Volume I: Investment Prospectus Rwanda Electricity Sector Access ...

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and work is underway to reduce these costs for the access programme. The electricity utilityhas already identified ways to lower the cost of new MV extensions, such as revising thetechnical specifications used in recent electrification projects and developing local capacity tomanufacture required materials. The scale of the access programme will also reduce costs byenabling private contractors to recover fixed costs over a larger quantity of new connections.Funding PlanA summary of per household capital costs for the access programme is provided in Table B.Costs are shown separately for the total access programme investment package and forrequired investments in MV/LV infrastructure.Table B shows the capital costs of rolling out the transmission and distribution network toachieve the required number of new connections derived from the geospatial planningexercise, as well as the capital costs of off-grid solutions where those are more efficient.Connection costs start at around US$1,300 per household in 2009 and fall to aroundUS$1,200 in the remaining years of the EDPRS as the programme achieves cost reductions.The cost savings are partially offset each year as the programme moves from connectingprimarily urban and peri-urban customers to reaching more rural communities. The totalcosts of the programme fall in 2013 to less than US$900 per household as investments toachieve the Government’s EDPRS targets are no longer required.An indication of the additional costs incurred in the access programme by targeting remotecommunities and social institutions is also provided in the right hand columns of the table.These estimates only include MV/LV investments in the cost per household calculations(excluding costs incurred through solar and micro-hydro investments). Focusing only on thecost of MV/LV infrastructure reduces per household investment costs to less than US$1,000in 2009 falling to around US$600 in 2013.Table B: Capital Costs of Electricity Access Programme per Household (US$)YearHouseholdsConnectedTotalInvestment(US$ million)Cost perHousehold($/HH)MV/LVInvestment(US$ million)Cost perHousehold($/HH)2009 36,969 56.1 1,323 35.5 959.72010 57,428 78.9 1,247 50.4 877.22011 65,983 84.2 1,194 47.1 713.52012 67,661 92.1 1,281 51.6 763.32013 71,645 66.3 882 43.0 599.6Total 299,686 377.6 1,185 227.5 782.6The programme to increase electricity access also needs to be fully integrated with theongoing provision of services to existing customers, as well as efforts to improve the qualityof the network and develop new, lower-cost sources of generation. For this reason, theaccess programme considers the funding needs for system expansion within the overallfunding requirements for the sector.iv
There are three sources of funds for the electricity sector: customer payments, Governmentsubsidies and contributions from development partners. For the power sector to befinancially viable, the entire funding needs of the sector—which include both capital andoperating costs—must be able to be covered from these three sources of funds.The Government has prepared an initial analysis of how total sector funding needs over thenext five years (2009–2013) will be met from the three major funding sources:• Funding needs—The total funding needed to meet operating costs and achievethe Government’s sector plans for new generation and transmission investmentand the access programme is estimated to be US$875 million, an average ofUS$175 million per year• Funding sources—In its new energy sector policy the Government has statedthat, at a minimum, operating costs should be met through operating revenues.Additional funding will then be provided through Government contributions anddevelopment partners to meet the capital costs of the access programme andinvestments in generation and transmission capacity. The Government proposes asustainable financing framework for the electricity sector that will see 10 percentof the capital costs of new grid extensions provided through connection charges,10 percent of the capital costs of new grid extensions provided from the utility’sfinancial resources (funded from surplus tariff revenues), and the remaining 80percent funded by the Government and development partners.The ability to fund operating costs through customer payments is greater in Rwanda thanmany other African nations due to Government decisions to raise tariffs in recent years. Thecurrent residential electricity tariff in Rwanda is around 20c/kWh (112 RWF/kWh),excluding value added tax. The Government recently completed a study to understandwhether tariffs can be adjusted to account for the lower cost of new generation sources. Thisstudy found that the Government needs to be cautious before implementing any tariff cuts,as the true costs of serving different customer classes are not yet known. To achieve abalance between affordability and the need for customer funding, the financial balance forthe sector has been calculated assuming that consumers are asked to contribute an averageamount of US$100 (10 percent) towards the cost of connection.The Government plans to complete a full tariff study this year to consider this issue further.At this time it is clear that given a plausible range of tariffs and connection charges that areaffordable for Rwandan households, more than half of the total costs of the sector will needto come from the Government and the development partners. This contribution will have animportant effect on accelerating growth and reducing poverty. As incomes rise over time, thepower sector in Rwanda will become self-sustaining and electricity will become affordablefor a greater proportion of Rwandan households.Programme ImplementationThe Government recognises that the access programme will require a significant scaling-upof capacity to efficiently manage the programme and procure the required materials. Theelectricity utility in Rwanda, Electrogaz, has already increased the rate of making newconnections through the use of external contractors to complete low voltage distributionnetwork extensions. In 2008, Electrogaz made over 20,000 new connections compared toonly 1,000 new connections five years ago. The utility will continue to expand its use ofv
Page 1: Rwanda ElectricitySector AccessProg
Page 5 and 6: Table of Contents1 Purpose of Prosp
Page 7 and 8: Figure 2.2: Comparative Data from A
Page 9 and 10: Glossary of TermsAbbreviations and
Page 11 and 12: Executive SummaryThe Government of
Page 13: A series of important conclusions o
Page 17 and 18: 1 Purpose of ProspectusThe Governme
Page 19 and 20: 2 Access Programme is a Critical Pa
Page 21 and 22: supply capacity is available as exp
Page 23 and 24: Table 2.2: EDPRS Targets for Expand
Page 25 and 26: important for the access programme,
Page 27 and 28: Central GovernmentThe Government’
Page 29 and 30: 3.4 Energy Sector Legislation and R
Page 31 and 32: Figure 4.1: Overview of Approach to
Page 33 and 34: Table 4.1: Variables Considered in
Page 35 and 36: Figure 4.3: Location of Administrat
Page 37 and 38: In order to provide a realistic vie
Page 39 and 40: The planning approach compares the
Page 41 and 42: • Presidential priorities for ele
Page 43 and 44: Figure 4.8: Least Cost Grid Priorit
Page 45 and 46: Figure 4.12: Least Cost Grid Priori
Page 47 and 48: Figure 4.14: Least Cost Grid Priori
Page 49 and 50: Off-grid micro hydro systemsThe com
Page 51 and 52: Table 4.4: Social Institutions Elec
Page 53 and 54: Figure 4.17 (below) indicates the l
Page 55 and 56: Figure 4.19: Overall Electrificatio
Page 57 and 58: 5 Funding for the Access ProgrammeT
Page 59 and 60: The average contract size is expect
Page 61 and 62: Estimates of the capital cost of th
Page 63 and 64: ased on how much is needed to meet
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which estimate 370GWh of domestic e
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Table 5.5: Capital Cost of Sector I
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on approximately 75 percent of resi
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• The capital costs of the access
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• EPC contracts for half of the n
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Managing Director of RECO will then
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Figure 6.2: Overview of Programme M
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The electricity utility is well-pla
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To account for funds committed to t
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Impact on funding requirements-US$1
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7.3 Management of Development Partn
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ReferencesColumbia Earth Institute.
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T: +1 (202) 466-6790F: +1 (202) 466
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Volume I: Investment Prospectus Rwanda Electricity Sector Access ...

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