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

MODULE 10: INCREASING ACCESS TO ENERGY SERVICES IN RURAL AREAS
page 10.65
3. The NPV of the total subsidy is divided by the total number of benefit points that have
accrued, giving a cost per benefit point of the project.
Once projects have been selected and packaged for development by the Ministry of Energy
and/or the REA (or other appropriate body) the real prioritization will depend on the
response and on specific requirements from private investors and the financial institutions.
The following are examples of criteria that can be used for further analysis and prioritization:
4. Capital Cost per Connection analysis does not take into account the Life Cycle Costing
(LCC) or overall project viability, so projects, which could well, be viable may still show
the highest Capital Cost per Connection. This approach to prioritization is thus very limited.
5. Subsidy Analysis takes into account the full LCC and O&M costs, as well as determining
the subsidy that which will result in setting tariffs at affordable levels. Projects that
require no subsidy are clearly favoured over those requiring large subsidy. The Subsidy
Required per Connection shows clearly which projects are most viable and which are
not, but does not always clearly rank the projects.
6. Benefit Points Analysis gives a more useful overall ranking.
7. If projects do not fit within these Benefit Point Analysis Criteria, then it is possible that
some of the less economical lines or components would have to be excluded from the
project.
8. A further criterion for ranking would be that projects must have a minimum number of
BPs to be considered. If this were not done, large numbers of applications involving
many tiny projects may result in the larger projects being neglected.
Step 5: Regional equity adjustment
Following the prioritization of projects, the rankings could then be adjusted depending on
other external influencing criteria:
• Funding contributions from non-government sources;
• Transmission grid and distribution network transfer capacity and security of supply;
• Supply capacity available, scheduled load-shedding;
• Generation capacity expansion programmes;
• Grid and network expansion programmes;
• Distributed (“in-project”) electricity generation;
• Respective proportions of costs of transmission/distribution reinforcement and reticulation;
• Political expectations;
• Poverty alleviation policy and projects;
• Regional equity (see further comments below).