Argentina – Putting power first

A 29 July paper from the International Institute for Environment and Development (IIED) has taken a look at how governments, donors and businesses can work together to provide poor communities with low-carbon energy supplies. Giles Crosse learns more.

Often, grid-remote communities don’t figure highly in the plans of global renewables providers. The reasons for this are simple: relative costs of reaching and supplying power into such areas, compared with building far more centralised facilities are normally just too high.

But there can be options for implementing effective programmes to deliver power and all the associated development benefits into rural areas. These need not simply be a way for companies to improve their corporate social responsibility (CSR) metrics, or to seek approval from shareholders.

Introducing PERMER

The IIED has studied Argentine programmes that successfully delivered basic electricity access to remote, rural communities that are beyond the reach of the grid. The Project for Renewable Energy in Rural Markets (PERMER) has provided a combination of renewable solar and wind power and hybrid fossil fuel-renewable energy (eg diesel-solar mini grids) to around 10,000 households and 1800 schools and other public buildings, and is on its way to reaching another 18,000 households.

The programme was introduced in the late-1990s, when it became clear that power sector privatisation had done little to extend access in remote rural areas. Long distances, low population density and poverty meant the cost of extending grid networks was prohibitively high.

For many businesses, cost fears might be a certain turn-off, but PERMER has used government and donor funding to install generating equipment and subsidise user tariffs, with exclusive delivery contracts awarded to concessionaires – private sector, public sector co-operatives that run and maintain the services.

This model should in theory give all the partners more buy-in to the services, the jobs and the skills being created, ultimately creating communities that use more power, more sustainably as development kicks in. If done correctly, it could shine a light on how partnerships can make investment in rural areas sustainable for larger generators, and hence deliver long-term, scalable opportunities into often-disadvantaged areas.

Costs, poverty and demand

Yet given the obvious need for power to enable economic and social development, it perhaps seems strange that global governments, or indeed the Argentinians themselves wouldn’t do more to extend grid access to remote regions? Is this to do with price, demand, or are there simply bigger priorities on the table just now?

“It is mainly about costs, poverty and demand,” says Sarah Best, who authored the report and now works with Oxfam. “Argentina covers a huge territory: 2.8mkm2, which is almost of the same size as India, but it has a population of just 40m, compared to 1 bn in India.

“And the vast majority; 92% of Argentina’s population live in urban areas. Rural areas are sparsely populated and often long distances from the grid. The poverty of the people, and their low consumption potential, means the cost of providing a service through grid extension can be prohibitively high. In general grid connections are high for the region: over 95% of the Argentine population is connected, so PERMER is really about reaching that last few per cent.”

PPPs well placed to achieve more

Best explains that at the same time, there are certainly instances where communities are relatively close to the grid, perhaps a few kilometres, but face long delays in getting connected. This may well relate to their limited power and political voice. Urban populations nearby will often be seen as more important politically for local decision-makers and politicians. Why then, from this perspective, are public-private partnerships so well placed to achieve more in this context?

“The model is a type of public-private partnership,” Best reveals. “It combines government funding to install equipment and subsidise tariffs, with exclusive contracts to concessionaires, which could be a private or publicly owned firm, or a co-operative provider who runs and maintains the service.

“The plurality of partners – public, private and co-operative – reflects the fact that Argentina did not completely privatise its power sector and the variety of arrangements which subsequently emerged in local power markets across different provinces. The case study focuses on Jujuy, where the programme is most advanced and the company (EJSEDSA) is in private ownership.”

Best thinks the reason the PPP model works in Jujuy is that the government provides subsidies, particularly for equipment purchase and installation, which are necessary to overcome the lack of commercial attractiveness of the rural markets, and the company is obliged to maintain installations, or risk losing its contract to the urban market. “It also works because there is an effective local regulator in Jujuy, which can enforce the contract, and the company is seen to have a positive approach and commitment to the rural customer base,” she continues.

“Although the IIED study did not review variation in performance between different types of partner, government officials commented informally that there was no clear pattern where one type of partner performed better than others: there were good and less good examples on all sides.”

Technology-neutral microgeneration

Often smaller communities can benefit most from micro installations, and more localised forms of power production. Are there any forms of microgeneration particularly well placed to achieve best results in remote areas?

“The programme is technology neutral, using whatever is suited to local conditions,” Best suggests. “In the north, solar predominates and in the south, wind is common. They also use hybrid solar/diesel grids and mini hydro.

“Solar PV is thought to work well, particularly in the north, because of the very high rates of solar irradiation and low demands on users in terms of operation and maintenance of the equipment.  Government officials reported that in one area, they had investigated the possibility of using biomass, but decided not to proceed as this would have required a higher level of community organisation, responsibility and management skills than they felt was available to collect biomass and to operate the system. That said, the current phase of PERMER does aim to develop two biomass generation projects.”

Of course, development is not simply about power provision. It is equally about where and how the new possibilities are deployed. Water availability, for example, is among the most basic societal needs. How much more power is needed relatively to enable pumping and sanitisation in developing communities?

“The study did not investigate what additional level of power would be required, although many people comment that more power for irrigation and other productive activities was vital,” agrees Best. “The current phase of PERMER (2009-11), plans to install 20 solar-powered water pumps.

“This programme is top-down, so it is the government, concessionaire and regulator who organise and plan installations, rather than communities self-organising. Before installations take place, there are engineering feasibility studies to assess the most appropriate option.

“There are several examples of mini-grids being used, with over 2000 households already connected this way. The current phase plans to build another 21 mini-grids serving up to 2500 households. One of the advantages of the mini-grids is that they usually provided a higher level of power than the solar home systems.”

Building local skills and jobs

Presumably part of the overarching investment of this nature could also create jobs within communities, and build a local skills base, perhaps within engineering or maintenance for power generating facilities. How are such elements of sustainability being addressed?

“The investments do provide some jobs, for instance, engineers who install and maintain the panels,” says Best. “In more remote areas of Jujuy, the company trains up a local community member to provide basic maintenance service, necessary to overcome the time and delay involved in relying on engineer call-outs.

“In general, whilst there is definitely potential for job creation through stimulation of ‘green’ local equipment manufacturing and maintenance activities, for instance, there are good local research institutes and NGOs which are producing low-cost, locally-made solar equipment for cooking, heating and drying of agricultural products, PERMER itself has not stimulated this on any significant scale.

“This would require a broader enabling environment for green industries, including strengthening of national policy, institutions, regulation and economic incentives. One barrier is that procurement rules and product standards set by institutional lenders like the World Bank/GEF make it hard for local suppliers to compete with foreign competitors,”

Powering up remote communities

Of course, within today’s challenging carbon targets, any microgeneration technology and deployment has potential to contribute to low carbon energy futures. To what extent might global remote communities be “powered up” by 2020?

“The International Energy Agency (IEA) projections from World Energy Outlook, 2010, estimate that, without dedicated policies and finance, the number of people without access to electricity will only fall slightly by 2030, from 1.4bn to 1.2bn, and the number of people relying on the traditional use of biomass will rise, from 2.7bn today to 2.8bn,” argues Best.

“The majority of those without access to clean, modern energy services live in sub-Saharan Africa.  This underlines the critical need for governments and the international community to make universal access a priority and, according to the IEA, will require investment of at least US$36bn per year up to 2030.”

At least some of that shortfall could plainly be provided by a burgeoning private sector renewables industry, driven by punitive measures to push against carbon-intensive generation, by processes such as EU Directive decision-making. But much of the global community still lacks the member state accords to make such laws a reality. Altering this, perhaps more than any other driver, could create the wider business environment to drive local power generation worldwide.