Increasing access to energy services in rural areas - REEEP ...

SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUAL
page 10.64
Figure II.
Process for project identification and financial feasibility analysis
Process
Criteria
Propose project types and sizes
Based on financial criteria for viability:
• Scale of investments required
• No. of customers and potential
growth
• Potential turnover
• Start-up funding required
Determine project boundaries
Define appropriate projects on the
Geographical Information System
(GIS), which incorporate the above
criteria and constraints as starting
points.
Determine project feasibility
Based on pre-defined IRR on RE
operator‘s investment, calculate:
• Investment costs required
• O&M costs
• Predicted consumption levels,
• Tariffs required and affordability
• Uptake vs. subsidies required
Can use approaches
of either:
(a) Fixing tariffs and
determining sensitivity
of IRR versus subsidy;
(b) Fixing IRR and
determining sensitivity
of tariff versus subsidy.
Budget check
Consider scale of investments and
REA budgets available
Iterate process steps on
left if required
2. Each project will accrue a number of “economic benefit points” in order to take in to
account social benefits that arise from rural electrification. These social benefits are
not accounted for in a strict financial analysis of a project and so it is important they
are taken into account when prioritizing projects. The system of allocating benefit points
has been discussed previously.