Chapter Institutional Considerations for Renewable Energy Development

This chapter addresses issues related to renewable energy development, especially for water pumping applications. Water pumping is one of the simplest and most cost-effective applications for solar and wind energy technologies in remote rural communities; however, as with all development projects, institutional issues must be considered for long-term success. The critical links for any renewable energy project are the technology and the implementing agencies and the infrastructure that support it. Technical aspects are vital to ensure successful implementation of renewable energy projects, but they are not enough to guarantee the future of a project. Technically acceptable designs and installations often fail because of a lack of focus on institutional issues. This is especially true for development programs that introduce new technologies such as solar and wind water pumping in rural settings. However, as with all mechanical and electrical systems, the implementing agency and user must be prepared to maintain it to ensure its long-term operation. A viable renewable energy program must take into account the maintenance and other institutional issues necessary for long-term sustainability, include-ing policy and social issues, capacity building, technical assistance, education and training, and local infrastructure development.

Sustainability

Sustainable development, which we will call sustainability, is continued economic and social development without detriment to the environment and natural resources. In using renewable energy technologies to pump water in rural areas, sustainability provides users (consumers) with local access to qualified suppliers, high-quality equipment, and maintenance capabilities with a reasonable cost and payment schedule. Because of their higher initial capital costs compared to conventional technologies, access to reasonable financing is often an important factor in the sustainability of rural renewable energy technologies. Long-term sustainability is a natural consequence of local market growth. Where demand for a product or service is high enough to allow for profit generation and competition, market forces eventually establish the infrastructure required to generate a local market.

The goal of renewable energy development programs should be to provide needed services, such as health care, while contributing to local market growth and sustainability. Development programs are often carried out in economically depressed regions where the consumer's ability to pay is low and the supply infrastructure is inadequate. Rural program implementation often takes place in the context of social programs that include various forms of subsidies by governments or other organizations. Although subsidized programs are not inherently sustainable, they are justifiable, they can make significant social contributions, and they can function as catalysts to carefully develop local markets for renewable energy technologies.

Institutional Considerations

A number of institutional issues must be addressed to achieve sustainability for renewable energy water pumping projects. In the sections that follow, we discuss some key areas to consider for institutional development of renewable energy programs.

Policy Issues

Renewable energy projects are most successful when favorable national, state, and local policies are in place. Recognition of the social, environmental, and health benefits of renewable water pumping systems in rural areas can lead to sound policies on importation requirements, taxes, fossil fuel subsidies, and other government barriers that can artificially increase the cost of installed renewable energy systems. Government programs that are already working in related areas such as farming, ranching, and potable water can justify the direct involvement of government agencies in the implementation of renewable energy programs. Such programs are valuable vehicles in promoting renewable technologies and educating potential end users. Favorable policies encourage entrepreneurs and widespread market growth.

Solid Partnerships

Strong partnerships between government, industry, and development agencies should be nurtured for renewable energy water pumping programs to address the diverse cultural, technical, social, and institutional issues that arise when working to meet program goals. The success of a renewable energy water pumping program depends on working with local organizations and with industry. In addition, the program team, which is composed of members from different organizations, must function well together. It is important to choose partners very carefully.

Capacity

Significant efforts are required to help partners build the capacity necessary to independently evaluate and successfully develop renewable energy projects. Capacity building includes technical assistance, formal training workshops, focused field activities, and in-depth reviews of suppliers' quotes and designs for proposed systems as well as local manufacturing capabilities and infrastructure development.

Education and Training

A successful renewable energy program absolutely requires the development of local technical capabilities and knowledgeable consumers. Providing training to vendors, project developers, and government personnel is one component that ensures quality installation. Training also helps ensure that the technology is being used correctly. Vendors and end users must recognize the importance of the locations and applications in which PV or wind water pumping make sense, as well as those that are impractical.

Local village support and training are crucial for a successful renewable energy water pumping program. In-depth training is critical for developing the interest and knowledge required for understanding and successfully applying renewable energy technologies. A structure is essential to help partners build the capacity necessary to operate and maintain a renewable energy water pumping system. Technical assistance and training are continual processes best supplied incrementally. Not only project developers, but also local industry must be trained. System suppliers also need to occasionally check and fix installations. Success depends largely on the technical capacity of local technicians and administrators who continue to operate a water pumping system long after it has been inaugurated. Greater technical capacity of local suppliers leads to greater consumer and development agency confidence in terms of ensuring quality projects.

End users should receive training on the basic O&M of renewable energy systems to ensure the lifetime of a system. To enhance the effectiveness of the renewable energy system, end users should practice conservation and resource management. Education plays a key role in this area. The resources invested in training are justified by the better economics of more reliable and longer lasting systems. Figure 8-1 shows New Mexico State University representatives conducting a wind energy training course in Oaxaca, Mexico.

Figure 8-1. Wind energy training course in Oaxaca, Mexico, conducted by

New Mexico State University.

Figure 8-1. Wind energy training course in Oaxaca, Mexico, conducted by

New Mexico State University.

Technical Assistance

Technical assistance can take a variety of forms, from working with local partners and project developers to supporting local system suppliers. It is very important to work with local partners (project developers) to develop practical technical specifications for renewable energy systems. This allows for a basic understanding of the requirements of a quality system installation that will provide years of useful life. It is also important to work with local suppliers to make sure they understand specific requirements for meeting the technical specifications.

We cannot overstress the importance of including industry in all aspects of a renewable energy water pumping program. On a local level, sustainability and market growth can be ensured only with a strong supply infrastructure and reliable systems. Project developers must work closely with local suppliers to strengthen their ability to deliver high-quality systems at reasonable costs. Suppliers should be encouraged to attend training courses, conduct pilot system installations, and develop their own training programs.

Wind and solar resource maps of specific regions are useful for determining where to best target particular technologies. These maps are valuable tools for partner organizations and system suppliers as they work to determine the most feasible regions for renewable energy technologies. These and other forms of technical assistance are part of the capacity building process, and help program partners make informed decisions about renewable energy technologies.

Local Infrastructure Development

Establishing a local infrastructure is indispensable for sustainability. It provides access to systems, components, and qualified technical services. In rural areas, most renewable energy vendors rely on outside suppliers for equipment and system design. However, costs decrease when local vendors can handle design, installation, maintenance, and repairs. Healthier business relations between local vendors and their suppliers generally lower the overall costs for end users. In a good business environment, suppliers are more likely to support local vendors with technical assistance and discount pricing. Figure 8-2 shows mules transporting PV modules to remote sites in Mexico.

Figure 8-2. Mules carry PV modules to a remote site in Mexico. Program Implementation

Governments, NGOs, or private industry can successfully carry out a renewable energy program. Although each implementing organization will have different goals and objectives, combinations of these agencies working collaboratively can improve the success of the implementation program.

Government agencies can set and enforce requirements for procurement and quality control. They usually have significant human resources and infrastructure to cover a wide geographic area. They are also in positions to promote the use of renewable energy as an alternative to conventional water pumping systems in other agricultural and potable water programs.

Government personnel often lack the technical expertise and experience needed to develop a renewable energy program on their own. However, government involvement in project implementation is crucial to better understand the problems related to project dissemination and later, if necessary, for making policy changes. Program developers need to work renewable energy into the established development programs as part of the solution for meeting program goals (rather than focusing only on renewable energy).

Experience has shown that NGOs can implement renewable energy programs quite efficiently. In recent years, some NGOs have successfully obtained funding for development projects in rural areas. The key for an NGO to successfully apply renewable energy is to avoid the trap of becoming the system installer, but rather to work with local system installers and provide an oversight role.

Unfortunately, in some cases, NGOs have received funding for renewable energy programs, but have had little real knowledge or commitment. They have applied the resources inefficiently and installed substandard systems that give the industry a black eye. In many regions, these systems have only retarded renewable energy development. The greatest pitfall for an NGO is to install a system then fail to provide any long-term project maintenance and support. It is very important for a government to devise basic guidelines where all interested groups (government, NGOs, and end users) work together toward a sustainable future. Key steps required for successful implementation of renewable energy programs are described in the sections that follow.

Strategic Planning

Strategic planning with collaborative partners helps to create realistic goals to include renewables as part of instituted programs. Early planning must be realistic and within the bounds of available resources. Planning should include enough promotional activities, including training, to accelerate acceptance of the technology. Developing a comprehensive program from the project identification stage to acceptance testing and operation is key for local developers. However, program development should be kept as simple and straightforward as possible. There are many more options for partnering and tapping into opportunities than resources can support, so it is important to focus, limit, and succeed in a few locations, rather than expand.

Government-funded programs generally impose a 1-year cycle on which to base planning and budgeting. Renewable energy development programs greatly benefit from multiyear funding, mainly because significant results tend to be realized only after several years of diligent effort.

Pilot Project

Pilot projects (see Figure 8-3) can form an important foundation for growing sustainable renewable energy markets. Local suppliers have the opportunity to gain a better technical understanding of the integration of renewable energy systems. These suppliers have learned that with adequate planning and design, maintaining installed systems for the long term costs little. As a result of pilot projects and gradually increasing demand, prices to end users usually decline in areas where pilot project programs have been well implemented.

Figure 8-3. Pilot PV water pumping installation in the Mexican State of San Luis Potosí.

In Mexico, the U.S. Department of Energy and the U.S. Agency for International Development Mexico Renewable Energy Program managed by Sandia National Laboratories have helped the local renewable energy industry to expand. This growth trend and increasing competition have also had an important impact on lowering overall installed system costs. At the same time, quality levels have improved substantially. For instance, New Mexico State University has documented decreases of more than 30% from 1996 to 1998 of installed costs of PV water pumping systems in Chihuahua (see Figure 8-4). This occurred as vendors and program administrators gained experience with technologies, even though PV module prices have not similarly decreased over the same time period. (Costs include all system hardware—pumps, conductors, etc.—as well as labor and taxes.) Many of these same vendors also have expanded their service territories to other states, further contributing to increased competition and decreasing system costs across Mexico.

1996 1997 1998

Figure 8-4. Average declining cost trends per installed watt for 41 pilot PV water pumping systems in Mexico implemented by the Chihuahua Renewable Energy Working Group with SNL.

1996 1997 1998

Figure 8-4. Average declining cost trends per installed watt for 41 pilot PV water pumping systems in Mexico implemented by the Chihuahua Renewable Energy Working Group with SNL.

Sustainable Markets

Investments in cost sharing of pilot projects greatly facilitate the introduction and acceptance of renewable technology while fostering a sense of local ownership. As project volume increases, system costs are reduced because competition increases. Rural residents must be able to afford renewables, either through either cost sharing or financing. End-user financing at an affordable level similar to conventional energy expenditures lowers out-of-pocket initial capital expenditures and expands the renewable energy market. Pilot projects should be used as a tool, not as an end. Pilot projects should be installed to establish growing and sustainable markets, not only to point to the number of installations accomplished during the project. Their primary value is as a tool for training and building the capacity of implementing organizations, businesses, and the community (end users).

Grassroots Development

An integrated and grassroots development approach is needed to develop a village hybrid system. A local and capable champion greatly facilitates the development of local renewable systems. If a rural village hybrid system is to succeed and have lasting impacts, it must be installed first from a development perspective. System ownership and responsibilities need to be established early on for installed projects.

Quality Hardware

Many renewable energy programs and systems have suffered poor reputations related to the installation of substandard components and designs. There is a tendency among some development programs, especially when dealing with poor rural populations, to offer less than quality solutions to meet their needs. But regardless of location or economic status, all communities deserve quality and safe components and designs that will result in the best service possible from renewable energy technologies.

Substandard systems create an attitude that renewable energy systems are limited, do not function well, and are prone to failure. Quality installations require quality components and designs that are safe, reliable, and designed for the long haul. Systems that cannot be done right from the start should not be installed at all.

For any renewable energy project, the first order of business for good system design is to use energy-efficient equipment. It can be entirely appropriate to establish service contracts with users for community water pumping systems. Implementing a use-based water tariff in a village where people are accustomed to paying a minimal flat fee (or nothing) for water can provide a capital fund for future maintenance actions.

Project Monitoring

One characteristic of successful renewable energy development programs is a commitment to project follow-up and monitoring. Monitoring activities should be designed into a program at its inception, and focus on several issues, including the technical, social, economic, and environmental impacts of using the technologies and applications. Monitoring data can come from a variety of sources, including interviews with partner agencies, suppliers, and end users; site visits; and performance monitoring of installed systems. Long-term impacts cannot be evaluated without monitoring activities. It is much more useful to receive photos and data from operating systems in the field after 5 years, rather than a pretty photo of a new system on the day of its inauguration that may be doomed to fail because a maintenance infrastructure is lacking. Monitoring activities should develop a bed of various projects and technologies for long-term evaluation.

Maintaining a database of applicable project and program information collected from field personnel is valuable. Such a database allows program personnel to conduct analyses and make necessary adjustments along the way during program implementation. As any program continues its transition from direct implementation of pilot projects to further replication and institutionalization of partner organizations, these monitoring efforts continue to grow in importance.

Institutional Models for Renewable Energy Dissemination

Sustainable project replication is a program's ultimate measure of success or failure, and can occur in a number of ways. As partner institutions and end users gain familiarity with renewable energy technologies, they begin to implement new projects on their own. This generally occurs in a specific region first and then spreads to new regions. Through such activities, other related institutions become familiar with the merits of renewable energy technologies and initiate projects as well. The potential for this type of replication can be huge, given that the budget for development organizations can be in the millions of dollars. Private-sector spin-off replication occurs as a result of successful pilot projects. For replication to be substantial, several factors must be adequately addressed: the local population must know the technology and what it can provide; quality products and services must be available locally; and must be able to pay for the technology. For the last reason, access to applicable financing mechanisms is the key.

Renewable energy systems for water pumping can be prohibitive in initial cost for many rural farmers and ranchers in less developed regions, despite the fact that the levelized LCCs of such systems are often quite good compared to conventional water pumping systems. Sometimes development funds are available to buy down the system cost to make system affordable.

Program implementation by private enterprise is relatively rare in the area of rural renewable development, but some initiatives have been quite successful, especially in the area of financing. Programs headed by private interests have the advantage that sustainability is in the best economic interest of the implementing agency.

Four basic approaches used to encourage the purchase of renewable energy system are:

• Financed sales

• Direct subsidies

Of these, market-based financing and leasing approaches for renewable energy projects have the greatest potential for expanding the access of rural households to this technology. Renewable energy for water pumping also offers the potential to generate new and important business activity in rural areas by creating jobs through local retail sales and services.

Sales of renewable technologies, especially PV systems, in rural regions of less developed countries occur at four levels, as exemplified by the sales approach pyramid in Figure 8-5. At the top of the pyramid are the few direct cash sales to relatively well-to-do rural households that can afford the high initial capital costs of a renewable energy system. Following this are many more consumers who can afford to purchase a renewable energy system if reasonable credit terms are provided. Figure 8-5 also shows that still more people could afford to simply pay a service fee for energy by leasing a renewable system. Finally, the poorest households are simply trying to survive and have other pressing issues, such as adequate housing and clean water. They would probably not choose to participate in any form of renewable electrification program unless it was subsidized directly by development agencies or the government. The exact percentage of persons in any of these categories varies greatly from country to country.

Rural well-to-do

Rural well-to-do

Credit

Credit

Rural Poor

Rural Poor

Very Poor

Figure 8-5. Institutional renewable energy sales approach pyramid

Very Poor

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