects - 204 Total 1099

15. 15 On going Projects (2006 onwards) NES Phase 4 Complete SHEP3 Phase3; Current SHEP 4: to connect 2,500 communities with $350M; To date, grid extension has been the main approach, with a few solar PV programmes as an off-grid option.

16. 16 Communities connected (2001-2007) on Annual basis

17. 17 SOME FACTS AND FIGURES # of towns connected before 1989 - 478 # of towns connected to date - 3,448 # of towns connected thru� SHEP - 1,900 Accessibility at commencement (1989)- 15% % of population have access to electricity- 43% ( as per census, 2000) Accessibility in 2004 - 54% Accessibility at present - > 60%

18. 18 Solar Photovoltaic Project The Project focused on the use of solar PV- systems in 48 rural communities in Northern Ghana; The Affram Plains

19. 19 Implementation Strategies: Fee-for-Service Outright Purchase

20. 20 Fee for Service 50 Wp Solar Home System Installation fee - US$ 10.00 Monthly tariff - US$ 6.00 Wiring of premises for the following: 3 lighting points Socket for Black & White TV/Radio 100 Wp Solar Home System Installation fee - US$ 20.00 Monthly tariff - US$ 10.00 Wiring of premises for the following: 5 lighting points Socket for colour TV/ Sound system

21. 21 Outright Purchase 50 Wp SHS - US$ 700 100 Wp SHS - US$ 1100

22. 22 Other Systems Health Clinic Systems Vaccine Refrigeration System - US$ 4225 Clinic Lighting & Sockets - US$ 1810 School Systems JSS � 3Unit/Office/Store - US$ 2000 Primary � 6 Unit/office/store - US$ 3250

23. 23 Total Number of Installations i. Solar home systems 4500 ii. School systems 204 iii. Clinics/hospitals 20 iv. Water pumping 1 Battery Charging stations 10 v. Street lights 165 Vi. Grid Connected (MoE) 50kW 1

24. 24 Domestic Installation

25. 25 Health Clinic in Binde

26. 26 Community InstallationsSchool System in Bunkpurugu

27. 27 Micro-enterprise

28. 28 Public Installation Retrofitted well in Binde

29. 29 FUNDING OF THE NEP & SHEP PROJECTS Project Funding Agency Type of funding NEP JICA, DANIDA Grants & World Bank, Dutch soft loans Govt. (ORET), SIDA, FINIDA, NDF, GEF SHEP Indian Ex-Im Bank, soft loans US Ex-Im Bank, SIDA, FINNIDA & South African Govt. Chinese Ex-Im Bank Govt. budgetary support of about US$9 m/yr over 2001-2004 (between 1990-2005 : about US$5m/yr) PS: About US$130million was used for off-shore electrical materials for the SHEP-3 (1,400 communities involved) About US$350 million would be required for the SHEP-4 (2,500 communities involved)

30. 30 KEY CHALLENGES Is SHEP strategy the best way to continue? Availability of funding to support projects; Complementary contribution from beneficiaries communities? Better focus on productive uses of electricity to make projects viable.

31. 31 Best Practices in Rural Electrification Public & Stakeholder workshop Institutional Models Financial Mechanisms Commercial Viability Rural Electrification Planning

32. 32 Best Practices in Rural Electrification � Institutional Models Setting up an effective implementing agency dedicated to rural electrification is the key Requires an independent or semi-independent oversight agency and service providers Public Utility model: Mexico, Thailand, South Africa, Tunisia, Vietnam Cooperative model: Bangladesh, Costa Rica, the Philippines, the USA Private sector or decentralized companies model: Chile, China

33. 33 Institutional Model I REA and Utility Model: Set up a Rural Electrification Agency (REA): oversight of rural electrification: strategies, planning, and regulatory guidelines development of technical and operational standards capacity building and technical assistance management of the Rural Electrification Fund Service providers for grid extension -- utilities (ECG/NED): construction and O&M Service providers for off-grid options: private sector or communities

34. 34 Institutional Model II Cooperative Model: Set up a Rural Electrification Agency: oversight of rural electrification and management of the REF Rural electric cooperatives as service providers in defined franchise areas, and utilities as the bulk power suppliers Advantages: cooperatives have a higher sense of responsibility for rural electrification Disadvantages: Is this feasible in Ghana? Cooperatives have weak capacities and may not be financially viable. It takes a long time to establish a few pilot cooperatives.

35. 35 Institutional Model III Rural Electrification Board (REB): Set up a REB to oversee: A fund manager to administrate REF A community electrification agency as service provider Risk of conflict of interests: administration and execution of the REF under the REB It would also take a long time to build up such a new system

36. 36 Best Practice of Rural Electrification � Financing Mechanisms Rural Electrification Fund: Principles of developing effective subsidies: Subsidizing capital investment costs not O&M Ensuring financial viability of the service providers Sources of the Fund: government budget, donors, levies on electricity bills, or sales from utility privatization Management of the Fund: an oversight agency, or a financial institution Level of subsidies: a percentage of capital costs, a fixed capital subsidy level per connection, or concessional loans

37. 37 Best Practice of Rural Electrification � Commercial Viability Cost recovery tariff: the most important factor; Affordability: Rural consumers in Ghana paying at least $4-5/month for kerosene and batteries in un-electrified areas; Charging the right price for electricity, at least recovering O&M costs; Reducing construction and operation costs; Reducing initial connection charges.

38. 38 Best Practice of Rural Electrification � Rural Electrification Planning Setting up transparent criteria for rural electrification, selection of communities, etc Allowing both grid and off-grid alternatives to coexist and complement each other

39. 39 Very Important Issues It requires strong government commitment to set up an REA; REA requires strong leadership and dedicated staff. It is advisable to keep the REA with a small number of staff at the initial stage when the deal flow is not yet strong; REA needs to keep an arm�s length from the government, and be given a high degree of autonomy to stay clear of political interference on selection of investment projects; The capital subsidies provided by the Rural Electrification Fund should provide a level playing field between grid and off-grid options, as well as between public and private service providers.

40. 40 Proposed Way Forward for Ghana Institutional arrangement: Maintain the policy functions within MoE Move the implementation of the Rural Electrification Programme functions outside MoE in the REA Rural Electrification Fund (REF): providing capital subsidies to all service providers Cost-recovery tariff structure Rural electrification planning and criteria: Based on economic and financial principles Clearly defining grid vs. off-grid areas

41. 41 Way Forward Integrate or mainstream renewables into rural electrification i.e. solar, wind, small hydro etc. This is because we are getting into the marginal communities; Involve District Assemblies in the provision of complementary contribution to assist the communities.

42. 42 ACTIVITIES FOR 2007 AND BEYOND Ghana Energy Development and Access Project (GEDAP) (US$210 million) Objectives: Enhance reliability and efficiency of power to existing customers Increase access to electricity to new customers Components: Sector & Institutional Development (MoE) Transmission Upgrade (VRA): Increase reliability of the system Distribution System Improvement (ECG): Reduce system losses and improve ECG�s financial position Electricity Access Expansion (ECG & NED): Develop a commercially-oriented rural electrification framework Intensification, grid extension, and renewable energy

43. 43 THANK YOU FOR YOUR ATTENTION