IFC/GEF EFFICIENT LIGHTING INITIATIVE

GLOBAL WORKSHOPCzech Rep., July 2000

ELI PERU

FRAMEWORK

ELI PERU

THE LEGAL FRAMEWORK

ELI PERU

ELECTRICAL CONCESSIONS LAW

– Non integrated generation, transmission and distribution activities with private participation.

– Splitted market: free - more than 1 000 kw regulated - public service

– Competition conditions in generation, regulation in transmission and public service distribution. Efficiency incentives in these activities.

– Capacity and energy generation prices differentiated by hours of consumption (peak and off peak).

SUPPLEMENTARY BY LAWS REGARDING:

– Supervision and quality of service: establishing fines and penalties for bad service quality.

– Anti-trust law: limit monopolistic property concentration; penalizes market abuse, assuring free competition.

– Open access to clients to transmission facilities to assure competition.

ELI PERU

THE LEGAL FRAMEWORK

MARKET ASSESSMENT

ELI PERU

LAMPSANNUAL DEMAND 1999

Incand.73.0%

Linear Fluores.16.8%Circular

Fluores.9.0%

CFLs1.3%

ELI PERU

15’741,010

1’934,179

3’613,951

272,430

Total 21’561,570 lamps

RESIDENTIAL LAMPSINSTALLED UNITS

Incand.59.1%

Linear Fluores.18.8%

Circular Fluores.16.2%

CFLs5.9%

ELI PERU

15’852,730 5’058,090

4’350,280

1’580,380

Total 26’841,480 lamps

PUBLIC LIGHTINGINSTALLED LUMINAIRES

OTHERS1.8%

SODIUM57.1%

MERCURY41.1%

ELI PERU

Total 1’103,888 luminaires

630,858453,615

19,415

POTENTIAL MARKET

ELI PERU

CFLs INTRODUCTION IMPACTSENERGY & POWER SAVINGS

ELI PERU

362.242

841.782

210.445

100,6

233,8

58,5

0

400.000

800.000

1.200.000

1.445.275 2.474.314 5.781.101

LAMPS PENETRATION SCENARIOS

ENERGY (MW-h)

0,0

100,0

200,0

300,0

ENERGY SAVINGS (MM US$) POWER (MW)

ENERGY SAVINGS

POWER SAVINGS

CFLs INTRODUCTION IMPACTSCO2 REDUCTION & $ SAVINGS

ELI PERU

45,1

19,4

11,3

665.007

286.171166.252

0,0

12,5

25,0

37,5

50,0

210.445 362.242 841.782

ENERGY SAVINGS (MW-h)

MM US$

0

175.000

350.000

525.000

700.000

CO2 TONS

SAVINGS

AVOIDED CO2

MARKET OBSTACLES

ELI PERU

– Incandescent price is $0.50, while the CFL price is over $10.00.

– Low income C, D and E social economic levels represents 88% of total Peruvian population.

– CFL repayment period, which is of six months, is unknown to the majority of the population.

HIGH INITIAL COSTS

ELI PERU

– Saving & lasting time CFLs benefits are unknown to most low income population.

– Color temperature (or light color) is taken as lighting quality, while quantity of flux is considered as good lighting.

– Thick tube lamp is considered to produce a higher flux than a thin tube one.

– Efficient lighting concept does not exist.

LACK OF INFORMATION

ELI PERU

– Low income population does not have access to formal credit.

– Consumer banking interest rate is around 180% annually. Clients’ bad credit experience.

– Banks have low image and are considered unreliable in low income population.

LACK OF RESOURCES AND FINANCING STRUCTURES

ELI PERU

– CFLs are available only at supermarkets, hardware and electrical stores.

– Not available all countrywide.

– Distributed mostly in high income population zones.

– Standard and Triphosphor T8 lamps are not widely distributed. The same for electronic ballasts.

LIMITED AVAILABILITY

ELI PERU

– Presence of unknown low price/low

quality CFLs brands, without guarantee.

– Forged known brands in the market.

– Since last year, Indecopi has promoted

the development of official CFLs

standards.

LACK OF QUALITY STANDARDS

ELI PERU

– Since the massive CFLs introduction promoted by the Government in 1995 and 1996, many low quality brands entered the market.

– Clients have had a bad quality experience with CFLs, with an early failure rate, higher consumption and lower flux than the rated values.

CFLs PERCEPTION AND IMAGE BY CLIENTS

ELI PERU

STRATEGY

ELI PERU

• Residential Sector: Distribution of CFLs through Electric Utilities Companies (E.D.E.s).

• Public Lighting: Support E.D.E.s transactions for substitution of the existing public lighting equipment.

• Professional Sector : Identification and support of Professional Lighting projects, and Generation of Energy Service Companies (ESCOs).

MARKET SEGMENTATION

ELI PERU

RESIDENTIAL SECTOR PROJECTS

ELI PERU

PROBLEMS ON THE CFLs DISTRIBUTION PROGRAMS

– Delay on the approval of Energy Efficiency Law.

– Conception of some Ministry of Energy and Mines officials that Electric Distribution Utilities would earn too much and damage the market taking advantage of monopolistic conditions.

– Lack of information among clients.

– Low income of clients.ELI PERU

Agreements signed with:-Edelnor (EDN) – 748 697 residential clients-Luz del Sur (LdS) – 659 063 ""-Electrosureste (ESE) - 224 581 " "

EDN and LdS have agreed to participate in program with 1 000 000 lamps in the city of Lima. The date foreseen is september 2000.

ESE study to be made. Initial objetive 65 000 clients in the rural area. Quantity 80 000 lamps.

Other agreements to be signed:Electro Oriente 80,000 lampsElectro Ucayali 50,000 "Grupo Gloria (4 Utilities) 200,000 "

RESIDENTIAL PROGRAM PROJECTS

ELI PERU

EDE´S RESIDENTIAL CLIENTS

1,407,306

224,581

748,697

659,063

EDN

LdS

ESE

OTHER EDE S

46,30%

24,63%

21,68%

7,39%

TOTAL RESID. CLIENTS 3 039 647TOTAL RESID.CLIENTS EDN+LdS+ESE 1 407 306 (53,7%)

ELI PERU

ELI PERU

CFL’s COST STUCTURECURRENT ESC. TARGET1 ESC. TARGET2 ESC.

Man.sell price to distrib. with VAT $6.58 $5.14 $5.02Dist.marg (U/D) 10.00% 10.00% 8.00%Dist.selling price, with VAT $7.32 $5.72 $5.45Wholesale marg (D/U) 5.00% 5.00% 3.00%Wholesale selling price, with VAT $7.68 $6.00 $5.61Retail marg (U/D) 25.00% 25.00% 22.00%Price to customer, with VAT $10.24 $8.00 $7.20

S/35.84 S/28.00 S/25.19

esc1 esc2 esc3Bid Price $4.00 $4.50 $5.00UMarg. (U/D) 20.00% 20.00% 20.00%SPrice w/o VAT $5.00 $5.63 $6.25VAT $0.90 $1.01 $1.13CPw/ VAT $5.90 $6.64 $7.38Ex. Rate 3.50$ 3.50$ 3.50$ CPw/ VAT S/. 20.65$ 23.23$ 25.81$ DEBT (S/.) 20.65 23.23 25.81TERM 12 12 12RATE 30% 30% 30%Monthly Pay S/. 1.98 2.23 2.47TOTAL PAY S/. 23.76 27.00 29.64

US$ 6.79 7.70 8.47

TRADITIONAL LAMPS DISTRIBUTION CHANNEL

PAYMENTS WITH ELI PROGRAM

6,79

7,708,47

10,24

8,007,20

0

2

4

6

8

10

12

1 2 3 4 5 6ELI Program Traditional Channel

ELI PERU

CFL’S FINAL PRICE

PUBLIC LIGHTINGPROJECTS

ELI PERU

A Letter of Intent has been signed to develop a public lighting feasibility study for the four electrical utilities of Grupo Gloria.

ELI will co-finance the study with an estimated cost of US$ 32 600. A draft of the contract (MOU) is being reviewed.

ELI Peru and Grupo Gloria will jointly supervise the study.

ESE (Elec. Sur Este) has shown interest in this activity.

PUBLIC LIGHTING PROJECTS

ELI PERU

GRUPO GLORIAPUBLIC LIGHTING / ENERGY CONSUMPTON (MWh)

& CLIENTS

UTILITY P.Light. % Total En. % Clients %ENO 24.56 18 336.09 22 178,265 20

EN 19.18 14 224.376 14 145,137 16

HIDRAN 62.45 45 609.88 39 299,669 34

ELC 31.69 23 391.82 25 267,179 30

TOTAL 137.88 100 1562.166 100 890,250 100

ELI PERU

PUBLIC LIGHTING PARTICIPATION

0

100

200

300

400

500

600

ENO EN HIDRAN ELC

PUB. LIGHT MWh TOTAL EN. MWh

ELI PERU

PROFESSIONAL SECTOR PROJECTS

ELI PERU

Marina de Guerra del Peru (Peruvian Navy)

An agreement has been signed to perform an inventory at seven navy facilities.

Objetive is to propose solutions for efficient lighting.

Philips at ELI Peru’s request will make thediagnosis and the corresponding proposal.

PROFESSIONAL LIGHTING PROGRAM

ELI PERU

NAVY SAVING POTENTIAL

EST. NAVAL LA PERLA 251.20 kWBASE INFANTERIA MARINA 148.27 "ESCUELA NAVAL 443.09 "BASE NAVAL CALLAO 543.60 "EST. NAVAL SALAVERRY 94.07 "CENTRO MEDICO NAVAL N.A.CENTRO ESPAR. SN. BORJA N.A.

1386.16 kW

ELI PERU