FINAL REPORT · 2004. 5. 11. · IN RURAL AREAS IN MYANMAR FINAL REPORT Volume 4 Main Report ... 2.2.3 Potential Increase in Foreign Investment: Clean Development Mechanism (CDM)

THE STUDY ON INTRODUCTION OF RENEWABLE ENERGIES IN RURAL AREAS IN MYANMAR

FINAL REPORT

Volume 4 Main Report Manuals for Sustainable Small Hydros

Part 4-1 O&M Manual-Small Hydros

Part 4-2 Design Manual-Small Hydros

Part 4-3 Design Manual-Village Hydros

Part 4-4 Institutional and Financial Aspects

i

THE STUDY ON INTRODUCTION OF RENEWABLE ENERGIES IN RURAL AREAS IN MYANMAR

Final Report Volume 4 Manuals for Sustainable Small Hydros

Part 4-4 Institutional and Financial Aspects

TABLE OF CONTENTS

1 Introduction .....................................................................................................................1

2. Government RE schemes ................................................................................................5 2.1 Institutional and Organisational Arrangements ...............................................................5 2.2 Financial Aspects of RE by MEPE................................................................................29

2.2.1 Financial Characteristics of MEPE........................................................29 2.2.2 Alternative Tariff Level .........................................................................30 2.2.3 Potential Increase in Foreign Investment: Clean Development

Mechanism (CDM)................................................................................31 2.2.4 Characteristics of Income and Expenditure of Rural Electrification.....32 2.2.5 Value of Renewable Energy (Hydro-Electric Power) and the

Comparable Tariffs ................................................................................34

3. Village RE schemes.......................................................................................................37 3.1 Institutional and Organisational Aspects .......................................................................37 3.2 Village RE Schemes ......................................................................................................51

3.2.1 Financial Aspects of Village RE Schemes.............................................51 3.2.2 Process to start Village Hydro Scheme..................................................53 3.2.3 Review of possible Options and Problems ............................................54 3.2.4 Sustainability and the Role of MEPE....................................................55 3.2.5 Example of Self-Funding with the help of Supplier Credit (Thaleoo

Village) ..................................................................................................56

ii

LIST OF TABLES

Table 1.1 Organisations Responsible for the Key Roles in RE ..................................................2 Table 2.1 Main Functions of the RE Section (Government RE Shemes).................................12 Table 2.2 Activities Linked to the Operational Interfaces........................................................13 Table 2.2.1 MEPE Financial Statements ..................................................................................30 Table 2.2.2 Income and Expenditure of MEPE Kalaymyo and MEPE Consolidated..............34 Table 3.1 Main Functions of the RE Section (Village Schemes) .............................................40 Table 3.2 Activities Linked to the Operational Interfaces........................................................42 Table 3.2.1 Review of Possible Options...................................................................................54 Table 3.2.2 Problem and Mitigation Measures of Village Hydro.............................................55

LIST OF FIGURES

Figure 1.1 Linkage between Roles of the Guidelines and the Manual.......................................3 Figure 1.2 Framework for the Implementation of Renewable Energy Projects for RE .............4 Figure 2.1 Proposal for Introducing a New RE Section into MEPE ..........................................5 Figure 2.2 MOEP Structure Post 2002 .......................................................................................6 Figure 2.3 New MEPE Organisation Structure ..........................................................................7 Figure 2.4 Proposed Structure of the New RE Section in MEPE...............................................9 Figure 2.5 Organisational Diagram of Transmission and Distribution Department.................10 Figure 2.6 Proposed RE Section within Structure of Transmission and Distribution

Department .......................................................................................................... 11 Figure 2.7 Key Operational Interfaces of RE Section (RE Government Schemes) .................13 Figure 2.8 Process for Achievement of Sustainable RE...........................................................15 Figure 2.9 Institutional Structure for Sustainable RE – Government Schemes .......................17 Figure 2.2.1 MEPE Kalaymyo Township Income and Expenditure ........................................33 Figure 2.2.2 Value of Hydroelectric Power in Kalaymyo Township, 2002..............................35 Figure 2.2.3 Vicious Circle.......................................................................................................36 Figure 3.1 Institutional Structure for Sustainable RE – Village Schemes................................39 Figure 3.2 Key Operational Interfaces of RE Section (Village Schemes)................................41 Figure 3.2.1 Options of Finance for Rural Electrification........................................................52 Figure3.2.2 Basic Process to Initiate Micro-Hydro Rural Electrification in Myanmar ...........53 Figure 3.2.3 Self Funding with Local Supplier's Credit ...........................................................57

iii

LIST OF APPENDICES (Presented in Part 6-4 of Volume 6) Appendix 1 Case Study - Kalaymyo RE Scheme Served By Zi Chaung Hydro Appendix 2 Case Study – Village Scheme

-1- Nippon Koei / IEEJ Volume 4 Manuals Part 4

The Study on Introduction of Renewable Energies in Rural Areas in MYANMAR

1 Introduction

In this part of the Manual the institutional and financial aspects of implementing isolated small RE schemes using appropriate forms of renewable energy are considered. Two categories of small RE schemes are dealt with: “Government” (100kW to 1 MW) and “Village” (normally below 50kW). These are dealt with separately in Sections 2 and 3 respectively and supporting case study material is included in Volume 6, Part 6-4. The broad scope of the institutional and financial aspects covered for each of these categories of RE schemes is as follows.

Institutional Financial • Institutional framework • MEPE Financial Issue • Organisational arrangements • MEPE Tariff Issue • Operational interfaces • MEPE RE Financial Issue • Project monitoring and evaluation • Village Electrification Financial Issue • Examples of procedures • Fund Raising for Village Electrification

It is noted that MEPE currently has a small team at their HQ in Yangon dealing with a minor programme of small scale Village RE projects (usually diesel powered) in the Border Areas. Project funding is provided by MPBANRDA. This programme is not covered by this manual but it is recommended that the team’s work should be integrated within the proposed RE Section in MEPE (described in Section 2) and a strategy followed to seek more use of renewable energy as the power source for future schemes.

In order to achieve proper execution and sustainability of small isolated “Government” and “Village” RE schemes the implementation and monitoring processes will involve a number of organisations as shown in Table 1.1.



Table 1.1 Organisations Responsible for the Key Roles in RE

Role Responsible organisation Other organisations involved

National policy SPDC Strategic planning body MOEP / DEP

RE Champion MEPE

RE scheme planning and implementation

MEPE (Govt. schemes) VECs (Village schemes)

NGOs, private sector

RE scheme construction

Private Sector or MEPE or beneficiary community

Equipment fabrication cooperatives and NGOs

RE scheme O & M MEPE or private sector or VECs

MEPE and NGOs will support VECs

Monitoring and evaluation DEP +MEPE NCEA

Source: JICA Study Team

The framework for promoting, planning, implementing, operating and maintaining isolated RE schemes using renewable energy was set out in the Guidelines. The schematic diagram illustrating the framework is included overleaf for reference as Figure 1.2.

The Guidelines covered the conceptualisation and shortlisting processes for RE projects through to the project selection stage. The institutional and financial content of the Guidelines comprised:

Existing institutional framework

SWOT analysis of the existing arrangements to provide RE

Proposed institutional and organisational schemes for RE

Policies, laws and regulations necessary to facilitate RE schemes

Financial aspects e.g. raising capital, tariff considerations

Options for achieving greatest economic benefit from the scheme

O & M aspects of isolated RE schemes

Framework for the development of human resources

The relationship between the roles of the Guidelines and the Manual and the overall project cycle is shown below in Figure 1.1.



Feedback

1Feedback


Figure 1.1 Linkage between Roles of the Guidelines and the Manual

Rural electrification “needs”

Renewable Energy Projects Project identification

Organisationaland Financial

Technical

Monitoringand Evaluation

O & M of the Renewable Energy Project

Renewable Energy Project Design and construction

Guidelines (Institutional and

Technical)

Manual (Technical,

O & M, Institutional and

Financial)




Figure 1.2 Framework for the Implementation of Renewable Energy Projects for RE

Rural Electrification

Needs

Funding / Credit

NCEA

Environmental policy+monitoring

SPDC/TPDC

MEPE /

New RE Section

Coops and

NGOs

MOST + relevant instns

Research & Dev’t

Ministry of Energy

National energy database

Villagers / VEC

“Village” Schemes + Community participation

RE Scheme O & M

Inst’n Tech

RE Scheme implementation

Inst’n Tech

MEPE

Funding* TA / Encourage village schemes

Implementation of Govt. schemes

Ministry of Co-operatives

Establish VEC as

Coop if appropriate

Private Sector

Aid Agencies

Government

MEPE

= Feedback* = Government schemes only

Committee for ASEAN energy sector cooperation

Publicity on options and

opportunities for self-help schemes

plus feedback

Education & training

Policy

“R E Champion” Planning



2. Government RE schemes

2.1 Institutional and Organisational Arrangements

Organisational aspects

Government RE schemes are defined as small hydro schemes between 100kW and 1MW or other similar scale renewable energy projects. In order to implement such schemes, MEPE proposes to establish an RE Section within the Transmission and Distribution Department, with the prospect of eventually transferring the role to a new department. A diagram showing the arrangements of this concept is included as Figure. 2.1. The diagram reflects the changes made to MEPE’s departmental structure during 2002. More details of this updated MEPE structure are shown on Figure. 2.3 overleaf.

Source: MEPE

Figure 2.1 Proposal for Introducing a New RE Section into MEPE

During 2002 MOEP also restructured and created a new Department of Hydro Power. The new structure of MOEP is shown in Figure. 2.2.

Finance Dept

Admin Dept

Thermal Power Stn Dept

Trans and Dist Dept

Managing Director

MaterialPlanning Dept

Chief Engineer

Board of Administration

ProposedRE Section

Planning Dept

Hydro Power Stn Dept



Source: DEP

Figure 2.2 MOEP Structure Post 2002

Boardof

AdminManaging Director

Myanmar Electric Power Enterprise

Department of Hydro-Power

Director General

Department of Electric Power

Director General

Deputy Minister

Ministry of Electric Power Minister

-7-

Nippon Koei / IEEJ Volume 4 Manuals Part 4


Source:MEPE

Figure 2.3 New MEPE Organisation Structure

Managing Director

Director Director Director Dep. Chief Engineer

Dep. Chief Engineer

Board of Administration

Dep. Chief Engineer

Deputy Director

Deputy Director Superintend Engineer (2)

Superintend. Engineer (2)

Superintend. Engineer (5)

Assistant Directors (4) In charge of:

Fin. Planning + Treasury ___________Income + Payment + Acc Machine ___________Project Acc’g + States / Div Accounting: ___________Project audit + States / Div audit

2 divisions comprising: Procurement planning / Logistic movement

___________ Stores

4divisions comprising:

Personnel administration ___________ General administration ___________ Inspection ___________

Motors and vehicles

3 divisions comprising: Admin + budget____________ Electrical and mechanical ____________ Civil works

4 divisions comprising: Planning adminstration __________ Electricity planning __________ Budget __________ Installation of sub-stations and trans-mission lines

5 divisions comprising: Distribution Unit 1 ____________ Distribution Unit 2 ____________ Power system +transmission ____________ Admin + budget ____________ Repair and maintenance

Deputy Directors (2)

Dep. Chief Engineer

Superintend Engineer (3)

Managing Director’s

Office

3 divisions comprising: Admin and budget ____________Electrical __________

Mechanical

Staff of the Managing Director

Staff of the Chief

Engineer

Meter Committee

Planning Department

Finance Department

Material Planning Dept

Administrat’n Department

Hydel Power Stations Dept

Transmission & Distr Dept

Therm. Power Stations Dept

Chief Engineer

-8-



The proposed RE Section (whose scope of work should cover all relevant forms of renewable energy) has several functions to perform. These include the project development tasks referred to in the Guidelines, i.e.

RE Champion / Policy dissemination

Managing information / publicity campaigns

RE programme formulation

Funding arrangements

RE scheme feasibility studies and project prioritisation

In addition, and with particular respect to Government RE schemes using renewable energy, the main functions to be performed by the RE Section in the implementation and operational phases of the schemes are as follows:

RE scheme design and organising construction supervision

Organising RE scheme O & M

Monitoring and evaluation / Management of feedback

Arranging capacity building / training

Maintaining a nation-wide database of RE schemes / renewable energy

Given the above scope of work, a proposed structure for the RE Section is shown in Figure 2.4 The organisational structure of MEPE Transmission and Distribution Department is included overleaf as Figure 2.5 and the status of the RE Section within the department is shown in Figure 2.6.

-9-



Source: Proposed by JICA Study Team

Figure 2.4 Proposed Structure of the New RE Section in MEPE

MEPE Transmission and Distribution DepartmentDeputy Chief Engineer

Proposed RE Section

Head of Section

RE promotion and programme management

Advisory and support services

RE project implementation and monitoring

Existing operational

activities

-10-



Source: MEPE

Figure 2.5 Organisational Diagram of Transmission and Distribution Department

- Test laboratory

- Kamarnat

- Rakhine

Managing Director

Board of

Administration

Superintending Engineer





Distribution Branch 1

(Divisions)

Maintenance and Repair

Branch

Administration and Budget

Branch

Power System and Transmission

Branch

Dep. Chief Engineer

- Yangon

- Mandalay

- Sagaing

- Bago

- Bago West

- Magwe - Ayarwadi

- Taninthari

- Kachin

- Kayan

- Kayin

- Chin

- Mon

- Shan (1)

- Shan (2)

- Shan (East)

LINES

- Thazi

- Taungoo

- Chauk - Kyaukpa-Htoe

- Pyay

- Mandalay

- Thazi

- Pyinmana

- Aungpinle- Pyinoolwin

- Letpanhla

- Magwe

- Chauk

- Taungowngyi

- Nyaungbingyi - Taungoo

- Kalaw

- Workshop SUBSTATIONS

- Transformer

repair shop

Distribution Branch 2 (States)

Planning Department

Finance Department


Administrat’nDepartment


Transmission & Distr Dept Department



Office

Chief Engineer

-11-



Source: MEPE

Figure 2.6 Proposed RE Section within Structure of Transmission and Distribution Department

Managing Director

Planning Department

Finance Department


Administrat’n Department

Chief Engineer


Board of

Administration








Office

Distribution Branch 1

(Divisions)

Maintenance and Repair

Branch

Administration and Budget

Branch

Power System & Transmission

Branch

Distribution Branch 2 (States)

Proposed RE

Section


Dep. Chief Engineer

Transmission & Distr Dept Department

-12-



The main functions to be performed by the 3 units proposed for the RE Section (regarding Government RE schemes) are shown in Table 2.1 together with the linkages to the various study deliverables. The Head of the RE Section is responsible for meeting the “rural electrification performance targets” set by MEPE management and also has the key role of acting as the “champion” for RE using renewable energy.

Table 2.1 Main Functions of the RE Section (Government RE Shemes)

Unit in RE Section

Functions performed Relevant Study deliverable

1 RE promotion and programme management

Policy dissemination Information and publicity management

Preliminary project planning RE Programme management Management and updating of the “study” database

Distribute + update of Guidelines

Guidelines “Study” database Institutional and financial aspects manual

2 RE project implementation and monitoring

Project feasibility studies RE project funding management Detailed site investigations Project detailed design (and contract documents where needed)

Construction supervision and project commissioning

Monitoring and evaluation of RE schemes

Distribution and updating of the Design Manual – small hydro

Design manual – small hydro

Project Development Plans

Output from the monitoring of the Zi Chaung scheme

“Study” database

3 Advisory and supporting services

Advisory services to Divisional Offices / Township Engineers for O & M of RE schemes using renewable energy

Distribution and updating and training in relation to the O & M manual

Organising capacity building / training of VECs where applicable

O& M manual – small hydro

Institutional and financial aspects manual

Output from the monitoring of Zi Chaung scheme

“Study” database Source: Proposed by JICA Study Team

Operational interfaces

In order to fulfill it’s role the new RE Section will have to have effective operational interfaces with a number of internal and external bodies. The key interfaces needed are shown in Figure 2.7 and the main activities carried out through the interfaces are shown in Table 2.2.


Study on Introduction of Renewable Energies in Rural Areas in MYANMAR


Figure 2.7 Key Operational Interfaces of RE Section (RE Government Schemes)

Table 2.2 Activities Linked to the Operational Interfaces

Operational interface

Key activities related to Government RE schemes

MOEP

MOEP through DEP defines the overall strategic plan for RE and approves the budget for “Government RE schemes”

DHP DHP provides mini hydro design and construction services when appropriate and requested

MEPE Hydel Department

Micro hydro design and project implementation services when appropriate and requested

MEPE Divisional Offices

Support project implementation tasks and undertake the O & M Help to promote “renewable energy for RE” concept

Cooperatives

Supplier of equipment e.g. MICL. Sometimes VECs are cooperatives.

NGOs Help promote RE using renewable energy

Aid Agencies Support development of the sub-sector and specific projects

Private Sector

May undertake design and / or construction under contract Equipment and material supplies


MEPE Transmission and

Distribution Department

ProposedRE Section

MOEP /

DHP

Cooperatives

Aid Agencies

Private Sector

NGOs

MEPE Divisional and State

Offices



Project monitoring and evaluation

Small isolated Government RE projects using renewable energy should be monitored and evaluated (even if only a sample basis) and this should cover:

All activities from site investigation, design and procurement through to construction and commissioning in order to assess their quality and the efficiency of the RE scheme “as built”

O & M and scheme management by MEPE (or a VEC or private sector if MEPE delegates this roles) in order to assess the potential sustainability of the RE scheme

A feedback process should follow the monitoring and evaluation in order to update the Guidelines and Manuals (to improve sustainability prospects).

The generic process for promoting and achieving sustainable RE using renewable energy sources is shown in Figure 2.8 and shows the important roles that monitoring and feedback play within the process. The role of feedback within the implementation process was also shown on Figure 1.2 and the two main project monitoring tasks are shown in Figure 2.9.



Feedback


Figure 2.8 Process for Achievement of Sustainable RE

Institutional structure for the implementation of Government RE schemes

The overall institutional structure for carrying out RE schemes of the two types being considered in this manual is shown in Figure 2.9 overleaf. The elements relevant to “Government RE schemes

” are shown highlighted

The new RE Section must ensure that all Government RE schemes conform to the current legislation and regulations related to the sector and also with environmental legislation requirements.

Operating procedures of the RE Section

Successful implementation of Government RE schemes under the overall direction of the RE Section will necessitate a number of procedures being effectively carried out. These are related to the main functions listed earlier in Table 2.1. Examples of outline

O & M

Rural communities RE needs

Strategic planning

Implementation

RE schemes should be

“Environment friendly”

Publicity / information

MonitoringAnd

Evaluation +

Feedback



procedures are included overleaf. Some of these apply equally to Village RE schemes, this is the case for the following procedures:

Policy dissemination

Information management

Publicity management

RE programme management



SPDC

MOEP

MEPE Admin Trans/Distr Planning Mat’ls Plan’g Finance Therm PS Hyd PS

Government RE

Schemes

Divisional / Township Engineers

Scheme planningand

implementationby VEC

Monitoring

(1) By NCEA regarding environmental impact (2) By MEPE’s “New” RE Section regarding performance

Village RE

Schemes

Support to newRE Section

or VEC

during project planning,implementation

and O&M

National Policy

Scheme planningand

implementationby MEPE

(or outsource to private sector)

O&M by

the VEC

O&M by MEPE (or outsource to VEC

or private sector)

NGO support

Liaison With

D/TPDC

DEP

DHP

‘Champion’

HydroScheme Design and construction

Strategic planning

“New” RE Section

Mini Large

Micro

Figure 2.9 Institutional Structure for Sustainable RE – Government Schemes



Examples of preliminary procedures

Common to all RE Schemes

1. Policy dissemination 2. Information management 3. Publicity management

Government RE Schemes

4. Project funding - sourcing / management 5. Project planning and RE Programme management 6. Project feasibility studies

7. Detailed site investigations and RE scheme design 8. Preparation of contract documents (where necessary) 9. Construction supervision and project commissioning 10. Management of the O & M arrangements



Procedure for MEPE RE Section

Name of procedure 1. Policy dissemination 1 Description of task to be undertaken

Communicate the policy defined by SPDC for improving the level of electrification in the rural areas with the emphasis on maximising the usage of appropriate forms of renewable energy to all key stakeholdersAlso communicate the MEPE strategy for implementing this policy with supporting information on targets to be achieved.

2 Diagram of process showing key players Roles of different key players SPDC Policy definition for RE using renewable energy MOEP Policy implementation via MEPE MEPE Policy implementation via RE Section

3

RE Section Policy dissemination and implementation 4 Output definition i.e. expected outcome of the procedure

All key stakeholders to be fully aware of the national policy for RE using renewable energy and of MEPE’s strategy / plans to implement same.

5 Relevant study deliverables that support the procedure Guidelines, institutional component of the Manual

6 Monitoring and evaluation requirements At appropriate intervals and opportunities the RE Section is to assess the extent to which the policy is understood by key stakeholders and take action to address any needs to improve it’s communication.


MEPETransmission & Distribution Dept

DHP

Divisional Offices / Township Engineers

NGOs Aid agencies

DEP

SPDC

Rural communities

National Policy

MOEP

MediaPrivate sector




Name of procedure 2. Information management 1 Description of task to be undertaken

Manage and update a comprehensive database for RE using renewable energy

Manage and update a management information system that enables detailed reporting to be made to MEPE management on the performance of the RE Section related to the targets set for rural electrification

Manage and update information that supports the needs of the PR campaigns necessary to promote RE using renewable energy

2 Diagram of process showing key players

Roles of different key players RE Section Overall responsibility for information management related

to RE using renewable energy and for maintaining and updating the “study” database. Using data for reporting and design

DHP Providing updating data and taking out design data MEPE Hydel Providing updating data and taking out design data NGOs Providing updating data Private Sector Providing updating data and taking out design data

3

Other MEPE departments

Providing updating data and taking out data

4 Output definition i.e. expected outcome of the procedure All technical and other information held by the RE Section is up to date and adequate to meet the operational needs of the section i.e. it enables the section to fulfil its objectives and performance requirements and give management adequate decision making data

5 Relevant study deliverables that support the procedure Database, Guidelines, institutional component of the Manual

6 Monitoring and evaluation requirements None


MEPETransmission and Distribution Dept Hydel Dept

DHP Hydro Scheme Design and construction

Mini Large

Private Sector

NGOs “Study” database

Other

MEPE

Design data Regular reporting

Updates

Data usage on projects

Updates




Name of procedure 3. Publicity management 1 Description of task to be undertaken

Producing good quality and relevant material to be used to publicise (1) the benefits of RE, (2) the benefits of using renewable energy (3) the way communities can participate in (or fully implement) RE schemes on a self help basis

Liasing with key agencies who can assist the PR process e.g. MEPE Divisional Offices, NGOs, TPDCs and the media

Overall management of the PR function 2 Diagram of process showing key players

Roles of different key players RE Section Overall responsibility for publicity management MEPE Divisional Offices

One route for publicising benefits of RE and opportunities to participate to rural communities

Media Publishing and / or broadcasting the data provided by the RE Section

TPDCs Another route for publicising benefits of RE and opportunities to participate to rural communities

3

NGOs Another route for publicising benefits of RE and opportunities to participate to rural communities

4 Output definition i.e. expected outcome of the procedure Rural communities well informed of government policy and the opportunity to implement RE using renewable energy and of the potential for community participation. Private sector well informed of the opportunities to participate in scheme implementation.

5 Relevant study deliverables that support the procedure Database, Guidelines, institutional component of the Manual

6 Monitoring and evaluation requirements None

Rural communities


MEPE

Transmission and Distribution Department

Divisional Offices / Township

Engineers

NGOs

Media

Private Sector

TPDCs



Procedure for MEPE RE Section (Government RE schemes)Name of procedure 4. Project funding - sourcing / management

1 Description of task to be undertaken Identifying the budget needed for the planned / agreed programme of

“Govt” RE schemes for the year ahead in liaison with DHP Managing the part of the budget allocated by MOEP to MEPE for RE

using renewable energy in order to ensure that it is used for the purposes intended and in the most cost effective manner

Being accountable for proper usage of the budget allocated 2 Diagram of process showing key players

Roles of different key players MOEP Allocation of the sector budget to DEP, MEPE and DHP MEPE Allocation of budget from MOEP to each MEPE departmentRE Section Management of (and accountable for) that element of the T

and D Dept’s budget allocated to RE using renewable energyDHP Use of part of it’s budget for the design and construction of

mini isolated “Government” RE schemes using renewable energy

3

MEPE Hydel Use of part of it’s budget for the design and implementation of micro isolated “Government” RE schemes using renewable energy

4 Output definition i.e. expected outcome of the procedure Adequate budget allocated and this budget spent effectively and efficiently

5 Relevant study deliverables that support the procedure None

6 Monitoring and evaluation requirements Usual financial accountability monitoring / auditing


MEPETransmission and Distribution Dept, Hydel Dept

DHP

Divisional Offices /

Township Engineers

Hydro Scheme Design and construction

Mini Large

Annual programme of “Government” RE

schemes

MOEP

Budget allocations Budget allocations



Procedure for MEPE RE Section (Government RE schemes)Name of procedure 5. Project planning and programme

management 1 Description of task to be undertaken

In the light of MOEP’s strategic planning for RE as defined by DEP, to undertake the overall RE programme management in an effective manner that ensures targets are achieved

Managing the preliminary RE project planning processes of Government RE schemes in coordination with other key players in conformance with the Guidelines

2 Diagram of process showing key players Roles of different key players RE Section Overall responsibility for RE programme management

Execution of project planning tasks supported by DHP, private sector and MEPE Divisional Offices as necessary


Supporting project planning as requested by RE Section

DHP Supporting project planning as requested by RE SectionMEPE Hydel Supporting project planning as requested by RE Section

3

Private sector Doing outsourced tasks for project planning 4 Output definition i.e. expected outcome(s) of the procedure

Overall RE programme using renewable energy is effectively managed such that strategic planning objectives regarding improving the percentage of isolated rural communities electrified are achieved. Proper preliminary project planning procedures are followed and only viable options pursued.

5 Relevant study deliverables that support the procedure Guidelines, database

6 Monitoring and evaluation requirements Relevant feedback to be used to update the Guidelines


MEPETransmission and Distribution Dept Hydel dept

DHP

Divisional Offices/

Township Engineers


Mini Large

RE programme management

RE scheme planning

Feasibility studies

Private Sector

Study Database



Procedure for MEPE RE Section (Government RE schemes) Name of procedure 6. Project feasibility studies

1 Description of task to be undertaken Preparation of a feasibility study for a particular RE project using a

suitable form of renewable energy including evaluating appropriate options

Carrying out the study in a competent and consistent manner that enables the preferred option to be compared with other potential schemes in the RE programme and priority ranked

2 Diagram of process showing key players Roles of different key players Carrying out outsourced feasibility studies

Overall responsibility for feasibility studies, supported by DHP and MEPE Divisional Offices as necessary Managing studies outsourced to private sector


Supporting feasibility studies as requested by RE Section

DHP Supporting feasibility studies as requested by RE SectionMEPE Hydel Supporting feasibility studies as requested by RE Section

3

Private sector Carrying out the outsourced feasibility studies 4 Output definition i.e. expected outcome of the procedure

A properly carried out study that clearly demonstrates the technical feasibility and financial viability of the proposed RE project after consideration of potential options and environmental /social aspects.



Private Sector (outsourced

studies)


MEPETransmission and Distribution Dept MEPE Hydel

DHP


Township Engineers


Mini Large

Scheme planning

Feasibility studies

Design

Study Database



Procedure for MEPE RE Section (Government RE schemes) Name of procedure 7. Detailed site investigations / RE scheme design

1 Description of task to be undertaken Carry out by direct labour or through a contract, an adequate detailed site

topographical survey and geotechnical investigations to show that it is feasible to construct the proposed scheme in the precise location planned and that the scheme is technically feasible

Prepare design calculations and drawings of the proposed scheme to a level of detail that is adequate to enable the works to be constructed by either direct labour or private contractor as appropriate and in a manner that ensures that the objectives in the feasibility study are fully met


Roles of different key players RE Section Monitoring the process + organise the site

investigation + Option 1 for design of schemes other than small hydro + issuing and updating design manual

DHP Option 1 for design of mini hydros MEPE Hydel Option 1 for design of micro hydros Private sector or cooperative

Option for site investigation and for design for all technologies

3

Divisional Offices / T Eng Assist with site investigation where requested 4 Output definition i.e. expected outcome of the procedure

A competent and buildable project design 5 Relevant study deliverables that support the procedure

Design manual – small hydro; Design manual – micro hydro 6 Monitoring and evaluation / feedback requirements

Any improvements to the design process or new technology data is to be fed back to the RE Section to update manuals and database.



DHP


Township Engineers


Mini Large

Scheme planning

Detailed site

investigation and

Micro hydro

Mini hydro

Other renewable energies Option 2

Outsource to

cooperative



Procedure for MEPE RE Section (Government RE schemes)

Name of procedure 8. Preparation of contract documents 1 Description of task to be undertaken

Preparation of contract documents for RE schemes in the following cases:

For small hydros not being constructed by DHP For isolated Government RE schemes using forms of renewable energy

other than small hydro e.g. biogas 2 Diagram of process showing key players

Roles of different key players RE Section Preparation of the contract documents or management of

the private sector if the task is outsourced DHP Providing specialist technical or construction advice re

mini hydros as requested by RE Section MEPE Hydel Providing specialist technical or construction advice re

micro hydros as requested by RE Section

3

Private sector Preparation of contract documents if task is outsourced 4 Output definition i.e. expected outcome of the procedure

A comprehensive and technically / legally correct set of contract documents (including the detailed design drawings and related bills of quantities prepared under Procedure 7) that will allow competitive bids to be prepared by the private sector.

5 Relevant study deliverables that support the procedure Design manual – small hydro. Study database.

6 Monitoring and evaluation requirements Relevant feedback to be used to update the design manual – small hydro. Model contract documents to go in the database.

Construction



DHP


Township Engineers


Mini Large

Scheme planning

Design

Contract documents

Study Database

Private Sector (task

outsourced)



Procedure for MEPE RE Section (Government RE schemes) Name of procedure 9. Construction supervision and commissioning

of the project 1 Description of task to be undertaken

Supervise the actual construction of the RE scheme, including overseeing all necessary tests to ensure that the works conform to all quality and performance requirements

To carry out the final witnessing and approval of the commissioning of the scheme to ensure its proper operation

Making sure that the persons who will finally do the O & M witness appropriate stages of construction and the commissioning

Ensure all manuals / documents on the works given to O & M staff 2 Diagram of process showing key players

Roles of different key players RE Section Monitoring the process only + issuing and updating

manuals + organising training Divisional Offices / T Eng

Liaison with private sector and overseeing their task on behalf of RE Section

DHP Occasionally could be asked to build a scheme on a design / build basis

MEPE Hydel Support to RE Section for micro hydro implementation

3

Private Sector Option for scheme construction Option for scheme supervision

4 Output definition i.e. expected outcome of the procedure A properly finished project that conforms to the design and quality expectations, completed on time and to budget and meeting the objectives in the feasibility study.

5 Relevant study deliverables that support the procedure None.

6 Monitoring and evaluation requirements Any lessons learned in the construction process that can lead to design improvements are to be fed back to the RE Section to update manuals.



DHP


Township Engineers


Mini Large

Scheme planning

Design

Construction

Private Sector

Private Sector

Construction options

Supervision

Micro



Procedure for MEPE RE Section (Government RE schemes)Name of procedure 10. Management of the O & M arrangements

1 Description of task to be undertaken O & M of small isolated “Government” RE schemes This will normally

be done by MEPE Divisional Offices / Township Engineers but it could be outsourced to the private sector or a VEC

Provision of technical back up to this function whenever necessary Monitoring the activities and doing everything possible to ensure that O

& M is carried out in the most effective and efficient manner in order to make the RE scheme sustainable

Distribution and updating of the O & M Manual – small hydro 2 Diagram of process showing key players

Roles of different key players RE Section Central management of the O & M task

Technical back up when required Arrangement of outsourcing when appropriate Arranging training of VEC in O & M when neededIssue and updating of the O & M Manual Monitoring and evaluation

Divisional / Township Engineers

The normal option to undertake the O & M Oversees VECs when they undertake O & M

VECs An outsourcing option to undertake the O & M

3

Private sector An outsourcing option to undertake the O & M 4 Output definition i.e. expected outcome of the procedure

Small isolated “Government” RE schemes using renewable energy are properly operated and maintained and are sustainable.

5 Relevant study deliverables that support the procedure O & M Manual – small hydro. Study database.

6 Monitoring and evaluation requirements RE Section to monitor and evaluate these RE schemes on a sample basis and incorporate any important feedback in an update of the O & M Manual – small hydro.

O&M


MEPETransmission and Distribution Department


Township Engineers

Scheme planning, design and

construction

Private sector

VECs



2.2 Financial Aspects of RE by MEPE

2.2.1 Financial Characteristics of MEPE

MEPE is one of State Economic Enterprises (SEE). SEE’s accounts are dependent on Governmental Budget. Their focus is not on the increase of income, which is essentially allocated by the government, but rather on expenditure to keep the balance of income and expenditure or the “Balanced Budget.” There has been no finance from private market since 1989, when the authorities shifted all their financial requirements to the budget, and in effect the finance became an inter-governmental budget allocation. Under this financial arrangement, power supply cannot be for profit but for public service. If there is any profit, it shall be contributed to the state.

Financial statements, especially balance sheet and income statement (see below table), are expected to be the mirrors of the financial characteristics and the financial performance. However, the real picture of financial performance of MEPE is distorted in the MEPE’s financial statements because of two major reasons. One is the gap between official exchange rate and real market exchange rate. Another is the subsidization on prices of fuels.

MEPE’s income statement has very low figures of interest and depreciation charges. This is because all foreign loans the Government (not MEPE after 1989) has taken out for power plant construction and equipment are charged to MEPE at the official exchange rate of only K6.3 to one US dollar. Consequently, the book values of its total debt and interest costs in local currency are very low. Without this distortion, the assets in balance sheet, in which equity share is zero, would have been swelled. It means an expansion of liabilities, which would enlarge the interest payments. (see Appendix: Financial Aspects of MEPE)

Moreover, the fuel expenditures are very low, because MEPE buys fuels from MOGE (Myanmar Oil and Gas Enterprise) at a fixed price that is far below the inflation sensitive market price. The governmental prices of gas, oil and diesel are respectively K10/1000 cubic feet, K12/gallon, and K160/gallon. The market prices, which have been rising under inflation, are around US$1.00/gallon for oil and diesel and US$3.00/1000 cubic feet for gas. Assuming K1000=US$1.00, the government prices of gas, oil and diesel are only 0.3%, 1.2%, and 16% of the respective market prices.

The impact on balance sheet is limited to the part of the current asset value of fuels. However, if there were not these distortions, the expenses in income statements would be very large, which would have resulted in a huge loss depending on the fuel mix



Table 2.2.1 MEPE Financial Statements Balance Sheet (1000 Kyats)

Income Statement (Consolidated Revenue Accounts) (1000 kyats)

YEAR END 2001 1991 PERIOD 2000-2001 1990-1991 Fixed Assets (Net Capital Expenditure) 13,455,913 2,571,221 Total Income 16,849,302 860,289 Capital Expenditures 19,678,208 4,713,990 Sales of Electricity 16,588,091 822,185 Less Accumulated Provision for Depreciation 6,222,295 2,142,769 Other Income 261,211 38,104 Capital - Works in Progress 12,109,708 4,007,414 Generation Expenses 19,288,564 491,794 Salaries and Wages 143,867 23,280 Current Assets 19,436,767 1,674,980 Fuel Consumption 1,922,696 316,528 General Stores 5,903,454 759,514 Purchase of Electricity 16,728,317 1,951 Fuel, Petrole, Oil and Lubricant 113,719 9,713 Depreciation 300,600 137,713 Consumer's Accounts 2,376,455 172,511 Maintenance, Repairs and Other Expenses 193,084 12,322 Other Debtors 11,030,856 578,304 Cash-in Hand 550 140 Transmission Expenses 283,265 41,430 Cash-in-Transit 11,733 11,865 Salaries and Wages 74,593 20,596 Cash at Bank - 142,933 Depriciation 110,046 17,839 Maintenance, Repairs and Other Expenses 98,626 2,995 Total Assets 45,002,388 8,253,615 Distribution Expenses 672,342 71,173 Long-term Liabilities 39,837,976 7,562,954 Salaries and Wages 191,426 26,806 Initial Investment (Gov. Fund) 3,814,278 607,837 Depriciation 260,024 24,512 Revenue Account 23,601,921 983,063 Maintenance, Repairs and Other Expenses 220,892 19,855 Capital Reserve 136,087 136,088 Foreign Loan 10,007,291 2,416,637 Administrative Expenses 1,876,542 208,495 Bank Loan (State Investment) 2,278,399 3,419,329 Salaries and Wages 392,206 59,117 Depriciation 55,013 11,895 Current Liabilities 5,164,412 690,661 Maintenance, Repairs and Other Expenses 431,697 51,222 Consumer's deposits 774,846 110,490 Interest Expenses 77,768 45,224 Other creditors 4,389,566 580,171 Commercial Tax 919,858 41,037 Total Liabilities 45,002,388 8,253,615 Total Expenses 22,120,713 812,892 Profit/Loss before Tax and State

Contribution (5,271,411) 47,397

Income Tax - 14,386 State Contribution 4,888,854 33,528 Source: MEPE Statistics April, 2002 Profit/Loss after State Contribution - -

A more autonomous MEPE with more financial freedom would contribute to the increase of net income. However, borrowing from the state controlled banking sector with interest rate lower than the inflation would simply damage the Myanmar economy. It is understandable, therefore, without fundamental reform of the economic structure including the before mentioned distortions, profits from a more autonomous MEPE as one of SEEs would turn out to be harmful for the Myanmar economy.

It is suggested to consider an autonomous MEPE in order to make more financial options available as part of restructuring of the Myanmar economy.

2.2.2 Alternative Tariff Level

In the long run, the impact of price distortion will be more critical, because the portion of liability and interest payment depends on the share of equity and they are



not inherent to the business of power supply. However, the fuel costs are inherent to power supply and are often the largest portion of operating cost; therefore, it is an indicator of minimum level of required tariff for sustainable operation.

In case of EGAT, Thailand, the cost of fuel is about US Cents2.2/kWh, or about 35% of the unit price--US Cents6/kWh. In case of MEPE, using the above income statement, the fuel cost is K0.59/kWh—about 12% of the unit price of K5.07/kWh. Assuming US$1.00=K1000, they are about US Cents0.059/kWh and US Cents0.5/kWh; in other words they are respectively only 2.7% and 9.5% of those of EGAT.

As such, the costs of fuels and unit power price in Myanmar are severely distorted. In fact, the unit price of electricity in Myanmar in 2003 is less than one tenth of other ASEAN neighbors. A flexible tariff system linked to major cost components is an essential requirement to an alternative tariff system for consideration. (see Appendix: International Comparison of Tariff, Residential Tariff Comparison, and Comparison with EGAT, Thailand)

2.2.3 Potential Increase in Foreign Investment: Clean Development Mechanism (CDM)

CDM is a mechanism to minimize the worldwide costs for the reduction of Green House Gases (GHG), which cause global warming, especially CO2 emission from fuel burning. In this idea, CO2 emission is considered as a cost; therefore, the reduction of the emission becomes a value, which will be determined in the worldwide market for trading them. Such worldwide market of GHG gas reduction with CDM under the UN backed multinational framework (United Nations Framework Convention on Climate Change: UNFCC)—called Kyoto-Protocol is waiting for realization.

The cost to reduce one unit of CO2 emission in developing country such as Myanmar is significantly lower than that in developed country. Once realized, Myanmar endowed with rich hydroelectric power resources and high potential for reduction of GHG gas will become more attractive for those who wants to reduce CO2 emission or who want to buy “the reduction of CO2 emission” at low cost.

The key is the unit cost of the reduction of CO2 emission—namely reduction of the use of fossil fuels like coal, oil, diesel oil, and gas. For Myanmar, the replacement of existing diesel power generation or old thermal power generation by hydroelectric power will be the most cost effective for the reduction of CO2 emission.

In other words, the mechanism is an incentive for foreign direct investment for a reduction of CO2 emission. The actual investment cost of hydroelectric power will not change. However, investors of developed countries can have additional return in the form of CO2 emission trading (or Certified Emission Reduction (CER)).



The real market of the CO2 emission reduction is yet to come, however, pilot project and demonstration program are now underway. For Myanmar, this mechanism means increased chances of finance from investors of developed countries in energy sector, if combined with institutional reform of the power sector and cost-based tariff system.

2.2.4 Characteristics of Income and Expenditure of Rural Electrification

1) Financial Characteristics of Rural Electrification

Rural electrification often suffers from large fluctuations in income and expenditure. Any technical problem or demand change in the area will widen the income and expenditure gap. Zi Chaung hydropower scheme of Kalaymyo Township is an example. Its recent fluctuations are shown in figure 2.2.1.

Following the commissioning of the Zi Chaung hydropower scheme in 1996, the power supply increased up to fiscal year 1999 reaching 1,920 kW at peak load (energy consumption of 4.47 GWh per annum). Since then, the level of supply has been dwindling because of technical problems at the Zi Chaung scheme.

Kalaymyo Township used diesel generators to supply 0.37 GWh (in year 2002). This is less than 10% of the total energy sales. Nevertheless, the cost of fuel is the primary component of the generation expenses. Including supply to independent generators serving nearby villages, the diesel consumption amounted to more than 61 thousand gallons. This accounts for nearly 60% of the total expenditure (2002).

The O&M problems of the diesel engines at Kalaymyo powerhouse are of primary concern. The low efficiencies of old machines, as is often found in Myanmar, are another factor that leads to increased fuel consumption and expenditure. The fuel efficiencies of the three engines (806 kVA, 608 kVA, and 320 kVA) are calculated to be around 0.1 gallon/kWh, whereas the best available efficiency is 0.077 gallon/kWh.

The balance of income and expenditure is controlled by the power tariff rate and diesel fuel price.



Source: MEPE Kalaymyo Township Office

Figure 2.2.1 MEPE Kalaymyo Township Income and Expenditure

In the case of Kalaymyo Township, a change in the demand structure is another reason for decreased revenue. A demand decrease in domestic supply and an increase to government institutions has been significant since the fiscal year 1999. As a result, because the tariff rate for government is lower than that for domestic, the total sales revenue has decreased.

These characteristics can be read in comparison with the MEPE national figures. Table 2.2.2 shows a comparison of MEPE Kalaymyo Township and MEPE national for the key components of the income and expenditure.

For Kalaymyo Tsp, both income and expenditure fluctuated and the gap between them is large compared to MEPE national as a whole. As a result, net loss as percentage tends to be large for Kalaymyo Tsp.

In expenditure, fuel is the primary part for Kalaymyo, whereas power purchase from private company has become the major part of the cost for MEPE as a whole in recent years (1999/00-2001/02).

The proportion of Wages and Salary, and O&M cost is comparably large for Kalaymyo Tsp.

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1998/1999 1999/2000 2000/2001

000 Kyats

Generation Expense Distribution Expense Administrative Expense Income

Tariff Increased: Income Increased

Income and Demand Peaked

Zi-Chaung Maintenance Problem: Increased Cost of Diesel Oil



Table 2.2.2 Income and Expenditure of MEPE Kalaymyo and MEPE Consolidated

MEPE Kalay Township Income & Expenditure (%) 1998-1999 1999-2000 2000-2001 Dec.01/Nov.02 Income 100.0 100.0 100.0 100.0 Tariff 95.8 93.6 91.9 96.6 Other income 2.1 3.2 4.1 3.4 Meter installation 0.4 0.4 0.8 - In house wiring 0.0 0.2 0.3 - Meter application form fee and others 1.6 2.6 3.0 - Expenditure 310.7 74.6 136.3 131.7 Generation Expense 292.3 69.5 117.1 108.3 Distribution Expense 8.1 2.5 10.4 - Administrative Expense 10.4 2.6 8.9 23.4 Net Income -210.7 25.4 -36.3 -31.7 * MEPE Consolidated Income & Expenditure (%) 1998-1999 1999-2000 2000-2001* 2001-2002** Income 100 100 100 100 Sales of Electricity 97 98 98 99 Others 3 2 2 1 Expenses 127 119 97 94 (Salaries & Wages) 4 1 4 4 Generation Expenses 97 101 82 81 Fuel Consumption 89 12 10 9 Purchase of Electricity 0 87 69 69 Maintenance, Repairs, and Other Expenses 3 1 1 1 Others 6 2 2 1 Transmission Expenses 4 1 1 1 Distribution Expenses 8 3 3 3 Administrative Expense 18 13 11 10 Net Income -27 -19 3 6 *Estimate *Before Estimate

Source: MEPE

2.2.5 Value of Renewable Energy (Hydro-Electric Power) and the Comparable Tariffs

1) Value of hydroelectric power

An example to show the value of hydroelectric power can be given using data gained at Kalaymyo Township.

The value of hydroelectric power depends on the prospective consumers and their existing source of power supply (if any):

Case 1: for a user of kerosene (or diesel oil) lamp or candle, the willingness to pay for electric lighting would exceed K300/kWh.

Case 2: for a user of private diesel generator (with diesel price of K2000/gallon in year 2002) the cost is K200/kWh with efficiency of 0.1 gallon/kWh. Therefore, the value of hydroelectric power in this case exceeds K200/kWh.

Case 3: for MEPE diesel generator (with the diesel price of K160/gallon in year 2002,) the cost is K16/kWh with efficiency of 0.1 gallon/kWh. Therefore, the value of hydroelectric power in this case exceeds K16/kWh.

Case 4: for current MEPE customers of Kalaymyo Tsp, with average tariff of about K3.2 /kWh, the value of hydroelectric power cannot exceed K3.2 /kWh.



Source: MEPE Kalaymyo Township Office

Figure 2.2.2 Value of Hydroelectric Power in Kalaymyo Township, 2002

2) Vicious circle

The above example shows that the value for electricity for current customer is almost 1/100 of non-electrified villagers—or real market value (the case of new electrification). In terms of cost, MEPE unit tariff is far below the unit fuel cost. This is the most critical issue as one of the fundamental structural problems as mentioned before. The problem is that the actual MEPE electricity tariff has been fixed since 1999, in spite of severe inflation, at a substantially lower value than the economic value of electricity. This creates a vicious circle:

Alternative Cases Assessed Value kyats/kWh Basis of ValueCase1: New Electrification 300 Willingness to Pay for LightingCase2: Replacing Private Diesel Generators 200 0.1gallon (2000kyats/10) for 1kWhCase3: Replacing MEPE Diesel Generators 16 0.1gallon (160kyats/10) for 1kWhCase4: Supply Increase In Current Customer 3.2 Average tariff

300

200

163.2

0

50

100

150

200

250

300

350

Case1: NewElectrif ication

Case2: ReplacingPrivate D.G.

Case3: Replacing MEPED.G.

Case4: CurrentCustomer

kyat

s/kW

h




Figure 2.2.3 Vicious Circle

Electric power price—already lower than the economic value—becomes progressively cheaper relative to other commodities because of inflation.

Because of the low revenue and increasing costs, investment by MEPE on new supply equipment becomes difficult.

Demand for MEPE electricity increases because the tariff has become cheaper than other energy sources like rice husks due to the effects of inflation.

With increasing demand, an easy option is to depend on the low initial cost diesel power generation because of the shortage of income.

However, this option requires diesel fuel, which although widely available, is the most expensive fuel in Myanmar.

The high operating cost from the use of diesel fuel further decreases MEPE’s net earnings.

Cannot Afford LargeCapital Investment

Small Initial Cost =Diesel Generator

Low Tariff: Less ThanMarginal Cost

V icious Circle

Increasing Cost

Inflation

Power Demand

Decreasing Earnings

Increasing Fuel Cost

Low TariffIncreases the Demand

IncreasingCost



3. Village RE schemes

3.1 Institutional and Organisational Aspects

Organisational aspects

Village RE schemes are defined as micro hydro schemes below 50kW or other similar scale renewable energy projects e.g. biogas, solar or wind-power. The basis behind the definition is that the scheme is both very small (i.e. village scale) and that it is being done on a self-help basis. Often this will also mean that the scheme will be self-funded. The need to support such an initiative was another reason for MEPE to establish a new RE Section within the Transmission and Distribution Department as described in Section 2.1 of this Manual.

The proposed RE Section has several functions to perform, including the project development tasks related to the Guidelines as described in Section 2.1. A key role is to act as the “champion” of the principle of RE using renewable energy for isolated schemes. In addition, and with particular respect to Village RE schemes using renewable energy, the main functions to be performed by the RE Section (supported by the MEPE Divisional Offices / Township Engineers) in the implementation and operational phases of the schemes are as follows

Advice on possible funding options

Advice on RE scheme design and construction

Advice on RE scheme O & M

Advice on relevant legislation including that related to the protection of the environment

Monitoring and evaluation of completed Village RE schemes and management of feedback

Capacity building / HRD / education and training of VECs

Maintaining a nation-wide database of RE schemes / renewable energy

Given the above a proposed organisational structure for the RE Section (whose scope of work should cover all relevant forms of renewable energy) was set out in Section 2.1.

The overall institutional structure for carrying out RE schemes of the two types being considered in this manual is shown in Figure. 3.1 overleaf. The details relevant to Village RE schemes are shown highlighted.

The main functions performed by the proposed 3 units of the RE Section in relation to Village RE schemes are shown in Table 3.1 overleaf together with the linkage to the various study deliverables.



The main functions performed by the proposed 3 units of the RE Section in relation to Village RE schemes are shown in Table 3.1 overleaf together with the linkage to the various study deliverables.




Figure 3.1 Institutional Structure for Sustainable RE – Village Schemes

SPDC

MOEP

MEPE

Admin Trans/Distr Planning Mat’ls Plan’g Finance Therm PS Hyd PS

Government RE

Schemes

Divisional / Township

Engineers

Scheme planningand implementation

by VEC

Monitoring

(1) By NCEA regarding environmental impact (2) By MEPE’s “New” RE Section regarding

Village RE

Schemes

Support to newRE Section

or VEC

during project planning,implementation

and O&M

National Policy

Scheme planningand implementation

by MEPE or outsource to private sector

O&M by

the VEC

O&M by MEPE or outsource to VEC or private

Liaison With

D/TPDC

DEP DHP

‘Champion’Strategic planning


Micro

HydroScheme Design and construction

Mini Large



Table 3.1 Main Functions of the RE Section (Village Schemes)

Unit in RE

Section Functions performed Relevant Study

deliverable 1 RE promotion

and programme management

Policy dissemination Information management Publicity management Overall RE Programme management Management and updating of the “study” database Updating of the Guidelines

Guidelines “Study database” Institutional and financial aspects manual

2 Design and construction management

Advice on carrying out detailed site investigations, project design and the preparation of contract documents Advice on construction supervision and project commissioning Distribution and updating of the Design Manual – micro hydro

Design manual - micro hydro Output from the monitoring of the Zi Chaung scheme

3 Advisory and support services

Advice on RE project funding / sourcing Organising capacity building / training of VECs Advice on project feasibility studies Advice to VECs on O & M of RE schemes using renewable energy Distribution of the O & M manual – small hydro (where appropriate) Monitoring and evaluation of Village RE schemes by sampling

Institutional and financial aspects manual Output from the monitoring of the Zi Chaung scheme “Study database” O & M manual – small hydro




Operational interfaces

In order to fulfil it’s role in relation to promoting and supporting Village RE schemes, the new RE Section will have to have effective operational interfaces with a number of internal and external bodies.

One of the key working interfaces will be with the Divisional and Township Engineer Offices of MEPE (which also come under the Transmission and Distribution Department). This is because these offices will have to provide many of the locally based services to support the VECs regarding implementing and operating / maintaining the Village RE schemes. Capacity building will be necessary to ensure that these MEPE offices can carry out these roles effectively.

The overall key interfaces needed are shown in Figure 3.2 and the related activities for each interface are shown in Table 3.2.


Figure 3.2 Key Operational Interfaces of RE Section ( Village Schemes)

MEPE Transmission and

Distribution Department

Proposed RE Section

NGOs

Cooperatives

TPDCs

Aid Agencies

VECs

Private Sector

MEPE Divisional

Offices



Table 3.2 Activities Linked to the Operational Interfaces

Operational interface

Key activities


Advice and support to the VEC during implementation and O & M

TPDCs Approval of the scheme NGOs Support to VEC during scheme implementation Aid Agencies One potential source of funding and technical assistance Private Sector

An option for RE scheme design and construction and a potential source of funding

Cooperatives Equipment supply and related training VEC

Scheme implementer and operator on behalf of the village community


Project monitoring and evaluation

Small isolated MEPE RE projects using renewable energy should be monitored and evaluated. For Village RE schemes this would be on a sample basis. The task should cover:

All activities from site investigation, design and procurement through to construction and commissioning in order to assess their quality and the efficiency of the RE scheme “as built”

O & M and scheme management by the VEC in order to assess the potential sustainability of the RE scheme

A feedback process should follow the monitoring and evaluation in order to update the Guidelines and Manual (to improve sustainability prospects).

The generic process for promoting and achieving sustainable RE using renewable energy sources was shown in Section 2.1 and highlighted the role of monitoring and evaluation.

Operating procedures of the RE Section

Successful implementation of Village RE schemes promoted and supported by the RE Section with the assistance of MEPE Divisional Offices / Township Engineers will necessitate a number of procedures being effectively carried out. Some of these will be the same as those related to Government RE schemes i.e. Policy dissemination, Information management, Publicity management and RE programme management. Examples for the remainder are included overleaf and relate to the functions listed earlier in Table 3.1. Most of these procedures are for advisory



services. In addition, the RE Section will provide a technical back up service covering all aspects of Village RE schemes using renewable energy.



Examples of preliminary procedures (Village RE Schemes)

11 Assist the capacity building of VECs 12 Advice on project funding options 13 Advice on initial project preparation / feasibility studies 14 Advice on site investigations, RE scheme design and preparation of

contract 15 Advice on construction supervision, community participation and

project commissioning 16 Advice on O & M arrangements



Procedure for MEPE RE Section (Village RE schemes) Name of procedure 11. Assist the capacity building of VECs

1 Description of task to be undertaken Once a village becomes committed to implementing an RE scheme using

renewable energy it is advantageous to establish a VEC as soon as possible so that it can represent the village throughout the whole project implementation process. After completion the VEC will do the O & M.

The village will therefore need support and guidance to establish the VEC and the VEC will need training in order to perform effectively and ensure project sustainability


Roles of different key players RE Section Assist the establishment of VEC or delegate task to

MEPE Divisional Office or an NGO. Support VEC, give technical back up and arrange training when required. Monitor and evaluate VEC performance

Divisional Offices / Township Engineers

Perform support roles delegated by RE Section. Give technical advice and support O & M by VEC.

VECs Overall responsibility for RE scheme implementation and O & M on behalf of village Organise community participation if appropriate

Private sector Main option for scheme design and construction Cooperatives Another option for scheme design and construction

3

NGOs Assistance with setting up VEC and guidance through implementation

4 Output definition i.e. expected outcome of the procedure A properly set up and effectively operating VEC that can ensure small isolated Village RE schemes using renewable energy are properly implemented, operated and maintained and are sustainable.

5 Relevant study deliverables that support the procedure Institutional Manual.

6 Monitoring and evaluation requirements RE Section to monitor and evaluate VEC performance (sample basis)

O&M




Township Engineers

RE scheme planning, design and construction Private

sector

VECs

NGOs Support &

monitor

Support



Procedure for MEPE RE Section (Village RE schemes) Name of procedure 12. Advice on project funding options

1 Description of task to be undertaken Once a village becomes committed to implementing an RE scheme using

renewable energy it is necessary to identify the most appropriate form of funding.

The village will therefore need support and guidance to understand the options available and select the most suitable to meet its needs


Roles of different key players RE Section Assistance to VECs in their selection of the most

appropriate form of funding and in setting up the arrangements Monitor the arrangement once in place

VECs Overall responsibility for RE scheme implementation and dealing with the funding arrangements on behalf of village

Private sector Main option for scheme design and construction and therefore the potential source of supplier credit

Cooperative Farmers Bank

The only potential source of a bank loan but VEC would have to become a cooperative

3

NGOs Provide assistance in the process of supporting VECs in their selection of the most appropriate form of funding and in setting up the necessary arrangements

4 Output definition i.e. expected outcome of the procedure A properly set up and transparent funding arrangement that will ensure project can be completed as planned.

5 Relevant study deliverables that support the procedure Institutional and financial aspects of Manual.

6 Monitoring and evaluation requirements RE Section to monitor performance of funding arrangement (sample basis)




Township Engineers

RE scheme planning,

design and construction

VECs

NGOs

Funding optionsSelf - fund Supplier credit Grant Coop bank loan

Advice / guidance



Procedure for MEPE RE Section (Village RE schemes)

Name of procedure 13. Advice on initial project preparation and feasibility studies

1 Description of task to be undertaken A feasibility study should be prepared for each Village RE scheme using

renewable energy including evaluating appropriate options The village would need to seek private sector or NGO assistance for this

task Advice could be given by the RE Section and / or the MEPE Divisional Offices / Township Engineers and useful information / supporting data may be available on the study database


Roles of different key players RE Section Advice and guidance as necessary / requested

Providing relevant information from the database Divisional Offices / Township Engineers

Advice and guidance as necessary / requested

VEC Participating as much as possible in order to get best understanding of the issues involved

3

Private sector or NGO

Carrying out the outsourced feasibility studies

4 Output definition i.e. expected outcome of the procedure An adequate assessment of the feasibility of the RE scheme proposed that clearly demonstrates the technical feasibility and financial viability and considers any relevant environmental / social aspects.



Private Sector




Township Engineers

Scheme planning / Feasibility

study

VEC

Study Database

NGO

Advice/guidance



Procedure for MEPE RE Section (Village RE schemes)

Name of procedure 14. Advice on site investigations / RE scheme design and preparation of contract

1 Description of task to be undertaken There is a need to (1) carry out an adequate site survey and geotechnical

investigation to show that it is technically feasible to construct the proposed RE scheme (2) prepare design calculations and drawings of the proposed scheme to a level of detail that is adequate to enable the works to be constructed

Both the above tasks would most likely be carried out by the private sector and a suitable contract will need to be drawn up to cover these services and the subsequent construction of the RE scheme

Advice could be given by the RE Section and / or the MEPE Divisional Offices / Township Engineers and useful information / supporting data may be available on the study database

2 Diagram of process showing key players Roles of different key players RE Section Advice and guidance as necessary / requested

Issuing and updating design manual –micro hydroDivisional Offices / Township Engineers


Private sector or cooperative

Main option for site investigation and for design for all technologies

3

VEC Participating as much as possible in order to get best understanding of the issues involved

4 Output definition i.e. expected outcome of the procedure A competent and buildable project design

5 Relevant study deliverables that support the procedure Design manual – micro hydro

6 Monitoring and evaluation / feedback requirements Any improvements to the design process or new technology data is to be fed back to the RE Section to update manuals and the database.

Main option is to outsource to Private

Sector


MEPE



Township Engineers

Scheme planning

Detailed site investigation and

scheme design

VEC

Study Database

Advice/guidance Advice/guidance



Procedure for MEPE RE Section (Village RE schemes) Name of procedure

15. Advice on construction supervision, community participation and commissioning of the project

1 Description of task to be undertaken The VEC need support to properly supervise the actual construction of

the RE scheme There is a need to oversee all necessary tests to ensure that the works

conform to all quality and performance requirements and to carry out the final witnessing and approval of the commissioning of the scheme to ensure its proper operation

It is important for the persons who will finally do the O & M to participate in the commissioning and receive all manuals on the works


Roles of different key players RE Section Advice and guidance as necessary / requested

Monitoring and evaluation Divisional Offices / Township Engineers


VEC Arranging the maximum community participation in the construction in order to reduce capital cost

3

Private Sector or cooperative

Options for scheme construction

4 Output definition i.e. expected outcome of the procedure A properly finished project that conforms to the design and quality expectations, completed on time and to budget and meeting the objectives in the feasibility study.

5 Relevant study deliverables that support the procedure None.

6 Monitoring and evaluation requirements Any lessons learned in the construction process that can lead to design improvements are to be fed back to the RE Section to update manuals.


MEPE



Township Engineers

Scheme planning and design

Community participation

Construction

VEC

Main options for construction are Private

Sector or cooperative

Advice/guidance

Supervision



Procedure for MEPE RE Section (Village RE schemes) Name of procedure 16. Advice on the O & M arrangements

1 Description of task to be undertaken Supporting the O & M of small isolated Village RE schemes which will

normally be done by VECs Provision of technical back up to this function whenever necessary and,

if appropriate, issuing a copy of “O & M Manual – small hydro” Monitoring and evaluating the O & M of Village RE schemes in the

interests of sustainability to ensure that it is carried out in the most effective and efficient manner


Roles of different key players RE Section Advice and technical back up when required

Arranging training of VEC in O & M when neededIssue and updating of the O & M Manual Monitoring and evaluation

Divisional Offices/ Township Engineers

Advice and guidance to VECs when requested

3

VECs The normal option to undertake the O & M 4 Output definition i.e. expected outcome of the procedure

Small isolated Village RE schemes using renewable energy are properly operated and maintained and are sustainable.

5 Relevant study deliverables that support the procedure O & M Manual – small hydro. Study database.

6 Monitoring and evaluation requirements RE Section to monitor and evaluate Village RE schemes on a sample basis and incorporate any relevant feedback in an update of the O & M Manual – small hydro.

O&M




Township Engineers

Scheme implementation

VECs

Monitoring and giving advice /

guidance



3.2 Village RE Schemes

3.2.1 Financial Aspects of Village RE Schemes

The Governmental Departments, which potentially can supply finance for Village Hydro, are Ministry of Cooperatives, Ministry of Finance, and Ministry of Agriculture and Irrigation. From financial point of view, they controls cooperative societies, private banks and Myanmar Agricultural Development Bank respectively. For border area, Ministry of Progress of Border Areas & National Races & Development Affairs is involved in financial supporting of MEPE for RE. When looked at from the point of view of villages seeking funding for RE schemes, principally, there are six financial sources in Myanmar.

Self funding

Suppliers’ credit—financial help from supplier/contractor

Loan from cooperative; can get loan from Cooperative Farmer’s Bank

Donation from domestic and international donor

Commercial banks

Myanmar Agriculture Development Bank

The institutions of potential financial sources for RE are Myanmar Agriculture Development Bank and Corporative Farmers’ Bank. Another potential legal source is Cooperative Credit Societies, which are limited to cooperative society’s members.

In practice, the village’s own fund is the only viable option for most villages.




Figure 3.2.1 Options of Finance for Rural Electrification

6. MADB(Farmers who have collateral)

5. Commercial Banks(Urban, need collaterals

from establishedorganization or

individual)

Cooperative Societies17,000

Credit Societies-1704

Village Tract Cooperative Society10,000

Electrification (as of Dec. 2002)- by Diesel 78

- by Hydro 18; 1.5kW-40kW

Banks for Cooperatives - 3- Cooperative Bank

Short term only- Cooperative Promoters' Bank

Short/Mid term; 1-3y

Ministry ofCooperatives

MADB(for individual farmers only)

Seasonal Loan- Upto 25,000Kyats for crop harvest- Interest rate 15% (1% Area Development Loan for border area)- Term one year

Term Loan- Up to 5 times of deposit- Interest rate 15% (1% Area Development Loan for border area)- Term up to 5 to 12 years

Private Banks-20

Ministry ofFinance and

Revenue

Ministry ofAgriculture and

Irrigation

Central Bank ofMyanmar

Supplier / Constructor

International / Domestic

Donar

4. Donation

Village / VEC

1. Self Funding

2. Suppliers' Credit(Advance payment for construction)

Lending 15%Deposit 10%

Lending 11%: Substantially Lower than Inflation--in effect is a subsidy

Establishment of Cooperative Society(Cooperative Society Law)

- The Business is for collective benefit- Minimum 5 members

- Register to Township Cooperative office>> Get the power to hold property, to make contract, to get support from gov. etc.

Non Cooperatives Banks - 17

- Cooperative Farmers' Bank(not limited to crops)

Long term: 3-5yLoan from Cooperatives'Banks

- For cooperatives, not individual- For projects- Max 20-30mil ks, Min 1-2mil ks- Collateral: Landlease, Capital equipments, etc.- Require approval of township/district cooperative offices

VillageElectrifcation

Fund

3. Loan from Cooperatives(VEC under Cooperative)

The Only AvailableSource for Majority

ConditionallyAvailableInstitutionalSource

ConditionallyAvailableInstitutionalSource

IndividualMembers

Only



3.2.2 Process to start Village Hydro Scheme

Basically there are four steps:

1st step: Villages to confirm the willingness for electrification.

2nd step: Ask independent hydropower expert for power potential, scheme, feasibility and cost.

3rd step: Negotiation with expert and contractor for design and financial plan.

4th step: Fund raising and start construction.


Figure 3.2.2 Basic Process to Initiate Micro-Hydro Rural Electrification in Myanmar

1st StepWillingness of Electrification

Observation of Electrified Village

2nd StepAsk Hydro Power Experts

for Power Potential and Cost

at least- 30 to 40 households

- $100/household

3 rd StepNegotiation with Constructor and

Financial Feasibility/Plan

4 th StepFund Raising and Construction

Start

Financial Feasibility becomes better as- participating households increses

- labor contribution ioncreases

Find a River Nearbywithin 1 km of Village

Formation of VillageElectrification

Committee

RuralElectrification

Needs

ElectrifiedVillage

MEPE /Experts

Cooperatives

Experiences TechnicalInformation

Financial/ManagementalInformation

Finacial / OrganizationalAspects Technical Aspects

Power Potential Increases as- River Water Volume Increases

- Water head (differences of water levels) Increases

Construction Cost Increases as- Distance to River Increases

- Access to River becomes Difficult- Increase the Water head by construction



3.2.3 Review of possible Options and Problems

1) Review of possible options

There are various options for different components of RE schemes. Table 3.2.1 lists these options and shows their advantages and disadvantages.

Table 3.2.1 Review of Possible Options Components Options Advantage Disadvantage

Village Fund Most convenient Fund is limited

Supplier Credit More feasible and reliable - Needs mutual trust - Credible Suppliers/Experts are limited

Cooperative (establish and register VEC as a cooperative)

Can apply cooperative farmers bank

Extra work for administrative requirements: approval of township and divisional cooperative officers

Financial Source

Donation No financial burden - Cases are rare and limited - Cause unfairness among neighbors - Cause continued dependency and demand for donation

VEC Natural and typical Accountability is not legally binding

Cooperative Legal status Involves legal process

Ownership

Private Clear and simple Legality of sales of power to others is ambiguous

Metering Fair in terms of energy use Extra cost of meters

Monthly flat Most Simple Needs to limit the number and types of equipment (light bulb and TV's) to be fair

Tariffs and billing

Equipment flat: based on kW requirements of equipment

Simple Equipment needs to be inspected to prevent misuse and cheating

Tariff collector Tariff collector can check each household for the electricity usage

Extra costs for tariff collector Tariff collection

No collector No cost Misuse may be unchecked

Hired Daytime operation Extra cost for operator Operator

Volunteer No Cost Daytime operation difficult

Contribution in construction Save the total cash requirement & can learn technical matters

Needs leadership & coordination of VECVillage Labor

No contribution Can save time Cannot save capital cost requirements

- Rainy Season: Prepare - Dry Season: Construction

Construction and payment can be more comfortable with seasonal differences

Schedule have to be adjusted to the seasonal cycle

Construction Period

No specific time frame More financial freedom for payments

Construction is difficult in rainy season


2) Dealing with potential problems

There are potential problems in village scheme. Next table summarized such problems and the mitigation measures.



Table 3.2.2 Problem and Mitigation Measures of Village Hydro Problem Mitigation measures Funding Financial sources are very limited

(mostly own fund only) - Use low cost, locally available materials and technology - Use own labor to reduce cash payments - Efficient use of village fund by learning from successful experiences of other villages — e.g. risk share with local expert/supplier - Use cooperatives

Suspicion between villagers and suppliers - Suspicion to scheme completion by

villagers - Suspicion to villagers willingness by supplier

- Third party guarantee (MEPE advice for technical feasibility) - Risk sharing: villagers buy equipment like wires and light bulbs before construction, which is useless without electricity, to show their will and firm commitment

Inflation Value of village RE fund decreases with

time due to inflation - Aim for an early completion - Use funds to buy materials as soon as possible.

Daytime use of electricity - Unstable if used with large power

consuming appliances like electric motor - Require full-time operator

- Do not permit the use of electric motor - Limit the use of refrigerator and other power consuming appliances for public needs like medical center and school.


3.2.4 Sustainability and the Role of MEPE

1) Sustainability

Sustainability is one of the key factors for successful village RE. Sustainability depends on villagers’ self-effort or their willingness for operation and maintenance. From financial point of view, the willingness of the villagers is reflected on their monetary contribution. From this point, the options of financial sources are critical. As most likely options, village fund, supplier credit, cooperatives, and donation are listed. Among these options the monetary contribution from village becomes the smallest for the case of donation. Donation, especially foreign grant, which tends to be larger than the domestic one, is a wonderful gift for the recipients. However, to be cautious here is the sustainability. Because donation tends to create dependency mind and it prevents villagers’ effort of self-help. Operation and maintenance is not for free—it is a matter of recipients’ willingness and self-effort. Foreign donors as well as MEPE advisors should take this point into their consideration and advices.

2) RE Fund: Fund for investment, not consumption

Such donation would make RE more sustainable if it can contribute to sustainable RE fund. Namely, donation would be more effective if it is not just consumed, but can reproduce fund for investment. For example, the power supply from donation can be paid with tariff, which reflects the current payments for kerosene, diesel and/or candle spending—or around one to two thousand Kyats per month per household



(US$1-2/month/household). The sales income shall be pooled in the RE fund to be managed by the recipients or third party Non-Governmental Organization for future investment.

3) The role of third party (MEPE) advice

One of the big obstacles of village RE is the worry in both villagers and local supplier (contractor). That is, although villagers want electric power, they are not so sure about outsider expert opinion. Especially their anxieties to the feasibility and suspicions to the cost estimate of outsider are understandable. On the other hand, local contractor worries the ability and the willingness of the villagers to pay for the power plant once constructed. Because there is no competitive market for village power supply, the price and the quality of Village Hydro are a matter of mutual trust between the villagers and the contractors. In this regard, any guarantee of feasibility and reasonability of costs in the form of advice from such neutral party like MEPE as expert for electrification will greatly promote the village electrification by enhancing mutual trust between them.

3.2.5 Example of Self-Funding with the help of Supplier Credit (Thaleoo Village)

This Village Hydro scheme was implemented over three seasons as typical in Shan states during one year as follows:

Winter (Cool) Season: November-February

Initiate Village Electrification Committee.

Request for site survey by a local independent expert to assess the feasibility and cost of the scheme.

In response, the expert presents the feasibility and associated costs.

Negotiation between VEC and expert and local contractor/ supplier.

Village gives first disbursement after getting income from the sale of the winter crops.

Prepare equipment with the provided cash and make preparatory works.

Summer (Hot) Season: March-May

Local supplier/contractor completes the major construction works within the dry season of summer.

The VEC makes second disbursement after the sale of the summer crops.

Rainy Season: June-October

Local supplier/contractor completes the work, starts the power supply, and transfers the plant



The VEC makes the third disbursement after the sale of the rainy seasons’ crops.


Figure 3.2.3 Self Funding with Local Supplier's Credit

Local

Contr

acto

r/Supplie

r

Framework1. 100-150 W/household

2. Locally Avilable Technology, Materials, & Labor3. Fund Limited to about US$100 plus Labor Contribution per Household

OrganizeVillage

ElectrificationCommittee

(VEC)

Request of Site Survey by VEC

Initial Fund (1/3) from VECJoint Preparatory Works

Pay Back (1/3)

Pay Back (1/3)

Win

ter

Nov

.-Feb

.Su

mm

er M

ar.-M

ay.

Rai

nny

Jun.

-Oct

.Scale and Cost

No. of Households Generation Capacity (kW) Cost (Kyats, Year 2002 equivalent)30-40 5 3 mil (cash) + 2 mil (equivalent labor)70-100 10 4 mil (cash) + 3 mil (equivalent labor)100-200 20-30 8 mil (cash) + 4 mil (equivalent labor)

Case: Thaleoo Village, Nyaung Shwe Township, Southern Shan State- Construction start January 2001 --Power supply start September 2001

- Generating Capacity 20kW- Actual Load: Households 81, Street light, and Schools, Total Lamp Used 240 x 20w=4.8kW

- Finance: Total 5 million kyats (year 2001) or about US$10,000 - Initial Contribution 2.5 million kyats from Villagers--used for civil works and some materials

- Rest 2.5 million kyats from out of pocket of the Supplier to complete the plant- Villagers paid back to the supplier by seasonal installment

Negotiation & Contract

Out of PocketDisbursement

Out of PocketDisbursement

MajorConstruction

STEP 1

STEP 2

STEP 3

STEP 4

STEP 5

Complete &Transfer Plant

Site Survey by Expert& Specification

VEC

/ V

illag

ers

Documents

FINAL REPORT · 2004. 5. 11. · IN RURAL AREAS IN MYANMAR FINAL REPORT Volume 4 Main Report ... 2.2.3 Potential Increase in Foreign Investment: Clean Development Mechanism (CDM)