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Renewable Energy for Rural Electrification: The Ghana Initiative

Clement G. Abavana

Renewable Energy Services Project - P. O. Box SD 310 ­ Stadium ­ Accra ­ GHANA Phone: (233) 21-667154 - Fax: (233) 21-667156 - E-mail: [email protected] Abstract ­ The Renewable Energy Services Project (RESPRO) is a UNDP/GEF funded project with counterpart funding from the Government of Ghana and co-financing from the U.S. Department of Energy and National Renewable Energy Laboratory (NREL) for technical support. RESPRO addresses the need to find sustainable energy paths, on a pilot scale, that can use renewable energy-based electricity and fuel supply technologies in place of fossil fuels, for rural, social and economic development. The Project also facilitates the widespread use of low greenhouse gas emission technologies such as photovoltaics, wind and biomass. This paper explores (i) the objectives and goals of this project, (ii) the relevance of these objectives and goals within the context of the Ghana national electrification scheme, (iii) the benefits, limitations and opportunities of the renewable energy technologies, and(iv) examines the present method of implementation, its problems and efforts being made to solve them and suggestions for improvement of the method of implementation. It also examines the economic, social and political barriers faced by the project. It concludes by addressing the lessons learnt and proposals for the future of RESPRO in the context of the National Electrification Scheme.

1. INTRODUCTION The Renewable Energy Services Project (RESPRO) is funded by UNDP/GEF and the Government of Ghana with co-financing from the U.S. Department of Energy and the National Renewable Energy Laboratory (NREL) for technical support. The funding is divided as follows:

UNDP/GEF INPUTS GOV'T OF GHANA US-DOE/NREL TOTAL US$ 2,472,000.00 US$ 500,000.00 US$ 100,000.00 ---------------------US$ 3,072,000.00

2. PROJECT CONCEPT AND DESIGN The original concept was to have a project, which addresses the core issues in Rural Social and Economic Development, i.e. reliable access to clean water, electrified dispensaries and clinics, refrigeration, lighting, communications, education and entertainment. The project concept therefore focuses on the use of commercially proven small photovoltaic (PV) units for households in thirteen (13) rural communities and additional PV installations to meet community priority needs including improved health facilities, water systems, public lighting and centralised PV-diesel and PV/wind hybrids to meet domestic, community and commercial needs. The project was designed to address the Ghana Government's interest in accessing the technical, economic and institutional requirements of providing renewable energy-based electricity to off-grid communities, especially those that would be unlikely or unable to obtain electricity from the national grid in the near future. The design also included the provision of the necessities and amenities that will make the village environment more attractive in terms of living conditions and opportunities for employment and economic growth to some thirteen (13) rural communities in the East Mamprusi District on a pilot scale. In the original concept, the Volta River Authority/Northern Electricity Department (VRA/NED) was to assume primary responsibility for initiating a programme to provide basic rural electricity services by using solar PV systems as a least-cost option on a widespread and sustainable basis. This would have been incorporated into VRA/NED's ongoing rural electrification programme as the results of the pilot scheme

The goal of this project is to support the development of a national capacity, combining both private-sector and public-sector efforts, to primarily use renewable energy-based technologies, especially photovoltaics (PV), PV/wind and PV/diesel hybrid power systems, for sustainable rural electric power delivery. These technologies will be used for both individual applications and centralised electrification of off-grid communities, which are technically or economically not suitable for electrification via grid extension. The central objective of this project is to assess the economic and technical performance of these renewable energy options on a pilot scale in the type of environment in which they would be used on a much larger scale in subsequent investment projects. Another goal of the project is also to demonstrate the commercial viability of a rural energy services enterprise.

unfolded. VRA/NED would have provided preelectrification and entry-level electrification services to off-grid rural communities. Presently in Ghana, there is no established PV systems and equipment market. There is only an embryonic commercial infrastructure to support the diffusion and maintenance of PV systems. Therefore, the idea was to have a strong utility-led programme of dissemination and support so that the market for PV systems, products and services could be established to provide the best option of off-grid electrification. The private sector might then have responded to this market opportunity. Related private sector supplied services and activities could then include equipment installation, commissioning, maintenance and repair. This could also lead to joint venture local manufacturing of PV equipment and appliances when an assured PV market was established. However, towards the end of 1997 due to a draught that had greatly reduced the electric power generating capacity of the Volta Dam (the main business of VRA), VRA pulled out of the project to concentrate on more pressing issues. Therefore Government had to set-up a special project unit (RESPRO) within the Ministry of Mines and Energy to implement this Project. This obviously changed the parameters governing the design of the project. The implementation was no longer going to be utility-led and therefore could not be incorporated into a planned utility programme of rural electrification. If the implementation had been led by an electric utility, the utility would have had the opportunity to use this alternative or a blend of alternative strategies to determine the least cost options unlike RESPRO, which is implementing this as the only option. In the original concept, communities that were not going to get grid-connection in the near future were to be targeted for solar PV systems as pre-electrification or entry-level service that will still meet community priorities. However, with no clear-cut policy on this issue having been implemented, most of the people of the beneficiary communities, especially those near Nakpanduri, the nearest grid-node, have adopted a wait-and-see attitude hoping that the grid will be extended sooner than later.

3. OBJECTIVES AND GOALS WITHIN THE CONTEXT OF NATIONAL ELECTRIFICATION SCHEME 3.1 Principal Objectives The Government initiated the National Electrification Scheme to provide the whole country with reliable electricity for household energy needs, community services and productive uses by the year 2020. In this context therefore, the Government through the Ministry of Mines and Energy is exploring the potential role of decentralised renewable energy-based electricity services as an alternative to grid extension and also as a least cost option. The principal objectives of the project as contained in the project document are: Ø To increase the Government of Ghana's understanding of the technical requirements, equipment options, capital and operating cost for use of PV-based energy systems, both as stand-alone units and in hybrid power systems, for rural power delivery. Other renewable energy systems, such as wind and biomass may also be considered. To demonstrate in Ghana, the technical, economic, institutional and social feasibility for sustainable large-scale diffusion and applications of small PV units and hybrid power systems. To enable the Ministry of Mines and Energy and the Electric Utilities to integrate the use of renewable energy systems into the ongoing rural electrification activities through the establishment of rural energy services enterprises targeted at un-electrified communities for which decentralised renewable energy services are more practical and more cost-effective than grid extension. To provide electricity services to thirteen (13) off-grid communities in Northern Ghana, as a pilot effort to confirm the technical, economic social and institutional requirements for largescale diffusion of these technologies. To catalyse large-scale use of the technologies for off-grid energy services in the country through the creation of new private sector rural energy services enterprises.

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By the end of the three-year project period, it is expected that PV-based electricity services will be available throughout the pilot area (East Mamprusi District). RESPRO would then have been able to establish itself as a profitable Renewable Energy Services Company.

3.2 Social and Economic Goals With availability of reliable electricity, it is hoped that there will be co-investment in socially and economically productive activities to enhance the value of the solar PV electricity thereby contributing to the total development of the District. The areas of development would include: Ø Improvement in the levels of literacy and education for both children and adults through the use of educational media such as TV/VCRs and computers. The Government would also take advantage of the reliable electricity services to make investment in upgrading schools, health posts, water supply systems and support for small-scale farmers; In the country as a whole, a new indigenous industry would emerge to supply new products for village power market, including solar lanterns, small efficient refrigerators, TV sets, small power tools, grain mills, sewing machines, vacuum packed units for agricultural produce. Commercial suppliers of PV equipment and related appliances would emerge. Ø

dry cells, auto batteries and battery charging services; Stimulate the establishment of an indigenous PV industry.

4. BENEFITS, LIMITATIONS AND OPPORTUNITIES 4.1 Benefits PV systems are safer and more convenient than kerosene lanterns and dry cell and automotive batteries that must be carried up and down for recharging. They are environmentally friendly, allowing cleaner indoor air devoid of smoke and soot. PV systems also allow easy access to services such as TV, radio, Internet, etc. In the community they also provide an elevated social status normally associated with electrification. 4.2 Limitations Solar PV systems are considered inferior because of some limitations of the systems. Some of these are: Ø The amount of electricity available from a solar home system is very limited and greatly depends on the capacity of the array. The incremental cost of obtaining more electricity from a solar home system is relatively much higher. In contrast, the grid service can offer unlimited amounts of low-cost electricity. Solar home systems usually require DC appliances. While DC black & white TVs, radios and other small appliances are generally available, other DC appliances are not widely available or cost more than their AC equivalents. One therefore needs an inverter in some cases. Subsidized grid connections generally cost less to the end-users than contributions demanded from solar home system users.

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The UNDP would then be in a position to increasingly incorporate sustainable energy technologies into the country programmes for poverty alleviation, micro enterprise development, agriculture, water supply and education. 3.3 GEF Concerns In the context of a GEF funded project, the eventual widespread use of photovoltaic systems for small-scale and community energy needs is expected to: Ø Ø Ø Ø Ø Reduce the use of kerosene in rural areas; Reduce the growth of thermal power generation for rural electricity services; Support rural medical and educational services; Reduce indoor and outdoor air pollution; Support the establishment of economically productive activities including handicrafts cottage industries, higher output farming and food processing; Provide greatly superior electric lighting at costs comparable to present expenditures for kerosene; Provide access to community micro-grid electrification services at costs comparable to present total expenditures for kerosene,

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4.3 Opportunities Solar home systems may have their limitations but they still offer the individual a window of opportunity to modern living. One can operate almost all domestic appliances on solar home systems. These include: fridge, fan, TV, radio, sound system, computer, fax machine, sewing machine, blender etc.

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5. IMPLEMENTATION 5.1 Mode of Implementation This Project is being implemented on a fee-forservice basis. As such potential customers are not expected to make full upfront payment for solar systems. The systems for homes, commercial enterprises and public benefit such as street lighting, water pumping etc are owned by RESPRO. The prospective customers apply for systems just as they would for ordinary electricity (240/415-volts) supply. They will then be served after the necessary inspection, estimates and payment have been done. Presently, two standard sizes of solar home systems are being installed: 100 Wp and 50 Wp Home Systems. For the 100 Wp system, customers pay an initial connection fee of ¢160,000 (US$30) and a monthly service fee of ¢15,000 (~US$3). For the 50Wp system, the connection fee is ¢100 (US$20) and the monthly service fee is ¢10,000 (US$2). 5.2 Implementation Issues The project, as is being implemented now, is rather slow. Some of the assumptions considered during the conceptual stage no longer apply. As such the progress of implementation of the project has been affected thereby making it rather expensive. Some of these issues have been mentioned in the comments on the concept and design of the Project. In addition to that, the following are also nagging problems: Ø Affordability has become a big issue because of the changing economic conditions of the country. Results of the surveys on willingness-to-pay and abilityto-pay are at variance with the reality on the ground. Presently, only middle and upperincome families are able to afford solar home systems. A 100Wp system (including transportation and installation) cost about US$ 1200.00. Even at zero interest rate, a monthly payment rate of US$10.00 will require ten (10) years to recover the cost. Even though the surveys indicated that in July 1999 about seventy percent (70%) of households were spending as much as the cedi equivalent US$10.00 (¢25,000.00) per month on domestic energy use such as kerosene, candles, dry cell batteries, charging of automotive batteries for black & white TVs etc., this figure of US$10.00

has more than doubled now in cedi terms because of the cedi/dollar exchange rate. If operating and maintenance costs are added with a reasonable return on the investment the monthly rates would be even higher. A greater number of households would have been connected with solar home systems by now if the local electric utility, VRA/NED were offering these rural electrification services as the least cost option to grid extension. VRA/NED could then afford recover cost over a long period of time. That notwithstanding, the project is still very relevant to the developmental efforts of Government. It falls in line with the government's policy to make electricity available to all communities by the year 2020.

6. OPERATIONAL ISSUES 6.1 Technical The Project technically, does not have many operational problems. The establishment of the various field Offices in Nakpanduri, Bendi and Bunkpurugu has been done. The Engineers and Technicians have received the appropriate training to enhance their skills and performance. The operational vehicles and tools have been purchased. The Ghana Government's cash and inkind contribution of solar systems have been delivered and these systems are presently being installed. 6.1.1 Charge Controllers: The only hardware problems that we have experienced are with the Isofoton charge controllers, which have the tendency to burn out due to excessive heat that cannot be quickly dissipated. An appropriate size of heat sink has to be provided for each controller. The manufacturer has been informed and we expect a solution to be offered soon. 6.2 Non-technical As mentioned earlier on, the main non-technical problem is the tariff. The economy, and the declining value of the currency have made all calculations (in dollar) based on the results of the survey on ability-to-pay and willingness-to-pay rather out of gear. Ø At inception of the Project in February 1999 the exchange rate of the cedi to dollar was ¢2303.36/US$1.00. By the time the follow-up survey on ability-to-pay and willingness-to-

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pay was conducted in July 1999 the rate was ¢2500/US$1.00. The rate of exchange is now over ¢6000/US$1.00. The tariff was calculated in July 1999. This means that in cedi terms the tariff has more than doubled now. This obviously has affected the ability-to-pay and consequently the willingness-to-pay. The implementation is being done on a feefor-service basis. As such any amount charged, that is higher than the lifeline tariff (¢ 4,000/first 50 units) being charged by the electric utilities, that is either not a one time payment like a connection fee or not being paid towards owning the systems, has been difficult to accept by the beneficiary communities. The operating and maintenance costs are also high due the remoteness of the project area. The overheads are high, as result of the setting up of a new unit complete with a lot of staff, some of which do not add much value to real implementation of the project but yet are very important such as security etc. The establishment of a new separate unit, which included: recruitment and training of new staff, acquiring of new offices and furnishing, procurement of vehicles, communication network etc. created the following: a) Delayed start of the project which otherwise would have taken off immediately after the inception meeting (16 February 1999) with VRA-NED staff seconded to the project. b) Created large over-heads in the operations instead of a much smaller incremental cost that it would have been to VRA-NED. c) Created a perception among the people in the target communities that this was an NGO operation providing inferior power supply and blocking their chance of getting the `real thing'. (Because it is not VRA/NED that is providing the services and which could have been explained-off by VRA/NED as using the least cost option until there was real economic justification to extend the grid). d) The non-involvement of VRA-NED (or ECG) in the project means that the cost of hardware, which the Government normally bears for rural electrification through grid-extension, is denied the same rural electrification when it is done through solar-PV.

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The non-involvement by any of the national electric utilities also means that the benefit that all grid customers get under lifeline tariff is denied customers of solar PV rural electrification who are called upon to pay full cost recovery rates.

7. ECONOMIC, SOCIAL AND POLITICAL BARRIERS 7.1 Economic Barriers As mentioned elsewhere in this paper, affordability has become a major issue in the implementation of this project. In South Africa, the government has embarked on the electrification of 350,000 households with (mainly 50Wp) solar home systems. This project is being done by seven consortiums in joint-venture ship with ESKOM (Electricity Supply Commission of South Africa). Even though this is also a fee-for-service project, the government is supposed to bear two-thirds of the cost of the systems and one-third of the cost plus the operating and maintenance costs are to be recovered over twenty years. If the same financing arrangement were available to the electric utilities in Ghana or favourable financing schemes for the private sector, it would have catalysed the market and brought in the private sector in a big way. 7.2 Social Barriers The opinion leaders in the pilot area feel there is no social justice for them to be paying more for electricity than those in the towns and cities when the same government is providing it. Some even contend that, even if the private sector were providing the service, then the District Assembly should use some of the funds from the common fund to make up the difference between the lifeline tariff and the cost recovery rate. 7.3 Political Barriers Political pressure was thus brought on the project to suspend the cost recovery rates and charge affordable rates that will cover the operating and maintenance costs only, hence the present monthly rates of ¢ 15,000 and ¢ 10,000 for 100Wp and 50Wp solar home systems respectively. The year 2000 being an election year in Ghana, political opponents of the ruling government are discouraging would-be customers with promises of free grid extension and cheaper monthly charges thereby creating a wait-and-see situation. However, with the run-up to the elections in

December 2000, and realising that no matter which Party wins the elections, grid extensions definitely will not be priority for whichever party wins the elections, conditions have changed. Most communities have realised that solar PV is their best bet for electrification for the near future. As such there is renewed interest in obtaining solar home systems. The following figures illustrate this:

Month December 1999 January 2000 February 2000 March 2000 April 2000 May 2000 June 2000 July 2000 August 2000 TOTAL 100Wp 26 5 8 19 44 8 36 27 54 227 50Wp 8 1 3 7 3 1 8 10 20 61 TOTAL 43 6 11 26 47 9 44 37 74 288

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8. LESSONS LEARNT FROM RESPRO 1. Establishment of a rural energy services company (ESCO) inherently has high overheads due to initial set-up costs and staff recruitment. It therefore, requires an existing organisation for which the incremental cost will be far less than establishing a new body. In RESPRO, there are high operating costs due to the small size of the project and its remoteness from supply and vital service centres. Therefore, a critical mass of customers is required to make it a viable and sustainable project. (In this case about 2000 customers). When Government policy (on PV Solar rural electrification) is not very clear it creates uncertainties, which also create await-and-see attitude. Instead of a-fee-for-service, a mix of strategies should be employed to implement the project: e.g. leasing, cash sales etc. A suitable policy framework and appropriate financing mechanisms are necessary to encourage wider participation.

should be utility involvement in the implementation so that optimum benefit can be derived from the project. The Ministry of Mines and Energy and the Electric Utilities should as soon as possible implement the Principal Project Objective No. 3 i.e. the Ministry should incorporate renewable energy systems into the on-going rural electrification activities to be targeted at un-electrified communities for which decentralised renewable energy systems are more practical and more cost-effective than grid extension. The boundaries of the project should be extended to allow the Project to operate more commercially to catalyse large-scale use of renewable energy technologies for off-grid energy services. The mode of implementation should not be limited to only fee-for-service. There should be equivalent Government support for Solar PV rural electrification as is being given for rural electrification, which is done through grid extension.

10. CONCLUSIONS Ø Clear government policy is very important to the success of any renewable energy implementation effort because this can either create the potential market or stifle it. Grid extensions and solar PV systems need not be mutually exclusive. If properly planned they could in fact complement each other. PV markets can only survive in a framework of sustainable energy programmes where different stakeholders operate complementing each others efforts. The stakeholders here are: Government (policy/regulations) Power Utility Sector The Banks/Financial Institutions Business/Private Sector Society and Community leaders

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REFERENCES Anil Cabraal, Mac Cosgrove-Davies, Loretta Schaeffer: Best Practices for Photovoltaic household Electrification Programmes C.G. Abavana: Customer and Supply Choices Available in the Utility Environment

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9. PROPOSALS FOR THE FUTURE OF RESPRO Ø It is therefore proposed that the project be implemented in the manner in which it was originally conceived. In other words, there

C.G. Abavana: The PV Market: National Policies & Regulations

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