Pawel Jamrozek is supporting the industries (automotive, wood, glass, steel) in achieving better ENERGY EFFICIENCY and lower environmental impact (carbon footprint) through introducing LEAN and off-balance business models. This is offered on the basis of energy AUDITS, governmental support, MERGERS AND ACQUSITIONS as well as introducing INVESTMENTS based on efficiency, tolling and OUTSOURCING models •
He is working with environmental and climate policies, power market and CHP projects. Cooperating with the top-tier engineers on optimizing the generation & distribution grids of electric energy, gas, compressed air, technological heat and water typologies - as available on industrial (production) site •
Mr. Jamrozek is EVALUATING investment projects, grant proposals and business plans. Coordinating DUE DILLIGENCE investigations and business valuations for M&A. Organizing trainings and seminars on energy efficiency, renewables, environmental regulations and standards. Editing articles for branch media. SUPPORTING GOVERNMENTAL ORGANISATIONS and policy makers. Expertise in the development of smart cities, suburban and urban planning (since 2010) •
1 STRATEGY 1.1 APPROACH OUTLINE The Consortium has successfully managed administrative and institutional capacity building projects in the past and confident of our ability to operate the subject project the most exacting standards of this type of Technical Assistance action. As a consortium we have developed our approach accordingly and propose the following key principles to implement this assignments: 1.1.1 FACILITATION IN REMOVAL OF BARRIERS FOR EFFECTIVE DATA COLLECTION AND ANALYSIS The Consortium's approach to the Strategy starts from the basis that people and institutions are the most important resource for economic development. For Mozambique the process and participation in the donor activities generate a huge burden on public administration in terms of organizing an effort to meet donors' requirements and manage multiple support programmes. This create barriers for people and inclusive collaboration and communication within and between organisations of people. The Technical Assistance will therefore actively facilitate a mutually rewarding cooperation between the beneficiaries and stakeholders, as described in the proposed methodology hereinafter. 1.1.2 TRANSFER OF SKILLS, EXPERIENCE AND KNOW-HOW AT ALL LEVELS Too often, donor-funded projects create new parallel structures which do not work closely with beneficiary organisations, but rather implement projects with little reference to existing and counterpart institutional structures. Consequently, when such programmes end there is little legacy in skills and know-how behind. Counterpart development and transfer of skills at all levels of operation will ensure sustainability of the results of the programme. The Consortium's approach is based on working closely within the existing institutional framework, and imparting technical knowledge and skills, both formally and thorough cooperative work. The Key Expert Team will design and implement a structured learning programme with coaching and mentoring elements built in to ensure sustained transfer f skills and knowledge to the project's national, regional and local counterparts and stakeholders. Although useful, training courses are no substitute for the 'hands-on' learning gained through implementing real life activities. Practically, this should be comfortably workable as the project will be hosted by MIREME and ARENE. 1.1.3 BUILDING SUSTAINABLE FRAMEWORKS ON PREVIOUS ACHIEVEMENTS It is crucially important the planning process is followed by visible project action at an early stage. The Consortium is fully aware of the need to make the project actually happen and our work with MIREME, ARENE, EDM, FUNAE, GET.Invest counterparts and other stakeholders will be focused on the objective of getting all project activities up and running as soon as possible. This will be built on existing recommendations, structures, frameworks and resources that will be reviewed during the project Inception Phase. The Consortium see the success of the project not only in the documents produced and promoted but in its sustainability - the beneficiaries' ability to continuously maintain and develop the project outcomes in order to facilitate the policy feedback and channel it back to the policy development processes. 1.1.4 SYNERGY ACROSS ALL PROJECT ACTIVITIES Whilst there are several other projects being run as GET.Invest and GET.FIT, inter alia, a number of synergies are to be discussed and developed. A major factor in achieving this congruity is though the maintenance of regular management meetings with beneficiaries and stakeholders, and proper communication and planning based on regular progress reports and plans. 1.2 PROPOSED TASKS 1.2.1 INCEPTION PERIOD AND CLOSURE PHASE Before the substantive work begins on the subject project's three core components, the Consortium supported by the Key Experts and Backstopping Office will undertake the Inception Phase seeking to lay the ground work for the project's successful implementation. This will ensure that the scope, objectives and activities to be undertaken are clearly identified and documented in agreed work plans, and that the necessary logistical and support arrangements are in place. As per ToR the Inception Phase will last up to 4 months and end in within the first quarter of 2019. The Closure phase will be related with concluding of all pending Technical Assistance activities with the project stakeholders and beneficiaries. Both Key Experts will start drafting the Final Report, as to be submitted within one month of receiving comments on the draft document from the Project Manager identified in the contract. The Final Report will include a description of achievements, including problems encountered and recommendations. The Consortium will be also available to respond to any additional ad-hoc reporting and support requests of the Contracting Authority, the European Union Delegation in Mozambique and the EU Steering Committee. Finally, during the Closure Phase the Consortium will provide logistical support to all additional procedures including full support to any consultant that might be employed directly by the European Union to undertake additional service works. Activity 0.1: Establishing both offices at MIREME and ARENE A key priority as the project begins will be to ensure that all the necessary logistical arrangements are in place, to that the Key Experts can focus on technical aspects and begin to deliver their inputs as effectively as possible. It is assumed that appropriate accommodation for the Resource Centre will be provided for the project in premises of (1) MIREME DNE primary office in Maputo and (2) ARENE secondary office in Maputo. This has the dual benefit of allowing quick establishment in existing office space and, importantly, it will allow for the team to integrate and build relationships with MIREME and ARENE from day one. The Team Leader, with the assistance of the Backstopping Team, will if necessary equip the office with a computer based on an Internet access (if provided), an appropriate telecommunications system, photocopying facilities and other basic office equipment (if not provided). In case the Technical Assistance team needs additional furniture (desks, chairs, filling cabinets) or other office equipment necessary for execution of the contract (laptops, additional telephones, fax machines, photocopiers, etc.) the Consortium is prepared to deliver necessary items at short notice. To ensure that the project team can concentrate on their professional activities, the Consortium have also budgeted for a full time Office Manager. This additional person will be engaged following a transparent recruitment procedure. All job openings will be published on a popular websites (for example www.emprego.co.mz, www.olx.co.mz, www.trovagas.com) as well as on the websites of the Consortium Partners. Interviews with short-listed candidates will be carried out by the Team Leader and the Project Director within the first two weeks of project implementation so that the office personnel is engaged in preparations for the meetings with relevant stakeholders (including public administration officers representing, inter alia, MIREME, EDM, ARENE, FUNAE, GET.Invest, Project Steering Committee and media). Analogue transparent and competitive processes will be launched for service and supply orders related with operation of the offices. The local Office Manager would be responsible for much of the logistical management of the project, therefore relieving the burden placed o the Team Leader and Key Expert 2, to ensure that both are free to concentrate on technical work. The Office Manager, additionally, will focus on supporting general activities of the office and ensuring smooth information flow within the Resource Centre. Activity 0.2: Establishment of the EU Energy Steering Committee As Required by the ToR (Paragraph 4.3, Section 'Management structure'), in close cooperation with the Resource Centre, GET.Invest, AMER (Mozambique Renewable Energy Association) and main beneficiaries (i.e. MIREME, ARENE, EDM and FUNAE) a Energy Steering Committee (ESC) will be established to monitor the project's progress, provide guidance on project implementation, and ensure ownership and coordination among the various different institutions involved. Key Experts representing the Resource Centre will seek to meet each of the prospective PSC members early during the Inception Phase so as to introduce themselves and the project, but also to understand individual expectations and needs towards the subject project. It is expected that The Minister of Cooperation and Foreign Affairs, represented by the Gabinete do Odnador Nacional do FED (GON) or MIREME, if delegated, will host and chair the meetings. Therefore the project staff will be responsible for providing the technical secretariat, preparing and distributing agendas and minutes. The membership of the ESC will be established at the beginning of the project to provide overall guidance and coordinated steering to both the Resource Centre and GET.Invest. Therefore two PPF components will be properly managed and synchronized with adequate information to generate synergies and enhance the overall cooperation. The ESC will meet every six months or upon a request of the Resource Centre. The Team Leader will prepare six monthly work plans which will be presented during the meetings with the ESC. It is envisaged that the first official meeting of the ESC will be convened once the Inception has been produced. All Technical Assistance members will attend to the EU Energy Steering Committee meetings, in addition a representative from the Consortium. Activity 0.3: Validation of identified priority areas with beneficiaries and donors Once the logistical arrangements, project office and staff etc. are in place, the Technical Assistance team will commence with a number of orientation meetings with key beneficiaries and donors. The first meetings will firstly focus on MIREME, ARENE, secondly on EDF and FUNAE to inquiry for their guidance and support for arranging further meetings with other key stakeholders and other organisations, EU projects active in Mozambique and persons whom the Key Experts should meet. The main objective of these meetings will be to: • Establish relations with key beneficiary stakeholders, • Develop a full understanding of Resource Centre, including the priorities, operational targets and requirements, its work and functions, • Develop a stakeholder analysis covering the wider institutional framework for the PPF as a part of Mozambique National Indicative Programme and the European Development Fund, • Establish contacts with other ongoing technical assistance projects, including Get.Invest above all, that are relevant to the work of the subject project so that effective cooperation can be established, and • Begin the process of identifying key issues, additional project risks and possible synergies which could be incorporated into the Inception Report and the development of the action plans. Such consultation and orientation meetings held during the Inception Phase will not be one-off events. The Technical Assistance team will consider them as an opportunity to establish modalities for on-going day-to-day cooperation with the Resource Centre, its core team, counterparts and stakeholders, establishing a baseline communication schemes in early stage of project operation. Activity 0.4: Development and implementation of the communication Strategy The Technical Assistance team will, during the Inception Phase, draw up a publicity and information strategy for the Resource Center, which will aim to raise awareness of the project itself, but mainly to: • Establish a lasting relationships with media, including the regional ones, providing regular coverage and reaching distant areas, • Enhance knowledge of the energy regulations and laws, responsibilities, • Promote an efficient usage of electric energy, • Underline the role of renewable energy sources among the investors, public administration officers and citizens. This will be done in strict and regular cooperation with GET.Invest and AMER, inter alia, • Encourage marginalized groups, including the rural and gender criteria, to consider new patterns and benefits related with the access to sustainable and affordable renewable energy sources, and • Facilitate a good climate around new regulations, understanding of tariffs as well as all legislative mechanisms and changes to come. It is envisaged that the visibility campaign will be starting with the Resource Centre website, well-thought kick-off meeting about each all beneficiaries and stakeholders will be informed. Regular reports, marketing materials, information meetings and discussion groups will lay a long-term understanding of the Resource Centre role in modernizing Mozambican energy sector. Regular communication with GET.Invest and Mozambique Renewable Energy association will enable the Technical Assistance team to discover additional synergies and enhance the impact of all key project developments. Gathering information and opinions will be based on following activities of Technical Assistance team: • Opinion surveys, • In-depth interviews, • Building relationships with focus groups, • Literature and media review, • Stakeholder mapping, • Desk review of other agencies’ opinion research. Finally, the Communication Strategy will target at ensuring the capitalisation and sharing of knowledge related with the project. This includes observations delivering tangible pedagogical and technical value, which would be interesting for other professionals, and which will not infringe the obligations of article 14 of the General Conditions of the Contract. For sharing such information the Conrtium will use the Capacity4.dev.eu internet portal. Activity 0.5: Developing the database with pool of local and foreign Short-Term Experts As the Consortium has a considerable expertise in the field related to the project, it is over control of a joint databases of energy, regulatory and capacity building experts. They can confirm their relevant experience in Mozambique and in the region as well. Figure: Pool of experts available in the consortium at short notice Our backstopping specialists are characterized by over 10-year-long track record in organizing recruitment campaigns for various Technical Assistance projects, including these implemented in Mozambique and South-West Africa. At the moment the Consortium can confirm having a number of shortlisted candidates, who can deliver proper short-term but intensive capacity in the following areas underlined by the ToR : All short-term experts the Consortium have already shortlisted either native citizens of Mozambique or international experts, speaking fluently in English and Portuguese. Such experts will be engaged upon a proper acceptance of the beneficiaries to supplement the inputs provided by the full time Technical Assistance team. Also, the Consortium will be open to recognize properly skilled and experienced experts who can deliver their ad-hoc expertise following up the recommendation given by the target groups. Anyway, the selection procedures applied by the Consortium will be transparent and based on a fixed criteria, including the professional track record, language stills and education. Figure: Screenshot presenting one of the Consortium's database of qualified experts Within the subject Activity the Technical Assistance team will ultimately close the preparation of a shortlist including a number of short-term experts in first two categories (namely category I and II) following their experience and education. This will result in various unit prices and travel costs, as the Consortium backstopping staff will gather all necessary information to one shortlist table. Activity 0.6: Development and implementation of the Monitoring and Evaluation Strategy The goal of proposed Monitoring and Evaluation (M&E) strategy is to understand the extent to which the Consortium is achieving, and ultimately will have achieved, the objectives of the subject contract and newly established targets set up by the beneficiaries. This is also to learn throughout the project implementation period and make everyday decisions based on concrete data. Within the framework of this strategy, monitoring and evaluation has three main purposes: to strengthen the technical and operational capacity of final beneficiaries, sto stimulate learning and improved performance across the partnership, and to facilitate organisational decision-making by all institutional stakeholders at central and regional level as well. Monitoring and evaluation are central pillars in the operation of Energy Resource Centre and will provide useful information about the progress in all operations of the Consortium. The monitoring and evaluation strategy is organized into four main streams of work: results monitoring, evaluation, dissemination and learning. Each plays a pivotal role in the Technical Assistance staff's availability to monitor and assess progress at the country level, and of the partnership as a whole. The person who will be devoted to tracking progress development in all mentioned categories is Office Manager. She/he will be gathering monthly progress data within each component: COMPONENT DESCRIPTION KEY PROGRESS INDICATORS Results monitoring Periodic monitoring of all targets as to be achieved advancement and intensity of all services as to be provided (% value against the forecast) number of regional institutions benefiting from the Technical Assistance (specific value) a number of people' increased access to energy (specific value) a relative scale of knowledge gained in project-specific 'Priority Support Areas' (percentage value of progress compared to a baseline situation) number of disadvantaged rural groups and/or genders(specific value) Evaluation Periodic questionnaires filled-in by the beneficiaries regarding the quality of Technical Assistance number of questionnaires filled-in at central and regional level (specific value) satisfaction survey following up the implementation of contractual services, including sets of subjective and objective factors (value within the 1-10 scale) a number of pending issues, tasks or content-related topics to be solved yet (specific value) a number of jobs created (specific value) Dissemination Verification of project's visibility, communication and dissemination campaign number of people participating project events (specific value) number of marketing materials distributed (specific value) number of website visitors (specific value) Learning A regular check of the progress in receiving knowledge in the Priority Support Areas number of trainings and participants gaining new skills and knowledge (specific value) number of documents, ToRs, tender documents supported (specific value) number of tickets, i.e. specific TA requests both completed and pending (specific value) The proposed Monitoring and Evaluation strategy is based on four basic principles and standards, i.e. (1) Partnership, (2) Mutual Accountability, (3) Transparency, (4) Priorities and alignment. The entire M&E procedure is to be duly established by the end of the Inception Phase in strict cooperation with project beneficiaries and with the Energy Steering Committee, if possible. A dedicated plan will explain how activities will feed into the results monitoring framework. Upon an establishment of Energy Resource Center, the Key Experts will issue a dedicated questionnaire among the future participants of project activities to establish a big and clear picture of baseline knowledge on all intervention areas. This would enable to monitor the knowledge-transfer progress in a more tangible way. As soon as any short-term assignment will be completed, the beneficiary will be asked to fill-in a dedicated questionnaire on confirming that the tasks have been properly performed and that the amounts claimed by the experts have actually tooked place. Moreover, all abovementioned M&E components will be duly compared with all programme components and all activities within each. Project monitoring will aggregate all inputs and outputs related under components describing the progress made on people's increased access to energy, and to track the effects on women and girls as well as village-based citizens benefiting from the project. Gender and youth analysis would deliver a very important knowledge following up the overall objective of the project. Activity 0.7: Coordination with GET.Invest. Meetings with the main donors to avoid overlapping of the same activities. Review of the existing legal and donor framework of Mozambican energy sector. Proper coordination with GET.Invest project, managed by GiZ under the framework of Africa-EU Energy Partnership (AEEP), will be crucial for the creation of joint synergies and impacting the market as a whole. Both private and public component of PPF are much coherent to achieve common goals: Common focus areas: • Generation of renewable energy investments, especially in rural areas and for women and girls • Establishing a lasting cooperation, understanding of mutual needs and expectations between the private and public sector in Mozambique Potential synergies: • Common events, conferences, marketing materials • Providing permanent Technical Assistance and full provision of required competencies at any moment • Better information flow in between the private and public sector • Creation of coherent communication and messages to the stakeholders and target groups Figure: Graphic illustration of possible synergies between 3 components of PPF Therefore the GET.Invest project representatives (at all levels) will be welcome to take an active part in the operation of Energy Steering Committee. Also, a set of regular meetings and mutual visits is envisaged, especially in the Inception Phase to set up cooperation rules, discuss mutual interest, synergies and expectations against the common focus areas. The key change in Mozambique’s relationship with its donors has been the shift away from project aid and towards direct budget support, which is now the most important source of aid money for Mozambique, accounting for nearly half of the state budget. Donors expect budget support to increase government ownership of the development process, to create mechanisms of mutual accountability between donors and the government, to bring about greater harmonization, co-ordination and information sharing amongst donors, and to unite donors in the support of a common goal. The Consortium is aware of a number of international donors supporting the Government of Mozambique, i.e.: ADB AUSTRIA BELGIUM CANADA DENMARK EUROPEAN UNION FINLAND FLANDERS FRANCE GERMANY ICELAND IRELAND ITALY JAPAN MCC NETHERLANDS NORWAY PORTUGAL SOUTH KOREA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM UNITED STATES OF AMERICA WORLDBANK The most active donors in Mozambique are the European Union, Agência Espanhola de Cooperação Internacional (Spain), República Federal da Alemanha (Germany), Agência Francesa de Desenvolvimento (France) and Austria. Only in 2018 a number of ten newly launched donor-funded projects have been started. Their aggregated value extends € 2892M, following up the commitment of donors from Canada, Switzerland, Spain and Italy . The Key Experts will duly contact the donors to generate new synergies across the projects targeting the issues of: • Energy including energy efficiency, use of renewable energy sources, access to energy, investments • Vulnerable and disadvantaged groups including women, girls, people located at remote and village areas, unemployed, the poorest • Legislative changes related to the implementation of new models and establishing a framework • Capacity building of the public sector both at regional and provincial level through a number of training and advisory services The Resource Centre will therefore play secretariat role to support cohesion with EUD's and other donors' activities in similar areas, among others through participating at the Energy Sector Working Group (ESWG) meetings. Also, another EU interventions in Mozambique will be supported by seeking synergies as much as possible. This is to cover technical areas of road transportation, sustainable agriculture, value chain and nutrition. Activity 0.8: Engagement, coordination and creation of links with ESC, EPCU, ESWG and other stakeholders At the early stage of Energy Resource Centre establishment and under the first days of Inception Phase both Key Experts providing Technical Assistance will recognize all representatives of project beneficiaries, stakeholders and target groups. Each institution will be recognized separately and represented by a different contact person. Therefore the cooperation character will became more individual, tailor-made and target-oriented. Properly engaging links between ESC, EPCU, ESWG and other stakeholders will be established by a set of following activities managed by the Resource Centre, among others: • Open days (e.g. Mondays) of the Energy Resource Centre reserved for providing individual assistance at the premises of MIREME and ARENE for all interested individuals and organisations • Supporting the implementation of common initiatives as the Key Experts are open-minded and will remain available for all • Participation in the statutory events as organized by the ESC, EPCU, ESWG and other stakeholders • Creation of the individual newsletter and mailing list supporting the mutual communication on events, needs, Technical Assistance • Joining trade fairs, press conferences and other ad-hoc events to strengthen a common message for all investors and citizens With respect to the privacy and data protection, the Consortium will operate on high level systems to protect information, facilities and ensure private security as well as will implement proper organisational discipline and procedures among all experts engaged in the subject cooperation. Activity 0.9: Identify new support areas, respond to support requests The Technical Assistance team will remain available for all initiatives addressing the discover of new support areas given to the beneficiaries. A special questionnaire is to be prepared and distribute to recognize their individual and group capacity building needs. For a better understanding, the Key Experts will attend formal meetings or different kind of informal events organized by the beneficiaries, to recognize their current way of operation, decision-making process and all factors having impact on the efficiency. The consortium is fully aware that some TA support needs may be outdated, and much more could be requested by the potential beneficiaries as new eligible needs may have arisen. Consequently, a dedicated communication scheme will be established to manage the support requests: Figure: The dedicated scheme for providing the TA on-demand support In regard to the proposed scheme, a set of principles can be presented: • Transparency as all tickets will be published and shared • Prioritisation as the resources will be mobilised due to expected urgency of the case • Responsibility as no request will be left without feedback and the receipt is to be confirmed • Flexibility as the TA support will be possible to be ordered: o on-line, o by e-mail, o by phone, or o personally. Respecting the time of Key Experts being busy of sharing their time, knowledge, know-how and any potential leverages - local Office Manager will be the person nominated in charge of the entire process will be. This will ensure that there will be absolutely no mental or language barrier towards asking every single question or problem concerned. To sum it all, the Resource Centre will keep a track records of all inquiries, developments and key decisions made. Activity 0.10: Organisation of the kick-off visibility event Following up best practices of the Consortium, towards the end of the Inception Phase, or early in the implementation phase, the Technical Assistance team will organize a kick-off meeting to ensure that the subject project has a proper level of visibility amongst the beneficiaries, target groups and stakeholders across Mozambique, including the Nampula and Zambézia districts. The kick-off event will convey the message that the project has started work, will explain what the project's remit is, what its action plan and time table will be and will detail the project's expected outcomes and results. The event will held as a national one-day conference, consisting in two parts: the first one being the project presentation, and the second part is the form of press conference and parallel panel discussions. The Technical Assistance team will avoid the delivery of numerous presentations and focus on brief, targeted presentations that will provide an introduction to discussion. This will not only have the advantage of making the event participatory, it will also offer the opportunity for participants from different backgrounds and communities to get to know each other. The conference will also provide a chance to present the Key Experts, their rich professional portfolio documented by a number of success stories and best case practices in the relevant field. Additional target is to arouse the interest of the national and regional media, who will be invited to cover the event, in activities that are going to be implemented throughout the project. The Consortium will ensure efficient organisation of the presentation event, though providing the necessary know-how, setting-up necessary logistical arrangements including catering and interpreting services. Activity 0.11: Development of the Action Plan and the Inception Report The Inception Report, together with its Action Plan, will be the basis for all activities undertaken during the remaining years and months of the project implementation. The Consortium will ensure that all members of the Technical Assistance tea and beneficiary institutions are directly involved in planning discussions during the entire Inception Phase and particularly during the drafting of the Action Plans, increasing a sense of ownership and participation in the project design. The report will be retrospective and prospective, i.e. it will report on activities carried out during the Inception Phase and will include a detailed work plan, including indicators of achievement, for the implementation phase. The action plans will be constructed in a top down manner, ensuring that all three Components and their deliverables duly reflect the Energy Resource Centre project objectives. The plans will highlight and map interdependencies and thus facilitate phasing. Both an overall Action Plan and the first Annual Action Plan will be properly developed. It is understood that some changes to the contents of the original project ToR as a response to the occurrence of specific circumstances after research on site may be deemed necessary and they will have to be discussed with the beneficiaries beforehand. Also based on the assessment done in the Inception Phase, alternative and/or complimentary project activities or working methodologies may be proposed in the Inception Report. They will, however, have to be formally approved by the Contracting Authority. The Inception Report will be submitted for approval to the Contracting Authority within two months of the Inception Phase so that it can be presented at the first meeting of the Energy Steering Committee. 1.2.2 PROJECT MANAGEMENT Activity 0.12 Providing TA to beneficiaries through PPF-RC in-house expertise The Consortium has established a clear division of competencies among the in-house staff to enhance the overall cooperation with the beneficiaries. The Team Leader will be supported by Key Expert 2, Office Manager and The Backstopping Team. Entire organization is to support knowledge sharing and smooth implementation of core Technical Assistance services by all in-house and short-term experts. All the organizational, logistical and formal arrangements around the service will be therefore delivered by the Office Manager (preferably a Mozambique citizen) on local level and The Backstopping Team on Consortium central level. Figure: Proposed composition of the TA team including the information of key tasks to be covered The Backstopping team consist in the position of Financial Manager, Logistics, Information Technology (IT) and secretarial support. It will deliver an overall know-how as the Consortium has deep experience in the field of (renewable) energy, regulations, investments and South-West Africa. Considering a fluent project implementation it is important to remember the role of EPCU composed by one representative from EU Delegation, on from the GON (both understood as The Contractor), one from the GET.Invest and one from the Resources Center (preferably the Team Leader, but also the consortium's Contract Manager will remain available). Meetings organized on a monthly basis will secure a proper pace of project implementation, including the usage of proposed Monitoring and Evaluation tools as well as other reports and minutes prepared within the Technical Assistance team. Figure: Project structure including the role of The Energy Project Coordination Unit (EPCU) Activity 0.13 Providing TA to beneficiaries in preparing support requests, defining ToRs, tender docs, etc. The beneficiaries will be provided with solid and regular Technical Assistance on a daily basis. This is to be achieved by a series of initiatives, as duly described under the Activity 0.9 'Identify new support areas, respond to support requests'. While drafting official documents in strict cooperation with the beneficiaries, the Consortium will propose to use secure and reliable data storage preventing the information leaking outside the Technical Assistance project. Following list provides an indicative, but not exhaustive, list of documents as to be supported by Key Experts and Short-term experts: • Documents and calculations on the tariffs, • Business plans and investment proposals, • Policies, regulations and laws relevant to the project operation, • Comments to official statutory documents, statistical reports, organisational charts, registers and databases as to be consulted and managed in the optimal way, • Draft strategies, planning documents, forecasts and development plans, and • Tender documents including formal and technical specifications. Activity 0.14 Recruiting and contacting Short-Term experts for providing external TA Following up the Activity 0.5: 'Developing the database with pool of local and foreign Short-Term Experts' the Backstopping Team will ensure that all required competencies and technical areas, as to be covered to the beneficiaries, will be secured by a number of available external experts. In the scope of subject Activity, the Backstopping Team will ensure that: • Short-Terms experts are available, will gather relevant information, • Individual fees, logistical and formal issues are fully identified, • ST experts are prepared prior to providing their service, are familiarized the project assumptions, context and up-to-date developments, • Project facilities are providing enough space and equipment for the efficient implementation of Technical Asstance, • Energy Steering Committee, Beneficiaries and Stakeholders have expressed their needs fully, are ready and available for the service in a fixed term and will evaluate the service following up its implementation, and • All areas of expertise, as required by the ToR will be covered with properly skilled and experienced person representing the service of value-for-money. Figure: A typology of Short-Term Expertise as to be delivered in the project Activity 0.15 Implementing, supervisory and monitoring ST contracts Consequently to the recruitment of Short-Term Experts who will be confirmed ready to provide their ad-hoc Technical Assistance services The Office Manager in close cooperation with the Backstopping Office will cover necessary logistics, organisational and formal arrangements. The Consortium and in-house staff, as to be engaged in the project, has a wide range of IT tools and internal procedures which will support the implementation, supervision and monitoring of Short-Term Expertise: • A wide range of IT toolkit as Doodle, on-line spreadsheets and questionnaires which will identify the availability, • Shared calendars among the contact personnel at each beneficiary institution, • Project boards which will be located closely to the office facilities at MIREME DNE and ARENE providing up-to-date information on the project events and developments, • Newsletters informing all beneficiaries about planned visit of ST expert with the agenda, • Written bulletins distributed weekly or monthly among the beneficiaries, • Spoken arrangements done under the individual manner, • Monitoring and evaluation procedures as will set up during the Inception Phase. This would include regular reports on Technical Assistance provided and questionnaires filled-in by the beneficiaries at the end of each service (to measure satisfaction and the quality of service), and • The Technical Assistance support cycle, as described under the Activity 0.9, assuming the rules of transparency, prioritisation, responsibility and flexibility. Figure: One of the IT tools which may be used to set up optimal meeting terms for ST assistance Figure: Another IT tool enabling the project participants to see their individual availability in each week Activity 0.16 Bi-Annual Reporting Following up the Article 26 of the General Conditions and the requirements provided in the ToR, Interim Reports will be prepared every six months during the project implementation period. Such regular reports will be drafted by the Team Leader supported by the Key Expert 2 and Office Manager, always in consultation with the Energy Project Coordination Unit (EPCU). Especially since the documentation will be corresponding with the invoice, the financial and expenditure verification reports. Each report will consist of a narrative section and a financial section describing the activities, their costs and results as occurred within the specific period of implementation (including the time inputs of the experts, incidental expenditure and expenditure verification). Activity 0.17 Evaluation and final reporting Evaluation of the Technical Assistance provided by the Consortium and all experts engaged will be following the Monitoring and Evaluation Strategy as described under the Activity 0.6 and finally set up by the end of the Inception Period. Final report will describe all project developments, resources used and achievements. The document will include all problems which were encountered by the Consortium and the Technical Assistance team, as well as recommendations following up a long and extensive consultation process with project beneficiaries and stakeholders. It will be drafted in consultation with the Energy Project Coordination Unit (EPCU) and completed within 1 month of receiving comments on the draft final report from the Project Manager. Finally, the Consortium will ensure that necessary logistical support to these processes including full support to any consultant who might be engaged to undertake the review process employed directly by the EU and representing the Contracting Authority. 1.2.3 COMPONENT 1: CAPACITY BUILDING Activity 1.1: Updating and reviewing the capacities of key beneficiaries The main players in the energy sector are: The Ministry of Energy (MoE) who is responsible for national energy planning and policy formulation and for overseeing the operation and development of the energy sector. Electricidade de Moçambique (EDM), the national utility, which is wholly owned by the government and mandated to do generation, transmission, distribution and commercialisation of electricity throughout the country; The Fundo Nacional de Energia (FUNAE), a public institution responsible for the promotion of rural electrification and rural access to modern energy services; the Conselho Nacional de Electricidade (CNELEC), which operates as an independent advisory regulatory body for the electricity sector. In order for the Technical Assistance team to deliver the training and development activities, the overall support framework must respond to the needs and capacity requirements of concrete beneficiaries and stakeholders that will work with the Resource Centre and that will be responsible for delivering a new legislation, investment framework and legislation in the field of the renewable energy sources and energy sector in Mozambique. However, before undertaking the training delivery a structured training assessment of what is requested in terms of training, missing capacity, organisational and knowledge gaps will be undertaken. This will be a full training needs assessment for those who will work directly within and with the Technical Assistance project seeking sufficient information to allow the content of the training and the method of delivery to be specifically targeted to needs. By building a picture of what is required, the training can be as targeted and, therefore, as transparent and responsible as possible. The product of this assessment will be a thorough identification of gaps in skills, experience and institutional capacity amongst the MIREME, EDM, ARENE and FUNAE staff, above all. Once the diagnostic assessment is carried out of what is required from the training they will put in place a development schedule which meets clearly defined objectives and establish the appropriate delivery mechanisms. It is envisaged that the training needs assessments will follow four steps: • Clearly defined development objectives and a development strategy which responds to the specific needs of the 'relevant' staff as targeted by the project, • The selection of an effective means of development delivery, be it training, mentoring or study visit (if needed), also the schedule and venue for such actions, • The circulation and approval of proposed individual development plans to MIREME, EDM, ARENE and FUNAE senior management, and • An indicative list of development/training materials and documentation required to deliver training. As the ToR drafted an proposed framework of Priority Support Areas acting the baseline of TA service, all of them are to be prioritized and verified during the subject Activity 2.1. Thematic area Proposed Support Areas Supported beneficiaries MIREME EDM ARENE FUNAE MITADER Capacity building 1.1 TA for Project Management skills 1.2 TA for information and database management and statistical analysis for policy making purposes 1.3 TA for development and assessment of pre-feasibility and feasibility studies (technical and financial) 1.4 TA for technical knowledge on renewable energy technologies and application models Enabling Environment 2.1 TA for developing methodology for tariff setting and regulation (on-grid, off-grid and standardized) 2.2 TA for preparation, management and regulation of concessions for smaller on-grid (<20MW) and off-grid systems; TA for improving legal framework for mini-grids 2.3 TA for development of on/off-grid strategies, policies and plans (including models for private sector participation and use of bended finance) 2.4 Enhanced donor coordination through secretariat services 2.5 Reform of the environmental licensing requirements of small electrification projects 2.6 Support to establishment of a One-stop-shop for information on energy sector 2.7 Support the establishment and/or operation of a Rural Energy Agency 2.8 TA for developing technical standards, energy efficiency codes, quality norms for industry and electrical equipment 2.9 TA for developing awareness raising and communication strategy for energy efficiency/DSM Pipeline of Projects 3.1 Support in developing Investment Prospectus selected projects of the Renewable Energy Projects Portfolio 3.2 Support identification of sites for grid densification 3.3 Map areas for reducing non-technical losses in distribution network 3.4 Identification of activities eligible for productive use of energy (linked to feasibility studies) Two symbols relates to the support type, i.e.: - obligatory, - optional, Table: Baseline Priority Support Areas as to be updated under the Activity 2.1 Activity 1.2: Capacity building MIREME - DNE MIREME is considering one the most crucial beneficiaries of the Technical Assistance services as to be implemented. The Department of Planning and Cooperation has recognized its limited capacity in the following areas: • Tariff evaluation, setting and regulation, • Renewable Energy projects and investments, assessment, implementation and operation, • Evaluation of financial plans, models and budgets related to the RE investments, • Cost-benefit analysis, • Policy making tools including Strategic Environmental Assessment (SEA) for the energy sector*, • Project management in the scope of licensing and monitoring of energy investments*, • Data collection, analysis and reporting*, • Forecasting and scenario-making for the energy sector. * - common area of interest of both MIREME DNE and DPC There is a strong need to have MIREME better coordinate activities of EDF and FUNAE, to supervise and guide these institutions towards a common vision in terms of policies preparation and implementation, managing the available resources, risk assessment related to the investments. This would enable these beneficiaries to understand the (renewable) energy market, knowing the causes and effects. Therefore the Consortium will apply there a set of the most suitable techniques to discuss a various set of relevant case studies, from the perspective of public regulator. Activity 1.3: Capacity building MIREME - DPC Across the competencies of MIREME's Directorate for Planning and cooperation there are several weak points which should be improved by providing properly tailored Technical Assistance services, namely: • project management at all levels of public administration operation (central, regional and local), • Policy making tools including Strategic Environmental Assessment (SEA) for the energy sector*, • Coordination of stakeholder's contribution and impact during projects and meetings, • Data collection, analysis and reporting*, * - common area of interest of both DNE and DPC at MIREME The Department of Studies and Investment Analysis (DEAI) of the DPC would also greatly benefit from the Technical Assistance provided. Especially in terms of investment analysis, data collection, publication of regular energy information for policy-making purposes, market information and studies. A set of various renewable energy case studies are to be discussed to deliver a down-to-earth Activity 1.4: Capacity building ARENE The role of ARENE in the entire process of building a modern energy infrastructure supported by legislation, concessions and tariffs should not be underestimated. Such a new and autonomic body, with a strong governmental mandate, plays a crucial role in approving the electricity prices and tariffs related with a number of possible self-sustainable and self-financing mechanisms for investors. Its role is also to propose and comment new policies to ensure that the entire energy market remains competitive and can deliver a best value-for-money to its end customer. As the Government of Mozambique has no tactile experience with independent Energy Regulator as ARENE, the Technical Assistance services should be even more intensified to deliver a real capacity to the organisation, it's leaders and operational staff. ARENE have a great chance to guide the entire energy sector, became the main information source for investors, other authorities, international organisation and habitants. Therefore a tailor-made support should be give to its managers, including the areas as follows: • drafting methodologies for a proper evaluation of investment proposal, providing the beneficiaries with a set financial and technical guidelines following up a number of success stories and real case practices, • defining the methodology frameworks for setting up tariffs and self-financing renewable energy investment support mechanisms, • support in establishing the managerial and operational procedures, • developing policies and regulations to ensure their long-term sustainability towards achieving proper market impact. Activity 1.5: Capacity building EDM - DER Electricidade de Moçambique (EDM) has created a Directorate of Renewable Energy and Energy Efficiency (DER). This special unit is devoted to enhance a number of energy project, both on- and off-grid. The organisation targets the energy consumers with a number of initiatives and potential investments, following up a series of public-private consultations and studies. This is to secure and manage the energy demand and production in a long-term perspective, prepare contingency procedures and increase the awareness of the market stakeholders in the field of energy generation and consumption models. As the EDM has prior experience in the area of Energy Efficiency, the capacities related to the Renewable Energy Sources needs to be improved the most. The main focus behind the Technical Assistance will be given to the assessment of RE investment in terms of their technical context, cash-flow and financial factors (e.g. SPBT, CAPEX, OPEX, IRR) enabling to assess the overall viability of each project. This put EDM - DER to support the electrification of remote rural areas if only the investment will be economically justified and will not impact the end-users negatively (e.g. by providing an unstable energy source damaging energy receivers). Such a message should be targeted e.g. for the industrial facilities to increase their awareness on: • benefits from reactive power compensation, • attractive investments heat exchangers, small energy generators (both engines and turbines using cogeneration), • application of Renewable Energy, even at small cale, as photovoltaic, heat pumps, geothermal resources • the potential behind the energy recovery and/or automation • methods supporting the reduction of leakage in steam, compressed air and refrigeration. All possible scenarios for the generation of Renewable Energy Sources will be duly discussed with the Technical Assistance team, including solar, hydro, geothermal and wind powers. This would be related with the public relation tasks targeted at the stakeholders of EDM-DER, including investors, end-users, provincial administration and the industrial entities acting the largest energy consumers. Therefore a different message should be prepared to each group, with a set of convincing arguments, for achieving an optimal effect. Therefore a set of following capacities should be developed to achieve better operation and achievement of targeted results: • renewable energy and energy efficiency project planning, development and management, • implementing energy efficiency audits for customers (including a series of technical and economic calculations to recognize the volume of potential energy losses and/or savings), • designing strategies and plans for Demand Side Management and RE, • development of operational procedures and job descriptions, • recognition of related technical and financial parameters related with the Renewable Energy Sources, based on a number of real scenarios and business plans, • preparation and implementation of efficient awareness raising campaigns in the field of Energy Efficiency and Renewable Energy, with the usage of the most efficiency tools. Activity 1.6: Capacity building FUNAE Mozambique's Energy Fund (FUNAE) targets the implementation of electrification projects at remote rural areas to cover the social risks and inequalities. Establishing a properly engaging cooperation with the private sector is a must. This is to be done by establishing a Portfolio of Renewable Energy Projects under which the most promising investments will be duly identified and evaluated to establish new energy off-grid islands to cover consumers' demand. The investment will be assessed under the technical and financial criteria, considering above all the mini-grids based on solar and hydroenergy. Food crop production is the most important agriculture sub-sector accounting for around 80 percent of the cultivated area. The most fertile areas are in the northern and central provinces, which have high agro-ecological potential and generally produce agricultural surpluses. Therefore many agricultural process in Nampula and Zambézia require or would benefit from the access to electricity. Enabling irrigation in off-grid and low water regions as Mozambican produce is supported by small-holder farmers and solar irrigation systems are able to reduce costs (by 30% approx.) and increase yields (by 40% approx.). By using the blended finance and subsidy mechanisms the FUNAE has the greatest potential to promote projects with the greatest market impact. This would certainly increase gender equitable access to sustainable and affordable renewable energy in rural areas and would require strengthening cooperation with provincial-level institutions and organisations (including investors, governmental and non-governmental organisations as well as trendsetters i.e. people having the greatest impact on their local societies). Development of investments in mini-grids is now limited by lack of policies around concessions, Feed-in tariffs, guarantees and duties. FUNAE should be in a position to draft a clear and credible master plan for grid extension considering its statutory competencies, possible impact and newly enhanced capacities. The Technical Assistance team will support FUNAE and provincial institutions in the development of all necessary strategic documents. It is therefore important to remember that mini-grids (off-grids) require alignment across four key areas to scale. Figure: The off-grid pathway towards achieving a proper impact on rural environment The Technical Assistance is to strengthen following capacities of FUNAE: • definition of legal and operational models for private sector, • assessment of the market potential for priority energy generation units, including the evaluation of a number of perspective energy users, • preparation of pre-feasibility and feasibility studies. Activity 1.7: Strengthening cooperation with GET.FIT The Global Energy Transfer Feed-in Tariffs (GET FiT) Program is to address some of the barriers as (1) Cost competitiveness, (2) Technical concerns, (3) Access to financing and (4) Project development by mitigating the key risks and making renewable energy projects bankable. The problem actively promotes the usage of new international Public-private Partnerships. Therefore, GET FiT would achieve synergies through combining public money with risk mitigation strategies and coordinated Technical Assistance finally overcoming project development and financing barriers. Such a comprehensive approach would catalyze the supply of, and the demand for, private sector financing of renewable energy projects in countries similar to Mozambique. A Renewable Energy Feed-in Tariff (REFiT) was introduced in Mozambique in 2014. However, private investments in renewable energy projects have not materialized as expected. In order to operationalize the REFiT, the Government of Mozambique has requested KfW to undertake a detailed design and implementation readiness study to develop a programme concept for a GET FiT Programme in Mozambique. The study was financed by the Government of the United Kingdom and Northern Ireland. It was indeed tendered and initiated in the course of 2017. Figure: The summary of GET FiT Solution GET FiT and Energy Resource Centre would jointly serve a bridge to grid parity for renewable energy both by allowing Mozambican institutions to gain experience with renewable resources prior to break-even scenarios, and by adjusting incentive rates to reflect low prices over time. The cooperation considered under this Activity is dedicated for developers and financiers of renewable energy projects, highlighting the instruments which would help to mobilize private initiative, know-how and the capital. The Energy Resource Centre in cooperation with GET FiT would focus on three essential directions to achieve the join mission and address related goals, as presented below. Figure: Common goals of GET FiT and the Energy Resource Centre The Technical Assistance provided by the Energy Resource Centre would contribute towards solving following renewable Energy risks: • Development risks (delays, incompletion, missed milestones, time and cost contract negotiations) • Construction risks (delays and cost overruns, higher costs allocation for grid connection, later than expected connection to the grid) • Revenues risks (adequacy of revenues to provide target returns, unit price lower than expected, demand lower than forecasted) • Technology risks (technology does not perform as expected, contractual damages for performance failures) • Operational risks (lower output or higher operating expenses, shorter than expeted lifetime of equipment) • Regulatory and legal risks (unstable incentive structure focused short-term and unstable, appeals/lawsuits challenging procurement results) This would be achieved by setting up a regular cooperation with GET FiT staff, consultations and mutual flow of adequate information. The Technical Assistance team will be available to provide its expertise, participate at GET FiT events and meetings. Common reporting is also being considered as an option. Activity 1.8: Supporting the provincial directorates (DIPREME) in Nampula and Zambézia DIPREME are Provincial Directorates of Mineral Resources and Energy located in Nampula and Zambézia, inter alia. DIPREME represents the Ministry of Energy on the regional scale. The cooperation between the Resource Centre and DIPREME can be implemented by a number of tasks that fall under two categories: • Capacity Building Program • Sensitization and Awareness Program CATEGORY OPERATIONAL DETAILS Capacity Building Program Target Audience • National Government Representatives Content • Mini Grid Business Models • Mini Grid Revenue Collection Mechanisms • Operations and Maintenance • Project Management • Environmental Health and Safety Duration • One (1) – Two (2) Weeks depending on target group Group Size • Five (5) – Ten (10) People depending on target group (10ppl) Sensitization and Awareness Program Target Audience • District Level Representatives • Community Representatives Content • Mini Grid Business Models • Quality and Safety Standards Awareness • Mini Grid Technical Safeguards • Efficiently Use and Maintain of the Mini Grid • Benefits of Mini Grids Duration • One (1) – Two (2) Weeks depending on target group Group Size • Ten (10) – Twenty (20) People depending on target group (60 ppl) All the operational details of event and initiatives will be agreed between the Technical Assistance team and MIREME Provincial Directorates of Mineral Resources and Energy located in Nampula and Zambézia. The Consortium, in cooperation with the Backstopping Team, will enable MIREME to take advantage of the expertise and inputs given by the Short-Term Experts, whenever justified and required. To sum it all, at the end of the subject Activity MIREME will be in a position to map opportunities for productive use of new energy generation investments across northern provinces of Mozambique, work with businesses to understand variable models, as well as link with business and funding opportunities as available at the local level of Nampula and Zambézia. 1.2.4 COMPONENT 2: ENABLING ENVIRONMENT Activity 2.1: Supporting ARENE acting Energy Regulator Component 2 on Enabling Environment is much irreverent from the previous one dedicated to the capacity building of national and regional institutions. More than focusing on in-house competencies and expertise it will support public institutions in creating a private sector friendly environment to increase the volume of investments in on- and off-grid renewable energy sources. Therefore, within the framework of Technical Assistance as to be provided, both Key and Non-Key Experts will support ARENE and other beneficiaries, if needed, with following operational tasks: • evaluation and advisory on renewable energy policies and regulations, • supporting the establishment of long-term regulations for IPPs, regulations on import of solar home systems, grid codes for IPPs and captive powers systems, • strategic support given to the to the creation of concessions and licensees for renewable energy sources. Figure: Regulatory policies in lower income countries as Mozambique, inter alia, as of 2015 As the Key Expert 2, specialized in the field of Energy Market Regulations, will be operating at the premises of ARENE, a day-to-day cooperation will result in improved capacities in the following areas: • assessing cost proposals and benchmarking the energy sector with other markets, • recognition of national and international energy patterns (usage, efficiency, costs, investments, stock prices of raw materials used for the generation of energy), enabling ARENE to benchmark the Mozambican energy sector with other countries, • preparing concessions, • preparation of a properly detailed employment plan to prevent staff fluctuation, and • establishing a transparent set of recruitment procedures. Figure: Stakeholder of ARENE which are to be indirectly supported by the TA activities Activity 2.2 Establishing on- and off-grid strategy, plan and models Increased interest in the Mozambique’s Mini-Grid RE sub-sector can be attributed to the Atlas for Renewable Energies of Mozambique (2013). In particular the Atlas mapped out the potential for hydro, wind, solar, biomass, geothermal and wave energy in Mozambique as well as identification of the commercially viable sites. A considerable number of sites were located in remote areas where grid accessibility is a challenge. Furthermore, the information on description of the RE source, potential size of the project, location and distance of village from the RE source, were all provided in the Atlas. However, considering the low access to electricity in Mozambique’s rural areas (less than 5%) and the abundance of renewable energy in these areas, mini-grids became the preferred option for off-grid electrification. EDM has also confirmed interest in the Atlas, which enabled identification of suitable projects capable of harnessing clean sources while also increasing installed capacity, meeting growing power demand and expanding rural energy access. In this regard, the immediate objective of this activity will be to create a favourable enabling environment in terms of regulatory and policy framework for commercial deployment of renewable energy based rural mini-grids in Mozambique. The Technical Assistance will support the Government of Mozambique in improving the enabling environment for on-grid and off-grid private investments in renewable energy, as to accelerate progress towards energy access and energy diversification goals. This will be achieved by: (1) strengthening the legal and regulatory framework to support the implementation of the new Feed-in Tariff Regime for small-medium renewable energy projects and (2) preparation of the mini-grid regulatory framework including capacity building and awareness activities for national and local (district and community level) representatives. Mini-grids should be positioned to complement Solar Home Systems, provide productive use and appliance of grade power. Figure: The relations between the power demand and the distance from the grid, considering the SHS and mini-grids Site identification and extensive licensing are two mayor challenges related with the development of off-grids (mini-grids). The Technical Assistance is targeting creating a set of complimentary on- and off-grid strategies, plans and models to support investors and public authorities at all levels, inter alia, by proposing trusted models related during the data analysis, benchmarking and investment planning. Figure: A number of challenges related with the development of mini-grids The entire Technical Assistance support for the creation of on- and off-grid strategy, plans and models can be divided into four main categories: (1) Development of Tariff Structure and Design for Mini Grids, (2) Development of Technical Regulations for Mini Grids, (3) Development of Environmental Standards, Regulations and Norms for Mini Grids, and finally (4) Capacity-Building and Awareness in Mini Grids. CATEGORY OPERATIONAL DETAILS Development of Tariff Structure and Design for Mini Grids The Technical Assistance will review the respective tariff and propose a sustainable structure and design for off-grid installations which could be energy-based, power based or fee-for service. Potential connection fees and levels of subsidies will equally be explored. The activity will also be used to provide additional advisory services on the prevailing FiT to ensure the proposed tariff design and structure for Mini Grids is complementary and harmonized for both grid connected and off-grid renewable energy projects. The activity will also include capacity building in tariff design, structure and modeling. In conclusion, the tariff structure should strike a balance between commercial viability and the consumer’s ability. Development of Technical Regulations for Mini Grids Considering the significant opportunity for development of renewable energy based mini grids in Mozambique, the need for technical regulations will be important for all operator models to ensure safe and reliable operations for the protection of customers without being obstructive for mini grid developers. The technical regulations will have specific aspects on the Mini-Grid system but not limited to: • Minimum technical standards for mini-grid generation and distribution networks i.e. minimum safety requirements, allowable voltage and frequency variations, • Operating and maintenance requirements, • Quality of service standards i.e. number of days to connect households, resolve complaints and reconnect customers, and • Safe interconnections between EDM and the mini-grid in line with the grid connection guidelines developed. Development of Environmental Standards, Regulations and Norms for Mini Grids The Technical Assistance provided by the Resource Centre will support the development of clear, straightforward and simple procedures for conducting environmental impact assessments. The standards and norms will include measures such as (but not limited to) biomass fuel supplies to prevent deforestation, enforcement of recycling solar PV panels and batteries at their end-of-life, and building standards for the small hydros to ensure minimum impact on river flora and fauna Capacity-Building and Awareness in Mini Grids Capacity building for national government representatives will target project monitoring and evaluation of technical standards, business models, revenue collection mechanisms (tariff based). The capacity building program will be conducted through in-house training, workshops and seminars. Community representatives are key to the successful implementation of the project, and will require sensitization and awareness on quality and safety, contractual and operational aspects of the Mini Grids, community business models (cooperatives, societies groups). Activity 2.3 Enhancing donor coordination The purpose of this activity is to provide recommendations for establishing a more effective aid coordination mechanism in Mozambique, including proposed model and key steps for its introduction. It is expected that such a model would contribute to improved aid effectiveness- strengthened national ownership and alignment, improved accountability as well as increased efficiency in use of administrative capacities for aid coordination. The new effective donor coordination mechanism is developed through a three-step designing process: Figure: A set of available instruments for enhancing donors coordination The Technical Assistance team's methodology for enhancing the Donor's coordination will keep in mind a big picture related with the Aid coordination and Development coordination as well: • Stage one - Donor coordination o main drive usually comes from the development partners, o government usually plays a passive role at this stage (lack of systems to deal with aid or to engage with the donors in policy dialogue, etc.), • Stage two - Aid coordination o more proactive engagement of government counterparts, o setting up of the foundations of improved aid forecasting, accounting and aid management systems on the government side, • Stage three - Development coordination o government increasingly taking the lead in policy design and implementation, o effective mechanisms for management of all government resources, o efficient mechanisms of cooperation between the government and the community of development partners integrated with government mechanisms and systems. All three types of coordination use different instruments and at different level (national, cross-sector, sector, local, programme, etc.). Major challenge lies in adequate definition of sectors and appropriate levels of coordination. Activity 2.4 Reforming Environmental Licensing Requirements (EIAs) Environmental licensing is a tool to regulate activities that may cause harmful pollution or environmental degradation. It sets legally binding requirements to protect human health and the environment through a public and transparent process. Environmental licensing should be carried out by a public environmental authority prior to the approval of projects in order to prevent, reduce, or compensate for the environmental impacts of human activities. Figure: Environmental Licensing tools for protecting the environment Such activities include creating job opportunities, improving infrastructure, and augmenting the tax base. Good environmental licensing systems employ the “assess and prevent” approach that should prevail over the traditional “react and remedy” model of public management, because it is more effective and efficient to prevent, rather than try to cure, damage to the environment. The cornerstone of environmental licensing is an environmental assessment that enables a public authority to evaluate an activity’s environmental impacts. Environmental licensing should not be seen as an obstacle to economic development, but as a supportive mechanism for achieving growth on a sustainable basis. In most cases, the private sector says “what” and the environmental public authority says “where and how.” It is a dynamic tool that should be adapted to fit the specific characteristics of proposed development projects. It is worth to mention that Mozambican Legislative Framework is considered generally good as: • Several updates have been implemented recently in the field of the Oil and Gas Sector, • Environmental and Social Impact Assessments are mandatory, • Public Consultations are obligatory, • Environmental Licenses prerequisite to the issuance of any other license which may be legally required (following up the Environmental Law). Environmental licensing interacts with other governmental policies and programs such as hydro resources policy, economic and territorial planning, energy and mines policy, transportation policy, and health and safety directives. Where such interaction is needed, following tools, complimentary to EIAs, are recommended: (1) Strategic environmental assessment (SEA). This is a tool for use at the governmental authority decision level. The objective of the SEA is to assess the environmental impacts of governmental policies, plans, and programs. It identifies the environmental issues at stake and it defines the critical decision points subject to analysis by the governmental authority. Preliminary stages of the licensing process may be skipped and replaced by the outcome of the SEA. SEAs are used to define the planning process and influence policies upstream from the licensing decision at the project level. Environmental licensing of a certain activity is at its best when it fits the SEA’s goals, programs, and plan of action. (2) Sector agencies’ interaction with the environmental licensing process. If a proposed project requires authorization from a sector agency (for example, in the case of mining, or oil and gas activities), the sector agency would typically liaise with the environmental agency to exchange information and contribute to the environmental licensing process. During the licensing process, the sector agency (1) is expected to comment on, or require additional information regarding, the EIA; (2) is required to attend one or more public hearings regarding the proposed license; and (3) may have to deal with technical requirements imposed by the environmental agency. (3) Environmental compliance and inspection tools, such as audits and monitoring. At the level of technical decision making, environmental compliance and inspection tools should be employed to monitor the operation of the licensed activity. These tools help evaluate whether the operation complies with the technical conditions of the environmental license and may be applied in the process of renewal of the operating license. Environmental public audits may serve as a tool to verify whether the licensed activity is complying with the technical conditions set forth by the environmental agency. When the project fails to comply with the technical conditions set for its operation, the environmental license may be subject to revocation. Civil, administrative, and criminal sanctions may also be applied. A number of stakeholders, however, raise three main challenges in the field of Environmental Impact Assessments (EIAs) due to: • average or poor quality of EIAs, • compliance issues with approved Environmental Management Plans (EMPs), • weak transparency and follow-up of the post-licensing process . These problems are related, above all, with poor institutional capacity and a series of weakness which are to be targeted by the Technical Assistance of Energy Resource Centre as to be established soon. The Consortium can offer its top-tier Key Experts teamed with a number of Short-Term Experts specialised in the field of Environmental Licensing Requirements and EIAs. The targets of environmental licensing are activities that potentially cause pollution and significant environmental impacts. Listed below are categories and examples of such activities: • Industrial developments (manufacturing industries, landfills, oil and gas exploitation, mining), • Infrastructure projects (roads, airports, electric power plants, settlement and housing projects), • Urban constructions (shopping centres, university campuses), • Agricultural and forest activities (cattle raising, timber logging). The activities submitted to environmental licensing will be assessed within the Technical Assistance service of the Energy Resource Centre in accordance with the legal and economic criteria of each stakeholder - with special attention given to the public administration units at central and provincial levels of Nampula and Zambézia. Activity 2.5 Supporting the Rural Energy Agency Mozambique has one of Africa’s lowest electrification rates. The national grid reached just 23% of the population in 2012. Around 68% of Mozambicans live in widely dispersed rural areas making extending access to electricity difficult. The national grid infrastructure is extremely limited and increasingly struggling to cope with rising demand. Around 80% of the country’s residents rely on biomass resources like wood, charcoal and leaves as their sole energy source for cooking and heating. Ironically, this widespread energy poverty is happening against the backdrop of plentiful natural resources. In the past decade, significant coal and gas resources have been discovered. The wealth generated by this extractives boom represents a significant opportunity for Mozambique. It could provide the chance to address long standing challenges around limited electricity access and widespread energy poverty. Electricity needs to be sustainable, accessible and affordable to all. It should not be the sole preserve of industrial consumers or those in urban areas. Mozambique’s electricity quantity and quality deficit could emerge as the biggest constraint to continued economic growth. Rural electrification projects are thus heavily backed by donors who see them as a promoter and enabler of economic development. What is rarely discussed with clarity is who and how many will benefit from rural electrification. Complex financial and technical considerations will be involved by the Resource Centre Technical Assistance team when extending a grid. This includes the cost and difficulty of extending the network across vast distances and varied landscapes. Yet it is also very much a political and economic process. It involves choices around tariffs, subsidies and which areas to electrify and when. High investment costs to provide service means that many rural households will be unable to afford, left to buy cheap units or continue with traditional fuels. Figure: Leading operations to support market covering rural populations unable to afford, left to buy low-quality units Since the early 2000s, renewable – particularly solar – energy has been included in projects using localised mini-grids or standalone systems. These projects seek to provide electricity for administrative centres like hospitals, clinics and schools. This process has been led by the state’s National Energy Fund. This model has so far succeeded in expanding electricity access in far-flung rural areas. The problem is that it is often undertaken with little capacity building. Local communities are also not always consulted properly or given a chance to participate in planning and implementation. The support provided by the Technical Assistance team to Rural Energy Agency will be divided into following categories: • personal training, mentoring and consultation, • discussing documents (technical, financial and legislative, inter alia), • evaluating investments, their parameters towards the local market impact, • presenting best-case practices known in Mozambique, in South-West Africa and worldwide, • organizing study visits and exchanging information between the regions. This would include the creation of handbook of success stories supporting local communities in context of natural resources, agricultural structure, specific demands and expectations from the electricity as still expected to be delivered. This would enable to spread the results of ongoing electrification efforts across the rural as, inter alia : • Women have benefited the most from the expansion of electric mills in the area. Women and girls constitute between 30 and 40 percent of those taking advantage of evening classes that started once electrification made this possible. Women also constitute the majority of entrepreneurs in small-scale businesses, • In the electrified areas, businesses have emerged which, for example, sell fresh produce such as meat and fish. Access to fridges and freezers means that these types of produce stay fresh longer, which has in turn improved people's eating habits, • Access to electricity has also led to improved quality within the healthcare sector. Patients can receive care 24/7, clinics can handle more difficult cases in the areas of maternity care, surgery and emergency care. Maternal mortality has dropped. Emergency care departments previously referred 30 cases per month to larger clinics. This number has now been reduced to 3 cases per month in particular areas, • As soon as electricity was installed, evening classes started in schools. The schools are also showing improved study results. In one agricultural school, the number of pupils successfully completing their courses increased from 82 percent in 2001 to 96 percent in 2005, • Electricity has also signified greater security for people in that they now have street lighting. More people have moved into the area, creating new job opportunities. Energy costs have decreased in comparison with the previous method of producing electricity with the use of diesel-fuelled generators. Multimedia centres have been established and communications have increased. Activity 2.6 Supporting MIREME's DEAI for creating sets of energy statistics (Energy Shop) Energy has always played an important role in human and economic development and in society’s well-being. A full set of information should describe the usage of energy sources. A full typology of energy sources is provided below. Figure: Primary and secondary energy sources versus renewables and non-renewables The Consortium has a broad expertise in the area of energy statistics (e.g. establishing databases, establishing relevant procedures and IT tools), which will play a significant crucial role for all energy sector beneficiaries - especially public units as MIREME, ARENE, EDM and FUNAE - but also citizens, investors, banks and international donors. Figure: Main information flows which are proposed to contribute to the Energy Shop database Energy Statistics available under the concept of the Energy Shop are proposed to deliver information and analytical statistics in following categories: ENERGY PRODUCTION • Fuels can be produced in a large diversity of ways: deep mine for coal, offshore platform for oil, forest for fuelwood, etc. The production of primary fossil fuels is usually measured close to the point of extraction from the reserves. The quantities produced should be those measured when the fuels are in a marketable state. Any quantities which are not saved for use or sale should be excluded from the production figure, • Primary electricity and heat is closely related to the definition of these two forms of energy in the different conditions of their exploitation. In general, the statistical production point is chosen to be a suitable measurement point as far “downstream” as possible from the capture of the energy flow before the energy flow is used. For example, for hydroelectricity, this will be the electricity generated at the alternators driven by the water turbines, • The trading of fuels between buyers and sellers in different countries raises a number of issues for reporting statistics of imports and exports. Imports and exports of commodities are the quantities entering and leaving a given country as a result of purchases and sales made by persons living in that country. The most fundamental issue is to ensure that the definition of national territory is clear and applied in an identical manner to all energy commodities. As the Mozambique has “free trade zones”, then there should be an established policy on their inclusion or exclusion from reporting and on the effects of the decision on the internal consistency of the commodity accounts, in particular on the national stocks and consumption figures. INTERNATIONAL MARINE BUNKERS • Deliveries of oils to ships for consumption during international voyages (bunker oils) represent a special case of flows of oil from the country. The oils are used as fuel by the ship and are not part of the cargo. All ships, irrespective of the country of registration, should be included but the ships must be undertaking international voyages. International marine bunkers statistics should include fuel delivered to naval vessels undertaking international voyages. Care should be taken to ensure that data representing oil delivered for international marine bunkers meet the definition given here and, in particular, exclude bunker oil used by fishing vessels. STOCKS • Stocks of fuels serve to maintain operations when supplies or demand vary in a manner which causes demand to differ from supply. Stocks are held by fuel suppliers to cover fluctuations in fuel production and/or imports, and orders for fuels. Stocks are held by consumers to cover fluctuations in fuel deliveries and consumption. Stocks held by suppliers and power generators should always be included in the national fuel statistics. Stocks held by other consumers are included only if figures for consumption by the consumers are based on surveys of consumption at consumers' premises. FUEL TRANSFORMATION AND CONVERSION • Fuel transformation or fuel conversion changes a primary fuel, by physical and/or chemical means, into a secondary energy commodity which is better suited than the primary to the uses for which the secondary commodity is intended. Examples are the manufacture of coke from coal in coke ovens or the generation of electricity from steam produced by burning fuels. FINAL CONSUMPTION Final energy consumption covers deliveries of commodities to consumers for activities that are not fuel conversion or transformation activities as defined elsewhere in the balance structure. The energy commodities are considered consumed and not transformed into others. In short, they disappear from the account. Quantities shown are intended to represent the energy needs of the economic activity under which they are classified. Within the industry sector, for example, consumption of energy commodities will be for final use without transformation into other commodities. Databases can be prepared under following sub-categories to ensure the delivery a big picture to all stakeholders and authorities: • Industrial enterprises use energy commodities for heat-raising for own use, for nonenergy purposes, transport, electricity generation, and production of heat for sale. • Main transport modes: road, air, pipelines, inland, navigation. • Thematic information on energy consumption by sectors: residential, commerce, public services, etc. Non-energy uses of fuels The petrochemical industry represents, by far, the most important user of fuels for non-energy purposes. It converts fossil fuels (oil, natural gas and coke-oven byproducts) and biomass carbon to synthetic organic products. A number of fuels may be used for non-energy purposes. These are: • Raw materials for the manufacture of non-fuel products (feedstock use). The use of the hydrocarbon content of fuels as raw material is an activity which is almost entirely confined to the refining and petrochemical industries. • Lubricants and greases are used in engines for their “slippery” qualities, and bitumen on roofs and roads for its waterproofing and wear qualities. This is related with their physical properties. • White spirit and other industrial spirits are used as diluents in paint manufacture and for industrial cleaning purposes. This related with their solvent properties. The Technical Assistance team will provide its top-tier statistical expertise to all beneficiaries (i.e. MIREME, EDM, ARENE and FUNAE). The Consortium believe, however, that ARENE acting the National Energy Regulator should be in charge of the process of data collection, analysis and presentation. This is to be discussed with the Energy Steering Committee prior to the implementation of the subject activity on the Energy Shop establishment. Figure: Example country-related set of statistic sheet providing a big picture on the energy market Activity 2.7 Discussing VAT/duties on import of renewable energy equipment and appliances The Technical Assistance support can help the beneficiaries to review their regulatory and sustainability business frameworks related with targeted energy and emissions trading plans. Both Key and Non-key Experts can provide tax characteristics of carbon credits, resolve Clean Development Mechanism issues, and define implications of Certified Emission Reduction forward contracts from both trading and transfer pricing standpoints. The Consortium can also help MIRENE, EDM, ARENE and FUNAE on navigating the wide array of available global and local Government and municipal grant programs or tax incentives related to the production and sale and purchase of alternative energy and green products. These include FITs, tax holidays, accelerated depreciation, carbon tax and pricing, trading schemes, energy taxes, excise taxes or VAT in relation to wind, solar, biomass, biofuels, geothermal and hydropower sources, as well as increased energy efficiencies, smart grid technologies, and carbon capture and storage technologies. Due to the impact of these incentives and taxes on potential investment decisions, the Technical Assistance team can factor them into tailored due diligence and tax modelling services. These services apply not only to production or sale/purchase of green goods but also to green investments and financing arrangements. The Consortium unites a large group of professionals who specialize in these tax practice areas: • Financial Services Tax, • Global Indirect Tax, • Global Transfer Pricing Services, • VAT and duties related to the energy sector (investments, import/export, operations), • International Corporate Tax, • Mergers & Acquisitions. Both Key- and Non-key Experts will be prepared to invest significant time and resources in deepening their understanding and knowledge of the energy and finance sector of Mozambique. This will enable them to provide Resource Centre beneficiaries with strategic and insightful services that are tailored to their specific needs and based on an understanding of their challenges. In the regard of VAT and duties on renewable, the market provides a variety of support schemes, including: • Carbon emissions incentives (e.g. Certified emissions reduction TAX exemption), • Energy efficiency incentives (e.g. Industrial policy projects additional allowance, Energy efficiency savings allowance, Production of renewable energy allowance, Research and development allowance), • Environmental incentives (Environmental treatment and recycling or waste disposal asset allowance, Deductions in respect of environmental conservation and maintenance), • Special Economic Zones with dedicated TAX regime, • Operating subsidies (e.g. the R&D tax credit program, Feed-in tariff), • Quota obligation. The Technical Assistance team will actively support all beneficiaries to establish a coherent and clear scheme on VAT and duties promoting the development renewable energy and including the dedicated conditions for related import of equipment and appliances. INPUTS OUTPUTS ... ... ... ... ... ... SCHEDULE Year 2018 2019 2020 2011 2022 Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Month Activity 2.8 Strengthening the Energy Efficiency / Demand Side Management The most effective way to promote energy efficiency is through the definition of tariffs that allow the recovery of costs associated with each and every activity of the electricity sector and by tariff structures and prices that reflect marginal or incremental costs. This methodology should be adequately incorporated in the Mozambican electricity tariff code. Nonetheless, environmental externalities not reflected in prices and the existence of barriers to the adoption of efficient behaviours justify the implementation of initiatives to foster energy efficiency. Therefore, the Technical Assistance team will contribute to the development of a mechanism for promoting efficiency in electricity consumption (PPEC). PPEC consists of a tender mechanism, by which eligible promoters (suppliers, network operators, consumers’ rights associations, energy efficiency agencies, etc) submit initiatives to improve electricity efficiency in the industrial, services and household/residential sectors. The annual budget is to be fixed, and as foreseen i the tariff code, that amount is supported through the Global Use of System Tariff, paid by all consumers. This would ensure a long-term sustainability of the system, which in principle would became self-financing. PPEC comprises two types of measures: • Tangible – installation of equipment with a level of efficiency superior to standard equipment on the market, therefore producing measurable consumption reductions. In the table below some examples of tangible measures are shown, as well as their technical characteristics. Measure Assumptions Residential lighting (Fluorescent Compact Lighting 18 W) • Aimed for the household segment • Useful lifetime: 6 years • Annual consumption reduction: 62 kWh (relative to 75 W incandescent light bulb) Electronic ballasts • Aimed for the services segment • Useful lifetime: 16 years • Annual consumption reduction: 63 kWh (relative to a ferromagnetic ballast and considering T8 bulbs of 36 W) Electronic speed variator (<=70 kW) • Aimed for the industrial segment • Useful lifetime • Annual reduction in consumption: 25% • Intangible – disseminating information on energy efficient practices in order to promote a change in behaviours. An example of this kind of measures is energetic audits, information campaigns, seminars and conferences. Demand Side Management (DSM) is the reduction or shifting of energy consumption through efficiency improvements or load shifting on the customer side of the electrical meter. DSM is often referred to as the least cost resource because the cost of developing defined quantities of energy that can be reallocated or shifted is significantly lower than the cost of constructing new capacity. Figure: Daily Measure Load Shape following up the DSM principles The Technical Assistance will support two baseline pillars of the DSM system: • support the preparation and execution of DSM Load Control (DLC) programs that lead to coordinate reduced customer power consumption during specific events of peak system demand. Curtailing manufacturing processes that are interruptible during times of peak energy demand. Figure: Sample Single Day DLC Capacity Impact • delivery of the know-how and capacity to Energy Efficiency (EE) programs that accumulate savings year-over-year and can, in aggregate, offset future load growth and reduce peak system demand. This requires a volume of scale, many measures, as well as measures have varying lifetimes or persistence, tracking is required. INPUTS OUTPUTS ... ... ... ... ... ... SCHEDULE Year 2018 2019 2020 2011 2022 Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Month 1.2.5 COMPONENT 3: PROJECT DEVELOPMENT Activity 3.1 Discussing the portfolio of renewable investments Training and development of MIREME, EDM, ARENE, FUNAE and other stakeholder staff should extend beyond the development of their improved capacities and enabled environment. The ultimate market target is to establish a proper pipeline of bankable project proposals, including a number of cases using the PPP model. Stakeholders should be therefore in the knowledgeable position to make an effective demand on the energy and financial markets to provide interested investors with proper data, Feed-in Tarrifs and interpretation of Mozambican legislation for use in impact analysis, policy development and well-prepared businessplans in the field of on- and, above all, off-grid renewable energy investments. Investors need a business-friendly environment for investors to increase the uptake of renewable energies in Mozambique. Therefore, within the framework of the subject Activity a series of technical, financial, social and environmental evaluations will be done in order to balance benefits, risks and costs. The pipeline of possible renewable investments will be jointly developed, prioritized and monitored. Discussing the portfolio of infrastructure investments in general and renewable infrastructure in particular can be brokendown into three categories, according to the stage of development, from the (1) pre-investment phase to (2) construction (greenfield) and, finally, (3) operation (brownfield). Even though not all of them can be completely hedged out, many risks can be mitigated and this section provides an overview of possible risks and available mitigation tools. At the pre-investment phase, one of the most important challenges in renewable infrastructure investing is the available deal flow, especially for larger investors. Frequently, renewable-infrastructure opportunities are scattered, unique and projects not large enough to justify the due-diligence costs. Some of these challenges will be naturally overcome by market growth. As grid parity becomes more widespread, larger projects become viable. At the greenfield stage, the first few key discussion topics are related to land purchase and site approvals. The private partner is responsible for ensuring the suitability of the project site, including geology, security, pollution and having the necessary permits. Neither the government nor the contracting authority has the obligation to facilitate the issuance of permits. Besides thorough due diligence, the private partner can mitigate these risks through possible risk transfer to the engineering, procurement, construction (EPC) contractor. Environmental and social matters are also the responsibility of the private partner. International lenders and development finance institutions are especially sensitive about these risks. Private partners can mitigate some of these risks by making sure the contractor complies with permits and consents, including respective clauses in the contracts. Potential technical and financial design details should be identified and discussed prior to the implementation phase with all stakeholders of the subject investment. They usually refers to the compliance with output and performance specifications, as any necessary changes would have to be approved by the contracting authority and delays would likely ensue. The usual mitigation is to include pass-through obligations to the contractors, and incorporate project-relief principles in the EPC contract. Finally, construction and completion discussion topics finish the list for greenfield stage projects. Those include labour disputes, quality standards, intellectual property rights breaches, cost overruns, delays and failure to meet the scheduled commercial operation date fixed under the power-purchase agreement (PPA). Delays lead both to additional construction costs and loss of revenue from the effectively shorter PPA term. Ultimately, the PPA contract may be terminated if delays are excessive (usually 18 months in emerging market contracts). The private partner can mitigate these risks with pass-through obligations to contractors (including delay-obligation damages), or engaging the consulting services of independent engineers (sometimes appointed by contracting authorities in emerging markets). As project operation begins, a different set of necessary analysis arises, especially in performance and prices. The private partner is responsible for meeting the output specification metrics and matching expected generation costs. It typically is not possible, for instance, to add solar panels beyond what is contracted under the PPA. In this sense, the best mitigation tool is to pass the performance-specification responsibilities to contractors. In emerging markets, repairs might be allowed. INPUTS OUTPUTS ... ... ... ... ... ... SCHEDULE Year 2018 2019 2020 2011 2022 Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Month Activity 3.2 Replicating the pilot studies for Grid Densification All types of Technical Assistance meetings, study visits and research should be tailored to understand the objectives among stakeholders and the way how they interact with each other. Figure: Mapping relationships to replicate market initiatives for the grid densification Building on the capacity development and good environment achieved as a part of the subject project, the Resource Centre will also seek to give key beneficiaries an opportunity to take part in a study tours and/or discussion panels to fine tune skills and continue to gain experience through hands-on exposure to the best case practices of Renewable Energy investments across Mozambique. The information on the pilot studies and investments should be spread across the stakeholders with the active participation of key beneficiaries (MIREME, EDM, ARENE, FUNAE and MITADER), media, investors and local-level influence- and decision-makers. The consortium has considerable experience in conducting both in-country and international study tours as well as there are a number of steps that the Technical Assistance team would undertake to ensure that the study visits and working groups are as useful and beneficial as possible. While mini-grid operators remain nascent, many Solar Home Systems (SHS) operators are experiencing strong growth, with some securing local debt. Pilot studies on grid diversification will therefore consider a number of financing models (e.g. grants, equity, quasi, concessionary debt or obtaining capital commercial from commercial sources). Figure: Correlation between the revenue, investments and the mode of project finance The replication of the pilot studies for Grid Densification will start from the: • Selection of the most relevant solutions in regard to specific provinces - as each province is specific with its structure of agricultural production, energy access and social expectations, pilot studies need to be tailored and consider a local baseline situation above all. Depending on the type replication event, it's location and timing - the most appropriate cases should be discussed to impact the energy market as much as possible. • Selection of participants - the Technical Assistance experts will assure and select the target groups who are considered the most appropriate tottake part in the forecasted event. It is understood that the representatives of FUNAE, ARENE, MIREME and EDM, among others may be invited to participate, • Detailed Study Tour and/or Discussion Panel programme and 'Information Pack' for participants - following up the selection of the topic and/or study to be replicated all participants will receive a detailed programme for the event that would be developed. As a part of the preparation, an 'Information Pack' would be put together for each participant containing background information on the selected study and/or topic. If appropriate, a structured questionnaire will also be prepared for the participants to be used during the event, • Study Tour and/or Discussion Panel logistical support - one person from the Technical Assistance team, preferably local Office Manager, will accompany the participants and possibly, someone from the Consortium's Backstopping Team to ensure that planned meetings and travel arrangements are organized and confirmed, before and during the tour, • Study Tour and/or Discussion Panel evaluation and conclusions - a short workshop will be held the participants at the end of each day to assess the developments. It would enable the beneficiaries as well as the Technical Assistance team to aggregate and to validate the findings and recommendations emerging from the study tour and/or discussion panel. INPUTS OUTPUTS ... ... ... ... ... ... SCHEDULE Year 2018 2019 2020 2011 2022 Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Month Activity 3.3 Limiting the energy losses In recent year, electric power demand of Mozambique citizens has increased drastically due to superiority of electric energy to all other forms of energy and the expansion of power generation and transmission has been severely limited sequel to limited resources, environmental restrictions and lack of PPP projects. No matter how carefully the system is designed, energy losses are always present. Electric power losses are wasteful energy caused by external factors or internal factors, and energy dissipated in the system. They include losses due to resistance, atmospheric conditions, theft, miscalculations, etc, and losses incurred between sources of supply to load centre (or consumers) . Loss minimization and quantification is very vital in all human endeavour. In power system, it can lead to more economic operation of the system. If we know how the losses occur, we can take steps to limit and minimize the losses. Consequently, this will lead to effective and efficient operation of the system. Therefore, the existing power generation and transmission can be effectively used without having the need to build new installations and at the same time save cost of losses. Basically, losses in electrical power system can be identified as those losses caused by internal factors known as Technical losses and those cause by external factors are called non-technical losses. Figure: Mozambique - Electric power transmission and distribution losses (% of output) The Mozambican electricity grid has a large proportion of transmission and distribution losses - whopping above 15% and increasing. This is attributed to technical losses and non-technical losses. Due to the size of the area the power system serves, the majority of the power systems are dedicated to power transmission. Generally, system losses increase the operating cost of electric utilities and consequently result in high cost of electricity. Therefore, reduction of system losses is of paramount importance because of its financial, economic and socio-economic values to the utility company, customers and the host country. However, low losses in transmission system could be achieved by installing generating stations near the load centres. The Technical Assistance team is aware that losses in electrical system can be determined in different ways. Electric technical losses occur as current flows through resistive materials and the magnetizing energy in the lines transformers and motors. The losses incurred in resistance materials can be reduced by adopting the following means: • Reducing the current, • Reducing the resistance and the impedance, • Minimizing voltages. Both Key-Experts and Short Experts deeply specialized in the field of eelectrical power system losses will be in a position to support the beneficiaries in computing such using several formulae in consideration of pattern of generation and loads, by means of any of the following methods: • Computing transmission losses as I2R, • By differential power loss method, • By computing line flows and line losses, • Analyzing system parameters, • By using B-loss coefficient formula, • Creation of load flow simulations. INPUTS OUTPUTS ... ... ... ... ... ... SCHEDULE Year 2018 2019 2020 2011 2022 Quarter Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Month Activity 3.4 Supporting the productive use of energy. Discussing the Energy Efficiency As the market for energy efficiency evolves, new financing models involving third party lenders or investors are also emerging in order to address specific needs of the owners and service providers. The market for energy efficiency products and services has gained momentum in the recent years all over the Africa. This is due to both regulatory impetus and commercial incentives for green building and industrial process efficiency. Energy saving products and services in Africa, especially in Mozambique, could offer interesting capital investment opportunities. This is possible to be achieved by strengthened cooperation between the Resource Centre, GET.Invest, GET.FIT and public institutions involved in the Energy Steering Committee, inter alia. Energy efficiency projects often involve an energy saving performance contract (ESPC) between facility owner and a service provider, called the Energy Service Company (ESCo). The performance contract contains legal provisions between the two parties and lays out a code of best practices, liabilities, default conditions and remedies, indemnification provisions and insurance requirements. The ESCo carries out design and implementation of the project and this can take several forms including retrofits, process design and modification, installation of new equipment as well as control and management systems. Since performance contracts are negotiated based on future savings estimates, the role of proper monitoring and verification (M&V) of actual savings at pre-defined intervals during the contract period remains a key issue. Figure: Main industries of Mozambique with the largest energy consumption to which the Energy Efficiency models will be dedicated the most Industries and individual customers are in principle the largest energy consumers. Discussing the Energy Efficiency with them will be based on following communication principles: • Conduct opinion research What does our audience think/feel? • Determine objectives What do we want our audience to think/do? • Design compelling messages What do we want people to know/feel? • Identify optimal channels Where do people get trusted information? • Assign spokespeople Who is a credible deliverer of our messages? • Determine a timeline and budget • Design tactics What do we need to do to encourage/inform dialogue? • Set measurable goals How will we know if we are succeeding? The communication should be supported with properly developed best case practices and scenarios. The Technical Assistance will consider a wide range of Energy Efficiency models in discussion with the stakeholders and beneficiaries, to choose the most appropriate one for each category of investments : Guaranteed saving model The guaranteed saving model is termed so because the ESPC comprises performance guarantee by the project implementing ESCo. Third party lender finances the project and the facility owner provides it with recourse to their balance sheet. Therefore creditworthiness of the owner is a necessary condition. The owner in turn has recourse to the ESCo’s guarantee and is able to share some risks of the project. After repayment of loans and project payments to the ESCo, the owner earns the realized savings from their energy bill which effectively constitute the investment returns. It is also possible that the lender requires a guarantee from the ESCo for its payments. Shared saving model In the shared saving model, it is the ESCo who invests in the project and assumes higher risk than the facility owner. This type of model is particularly helpful in case where the creditworthiness of the facility owner is an issue. One mitigation arrangement is to create a separate escrow account under the contract. The owner pays up all accrued saving into this account and all repayments of finance are channeled through it. Third party, who may lent to the ESCo, would normally have the first access to this account. Thereafter, ESCo receives its payment (an agreed percentage of the savings) and any excess is availed by the owner. However, unlike the first case, this last share of accrued savings to the owner is not guaranteed. Lease models – ESCo as the Lessor When energy efficiency project involves installation of tools and equipment, lease finance as an option can be explored with the ESCo as the lessor. As with any other lease, lessee i.e. the facility owner pays a fixed rent for new installations for pre-agreed period and amounts. The ESCoavails secured loans for purchasing tools and equipment and the balance of lease rent and loan repayment are its returns. Surplus in the savings on energy bills of the facility owners are retained by them. Lease aggregation Lease aggregation is possible if individual facilities do not amount to significant investment. In such cases, the ESCo may float a special purpose vehicle (SPV) which aggregates the leases and channels the repayments. Equipment manufacturers and third party investors may also acquire holdings in the SPV. Development finance model Development finance has played an important role in encouraging the markets for energy efficiency in Mozambique. This has particularly been noteworthy in supporting small, micro and medium enterprises with access to soft capital through a number of refinancing institutions. A facility owner (or the enterprise) procures soft loan under favorable conditions and this helps covering their capital expenses. The performance contract between the owner and the ESCo can be structured on lines of the regular models such as guaranteed or shared saving as discussed earlier in this article. Energy Service Agreement model – Investor/Lender at the center stage This particular model has typically been used in relatively mature markets such as the US where a lender or investor takes the center stage in the energy efficiency project implementation and saving realization. In this model, the lender or investor executes an energy service agreement (ESA) with the facility owner to fund their entire cost of energy saving installation, upgrade and maintenance. In return, the investor or lender assumes responsibility of the utility bill payments and thereby captures all savings that accrue from the baseline, effectively charging the owner for avoided energy costs. There is a minimum pre-implementation energy bill criterion that facility owners need to satisfy under this model. Also, projects attract much higher capital than experienced in the previous models. On the other hand, the lender or investor carries out a performance contract with the ESCo to provide capital for installation and maintenance services (or, even active energy management) at the owner’s facility on an ongoing basis. Such a contract may also have a provision for the ESCo to share profits from accrued savings. Concluding, as the Mozambican renewable energy market develops, variants under each of the discussed financing models will see evolution in maturity and complexity. Also, new and innovative cooperation models are likely to appear for support and risk allocation amongst involved parties. Therefore, it is not only the industries, building sector and ESCos but also the financial institutions that are looking at energy efficiency with great interest.
4.1 APPROACH 4.1.1 Rationale Renewables have experienced a remarkable evolution over the past decade. Global installed capacity and production have grown exponentially, particularly in the power sector, as costs continue to fall. A record amount of newly installed renewable power capacity has been added in recent years – mostly solar PV, wind power and hydropower – and renewable energy accounts for almost two thirds of all new generating capacity installed around the world in 2017. The cost of electricity from renewables is decreasing across technologies – quite rapidly for solar PV and wind – and observers are noting record low prices at auctions globally. Most of the installation of new renewable energy capacity is now occurring in developing and emerging countries. However, progress is not homogeneous across countries and sectors. Several key barriers still hamper renewable deployment in some developing countries. Moreover, despite significant progress in the power sector, renewables are lagging behind for heating and cooling and transport applications, with fewer countries implementing regulatory measures for those end-uses. As renewable technologies mature, policy makers are confronted with new challenges. The rapid expansion of variable renewables, such as solar photovoltaic (PV) and wind power, requires more flexible energy systems in order to ensure reliable and cost-effective system integration. In general, the graduation of renewables into the mainstream calls for more holistic and sophisticated policy approaches, which can be perceived as a new challenge by some governments. Existing and future applications of electricity and other modern energy carriers will be instrumental to achieving many of the Sustainable Development Goals (SDGs) adopted in September 2015 by the member states of the United Nations. Whereas the Millennium Development Goals (MDGs) did not explicitly address the energy situation and its relation to poverty alleviation, Goal 7 among the SDGs is to “ensure access to affordable, reliable, sustainable and modern energy for all”. The related targets promote enhanced international cooperation to facilitate energy access, and express the need to expand infrastructure and upgrade technology, especially in the least developed countries. Also, a recent report from ‘Sustainable Energy for All’ (SEforAll) emphasizes the importance of understanding the interactions between energy and other development areas, such as food, water, gender equality, education and health, in order to achieve the objectives of the SDGs and the SEforAll programme. In many African countries, including the island states targeted by the project, the demand for electricity generally exceeds supply and households’ ability to benefit from electricity services differs considerably. The continent is rich in unexploited energy resources, and increasing the generation and availability of electricity is a political priority in most countries. In the public debate, electricity is often portrayed as part of ‘modernity’ – the aspirations towards improved socioeconomic standards of living and political-economic equality. Evidence shows that in areas where access to electricity has been provided, there have been substantial societal benefits of long-term importance for social and economic development, including lightning, education, health, leisure and security. However, in spite of the above, the countries in the AIS suffer both economically and socially from underdevelopment of the electric power sector, including insufficient generation capacity, unreliability of existing power supplies, poor transmission and distribution infrastructure and very low rates of access to the electricity grid, including microgrids . Even if the African continent is rich in energy resources, if technical solutions exist and if increased electricity provision is much desired, this has not been enough to result in a clear increase in electricity access and higher consumption levels in the majority of African countries. Institutional aspects have received significant attention both in terms of country-specific and regional institutional drivers and barriers to increased electricity access. The importance of “effective, accountable and inclusive institutions at all levels” is also emphasized in the SDGs Goal 16 on peaceful and inclusive societies. The problem of accessing electricity varies greatly across countries. The worst situation is observed over the Republic of Madagascar and Republic of Guinea-Bissau as well as over the Republic of Guinea-Bissau where jointly over 58 200 000 citizens have no access to electricity. TableTable 1: List of beneficiary countries by Population without electricity Beneficiary country Population without electricity Electrification Total population Urban areas Rural areas 1 Republic of Madagascar 19 500 000 15% 37% 4% 2 Republic of Guinea-Bissau 1 300 000 21% 37% 6% 9 Zanzibar (a a semi-autonomous region of Tanzania) ≈1 151 570 <15% n/a n/a 3 Republic of Equatorial Guinea 300 000 66% 93% 48% 4 Union of the Comoros 200 000 69% 89% 62% 5 Republic of Cabo Verde 153 027 71% 84% 47% 6 Democratic Republic of São Tomé and Príncipe 100 000 59% 70% 40% 7 Republic of Seychelles 2 795 97% 97% 97% 8 Republic of Mauritius 0 100% 100% 100% Another consideration is whether the electricity grid actually connects to citizens. In some instances, the electricity grid is in the area but connections to dwellings are not present. Development of renewable energy sources such as wind, solar, bioenergy, geothermal, wave or tidal energy could counteract with the electricity generation issue. Renewable energy initiatives should definitely be part of national energy plans. Renewable energy production is generally good for the environment and may not require large-scale infrastructural projects and investments. But some initiatives need to be complemented by traditional approaches. For renewable energy projects to work systematically, they must provide rural dwellers and the poor the same coverage and quality as on-the-grid electricity flows. It is crucial to assess the potential for renewable energies development in these AIS and to achieve a satisfying development, several objectives have been defined in the AUC Agenda 2063, UN Agenda 2030 and the Paris agreement which will guide the design of the renewable energy development program in AIS of the present project. 4.1.2 Beneficiary Country profiles The scope of the study is very broad with countries located geographically distant from each other as shown in the map below. 1. Republic of Cabo Verde 2. Union of the Comoros 3. Republic of Equatorial Guinea 4. Republic of Guinea-Bissau 5. Republic of Mauritius 6. Democratic Republic of São Tomé and Príncipe 7. Republic of Seychelles 8. Republic of Madagascar 9. The semi-autonomous region of Zanzibar, which is part of the United Republic of Tanzania Figure 4: Location of nine beneficiary countries of the REAIS project The baseline situation of the different AIS with regard to energy access is very heterogeneous as shown hereunder. Figure 5: Access to electricity, rural (% of rural population) Both Tanzania and Madagascar show a very low access to electricity rate while Mauritius and the Seychelles have shown a steady rate in the last 20 years with almost a 100% of the population having access to electricity. The tendancytendency for other AIS is to the increase of the access to electricity due to a number of new investments and favourable policy frameworks. Table 2: Breakdown of electrification figures per AIS Name Republic of Cabo Verde Union of the Comoros Republic of Equatorial Guinea Capital Praia Moroni Malabo Map Population without electricity 153,027 200,000 300,000 Electrification total population: 97% urban areas: 97% rural areas: 97% (2012) total population: 69% urban areas: 89% rural areas: 62% (2013) total population: 66% urban areas: 93% rural areas: 48% (2013) Name Republic of Guinea-Bissau Republic of Mauritius Democratic Republic of São Tomé and Príncipe Capital Bissau Port Louis Sao Tome Map Population without electricity 1,300,000 - 100,000 Electrification total population: 21% urban areas: 37% rural areas: 6% (2013) total population: 100% total population: 59% urban areas: 70% rural areas: 40% (2013) Name Republic of Seychelles Republic of Madagascar United Republic of Tanzania* Capital Victoria Antananarivo Dodoma (legislative capital) Dar es Salaam (administrative capital) Map Population without electricity 2,795 19,500,000 37,400,000 Electrification total population: 97% urban areas: 97% rural areas: 97% (2012) total population: 15% urban areas: 37% rural areas: 4% (2013) total population: 24% urban areas: 71% rural areas: 4% (2013) * - the Consultant provides figures for the country as whole, and a set of data for Zanzibar will be delivered within the project reports Small, peripheral island states are natural, self-contained political units of administration, of great diversity but easily idealised as highly sociable and well-run. In academic jargon, they may be ‘network-driven’ with high ‘social capital’ and ‘island neo-corporatism’ that inherently morph into ‘good governance’. African Island States in particular have long been seen as sharing characteristics that pose specific development challenges. In addition to small size and insularity, shared characteristics also may include : • geography - remoteness, being an archipelago, being mountainous, being landlocked and being tropical; • society – ethno-linguistic complexity and small but growing populations with high inequalities, a deep divide between urban elites and rural poor, high youth unemployment and • deep pockets of poverty, • political - high public service and institutional costs, • a wide range of economic challenges. These shared economic characteristics may include the following challenges : • limited capacities in the public and private sectors; • high volatility in national incomes, high costs of tertiary education and limited opportunities for high-skilled employment, and high volatility of GDP; • ‘natural monopolies’ leading to market distortions; • limited economic diversification with difficult economic transitions to changing world trade contexts; • dependence on a narrow resource base, isolation and remoteness from large markets, vulnerability to natural disasters and other external shocks; • significant dependence on foreign aid and/or international trade; fragile environments and climate change; inability to find economies of scale; • lack of market competition; • higher cost of living; • excessive dependence upon a few dominant activities, exports and export markets; and finally • small domestic markets. Small domestic markets deter investors, as costs of doing business are higher due to expensive infrastructure development and high communication, energy and transportation costs. Small domestic markets limit any import-substituting industrialisation. The lack of comparative studies of administrative capacity in small developing states has hindered understanding of the impact of state size on the relationship between politics and public service. All these characteristic will need to be taken into account for the development of adapted strategy and Action plan specific to each AIS. It is also important to consider distinguishing factors between small states, including SIDS, that shape the character of their public service. Differences in the capacities of public service may be shaped by many influences. External factors such as regional, geographic and historical differences all come into play. To sum it up The African island countries highlight that economic growth and social stability are achievable for remote, small island states, and that even with few resources, they can overcome their problems of scale, size, isolation and poverty. 4.2 METHODOLOGY 4.2.1 Introduction to the methodology The proposed methodology includes a number of Activities and Associated Tasks towards establishing a common strategy and the implementation plan for the increase of renewable energy investments across the African Island States. The overall project implementation framework assumes following prerequired conditions: • active participation of target groups and stakeholders, • regular communication with the key representatives of African Island States and AUC, • 12 field visits of one or more members of the project team, namely: 1 x Inception Mission workshop project weeks 2 to 4 visiting all beneficiaries in person and/or remotely (conference call) concluding the project assumptions and targets, validating the working arrangements 9 x Mapping of existing initiatives and financing schemes project weeks 4 to 14 visiting all beneficiary countries, for a comprehensive analysis scoping study on existing energy supply and demand evaluating the effectiveness of policy and regulatory frameworks consultation of key stakeholders to identify best suitable renewable energy sources and have an overview of the energy sector in each island analysis on existing mechanisms and instruments for climate funds 1 x Legal and policy workshop project week 19 presenting the draft report covering task 1 to 5, the draft Strategy and Action Plan and the Concept for the financing Facility discussing the overall project progress consulting the Strategy and Action Plan presenting the energy situation across the AIS, main challenges and goals 1 x Financial workshop project week 30 presenting the draft final report, the draft final Strategy and Action Plan and the detailed design of the financing Facility discussing the overall project progress consulting identified renewable energy investments and supporting mechanisms presenting the Strategy and Action Plan introducing the Financial Facility Four key priority areas will be targeted by the project to achieve a cross-cutting progress among the stakeholders: Figure 6: Key priority areas of the REAIS The Consultant has included a number of project stakeholders, and would like to emphasise the role of the African Union Commission statutory organs. These entities are in a favourable position to impact the Island States, inter alia by participating in the subject project during on-site visits of the Team. Figure 7: The organs of the African Union to which the project tasks are addressed Increased institutional and technical capacities of the public authorities and their groupings would have an additional impact not only on the project development, but mainly on further implementation activities. Both documents, Strategy and Action Plan, require an overall strategic support in establishing a consistent and clear vision on how the renewable energy sources will be developed. 4.2 The Work Plan The project assumes implementation of following tasks, which were duly suggested by the ToR: Activity Associated tasks 1) Mapping of existing initiatives and financing schemes The Project Team will take part in a number of field visits to evaluate local energy markets across all AIS 1.1 Scoping study on existing energy supply and demand 1.2 Evaluating the effectiveness of policy and regulatory frameworks 1.3 Consultation of key stakeholders to identify best suitable renewable energy sources 1.4 Analysis on existing mechanisms and instruments for climate funds 1.5 Map existing initiatives and financing mechanisms 2) Developing a Strategy and Action Plan developing the energy market Elaboration of a cross-cutting documentations establishing a solid baseline for the further development of the renewable energy investments and initiatives across the African Island States 2.1 Inception phase with governmental institutions to review legislative documents 2.2 Mapping activity, discussing the Action Plan and Strategy with target groups and working on the baseline analysis presented within the Inception Report 2.3 Formulation of monitoring and evaluation framework for renewable energy programmes 2.4 Analysis on the target group capacities and development of capacity building strategy 3) Designing a Financial Facility supporting renewable energy investments On the basis of existing mechanisms and instruments a new Financial Facility will be designed to accelerate the design and implementation of new renewable energy investments across the AIS 3.1 Identify stakeholders and project sponsors involved and targeted by the green facility 3.2 Identify barriers to investments in renewable energy 3.3 Define criteria for green investment access facility and type of climate funding (loan, grant, etc..) 4) Increase stakeholder knowledge and capacity building to sustain investments in renewables Organisation of two stakeholders workshops enhancing the capacities of stakeholders 4.1 Legal and policy workshop 4.2 Financial workshop The overall Project Implementation Framework is presented by the following table: Timing Deliverables Activities Year Month Week of implementation Inception Report Draft Report Draft Strategy and Draft Action Plan Concept and proposed structure of the Financing Facility Draft Final Report Draft Final Strategy and Action Plan Draft detailed design of the Financing Facility Final Report with a stand-alone Executive Summary Mapping of existing initiatives and financing schemes Developing a Strategy and Action Plan developing the energy market Designing a Financial Facility supporting renewable energy investments Increase stakeholder knowledge and capacity building to sustain investments in renewables D1 D2 D3 D4 D5 D6 D7 D8 A1 A2 A3 A4 2018 Nov 1 2 Dec 3 ☓ 4 5 6 2019 Jan 7 8 9 10 Feb 11 12 13 14 15 Mar 16 ☓ ☓ ☓ 17 18 19 Apr 20 21 22 23 24 May 25 26 ☓ ☓ ☓ 27 28 29 Jun 30 31 32 33 Jul 34 35 36 ☓ 4.2.1. Activity 1 : Mapping of existing initiatives and financing schemes Task 1.1: Scoping study on existing energy supply and demand This is to provide the governmental institutions as well as the stakeholders in the island states (public, private and non-state actors) with a comprehensive overview on the following aspects establishing the baseline for the project implementation: • energy demand and supply • energy mix • key energy development indicators including level of access in each island state • energy sources and their potential • existing plans and projections • existing energy initiatives and programmes Consequently, the identification phase has to cover the evaluation of existing configuration of the energy sector institutional capacities, policies and regulatory frameworks. In order to prepare a valuable and useful document, a number of documents have to be consulted, part of them provided by AUC, others to be found by the consultant through web search and by consulting relevant authorities. Following target groups are considered crucial for the successful implementation: In regard to all interested parties, including the above, the Consultant will conduct the consultations following the following process: 1. Identifying key stakeholders A long-list of the key stakeholders to consult will be prepared and confirmed in strict cooperation with the AUC. A special attention will be given to private and public organisations dealing with the issue of energy, renewables, environment protection, climate change, regional development and investment financing and government institutions involved in the energy sector. 2. Initiating the dialogue Number of the working groups will be establish to cover all project intervention themes (e.g. PV, wind, geothermal, hydropower, financing and policy groups). Dedicated mailing lists will be also prepared to exchange ideas and promote in-country events related with project or other AUC interventions. This would enable free exchange of information, presentations and demonstration events organized on their own and fairs. 3. Exchanging ideas All project documents will be discussed with the working groups, both remotely as well as in-person discussion panels organized during field visits as foreseed under the A1 Mapping Action. A special tool called Book of Best Practices will be establied and shared among the groups. Exchange of ideas will take place during the project implementation stage. 4. Building the capacity Following the major part of project implementation two centralized workshops will be organized for increasing the financial and legislative capacities of the stakeholders in the wide context of the renewable investments. A number of best case practices will be duly presented by their authors and discussed among all participants. A framework of mutual exchange programms and study visits will be establised under the recognition of the internal offers and needs during both workshops. 5. Shaping the future At the late stage of project implementation period a management over the communication channels, databases, documents and IT tools will be taken over to the African Union Commission or any other body appointed by the AUC. The Consultant will remain ready and available for the continuation of the activities as designed at the local and regional level by supervising the investments and sharing its best know-how. Following communication channels are to be used within the interaction with stakeholders: • social portals (e.g. Facebook, LinedInTwitter, Bongoline, Yookos, Afroterminal , MXit), • e-mail distribution lists, • official website of the project, the AUC Contractor's and partners sites, • open data cloud where all data and presentation will be free to access, • traditional media coverage to reach the broader audience (press, TV and radio). Task 1.2: Evaluating the effectiveness of policy and regulatory frameworks Legal and policy frameworks consist of a variety of instruments: treaties, laws, regulations, policies, agreement and norms. Policies whose specific goal is to promote renewable energy fall into three main categories: • price setting and quantity-forcing policies, which mandate prices or quantities; • investment cost reduction policies, which provide incentives in the form of lower investment costs; and • public investments and market facilitation activities, which offer a wide range of public policies that reduce market barriers and facilitate or accelerate renewable energy markets. Historically, governments have enacted these policies in a rather ad hoc manner. More recently, national renewable energy targets (also referred to as goals) have emerged as a political context for promoting specific combinations of policies from all three categories. Such targets focus on the aggregate energy production of an entire country or group of countries. Targets may specify total primary energy from renewables or minimum renewable energy shares of electricity generation. In order to implement the tasks in the most adequate and efficient way, the Consultant has to review a number of policy documents and regulatory frameworks in strict cooperation with the beneficiaries. The goal of this task is to see how these policies can support investments and renewable energy and measure their effectiveness until now to envourage the development of renewable energies. This would be done by consider a number of market solutions which are ready to be applied over the African Island States directly, indirectly or in a connected way: RENEWABLE ENERGY PROMOTION POLICIES • Price-Setting and Quantity-Forcing Policies - establishing favorable pricing regimes for renewable energy relative to other sources of power generation, featuring: Electricity Feed-in Laws - seting a fixed price for utility purchases of renewable energy Competitively-Bid Renewable-Resource Obligations - power producers bid on providing a fixed quantity of renewable power, with the lowest-price bidder winning the contact Renewable Energy Portfolio Standards (RPS) - requiring a minimum percentage of generation sold or capacity installed be provided by renewable energy. Obligated utilities are required to ensure that the target is met Renewable Energy (Green) Certificates - providing evidence of renewable energy production and are coupled with institutions and rules for trading that separate renewable attributes from the associated physical energy • Cost-Reduction Policies - providing incentives for voluntary investments in renewable energy by reducing the costs of such investments, featuring: Subsidies and Rebates - Reducing in the initial capital outlay by consumers for renewable energy systems is accomplished through direct subsidies, or rebates Tax Relief - promoting renewable energy, addressing energy production, property investments, accelerated depreciation, and renewable fuels (including Investment Tax Credits, Accelerated Depreciation, Production Tax Credits, Property Tax Incentives) Grants - offering grants for renewable energy purchases Loans - financing for the purchase of renewable energy equipment. Loans can be market rate, low interest (below-market rate) or forgivable • Public Investments and Market Facilitation Activities' Public Benefit Funds - for renewable energy development are raised through a System Benefits Charge (SBC), which is a per-kWh levy on electric power consumption Infrastructure Policies - supporting market institutions, participants, and rules to encourage renewable energy technology deployment (including Construction and Design Policies, Site Prospecting, Review and Permitting, Equipment Standards and Contractor Certification, Industrial Recruitment, Direct Equipment Sales) Government Procurement - aiming to promote sustained and orderly commercial development of renewable energy Customer Education and Mandated Generation Disclosure Information - restructuring and deregulation policies mandate that information be provided to customers about choice of electricity providers and characteristics of electricity being provided (such as emissions and fuel types) Solar and Wind Access Laws - providing a property owner the right to continued access to a renewable resource TRANSPORT BIOFUELS POLICIES • Biofuels mandates and tax policies are known all over the modern world. In Brazil, the United States, and Europe have supported accelerat¬ing development of biofuels. Biofuels mandates require that a certain percentage of all liquid transport fuels be derived from renewable resources. Tax policies may provide tax credits or exemptions for production or purchase of biofuels. POWER-SECTOR RESTRUCTURING POLICIES • Competitive Wholesale Power Markets and Removal of Price Regulation on Generation - wholesale electricity becomes more of a competitive market commodity, price becomes relatively more important than other factors in determining a buyer’s choice of electricity supplier • Self-Generation by End Users and Distributed Generation Technologies - with the advent of IPP frameworks, utility buyback schemes (including net metering), and cogeneration technology options, more and more end users, from large industrial customers to small residential users, are generating their own electricity • Privatization or Commercialization of Utilities - utilities, historically government owned and operated, are becoming private for-profit entities that must act like commercial corporations • Unbundling of Generation, Transmission, and Distribution - Utilities have traditionally been vertically integrated including generation, transmission, and distribution functions. Under some restructuring programs, each of these functions is being unbundled into different commercial entities, some retaining a regulated monopoly status • Competitive Retail Power Markets and Green Power Sales - Competition at the retail level, the newest phenomena in power sector restructuring, means that individual consumers are free to select their power supplier from among all those operating in a given market DISTRIBUTED GENERATION POLICIES • Net Metering - allowing a two-way flow of electricity between the electricity distribution grid and customers with their own generation • Real-Time Pricing - known as dynamic pricing, is a utility rate structure in which the per-kWh charge varies each hour based on the utility’s real-time production costs • Interconnection Regulations - needed to address a number of crucial barriers to interconnection of renewable energy with the grid (e.g. Legal Access, Dynamic Generation and Transmission Scheduling, Elimination of Rate Pancaking, Capacity Allocation, Standard Interconnection Agreements) EMISSIONS REDUCTION POLICIES • Renewable Energy Set-Asides - meeting emission reduction targets through actual emission reductions or purchase of emission reduction credits from other countries participating in a region-wide NOx trading program • Emissions Cap-and-Trade Policies - emissions allowances are being set aside for utilities that employed renewable energy or energy- efficiency measures • Greenhouse Gas Mitigation Policies - promoting the capture of landfill methane gas for power generation, thus avoiding methane emissions (methane has a high global warming potential) RURAL ELECTRIFICATION POLICIES • Rural Electrification Policy and Energy Service Concessions - extending electric networks to large shares of rural populations that remain unconnected to power grids (globally, an estimated 1.7 billion people • Rural Business Development and Microcredit - approaches supporting rural entrepreneurs with training, marketing, feasibility studies, business planning, management, financing, and connections to banks and community organizations • Comparative Line Extension Analyses - Economic comparisons of line extension versus distributed renewable energy investment Through the review of following global and regional documents, both the Consultant and beneficiaries will gain a common understanding of the goals and principles necessary for the successful implementation of the subject project: • AGENDA 2063 - The Africa We Want It is a strategic framework for the socio-economic transformation of the continent over the next 50 years. Its builds on, and seeks to accelerate the implementation of past and existing continental initiatives for growth and sustainable development. Some of the past and current initiatives it builds on include: the Lagos Plan of Action, The Abuja Treaty, The Minimum Integration Programme, the Programme for Infrastructural Development in Africa (PIDA), the Comprehensive Africa Agricultural Development Programme (CAADP), The New partnership for Africa’s Development (NEPAD), Regional Plans and Programmes and National Plans. It is also built on national, regional, continental best practices in its formulation. • Social Protection Policies The AU Social Policy Framework for Africa encourages member states to adopt minimum social protection policies covering the following: essential health care, social insurance, social welfare, employment guarantee and non-contributory cash transfer schemes for children, informal workers, the unemployed, elder persons and persons with disabilities. Member States are expected to formulate an implement their minimum social protection policies along the above • First 10-year implementation plan 2063 After the adoption of the Agenda 2063 Framework Document by the Summit in January 2015 as the basis for Africa’s long term socio-economic and integrative transformation, it directed the AUC to prepare the First Ten Year Implementation Plan of Agenda 2063 (2013 – 2023). This plan, the first in a series of five ten year plans over the fifty year horizon was adopted by the Summit in June 2015 as a basis for the preparation of medium term development plans of member states of the Union, the Regional Economic Communities and the AU Organs. • UN Agenda 2030 for Sustainable Development Goals and Paris Agreement These agreements rightly focus on the result that is to be achieved, the goals: the Paris Agreement aims among others to hold the increase in the global average temperature to well below 2°C and to pursue efforts to limit it to 1.5°C. The SDGs put poverty eradication and sustainable development at the core of the 2030 development agenda, recognizing that there is little hope for human development without sustainable development. The vision of the goals provides an overall direction and brings everyone together around the same compass, but how to get there? This is where Life Cycle Thinking (LCT) is needed, supporting our steps towards sustainable development by identifying priorities of interventions based on the areas for highest opportunities and managing potential trade-offs. Task 1.3: Consultation with key stakeholders of the islands on the most suitable renewable energy sources The Consultant will commit at least one local visit at each beneficiary country to consult relevant legislative, regulatory, public and private stakeholders During planned 5-day visits a series of investigations will take place to coordinate Action to discuss priorities over policies and regulatory frameworks as well as to recognize existing initiatives and financing mechanisms (aim of the parallel A2 action). Between week 4 and 14 of project implementation, the consultant consult key stakeholders identified ahead of the visits such as: • Interested governmental institutions and organizations, both legislative and executive A clear message will be delivered by the representative of the beneficiary countries (Republic of Cabo Verde, Union of the Comoros, Republic of Equatorial Guinea, Republic of Guinea-Bissau, Republic of Mauritius, Democratic Republic of São Tomé and Príncipe, Republic of Seychelles, Republic of Madagascar and Zanzibar and the United Republic of Tanzania) confirming that the project is running and will deliver a set of specific tailor-made results. • African Summit Meetings of the Heads of States and Government of the African Union. • Executive Council The Executive Council of the African Union – currently made up of foreign ministers of Member States of the Union. It is the next highest Policy Organ of the Union after the AU Summit. • PanWise It is a continental network that brings together panels or bodies of wise Africans under the AU Panel of the Wise umbrella to promote peace, security and stability on the continent. • Regional Economic Communities (RECS) They are the 8 regional economic communities recognized by the African Union. These are: Common Market for Eastern and Southern Africa (COMESA); Community of Sahel-Saharan States (CEN-SAD); East African Community (EAC); Economic Community of Central African States (ECCAS); Economic Community of West African States (ECOWAS); Inter-Governmental Authority on Development (IGAD); Southern African Development Community (SADC) and the Union of Maghreb States (AMU) • Permanent Representative Committee The African Union Committee of Ambassadors and other plenipotentiaries of the AU Member States. It a Policy Organ of the AU and reports to the Executive Council of the AU • Specialized Technical Committees Ministerial Committees of the AU responsible for coordinating sectorial policies, plans, programmes and performance at the continental level. Some of the STCs are Finance, Economy, Planning and Integration; Education; Health; Infrastructure etc. Task 1.4: Analysis on existing mechanisms and instruments for climate funds A number of diversified mechanisms and instruments are being implemented over the AIS in the field of climate and energy. Consequently, in strict and direct cooperation with the project beneficiaries, a following set of programmes and initiatives is to be taken into the consideration by the Consultant under the implementation of the subject Task: • African Agribusiness and Agro-Industry Development Initiative (3ADI) Launched in August 2010 by FAO and UNIDO in response to a request from the AU, its objective is to raise the competitiveness, productivity and growth of Africa’s agro-based industrial sector through implementation of policies geared towards value addition/agro- industry transformation and enhanced market participation. • African Centre for Disease Control It was formally established in January 2015 by the AU Assembly. A Multinational Taskforce has been created to oversee the development of its , mandate/scope, nature and legal framework by June 2015. The Coordination Office is to be housed initially at the AU headquarters. The recent outbreak of Ebola in some west African countries highlighted the need for its immediate set-up. • African Climate Change Fund It was established in April 2014 under the auspices of the African Development Fund (AfDF). It received initial financial support from the government of the Federal Republic of Germany. Its main objective is to assist African governments, Non-Governmental Organizations, regional institutions, research organizations etc in addressing the issue of climate change and its associated challenges. • African Education Observatory As per the draft statutes, when established the African Education Observatory will be constituted by the Pan African Education Institute for Development (Kinshasa), the International Centre for Girls and Women’s Education in Africa (Ouagadougou) and collaborative relationships with the Association for Educational Development in Africa, UNESCO and UNICEF in addition to others. To be located within the Pan African Education Institute for Development in Africa, it will amongst others: develop an integrated data base of African Education; conduct educational policy analysis; develop early warning systems for triggering policy shifts in education development and management; provide advisory services and technical assistance to member states; promote the use of Educational Information Management Systems; create a platform for networking and sharing of best practices in education. • African Minerals Development Centre It was established to support the implementation of the Africa Mining Vision adopted by the AU through the Executive Council’s Decision on the Development and Management of Africa’s Mineral Resources. • African Mining Vision Developed through a consultative process by the AUC/ UNECA/ AfDB in 2009 aims for the continent “a transparent, equitable, and optimal exploitation of mineral resources to underpin broad based sustainable growth and socio-economic development on the continent”. This is to be achieved through: creation of downstream (manufacturing), up stream (mining capital goods, consumables and services industry) , side stream (power, logistics, water, communications) linkages for mineral beneficiation; building of mutually beneficial partnership between the state, private sector and civil society in the exploitation of mineral wealth and developing capacity for building a comprehensive knowledge base of member states mineral resources and development process. • African Peace and Security Architecture It is a continental framework for the promotion of peace, security and stability in Africa. It is supported by the Protocol relating to the Establishment of the Peace and Security Council of the African Union, and the Common African Defence and Security Policy (CADSP). The Protocol was adopted by the AU assembly on 9 July 2002 in Durban, South Africa, and entered into force in December 2003. CADSP was adopted by the AU Assembly on 28 February 2004 in Sirte, Libya. It is under the overall leadership of the AU Peace and Security Council • African Standby Force It is one of the pillars of the Peace and Security Council established under Article 13 of the Protocol Relating to the Establishment of the Peace and Security Council of the African Union. It is composed of five brigades from ECOWAS, SADC, ECCAS and Eastern and Northern geographical regions of Africa. • Africa’s Blue Economy It is constituted by all economic activities that emanate from Africa’s oceans, seas / sea beds, lakes, rivers. Example of blue economy activities include: fishing, marine/lake transport/shipping, seabed mining, marine tourism , generation of tidal energy etc. As the Consultant has recognized the inernational organisation participation over the project implementation areas, including: • ACP, • AfDB, • AU, • C, • CD, • EAC, • EADB, • EITI, • FAO, • G-77, • IAEA, • IBRD, • ICAO, • ICC (NGOs), • ICCt, • ICRM, • IDA, • IFAD, • IFC, • IFRCS, • ILO, • IMF, • IMO, • IMSO, • Interpol, • IOC, • IOM, • IPU, • ISO, • ITSO, • ITU, • ITUC (NGOs), • MIGA, • MONUSCO, • NAM, • OPCW, • SADC, • UN, • UNAMID, • UNCTAD, • UNESCO, • UNHCR, • UNIDO, • UNIFIL, • UNISFA, • UNMISS, • UNWTO, • UPU, • WCO, • WFTU (NGOs), • WHO, • WIPO, • WMO, • WTO - the next step is to consult the most active donors in strict cooperation and coordination of The African Union Commission. 4.2.2 Activity 2: Developing a Strategy and Action Plan developing the energy market The development of renewable energy will be central priority of both Strategy and Action Plan as to be elaborated by the Consultant. This would require a number of in-person and remote consultations with all potential stakeholders from relevant African Island States and statutory organs of the African Union Commission. Consequently to a series of site visits implemented under the Activity 1, the Consultant will have an adequate big picture of how individual expectations and conditions of nine Beneficiary States, enabling him to draw wholistic conclusions related to common needs and support scheme which are to be addressed by subject documentations. The relation between the Strategy, Action Plan, capacity building and policies are described by following 'iceberg strategy' presenting the position of Strategy and Action Plan in the entire set. Figure: The most fundamental and the most visible elements of the entire approach Advisory - supporting the market entities (private and public) interested in renewables Financing - updating and implementing new financial incentives for the investors Updating Policies - creacting a favourable framework for the investments Capacity Building - improving the technical and economic capacities of the administration Action Plan - establishing a detailed implementation plan at global and local level Strategy - formulating a general vision based on a extensive analysis Table: The meaning of particular steps included under the 'iceberg' strategy Renewable Energy Strategy is to reduce the dependence on fossil fuels, improve security of supply, as well as reduces greenhouse gas emissions creating environmental benefits while delivering green jobs to the economy, thus contributing to national competitiveness and the jobs and growth agenda. Climate change, energy security and competitiveness are inter-related challenges that will be addressed through the transforming of Island States economies from one based on a predominantly based fossil fuel dependence to a more indigenous low carbon economy based around energy efficiency, renewable energy and smart networks. In implementing the policies set out in this Strategy, the renewable energy sector affords a major opportunity for growth and employment creation in Ireland. Employment opportunities in relation to renewable energy will also arise in the areas of manufacturing and assembly, services (including ICT) and the supply chain. While the deployment of renewable energy technologies has increased significantly in recent years, there remain a number of significant challenges inherent in successfully going beyond the current deployment levels of renewable energy in electricity, heat and transport to ensure delivery of our targets. These will need to be considered for the development of the AIS Strategy and Action Plan and include: • the strategic directions for predictable and transparent support frameworks to attract investment at a cost which is competitive, • the baseline for regulatory certainty which supports renewable energy development in the long term interest of consumers, • supporting cost effective timely investment in electricity transmission and distribution, • ensuring best practice planning and permitting procedures and coherence between environmental and renewable energy objectives, • impacting large scale penetration of renewable technologies on the overall energy system with regard to overall cost efficiency and system reliability, • winning public acceptance around environmental and other impacts and securing benefits for local communities, • balancing the supply and demand challenges the renewable energy sector and providing market with proper certainty where possible, • tackling the barriers to developing renewable energy demand and local distribution systems. The Strategy will be designed within the spirit of Global Framework respecting Local Values. The starting assumption will be to respect for local values and priorities is proper. The proposed structure of the document is based on the Consultant's prior experience, e.g.: Executive Summary - background and vision - aims and objectives Introduction - common problems across AIS - purpose and methodology - timeframes Overview - specific issues of each African Island State Sustainable Bioenergy - cleaner cook stoves - Solid biofuels - biogas Renewable Electricity - grid-scale power - clean energy mini-grids - off-grid power - small hydropower - tidal and wave energy The Cross Cutting Issues - rural electrification - nominating the energy officers - education, capacity building and research - information, transparency and statistics Coordination, Leadership and Next Steps Achievement of the strategic goals, as above, and delivery of the key actions on the development of renewable energy investments must be a collective endeavour. Below the Consultant provides a number of potential list of Strategic Challenges to be addressed by the Action Plan on the basis of his prior experience in the region such as: • costs and pricing of renewable energies related with a large initial cost of renewable investments and relatively high depreciation costs • subsidies for competing fuels as the traditional fossil fuels are often supported what lower final energy prices, putting renewable energy at a competitive disadvantage • low efficiency on energy generation since renewable energy sources require higher amounts of financing for the same capacity, what is related with an irregular access to their source of power (e.g. wind, sun) • difficulty of fuel price risk assessment as risks associated with fluctuations in future fossil fuel prices may not be quantitatively considered in decisions about new power generation capacity because these are inherently difficult to assess • unfavourable power pricing rules renewable energy sources feeding into an electric power grid may not receive full credit for the value of their power. Especially since small-scale grids for distributing the renewable energy are usually small and may even not require transmission and distribution • increasing the access to credits and financing In some countries, power project developers have difficulty in obtaining bank financing because of uncertainty as to whether utilities will continue to honor long-term power purchase agreements to buy the power • fulfilling liability insurance requirements small power generators (particularly home photovoltaic systems feeding into the utility grid under so-called net metering provisions) may face excessive requirements for liability insurance. • mitigating restrictions on siting and construction wind turbines, rooftop solar hot-water heaters, photovoltaic installations and biomass combustion facilities may all face building restriction based on heights, aesthetics, noise or safety, particularly in urban areas. Urban planning departments or bulling inspectors may be unfamiliar with renewable energy technologies and may not have procedures for dealing with siting and permitting • improving legal frameworks for independent power producers In the absence of a legal framework, independent power producers may not be able to invest in renewable energy facilities and sell power to the utility or to third parties under so called purchase agreements • increasing transmission access utilitities may not allow favourable transmission access to renewable energy producers or may charge this process for transmission access. Transmission access is necessary because some renewable energy resources like windy sites and biomass fuels may be located far from population centres • bypassing utility interconnection requirements individual home or commercial systems connected to utility grids can face burdensome, inconsistent or unclear utility interconnection requirements. Lack of uniform requirements can add to transaction costs, especially when it comes to hiring legal and technical experts to understand and comply with interconnection requirements Results Matrix Results Matrix is a type of LogFrame (i.e. Logical Framework) demonstrating a clear linkage of the objectives/outcomes and proposed activities, outputs and indicators. All information is to be used during the preparation of the Strategy and Action Plan. The following is an example of how a Results Matrix may look like for the present assignment. Expected outcome Key activities Outputs Indicators Timeline R1. Development of coherent policy and regulatory frameworks • Inception phase meetings with governmental institutions • Reviewing and discussing the legislative documents • Strategy for common policies and regulatory framework • Action Plan • 9 individual reports, each for one beneficiary country • Number of meetings and reports of the working groups • Number of policies elaborated and/or supported • Number of policy makers engaged • consultation period from week 4 till week14 • two workshops, one in week 19 and the second in week 30 R2. Facility developed for green financing for project development and risk mitigation • Mapping activity • Discussing the Action Plan and Strategy with target groups • Working on the baseline analysis presented within the Inception Report • Guidelines for the renewable energy development over 9 countries of operation • Establishing a working mechanism for green energy development • Number of energy developers engaged under the facility development • Number of investments identified and/or generated • consultation period from week 4 till week14 • developed of a financial facility from week 16 till week 25 R3. Formulation of monitoring and evaluation framework for renewable energy programmes • Reviewing current frameworks and existing M&E mechanisms • Reviewing current programmes and mechanisms • Consulting the M&E framework with target groups and stakeholders • Strategy for the Monitoring and Evaluation • Presentations from the working groups meetings • Number of initiatives and/or policies eligible under the monitoring and evaluation scheme (B4) • Number of presentations and/or materials spread over the working groups (B5) • consultation period from week 4 till week14 • development of Strategy and Action Plant with proper monitoring and evaluation framework from week 10 till week 15 R4. Knowledge facilitation and capacity building enhanced • Mapping existing initiatives • Analysis on the target group capacities • Regular communication across the target groups and stakeholders • Inception report • Working groups meeting on a regular basis • Presentations from the working groups meetings • Number of the working group meetings • Number of individual and/or group trainings • Number of presentations and/or materials spread over the working groups • consultation period from week 4 till week14 • two workshops, one in week 19 and the second in week 30 4.2.3. Activity 3: Designing a Financial Facility supporting renewable energy investments Meeting the energy targets for renewables requires substantial levels of spend. And investments is one of the main barriers to the development of renewables in developing countries. Once drafting the Financial Facility two quotas should be considered together above all: the sum to be spent for energy efficiency respecting and saving existing electric energy generation, as well as annual capital expenditure on new renewable energy source installations. Financial barriers range from a long-standing lack of access to capital in some countries, to others where financial constraints are more temporary and largely attributable to the aftermath of the economic crisis. Publicly funded financial instruments should target the barriers or risks that are constraining or inhibiting private investment, rather than simply being used to fund renewable energy projects in general. As well as being more efficient, this also reduces the risk of “crowding out” private investment. Under the assumption that public finance will generally be lower cost than private finance, there will always be a preference to use public funding even where a project would be more suitable for private financing. Consequently, private investors find themselves unable to finance attractive projects, which are instead funded from public resources that could be better deployed elsewhere. The use of public funding for renewable energy projects may potentially create inevitable market distortions. Within the broad framework of the Financial Facility supporting renewable energy investments a variety of instruments will be discussed with AUC and the beneficiary countries, including: In fact a wide range of financing instruments can be applied in support of the scaling up of renewable energy technologies. These can be broadly grouped into those used to overcome financing barriers, those used to address the specific risks of renewable investments, and those that address both simultaneously (as, for example, where financial markets lack the sophistication to offer risk management instruments suitable for renewable energy). These various instruments can in turn be distinguished by both the level of risk assumed by the public sector entity funding the instrument concerned, and by the level of leverage (the extent to which public funding mobilizes private finance) involved. Figure below illustrates this fact. Instruments are organized on the horizontal axis by their primary focus — whether to address underdeveloped financial markets, the risks and costs of investments, or both. On the vertical axis, instruments are organized by the level of risk and leverage associated with their use. Pure grants are considered to be the most risky, as these give the public sector no control over the funds contributed and no recourse. Equity is next; although it comes with control, shareholders are the last to be compensated from the project. This is followed by debt in its various forms. Figure : The Range of Financial Facilities and Instruments Note: The risks and barriers are shown across the horizontal axis, with instruments shown below. Those instruments occupying the middle of the three columns are potentially suitable for addressing both risks and barriers. AMC = Advanced Market Commitments; OBA = output-based aid; OBD = output-based disbursement; PES = payment for environment service. The subject figure also identifies three further cat¬egories of instruments that have specific uses: funding delivered on the basis of results, instru¬ments targeted on realizing potential revenues from carbon markets, instruments specifi¬cally focused on the barriers and risks facing small-scale renewable energy projects and programs. The summary of proposed financing mechanisms, their advantages and disadvantages is given below: Mechanism Grants Equity (Venture Capital) Senior Debt Characteristics Reduce project costs and provide long-term finance (capital grants). Provide long-term finance (equity holdings). Funds preinvestment costs as risk capital. Reduces project costs. Provides long-term finance. Pros Relatively simple to implement. Do not require ongoing administration Pays for itself. Strong incentives for project viability to enable potential gains to be realized Obligation to repay creates incentives for project viability. Repayment of principal frees funds for further support to RET projects. Used as a means to increase CFI involve¬ment in RET projects (through provision as credit lines). Cons High risk in terms of achieving objec¬tives as they do not create incentives for delivery. If grants are made in return for equity then the public sector is involved in the control of projects, which may lead to poorer per¬formance and the crowding out of private financing. Low levels of leverage as it directly replaces possible private financing. No return on capital that could have been used to finance further projects High returns are needed to compensate for the risk. Since public financing can accept lower returns, it reduces incentives and makes it harder for private providers of equity to compete. Low levels of leverage as it directly replaces possible private financing. Developed financial markets are needed to allow exit from investment through an IPO or a direct sale of shares. Need for due diligence to verify ability of project to repay loan increases transaction costs. Leverage is limited and may crowd out potential private providers of debt. Mechanism Subordinated Debt (Mezzanine Finance) Asset-Backed Securities Individual Guarantees Characteristics Provides intermediate funding between equity and senior debt, which helps reduce risks to senior lenders while not taking control away from project sponsors. By doing so, can extend the term and reduce costs of senior debt. Offer project financing through bond offerings rather than through loans. Free public funds for future RET project development when completed projects are refinanced. Guarantee a part of the losses incurred by a project in the event of a specified event occurring. Guarantee ability to meet commitments on debt servicing / financing (liquidity guarantee). Guarantee policy and regulatory commit¬ments by host government (PRI/PRG). Pros High level of leverage. Crowds in senior debt by allowing projects to meet acceptable risk criteria for lenders. Longer tenor and possibly lower cost than bank financing. Ready means to refinance projects, freeing developer funds for further investments. Potential to bundle projects together in a single security can reduce risks and, there-fore, financing costs Can be a good tool for expanding capital market offerings given the relative low risk of some RETs (because of their guaran¬teed offtake). Guarantees are targeted to specific risks deterring private investment, thereby minimizing the risk of market distortions and being an effective means of crowding in private investment. A high degree of leverage as a rela¬tively small commitment of funds can mobilize significant quantities of private investment. No need for large up-front payment, mak¬ing it easier to obtain political approval. Cons It is generally custom designed for each project, implying high transaction costs. Significant risk transferred to public financ¬ing agencies, but with only limited ability to control these risks Sophisticated markets required to be able to analyze and price the risk associated with this type of security. Generally are custom designed for each project, implying high transaction costs. Significant risk is transferred to public financing agencies but with only limited ability to control these risks. Ability to avoid up-front funding may encourage excessive use of guarantees for political reasons and favoured projects. Mechanism Resource Insurance Results-Based Financing (Payment Against Outputs) Results-Based Financing (Contingent Project Development Grants) Characteristics Insures against lost revenue in the event of lower-than-expected output due to lack of wind or sun (wind/solar insurance). Insures against costs of failed exploratory wells (contingent risk insurance for geo¬thermal projects). Pays grants or subsidies against the deliv¬ery of a specified set of outputs. For RET projects, grants and subsidies are used to reduce the costs. Provides preinvestment funding, either as loans that turn to grants if the project is successful or grants that turn to loans. Pros Targeted on specific risks deterring private investment, thereby minimizing the risk of market distortions and being an effective means of crowding in private investment. A high degree of leverage can be achieved as a relatively small commitment of funds can mobilize significant quantities of private investment Linking payment of grants and subsidies to results creates strong incentives on developers to deliver. Availability of local credit to implementing entities is boosted, if the founder of RBF payments is credible. Crowding out effects are limited, as devel¬opers must still arrange a large part of the up-front financing. RBF can leverage private financing by supporting development of projects to a stage where private investors are willing to participate. The use of loans that will be converted to grants provides incentives to developers to complete projects in a timely fashion. The use of grants that will be converted to loans means developers are more willing to take on marginal projects, knowing that the costs of preinvestment activities are covered if the project is unsuccessful Cons A large number of projects with diversity of locations are required for the insurer to be able to diversify their risk exposure away from any one project. A large database of historic performance is required for insurers to be able to assess and price risks. For these reasons, resource insurance either needs multinational insurers or large and sophisticated domestic financial markets combined with large volumes of existing RET projects. The need for up-front financing by the developer means that results-based financing doesn’t necessarily overcome financial markets barriers—it may be dif-ficult to obtain loans against expected future payments. For small-scale projects, the costs of verifi¬cation can be extremely high. Without careful definition of the required outputs, incentives can be distorted. The use of loans that will be converted to grants increases the risk for developers if the project is unsuccessful. The use of grants that will be converted to loans can reduce incentives to complete projects of marginal viability. Mechanism Carbon Financing Microfinancing Portfolio Guarantees and Loss Reserves Characteristics Allows projects to access expected rev¬enue streams from CERs ahead of commis¬sioning or at start of operations. Provides customers with credit to pur¬chase RET hardware (typically SHS). Guarantee a part of the losses incurred by a portfolio of similar projects in the event of a specified event occurring Pros A possible means of obtaining up-front financing secured against carbon revenues (that is, project financing). Used to refinance projects, thus freeing up resources for development of new projects. A means of allowing RET develop¬ers to receive payment on installation of systems, reducing need for up-front financing. By grouping projects, the reserves required against default can be reduced as a result of the diversification of risk com¬pared to individual guarantees, allowing for a greater degree of leverage. Transactions costs for each project are reduced as any project meeting the required criteria can be included in the guaranteed portfolio. Cons Only a small number of potential buyers of CERs exist. Significant risk is transferred to the public financing agencies, if purchases are made ahead of project registration (under the CDM) or if carbon revenues are uncertain. Process of realizing carbon revenues can be complex and costly, particularly for first-of-a-kind projects, and reliance on these may delay project development substantially. Front-end loading of carbon finance revenues has been difficult to realize in practice given the regulatory and opera¬tional uncertainties of these projects. Financing only covers a part of costs and amounts received depend on carbon prices. MFIs may not exist or may be unwilling to lend for purchases of RET hardware, as loan terms are longer than typical MFI loans and repayment is dependent on household incomes rather than revenue generation. Transactions costs are high, although MFIs are able to reduce these compared to alternative financing arrangements. Microfinancing still requires RET devel¬opers to find significant working capital to fund initial purchases of RET systems ahead of first sales. Large number of similar projects are required for this funding to be effective. Project developers may include inappro¬priate projects in the portfolio, increasing the risk exposure of public financial agencies. Ideally requires good database of similar projects to be able to assess risk of guar¬antee or reserves being utilized. As with other guarantees, requires good accounting of contingent liabilities and may create scope for abuse. Sophisticated institutional capacity required to manage such programs. Mechanism Aggregation Characteristics Reduces transactions costs by bundling together similar projects that use standard contracts and specifications. Pros Transactions costs for each project are reduced as the standardization of docu-mentation means rapid review is possible Cons Large number of similar projects are required for it to be effective Commitment on part of developers, off-takers, and financiers is required so they do not amend standard documents Table : Characteristics of a different financing mechanisms foreseen for the development of renewable energy sources 4.2.4. Activity 4: Increase stakeholder knowledge and capacity building to sustain investments in renewables Organisation of two stakeholders workshops will be required to increase the capacity of all public and private actors meet at the mapping stage, where the information are to be gathered. Basic parameters of the legal and policy workshop are as following: During each workshop relevant project-related developments and documents will be presented, including the Strategy and Action Plan. This would enable the project team, AUC and participants to reach a broad consensus and fully utilise the opportunity of having all parties in one place and in one time. Also, for a better communication and awareness of all participants, each workshop will deliver: a big picture on the energy situation, including the renewables, infrastructure and main challenge identified by the Consultant, aligning conceptions towards legal, policy and financial instruments supporting the development of renewables, increasing stakeholder interest in having a long-term cooperation frameworks and communication channels, well conceived strategies including set of indicators for planning perspective activities under the umbrella of the African Union Commission Task 4.1: Legal and policy workshop Regulatory policies such as quotas and obligations and pricing instruments, supported by fiscal and financial incentives, are necessary to generate a number of renewable energy investments. Quotas and mandates enable targets to cascade down to electricity producers and consumers. They are generally supported by tradable renewable energy certificates. To ensure the effectiveness of quotas and certificates, a robust framework to monitor and penalise non-compliance is needed. In an age of competitive market, the success of policy framework is crucial for high shares of renewable energy sources to translate into low-cost electricity for consumers. These relate to technology, awareness and capacity, cost, finance, infrastructure and public acceptance, in addition to policy, regulatory, institutional and administrative barriers. A combination of policy measures are needed, focusing on direct support (deployment), integration and enabling environment: In any case policies must be selected with care and designed or adapted to reflect specific national and local circumstances. The long-term stability of targets and policies is key to ensuring investor confidence and sustained growth. At the same time, policies need to continuously adapt to changing market conditions, to achieve greater cost-competitiveness and improved integration of renewables into the system. To ensure that the energy transition accelerates, greater attention must be paid to the transformative impact on society, institutions, financing, ownership structures and the wider economy. This requires supporting effective participation by all policy stakeholders. Some of AIS policy makers already have the tools necessary to support increased deployment, and a wide variety of actors, including traditional utilities, have already taken promising actions. The time has come to exploit the synergies in those actions, to break down the remaining barriers, allow for increased integration of renewable energy across sectors, and go beyond energy sector policy to broader development policy to achieve the energy transition. Strengthening and development of renewable energy sources in Africa requires the development of legislative capacity a number of areas including: • Development planning aligning priorities and concepts • Service delivery to investors and citizens willing • The investment framework motivating the society to make a change • Energy regulatory policies preventing corruption, ad-hoc decisions • Monitoring and evaluation of all activities emerging from the legislative frameworks • Creation of legal and institutional network among AIS, delivering synergies • Sharing best practices and success stories on developing the renewable energy The Consultant, on the basis of prior field visits and own profound experience, will provide the participants with a direct advisory towards designing policies explicitly for the promotion of renewable energy. Also the results and suggestions will be provided in regard to other policies that indirectly are linked with incentives and barriers for renewable energy. In principle there are six different types of policies which will be taken into the consideration: The workshops will, above all, lay the ground for renewable energy promotion policies, as the comprehensive catalogue was listed under the Task 1.2. It is foreseen that the training would take up to 3-4 days and all AIS should be represented by appropriate delegations. Stakeholders, who may benefit from the subject task, are: • Local, regional and national public authorities, • Energy regulatory entities, • Governmental organisations, ministers, • Advisors, high level bureaucrats responsible for decisions, • Parliamentarians, • AUC statutory bodies, • Relevant members of political parties and their advisers, • Professional organisations: labour unions, business organisations. Task 4.2: Financial workshop The content of the financial workshop would cover following areas of general knowledge: • Budgeting renewable energy sources, it's important because: it allows to identify main spending patterns, of prioritizing spending (needs vs. wants), of eliminating potentially damaging spending behaviours and policies, of controlling money in a more detailed sense, financial officers piece of mind and increases probability of reaching goals. • Financial planning, evaluating market and technology risks behind the renewables • Investing into the renewables, the most important financial parameters (CAPEX, OPEX, SPBT, IRR, equity cost), portfolio construction, diversification rules, time and volatility, investment discipline, investment selection, risk management and insurances (property, liability, natural disasters), • Investment and estate planning basic procedures, documents and formal allowances, set up and logistics, • Drafting the financial programms, • Designating the beneficiaries of the investment programmes formal procedures, case studies, • Best case scenarios of investing into the renewables under certain conditions Consequently, the following project data and documents are to be delivered to all participants: • Situation of the energy sectors across the African Island States legislation, infrastructure, risk analysis, priorities and challenges to overcome, structure of the power production and distribution, tariffs, specific natural circumstances and resources, • Existing initiatives and financial schemes • Policy and regulatory frameworks • Strategy and Action Plan explained infrastructure development directions and priorities, the most favourable energy generation models and investments, policy and regulatory frameworks to come, new mechanisms and instruments for climate founds. The overarching rationale for the use of Financial Instruments for renewable energy development is that facilitating access to finance through the use of repayable instruments contributes to sustainable regional economic growth and employment. Underpinning this are three largely distinct premises for intervention. Also, lack of access to finance may constrain investment in R&D and innovation, leading to suboptimal investment in new technologies that would benefit society more widely; similarly, urban development or energy efficiency projects offer societal gains that justify public intervention, but might not attract commercial funding because of long payback times or uncertain risks. Crucially, however, the feasibility of using financial instruments depends on a number of factors: the capacity of projects to generating cost savings or revenue; the presence of sufficient numbers and scale of viable projects that are not commercially funded; the scope for timely exits and repayments; the costs involved in running repayable funds; and the need for losses and fees not to erode returns. Therefore investors and supporting authorities will be encouraged to well consider their portfolio construction. Figure: Investing - portfolio construction A broader perspective on the risk management, under financing and management criteria, will be also explained case-by-case inter alia using the table below. Table : Renewable technologies versus financing and project risks Note: Lo = Small or no impact (mitigation of risks is desirable); Med = Moderate impact (mitigation of risks is likely to be required); Hi = Significant impact (mitigation of risks is generally necessary if the project is to proceed) Lack of market funds is not included in the figure. This financing barrier could affect any technology and is driven by the size of domestic capital markets, not the specific risks of any technology. The idea of the financial planning concept is the crucial activity of the investment. Not only the energy generation should be considered, but also the elements of the energy efficiency. In result same installed electric powers may reach more citizens, once they start to save the energy delivered. Figure: The financial planning process Efficiency is therefore key to the selec¬tion of the appropriate financial instruments to support renewable energy investments. The aim should be to use those instruments that deliver the great¬est amount of private funding for the smallest amount of public funds (thus achieving the greatest leverage). Figure: Energy efficiency and the Renewable Sources Finally, a number of investments and case studies will be evaluated in workgroups for a better understanding of all processes, cash flows and risks. The Consultant provides below two exemplary materials from his previous presentations in the relevant subject. AN EXAMPLE EXERCISE # 1 - WIND TURBINE INVESTMENT'S TIMETABLE A typical project development timetable for wind projects, shown below, illustrates the length of the development process. Even at the soonest, this would take 2 to 3 years to reach financial close; site identification and resource assessment in particular take time. Substantial preinvestment financing is needed to cover the costs up to the point where revenues are generated, and to allow for the risk of delays. Figure : The project development timetable for wind turbine AN EXAMPLE EXERCISE # 2 - ONSHORE WIND PROJECT'S IRR Illustrative cash flows for a 35 megawatt (MW) onshore wind project can be used to show the importance of obtaining long-term financing for RET projects. In these two examples, the only change is the term of debt available to the project. The result of a 5-year debt term is to push the project into deficit for the first 5 years of operations—for a total of $15 million in financing that would have to be made up by the sponsor—and to reduce the return on equity below the threshold of viability.