Green Energy Service Centres for Communities in Rural Mali...2. Development, installation and management of community owned R.E Service Centres Main activities include: Mini-grids

Green Energy Service Centres for Communities in Rural Mali

Mali | West African Development Bank (BOAD)

15 September 2017

Project/Programme Title: Green Energy Service Centres for Communities in Rural Mali

Country/Region: _ Mali, West Africa_______________________

Accredited Entity: BOAD

National Designated Authority: Agence de l’Environnement et du Développement Durable (AEDD)

PROJECT / PROGRAMME CONCEPT NOTE GREEN CLIMATE FUND | PAGE 1 OF 5

Please submit the completed form to [email protected]

A. Project / Programme Information

A.1. Project / programme title Green Energy Service Centres for Communities in Rural Mali

A.2. Project or programme Project

A.3. Country (ies) / region Mali, West Africa

A.4. National designated authority(ies)

Mr. Boureima CAMARA

Address: 2357, Bamako, Mali

Tel.: +223 20 23 10 74

Fax: +223 20 23 58 67

Email: [email protected]

A.5. Accredited entity West African Development Bank (BOAD)

A.6. Executing entity / beneficiary

Executing Entity: AER et AMADER

Beneficiary: Rural Communities in up to 300 localities in Mali.

A.7. Access modality Direct ☒ International ☐

A.8. Project size category (total investment, million USD)

Micro (≤10) ☐ Small (10<x≤50) ☐ Medium (50<x≤250) ☒ Large (>250) ☐

A.9. Mitigation / adaptation focus

Mitigation ☒ Adaptation ☐ Cross-cutting ☒

A.10. Public or private public

A.11. Results areas

(mark all that apply)

Which of the following targeted results areas does the proposed project/programme address?

Reduced emissions from:

☒ Energy access and power generation

(E.g. on-grid, micro-grid or off-grid solar, wind, geothermal, etc.)

☐ Low emission transport

(E.g. high-speed rail, rapid bus system, etc.)

☐ Buildings, cities, industries and appliances

(E.g. new and retrofitted energy-efficient buildings, energy-efficient equipment for companies and supply chain management, etc.)

☐ Forestry and land use

(E.g. forest conservation and management, agroforestry, agricultural irrigation, water treatment and management, etc.)

Increased resilience of:

☒ Most vulnerable people and communities

(E.g. mitigation of operational risk associated with climate change – diversification of supply sources and supply chain management, relocation of manufacturing facilities and warehouses, etc.)

☒ Health and well-being, and food and water security

(E.g. climate-resilient crops, efficient irrigation systems, etc.)

☐ Infrastructure and built environment

(E.g. sea walls, resilient road networks, etc.)

☐ Ecosystems and ecosystem services

(E.g. ecosystem conservation and management, ecotourism, etc.)

A.12. Project / programme life span

……4……… years

1 Please use the following naming convention for the file name: “[CN]-[BOAD]-[20170913]-[002]” (e.g. CN-

ABC-20150101-1).

mailto:[email protected]


A.13. Estimated implementation start and end date

Start: …2018……………………...

End: ……2021…………………….

B. Project/Programme Details

The Fund requires the following preliminary information in order to promptly assess the eligibility of project/programme investment. These requirements may vary depending on the nature of the project/programme.

B.1. Project / programme description (including objectives)

The objectives include increased energy use for economic activities, increased access to energy-dependent services and, in effect, permanently reduce the carbon intensity of Mali’s rural electrification. It’s in line with Mali’s ambitions for 31% reduction of greenhouse gas (GHG) emission in energy sector under the Nationally Determined Contributions (NDCs).

Source: REA, April 2017

It aims at creating energy-sufficiency in up to 100 rural off-grid communities from renewable energy sources, including solar and wind within the 05 regions in Mali.

Region

Number of proposed locations

kayes 11

koulikoro 17

Sikasso 20

Ségou 28

Mopti 24

Total 100

The communities in Mali are organised into villages complete with social service centres (clinics, worship areas and learning centres). This concentrated human settlements increases energy demand in the area. Therefore, most of these off-grid communities are suitable for mini-grids owing to the critical mass of paying consumers required to operate national grid. Thus, within each community, autonomous power systems will be developed with associated relevant energy services. The associated services will include water pumping, cold storage, solar drying, etc. At the core of each “Renewable Energy Service Centres (RESC)” is a mini-grid powered with solar or solar-wind hybrid with battery bank (energy storage) sized optimally.

During studies to select sites, the beneficiary communities will be closely engaged to determine the most appropriate interventions and the system’s sizing. In general, they will be mini-power plants with an average installed capacity of 50 kWc to 100 kWc. The innovation proposed in the project consists of the realization of purely solar power stations, with the mutualisation of several localities

It is also based upon the country's National Energy Policy and the National Renewable Energy Development Strategy, which aims to increase the rural electrification rate to 55% by 2020 and the contribution of renewable energies from 1% to 10% in the national energy balance by 2033.

Figure 1: Administrative Map of Mali


(located between them within a radius of about 20 kilometers) by medium voltage (MT) and low voltage (LV) power systems without generating sets. The project is planned to create lasting transformation in communities’ lives by promoting value addition to current economic activities. Thus, each mini-grid establishment will begin with creation of an “ownership and management unit” constituted by the community members and other stakeholders including the private sector actors. These units will ensure the energy service centres are run professionally and profitably. Each community will set up a kitty that ensures maintenance, technology integrity and sustainability.

The project’s specific objectives are : (i) building capacity of existing or new national and local institutions to support the development of renewable energies ; (Ii) promoting sustainable investments for off-grid electrification of 100 rural communities through new forms of public-private partnership ; (Iii) supporting beneficiary communities in improving access to energy services and the discovering new economic opportunities with proven social and environmental benefits ; and (iv) learning lessons from the approach to be implemented and mobilizing resources for its scaling up in the country and within the West African subregion.

The project has 4 components : - Component 1: Institutional Support and sectoral capacity Building - Component 2: Development, installation and management of community owned R.E Service Centres - Component 3: Supporting beneficiary communities - Component 4: Project management/Monitoring, Evaluation & Learning and knowledge development

1. Institutional Support and sectoral capacity Building

Main activities under this component are:

Develop human capital- renewable energy skill sets, certification programmes

Strengthen the technical, financial and managerial capacities of private operators through continuing education programs and integration into the Malian school curriculum, training courses dedicated to the ER trades,

Build the capacity of the Renewable Energy Agency (REA) to fully and properly execute its mandate, as well as AMADER to increase ability to accelerate rural energy investment

Develop and adopt Standards- for PV technology, skill standards

2. Development, installation and management of community owned R.E Service Centres Main activities include:

Mini-grids powered by solar, wind or both

Install demonstration systems for energy service business in each site

Associated renewable energy technologies supporting economic activities

3. Supporting beneficiary communities

Develop business models for energy-powered services (irrigation, cold storage, battery charging)

4. Project management/Monitoring, Evaluation & Learning and knowledge development. This will be designed and run in such a way as to:

ensure transformative and permanent changes

Document the best practices

Leverage other resources

Share and adopt best practices


B.2. Background information on project/programme sponsor

Describe project/programme sponsor’s operating experience in the host country or other developing countries.

Off-grid electrification strategies are at the centre of the Government strategy for universal access to modern energy and energy services.

The project sponsor is the Government of Mali through the Malian agency for Development of Household Energy and Rural Electrification (AMADER) and Renewable Energies Agency (REA).

AMADER

The Malian Agency for the Development of Domestic Energy and Rural Electrification (AMADER) is a Public Administrative Institution (EPA), created in 2003 by Law N ° 03-006 / of May 21, 2003, to following the reform of the electrification sector in 2000 to implement the rural electrification policy aimed at the economic development of rural areas through access to modern energy services and the promotion of public / private partnership by entrusting the management of electrical infrastructures to private operators. It plays an essential role, as the body responsible for: (i) promoting electrification in rural and peri-urban areas; (ii) cooperate with all types of operators (national or international private operators, NGOs, decentralized groups, cooperatives, etc.); (iii) provide technical and financial assistance, and (iv) play the role of regulator in rural areas. AMADER is responsible for analysing and selecting the operators' business plans, participating in the financing of investments under the Rural Electrification Fund (FER) and supervising the operators. Missions of AMADER are:

• Development of Domestic Energy: implementation of Mali's domestic energy policy; • The development of rural electrification: implementation of the rural electrification policy in Mali; • Promotion of the Public / Private Partnership (PPP).

Public / Private Partnership in Rural Electrification:

Rural electrification activities are carried out within the framework of the Public / Private Partnership. This is a small public utility concession (not exceeding 250 kW of installed capacity), called Authorization. Rural Electrification Dealers are private operators called Perimeters.

Role of parties:

AMADER:

• Delegated Contracting Authority (by the State);

• Planning rural electrification;

• Finance research ;

• Implementation of rural electrification projects: provision of private electric power for the public service through an Authorization Agreement and a Terms of Reference for a renewable period of 15 years;

• Operations follow-up: AMADER ensures the monitoring and control of the equipment and the management of the exploitation through the operating reports and financial statements produced obligatorily by the Perimeters;

• Regulation of the rural electrification sub-sector.

CONCESSIONAIRES:

• Participation in Investments;

• Operation of the works: The concessionaires are responsible for ensuring the continuity of the public electricity service in accordance with the specifications for the period of the Authorization;

• Maintenance and Renewal of facilities.

operating experience

From 2006 to 2016, the activities carried out by AMADER in the field of rural electrification made it possible to achieve the following results:

255 electrified localities throughout the country;

Public Private Partnership (PPP) with 63 operators (Permitters);

Improvement of the Rural Electrification Rate: from less than 1% in 2003 to about 19% in 2016;

More than 700 jobs created;


33 solar PVV / diesel hybrid plants with a total installed capacity of 1.5 MWp ranging from 10KWc to 230 KWp depending on the size of the projects;

More than 1100 km of Low Voltage (LV) line;

More than 150 km of Medium Tension line realized;

More than 4000 domestic and community PV systems installed.

Currently, six rural electrification projects are being implemented at AMADER, namely:

1. Project Hybrid Systems of Rural Electrification (SHER):

The project involves the construction of 50 solar / diesel hybrid plants in already electrified localities on the basis of purely diesel thermal production and further extending the distribution network in these localities to make additional connections. The project also includes installation of individual solar kits, diffusion of solar lanterns and energy-saving equipment.

The project also focuses on the development of off-grid lighting and the distribution of portable solar lanterns and pico-PV materials certified "Lighting Africa" in rural areas. It will also contribute to the improvement of energy efficiency and promote the rational and efficient use of electricity in mini-grids

Financing:

PTF (World Bank): US $ 44.9 million, including:

- IDA: US $ 25 million

- SREP: US $ 14.9 million

- GPOBA: US $ 5 million

GdM (State Counterparty): 4.45 billion FCFA (7,417 million US dollars, rate: 600)

concessionaires: 865 million FCFA (1.44 million US dollars, rate: 600)

Total: US $ 53.757 million

Project duration: 6 years

2. The Hybrid Production and Rural Access to Energy (PHARE) project:

Like the SHER (Hybrid Systems of Rural Electrification), this project consists of 60 solar / diesel hybrid plants in localities already electrified on the basis of a purely diesel thermal production, and to further extend the distribution network in these localities to make additional connections.

Financing:

PTF: AFD: 38 million Euros

GdM (Counterparty): 1 million Euros (655.95 million FCFA)

Permit holders: 2 million Euros (1,312 million FCFA

Total: 41 million Euros


3. The Rural Electrification by Hybrid Systems Project (PERSHY32):

The project aims at the electrification by hybrid systems of 32 localities in rural areas of which 10 localities already electrified will be strengthened at the level of production.

Financing:

TFP: - Abu Dhabi Development Fund (ADFD): US $ 9 million

- BADEA: US $ 10 million

GdM (Counterparty): US $ 2.15 million

Permit holders: US $ 0.359 million


Total: US $ 21,509 million


4. The Rural Development Project by Solar Rural Electrification in Mali:

The project aims at the electrification of 24 villages (Saloba communes: 13 localities and Sana: 11 localities) from two pure solar power stations (1 MWp and 1.2 MWp) with two storage benches in the circle of Macina (Inter-rivers area).

Financing:

TFP: IDB: US $ 15 million

ONEE: US $ 0.46 million

GdM (Counterparty): US $ 1.6 million

Permission holders: 0

Total: US $ 17.06 million


The public-private partnership will be based on the model contract type leasing to ensure the management of the operation.

5. The PRODER phase 2:

The project involves the construction of solar PV / diesel hybrid plants to replace multifunctional platforms (village women's mills) used for pre-electrification in 13 villages. The existing mini-networks (1.5km to 2km) will be rehabilitated and extended by one more km.

The project is financed by WAEMU and is managed by SABER, which has been designated by WAEMU for this purpose.

6. The electrification project of 14 localities.

The project consisted of electrification of solar / diesel hybrid systems in 14 localities in rural areas by six (06) operators (licensees) selected after the unsolicited application process for rural electrification.

Financing:

TFP: KfW: 2 billion FCFA

GdM (Counterparty): CFAF 531.2 million

Permission holders: 475.35 million FCFA

Total: 3 billion FCFA

The 14 hybrid power stations are built with the associated distribution networks. Operation is underway in the 14 localities. The project was closed in March 2017.

financial status

AMADER is a Public Institution with an administrative character, legal personality and financial autonomy. It receives funding from the Government budget according to the rural development plans in place. AMADER also administers/manages funds by donors and investors who have interest in especially rural electrification. This is demonstrated in the experiences with co-finance above. The existence of Government funding aligned to clear policies and strategies presents strong confidence in the agency as well increases the assurance that the projects carried out by the AMADER will not only be in line with the sustainable development aspirations but also cost-effective.


Describe financial status and how the project/programme sponsor will support the project/programme in terms of equity, management, operations, production and marketing.

how the project/programme sponsor will support the project

The Government of Mali will support the project through AMADER witch is mandated to invest in the rural areas for energy access as well as energy efficiency and REA, mandated to promote the use of RE in the country. The project will benefit from an exemption from taxes on imports of solar and wind equipment.

The rural electrification model of Mali through AMADER is regarded as a success in the subregion, notwithstanding the difficulties encountered. It is essentially a bottom-up model, in which decisions taken locally by private entrepreneurs or cooperatives; to realize and manage small mini-networks are taken. Financial support from the Rural Electrification Fund (ERF) is designed to ensure that rural customer rates are affordable and provide private operators with acceptable rates of return. Investment grants in mini rural networks were limited to 80% of the investment amount. In particular, subsidies were awarded based on the results obtained (based on the number of customers to be connected in the first two years, the average tariff and the cost of investment by connected off-grid customers). There are no subsidies for electricity consumption or operating expenses.

AMADER, on the basis of previous experiences, expects to experiment with the farming model for this project. The model will enable contracts to be drawn up in which the management of the operation of the public service will be entrusted to farmers who are freely chosen on the basis of the defined criteria, for a fixed period (generally shorter than that of a concession, of the absence of capital to be amortized).

Renewable Energy Agency (REA)

The REA was created in October 2014 in place of the National Center for Solar Energy and Renewable Energies (CNESOLER). REA mission is to promote the widespread use of renewable energies in Mali.

Experience of REA

Project Title Close FINANCING

Accès à l’énergie par système de lampadaires solaires 2020 Budget

National

PENRAF (Promotion Energies Nouvelles et Renouvelables pour

l’Avancement des femmes) financement avec

2017 PNUD/

TICAD Japon

PASER-K (projet d’accès aux Energies Renouvelables dans le cercle

de Kita)

2017 UE, Plan

Espagne

PRET EnR (Projet Prêt Energie Renouvelable),

Continu

Banques de la

place

Production durable d’électricité en milieu rural par le biais des

technologies hybrides.

2020 GEF, FEM,

PNUD, BN

PDEnR (Programme de Développement des Energies Renouvelables)

2020

Budget

National

PEVES (Projet d’Electrification Villageoise par Système Solaire) Continu

Gouvernement

Inde / Budget

National

financial status

The EAR operates on budget allocation from the Government and on external financing from technical and financial partners. the EAR budget deficit for 2017 is as follows:

CURRENCY BUDGET FINANCING ALLOWED DEFICIT

BUDGET NATIONAL

technical and financial partners

(F. CFA) 7 577 000 000 2 480 000 000 500 000 000 4 597 000 000

USD 15 154 000 4 960 000 1 000 000 9 194 000


(1$=500FCFA)

management

Management of the assets installed in this project will be localised and run per site. This approach is being adopted after assessment of existing of similar projects in Mali and elsewhere. The management and ownership in this project will be localised with the beneficiary communities holding a leading stake and creating local management committees.

AMADER and REA will be instrumental in actualising this model of ownership and management. Developing the management capabilities of these community management committees will be carried out by the two agencies.

B.3. Market overview

Describe the market for the product(s) or services including the historical data and forecasts. Provide the key competitors with market shares and customer base (if applicable). Provide pricing structures, price controls, subsidies available and government involvement (if any). Mali is a landlocked country in the Sahelian belt, West Africa. It covers an area of 1.241.248 km

2, of

which 51% are desert lands and 4% arable lands. Such geographic situation, combined with the fact that Mali does not have any fossil fuel on its territory, forces the Government to import all the fossil fuel it needs and makes it highly dependent on prices volatility. Local energy service providers in rural areas that are operating isolated fossil fueled generators and mini-grids are in particular affected by rising and volatile fuel prices, considerable fuel transport costs inside Mali, and environmental pollution (GHG emissions, noise pollution) in the rural villages, especially where electrification rates are still very low. Fuel charges currently amount to up to 75-80% of operational expenditures for local energy service providers in rural areas. In view to enhance energy security, the Government of Mali is keen to reduce fossil fuel imports and embark on a low carbon emission development path for both grid and off-grid electrification schemes.

1. Electricity supply in rural areas In the rural areas, private local energy companies and local initiatives (communities, women associations), with support from AMADER, are the drivers of Mali’s rural energy access agenda. The Government of Mali established a rural electrification fund, Rural Energy Fund (REF)

2 in 2000,

and AMADER, as a specialized rural energy services agency, in 2003. About 54 000 off-grid connections in households and for public lighting have been made to provide electricity access to more than 750,000 beneficiaries in 2010. In addition about 825 public institutions, 181 schools and 146 health centers have also been provided off-grid electricity access. Mali’s rural energy access rate increased correspondingly from 1 % in 2000 to 15 % in 2010. Generation technologies introduced so far are essentially diesel generators and associated transmission and distribution systems, but there are also many SHS introduced and a few pilot hybrid solar/biofuel mini-grids piloted on a project by project basis. The total installed capacity in off grid areas is around 10 MW, with less than 10% accounting for renewable energy uses. Historically, there have been many initiatives: home solar power kits, WREP

3, mini-grids

4, MFPs

5,

etc. despite which the rate of modern energy access remains alarmingly low.

2. Electricity demand growth in rural areas

2 Mali’s rural electrification fund was created in 2000 through the application degree 00-019/P-RM. The fund provides financial support,

amongst others, for (i) feasibility studies of rural electrification projects; (ii) subsidies to the upfront investment costs of rural electrification projects; (iii) provide guarantees for rural electrification schemes; and (vi) promotes the country’s rural electrification agenda through pilot projects, communication and awareness raising campaigns. 3 WREP: The WREP installed 113 solar lighting systems for health centres and literacy centres, 74 solar water heaters in health centres,

27 solar driers for the conservation of perishable fruits and vegetables, 2 wind water pumping systems for small-scale irrigation, and 16 MFPs running on jatropha oil to relieve women of their arduous workloads. These technologies were installed in 130 villages of the regions of Koulikoro, Ségou and Sikasso. The WREP also provided various literacy training to more than 3 500 women, and maintenance training to 60 local technicians 4 Mini-grid market has been developing; an examplehttps://www.ruralelec.org/news-from-are/inauguration-eight-hybrid-mini-grids-mali

5 WBG Mali Rural Electrification Hybrid System Project: http://projects.worldbank.org/P131084?lang=en

https://www.ruralelec.org/news-from-are/inauguration-eight-hybrid-mini-grids-mali

http://projects.worldbank.org/P131084?lang=en


The access rate in rural areas was only 14.89% compared to 55.27%in urban areas in 2010 , thanks to commitment of local private energy sector companies and initiatives to a carry out the government’s rural energy access expansion program in public private partnership with AMADER. According to the quantified objectives of the National Energy Policy, rural electrification rate is expected to increase to 55% in 2020. In this context, the Government of Mali has set objectives to achieve better electrification rates nationwide. It is currently updating the energy policy, including a new target for rural electrification of 61% by 2033. The share of non-hydro RE in the electricity production of Mali is 0.1%; leaving massive growth potential.

3. Resource potentials of Renewable Energies Renewable energy has a significant potential to play an important role in addressing many of the sector challenges as well as to contribute to socio-economic development and poverty reduction. However, at present, it represents only 3% of electricity generation (excluding hydro generation above 10 MW), its development remains slow, and it is expected to reach only 10% of the generation-mix by 2020 (National Policy target), in spite of considerable solar, hydro and biomass potential throughout the country. Mali has a high potential for Renewable Energies, among which solar and wind.

- Solar Potential: Average solar radiation in Mali is well distributed over the national territory with an estimated 5-7 kWh/m2/day37 with a daily sun lighting duration of 7-10 hours. The global typical average is only around 4-5 kWh/m2/day.

Figure 2: Solar Radiation in Mali

- Wind Potential: A relatively significant wind energy potential is estimated, depending on the region of Mali. In the Sahelian and Saharan zones, the annual average wind speed is estimated at 3 to 7m/s.


Figure 3: Wind resource map of Mali

4. Overview of Renewable Energy projects and programs implemented to date

A considerable development and testing of small scale renewable energy applications took place over the past 15 years. These pilot schemes and various projects have yielded the following results:

- Solar: Various small scale solar thermal and PV applications have been tested and adopted to local conditions for various uses (lighting, pumping, refrigeration, cooking, drying in farming or fruit production, heating in health centres and in households, solar home systems for households and community institutions, etc.). However, only a few of them have sufficient scale and/or installed capacity to providing quality electricity supply to households and promote productive energy uses to a wider range of appliances relying on electricity supply.

- Wind: Wind power is mainly used for water pumping (generator systems are few and have low power output).

5. Key renewable energy actors in Mali.

5.1. Public institutions On the national institutions level, historically, the development of small scale renewable energy technologies and appliances in Mali started under the responsibility of the National Energy Directorate, with the support of the former National Centre for Solar and Renewable Energies (CNESOLER) since the 1980s, now raised in a National Renewable Energies Agency.As part of its mission to promote household energy and develop access to electricity in rural and peri-urban areas under a technology neutral approach, AMADER has supported since 2003 the development of REs in all regions of Mali on a project by project basis, in partnership with former CNESOLER. Since 2003, AMADER has supported the development of renewable energies in all regions of Mali. Today, 33 hybrid power stations are built and operational. Projects underway involve the construction of a total of 155 power stations with associated mini-networks, including the


construction of two hybrid power stations serving a dozen villages each; and the prefeasibility study for 97 new localities.

5.2. Development partners

Mali’s development partners play a major role in promoting and disseminating renewable energy technologies. They fall under three groups:

The first group concerns multilateral cooperation institutions that participate in financing projects and Programs through public and private institutions: the World Bank Group, the African Development Bank, United Nations Development Program, and the European Union Delegation.

The second group is made up of development partners under bilateral cooperation arrangements, for financing projects and Programs through public or private institutions. In this regard, it would be worth mentioning GTZ (now GIZ) and KFW (Germany), the United States Agency for International Development (USAID), Danish Cooperation (DANIDA), French Development Agency (AFD), Belgian Cooperation, the Netherlands, and India.

The third group concerns organizations that search for financing among development partners for renewable energy projects and Programs. These organizations work directly with the beneficiary communities. These are Mali Folkcenter, SNV (Netherlands) and the Technical Research and Applications Group.

5.3. Private and local initiatives

As stated above, private local energy companies and local initiatives (communities, women associations) play a key role in Mali’s rural energy access. However, the players are few. Therefore competition for the market is virtually absent in the areas designated. The total installed capacity of mini-grids is around 6 MW, with less than 10% accounting for RE uses. Private energy service companies are establishing tariffs schemes based on the procedures and framework of the Rural Electrification Fund (REF), including business plans and surveys of their customer’s willingness to pay for electricity. Different service categories are set up according to rural customers’ electricity needs. For customers in poverty, monthly lump sum payments, usually around US$ 5 and a monthly contribution to public lighting were created. Those with higher power demands are billed accordingly for metered consumption at about US$ 0.50/kWh

6.

Costs Estimates of Renewable Energies in Mali As mentioned above, many small scale installations and appliances have been introduced in Mali by diverse government institutions, and development partners, without having an exhaustive and detailed monitoring and evaluation system in place at a national level. A few larger scale projects are being piloted for electricity generation on a project by project basis, both for off-grid and on-grid electrification (mainly solar PV, biofuel, and hybrid mini-grids). Feasibility studies proposed under the proposed project will provide better data quality. However, preliminary cost estimates show the need for substantial investment support for the promotion of RE in Mali. Indeed, in order to maintain their commercial viability in the absence of additional subsidies, local private operators of isolated mini-grids currently charge their customers prices that are up to two times higher than the prices charged to social tariff customers by the national utility.

B.4. Regulation, taxation and

Provide details of government licenses, or permits required for implementing and operating the project/programme, the issuing authority, and the date of issue or expected date of issue.

6 Source AMADER: From the rural electrification master plan, capital investments need subsidies about 70% in Mali to attain end user

tariffs of about USD 0.50/kWh (PRODER, 2003). Without capital cost investment subsidies, rural electrification schemes are expected to

be 4-5 times above average utility tariffs.


insurance Describe applicable taxes and foreign exchange regulations.

Provide details on insurance policies related to project/programme.

The current regulatory framework promote private investment in renewable energy, though the local private sector has been increasingly involved in rural electrification since 2007. This is because of the 6 policies in place, only two (and to an extent the 3

rd one) below support the development of off-

grid power systems and to:

(i) the PPPs Framework; (ii) the Investment Code (iii) the Investment Promotion Agency (API), providing a one-stop shop for all business start-up

procedures, assistance to investors and issuance of certification in accordance with the Investment Code;

The PPP framework: PPPs take the form of operating arrangements based on authorization and concessions. A framework for PPP exists in the form of Build Own Operate and Transfer concession contracts. While it supports private capital to flow into the sector, it favours the large-scale on-grid installation.

The Investment Code: establishes a preferential customs and tax regime for the promotion of investments including renewable energy investments;

Trade barriers and trade policies: Mali has a decree7 on “suspension of VAT and duties on imported

renewable energy equipment”. It abolishes these taxes for 5 years from September 2009, thereby promoting the importation of solar PV and other RE equipment. The decree was renewed – and improved – in early 2014, for another 5 years.

The rebate resulted in an overall decrease in the prices of renewable energy equipment to various levels: 9.23% to 53.1% for modules, 16.7% to 21.5% for batteries, 23.7% for regulators, 18.4% for inverters, and 23.4% to 43.68% for lamps in relation to the initial cost of the equipment.

B.5. Implementation arrangements

Describe construction and supervision methodology with key contractual agreements.

The Government, through AMADER, issues rural electrification licenses to private operators to involve them in the development of rural electrification.

The construction and operation model will be based on Making / Doing through Public Private Partnership contracts materialized by the issuance of Rural Electrification Authorizations (AER) and the granting of investment grants to Private Operators.

The granting of AERs and the granting of subsidies are based on organized competition between private operators interested in the same perimeter. The selection methodology is based on three approaches at the end of which a Rural Electrification Authority is issued exclusively to an operator by the Minister for Energy on the proposal of AMADER for 12 years or 15 years depending on the installed capacity:

(i) Tenders for the construction and operation of the Electrification Zones Multisector (ZEM): (TOP-DOWN method);

(ii) Calls for proposals;

(i) Spontaneous Candidate Projects (Bottom - up method);

The operator who offers the best conditions for rural electrification wins the competition.

The construction is supervised by the AER which ensures the quality and monitoring of technical requirements. During the implementation phase of the project, technical and financial supervision missions will be carried out by BOAD in the field.

7 Decree on customs rebate: The decree No. 09-503/P-RM of 23 September 2009


In addition, an Independent Control Office will be recruited to monitor and control the work.

Describe operational arrangements with key contractual agreements following the completion of construction.

The operation of the works will be entrusted to private enterprises under the supervision of AMADER, which is responsible in particular for fixing kwh prices.

BOAD will be in charge of the follow-up of the exploitation.

Provide a timetable showing major scheduled achievements and completion for each of the major components of the project/programme.

Component AN1 AN2 AN3 AN4

T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4

1. Institutional Support and sectoral capacity Building

2. Development, installation and management of community owned R.E Service Centres

3. Supporting beneficiary communities

4. Project management/Monitoring, Evaluation & Learning and knowledge development

C. Financing / Cost Information

C.1. Description of financial elements of the project / programme

Please provide:

a breakdown of cost estimates analysed according to major cost categories.

a financial model that includes projection covering the period from financial closing through final maturity of the proposed GCF financing with detailed assumptions and rationale;

a description of how the choice of financial instrument(s) will overcome barriers and achieve project objectives, and leverage public and/or private finance.

Total amount

(million USD) GCF (million USD)

Co-financing (million USD)

Component 1: Institutional Support and sectoral capacity Building (grant)

5

5 0

Component 2: Development, installation and management of community owned R.E Service Centres

50

30 20

Component 3: Supporting beneficiary communities

20 10 10

Component 4: management/Monitoring, Evaluation & Learning and knowledge development (grant)

5 5 0

Total project finance (million USD)

80 50 30

C.2. Project financing information

Financial Instrument

Amount Currency Tenor Pricing

Total project financing

(a) = (b) + (c)

80 000 000 million

USD ($)


(b) Requested GCF amount

(i) Senior Loans

(ii) Subordinated Loans

(iii) Equity

(iv) Guarantees

(v) Reimbursable grants *

(vi) Grants *

41 000 000 ………………

…………………

…………………

…………………

…………………

9 000 000

Options

Options

Options

Options

Options

million USD ($)

(20) years

( ) years

( 1 ) %

( ) %

( ) % IRR

* Please provide detailed economic and financial justification in the case of grants.

Total Requested (i+ii+iii+iv+v+vi)

50 000 000 ………

million USD ($)

(c) Co-financing

Financial Instrument

Amount Currency Name of

Institution Seniority

Senior Loans

Senior Loans

Options

Options

19 000 000

10000000

…………………

…………………

million USD ($)

Options

Options

Options

BOAD

local Institutions

…………………

…………………

pari passu

pari passu

Options

Options

Lead financing institution: …WEST AFRICAN DEVELOPMENT BANK (BOAD)…………

(d) Covenants

(e) Conditions precedent to disbursement

D. Expected Performance against Investment Criteria

Please explain the potential of the Project/Programme to achieve the Fund’s six investment criteria as listed below.

D.1. Climate impact potential [Potential to achieve the GCF's objectives and results]

Specify the climate mitigation and/or adaptation impact. Provide specific values for the below indicators and any other relevant indicators and values, including those from the Fund’s Performance Measurement Frameworks.

Total tonnes of CO2 eq to be avoided or reduced per annum

In Mali, the primary source of GHG emissions is biomass, which accounts for 81% of CO2 emissions. With around 15,450 tonnes of CO2 emitted per year, Mali represents 0.06% of global emissions and therefore remains a low emitting country. In general, the use of renewable energies has a positive impact on the environment and the climate by limiting the amount of GHG emitted into the atmosphere.

Considering the capacity to integrate of 15 MW and the standardized factor of emissions of the project of electiveness of the WAPP system, avoided greenhouse

http://www.gcfund.org/fileadmin/00_customer/documents/Operations/5.3_Initial_PMF.pdf


gas emissions would be 73 584 TCO2 per year.

Knowing that the main source of energy in rural areas is biomass, the project should promote the reduction of deforestation in targeted areas. This reduction in reforestation will be quantified in the studies and reduced or avoided GHG emissions will also be estimated.

Expected total number of direct and indirect beneficiaries and number of beneficiaries relative to total population (e.g. total lives to be saved from disruption due to climate-related disasters)

TBD

D.2. Paradigm shift potential [Potential to catalyze impact beyond a one-off project or programme investment]

Provide the estimates and details of the below and specify other relevant factors.

Potential for scaling-up and replication (e.g. multiples of initial impact size)

Potential for knowledge and learning

Contribution to the creation of an enabling environment

Contribution to the regulatory framework and policies

Mali has over 74%8 of the population living off-grid and without modern energy

access. In the rural areas where this project targets, the proportion of the population without electricity access is 91%

9. The country has been making a calculated shift of

attention to off-grid electrification strategies. In effect, numerous policies and regulations have been developed. Incentives such as customs rebates are in place. However, there has not been significant to-scale investments off-grid.

This GCF project seeks to remove these barriers: it has a dedicated component on institutional & technical capacity building and knowledge management. It will support the revision/updating of the mandates of agencies and institutions actively involved in RE. Having had a legacy of not-so-successful off-grid interventions, this project has the ambition to demonstrate working models that factor pertinent factors. The learning sub-component will ensure best practices and lessons are well-documented and communicated effectively to stakeholders in the emerging sub-sector.

The project will develop mini-grids that outnumber the existing installations and represent a significant ratio of the total Installed capacity of Mali. This way, the confidence in the community-run energy systems will rise and thereby permanently change the investment environment.

The project is founded on existing experiences from historic and ongoing projects and programmes. All stakeholders will be involved. It will therefore contribute sound and pragmatic additions and/or amendments to the existing regulatory framework and policies.

The promotion of demand to increase productive uses of renewable energy will demonstrate the competiveness of isolated grids with respect to grid tariffs so as to influence the national tariff regime (for both on-grid and off-grid).

A successful scale up of Mali’s rural electrification project combined with the greening of Mali’s rural energy mix will provide lessons to be learned and best practices for rural energy agencies in the sub-region in the framework of the African club of rural energy agencies. BOAD is committed to developing a case study replicable in the 8 member countries and across the WAEMU countries.

8 USAID: https://www.usaid.gov/powerafrica/mali

9 USAID: https://www.usaid.gov/powerafrica/mali

https://www.usaid.gov/powerafrica/mali


D.3. Sustainable development potential

[Potential to provide wider development co-benefits]

Provide the estimates of economic, social and environmental co-benefits. Examples include the following:

Economic co-benefits - Total number of jobs created

- Amount of foreign currency savings - Amount of government’s budget deficits reduced

Social co-benefits - Improved access to education - Improved regulation or cultural preservation - Improved health and safety

Environmental co-benefits - Improved air quality - Improved soil quality - Improved biodiversity

Gender-sensitive development impact

- Proportion of men and women in jobs created

Sustainable development potential: Mali has up to two thirds of the population in high climate vulnerability. This is because the country is 51% desert (arid and semi-arid areas) while depending on agro-based economic activities. The project is focused on renewable energy for productive use to enhance economic activities and eliminate barriers to sustainable development. In particular the project directly addresses SDG

10 numbers 1, 6 and 7 while having contributions to other SDGs. The project

creates sustainable energy self-sufficiency for communities while improving well-being and good health in multiple ways (from better food availability to better access to healthcare and improved indoor environments).

Economic co-benefits

The project will create 600 permanent jobs when fully implemented and another 1,500 temporary jobs during the construction period. With the skills attained from the installation period, the temporary workers will be available for similar subsequent projects in the localities with the most need.

Assuming each site would be the equivalent of a 20kVA diesel generator, an all RE system would avoid 21,000 litres of diesel annually. This translates to 6,300,000 litres annually. This would save the country upwards of FCFA2.5 billion annually and comparable foreign currency savings. This would in turn improve the fiscal balance.

Social co-benefits

The absence of modern energy hinders community development; climate change complicates the situation. Poor lighting & indoor air pollution increases the prevalence of health complications including respiratory tract infections and heart complications (16,900 people die in Mali annually due to indoor air pollution, WHO, 2012), which dramatically reduce life expectancy and strain the national health budget.

The introduction of modern energy in the rural communities will lead to various social benefits including:

better social services such as medical services and education

increased safety in communities following the introduction of street/public lighting

better health of especially women and girls following improved indoor lighting and decreased air pollution; as well as reduced distances to cover in search of energy services and/or resources

better sanitation and increased availability of clean safe drinking water

10

SDGs: http://www.un.org/sustainabledevelopment/sustainable-development-goals/


Increased access to and improved use of basic social services, such as education and health care (lighting/heating/cooling of schools and health centers through solar panels), and increased access to water in rural areas (through solar PV pumping systems). Solar home systems also prevent health issues related to indoor use of firewood and improve household safety by decreasing domestic accidents caused by

candles and kerosene lamps.

Environmental co-benefits

About 78 per cent of the energy needs of Malian households are met by biomass resources (firewood and coal), which not only create health problems related to indoor air pollution in rural homes, Aggravates deforestation and soil degradation with the release of carbon stored in trees and soils.

The implementation of the project will contribute to reducing the use of firewood for domestic lighting needs at night in households, thus contributing in the long term to reducing the pressure on existing plant resources in the project areas, with benefits for biodiversity, soil and air quality improvement.

Gender-sensitive development impact

The focus on gender in ownership and management of the energy services centres will ensure inclusion of all gender and youth. So the improvement of livelihoods and other development benefits will be shared fairly.

D.4. Needs of recipient [Vulnerability to climate change and financing needs of the recipients]

In Mali, most of the energy supplied comes from biomass (78%). It represents the largest source of energy for the majority of the population, while fossil fuels contribute 21% of the energy supply and 1% hydroelectricity (excluding electricity trade). All of these factors are vulnerable to climate and economic shocks. Due to the impacts of climate change, such as drought and decreasing rainfall, wood energy is suffering from increasing cutting, soil degradation, etc., and the hydroelectricity of the energy deficit, water for its operation. As for fossil fuels, their fluctuations strongly impact Mali's trade balance, which imports all its consumption. This situation of poverty is accentuated in rural areas which use mainly biomass.

Mali is particularly vulnerable to climate change. The most plausible scenarios foresee a rise in temperatures and a decrease in precipitation in all the localities of the country, with possibly serious repercussions on agriculture, forests, health, energy and water, among others. According to the National Adaptation Program of Action (NAPA) Mali, energy is considered one of the sectors requiring urgent adaptation measures to climate change. In terms of vulnerability, climate variability particularly affects the hydroelectricity subsector. Under the climate scenario developed under the NAPA, a 1% drop in flow would result in a 1.3 million kWh reduction in electricity generation. In particular, the mitigation of the impacts of climate change on hydroelectric production and biomass production will be at the heart of any strategy for energy development and poverty reduction.

The majority of the population of Mali (about 64%) lives in rural areas but the urban population is growing at a constant rate of 5% per year. This demographic growth is a major concern for the future of the country because it implies a sharp increase in basic needs, in particular energy. Mali's economy is dominated by the primary sector, which contributes to 36.5% of GDP and employs almost 85% of the working population. The electricity and water subsector contributes to 1.91% of GDP. Mali imports all of its fossil fuel needs, making it highly sensitive to price volatility.

The results of the Survey of Consumption, Praetorship and Welfare of the National


Institute of Statistics of Mali reveal an incidence of poverty estimated at 11.1% in Bamako against 46.6% and 52 respectively, 8% in other cities and rural areas.

This level of poverty accentuated the vulnerability of rural communities through the following factors11:

- At the level of education, the literacy rate in relation to the 15-year poverty level in rural areas is 17.9% compared with 52.3% in Bamako and 44% in other cities;

- at the health level, because of the costs deemed too high by the poor (74.9%), they are consulted by traditional healers or community health centres that do not have sufficient resources,

- at the level of access to energy, 92% of poor rural households use wood as a source of cooking and only 23.3% have access to electricity compared to 74% of poor households in Bamako.

D.5. Country ownership [Beneficiary country ownership of project or programme and capacity to implement the proposed activities]

Provide details of the below and specify other relevant factors.

Coherence and alignment with the country’s national climate strategy and priorities in mitigation or adaptation

Brief description of executing entities (e.g. local developers, partners and service providers) along with the roles they will play

Stakeholder engagement process and feedback received from civil society organizations and other relevant stakeholders

Country ownership:

The GoM’s vision and targets have been formulated in key policy papers, namely: National Energy Policy (2006); National Strategy for the Development of Renewable Energies (2006); National Strategy for the Development of Biofuels (2006); and the National Energy Sector Policy Letter (2009-2012).

BOAD has a strict focus on ensuring that not only do countries own and lead all projects financed but also that the beneficiary community needs drive the choice of interventions. This project will take this approach ensuring that communities have full control of the systems created while at the same time supporting the country to have a proper policy environment for this and similar projects in future to thrive.

Mali’s NAMA aims at reduction of GHG emissions by 1,285,034 tCO2 per year through renewable energy production (e.g. with hydro, wind, biomass and solar PV). The UNFCCC lists of 19 priority projects in Mali three are directly related to this GCF project: Contribution to barrier removal for the promotion of the use of solar energy in Mali; Implementation of boreholes equipped with solar- or wind-driven systems; Promotion of income-generating activities and development of mutual assistance.

Mali's National Adaptation Programme of Action, completed in 2007, identifies Agriculture and Health as the most vulnerable sectors, followed by Fisheries, Energy and Water Resources.

Implementing these mitigation and adaptation activities are slower than desired because of various constraints include absence of capital and weak institutional capacity and experience. However, the country has instituted the agencies and structures required for actualisation of these climate action plans/strategies.

Execution will be by the AER and AMADER, a government agency, in collaboration with formal community structures. The proposed activities will be implemented by:

AER will lead the construction (installation) of the mini-grids and carry out all associated procurement,

11

Survey of Consumption, poverty and Welfare of the National Institute of Statistics of Mali 2014-2015.


AMADER will be in charge of the operation of the project

BOAD will offer project management and capacity building (through local and international experts);

National and international stakeholders will play the role of support services, consultations for policy formulation/improvement.

D.6. Effectiveness and efficiency [Economic and financial soundness and effectiveness of the proposed activities]

Provide details of the below and specify other relevant factors (i.e. debt service coverage ratio), if available.

Estimated cost per t CO2 eq (total investment cost/expected lifetime emission reductions)

Co-financing ratio (total amount of the Fund’s investment as percentage of project)

Economic and financial rate of return - With the Fund’s support

- Without the Fund’s support

TBD

E. Brief Rationale for GCF Involvement and Exit Strategy

Please specify why the GCF contribution is critical for the project/programme.

Please explain how the project/programme sustainability will be ensured in the long run, after the project/programme is implemented with support from the GCF and other sources.

GCF funding is critical for the success of this project. There are various reasons for this:

The lack of ability of the target communities to invest in modern energy systems. While the relevance and impact potential of these systems is high, the initial investment is prohibitive.

The rate at which the national electrification is happening also means it will be many years before the communities the project targets can have access to modern energy services. This project bridges that gap and compliments the efforts of government and other stakeholders.

There exist barriers that need to be eliminated for complete resilience of the climate vulnerable communities the project targets. These are among others national capacity (financial and skills), financial mechanisms and policy frameworks for supporting green growth. This project has a dedicated component for eliminating these barriers.

Through GCF funding, investment costs will be supported and RE projects will be viable and profitable on a life cycle basis, with associated co-benefits and operating costs competitive to thermal generation in off-grid schemes. Studies included under the program will analyze and evaluate life cycle costs between hybrid mini-grids and thermal mini-grids in several isolated areas of Mali

Beyond this project, sustainability will be ensured by:

The business models developed and demonstrated in this project will ensure replication and self-sustenance. The fact of basing the interventions on solid business cases is a key strategy in that it enables the management of the systems to maintain and improve the systems without requiring external support.

Having the government materially involved in this project ensures that the successes are mainstreamed in the country’s development strategies and plans. The project also expects public investments to increase for similar interventions

The project will enable a systematic approach to rural electrification, rather than an ad-hoc and piecemeal approach hitherto adopted, by evaluating and standardizing the business models adopted in mini-grid extensions. This would provide momentum to attract private energy service companies and diversify their portfolio of various energy and electricity services targeted to the needs of rural customers (including mini-grids, off grid lighting, energy efficiency appliances, SHS, operation and maintenance services for electrical appliances) will be crucial for transforming the sub-sector. The government has made significant efforts to develop renewable energy. But for lack of funding many projects are not carried out. The contributions of the technical and financial partners are strongly awaited.

F. Risk Analysis

Financial risks: The RE sector in Mali, although showing increasing budget allocations, has limited financial resources and its viability will depend on the leverage prospect of external funding to implement the project. Relative high upfront


capital costs of RE technologies might prevent the sourcing of investments at a significant scale. The proposed project will play a catalytic role in decreasing the financing costs of RE projects and required financial support mechanisms will be designed and assessed during preparation, in line with the on-going MDB and development partner interventions in the energy sector. At project appraisal, the financial viability of each executing agency will be assessed and corrective measures will be agreed on as needed. Operational risks (risks related to technological complexity): Technologies to be adopted for solar PV and wind systems are proven and assessed as adequately to be handled by the implementing actors, in combination with the planned technical assistance and capacity building activities under the project. Detailed feasibility studies will provide further site specific information and valuable lessons learned to fine-tune technology investments as needed. Track record in off-grid electricity access expansion over the last years and appetite of local private energy sector companies to invest in energy technologies have created momentum and is expected to continue under the proposed project.

Please briefly specify the substantial environmental and social risks that the project/programme may face and the proposed risk mitigating measures.

Environmental and social Risks: A screening against environment and social performance standards showed few potential risks during pre-construction, construction, operation and decommissioning phases, on air quality (dust generation, exhaust emission), noise, waste generation… Also, there are many hazards associated with a solar PV power plant if sufficient precautions are not taken during the operation stages such as leaching of materials from broken or fire damaged PV modules, Emergency Fire Hazard, electrocution of workers, electromagnetic radiation from PV modules. In view of implementing the project in a sustainable and environmentally friendly manner, an environmental impact assessment will be done. The potential impacts of the project’s activities will be assessed and mitigation measures will be proposed as part of the Environmental and Social Management Framework (ESMF). ESMF activities will be implemented and monitored through a Coordination Mechanism.

G. Multi-Stakeholder Engagement

Please specify the plan for multi-stakeholder engagement, and what has been done so far in this regard what has been done so far in this regard

The BOAD started the formulation of a project for climate mitigation by renewable energy in Mali with stakeholder consultation in December 2016. Later, in 27 February to 04 March 2017, a delegation of experts from the BOAD was in Mali to consult with key stakeholders at the National level during which mission the following was achieved:

1. Creation of proposed structure, objectives, suggested components and activities of the project was done, 2. Gathering information and updated knowledge needed to support the development of a successful project 3. the studies required to establish the knowledge gaps and to enable tailor-making of the project interventions

were decided upon 4. Full support from the government structures and key stakeholders (at preparation and implementation stages)

was achieved and public sector commitment guaranteed after the proposed project was validated 5. Possible technologies and nature (and range) of interventions was agreed upon. The geography was generally

agreed to be national and off-grid in areas of high population density

Plan for multi-stakeholder engagement

The PPF is expected to conduct a consultation of all stakeholders from central to community level, members of society and private sector actors. The process will involve identifying stakeholders at each stage, assessing the impacts of the change and the project on each identified and site-specific PP, and assessing the commitments each PP demonstrates for the project. The process will result in the analysis of the PPs and the elaboration of the management plan relating to them.

H. Status of Project/Programme

1) A pre-feasibility study is expected to be completed at this stage. Please provide the report in section J.

2) Please indicate whether a feasibility study and/or environmental and social impact assessment has been

conducted for the proposed project/programme: Yes ☐ No ☒ (If ‘Yes’, please provide them in section J.)


3) Will the proposed project/programme be developed as an extension of a previous project (e.g. subsequent phase),

or based on a previous project/programme (e.g. scale up or replication)? Yes ☐ No ☒ (If yes, please provide an evaluation report of the previous project in section J, if available.)

I. Remarks

J. Supporting Documents for Concept Note

☐ Map indicating the location of the project/programme

☐ Financial Model

☐ Pre-feasibility Study

☐ Feasibility Study (if applicable)

☐ Environmental and Social Impact Assessment (if applicable)

☐ Evaluation Report (if applicable)