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The project will contribute significantly to increasing the access to thermal energy and electricity through a technology neutral approach, in 19,500 households in 194 rural communities in Afghanistan. This will result in increasing the access to electricity, clean cooking and heating options and will contribute to a tangible reduction in the pre-mature deaths of women and children due to indoor air pollution. The project will pilot seven innovative financing models which once successful will be mainstreamed. The project will also establish conducive policy and regulatory frameworks and capacity development of key stakeholders. It is envisaged that, the project will establish a sustainable rural energy supply approach which can be scaled up beyond the project period.
The ASERD program plans to establish sustainable rural energy services in 194 rural communities in 5 years, providing both electrical and thermal energy services. The efforts will bring sustainable energy to over 19,500 households providing health, economic and social benefits. Most significantly, the major contribution will be the establishment of delivery models that are technology neutral, leverage additional local and international resources, mobilize communities, engage the private sector and financiers to establish a self-sustaining delivery model. The program will also aim to establish the right frameworks for policy, regulation, environmental protection, quality and incentives and develop human and institutional capacities for these delivery models to continue to increase access to energy in Rural Afghanistan.
Output 1: Rural Energy Services increased in targeted areas.
Output 2: Rural energy policy and regulations developed
Output 3: Innovative approaches to delivering rural energy piloted in target areas
Output 4: Capacity of rural communities and relevant institutions developed
Theory of Change
If access to rural energy services are increased, robust rural energy policies and regulations are developed, innovative approaches to the delivery of rural energy are proven effective along with increased capacity of rural communities to manage the energy services, and the capacity of select institutions are strengthened; then there will be increased access to affordable energy in rural Afghanistan.
Strategy and Rationale
Based on the existing experience in Afghanistan and the challenges and problems identified, the program will follow a three-pronged strategy:
1. Graduate from the current approach of commissioning electricity generating infrastructure in rural communities to establishing a technology-neutral sustainable energy service delivery arrangements. Integrate thermal energy services provided through appropriate technologies into this proposition.
2. Expand the energy coverage in rural areas to support existing economic activities that can improve their productivity and also expand to public service institutions in rural areas such as schools and hospitals which could act as anchor customers. Strengthen the rural energy and renewable energy policy and regulatory framework to ensure sustainability of the delivery models.
3. Pilot innovative implementation and delivery models for rural energy that leverage skillsets and resources from communities, private sector and financial institutions with a view to mainstreaming successful ones. These delivery models should be consistent with the financing principles of global financing mechanisms for climate change and energy.
The above strategy is being proposed based on the following rationale:
• The current implementation leaves a gap in terms of operation & maintenance, finance and business management of commissioned power plants, which is resulting in a significant number of power plants being defunct before their normal lifetime.
• The current approach of donors and government financing the full capital cost and the facilitation costs acts as a disincentive against sense of ownership of the systems. Communities often expect and await the government or donor to repair the systems in the event of a break-down.
• Absence of thermal energy solutions as part of village energy programs only solves part of the energy problem in rural areas and does not address the health problems caused by traditional baseline energy use.
• Currently evaluation of anchor customer possibilities through analysis of existing businesses and government institutions and development of a tariff structure which ensures full cost recovery is not carried out as part of the existing programs.
• Current policy and regulations do not allow for operation of rural energy utilities by private or institutional entities. Current regulations also do not address the technical and business aspects of inter-connecting village grids to national grids.
• Innovation in the rural energy space in Afghanistan in terms of technology, business models and financing mechanisms is rather low. Rural energy users may be able to benefit from better service-finance offerings through innovation.
• The current NIM model followed by ERDA forms limited partnerships with local private sector, financiers and facilitators which will seriously affect the sustainability in the post-program phase when government takes over.
• Afghanistan has the opportunity to align the program principles to global financing mechanisms for energy and climate change that are output oriented and will finance energy delivery and emission reductions ex post. This may also justify a change to a service delivery model as opposed to merely commissioning energy infrastructure.
• Another opportunity being explored by the program is to transform the financing of rural energy in Afghanistan to be less dependent on aid financing and to make it increasingly financed by local financial resources. Such a transformation will also increase the sustainability of the program.
ASERD plans to bring in a number of innovations which are aimed at increasing the scale of impacts, engaging new partners’ viz. private sector and financial institutions, innovating on energy service delivery and process innovation. The key elements in the innovation that is being employed in the program are:
• Technology neutrality which will extend coverage beyond villages close to hydro sites to allow utilization of renewable energy resources such as solar, biomass, wind and hybrid systems and grid extensions. Increase the scale of the electricity systems, where possible to mini-grids and provide services to a cluster of villages.
• Thermal energy services provided through renewable energy and energy efficiency systems to rural households in Afghanistan at a programmatic scale. Provision of portable lighting and cooking systems to the nomadic Kuchi community.
• Use of private sector for facilitation and village energy service provision, use of DABS for village energy service provision and use of NGOs for facilitation.
• Building in-country institutional capacity with education, research and capacity building organizations for capacity and human resource development.
• Innovation in village service delivery models which will include innovations such as Public-Private-Partnerships (PPPs), de-risking mechanism for private investments, utilization of migrant remittances, women enterprises that are linked to carbon finance, rural economic zone with active participation from women, energisation systems based on portable systems for Nomadic communities and a ‘pay-as-you-go’ energy service model linked to mobile telephones.
Sustainability of the village energy services as well as sustainability of the national efforts in Afghanistan to provide modern energy to all rural village communities is important. The elements of the sustainability strategy for the program are as follows:
• Build an ecosystem of local facilitating agencies which will retain the skillsets for mobilizing communities, carrying out techno-economic feasibility studies and supervise implementation and service provision;
• Progressively build capacity of the REED at MRRD to plan, oversee implementation and monitor rural energy projects;
• Build capacity with national education, research and training institutions for human resource development and capacity development in rural energy within the country;
• Build the capacity of private sector to manufacture and integrate rural energy systems and devices and also to run energy utility operations in rural areas;
• Engage the financial institutions to finance rural energy investments by using donor and government funds to de-risk and leverage commercial finance investments;
• Engage DABS into the program and ensure that DABS owns and operates a significant share of the rural energy systems;
• Progressively reduce the grant component of the rural energy infrastructure and devices investments and replace these with local finance;
• Put in place the policy and incentive framework to incentivize and protect private sector participation and investments in rural energy;
• Establish linkages between the rural energy program and global financing mechanisms for energy and climate which will facilitate international finance flows and ensure sustained operation of systems.