"ANNEX A � INCREMENTAL COST"
RESPONSE TO COMMENTS FROM COUNCIL MEMBERS Chile: Barrier Removal for Rural Electrification with Renewable Energies Country Comment Response France TRANSLATION: to The CNE (National Energy Commission) established evaluate the relevance of the the Rural Electrification Program (REP) in 1994. proposed project, it misses Annex H includes background information, an analysis of the rural implementation and financing, and results of the REP electrification in Chile (1995-1999). Further, this Annex addresses the REP (situation, costs, tariffs, plans for 2000-2005 (plans and benchmarks). financing, institutions, plans in the short and medium term) TRANSLATION: The Section A.2 (Host Country Strategy) described Chile’s document should give a approach to rural electrification. Annex H also includes clearer vision of the information on the CNE’s REP, including the national renewable energy situation plans for rural electrification within Chile for 2000- and show how the project 2005. will: - complete rural The project’s rural electrification activities are electrification described in Section D. This will involve the - articulate the provisions generation of a portfolio of rural electrification projects taken (role of electricity using NCRE, including identifying the most companies electricity, appropriate technologies and conducting pre- public-private investment studies. In total, approximately 10,370 partnerships) households out of a total household market of 74,000 will be supplied with electricity. During the PDF B stage, electricity companies were surveyed regarding their perceptions of, and problems with, renewable energy and how these could be overcome. This survey helped to formulate the project’s current design. Also, this proposal has been presented and discussed with the energy sector at conferences on renewable energy. Such outreach activities will continue under this project. TRANSLATION: Section J, on the budget, has a breakdown and Financing/budget should be explanation of the budget. specify whether investments are for durable and non- Project co-financing is divided between contributions durable goods, cash, in-kind, from the Government of Chile (in cash and in kind), etc. the private sector, and the future project beneficiaries. There are $16,199,000 of subsidies by Regional Governments according to the REP ($5,814,000, for the installation of approximately 6000 PV system units; $9,185,000, for new rural electrification projects with NCRE; $1,200,000, for hybridization projects with diesel-fueled systems). From private electricity companies, $7,628,000 will be invested in equipment. Beneficiary contributions amount to $1,468,000, covering all costs of internal household installations and measuring equipment. The CNE will contribute the following: $200,000 for the development of a portfolio that includes all possible “Rural Electrification with Renewable Energy” projects; $60,000 for the diffusion and promotion of the project and its activities, such as marketing, publications, and press advertisements; and, $30,000 for administrative costs such as office leasing, communication equipment and services, and documentation needs. In-kind contributions by the Government of Chile ($755,000) correspond to technical and managerial CNE staff involved in all project activities. TRANSLATION: the The hybrid systems involve two or more technologies, description of the types of one of which is renewable energy technology. For this equipment should be more project, there are three potential hybrid system precise (for example, the configurations: (1) diesel-wind (with battery); (2) term hybrid system is too diesel-small hydro (in-stream); (3) diesel-PV. This vague). clarification has been included in the project document (see section A.2). Sweden “The project is very relevant The limited financial capacities of many target from a development households involved in this project are well recognized. perspective since it aims to As such, rural electrification projects are co-financed bring substantial by government contributions of 60 to 70% of the total development benefits to project cost. For the installation of 6,000 PV projects some of the poorest regions covered under this project, there will be $5,814,000 in of Chile. Therefore, it should government subsidies. For new rural electrification also be analysed how the projects with NCRE technology, there will be limited financial capacities $9,185,000 of subsidies. For hybridization projects of many of the households with diesel-fueled systems there will be a $1,200,000 involved may affect the total subsidy. project’s success.” Prior to the development of rural electrification projects, an analysis is made of the household’s ability to pay for electricity. The calculation of the government’s subsidy for each project investment takes into account this ability to pay, and ensures that the fee charged to households for electricity is sufficient. For the hybrid projects conducted under this project, only those with strong development potential will be chosen. This development potential, and associated income generation, is factored into the government’s subsidy analysis. “It would also be interesting During the PDF B stage, electricity companies were to see engagement from surveyed regarding their perceptions of, and problems energy companies in a with, renewable energy and how these could be project like this.” overcome. This survey helped to formulate the project’s current design. Also, this proposal has been presented and discussed with the energy sector at conferences on renewable energy. Such outreach activities will continue under this project. As a contribution to this project, private electricity companies will invest $7,628,000 in equipment. Switzerland “A country like Chile has an Through this project, 6,000 PV systems will be electricity consumption installed in isolated regions of the country where the pattern that suggests that the households are dispersed. These target households aspirations of most were identified as those unlikely to have electricity in unelectrified households is the foreseeable future. This population will receive unlikely to be met by SPV basic services that increase standard of living, as they systems” will receive electricity for lighting and communication (e.g., radio). Therefore this segment of the population is regarded as having significantly different energy consumption aspirations that other segments. In contrast, the project will also involve the introduction of hybrid systems. When choosing the households that will adopt the hybrid systems, the anticipated consumption patterns will be considered and taken into account when determining the appropriate technology. “The prevalent tendency of For those households targeted for receiving the PV rural electrification through systems, analysis of the conditions and populations’ small electricity generators needs indicated that PV was the most appropriate seems very difficult to technology. Currently, this group has no electricity, is overcome, as they present rural, and is highly dispersed. PV was chosen for this the flexibility to add group because of the suitability of PV in these additional plug loads and locations (kcal/m2/day), and the prohibitively high cost income generation activities and low reliability of transporting diesel to remote with small machines. The locations (e.g., using horses). Indeed, in the past, CNE numbers to compare the has experienced failed rural electrification projects in economy of fuel based particular because of difficulties in transporting the fuel electricity generators with to remote locations. SPV are not available in the project brief. The project For the hybrid project, however, the flexibility of the aims at reversing a well-set systems is an important issue. The CNE’s REP has an tendency of fuel based objective to promote productive development (see decentralized electricity Annex H). As this project falls under the REP, the generation, a goal that hybrid projects (i.e., wind-diesel, PV-diesel, hydro- appears based on little more diesel) will certainly aim to provide the flexibility than good intentions.” required to allow for income generation activities. Therefore, under Objective 1, future energy needs will be a major consideration when identifying locations to ensure that the NCRE chosen is appropriate and is expandable as necessary given the growth potential of the area. (see Activity D.1.1.4). UNITED NATIONS DEVELOPMENT PROGRAMME GLOBAL ENVIRONMENT FACILITY PROJECT DOCUMENT Project Number: CHI/00/G32 Project Title: Chile: Barrier Removal for Rural COST AND FUNDING (US$): Electrification with Renewable GEF: Energies Project: 5,984,900 Duration: 5 years PDF B: 82,400 Requesting Country: Chile Subtotal GEF: 6,067,300 Eligibility: Ratified UNFCCC Dec. 22, 1994 Co-financing: ACC/UNDP (Sub) Sector: Environmental/ Government of Chile: 16,489,000 (cash) Climate Change (200/201) 755,000 (in kind) Private: 7,628,000 GEF Focal Area: Climate Change Users: 1,458,000 (cash) GEF Operational Programme: Operational Program 6 Subtotal Co-financing: 26,330,000 Implementing Agency: UNDP Executing Agency: Comisión Nacional de Energía Total: 31,642,300 (cash) 755,000 (in kind) (CNE) Estimated Starting Date: July 2001 Associated Funding: 32,397,300 Summary: The project will help remove the existing barriers to the use of Non-Conventional Renewable Energies (NCRE) within the framework of the National Rural Electrification Program of Chile, by developing a set of activities that will allow for a decrease in the greenhouse gas emissions produced by energy sources in rural areas and improve the living conditions of rural communities. By means of co-funding and a Financing Mechanism, approximately 10,370 households out of a total household market of 74,000 will be supplied with electricity. This project also aims to generate, within rural electrification, the market conditions that will allow for the reduction of emissions produced by diesel-fueled electricity systems. The desired effect is to establish the market conditions for the NCRE to develop in rural and urban areas. Approved on behalf of Comisión Nacional de Energía: ___________________________________________________ Date: _________________________ Vivianne Blanlot S., Secretaria Ejecutiva Approved on behalf of Ministerio de Relaciones Exteriores: ___________________________________________________ Date: _________________________ Soledad Alvear, Ministra de Relaciones Exteriores Approved on behalf of Programa de Naciones Unidas para el Desarrollo (UNDP): ___________________________________________________ Date: _________________________ Thierry Lemaresquier, Representante Residente LIST OF ACRONYMS CNE Comisión Nacional de Energía, (National Energy Commission) PER Programa de Electrificación Rural, REP (Rural Electrification Program) GEF Global Environment Facility GHG Greenhouse Gases CONAMA Comisión Nacional del Medio Ambiente, (National Environment Commission) PDF-B Project Development Facility (GEF) UNDP United Nations Development Program UNFCCC United Nations Framework Convention on Climate Change CORFO Corporación de Fomento de la Producción, (Production Development Corporation) MIDEPLAN Ministerio de Planificación y Cooperación, (Ministry of Planning and Cooperation) FNDR Fondo Nacional de Desarrollo Regional, (National Fund for Regional Development) SEC Superintendencia de Electricidad y Combustibles, (Superintendence of Electricity and Fuel) ERNC Energías Renovables no Convencionales, NCRE (Non-Conventional Renewable Energies) INN Instituto Nacional de Normalización, (National Normalization Institute) BIP Banco Integrado de Proyectos, (Integrated Projects Database) SENCE Servicio Nacional de Capacitación y Empleo, (National Training and Employment Service) INE Instituto Nacional de Estadísticas, (National Statistics Institute) PIB Producto Interno Bruto, (Gross Internal Product) NPV Valor Presente Neto, (Net Produce Value) IPCC International Panel for Climate Change SUBDERE Subsecretaría de Desarrollo Regional y Administrativo (Regional and Administrative Development Undersecretary's Office) A. PROJECT CONTEXT A.1 Country Context Chile covers 756,096 square kilometers and is divided into twelve regions from north to south, in addition to a thirteenth region corresponding to the Metropolitan area. According to the 1999 data registered by the National Statistics Institute (INE), Chile’s population is over 15 million with 2.2 million (15% of the population) living in rural areas. Approximately 6 million, or 40% of the population, is concentrated in the city of Santiago. Other important cities are the neighboring cities of Viña del Mar and Valparaíso, with a combined population of 638,632, and Concepción with 953,787 inhabitants. Approximately 99% of the urban population, or 12,600,000 inhabitants, have access to electricity. While 76% of rural households1 have electricity access, 24% of rural households (136,669 households) lack electricity. Of these households, approximately 74, 000 have been identified as a potential market for Non-Conventional Renewable Energy (NCRE). The Chilean economy has experienced accelerated growth over the last decades. Between 1990 and 1999, Gross Domestic Produce (GDP) grew at a 6.73% yearly rate. The country’s annual consumption has also grown at rate similar to, or higher than, the GDP in areas such as the energy sector. Chile’s per capita energy consumption is still low, at 0.062 TJ per inhabitant, as compared to other industrialized countries. The energy intensity index shows a declining tendency similar to that experienced by advanced countries. The opposite, however, is true regarding CO2 emissions associated with the energy sector of the country and its future projections. The country’s primary energy sources are based on crude oil (39%), natural gas (20%), coal (14%), hydroelectricity (12%) and the remaining energy (15%) derived from firewood, biogas and others. The composition of the country's energy grid has changed during the past years fundamentally as a result of the incorporation of natural gas and investments in this area, as well as gas interconnection protocols signed with Argentina. The susceptibility of hydroelectric generation to periods of drought has strongly impacted the country over the last years. In addition, the availability of natural gas from Argentina, resulting from economic co-operation agreements between both nations, has led to a dramatic change in energy use. The generation of electricity in Chile, is based on hydro resources (41%) and thermal generation (59%). The demand for electricity will continue to have an increasing importance in supporting economic growth of the country. For example, the copper mining industry, which represents one of the highest energy consumption sectors of the country, will continue to expand in the years to come. Therefore, given no policy changes, it is expected that greenhouse gas (GHG) emissions per capita will continue to grow. This situation has motivated government authorities to develop corrective strategies that will allow to the nation’s economy to grow while not leading to increases in GHG emissions. It is clear that promoting policies for more efficient energy use may have strong short-term effects. From a long-term perspective, these policies could lead to important changes in the composition of Chile’s energy mix. 1 The term households in this document refers generally to houses, schools, emergency health centers, and other community facilities and public services in rural zones. 1 After considering both national and international experiences in the field, it is the goal of the Chilean government to promote the removal of the existing barriers to the installation of competitive energy markets for NCRE in Chile. National authorities have already begun to address rural electrification through programs established over the last five years. There are two main reasons for continuing rural electrification programs. First, these are programs that have successfully addressed the needs of the population and, with certain adjustments to meet some additional objectives, will continue to build on previous experience. Second, based on this previous experience with conventional energy sources, the challenges presented by implementing NCRE are now better understood. The current situation is appropriate for installing NCRE in Chile, as the conditions for a reliable market are sufficient to allow for continued growth in the near future. Therefore, the strategic objective of influencing the composition of the national energy mix may be achieved. Although the rural electrification process in Chile has been systematically implemented through grid extension, there is an important segment of rural households that are not viable by grid extension projects. These households are in the less populated, and most economically challenged, regions of Chile. The existing energy alternatives for these communities are currently financed by means of subsidies for diesel and gasoline electricity generators. However Chile’s geographic and climatic diversity presents an excellent potential for the use of renewable energies throughout the country. Solar energy is abundant in the north, hydro and biomass/agricultural energy are in the south, and there is potential for wind energy in coastal and southern-most areas. A.2 Host Country Strategy By the end of 1994, and in response to the initiative of President Eduardo Frei to incorporate all segments of Chile’s population in economic development, an agreement was developed by the Comisión Nacional de Energía (CNE, or National Energy Commission) to initiate a Rural Electrification Program (REP). The purpose of the REP was to provide solutions for the lack of electricity in rural areas, by incorporating the concepts of equity, reduction of migration, productive development, and decentralization of decisions. The goal of the REP was to provide electrification, as a first stage, to 75% of rural households in the country during the 1994-2000 period. At the time, rural electrification coverage reached only 59%. To accomplish the objective, the State implemented a co-financing system that involved private electricity distribution companies, the beneficiaries, and a state subsidy. The REP is developed by decentralized regional management, where each region elaborates, evaluates and finances its projects according to regional needs, while addressing national goals and objectives. Each project undergoes a rigorous evaluation to determine private investments as well as the corresponding amount of subsidy, which is only provided to those projects that present a social positive evaluation and a private negative evaluation2. Public funding is provided by the National Fund for Regional Development (FNDR), which is a financing source to help regions develop social investment sector projects. Since the REPs compete with other social projects to acquire financing from this fund, a special reserve provision (FNDR-ER) was created in 1995 to exclusively finance rural electrification projects. 2 Preparation and Evaluation Methodology for Rural Electrification Projects. MIDEPLAN-CNE. 1996 2 The support from the Fund to different regions is realized according to a methodology that promotes regional efforts in this area. Public expenditure in rural electrification, since the initiation of the REP to the end of 1994, has been close to US$ 115,000,000, and has provided electrical power to 90,145 households (national coverage of 76%). The creation, promotion and co-ordination of the REP is the responsibility of the CNE. Between 1995 and 1999, it promoted regional efforts, delivered technical assistance to optimize investment decisions, and monitored the results of the program. The main actions were: a) Regional co-operation agreements; b) Adaptation of the methodological-institutional framework; c) Annual control and monitoring of the Program; d) Widespread dissemination of the Program; e) Technical assistance for self-generation systems; f) Elaboration of preliminary regulations for the use of PV systems; g) Grid extension pre-investment studies; and, h) Expost evaluation. As one of the results of the REP, a number of rural electrification projects with NCRE were developed and evaluated3,4,5,6 with the objective of analyzing the difficulties resulting from their operations. The analysis concluded that wind, photo-voltaic (PV), biomass/agricultural residues, or hydro technologies differ in their conception, quality, service provided, and mainly in the relationship between the user and the electricity solution. It is accurate to say that the objective for the program in the 1995-1999 period has been successfully reached in terms of global coverage. However, about 136,669 households still have no access to electricity. These households correspond to a rural population of approximately 600,000 inhabitants. Some regions have 70% coverage, however, others have an 85% coverage, which indicates differences in regional development. The new National Rural Electrification Program of President Ricardo Lagos' government for the period 2000-2005 has set a goal of 90% coverage for households and community centers (schools and emergency health centers), both at a national and regional level, with a total State investment of 180 million dollars and electricity for 98,244 households. The government has also made a commitment to: - Improve human development indicators in the country's poorest regions and boroughs, coordinating its rural electrification efforts with other poverty eradication programs in the areas of education, health and productive development, as well as in regions with higher percentages of native communities; - Focus investment, training and dissemination activities in regions with lower energy supply; - Foster the use of Non-Conventional Renewable Energy by reducing existing barriers; and, - Support the gradual substitution of energy systems based on diesel generators to reduce greenhouse effect gas emissions. 3 Analysis of the Incorporation of the Small Hydroelectric Powerhouses in the Rural Electrification Program. MIDEPLAN, 1997. 4 Expost evaluation of some wind projects implemented in the country; Puaucho and Villa Las Araucarias cases. MIDEPLAN, 1997. 5 Expost Evaluation of PV projects implemented in the country; I, IV and VII regions, MIDEPLAN, 1997. 6 Management and Results of the Project: “Generation of Electric Energy by Gasification of Forest Biomass”; Methane Case. UNDP, 1999. 3 The 90% goal is based on the focalization of efforts on relatively concentrated rural areas; it does not include approximately 65.000 households that correspond to the dispersed rural population. Present government policy considers that, given the high geographical dispersion and the amount of investment needed to provide them with electricity, the social benefit-cost relation to provide electricity does not yet justify the allocation of state resources, given other social investment need of higher social returns. Expected goals and results of the REP by the year 2005, in terms of electrification coverage, are reflected in Table 1. Table 1 - Results of the REP Rural Households and Coverage End of year Total of With Energy Without Coverage Rural Energy Households 1999 570,557 433,888 136,669 76 % 2005 622,458 557,723 64,735 90 % Estimated coverage percentages and households for 2005 have been estimated given the following: Annual growth rate of rural households 1.476% Households with electricity period 2000-2005 123.835 As a result of PER 98.244 Vegetative growth of rural households 2000-2005 51.901 7 Households with electricity : 25.591 Households without electricity: 26.310 State programming establishes that 90% of the 98,244 households will be electrified through grid extension in the 2000-2005 period, with the remaining 10% to have access to electricity through diesel generators. However, an important percentage of these households may use NCRE if the barriers that prevent the entrance of these technologies into rural areas are removed. In relation to NCRE, it is worth noting that Chile was one of the first countries in the world to use solar energy for industrial purposes. In 1972, the first solar industrial plant was installed in the city of Antofagasta, located in the northern part of the country. Systematic solar energy measurements began in 1961. The national heliometric inventory records measurements in more than 120 stations along the country. In 1987, the Solar Energy Laboratory of the Federico Santa María University (Universidad Federico Santa María) published the National Inventory of Heliometric Evaluations. It contains monthly and annual rates of daily global radiation over a horizontal area from 129 heliometric stations. Examination of this registry indicates that northern Chile has extraordinary conditions for the use of solar energy. Between the I and IV regions, the solar energy potential can be classified among the highest in the world, as it is shown in Table 2, which illustrates annual radiation rates by region. 7 Vegetative growth of households refers to those in areas with electricity that do not require PER for energy supply. 4 Table 2 - Solar Radiation Annual Rate Region Solar Radiation [kcal/m2/day] I 4.554 II 4.828 III 4.346 IV 4.258 V 3.520 VI 3.676 VII 3.672 VIII 3.475 IX 3.076 X 2.626 XI 2.603 XII 2.107 RM 3.570 Antarctic 1.563 a In relation to wind energy, the first organized attempt to evaluate the resource as to its application corresponds to a series of experiments carried out in the Atacama Desert between 1962 and 1963 by Dr. Dannies, an expert from UNESCO. The study concluded that northern Chile presents favorable conditions for the installation of 25 and 300 kW unit plants. In 1992, the University of Chile elaborated a study entitled “Wind Energy in Chile: Evaluation of its Potential”. This study presented wind directions and velocities in 60 meteorological stations, although it is still necessary to carry out investigations taking into account wind energy demand. Studies must consider a wider coverage, station density, wider registration periods, greater number of daily registers, and the height necessary to obtain reasonable measurements. Such investigations have not yet been carried out since they have not been considered a need for national energy development. In relation to small-scale hydroelectric resources, initial studies indicate that in Regions VIII to XI there are abundant hydraulic resources to be utilized in small hydro. Still, efforts need to be made to measure the volume of flow, and estimate values and measurements of net heights available for hydroelectric generation, in rural communities having households in need of a project of such characteristics. Since 1994, isolated efforts have been made to incorporate NCRE in the REP. Pilot projects using different technologies, including PV, wind, small hydro and gasification of forest biomass, have been implemented. The operational results of the pilot projects are diverse, but fairly good results in some of them show good perspectives for the future, provided that technical and institutional lessons are incorporate to the future development. At present, in general terms, the Government and private companies supply electricity to isolated households by using diesel electricity generators, given the operational reliability of the equipment in both technological and economic terms. 5 The use of renewable energy in Chile has been published in the study: “Inventory for the Elaboration of the Installation of Non-Conventional Renewable Energies in Chile”. It demonstrates that, in 1998, the NCRE contributed approximately 105.08 TJ to the National Energy Balance. That is, 0.0132% of the final energy consumption8. The types of NCRE energy contributions include: 43.46% solar-thermal energy 24.06% solar PV energy 31.14% small hydro 0.44% wind energy 0.90% others9 Under the PDF B10, a study identified households that will never have access to electricity through grid extensions due to their extreme isolation and dispersion conditions. Approximately 29,355 households were identified, which are part of the 64,735 households that do not fall under the State’s assistance through REP. Considering the total number of households (and the 9,824 households that will be electrified by the program through diesel-fueled systems within the next 5 years) the estimated potential market for NCRE in new rural electrification projects is 74,559 households. After analyzing and integrating the results of the former study with the potential market analysis, the distribution of resources by household has been developed (Table 3). Table 3 – Potential by Resource Resource Household Potential Solar (S) 20,667 Hydro (H) 19,094 Biomass (B) 55,604 Wind (W) 17,324 Table 4 shows the number of households to receive electricity by various resources, assuming that an area can sustain more than one type of renewable resource. The distribution of the different combinations of renewable resources, by household, is also shown in Table 4. The estimation of the regional distribution of non-electrified households that have the potential for using renewable energy is provided in Table 5. Given these resources, the NCRE technologies that will be considered for the rural electrification projects are photovoltaic, wind power, small hydroelectric, biomass, and hybrid systems. The hybrid systems involve two or more technologies, one of which is renewable energy technology. For this project, there are three potential hybrid system configurations: (1) diesel-wind (with battery); (2) diesel-hydro (in-stream); and (3) diesel-PV. 8 Development implemented with large hydroelectric power-houses and the commercial profitability of biogas have not been considered in this analysis of the NCRE 9 Includes wind pumps, solar pumps, solar cooking stoves, firewood gasification and geothermal installations. 10 Study “Estimation of the Application Potential of Renewable Energies in Rural Electrification”. 6 Table 4 - Household Percentage by Type of Resource Resource Number of Percentage Potential Households S 10,291 13.80% H 127 0.17% B 26,333 35.32% W 76 0.10% S-H 4,153 5.57% S-B 1,773 2.38% S-W 2,791 3.74% H-B 12,506 16.77% H-W 447 0.60% B-W 13,469 18.06% S-H-B 1,321 1.77% S-H-W 338 0.45% H-B-W 203 0.27% S-H-B-W - 0.00% S/R 731 0.98% Total 74,559 100.00% Solar (S), Hydro (H), Biomass (B), Wind (W) Table 5 - Regional Distribution Region Number of Potential Number of Non- Households electrified Households I 689 602 II 14 14 III 610 479 IV 9,369 6,776 V 4,019 3,370 VI 9,860 3,495 VII 17,836 8,278 VIII 24,027 10,708 IX 25,903 9,912 X 36,417 25,204 XI 1,944 1,800 XII 560 500 RM 5,422 3,421 Total 136,669 74,559 7 A.3 Prior and Ongoing Assistance The CNE has been working on the implementation of projects with the support of international agencies to promote the use of renewable energies and the linkage with institutions concerned with the promotion of experience-interchange. As a result, the following actions have been developed: a) Energy Initiatives of the Americas, where the CNE, on behalf of the Government of Chile, presides over the Workgroup on Rural Electrification; b) Wide Co-operation Agreement in Renewable Energies, with the US Department of Energy (DOE). This agreement considers the following activities: Execution of four hybrid wind demonstration projects in Region IX and X rural communities; Development of a wind map for the Chiloé Archipelago in Region X, and a portfolio of wind energy projects aimed at supplying 3500 households in 32 islands of the Archipelago Training in wind energy. c) Greenhouse Gas Emissions Reduction Project in Chile, developed in conjunction with CONAMA and the assistance and financing of the UNDP/GEF; “Generation of Electric Energy by Gasification of Forest Biomass”; and, d) Rural Electrification Project of an indigenous community, by means of hydroelectric small powerhouses, developed in conjunction with the UNDP and financed by the Japanese government within the framework of APE. A.4 Institutional Framework In accordance with the economic policy and the regulatory framework applied in the country, activities related to the generation, transmission and distribution of electricity in Chile are primarily carried out by the private sector. State intervention is restricted to regulatory, compliance and subsidiary functions. Electricity companies are free to manage their investments, commercialization services and operations of their installations. Nevertheless, these companies must comply with certain obligations, regulations and technical norms, established by law, that constitute the regulatory framework of the electrical sector. For example, distribution companies are obligated to provide service within their corresponding concession area, and must respect maximum tariffs set by the authority for the sale of electricity to low-consumption clients. For electrical systems demanding 1500 KW or less, which includes rural electrification projects installing diesel generators and NCRE, the law dictates that maximum prices are to be agreed between the Mayor of the respective City Hall and the corresponding Distribution Company11. The law determines a tariff system regulating supply pricing, service quality, functioning service hours and all the pertinent conditions. State organizations participating in the regulation of the electricity sector in Chile are: Ministry of Economy Development and Reconstruction; National Energy Commission (CNE); Superintendent of Electricity and Fuel (SEC); and the National Environment Commission (CONAMA), among others. 11 This condition applies to systems and projects that receive service through 100% private investment and operational responsability. 8 B. PROJECT JUSTIFICATION B.1 Problem to be addressed and the present situation The Government of Chile has financed pilot projects with renewable energies. These experiences have allowed for the demonstration of the benefits of the incorporating such systems in isolated areas and the need, in some cases, to organize community users to ensure the long-term sustainability of projects. Given the existence of barriers and the market conditions, rural electrification tends to be accomplished by projects using diesel generators, and through grid extension. This project identifies the barriers to the use of NCRE in rural electrification. The successful implementation of the project will eliminate the barriers and disseminate these NCRE technologies with the participation of private investments. The barriers to the introduction and adoption of the NCRE in rural electrification identified in the elaboration of the project are: (a) lack of rural electrification projects with NCRE; (b) lack of regulations for renewable energy equipment; (c) lack of certification procedures for renewable energy systems and their installation; (d) lack of general knowledge with respect to NCRE; (e) lack of formal training programs; (f) existence of high cost investments in projects with NCRE; (g) perception of associated risks with renewable energy technologies; (h) lack of technical expertise, equipment, and analysis to make wind resource measurements; and (i) lack of NCRE commercial projects having economies of scale. These barriers are described below. B.1.1. Lack of rural electrification projects with NCRE The model utilized by authorities for rural electrification projects with NCRE is the same that applies to the extension of conventional electricity. Private companies are in charge of preparing and petitioning their projects to regional governments for the awarding of the subsidies for rural electrification, where the operation and maintenance of the systems is provided for a monthly fee. It is worth noting that this model has been successful for the NCRE projects that have used it. In most cases, engineering studies for grid extension projects are conducted by the energy companies through extensions of their own installations. The preparation of a NCRE project, however, demands resource evaluation and much more detailed engineering studies than that of a grid extension or diesel generation project, and therefore has higher costs and requires more preparation for the companies. Therefore, the NCRE projects are not abundant and, when analyzing subsidies awarded by regional governments, the NCRE alternative is not predominant, notwithstanding that it may be the economic and technologically preferable option in some cases. As a consequence, most of the isolated communities of the country have access to electricity by means of diesel or gasoline fueled electricity generators, and that has set a tendency in rural electrification. B.1.2 Lack of regulations for renewable energy equipment Chile has a national system of regulations established by the National Normalization Institute (INN). This Institute is charged with elaborating a collection of regulations for NCRE to be utilized in the REP. International experience in the subject is advanced, as ASTM and European norms are available for procedures and standards that allow for the certification of PV panels. U.S. and European norms include procedures to approve the construction of small hydroelectric powerhouses. 9 A barrier to the involvement of the private sector in the NCRE market is the lack of a legalized technical market tied to the electrical regulations of Chile. There is a lack of understanding regarding the technical requirements of each project, the minimum equipment required, quality standards, work designs, safety of the installations and assembling of the equipment. There is no basis of understanding developed from previous experiences with NCRE, yet it is the responsibility of the companies to operate and maintain the equipment to maximize the equipment’s useful life. B.1.3 Lack of certification procedures for renewable energy systems and their installation Another barrier that NCRE projects have faced is the lack of certification procedures for renewable energy systems and their installation to ensure compliance to technical and safety regulations. The lack of certification for renewable energy systems and their installations may result in the implementation of projects that comply with neither technical nor with minimum quality service specifications. There are small hydropower stations that do not comply with the stipulated generation potential, while other stations have been deserted. In addition, there are wind systems that operate only two hours average a day and PV systems that have been abandoned due to spare parts and equipment failure. B.1.4 Lack of general knowledge with respect to NCRE To date, there is a lack of knowledge in Chile with respect to renewable energies including: characteristics, applications, benefits, operations, and environmental and sustainability advantages with respect to other self-generation alternatives (e.g., diesel-fueled electricity generators). This lack of knowledge manifests at all levels, from the potential users of the technologies to energy distribution companies, government, and NGOs. This lack of knowledge has also prevented the development and dissemination of the NCRE in all their applications. It has limited the development of a market that could become attractive for the development and implementation of new projects with NCRE. Even when certain NCRE projects have been awarded to the REP, they have not been welcomed by traditional distribution companies, who instead offer grid extensions or diesel electricity generators as the preferred solution. B.1.5 Lack of formal training programs The PDF B project “Training Program Plan for the Introduction of the Use of Renewable Energies in Rural Electrification in Chile” verified the lack of formal training programs in the field of renewable energies in all of the country. In particular, there are no polytechnic training programs or university level training. Of Chile’s 50 universities, only three (6%) provide instruction on subjects related to renewable energies in mechanical, electrical and hydraulics engineering. The lack of formal training programs results in a lack of trained technicians able to develop NCRE projects, operate the systems, and provide adequate technical service. Therefore, the development of rural electrification projects with NCRE is limited not only by the adequate definition and execution of the project, but also by the lack of technical capacity to operate and adequately maintain the systems. 10 B.1.6 Existence of high cost investments in projects with NCRE Overall, NCRE projects are characterized by their high cost investment in relation to projects using diesel or gasoline generators. On a 20-year horizon, however, the optimal decision would generally be the implementation of projects utilizing NCRE. Nevertheless, the number of barriers as described in this document generates a high level of uncertainty regarding the economic flow of the project. Therefore, private companies that operate in this sector tend to not be in a position to use their investment resources for NCRE projects as the projects have higher risks. This risk avoidance has prevented the materialization of many rural electrification projects with NCRE. Companies tend to favor the installation of electrical generators, which require a lower up- front investment and have a higher perceived profitability, even if operation expenses are higher for traditional technologies. B.1.7 Perception of associated risks with renewable energy technologies A barrier to the introduction of NCRE is the perception of risk associated with the economic results of the projects. The lack of knowledge of the technology, the lack of national training capacity, and the scarcity of commercial-scale projects all contribute to the uncertainty of potential NCRE project investments. An analysis of pilot projects using different types of technologies has shown that there is an increase in risk perception associated with NCRE technologies. Despite the identified need to implement electricity solutions in isolated areas coupled with the Government’s co-financing of projects with NCRE, traditional distribution companies would rather promote and implement diesel solutions. When regional authorities have awarded NCRE projects, companies have not been willing to implement them. For example, in Santa María Island (Isla Santa María), a hybrid wind diesel project ended up being executed using only diesel. Another example is the electrification of the Alto Bío-Bío by means of small hydro, where Saesa Frontel (the distribution company) presented a grid extension offer at a higher investment. This barrier also affects a number of diesel systems operating and servicing communities with populations of over 500 inhabitants. Many of these systems could be hybridized by means of NCRE, thereby reducing operation costs, fossil fuel consumption, and emissions produced. The perceived risk of lower revenue and future costs of hybrid alternatives has led the local government to invest in the technology transformation of the systems. B.1.8 Lack of technical expertise, equipment and analysis to make wind resource measurements Chile has an enormous potential for exploiting wind resources. The only systematic evaluation effort of this resource has been the inventory of meteorological information, which does not allow for the development of electrical generation projects. The lack of systematic efforts to evaluate this resource for electrical development purposes has led to a lack of suitable professionals, technicians, equipment and practical experience to gather adequate information to define projects. This barrier has resulted in a lack of projects using wind energy. Although there may be economic and technical reasons for carrying out electrical generation projects with wind energy, it is difficult to implement them at this time due to the lack of adequate long-term measurements over long periods of time (e.g., with an adequate number of daily registrations). This type of information would permit the characterization of the resource according to its magnitude, intensity and internal capacity. 11 B.1.9 Lack of NCRE commercial projects having economies of scale The lack of large-scale NCRE demonstration projects is a barrier that prevents the different actors in the national energy market from understanding the possibilities of developing NCRE projects. Such large-scale projects benefit from economies of scale derived from providing electricity to a larger number of households, thereby transforming it into a commercially attractive project. These economies of scale may be obtained through amounts invested, as well as in the operation, maintenance, and administration of the projects. The lack of commercial demonstration projects with NCRE tends to heighten the levels of uncertainty and risk as perceived by potential investors when evaluating investments in rural electrification. B.2 Expected end of project situation In general, the removal of barriers that prevent the incorporation of NCRE in rural electrification will contribute toward the development of a national market for NCRE. This process will therefore reduce GHG generated from energy sources in rural areas. B.3 Target beneficiaries Some 6,000 households, will directly benefit from this project by replacing candles and kerosene with PV systems; 3,720 will be supplied with NCRE instead of diesel powered systems; and the quality of supply of some 650 households currently using diesel will improve by having these systems replaced with NCRE hybrid systems. Furthermore, the development of a market for NCRE will likely have a direct impact on project costs and quality, thus resulting in the development of new projects that will supply energy to an estimated 100,000 homes, rural schools, community centers, and communications centers. B.4 Project strategy and implementation arrangement B.4.1. Government Commitment and Institutional Provisions The content, methodology and objectives of this project coincide and are compatible with the Chilean government's policies on energy and social and community development. Since the creation of the National Rural Electrification Program in Chile in 1995, the Chilean government has been able to supply energy to rural communities and improve their quality of life by increasing coverage from 56% to 76% between 1995 and 1999, as well as foster social and productive development in those communities. The new Program's rural household electrification target for 2000-2005 has been set at 90% coverage nationally and regionally, in conjunction with the promotion of Renewable Energy and the gradual replacement of diesel fuel-based generation systems. The Chilean government's Comisión Nacional de Energía (CNE, or National Energy Commission), which manages the country's energy policies, oversaw the preparation of the Project, which was finally approved by national energy and environmental authorities. The Commission also developed similar projects with UNDP/GEF in the past and has been in charge of REP at a national level. The success rate and results obtained are the result of the development and execution of various projects in co-operation with different national and international organizations. The institution in charge of executing the project is the CNE. 12 The UNDP office in Chile will support the project, cooperating in the design, providing assistance for the project's administration according to the procedure and TORs established with the executing agency, opening the process to national and international tender for professional consulting services and equipment. B.4.2. Local community participation and sustainability The participation of the local communities in the REP is guaranteed by the experience developed with traditional rural electrification. Participation has been granted by the creation of Pro-light Committees in rural communities that have no access to electricity. It is necessary to incorporate the lessons learned by the development of these pilot projects into NCRE projects. The cooperation of the following organizations will be required to implement the program: community organizations, local governments, private electric distribution companies and supplying/servicing companies. The operation and maintenance will be provided for a monthly fee. B.4.3. Executing Agency and Implementation The executing agency for the project will be the CNE, which will oversee general aspects of the project and be responsible for the design, direction and monitoring of the project's components, approval of each of its activities and specific terms of reference, contracting of all professional, personal and equipment services, reporting and payment orders. These activities will be carried out by a staff member appointed by the agency to act as National Project Director and to represent the agency before national and international organizations linked to the project. The National Director will be responsible for the project's direction, planning strategies and efficient overall execution according to the norms established in the Project Document and its Appendices. The UNDP will select and hire a Principal Technical Advisor (PTA) according to the guidelines established jointly with the Commission. The PTA will manage the project under the direct supervision of the National Director. The hiring, salary and resource assignment will be authorized by the National Director in representation of the Commission, and according to the formal mechanism established jointly with the UNDP so as to guarantee the transparency and efficiency of payment and contracting approvals and authorizations. A Project Coordination Committee will be established to support project implementation, monitor project activities, and ensure that such activities fulfill the project's objectives as well as those of the National Strategy for Climate Change. The Committee will be chaired by the Executive Secretary of the CNE and will include the following members: the National Director; representatives of the CONAMA, UNDP and SUBDERE; and the Principal Technical Advisor, who will act as recording secretary. Likewise, regional government representatives, members of the community and of other involved entities, as well as experts, will be invited to participate in the Committee, according to the agenda of each meeting. The Committee will meet periodically as indicated by the President through the Secretary. There shall be at least two regular sessions each year. During these meetings, project progress during the 13 corresponding time period will be presented and analyzed. The committee members will receive relevant project documents, including progress status, current results, and objective achievement, among others. The Committee members will be allowed to express their opinions, questions, recommendations, and suggestions in written or oral form. B.5. Reasons for Assistance from UNDP/GEF The aim of the project is the creation of NCRE national development in rural electrification, resulting in the generation of a positive global impact, even after its termination. This project is consistent with the Climate Change Operational Program #6 - “Promoting the Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs”. The contribution by GEF is, therefore, relevant and necessary for contribute to the removal of barriers that prevent the incorporation of NCRE in Rural Electrification. The proposed project will contribute directly to the electrification using NCRE of 10,370 houses and result in at least 100,000 houses electrified using NCRE through 2020. This compares favorably to the baseline case, where the rural electrification will be based on diesel and grid extension in 2020. In addition to other domestic benefits, global benefits will include reduced emissions by 1,754,740 tons of CO2 by the year 2020, implying a ratio of US$ 3.4/ton of CO2 for the GEF grant. If the amount of US$ 2,000,000 to be used as a guarantee to finance credits is not included, then this figure decreases to US $2.27/ton of CO2. As the project is expected to have a sustained boosting impact on the Chilean NCRE market, the total reductions of GHG gases will be substantially greater. C. DEVELOPMENT OBJECTIVE The objective of the proposed project is to remove the existing barriers to the use of Non- Conventional Renewable Energies (NCRE) for Rural Electrification in Chile, by developing a set of activities that will allow for a decrease in the greenhouse gas emissions produced by energy sources in rural areas. The project will: (i) Promote the removal of the barriers that prevent the successful use of renewable energies in the Chilean rural electrification, generating within the existing institutional framework the conditions for the development of a NCRE market in Chile, and (ii) Promote public and private investments towards the development of rural electrification with non-conventional energies. (iii) Promote social equity and the improvement of living conditions in rural communities. 14 D. IMMEDIATE OBJECTIVES, OUTPUTS AND ACTIVITIES12 D.1 Immediate Objective 1: Generation of a Portfolio of Rural Electrification Projects using NCRE [GEF: US$ 300,000; Government: US$ 200,000 (cash), US$ 36,875 (in-kind); Users US$ 0; Private US$ 0] Result D.1.1. Overall potential use of NCRE in rural electrification in Chile, with a breakdown of available renewable energies by geographical location, and the number of potential households. Activity D.1.1.1. Update prospective studies on the potential for NCRE use in rural electrification by conducting field studies. Activity D.1.1.2. Update official land registers on NCRE-based technology currently in use and cross-reference this data with the information provided in prospective studies on their potential use. Activity D.1.1.3. Develop a geographic information system to identify potential use of NCRE in rural electrification. Activity D.1.1.4. Identify the best locations for the development of pre-investment studies in the country for the execution of rural electrification projects using NCRE during the period 2001-2005. Potential for future energy needs will be a major consideration when identifying locations to ensure that the NCRE chosen is appropriate and is expandable as necessary to be consistent with the CNE’s RE programme. Result D.1.2. Initial portfolio of Rural Electrification Projects with NCRE of 12,500 households, which are to be incorporated into the National Investment System13 (Sistema Nacional de Inversiones) for the State’s awarding of subsidies for rural electrification. Activity D.1.2.1. Determine where pre-investment studies for projects with NCRE will be conducted, and prepare TORs for their execution. Activity D.1.2.2. Contract and conduct pre-investment studies for projects with NCRE in coordination with regional government authorities in areas with the greatest potential for NCRE- based electrification and less coverage. Activity D.1.2.3. Develop a geo-referenced database of pre-evaluated rural electrification projects with NCRE, with estimated investment amounts, funding required, possible economies of scale, infrastructure requirements, identification of households, evaluation of renewable resources, etc. Activity D.1.2.4. Conduct basic and detailed engineering studies for pre-investment projects that can be financed with the Financing Mechanism (see Immediate Objective 7). 12 Some activities will be carried out by the PTA (Principal Technical Advisor) and his team, and/or the CNE. These activities do not have specific budget lines. 13 Administration system for State investments in infrastructure and social projects, with norms established by the Planning and Cooperation Ministry (MIDEPLAN) 15 Result D.1.3. Rural electrification projects with NCRE included in the National Investment System for application for State rural electrification subsidies. Activity D.1.3.1. Elaborate an initial portfolio of communities for execution of rural electrification projects with NCRE, and obtain social information required for the projects. Activity D.1.3.2. Prepare documentation and incorporate projects into the National Investment System. Activity D.1.3.3. Prepare documentation for the bidding process for the execution of pipeline projects considered in the pre-investment studies. Activity D.1.3.4. Prepare institutional agreements with regional governments for the bidding process for NCRE-based rural electrification projects that have been identified and assessed. D.2 Immediate Objective 2: Elaboration of Technical Norms for Electrification Systems with NCRE [GEF: US$ 365,000; Government: US$ 0 (cash), US$ 165,000 (in-kind); Users US$ 0; Private US$ 0] Result D.2.1. Standard procedures for the application of technical norms for electrical systems using NCRE. Activity D.2.1.1. Study the legal aspects regarding the application of technical norms for NCRE- based electrical systems taking into consideration the national regulatory and fiscal framework. Activity D.2.1.2. Prepare and use of standard procedure for technical norms for systems with NCRE. Result D.2.2. Technical Framework validated as an Official Chilean Electrical Norm by the Superintendent of Electricity and Fuel (SEC). This Framework will involve a series of norms for PV systems, small- scale hydro, wind and hybrid, and biomass gasification systems to facilitate the entrance of the private sector into the renewable energy market. Activity D.2.2.1. Conduct a country-wide and international study on existing technical norms for these technologies, and on the possible application of general norms for this equipment. Activity D.2.2.2. Conduct a study aimed at identifying the technical aspects that require standardization in order to ensure the success and sustainability of the operation of each technologies. Activity D.2.2.3. Analyze current systems and procedures for incorporation and approval of norms by the INN or SEC, and develop this process. Activity D.2.2.4. Conduct the studies for defining norms and prepare the necessary documentation to draw them up using INN or SEC standardization procedures. Activity D.2.2.5. Carry out normative procedure through the INN or SEC. 16 Activity D.2.2.6. Apply standing procedures for the norms designed in Result D.2.1 Result D.2.3. Wide knowledge of designed norms by equipment and systems producers and importers as well as professionals and technicians who have taken part in the development of these projects. Activity D.2.3.1. Carry out a dissemination program of the set norms to encourage the sharing of experience among promoters and executing agencies, the creation of new technological markets, and confidence in the technology of the NCRE electrification projects. D.3 Immediate Objective 3: Elaboration of Certification Procedures for Electrical Systems with NCRE [GEF: US$ 555,000; Government: US$ 0 (cash), US$ 36,875 (in-kind); Users US$ 0; Private US$ 0] Result D.3.1. NCRE Electrification Systems Certification Procedures to ensure compliance with technical norms for equipment quality, inspection of facilities and control of installers. Activity D.3.1.1. Analyze the international experience in certification methodology and procedures for NCRE equipment. Activity D.3.1.2. Define the relevant certification issues of the NCRE equipment and power-house according to the norms established in the immediate objective D.2. Activity D.3.1.3. Establish certification procedures to ensure compliance with Chilean technical norms. Result D.3.2. Development of an NCRE systems certification market in Chile to ensure the sustainability of this activity after the project has ended, and the quality, security and sustainability of all NCRE projects. Activity D.3.2.1. Analyze national certification capability, and study overall demand for certification procedures. Activity D.3.2.2. Sign cooperation agreements with universities to set up laboratories capable of conducting certification procedures. D.4 Immediate Objective 4: Implementation of a Promotional Campaign for NCRE [GEF: US$ 400,000; Government: US$ 60,000 (cash), US$ 36,875 (in-kind); Users US$ 0; Private US$ 0] Result D.4.1. Promotional campaign aimed at facilitating the development and management of NCRE-based rural electrification projects, reinforcing the NCRE market, and increasing knowledge of these technologies. 17 Activity D.4.1.1.: Identify the objectives, contents and outcomes of the promotional campaign. That is, design a campaign in terms of objectives, coverage, focus, target audience, resources, and market, considering the use of the following promotional tools: Development of advertisements, or programs for the media; Development of dissemination campaigns during project execution; Promotion through workshops and specialized events; and, Promotion through specialized media. The campaign will include the promotion of training programs for users. Activity D.4.1.2.: Execute the campaign according to its design. Activity D.4.1.3.: Annual evaluation of the campaign in each of the components and status of the target market. Result D.4.2. Project Website to facilitate on-line communication with and among agents interested in the project. Activity D.4.2.1.: Establish institutional agreements for the implementation of the project website, including agreements with internet service suppliers and other relevant national institutions involved in NCRE. Activity D.4.2.2.: Implementation and maintenance of project website. D.5 Immediate Objective 5: Development of a Training Program [GEF: US$ 500,000; Government: US$ 0 (cash), US$ 36,875 (in-kind); Users US$ 0; Private US$ 0] Result D.5.1 Generate sufficient training programs to cover demand at a national level for human resources training in NCRE-related fields so that all relevant actors in the implementation process of renewable energy projects acquire the following know-how: Users: Knowledge of the proper management of systems installed in their household (security and operating instructions). Knowledge of project management and obligations and rights as clients, according to the various system maintenance and sustainability models. Knowledge of what financing instruments are available and can be applied for to purchase systems to increase the capacity of the system installed in the household or for new users. Electrical or related companies Knowledge of regulations, norms or standards for certification of procedures and mechanisms to reduce the possible risks involved in the implementation of projects using this technology. Knowledge of funding mechanisms for projects of this nature. Technicians and installers Full knowledge of technical norms and standards, and of certification procedures established for the installation and maintenance of equipment. Knowledge of security matters for these systems, and troubleshooting. 18 Regulatory agencies, managers and inspectors Knowledge of established regulations for projects, norms or standards, and certification of installation procedures. Knowledge of required background data for presenting renewable self-generating systems projects, which include recommended models for equipment sustainability and maintenance. Activity D.5.1.1: Determine available NCRE courses and training programs in the country and overseas. Activity D.5.1.2.: Review and adjust training programs designed within the framework of the PDF B, and determine if it will be implemented in Chile or overseas, according to the identified requirements (Table 6). Activity D.5.1.3.: Develop of long-term institutional agreements with universities and training institutions. Activity D.5.1.4.: Execution of a training program for the different agents taking into account the following aspects: Target market Institutions involved Specific courses to be supplied Relevant international events Time-frame for the development Activity D.5.1.5.: Application of the follow-up, monitoring and evaluation mechanism on developed programs, to obtain feedback and thus reinforce and modify contents according to the results. D.6 Immediate Objective 614: Design and Execution of a Large-Scale PV Demonstration Project [GEF: US$ 794,900; Government: US$5,814,000 (cash), US$ 110,625 (in-kind); Users US$900,000; Private US$ 2,492,000] Result D.6.1 Install approximately 6000 PV system units in isolated areas of Region IV in the north, thus facilitating the replication of projects similar to those that supply energy with PV systems, and reach an estimated market of more than 20,000 households at the national level, including productive development projects with PV systems. Activity D.6.1.1 Design the project and conduct an evaluation using the project evaluation method of the Ministry of Planning and Cooperation (Mideplan). Activity D.6.1.2 Present the project and apply for State funding in order to obtain FDNR subsidy. 14 GEF funds will cover the incremental costs of equipment purchases by the government for the PV Demonstration Project, as described in Annex A. 19 Table 6 - Training Needs PROBLEM AREAS REQUIRING TRAINING CAUSE CONSEQUENCE TRAINING ACTIVITY PROPOSED PV (i) Users tamper Lack of High percentage Train users in basic functioning of the with system knowledge of failure in system. leading to sub- regarding regulators and Training oriented to improve electrical optimal equipment batteries technicians’ knowledge of maintenance operational functioning Abandoned and installation of PV systems. results systems Train in management, administration, maintenance, operation, and equipment replacement (for servicing companies). Wind (i) Users make Lack of Failures in the Train users to work with this type of faulty knowledge system technology. connections regarding of Long energy Train professionals and technicians in this technology blackout type of technology. use periods. (ii) Failure in the Lack of wind Short periods of Train the creators of the projects in the evaluation of the required for service adequate evaluation of the generation wind resource system’s Systems not resources. correct working operation properly Hydro (i) Failure in the Failure in the Abandoned Train professionals in the design and execution of the engineering small power- size/extent/capacity of hydro projects. work design houses (ii) Incorrect Lack of water Low quality Train the project designers to correctly evaluation of the for optimal service evaluation the hydro resource, and to resource system’s High failure rate design of hydro-based solutions. functioning Abandoned Train technicians to operate and maintain Failure in small power- the installations. engineering houses design Biomass (i) Lack of Insufficient Insufficient Train those responsible for administration, knowledge of the information, information, as operation and maintenance of the power- technology as only one only one project house regarding equipment functioning. project is is currently Train users regarding the proper use of the currently being evaluated technology. being evaluated 20 Activity D.6.1.3 Award execution, construction and service concessions to private enterprise(s). The installation and the operation and maintenance of systems will be awarded in a contract to one single company or separated into different contracts, one for installation and other for operation and maintenance, as appropriate. Open bids will be called internationally once State funding has been approved together with funding from users, private companies and GEF. Activity D.6.1.4 Follow-up of the installation of PV systems and final evaluation of results considering aspects such as user satisfaction, administration, operation and maintenance mechanism of the systems and participation in private campaigns. D. 7 Immediate Objective 7. Development of a Financial Mechanism for NCRE Project [GEF: US$ 2,070,000; Government: US$ 10,385,000 (cash), US$ 110,625 (in-kind); Users US$ 558,000; Private US$5,136,000] Result D.7.1 A non-grant Financial Mechanism, or Fund, will be developed that provides appropriate barrier removal so that investors will pursue NCRE systems over traditional approaches, and learn to manage and control possible risks involved in major investments for NCRE systems. Activity D.7.1.1. The design of the Financial Mechanism will be completed by subcontract in close collaboration of the UNDP Country Office, UNDP-GEF Headquarters, and the CNE. The Financial Mechanism will include clear methodologies and procedures to aid investors in the application process, format and content of application forms, operating procedures, and selection processes of the cooperating banking institutions. The main objective of the Financial Mechanism is to establish a guarantee or contingency Fund that will ease access by the NCRE investors to private credit. Activity D. 7.1.2. Develop specific evaluation methodology for selecting projects that will be candidates for consideration by the Financial Mechanism. Activity D. 7.1.3. Develop and establish the administrative regulations for the Financial Mechanism, including participation of UNDP, CNE, banks and possibly beneficiaries, as well as all required legal documentation. Activity D. 7.1.4. Presentation and dissemination of the objectives and nature of the Financial Mechanism to the various agents involved. Activity D. 7.1.5. Operation of Financial Mechanism or Fund. Only once the Financial Mechanism has been designed, and the design has been approved by the UNDP Country Office, UNDP-GEF Headquarters, and the CNE, will the Fund become operational. Therefore, not until final approval of the design and related supporting documentation has been obtained will budget line 73.01 be used by UNDP Country Office. Activity D. 7.1.6. Follow-up and evaluation of the Financial Mechanism's operation, and dissemination of results. 21 D.8 Immediate Objective 8. Reduction of the CO2 Emissions by means of Hybridizing Projects with diesel-fueled systems currently in operation [GEF: US$ 200,000; Government: US$ 0 (cash), US$ 110,625 (in-kind); Users US$ 0; Private US$ 0] Result 8.1 Generate hybrid projects to be executed through State and private financing, and with the support of the Financing Mechanism as described in Activity 7. Activity 8.1.1 Carry out an inventory of the communities having diesel installations in Chile, including their characteristics. Activity 8.1.2 Develop engineering studies to determine technological and financial feasibility to develop these projects case by case, taking into consideration the implementation of adequate measurements of the resource in these locations. D.9 Immediate Objective 9. Creation of Technical Capacity to Evaluate Wind Resources in Chile [GEF: US$ 300,000; Government: US$ 0 (cash), US$ 110,625 (in-kind); Users US$ 0; Private US$ 0] Result D. 9.1 Create the internal capacity within Chile to further develop the necessary accurate measurements and evaluations of the wind resources for both the State and private sector to be able to design projects. Activity 9.1.1. Define the internal capacities and the preparation of the participants for the learning process. Result D.9.2 Have access to full measurements in specific areas of the country, according to set requirements for the preparation of projects of this nature. Activity 9.2.1. Define the areas where the accurate measurements are to take place. Activity 9.2.2. Gather existing data and information related to the resource. Activity 9.2.3. Process and analyze the data to evaluate and characterize the resource. Activity 9.2.4. Purchase, install and provide training regarding the measuring stations. Activity 9.2.5. Operate and maintain the measuring stations. Activity 9.2.6. Gather and back-up the data gathered from the measuring stations. Activity 9.2.7. Provide training and conduct a final analysis of the data. Activity 9.2.7. Dissemination of the results. 22 E. MATERIALS The required resources for the execution of the project are “in kind” and “cash.” In-kind contributions are provided mainly by the Chilean Government through the CNE. Cash contributions are provided by: Chilean Government; Private enterprise; Users (beneficiaries of the projects); and, GEF. E1. Chilean Governments These are expected to contribute approximately US$ 16.489.000 cash, in direct relation with State subsidies for investment in rural electrification projects and US$ 755.000 "in kind". E2. Private Enterprise The finance structure for rural electrification projects also takes into consideration contributions from private enterprise (which are responsible for the project management for a monthly fee) apart from the Regional Government subsidy. This contribution has been estimated at approximately US$ 7,628,000. E3. Users The contribution of the users or future users of projects executed within the project framework corresponds to the internal installations and measurement units of their households, which they must pay for directly. This contribution has been estimated at approximately US$ 1,458,000 E4. GEF GEF is asked to contribute US$ 6,067,300 as support for the incremental cost of the project (including the value of the PDF B US$ 82,400). Of the US$ 5,984,900 provided by GEF, not considering the PDF B, US$ 2,000,000 will be used for the Financial Mechanism that will ease the credit system for the implementation of rural electrification projects with NCRE. Therefore, the effective GEF contribution would be US$ 3,984,900. Of this, US$ 794,900 will be used to co-finance the investment of 6,000 PV systems for a solar energy rural electrification demonstration project. The US$2,000,000 for the Financial Mechanism (i.e., guarantee or contingency fund) will only be operational after the design of such mechanism is complete and has been approved by UNDP Headquarters and Country Office and the CNE. Therefore, not until final approval of the design and related supporting documentation has been obtained will budget line 73.01 be used by UNDP Country Office. Once the project has concluded, and insofar as the projects that have been awarded security credits or other guarantees are successful, the amount outstanding of the Financing Mechanism will, with the UNDP-GEF approval, be made available for either of the following: 1. Extension of projects to foster the development of new projects, for which a new operating scheme will have to be established following the initial project's completion; and, 2. Direct investment in other NCRE projects applied to rural electrification, in conformity with the project's objectives. 23 F. RISKS AND SUSTAINABILITY The main risks associated with the proposed project relate to the external conditions that may alter the national energy market and/or the investment in rural electrification, thereby affecting the development of a NCRE market in Chile. As an outcome of barrier removal, it is expected that projects using NCRE be technologically but also economically competitive with grid extensions and diesel/gasoline generators. Therefore, lower prices of some fuels may pose a risk to the project, as this scenario would make it attractive for investors to execute energy projects with diesel generators. This project is embedded within the institutional frame of the REP, which considers reaching 90% coverage by the year 2005 with the investment of approximately US$ 180 million dollars. Therefore, deviations of the expected resources to other areas or budget cutbacks (e.g., economic crisis, a national catastrophe) is another risk to the project. An internal risk of the project, mitigated by the project design, involves the participation of the private sector. To ensure that the private sector sees these opportunities as potentially rewarding, specifically over the longer-term, the recovery of costs of good quality energy services will be addressed through a tariff structure that will be used to structure payments. Since several organizations will be required to implement the program (e.g., electric distribution companies, supplying/servicing companies), the operation and maintenance will be provided for a monthly fee. The investments in rural electrification in Chile have been traditionally executed by the private companies of electric distribution that have carried out development mainly through the extension of the grid or mini, diesel-fueled engine systems. This project, therefore, considers the level of involvement of these companies as key to success. In addition, the proposed project involves the participation and coordination of local committees and individual households as decision-makers. Therefore, a project of this nature may face risks including the non-participation of local communities or households. The non-participation of the local communities is addressed through awareness campaigns, and the use of committees such as the Pro- light Committees in rural communities. Also, the provision of these good quality energy services will provide a “win-win” situation for all. The provision of good quality energy services is expected to lead to an improved quality of life. The project will be subject to periodic revisions according to procedures and policies established by UNDP for supervision of projects and program implementation. The project will be monitored by experts of a consulting agency specifically hired for this purpose. G. PREVIOUS COMMITMENTS AND PROVISIONS G1. Previous Commitments The Convention on Climate Change was signed by the Chilean government on June 13, 1992, and ratified December 22, 1994. The Kyoto Protocol was signed June 17, 1998 and internal procedures are underway for its ratification. The Chilean government also signed an intra-ministry agreement in late 1994 to initiate the National Program for Rural Electrification (PER) developed by the CNE, which was aimed at overcoming the lack of electricity in rural areas, incorporating the concept of equality, migration reduction, productive development and the decentralization of the decision-making process. The program 24 established that 75% of rural households were to be supplied with electricity between 1994-2000, and 90% for the period 2000-2005. G2. Provisions The Chilean Government will be in charge of executing the project and will provide in-kind and cash funding for its implementation. National and international consultants and experts will be identified to participate in the development of certain project activities as required. The project document will be signed by the Chilean Government, represented by the Ministry of Foreign Affairs, the CNE as executing agency and UNDP. H. MONITORING, EVALUATION AND DISSEMINATION The project will be subject to periodic revisions according to procedures and policies established by UNDP/GEF. The project will be monitored by experts from a consulting firm specifically contracted for this purpose, chosen by UNDP/GEF in consultation with the CNE. The monitoring schedule will be agreed upon by the National Program Director and the Program Official assigned by UNDP. A tripartite meeting will be organized by UNDP with the Government (Ministry of Foreign Relations and Ministry of the General Secretariat of the Presidency) and the Executing Agency at least once a year. UNDP’s experience in monitoring large projects will be drawn upon to ensure that the project activities are monitored and properly documented. The planning matrix of the project, which includes monitoring indicators, is shown in Annex B. The project will be subject to annual Project Implementation Reports, conducted in accordance to established UNDP/GEF procedures. Additionally, a mid-term evaluation will be conducted to evaluate financial performance and compliance with expected results and activities according to the project’s pre-established objectives and work plan. The National Director will submit a Final Report upon the project conclusion, following general UNDP/GEF guidelines and procedures. An additional Monitoring and Evaluation mechanism will be implemented by the Project Coordinating Committee, as mentioned in section B.4.3 of this document. The Monitoring and Evaluation procedures for certain aspects of the project, including the implementation of the NCRE capacity building program and the diffusion and promotion campaign for applicable renewable energy technologies in the rural sector, will require special attention. In such cases, expert agencies will be specifically contracted for this purpose. The monitoring and evaluation of projects implemented through the Financial Mechanism will be conducted through a technical and operative audit. This mechanism will be specifically designed for this purpose during the first stage of the project. Regarding dissemination, the development of an open information system will guarantee wide dissemination of the lessons learned. The project will make every effort to identify both successful and unsuccessful experiences so that they can be learned from quickly. This will help investors to make renewable energy investment decisions with the latest available information about success in the Chilean context. 25 The design of this project has drawn upon previous UNDP-GEF sponsored projects and national experience, in particular pilot projects with NCRE that have been developed since 1995. The first lesson has been learned from PV systems implemented in the IV Region and the small hydroelectric power power-houses in the IX Region. This lesson relates to the importance of equipment standards and installation certification to ensure a high product quality. The second lesson relates to the sustainability of the installations with NCRE over time. It has been verified that the lack of economies of scale makes some projects unattractive for private investors. The failure of some pilot projects implemented with NCRE is due to the lack of basic and detailed engineering studies; therefore, from a monitoring point of view, it is of fundamental importance to verify the quality of engineering aspects of NCRE projects generated under Activity 1. To implement the monitoring and external evaluation, a series of indicators corresponding to each of the activities will be developed. Such indicators will allow, by means of established verification, the implementation of partial evaluations and a final evaluation of the project. It is worth noting that, among the specified activities of the project, the implementation of a dissemination and promotion campaign has been considered. The objective of the campaign is to publicize, among the participants involved in the REP, the technical, economic and environmental advantages associated in rural electrification with NCRE. The campaign also considers dissemination and promotion to external agents within rural electrification process, so as to promote the advantages represented by the use of NCRE in grid connected systems. I. LEGAL CONTEXT This project document shall be the instrument referred to as such in Article 1 of the Standard Basic Assistance Agreement between the Government of Chile and the United Nations Development Programme, signed on 15 January 1957. The host country, implementing and executing agencies shall, for the purpose of the Standard Basic Assistance Agreement, refer to the Government cooperating agency described in that Agreement. The following types of revisions may be made to this Project Document with the signature of the UNDP Resident Representative only, provide she or he is assured that the other signatories of the Project Document have no objections to the proposed changes: 1. Revisions in, or additions to, any of the annexes of the Project Document; 2. Revisions which do not involve significant changes in the immediate objectives, outputs or activities of the Project, but are caused by rearrangements on inputs already agreed to or by cost increases due to inflation; and, 3. Mandatory annual revisions, which rephrase the delivery of, agreed project inputs or increased expert or other costs due to inflation or taking into account agency expenditure flexibility. The Government will provide the Resident Representative with certified periodic financial statements, and with an annual audit of the financial statements relating to the status of UNDP (including GEF) funds according to the procedures set out in section 6.8 of the UNDP Programming Manual. The Audit will be conducted by the legally recognized auditor of the Government, or by a commercial auditor recognized by the Government. The legal context that will guide this project document is provided in Annex G: Complementary Measures: Legal Context. For all purposes, the Executing Agency of the host country refers to the Assisting Government Agency as described in Annex G: Complementary Measures: Legal Context. 26 J. BUDGET J.1 Five-year project budget (US$) Activity GEF Government Government Users Privates Total Contribution (cash) (in-kind) Contribution (cash) Activity 1 Generation of a 300.000 200.000 36.875 536.875 portfolio of rural electrification projects with NCRE Activity 2 Development of 365.000 165.000 530.000 Technical Norms for Electrical Systems with NCRE Activity 3 Development of 555.000 36.875 591.875 Certification Procedures for Electrical Systems with NCRE Activity 4 Implementation of a 400.000 60.000 36.875 496.875 Dissemination and promotion Campaign of NCRE Activity 5 Training Program 500.000 36.875 536.875 Development Activity 6 Design and 794.900 5.814.000 110.625 900.000 2.492.000 10.111.525 Execution of a Large-Scale Photovoltaic Demonstrative Project Activity 7 Development of a 2.070.000 9.185.000 110.625 558.000 3.936.000 18.259.625 Financial Mechanism of Risk Mitigation Investment in 1.200.000 1.200.000 Projects with NCRE Activity 8 Definition of the 200.000 110.625 310.625 CO2 Emissions Reduction Project by means of Hybridizing the Existent Projects Activity 9 Creation of Training 300.000 110.625 410.625 Capacity to Evaluate Wind Resource in Chile Evaluation , Administration, 500.000 30.000 530.000 Co-ordination and Monitoring Project Sub Total 5.984.900 PDF B 82.400 82.400 Project Total – Including 6.067.300 16.489.000 755.000 1.458.000 7.628.000 32.397.300 PDF B 27 Once the project has concluded, and insofar as the projects that have been awarded security credits or other guarantees are successful, the amount outstanding of the Financing Mechanism will, with the UNDP-GEF approval, be made available for either of the following: Extension of projects to foster the development of new projects, for which a new operating scheme will have to be established following the initial project's completion; or, Direct investment in other NCRE projects applied to rural electrification, in conformity with the project's objectives. Project co-financing is divided between contributions from the Government of Chile (in cash and in kind), the private sector, and the future project beneficiaries. In particular, $16,199,000 corresponds to subsidies by Regional Governments according to the Rural Electrification Program with Renewable Energy and $7,628,000 corresponds to private electricity company contributions. Beneficiary contributions amount to $1,468,000, covering all costs of internal household installations and measuring equipment. The subsidies by the Regional Government are detailed as follows: $5,814,000, for the installation of approximately 6000 PV system units; $9,185,000, for new rural electrification projects with NCRE; and $1,200,000, for hybridization projects with diesel-fueled systems currently in operation. The CNE will distribute the remaining cash contributions as follows: $200,000 for the development of a portfolio that includes all possible “Rural Electrification with Renewable Energy” projects; $60,000 for the diffusion and promotion of the project and its activities, such as marketing, publications, and press advertisements; and, $30,000 for administrative costs such as office leasing, communication equipment and services, and documentation needs. In-kind contributions by the Government of Chile ($755,000) correspond to technical and managerial CNE staff involved in all project activities. 28 J.2 UNDP Project Budget (US$) Line Component Project Year 1 Year 2 Year 3 Year 4 Year 5 Total *11 Experts 011-01 Interpretation of wind 15,000 15,000 measurements 011-02 Wind systems 19,000 9,500 9,500 011-03 Solar systems 19,000 9,500 9,500 011-04 Small hydroelectric 19,000 9,500 9,500 systems 011-05 Biomass systems 19,000 9,500 9,500 Subtotal Experts / 91,000 38,000 38,000 15,000 Consultants *13 Administrative Personnel 013-01 Administrative assistant 39,000 7,800 7,800 7,800 7,800 7,800 Subtotal 39,000 7,800 7,800 7,800 7,800 7,800 *15 Project Related Travel 015-01 Domestic travel 60,000 12,000 12,000 12,000 12,000 12,000 015-02 International travel 60,000 12,000 12,000 12,000 12,000 12,000 Subtotal 120,000 24,000 24,000 24,000 24,000 24,000 *17 National Professional Personnel 017-01 Engineering project 162,000 32,400 32,400 32,400 32,400 32,400 adviser 017-02 Principal technical adviser 240,000 48,000 48,000 48,000 48,000 48,000 017-03 Strategic assessment 199,245 39,849 39,849 39,849 39,849 39,849 017-07 Legal standards 13,000 13,000 assessment 017-08 Legal assessment for 63,000 63,000 equipment certification 017-09 Design of NCRE capacity 45,000 45,000 building program 017-10 Consultants 15,000 3,000 3,000 3,000 3,000 3,000 Subtotal Professional 737,245 181,249 186,249 123,249 123,249 123,249 Personnel *20 Subcontracts 021-01 Preinvestment studies for 230,121 76,707 76,707 76,707 project portfolio 021-02 Creation of NCRE 95,000 31,666 31,667 31,667 standards - - 021-03 Certification procedures 117,500 58,750 58,750 021-04 Incremental costing for 794,900 323,563 238,421 156,179 76,737 financing of photovoltaic systems 021-05 Design of promotion and 45,000 45,000 diffusion campaign 021-06 NRCE promotion 240,000 70,000 60,000 70,000 40,000 campaign 29 Line Component Project Year 1 Year 2 Year 3 Year 4 Year 5 Total 021-07 Monitoring and evaluation 25,000 10,000 5,000 10,000 of campaign 021-08 Preliminary studies 13,000 13,000 021-09 Portfolio of diesel-powered 40,000 40,000 locations 021-10 Engineering for 116,000 116,000 hybridization projects 021-11 Wind resource data 78,000 26,000 26,000 26,000 measurements 021-12 Monitoring and evaluation 40,000 10,000 10,000 10,000 10,000 of capacity building program 021-13 Monitoring and evaluation 54,999 18,333 18,333 18,333 of financial mechanism 021-14 Design of financial 35,000 35,000 mechanism Subtotal Subcontracts 1,924,520 201,373 636,687 645,878 285,512 155,070 *30 Training, Capacity Building, and Diffusion 31 Capacity Building 031-01 Capacity building for 91,000 22,750 22,750 22,750 22,750 users-beneficiaries 031-02 Capacity building for wind 30,000 30,000 measurement stations 031-03 Capacity building for 89,000 29,666 29,667 29,667 installation technicians 32 Diffusion of NCRE 032-01 Capacity building for 60,000 60,000 project managers 032-02 Capacity building for 60,000 60,000 professionals 032-03 Diffusion of standards 28,000 14,000 14,000 Subtotal Capacity 358,000 90,000 112,416 52,417 66,417 36,750 Building/Training *40 Equipment 45 Durable equipment 045-01 Wind measurement station 165,000 55,000 110,000 045-02 Durable purchases 40,000 8,000 8,000 8,000 8,000 8,000 045-03 Equipment for certification 240,000 120,000 60,000 60,000 045-04 Wind measurement station 15,135 5,045 5,045 5,045 maintenance Subtotal 460,135 63,000 123,045 133,045 73,045 68,000 *50 Various Expenses 052-01 Monitoring, evaluations, 150,000 10,000 20,000 40,000 20,000 60,000 and reports 53 Miscellaneous and Various Expenses 30 Line Component Project Year 1 Year 2 Year 3 Year 4 Year 5 Total 053-01 Registration of standards 90,000 22,500 22,500 22,500 22,500 in National Standards Institute of Chile 053-02 Miscellaneous 15,000 3,000 3,000 3,000 3,000 3,000 Subtotal 255,000 13,000 45,500 65,500 45,500 85,500 *70 Micro-capital Grants 073-01 Credit fund and/or other 2,000,000 500,000 500,000 500,000 500,000 funds Subtotal 2,000,000 500,000 500,000 500,000 500,000 Total Budget 5,984,900 618,422 1,673,697 1,551,889 1,140,523 1,000,369 ANNEXES: A. Incremental costs B. Project Planning Matrix C. Reply to the STAP Technical Review D. TORs for the Project's Technical Advisor and General TORs E. Calculated CO2 reductions F. Work Plan G. Complementary Measures: Legal Context H. Rural Electrification Program, National Energy Commission of Chile 31 ANNEX A – INCREMENTAL COST A.1 Broad Development Goal The broad development goal of this project is to help Chile incorporate renewable energy technologies into the existing Rural Electrification Program by removing the identified barriers and by demonstrating the social viability and sustainability of these projects, as well as the profitability of their private management. A.2 Baseline The actual electricity coverage in rural areas is 76%. The objective of the government is to reach 90% coverage by the year 2005. This is envisaged to be achieved by privately executed projects. The projects can be subsidized by a decentralized regional development fund, National Fund for Regional Development (Fondo Nacional de Desarrollo Regional, FNDR), if they fulfill the requisites, i.e. show positive social-economic return but negative return to the private investor. The subsidies to rural electrification projects totaled almost US$ 115 million between 1994 and 1999. These projects are mainly grid extension projects, although there exist a few isolated diesel generators and some renewable-based projects too. The emphasis on grid extension is due to the existing portfolio of grid extension projects, the feasibility studies of which where largely financed by the state, as well as the reluctance of the principal proponents – distribution companies – to develop other type of projects. In the absence of the proposed GEF project, this tendency will continue. The electricity coverage will reach 90% by 2005 implying the electrification of some 98,000 new households, mostly through interconnection to the grid (90%) and to a lesser extent through stand-alone diesel generators (10%). The private sector will invest some US$ 120 million in these projects and the state will subsidy them by some US$ 180 million. Taking into account the fuel mix in the interconnected system and the average fuel consumption in the diesel-powered grids, these new households are estimated to lead to carbon emissions of some 225,580 tC by the year 2020. The final 10% of the rural households – about 59,000 in 1999 – are sparsely located in remote areas. They will most likely not be subsidized by the FNDR because the social rate of return for these investments is low due to very high investment needed per household. These households will thus either continue using candles, kerosene and batteries charged elsewhere to satisfy their energy needs (about 90%), or – the economic situation permitting – acquire small gasoline generators for these purposes (about 10%). The households use on average some US$ 153 for these energy services per year. The NPV for the expenditure using 10% discount rate amounts to some US$ 8.7 million. The use of kerosene and gasoline by these households for illumination purposes generate about 388,920 tC of carbon emissions by the year 2020. On the other hand, some 3,000 rural households already electrified rely on diesel-powered small grids. As these households already have access to electricity, they can not participate in the Rural Electrification Program. In the absence of the project, these communities will continue using diesel oil to satisfy their electricity needs. As their economic situation improves, the consumption of fuel is likely to increase in the future (currently many systems only work for a few hours a day). The carbon emissions resulting from this fuel use are estimated at 46,500 tC by the year 2020. Total carbon emissions in the baseline case are thus 661,000 tC (2.4 million tons of CO2). A-1 A.3 Global Environmental Objective The global environmental objective of the project is to reduce carbon emissions from the electricity use in Chile. The project is consistent with the Operational Program Nº6, “Promoting the adoption of renewable energy by removing barriers and reducing implementation costs”. The project seeks to eliminate the identified institutional, financial, as well as capacity and awareness -related barriers to incorporate renewable energy technologies in the rural electrification program, thus reducing greenhouse gas emissions. A.4 GEF Alternative Scenario In Chile, all social investment projects requiring public finance must be incorporated into the Integrated Project Database (Banco Integral de Projectos) of the National Investment System. The rural electrification projects existing in this database are almost entirely grid extension or diesel generation projects. In the proposed GEF project, a portfolio of renewable energy projects will be generated to compete with the traditional grid extension and diesel generator projects. In order to reduce the high implementation costs of the renewable energy projects, a specific non-grant mechanism will be created. The purpose of this mechanism is to give equal financing conditions to a conventional and a renewable project whenever the expected return on these projects is the same – even if the initial investment needed for the renewable project is higher. Furthermore, additional barriers related to information, capacity, technical norms, etc. will be removed by specific activities. The proposed project aims at demonstrating to the state that renewable energy projects are worth supporting and the social benefits they provide can be sustainable. Similarly, it will demonstrate to the private sector (distribution companies, commercial banks, etc.) that providing energy services using renewable energy can be a profitable business if the projects are carefully designed. The project will directly install 6,000 PV systems in the IV Region of Chile through a service concession to be awarded to a private enterprise based on an open bidding. Furthermore, it is estimated that some 10% of the households that in the absence of the project would be connected to grid will be electrified using renewable sources and that 80% of fuel will be saved because renewable or hybrid projects will be realized instead of diesel-powered mini grids. Additional fuel savings and hence emission reductions will result from the hybridization of some 650 diesel-powered systems that are currently operating. The direct reduction of carbon emissions resulting from these activities is about 40,000 tC by the year 2020. After the removal of the barriers, the replication potential of these projects makes it economically viable to reduce the carbon emissions by more than 450,000 tC before 2020. The methodology used for the emission calculations is presented in Annex D. A.5 System Boundary The system boundary of the project is the rural electrification market in Chile. There are three specific target segments: 1. Households that are within the Rural Electrification Program target of increasing the rural electricity coverage from 76% in 2000 to 90% in 2005; 2. Households that belong to the remaining 10% of the rural population and are not likely to be attended within the REP; and 3. Households that are already electrified and connected to diesel-powered grids which can be converted to hybrid systems. A-2 The total amount of these households today is about 143,500. It is estimated that during the project about 10,000 households will be directly intervened and that conditions will be created to use renewable energy in all those households where it is economically viable. A.6 Domestic Benefits The main benefit in both the baseline and the alternative case is the increment in rural electrification from 76% in 2000 to 90% in 2005. In this context, the project does not bring an additional benefit. Nevertheless, there exist some domestic benefits as decreased fuel imports, improved national capacity to deal with renewable energy issues etc. These benefits are not be translated into money in the analysis. A.7 Incremental cost matrix Table A.4 summarizes incremental costs activities of the project. Activity 1 will generate a portfolio of projects with renewable energies. Without the projects, only grid extension projects would be taking into account. Activity 2 will develop the standards and regulations for non-conventional technologies, allowing the dissemination of renewable energies. Activity 3 will develop the certification mechanisms necessary to implement the quality of the renewable systems. Activity 4 will allow to remove the barrier of lack of knowledge in renewable technologies. The training program included in the Activity 5 would be unlikely to take place in the absence of the project and is therefore fully incremental. Activity 6 proposes the electrification of 6.000 isolated households by means of photovoltaic systems within 5 years. The baseline for participating families is the continued use of kerosene, candles and batteries due to their extreme isolation and dispersal condition. They will not be able to benefit from the Rural Electrification Program promoted by the Government. Rural families considered in this project spend approximately US$15 a month, or US$ 180 a year on candles, kerosene and batteries and other illumination means (excluding equipment cost). Excluding the 18% of the IVA (aggregated value tax), the cost on candles and others is US $12.7 a month and US $152.5 a year. Over a 20 year period, the present value (discounted 10%) of these expenditures amounts to US$ 1,451. At current prices, a 90 Wp photovoltaic system (including a 90 Wp peak module, charge regulator, battery and 4 fluorescent lamps) cost about US$1,244 (retail) in Chile. Discounting customs duty (10%) to imported goods and the IVA (18%) it comes to US$ 967. To evaluate the full cost of the system over 20 years, replacements must be taken into account. A battery costs US$ 176 (excluding IVA and customs duty) and replacements occur after 4 years. The charge regulator costs US$ 59 (excluding IVA and customs duty) and lasts 10 years, and the fluorescent lamps cost US$ 61 (excluding IVA and customs duty) and must be replaced every 7 years. Therefore, the total present value of a photovoltaic system, including replacements comes to approximately US$ 1,667 (excluding IVA and customs duty), over 20 years discounted at 10%. In summary, the incremental cost estimation for the photovoltaic system, including replacements, comes to US$1,667 – US$1,451 = US$216. Though, as the market grows towards its annual target rate of 1,500 systems/year for a period of 4 years, by the end of the project, the price of the PV system is expected to decline on a 13%, that being similar to what rural families pay for the energetic consumption of candles and others. From an initial value of US$ 967 per PV system, it is expected to decline in increasing steps to about US$ 842 at the end of the project. This means that the A-3 incremental cost of the PV system will constantly decline from US$ 216 at the beginning, until it becomes cero, at the conclusion of the project. The total incremental cost for the installation of 6,000 PV systems is equal to US $794,900, as it is shown in Table A.1. Table A.1 Projected Price and GEF Support for PV Units Total Price of the PV System Incremental Cost Installed Incremental Year excluding IVA and per Unit Systems cost customs duty (US$) US$ US$ 1 2 1,500 967 216 323,563 3 1,500 934 159 238,421 4 1,500 902 104 156,179 5 1,500 872 51 76,737 6 0 842 0 0 Total 6,000 794,900 The PV system sizes were determined taking into consideration the socioeconomic structure of the rural population that will receive the benefits. Households’ current energy consumption with candles was correlated with the expected consumption using PV systems to determine the appropriate system size. Table A.2 shows the projection of the number systems of each size that will be installed throughout the project. As the project is implemented, and user demand is better understood, then this projection may be revised. Table A.2 Number of Installed PV Systems by Size 5% 15% 65% 15% Total Systems 45 Wp 75 Wp 90 Wp 100 Wp Installed 1 2 75 225 975 225 1.500 3 75 225 975 225 1.500 4 75 225 975 225 1.500 5 75 225 975 225 1.500 Total 300 900 3,900 900 6,000 Table A3 shows the incremental costs (GEF grant amount) on a yearly basis for each of the proposed system sizes. This has been calculated by subtracting the Net Present Value (NPV) of the total cost for candle lighting from the NPV of the costs associated with the PV systems. A-4 Table A.3: Incremental Costs per Unit US$ Incremental Cost per Unit 45 Wp 75 Wp 90 Wp 100 Wp 1 2 105 178 210 240 3 75 129 152 174 4 50 82 97 111 5 22 36 43 49 Activity 7 will create a financial mechanism that minimizes risk perception associated to renewable technologies, allowing the displacement of grid extension or diesel power grid projects. Wind resource assessment and capacity development are targeted under Activity 8, permitting the use of wind energy and creating a national capacity for its measurement. Activity 9, generates the creation of a portfolio of hybridization projects in the country. Investments will grant the implementation of demonstrative projects, reducing CO 2 emissions. Co-ordination, Monitoring, Evaluation and Administration are costs associated to the project, and are considered to be totally incremental. A-5 Table A-4 Incremental Cost Matrix (Costs in US$) Component Benefits/Costs Baseline Alternative Increment Development of a Global Limited amount of renewable Renewable energy projects Significant increase in the RE portfolio to Environmental energy projects in the portfolio compete fairly with grid- amount of RE projects in the be incorporated Benefits extension and diesel projects in portfolio (12.500 houses PV, in the Integrated the portfolio wind an hydro) Project Database Domestic Goals of the Rural Goals of the Rural Electrification None Benefits Electrification Program reached Program reached using grid using grid extension and diesel extension, diesel generators and generators RET Costs 200,000 500,000 300,000 Developing Global Lack of technical norms Technical Norms permit RET The barrier related to lack of technical norms Environmental prevent the dissemination of dissemination technical norms is removed for RET Benefits RET Domestic Technical norms relate only to Technical norms include both Increase in technical norms Benefits conventional energy conventional and renewable energy Costs 0 365,000 365,000 Developing Global Benefits Lack of capacity and Established RET certification RET certification makes it certification mechanisms to certificate RET possible to enforce the standards procedures components and installations and improves the quality of RE systems Domestic None None None Benefits Costs 0 555,000 555,000 Diffusion and Global Benefits Only limited knowledge and Extensive diffusion and Information and awareness promotion information on RET promotion campaigns remove barriers removed campaign barriers related to information and awareness Domestic None None None Benefits Costs 60,000 460,000 400,000 Training Global Benefits None In-country capacity to deal with Capacity-related barriers Programme RET created removed A-6 Domestic No demand for renewable Supply of renewable energy None Benefits energy training; no supply of training satisfies the demand renewable energy training. Costs 0 500,000 500,000 Commercial PV Global Benefits None Social sustainability of PV Social sustainability of PV demonstration electrification and commercial electrification and commercial viability of PV services industry viability of PV services industry demonstrated; 6,000 households demonstrated; 6,000 households using PV systems avoid 7,070 using PV system avoid 7,070 tons of carbon from being tons of carbon from being emitted in 20 years; potential to emitted in 20 years; potential to reduce 389.000 tons of carbon reduce 389.000 tons of carbon emissions by the year 2020 emissions by the year 2020 through PV technology through PV technology unleashed unleashed Domestic - 6,000 households have energy - 6,000 households have energy Improvement in the quality of Benefits services (illumination, radio services (illumination, radio etc.) lighting and indoor air; time etc.) through use of kerosene, through use of PV systems for savings in battery charging candles, batteries etc. for which which each family spends about each family spends about US$ US$ 153 per year; 153 per year; - Social benefits generated by - Social benefits generated by investing US$ 5.8 million of investing US$ 5.8 million of public resources for PV public resources for social electrification investments other than PV electrification Costs 14,514,000 15,308,900 794,900 A-7 Risk mitigation Global Benefits None Mechanisms to direct Mechanisms to direct mechanism investments to RET created; investments to RET created; perception of risks related to perception of risks related to RET reduced; 4,370 households RET reduced; 4,370 households electrified using RET avoiding electrified using RET avoiding 8006 tons of carbon emissions in 8006 tons of carbon emissions in 20 years; potential to reduce 20 years; potential to reduce 67.000 tons of carbon emissions 67.000 tons of carbon emissions by the year 2020 through RET by the year 2020 through RET unleashed unleashed Domestic Rural Electricity coverage Rural Electricity coverage raised None Benefits raised to 90% by investing US$ to 90% by investing US$ 170.8 180 million of public resources million of public and US$ 116 and US$ 120 million of private million of private resources in resources in grid extensions and grid extensions and diesel diesel generators generators and US$ 9.2 million of public and US$ 4million of private in RE projects Costs 300,000,000 302,070,000 2,070,000 Wind resource Global Benefits None Assessment of wind resources Barriers related to lack of wind assessment and permit the use of wind energy; resource information and capacity national capacity to carry out capacity to measure the resource development resource assessments created. removed Domestic None None None Benefits Costs 0 300,000 300,000 Development of a Global Benefits None The profitability of hybrid The profitability of hybrid hybrid project investments demonstrated; 2.554 investments demonstrated; 2.554 portfolio tons of carbon emissions avoided tons of carbon emissions over 20 years time; potential to avoided over 20 years time; reduce 13.553 tons of carbon potential to reduce 13.533 tons emissions by the year 2020 of carbon emissions by the year through hybridization unleashed 2020 through hybridization unleashed A-8 Domestic None None None Benefits Costs 0 200,000 200,000 Coordination, Global Benefits None Barriers removal project Barriers removal project monitoring and successfully executed; global successfully executed; global evaluation benefits monitored and evaluated benefits monitored and evaluated Domestic None None None Benefits Costs 0 500,000 500,000 TOTAL Global Benefits Various barriers impede the - Barriers to the use of RET in - Barriers to the use of RET in use of RET and only a limited rural electrification removed; rural electrification removed; number of RE projects are - Over 17.000 tons of carbon - Over 17.000 tons of carbon realized in Chile emissions avoided directly in emissions avoided directly in 20 years because of the project 20 years because of the project activities; activities; - Potential to abate more than - Potential to abate more than 471.000 tC by the year 2020 471..000 tC by the year 2020 unleashed unleashed. Domestic Rural Electricity coverage Rural Electricity coverage None Benefits reaches 90% by the year 2005 reaches 90% by the year 2005 Costs 315,974,000 321,958,900 5,984,900 A-9 ANNEX B – PROJECT PLANNING MATRIX PROJECT PLANNING MATRIX Project Strategy Indicators Means of Verification Assumptions Project Development CO2 emissions from National Broadcasting Development of an Goal: Reduction of the electrical sector Official Statistics Investment Plan for CO2 emissions decrease on a 62.61Gg the REP resulting from the generation of electricity in Chile Project Purpose: Percentage of NCRE Official Statistics Incorporation of Incorporation of in the REP Reports of the Project NCRE in the NCRE in the REP Institutional Frame RESULT 1: 1.1 Each year 10 new 1.1 BIP Database Existence of Structured Portfolio of NCRE projects will be 1.2 National renewable resources NCRE Projects included in the BIP Investment System for their application RESULT 2: 2.1 Four new 2.1 Chilean Official Effective Application Establishment of Regulations, per Newspaper of the Regulations Technical Regulations technology, will be Published: PV, wind, small power-houses, and biomass/agricultural residues RESULT 3: 3.1 Number of 3.1 Superintendency Certification Implementation of realized Certifications of Electricity and Procedures are Certification (depending of the Fuel Effectively applied Mechanisms number of effectively executed projects) RESULT 4: 4.1 Increase in the 4.1 Reports from the Existence of means to Operational need - from rural municipality (City Apply the Campaign Dissemination and communities -of Hall) in Chile Promotion Campaign electrification projects with NCRE RESULT 5: 5.1 Number of courses 5.1 Reports of the Existence of Operational Training implemented for the Project Institutions Training Program following levels: 5.2 SENCE on NCRE Regional politics (project creators) Engineers and technicians Users RESULT 6: 6.1 One thousand 6.1 Report of Projects Existence of Co- PV Commercial (1000) systems will be 6.2 Databases financing State- demonstration Installed each year Privates-Users RESULT 7: 7.1 Financial 7.1 Written Existence of an Establishment of a Mechanism designed, procedures, guidelines Institution Assuming Financial Risk approved and and agreements in the Responsibilities of Mitigation Mechanism operational place; written the Project 7.2 At least one approval of the B -1 executed project per Financial Mechanism type of technology design by UNDP Country office, UNDP-GEF Headquarters, and CNE. 7.2 Biannual Reports RESULT 8: 8.1 At least two 8.1 Official Statistics 8.1 Existence of Wind Implementation of a Hybrid Projects in the Resource Portfolio of Hybrid BIP 8.2 Existence of an projects Institution Assuming the Administration of the Projects RESULT 9: 9.1 Measurements 9.1 Reports of the Existence of Generation of Taken at established Project Institutions to develop Technical and Stations measurements Practical Knowledge to Implement wind resource Measurements B -2 ANNEX C RESPONSE TO STAP ROSTER TECHNICAL REVIEW The STAP roster reviewer suggested that “Removal of Barriers for Rural Electrification with Renewable Energies” seems to be a good project overall. It is suggested that this project could form a model for similar activities in many other countries in Central & South America and elsewhere, and the reviewer urges that the project be carefully documented and evaluated to that end. However, as outlined below, the STAP roster reviewer made several suggestions as to how the project could be improved. It is curious that while the Brief relates the long history of Renewable Energy in Chile, section 1.3, paragraphs 23-25, the Barriers section implies that there is not much in the way of infrastructure to develop new NCRE. Chile has had some experience in developing the use of NCRE, in particular with the objective of quantifying the resources and establishing some isolated thermal solar projects. However, these experiences have failed to develop a NCRE market mainly because they were isolated experiences and were not part of a global politics in this issue. In the last decade, pilot projects were implemented under the political framework with the intent of evaluating technologies and organizational issues. The nature and scope of the barriers, as discussed in the project brief (see Section 2.3 Barriers to the Utilization of NCRE in Rural Electrification), did not allow for the development of a sufficient infrastructure for NCRE. Activity 4: $400/60/37 -- this description is rather vague. It is by no means clear that this activity, as described in the Brief, is central to the overall project. More detail on the "promotional campaign," would be welcome particularly given that it involves a very high ratio of GEF: Government funding. The activities involves in the promotional campaign include: design of the national promotion campaign; developing advertisement production for TV, radio and the news media; developing advertisement campaign during the project execution; promotion through workshops and specialized events; promotion through specialized media; design and support of the project webpage; promotion of specific outcomes of the project, such as standards, certification procedures, Financing Mechanism, among others; and evaluation and monitoring of the promotional campaign. This additional detail has been added to the project brief under paragraph . The implementation of this activity will make use of institutional agreements that the Government has with different media. Although these institutional agreements exist, this activity is totally incremental because the resources used for promotion focus on other sectors with more social impact, such as health and education, among others. The following is a breakdown of resources used for the promotional campaign: Design of national promotion campaign. US$ 20,000 Advertisement production for TV, radio and the media. US$ 35,000 Advertisement campaign during the project execution US$ 300,000 Promotion in Workshops and specialized events US$ 10,000 Promotion in specialized media US$ 20,000 C-1 Design and support of Project WEB Page US$ 25,000 Promotion of specific outcomes of the project, such as standards, certification procedures, Guaranty Fund, among others. US$ 25,000 Evaluation and monitoring US$ 25,000. Activity 6: $795/5,814/110 -- looks good. I suggest that the activity be expanded to include both short- and long-term follow up on the PV systems' performance. The reviewer’s comment on including short- and long-term follow-up on performance has been added into the. To help ensure this replicability of this type of project, Activity 6 will involve both short and long-term follow up on the PV systems' performance. This monitoring will assist with problem solving and with promoting and replicating the results of the experience in other areas of the country. Additional information on this activity is provided below. Activity 6 involves the implementation of a large-scale demonstration project using PV systems, where a private company will be involved to ensure the sustainability of the PV systems. The financing of this project considers contributions from the State, the private company, the users and the GEF. This activity takes advantage economies of scale associated with the provision of 6,000 PV systems, as 1,500 are installed per year over four years. Based on a bidding process, the successful company will be responsible for the installation of the 6,000 PV systems, the technical support, re-investment and operation of the equipment, and energy sale during over 20-year period. The legal framework that will regulate the participation of the private company is the same as that currently used in the Rural Electrification Program for the supply of electricity in isolated communities using diesel-fueled generators. This considers the subscription of three documents: (i) Administration Contract between the Regional Government and the Private Company; (ii) Service Contract between the Private Company and the customers; and (iii) Agreement for prices and quality of service, between the Private Company and the Mayor of each Municipality. These documents will be adapted to reflect the specific characteristics of the NCRE systems in general and the PV systems in particular. Activity 7: $2,070/10,385 -- looks o.k., but a bit more detail on criteria for dipping into, and the management of the "Guarantee Fund" would be helpful. The Financial Mechanism is an essential piece of this project and will be designed in detail by the joint work of UNDP and the CNE in the very early stages of the project. The main thrust of this mechanism will be to operate as a guarantee fund for the repayment of loans made by local banks to private NCRE investors. While the main operational aspects of this Financial Mechanism will determined through Activity 7 of the project, an administration body including UNDP, CNE, banks and beneficiaries representatives will decide on the granting of credits and their amount, following submissions prepared by the investors in accordance with established rules and formats that will equally be part of the design. The rest of the project activities should begin as soon as possible in order for both UNDP and the CNE to gain more information about the best possible features that should be introduced in the Financial Mechanism. Funds for the Financial Mechanism will not be released by UNDP until all aspects of its design have been completed and agreed. C-2 Paragraph 91 [now deals with the issue of projects being "economically competitive with grid extensions." A bit more detail would be welcome. I hope that social benefits are given weight at least equal to strictly economic benefits. This is an issue faced by all rural electrification programs. The social benefits of the project are considered in the evaluation of each project. According to the “Methodology of Evaluation Projects for Rural Electrification”, from the Ministry of Planning and Cooperation (MIDEPLAN), all the rural electrification projects must be evaluated in both economic and social terms. The economic evaluation allows for the calculation of the state subsidy amount required for each project; and, the social evaluation allow permits the best technological alternative to be chosen for implementation in the rural electrification project (i.e., diesel, grid extension or NCRE). Lacking a very detailed budget, and sufficient time for a review of budget items, it is impossible for me to provide detailed commentary on costs and financing. The budget, provided in Section J, contains greater detail. Monitoring and Evaluation: Please note comment above on Activity 6. - I suggest that the activity be expanded to include both short- and long-term follow up on the PV systems' performance. The reviewer’s comment on including short- and long-term follow-up on performance has been added into the project description, and also under Monitoring and Evaluation. To help ensure this replicability of this type of project, Activity 6 will involve both short and long-term follow up on the PV systems' performance. The cost of avoided tonne of carbon is very high. I am certain that many projects in Chile, e.g., in increasing the efficiency of large electric motors in the mining sector, would have much lower costs per avoided emissions in cost/tonne of carbon. Rural electrification, however, must be judged on a number of criteria…Many of these benefits would be exceedingly difficult to quantify, let alone value in monetary terms. (This relates to comment above at Chapter 4, paragraph 91.) [I note that carbon emission reduction, per se, is not stressed in Section 2.2, "Rationale for GEF Financing."] Additional information on costs of CO2 reduction is provided annex E. According to Annex E “Calculations of CO2 reductions”, Table E.2, the global benefits of the project in terms of CO2 emissions reductions will be 1,754,740 tons of CO2. When the GEF contribution of US$ 5,984,900 is considered, the cost of CO2 reduction is US$ 3.41 per ton of CO2. If the amount of US$ 2,000,000 for the Financing Mechanism is not included, then this figure decreases to US $2.27 per ton of CO2. A bit more detail regarding Activities 4, 6 & 7 would be welcome (as noted above). As described in the above response, additional information has been added to Activities 4, Activity 6 and Activity 7 . C-3 ANNEX D: TORS FOR THE PROJECT'S TECHNICAL ADVISOR AND GENERAL TORS (Budget line 17.02) Terms of Reference Main Technical Advisor Project CHI/00/G32 “ Removal of Barriers for Rural Electrification with Renewable Energies” 1. Background The Government of Chile, in accordance with the agreements acquired on the Convention on Climate Change, has turned its efforts in finding corrective strategies which will allow to disentangle economic growth from Greenhouse Gases (GHG) emissions. In order to achieve this purpose, it is extremely necessary to create a need for Non-Conventional Renewable Energies within the National energetic market. To this end, the government, through the CNE presented the Global Environmental Facility ( GEF) the project: “ Removal of Barriers for Rural Electrification with Renewable Energies”. The execution of the project will be the responsibility of the Comisión Nacional de Energía (CNE), which being the executing agency, will name, from within its staff, a National Project Director, responsible for the execution. The project also foresees the contracting of a Main Technical Consultant, who will be responsible for the administration, under supervision of the National Director. There will also be a Project Coordination Committee supporting the execution and guaranteeing that the project activities meet the project’s objectives, and the National Climate Change Strategy. In this context, it is required to hire an external consultant as a Main Technical Consultant for the project, as such, he/she it will be required to meet the following terms of reference. 2. Objective of the Consultant Service The general objective of the consultant service is to have an expert being responsible for the elaboration, implementation and monitoring of the activities necessary for the execution of the project. Being able to work within the guidelines and timetables established in the Project Document (PRODOC) and complying with the instructions derived from the National Project Director, and directions dictated by the Coordination Committee. 3. Functions and Exported Results The consultant hired for these matters should at least be able to carry out the following functions: A. Execute and carry out the activities foreseen in the work plan of the Project, according to the timetable previously set, and also the new activities which arise in under to achieve the objectives of the Project. To that end, the definition and implementation of specific aspects of the project, in order to execute each and everyone of its components. D-1 B. Finalization of specific terms of reference, and organization of selection processes and bidding for the hiring of studies, consultant services and acquisitions foreseen in the Project Elaboration of drafts of the specific terms of reference for such selection processes and bids, and all others instruments related to the different components of the Project. Preliminary revision and evaluation of the proposals, monitoring of the selection processes, contracting and monitoring of all the activities and tasks elaborated within the project implementation frame. C. Establishing and ensuring the operation of the mechanisms of coordination and information necessary for the implementation of the project . Including, at least, keeping work links with the organizations involved in it, maintaining open communication with the Project, Coordination Committee, assisting to Committee’s meetings, that is, work tables, as a secretary, being well informed of the project progress through the National Project Director. Therefore, it is required dose collaboration with the National Project Director, and permanent interaction with the rest of the advisors and consultants. D. Organization and association with the different institutions related in the execution of the project, among which , there are at least the following: Public Sector: Regional Governments, Town Councils, SERPLACs, CONADI, organizations dealing with rural development (INDAP, FOSIS, etc.) Private Sector: Distribution Companies , electric cooperatives , suppliers and makers of equipment, financial sector, consulting companies. Others: Communitary groups and organizations, indigenous (native) communities, universities, study centers and international specialized organizations, among others. E. Prepare periodic reports and articles on the progress of the project, as required by the National Director or the Coordination Committee, the consultant will be responsible for presenting a final report, containing a summary, and documenting all the pertinent information related to the different implemented activities and yearly implementation reports, according to the UNDP-GEF requirements. F. Design and develop dissemination actions of the project, that is, those already mentioned in the PRODOC, as those necessary for an optimal national and international awareness of the actual results of the project. 4. Profile of the Consultant It is expected for the consultant to meet the following characteristics: A. Superior academic studies degree, according to the projects demands. Post–degree studies and specialisation are valued. B. Experience in national and international projects related to the subjects and objectives of the Project. C. Experience in elaboration , managing and supervision of projects. D-2 D. Experience in managing control and administration of instruments and financial recourses. E. Knowledge on subjects such as: non conventional energies, rural electrification, climate change and development of rural communities. F. Mastery of the English language. G. Capacity for establishing contacts, keeping smooth work relations at a governmental, private as well as community levels. 5. Conditions A. The consultant will be selected by the CNE and the UNDP. His/hers contract will be established in accordance with standard UNDP regulations , on a yearly basis (the first contract will expired Dec. 31, 2001), renewable on parties agreement , upon CNE’s approval. The contract will be revocable at anytime, without cause justification , by joint decision of the CNE and the UNDP. B. The salary of the consultant is to be paid by the UNDP, on a monthly basis, with charge to the Project’s funds, upon payment certification by the National Project Director. C. His/her work is to be supervised by the National Project Director, and is to be carried out in accordance to the Coordination Committee’s guidelines. D. The consultant must be available to make work trips to localities out of Santiago, according to the progress of the project, and may even need to travel abroad. E. Within his/her line of work, the consultant must maintain at all times a conduct proper to his condition, avoiding, above all, clash of interests, immediately informing, if they ever produce, the National Director. F. The consultant must treat all the information related to the project in a confidential manner, not being able to communicate it to others, unless authorised by the National Director of the Project. G. The consultant will exclusively work on this project, not being able to maintain contractual relations with others during the contract, unless parties agreed on the contrary. H. The contracted consultant will work at an office assigned by the CNE. Notwithstanding, required flexibility according to the nature of the task at hand. The consultant will have the right to tickets and expense money when corresponding. 6. Starting date The contract will start August 1, 2001, and will initially be for a 10 months period, annually renewable on agreement between parties, and approval by the CNE. 7. Benefits Those established in the type of contract defined by the UNDP. D-3 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 1 GENERATION OF A PORTFOLIO OF RURAL ELECTRIFICATION PROJECTS UTILIZING NCRE (Budget line 21.01) General Objectives Determine the real utilization potential of NCRE in rural electrification in Chile, geographically associating renewable resources to the number of households that may be supplied. Generation of an initial portfolio of rural electrification projects with NCRE within the National Investment System, for its nomination to State subsidies. Activities The following activities must be carried out by the consultant services hired for the achievement of the objectives. It is worth noting that these reference terms may require the contracting of more than one consultant service. a) Collection and completion of the existent information related to the real potential of NCRE in rural electrification, implementing in situ activities on different regions of the country, elaborating a geographic information system (GIS), including the utilization potential of NCRE in rural electrification, and the lack of electricity associated to such potential. b) Updating register studies of the utilization of technologies based on NCRE in the country, for its crossing with potential information. c) Elaboration of pre-investment studies that provide results in reference to investment amounts, asset requirements, possible economies of scale, infrastructure needs, identifying households and evaluating current renewable resources. d) Elaboration of basic and detailed engineering studies in projects that might be endorse by the guaranty fund, including the gathering of social information related to the population objective (direct beneficiaries) of the investment project, such as : definitive list of beneficiaries, with their RUT (Tributary Unique Rol); CAS scores for each family, and the social and private evaluation of the Projects utilizing current Mideplan methodology. D-4 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 2 ELABORATION OF TECHNICAL NORMS FOR RURAL ELECTRIFICATION SYSTEMS WITH RENEWABLES (Budget lines: 11.02, 11.03, 11.04, 11.05, 17.07, 21.02, 32.03, 53.01) General Objectives The most important objectives of the consultant services being hired within this frame are the development of norms, regulations and procedures assuring the technical reliability of the rural electrification equipment with renewable energies, the protection of the integrity of the individuals and goods, the protection of the environment, as well as the establishment of a quality service criteria. Specific Objectives It is specially require: The design of a regulatory frame for the implementation of technical norms in electric systems utilizing NCRE. The elaboration of proposals of technical norms for photovoltaic systems, small hydroelectric centrals, wind and hybrid, and biomass gasificators, considering design phases, manufacture and installation of the systems and each of their parts. Activities On specific terms, the consultant services being hired must include the implementation of the following activities or assignments, given the necessary implementation of a national standard. a) Legal analysis of the implementation of technical norms in systems with NCRE, considering regulation and national supervision frame, and proposal of an implementation frame of technical norms in systems with NCRE . b) National and international analysis of the current technical norms for these technologies and the implementation of such general norms in equipment to be utilize in rural electrification. c) Identification of the technical aspects that require standardization to ensure successful and sustainable operation of the specific system. d) Design of norms and preparation of the documentation relevant for its compatible treatment with the normalization procedures of the National Normalization Institute (NNI). D-5 SPECIFIC TERMS OF REFERENCE “REGULATIONS FOR PHOTOVOLTAIC, SMALL HYDROELECTRIC CENTRALS, WIND AND HYBRID SYSTEMS” 1. Objectives The most relevant objectives and the scope of the study is the elaboration of norms, regulations and procedures that assure the technical dependability of the equipment and electrification systems with renewable energies, protection of the integrity of individuals and goods, protection of the environment, and also, the establishment of minimal quality service criteria. These regulations will be applicable to all projects utilizing electric generation technology: photovoltaic systems, mini and small hydroelectric centrals and biomass and agricultural residues. Regulations will be understood as minimal equipment quality demand, on work design, on the safety of the installations, assembling of equipment, protection and prevention of environmental pollution, in the operation and servicing, in such a way that they may not become a risk to installers, operators and beneficiaries during the useful life of the installations. 2. General Aspects The use of electric energy provided by renewable resources should become even more relevant as electric distribution grids are not feasible for isolated rural localities. Nevertheless, distrust in the manufacture of local technology, the lack of technical knowledge for selecting adequate equipment, operation and maintenance deficiencies, have created barriers in the development and implementation of such systems as a valuable electrification alternative. In that respect, normalization favours interchange among promoters and executors, the opening of new technological markets, the impulse and dependability of the technology for electrification projects with highly technically informed participants. It is necessary to create technical and minimal safety regulations in the actions that initiate, develop and define an electrification project, that is: 1) The elaboration of diagrams, charts, calculation reports, designs and technical specifications. 2) The quality, dependability and minimal protections in the manufacturing of the equipment15. 3) The installations, assembling, works and constructions. 4) The testing, trial and measurements. 5) The operation and maintenance of the installations. These should be demanded by supervising institutions appointed by the Governmental Authority in all the projects executed with the specified technology. 15 A description of the regulations will be added, whenever the equipment and elements have been manufactured according to international standards (IEC, DIN, ISO, JIS). D-6 In the case of transmissions systems, distribution of electric energy and grid connection to users, it will not be necessary to establish a new regulation, since regulations are already included in the “Current Technical Norms in the Republic of Chile Nch 4/84, 2/84, 10/84”, published by the Superintendence of Electricity and Fuel and Ministry of Economy, Development and Reconstruction. And those will be used as reference to indicate where they should be applied to the systems. 3.General Activities. On wide terms, it is require to carry out the following activities which will allow to evaluate current and necessary conditions to implement a national standard. 1) Investigation of Chilean Experience with current installations. 2) Identification of the technical aspects that require standardisation to ensure a successful and sustainable operation of the specified system. 3) Analysis of the regulatory systems in Chile in relation to the systems being subjected to study, including institutional aspects and supervising capabilities16. 4) Investigation of current regulations for electrification systems with renewable energies in other countries17. I. Small Hydroelectric Power Plants I.1 Introduction Small hydrogeneration power plant systems may be technical and economical solution for rural communities and isolated localities, where grid extension alternative is not feasible to satisfy the increasing need for household electric energy, and social and productive development. In such instances, they are designed and built by local personnel, according to much less rigid requisites, and utilizing, in some cases, components lacking standardized requirements. In the case of construction works, there are no unique solutions, since each project has its own characteristics, and there may be special conditions binding it to a particular design. In this case, construction work must be designed and executed with regulations allowing the simplification of the construction and the acquisition of elements such as lockgates, hatches, drains, etc., and, on the other hand, it must also respect safety criteria in construction, installation and assembling, avoiding the construction of unsatisfactory works which may jeopardize the success of the project. 16 The CNE contracted the study: “Guidelines for the Elaboration of Electricity Generation Projects through Photovoltaic Systems”, the investigation delivers technical regulations for Photovoltaic Systems, elaborated for the national experience and scenario. 17 In the case of electrification systems with wind turbines, European countries acknowledge their own national regulation. Therefore, Denmark, Holland and Germany have representatives and certification laboratories based on EIC standards. D-7 I.2 Construction Works There are diverse arrangements for systems with small and medium elevation drops. The design, installation and construction depend in the following basic factors: Sediment: Water contains small and abrasive hard material that may cause damage: it may block the water intake (inlet), drains, load chamber and may quickly wear down the turbine. Adequate Volume of Flow: Independent from the variations of the volume of flow of the river in any given year, the system must be capable of providing and maintaining the require volume of flow even at low water flow. Flood Flow: Floods resulting from deicing or a considerable amount of rain carry a high amount of debris ( large size stones, tree brunches, sediment), that might damage construction works and reach the turbine. Turbulence: Shifts in water direction will create turbulence that will erode the structures, resulting in loss of energy and transportation of sediments. Fall losses: Pressure pipelines should be built in such a way that friction losses do not excessively reduce fall. Water hammer (Hydraulic Ram): If water flow within a pipeline is abruptly stopped, high overpressures spark off, these are called , hydraulic ram strokes. Pipelines should be built strong enough as to bear such pressure. Such pressure will cause the pipeline to move resulting in damage if the anchoring is not strong enough. The regulations on design procedures, construction and assembling of the elements of the hydraulic circuitry of water supply, should consider the latter in order to implement an ideal dependable system. It is required to elaborate a general classification of the different diagrams of small hydroelectric power stations, considering installed potency, relative length of pressure pipelines and raceways, as well as the typical routes to follow. Given the previous indications, it is needed the formulation of regulations and construction procedures, installation and assembling for the components of the construction works: 1) Water inlets (intakes) 2) Regulation Luicegates (lockgate, gate) 3) Spillways (outlets) 4) Overflow Canals 5) Sand Removers 6) Adduction Canals 7) Surge Tank or Chamber 8) Balance Chimney 9) Pressure pipelines 10) Pipeline Supports (bearings, cradle) 11) Pipeline Anchoring (holdings, tie-downs) 12) Outlet Canal (discharge) 13) Machine Hall These should be supported by charts and tables, clearly explaining the expressed regulations and procedures. D-8 I.3 Mechanical Equipment It should specify minimal selection and assembling regulations for the mechanical equipment to allow adequate servicing (repairing) and inspection of construction woks and their correct functioning , that is: 1) Maintenance Gates. 2) Grille Panels 3) Gantry Crane, traveling crane 4) Hydraulic turbines and their auxiliary equipment (inlet valve, governor, pressurized oil supply system, water supply system and drain system) I.4 Electrical Equipment There will be a detailed list of minimal regulations for the selection and assembling of the electrical equipment necessary to control, supervise and protect the electrical system of the small hydroelectric power plant. There will be a list of electrical characteristics and specifications deliver by the manufacturer of the equipment, in order to make a pertinent choice in the acquisition of: 1) Electrical Generators 2) Voltage regulators 3) Control and protection dashboards (protections and minimal controls, measuring equipment) 4) Synchronization equipment. I.5 Testing, Trial and Measurements. On the trial functioning period of the small hydroelectric power plant, it is essential to verify normal or abnormal functioning characteristics that may eventually arise, in order to control the safety and dependability of the system. It is required to list and describe fundamental testing for the most vulnerable components of the system, and the authorised regulation procedures. If there are no such procedures, they will be created, technically justifying the activities and optimal results. Some of the necessary testing to be included are: 1) Electrical insulation testing of the electrical equipment 2) Wire mesh grounding testing 3) Hydraulic ram stroke testing 4) Testing of the functioning equipment in normal and failure conditions 5) Mechanical equipment embedding and holdings I.6 Operation and Maintenance For the correct operation and functioning of the small hydroelectric power plant, it is necessary the creation of fixed basic programs and procedures of the elements requiring essential periodic maintenance. They should be simple, so that an operator, not being precisely a technician, may be able to apply them. In the case of specialised maintenance, the activity to be perform and its regularity will be indicated. D-9 In relation to the operation, it is require to define basic handling activities, including: starting or stopping the generator unit, supervising variation demands of the system , routine inspections and the handling procedures in emergency or failure conditions. Maintenance should be scheduled according to: Routine Maintenance: activities which may be carried out by personnel incharge of the plant, including verifications and minor repairs. Specialized maintenance: Works that given their duration and complexity need specialized personnel. These activities must be well defined and scheduled once a year. Repairing activities must be scheduled according to the following programming: 1) Monthly Maintenance Program 2) Quarter and half-year maintenance program 3) Annual Maintenance program 4) Bimonth Maintenance Program II . Photovoltaic Systems II.1 General Criteria It is understood that all photovoltaic generation projects, so much as in their elaboration, as well as in their assembling, must be implemented in such a way that the installation does not represent a risk to users, provides good service, allows for an easy and adequate maintenance and it is feasible of expanding its facilities. Users, in most cases, have no knowledge neither experience with electricity, therefore, basic maintenance activities must be within their reach through the elaboration of regulations and methods fairly easy to comprehend and apply. II. 2 Regulations for Photovoltaic Panels There would be a thorough examination of the most important electrical specifications and characteristics provided by the manufacturer of the equipment (or the equipment’s catalog), in normal working conditions. It is necessary the elaboration of regulations expressing minimal installation requirements and the assembling of the panel, indicating the physical and mechanical characteristics to be met. In the case of guarantees being provided, it should express on which minimal conditions the panel is to be utilize and commercialized. In order to protect the panel in abnormal working or failure conditions, - quite likely to occur -, there should be a description of the minimal required protection elements to ensure the normal operation and dependability of the equipment. D - 10 II. 3 Regulations for Load/ Charge regulators. There should be an evaluation and description of the most important electrical specifications and characteristics provided by the manufacturer of the equipment (or the equipment’s catalog), in normal working conditions, and the conditions required as minimal in systems to be installed. For load/charge regulators, there would be a regulation indicating conditions and minimal requirements to be met by the guaranty of the equipment’s manufacturer. Such regulation should acknowledge typical needs within the national scenario. II. 4 Regulations for the Inverters There should be an examination and description of the most important electrical specifications and characteristics provided by the manufacturer of the equipment (or the equipment’s catalog) in normal working conditions and which of these will be required as minimum or maximum values, as well as their tolerance. For inverters there should be a regulation indicating minimal requirement conditions of the guaranty provided by the manufacturer of the equipment. Such regulation should acknowledge typical needs within the national scenario. II. 5 Regulations for Batteries Regulation should require characteristics and specifications the manufacturer of the equipment will provide in relation to: 1) Nominal electric characteristics 2) Their installation, location 3) Maintenance 4) Charge and discharge cycles 5) Ventilation For the batteries there should be a regulation indicating minimal requirements and conditions to be met by the manufacturer’s guaranty. II.6 Regulations for Installations and Assembling. For each of the installations and assembling of the equipment, there would be a regulation allowing to: protect users, facilitate maintenance and equipment replacement, and maintaining electrical supply continuity. In order to achieve that, conditions for the following parts should be specified: 1) Holdings / Brackets / Supports / Bearings 2) Structures 3) Cabinets 4) Connections 5) Conductors 6) Switches and Switchboards D - 11 II.7 Regulation for Protections and Measuring Instruments Regulation should indicate minimal protection elements, their location and their characteristics and applications. There should be protective device mechanisms for overcurrent (overcharge), overvoltage (excess voltage), atmospheric discharges (lightning, short circuits, etc.) There will be requirements for instruments to measure fundamental electrical variables for the proper operation of the photovoltaic system. Regulation will indicate which are necessary, and where they should be installed. III. Wind and Hybrid Systems III. 1 General Context Technology of electric generation systems by means of wind turbines is highly developed in the United States, and European countries (Denmark, Germany, Holland, etc.), at small and big potency levels. In Europe, the IEC regulation is quite recognized, and describes rules and design procedures, quality, selection and certification of wind turbines. The IEC standards regulating these systems are: Safety of Wind Turbine Generator Systems (IEC 1400-1 Edition 2) Safety of Small Wind Turbine Generator Systems (IEC 1400-2) Certification Requirements (WG9 Tenth Committee Draft (10 CD)) Power Performance Measurement Techniques (IEC 1400-12) Acoustic Noise Measurement Techniques (IEC 1400-11) Testing Methods for Rotor Blades (IEC 1400-23) Power Quality Requirements for Grid Connected Wind Turbines (IEC 1400- 21) Mechanical Load Measurement Techniques (IEC 1400-13) The Department of Energy of the United States (DOE), and the National Renewable Energy Laboratory (NREL) are responsible, in the country, for the elaboration of a research program and design of turbines, those programs and designs are revised by the ISO 9001 regulation. The use of these references will allow to understand the design requirements in relation to current international standarization, and its application within the existent national frame. With the previous guidelines, it is proposed the formulation of regulations and selection procedures of installation, maintenance, and operation of the components of a wind and hybrid system (diesel-wind). D - 12 III. 2 Basic Elements on Wind Systems The main components in a wind turbine are: The Foundations The Tower The Rotor Gear Assembly Mechanism (Box) The Generator The Controller The Monitoring System and/or Remote Control It is desirable the establishment of precise regulations for these elements. III. 3 The Foundations They may vary depending on the nature of the terrain and the type of tower to be used. It is of the outmost importance to carry out terrain studies in order to define the appropriate foundation. The foundation for a tower with iron structure, for a tubular tower, or for a concrete tower differ in size and depth. Besides, requirements for mechanical effort are different. It will be convenient to utilize the experience with high tension towers, which have similar working conditions. According to terrain classification, types and height of tower to utilize and mechanical requirements, it is require to determine manufacturing regulations, materials, and size, in order to support the whole system. III. 4 The Tower Towers may be built with various materials: stainless steel structures, tubular steel and concrete. Due to economical conditions, most towers are built with stainless steel structures. In Germany and France, due to environmental factors, towers are manufactured with tubular steel. Concrete towers are not that common. Generally the construction of the tower takes place in the site it will be installed. With the objective of building the correct tower, it is require to specify quality material regulations, design of the structure, and assembling of the tower, keeping in mind the mechanical requirements of the project. III. 5 The Rotor The rotor is the connection between the central axis and the blades. In most modern machinery, propellers are speed variable. In the center of the rotor the blades’ speed controller is installed. The system is operated from a central unit that may be distant or located close to the turbine. D - 13 This device registers the direction and wind speed from the anemometer and weather vane (wind vane) located on top of the turbine. It is desirable to classify different types of rotor, according to: nominal potency, control of variables and equipment quality. There should be an examination and description of the most important electrical specifications and characteristics provided by the manufacturer of the equipment (or the equipment’s catalog), in normal and abnormal or failure working conditions. III. 6 Gear Assembly Box Traditional machinery only requires one gear assembly box, in order to convert the turning speed of the rotor to the generator’s synchronic speed. In modern machinery, the gear assembly box and the generator are built together to avoid misalignment problems with the components. In the case of machinery provided with variable speed, gear assembly box is optional. In order to have the adequate orientation for the selection, sizing and operation, it is require to describe the most important characteristics and mechanical specifications provided by the manufacturer of the equipment (or the equipment’s catalog), in normal and abnormal or failure conditions, which will be demanded as regulation. III.7 The generator In most cases synchronizing generators are utilized. Nevertheless, technology advancements tend towards variable speed, though not all designs are economically competitive. The decision as to which of the technologies to use is always an economical one, depending on the particular project. For the selection, sizing and operation, it is require to describe the most relevant electrical characteristics and specifications provided by the manufacturer of the equipment (or the equipment’s catalog), in normal or abnormal or failure working conditions. Considering scenarios and types of demands currently available in Chile. III.8 The Controller In modern wind generation systems, the controller is made up by a high capacity and control flexibility microprocessor. It is a device that works automatically, maintaining the operational programming conditions of the machine, according to demand variations, when facing shifts in wind speed, rain, ice, snow, heat, cold, etc. The processor gathers operational status by means of sensors located in different components of the machine. The controller is also in-charge of all protection and safety functions, so that, whenever abnormal conditions occur (overcharge, overloads. short-circuits, etc.), it immediately disconnects the turbine from the transmission network. For the selection, sizing and operation of the controller, it is require to describe the relevant electrical characteristics and specifications provided by the manufacturer of the equipment (or the equipment’s catalog), according to current market, scenarios and types of demand. D - 14 III. 9 Installations and Assembling For each of the installations and assembling of the elements of system and the equipment, a regulation to protect users, facilitate maintenance and equipment replacement, and continuity of the electrical supply it to be defined. III. 10 Protections, Controllers and Measuring Instruments The regulation should indicate minimum controls and protection elements, their location and applications. There would be protection devices for overloads, overcharge, atmospheric discharges, short-circuits, earth faults, frequency changes, etc. There would be a requirement for instruments to measure basic electrical variables for the adequate operation of the system. There would be an indication as of which of them are necessary, where they are necessary and how they should be installed. III.11 Operation and Maintenance For an adequate operation and functioning of the wind system, it is required to elaborate basic programs and maintenance procedures of the elements requiring periodical maintenance, according to manufacturer’s and expert’s advice. Maintenance activities should be scheduled according to: 1) Monthly Maintenance Program. 2) Quarter and Half-year Maintenance Program 3) Annual Maintenance Program III.12 Testing, Trial and Measuring. Upon starting the operation of the system, it is require to verify normal working conditions. It is require to list and describe basic testing for the most vulnerable components of the system, and the procedures advice by authorized regulation. In the case of the nonexistence of such regulation, it will be elaborated, technically justifying the activities and optimal results. Some of the necessary testing to include are: 1) Electric Insulation Testing of the electrical equipment 2) Wire mesh grounding testing 3) Verification of the functioning of the protection equipment in normal and failure conditions. 4) Embedding and Holdings / tie-downs / anchoring of the tower and the electrical equipment. D - 15 IV. Hybrid Systems It covers the implementation of systems and arrangements between wind, diesel and photovoltaic systems. For these systems, the regulation fixed for single systems (photovolataic and wind) should be required. Diesel generation systems are regulated by international design standard that should be adapted to the requirements of the hydrid system. The coordination of the potency flows generated by the system require elements and devices of control and protection which are dependent on the specific characteristics of the project. It is a requirement the creation of a regulation allowing technical dependability in the equipment, protection and safety of individuals and goods, which also complies with current environmental legislation, also establishing minimal quality service criteria. V. Bibliography 1. Small Hydroelectric Power Plants. Elaboration of Handbooks of Small and Medium Size Hydroelectric, Small Plants, Ministry of Economy, Development and Reconstruction, 1989. Handbook of Small and Micro Hydraulic Plants, Intermediate, Technology Development Group (ITDG ), 1995. Micro-Hydropower sourcebook, NRECA International Foundation, 1986. 2. Photovoltaic systems. Guidelines for the Elaboration of Electricity Generation Projects through Photovoltaic Systems, National Energy Commission, 1996. 3. Wind Systems Wind power for Home and Business, Paul Gipe, 1993. Wind Power, Eron Wind International Holding Group, 1998. Wind Turbine Certification Program, DOE/NREL, 1998. Introduction to Small Wind Systems, American Wind Energy Association, 1993. D - 16 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 3 ELABORATION OF CERTIFICATION PROCEDURES FOR RURAL ELECTRIFICATION SYSTEMS WITH RENEWABLE ENERGIES (Budget lines: 11.02, 11.03, 11.04, 11.05, 17.08, 21.03, 45.03) Objectives The scope of the contracts related to the elaboration of certification procedures aim at the assurance of complying with technical regulations for the protection of individuals, goods, and the environment. Also the inspection of installations and the supervision of installers working within NCRE themes, that are associated to minimum quality service at user level. Activities On specific terms, consultant services to be contracted should include the implementation of the following activities or assignments, necessary for the creation of a certification market system with NCRE in Chile, which is to provide sustainability to this activity beyond this project, assuring quality, safety and sustainability of all projects with NCRE. a) Analysis of legal, administrative and technical frames for the implementation of a certification system in the country. b) Characterization of certification procedures existing in the country or abroad, that may be pertinent for their utilization in electrification systems with renewable energies. c) Definition of key points to certify, according to regulations, so much as for equipment and installations in Small Hydroelectric Power Plants, Photovoltaic Systems, Wind Systems, Hybrid Systems, and Biomass Gasificators. d) Certification procedures’ propositions and their required regulations, assuring the complying with implemented technical regulations. D - 17 SPECIFIC TERMS OF REFERENCE “CERTIFICATION PROCEDURES” I. OBJECTIVES The primary objectives and the scope of this study is to elaborate certification procedures that assure complying to the defined technical regulations for the protection of individuals and goods, preserving the environment, as well as the establishment of quality service criteria. Elaboration of contractual relations with the institutions that shall carry out certification procedures in the country to all projects utilizing the following electric generation technology: photovoltaic, wind, mini, micro and small hydroelectric power plants, hybrid and gasification systems. II GENERAL ACTIVITIES In global terms, it is required to previously implement the following activities, which will allow to evaluate the existent and necessary conditions for the elaboration of a national regulation system capable of maintaining the complying of technical equipment quality regulations, inspection of the installations, and supervision of installers working within renewable energy frame. 1) Investigation of the existent certification regulations in Chile 2) Investigation of legal, administrative and technical frames for the implementation of a certification system in the country. 3) Analysis of Certification Systems in Chile, in relation to foreign systems, including institutional aspects and supervising capacities. 4) Investigation of current certification procedures for electrification systems with renewable energies in other countries18. It is necessary to establish certification procedures and supervision systems to assure the complying of technical and minimal safety regulations in the phases that initiate, develop and define an electrification project: 1) Elaboration of drafts/drawings/sketches, calculation reports, design and technical specifications. 2) Quality, dependability and minimal protections in the manufacturing of the equipment 19. 3) Installations, assembling, works and construction. 4) Testing, trial and measurements. 5) Operation and maintenance of the installations. The dynamic systematization study of the certification phases will provide a useful tool to ensure the success of the project, not allowing it to interfere in the investment and execution process. 18 The CNE contracted the study: “Guidelines for the Elaboration of Electricity Generation Projects through Photovoltaic Systems”, the investigation delivers technical regulations for Photovoltaic Systems, elaborated for the national experience and scenario. 19 In the case of electrification systems with wind turbines, European countries acknowledge their own national regulation. Therefore, Denmark, Holland and Germany have representatives and certification laboratories based on EIC standards. D - 18 II. SPECIFIC ACTIVITIES Defining key points to certified, according to equipment regulations, as well as for installations. This activity will allow the elaboration of certification procedures in the phases and in the necessary installation points and equipment in: - Micro Hydroelectric power plants - Photovoltaic systems - Wind systems - Hybrid systems The analysis of the weaknesses and strengths of the electric generation system with renewable energies will allow to select the most vulnerable and critical elements, so that the adequate certification may ease and validate negotiations between manufacturers and contractors; between contractors and companies; between the government and companies, etc. Each selection of vulnerable points in self-generation systems with renewable energies needed to be certified, must be technically justified. Establishment of criteria and certification procedures that assure the complying of technical regulations in the phases determined in the previous activity. The procedures and criteria to be selected must be simple to apply, should not increase costs, and whenever possible, must not require complex testing systems demanding abroad certification. Determine, in the case of new elements (just coming out of the factory), standard and international parameters to be accepted for the validation of foreign equipment brought into the country. Identification of existent institutions and their capacities to carry out certification procedures within the country. Describe the types of certification feasible of being carried out by existent institutions in Chile (Universities, Laboratories, Research Centers, Supervising Institutions, etc.). Elaboration of an analysis of the possibilities to create new organisms specialized in technical certification, supervision and technical inspection of works and installations. Study of current legislation in the field of certification, in order to acknowledge methods and ways to create institutions recognizable to carry out certification in the frame of electrical generation projects with renewable energies and hybrids. III. EXPECTED RESULTS Conclusions in relation to current technical certification in self-generation with renewables in the country. Criteria, supporting statements and certification procedures pertinent to the national reality. Sketches, diagrams, methods and legal guidelines to elaborate a certification system in the country, according to the current legislation. Contractual formats with institutions selected to carry out certification in the country, and the validation of foreign institutions. D - 19 IV. REQUIRED EXPERIENCE Experience in regulation and certification. Experience in electrical, mechanical and public systems. Knowledge of institutions and legislation relevant to the subject. D - 20 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 4 IMPLEMENTATION OF A PROMOTIONAL CAMPAIGN FOR NCRE (Budget lines: 21.05, 21.06, 21.07) Objectives The objectives of the promotional campaign for renewable energies in Chile are: To facilitate the administration and generation of projects with these technologies To make different participants aware of the economical, technical and environmental advantages provided by these technologies, especially in its application to rural electrification. To favor the interchange between promoters and executors of projects with renewable energies, the opening of new technological markets, the impulse and dependability in the technology of electrification projects with NCRE. Activities To achieve these objectives, the project should have to contract a series of consultant services, mainly related to the design and execution activities of the campaign. Some of the main activities or assignments to be contracted, describe as follow: a) General design of the promotional campaign, considering coverage, focalization, means to utilize, resources and objective market. b) Design of a particular dissemination program of the regulations elaborated for systems with NCRE. c) Design of a particular dissemination program related to training with non-conventional renewable energies. d) Contracts with the media to execute the promotional campaign, according to the guidelines indicated in its design. e) Annual impact evaluation and measuring of the promotional campaign. f) Implementation and maintenance of a project web page. D - 21 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 5 DEVELOPMENT OF A TRAINING PROGRAM (Budget lines: 17.09, 21.12, 31.01, 31.03, 32.01, 32.02) Objectives Preparation of training programs in relation to the use and handling of renewable energies, directed to companies, technicians, users and projects that participate in the rural electrification process utilizing such technology. Promote the development of training offer in NCRE in Chile. To achieve the objectives, it is necessary to hire experts and/or consultants, who according to the identified training needs, will establish, design and execute definite specific programs for its execution. Activities In the formulation and development of training programs, the implementation of the following activities is to be considered: a) Revision and adjustment of the preliminary training programs designed in the frame of the PDF B, considering aspects such as : Detail of basic and specific topic contents. Duration of courses, workshops or seminars. Profile of the participants Number of participants Geographical location proposed for the courses, workshops, seminars. Objective of each of the activities develop in the courses, workshops or seminars. Cost of training activities Besides, the following activities should be contracted: b) Development and execution of the design training activities by the participants c) Tracking, monitoring and evaluation of the developed programs. It is expected, once all the activities related to these reference terms, have been developed, that each of the participants, relevant in the process of implementing renewable energy projects, to have achieved at least the following knowledge: Users Knowledge and proper handling of the system already installed, or that will be installed in the household, in relation to operational and safety regulations. Knowledge in the managing of projects and the obligations and rights as clients, according to the different maintenance models, and sustainability of the system. D - 22 Knowledge on financing instruments that allow the acquisition of a system to increase the installed capacity of a household, or new systems for other uses. Electric companies or related companies Knowledge of the regulation frame, regulations and standards, of the certification of procedures and the mechanisms to reduce risk when implementing projects utilizing this technology. Knowledge of available financing mechanisms for these types of projects. Technicians and Installers Thorough knowledge of technical regulations and standards, and the certification of procedures defined for the installation and maintenance of the equipment. Knowledge on the safety aspects of these types of systems, detection and solution of main associated problems. Regulating institutions, creators and supervisors Knowledge of the regulatory frame defined for the projects, of the norms or standards, and the certification of installation procedures. Knowledge of the necessary preliminary data for the formulation of projects with renewable self- generation systems, including models suggested for the sustainability and maintenance of the equipment. D - 23 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 7 DEVELOPMENT AND OPERATION OF A FINANCIAL MECHANISM OF RISK MITIGATION INVESTMENT IN PROJECTS WITH NCRE (Budget lines: 21.13, 21.14, 73.01) Objectives The general objective of the Financing Mechanism is to generate within the national financing system, the necessary reliability to provide financing credits for projects with NCRE, and diesel system conversions to NCRE systems. Specifically, the operation of the Financing Mechanism is associated to the execution of two types of projects, and therefore, two different objectives: Guarantee private credits to finance rural electrification projects with NCRE. Guarantee private credits for investments made in rural electrification diesel systems hybridization projects currently functioning in the country. A consultant(s) will be hired to aid in the complete design of the Financing Mechanism, in accordance with its main characteristics as specified in this Project Document (see Activity 7, pages 20-21). The consultant will work in close cooperation with the UNDP Country Office, the UNDP-GEF Headquarters and the CNE. Activities The consulting services will include the elaboration of methodologies and procedures to decide the acceptance of credit applications, possible incentive measures, composition and functioning of the oversight structure (e.g., Administration Committee), and selection process of the participating banking institutions. In addition, the consultant shall draft all relevant legal documentation and agreements. D - 24 SPECIFIC TERMS OF REFERENCE DESIGN OF FINANCING MECHANISM FUND (Budget line: 21.14) 1. Background In the proposed GEF project, a portfolio of non-conventional renewable energy (NCRE) projects will be generated to compete with the traditional grid extension and diesel generator projects. In order to provide incentives to implementing NCRE, a non-grant financing mechanism (Fund) at US$ 2.0 million will be created. This Fund is intended to provide non-grant financing for at least 4,370 households that are funded in parallel through the Government, investors, and other donors. While some background work20 has already been completed on the Fund design, this subcontract will provide a concrete design of the Fund so that it is operational. The purpose of the Fund, to be designed under this subcontract, may be twofold: (i) to give equal financing conditions to a conventional and a renewable project; and/or, (ii) to partially mitigate the perception of risk associated with NCRE. 2. Objective of the Subcontract The objective of the subcontract is to design the Fund in close collaboration with the UNDP Country Office, UNDP-GEF Headquarters, and the CNE. At the least, two possible Fund designs will be fully explored and developed: Loan Guarantee Fund – this Fund would ease access by the NCRE investors to private credit. The Fund would potentially cover the difference in investment amounts between the two project alternatives: the diesel solution and NCRE solution, equalizing costs between alternatives. Technology Risk Mitigation Fund – this Fund would address the perceived risks associated with the impact of technology failure on financial results of NCRE projects. To complement the Fund design and to ensure that it is operational, the subcontract also requires the development of the Fund administration process, clear methodologies and procedures to aid investors in the application process, format and content of application forms, operating procedures, selection processes of the cooperating banking institutions, and other related methodologies. 3. Duties and Outputs The subcontractor will fully develop, as a minimum, at least two possible Fund designs: (i) technology risk mitigation fund, and (ii) loan guarantee fund. In addition, the project size and selection methodology, Fund administration process, and the Fund methodologies and procedures will be fully described. The development of the Fund will require working in collaboration with existing banks in Chile so that the Fund is consistent with the Chilean banking norms and regulations. 20 “Preparacion de un mecanismo de mitigacion de riesgos para las energias renovables y de un producto financiero para sistemas fotovoltaicos”, prepared by Christian Gonzalez, March 2000. D - 25 Technology Risk Mitigation Fund The subcontractor will address the following issues when designing the Technology Risk Mitigation Fund: establish the maximum amount that should be guaranteed based on reliable data; identify the required characteristics of the candidate/eligible companies; identify and develop the specific procedures should be in place, including: review period audit requirements, and the information/data that is required for an objective review dispute resolution procedures. Loan Guarantee Fund The subcontractor will address the following issues when designing the Loan Guarantee Fund: identify the required characteristics of the candidate/eligible companies; determine the optimal percentage of the loan that should be guaranteed; identify the entity that will issue the credit; identify the entity that will hold the guarantee; identify the entity that will issue stand-by guarantees; and, develop any necessary stand-by and recovery provisions. Project Size and Selection Methodology Prior to the Fund design, the subcontractor will define a minimum and maximum size (monetary value) of projects to be covered under the Fund. The project size should take into account the potential administrative burden of the Fund and any associated fees. The subcontractor will: Develop specific evaluation methodology for selecting projects that will be candidates for consideration by the Fund; and, Develop and establish the administrative regulations for the Financial Mechanism, including participation of UNDP, CNE, banks and possibly beneficiaries, as well as all required legal documentation. Fund Administration Process The subcontractor will prepare documentation on the duties, responsibilities, and reporting structure of the Administration Committee. The responsibilities, duties and reporting mechanisms will be clear and consistent with the design of the Fund. The Fund Administration Committee will report to the Project's National Director and will be composed of representatives of the Implementing Agency (UNDP) and the National Executing Agency (CNE). The individuals who represent these institutions will be designated by the UNDP Resident Representative and the Executive Secretary of the CNE. In general terms, the attributions and responsibilities of the Fund Administration Committee involve making sure the fund is managed according to the project's objectives. The full responsibilities of the Committee will be elaborated by the subcontractor, based on the following draft responsibilities: Work closely with the national banking institution selected where the term deposits may be opened to back or guarantee the cash flow for the projects in execution with NCRE; Receive applications for fund requests; Request a report from the ATP, which is to include a technical assessment of the project; Evaluate, approve and reject applications or request further information; D - 26 Establish conditions for approval of applications; Instruct UNDP to take out a term deposit at the bank to guarantee the cash flow of approved projects; Determine how fund resources will be used to cover actual differentials of the project's estimated operation, amount, date and conditions; Instruct the bank to close-off clearings with the deposits taken out; Request annual fund operation, administration and financial reports from the ATP and/or banking institution; and, Prepare regular reports, or as requested, of the fund's administration to Project's National Director. Fund methodologies and procedures In addition, to complete the design of the Fund, the subcontractor will: develop clear methodologies and procedures to aid investors in the application process; develop the format and content of any required application forms; elaborate operating procedures; elaborate the selection processes of the cooperating banking institutions; and, develop other related methodologies as required. Final Deliverable The Fund design is to be presented (both oral and written reports) first to the UNDP Country Office and the CNE for discussion and any clarification. Once the UNDP Country Office is satisfied with the design and quality of the work, these reports will be submitted to the UNDP-GEF Headquarters for review, consideration, and final approval. The Fund will only become operational after the design has been approved by the UNDP Country Office, and UNDP-GEF Headquarters and the CNE. 4. Profile of the Consultant The subcontract will be awarded to a consulting firm with experience in project finance, the Chilean banking system, and energy projects. One member of the project team will be experienced with Chilean law as it applies to the banking system and the establishment of contracts. 5. Duration and Starting Date The subcontract will be operative over a six month period, with the Fund design (both oral and written reports) presented to the UNDP Country Office and the CNE three (3) months after the start of the contract. This subcontract will begin in August 2001. Accountability The subcontractor will be jointly responsible to the UNDP and CNE for the quality and timeliness of the products required under this contract and accountable for ensuring that the GEF’s rules are applied, in particular those pertaining to incremental costs. D - 27 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 8 REDUCTION OF CO2 EMISSIONS BY MEANS OF HYBRIDIZING PROJECTS WITH DIESEL-FUELED SYSTEMS CURRENTLY IN OPERATION (Budget lines: 21.09, 21.10, 21.13) Background Hybridizing projects with diesel-fueled systems currently in operation will allow for the reduction of CO2 environmental emissions, and therefore, contribute to the reduction of GHG emissions effect. Nevertheless, implementing this type of projects would at least require the development of two subject- studies of the reference terms. Objectives The general objective of this consultant service is to develop technical-economical feasibility studies and the detail engineering of self-generation hybridizing projects currently utilizing diesel. Such projects may be developed by the utilization of the Guaranty Fund. Activities The studies necessary to generate hybridizing projects deal with the identification of localities with diesel systems operating in the country, with gathering all relevant historic information concerning energy consumption and operational costs and maintenance of the diesel systems, the preliminary selection of some localities or sectors to carry out hybridization projects, collection of datum related to the availability of renewable resources, and the detail engineering require in each case. To sum up, activities may be grouped on two: a) An inventory of localities with diesel installations in Chile, and their main characteristics, and its incorporation to a geographical information system. b) Determining, for such localities, at a potential level, the renewable resources that may be utilize to replace current systems. c) Develop engineering studies in the selected localities, according to the characteristics of the system and the amount (existence) of renewable energies, to determine technical and economical feasibility to develop the project. D - 28 DRAFT TERMS OF REFERENCE PER IMMEDIATE OBJECTIVE 9 CREATION OF TECHNICAL CAPACITY TO EVALUATE WIND RESOURCES IN CHILE (Budget lines: 11.01, 21.11, 31.02, 45.01, 45.04) Objectives The contracts of consultants associated to the objective of the project must allow to acquire national capacities to develop proper measurements and evaluations of the wind resource, at a level necessary for the design of rural electrification projects. Activities To achieve the objective, at least one expert or consultant will be hired, he/she will be responsible for the development of the following activities: a) Development of technical specifications for the acquisition of measuring equipment. b) Technical assistance in the operation and installation of the measuring stations. c) Hands-on training to future maintenance operation managers, measuring stations data gathering and processing. d) Quality control and data analysis, evaluating important aspects of the wind resource such as: Medium speed and potential density (annual and monthly) Distribution of wind speed frequencies (Weibull distribution with K parameter) Wind direction frequency distribution, and the average speed in each direction. Daily variability (wind speed v/s time of day) e) Development of suggestions for future measurements of the resource in Chile, considering strategic locations, equipment proposal, etc. D - 29 ANNEX E - CALCULATION OF CO2 REDUCTIONS GENERAL METHODOLOGY Households Households bound to growth, increase at a 1.48% rate. Households included in the Rural Electrification Program only increase according to programming until 2005, and then become stationary. Calculation of Emissions Emissions were determined by the IPCC methodology. Emission factors for every fuel were calculated. First, it is necessary to transform fuel consumption into energy units, specifically, Teracalories. Provided with this information, the emission factor is calculated, as it is described below. a) Gasoline Density of gasoline 0.81 kg/L Gasoline calorific power 11,100 Kcal/kg Fuel consumption 1.5 L/hour household It was estimated that households have a 1.5 l/hour consumption. Besides, it was considered that average use of the equipment is 6 hours a day. With this information, it is possible to calculate fuel consumption per year. The consumption of litres in a year is transformed to teracalories, by using the following methodology: Tcal Consumption = L.Consumption x density (0.81) x Calorific Power (11.110) x 1/ 1000 x 1/ 1000 x 1/1000 Kcal Mcal Gcal Tcal The calculation of the emission factor is done according to: Transformation of Tcal to TJoule. Multiply by 4,1868 Transformation of superior calorfic power (PCS) to inferior calorific power (PCI): Multiply by 0.95 Carbon emission factor: 19.6 tonC/TJ. Calculation of oxidized carbon: Multiply by 0.99 Transformation to CO2: multiply by 44/12 E-1 Emission Factor = 4.1868 x 0.95 x 19.6 x 1/1000 x 0.99 x 44/12 TJ and PCI Carbon in tons Carbon in Gg Oxidized Carbon Calculation Transformation of Carbon to CO 2 Emission Factor = 0,283 Gg CO2/Tcal b) Diesel Density of gasoline 0.84 kg/L Gasoline calorific power 10.900 Kcal/kg Fuel consumption 1.6 L/Household A 1,6 l/per equipment, consumption was estimated. Accordingly, each equipment supplies 10 households, therefore, total consumption to be divided by 10. A 3% increase in the hours of use of fuel was assumed in relation to the economic growth of the country, and the ability of the user to buy a larger amount of fuel. The emission factor is calculated, considering in this case, that the emission factor of Carbon is 20.2 ton C/TJ. That is, Emission Factor = 0.292 Gg CO2/Tcal. c) Natural Gas Calorific power 9341 Kcal/m3 The specified consumption of Natural Gas is GN 0.2 m3/Kwh The calculation of Natural Gas consumption is done in a different way. An average of 80kwh/ month of electric consumption per household is assumed, by multiplying it for the specific consumption, natural gas consumption per household per month is obtained. The procedure to transform m3 of fuel consumption into Tcal is similar to the one described before. The volume of fuel must be multiplied by the calorific power, transforming it into Kcal, which must then be transformed into Tcal. The calculation of the emission factor of natural gas, corresponds to the procedure utilized in the calculation of the emission factor in gasoline and diesel, with the following exceptions: Transformation of the calorific superior power to inferior calorific power: Multiply by 0,9. Emission factor of Carbon: 15,3 tonC/TJ. Calculation of oxidized Carbon: Multiply by 0,995. Finally, emission factor = 0,21 Gg CO2/Tcal. E-2 d) Candles The calculation of the emissions of candles, is the only one not corresponding to the IPCC methodology. It was calculated in relation to the GEF’s report in Peru. It did not considered and increase in fuel consumption due to the fact that candles are mainly utilized for illumination. Consumption of fuel 6 kg kerosene/ household-month Emission factor 3 kg CO2/month Table E-1. Total Emissions out of the Project Sector Fuel Households Households Volume of Emission 20 years Year 0 Year 20 Fuel Factor Total (20 years) Emissions Factor (Gg) Out of the Petrol 6.009 7.952 455.978 m3 0,283 Gg/tc 1.160,17 Program Candle 53.276 70.523 88.622 ton. 3 kg/kg 265,87 In the Diesel 1.703 9.824 90.674 m3 0,292 Gg/tc 242,13 Program Grid 15.324 88.420 297,8 mill m3 0,210 Gg/tc 585,14 Extension Electrified Diesel 3.000 3.966 23.262 m3 0,292 Gg/tc 62,12 2315,43 Those are the CO2 emissions that will be produced if renewable energy projects are not implemented. Table E.2 Global Results of the Project in Terms of CO2 Reduction Emissions Sector Fuel Households Households Volume of Emission 20 years Year 0 Year 20 Fuel Factor Total (20 years) Emissions Factor (Gg) Out of the Petrol 6.009 7.952 455.978 m3 0,283 Gg/tc 1.160,17 Program Candle 5.3276 70.523 88.622 ton. 3 kg/kg 265,87 In the Diesel 1.703 9.824 72.539 m3 0,292 Gg/tc 193,70 Program Grid 1.532 8.842 29,7 mill m3 0,210Gg/Tc 58,50 Extension Electrified Diesel 3.000 3.966 23.262 m3 0,292 Gg/tc 49,70 1727.94 In the entry "out of the program", the emissions reduced by the project, correspond to 100%, because all of them will be transformed to PV systems. In the entry "in the program", the emissions reduced correspond to diesel use, amount for an 80% of the total as the transformation to hybrid or other renewable systems (except PV), allow an 80% fuel saving. In relation to those which will be supply through grid extension, 10% of the households could be electrified through non-PV renewable energy projects. It is estimated that the transformation of hybrid systems to renewable energy systems (other than PV) will permit a reduction of 80% of fuel consumed. E-3 Table E.3 Direct Benefits of the Project in Terms of Reductions of CO2 Emissions Sector Fuel Households Households Volume of Emission 20 years Year 0 Year 20 Fuel Factor Total (20 years) Emissions Factor (Gg) Out of the Candles (1) 6.000 6.000 8640 ton. 3 kg/kg 25,92 Program In the Renewable 3.720 3.720 7499,5 m3 0,292 Gg/Tc 20,03 Program Electrified Diesel 650 650 4.368 m3 0,292 Gg/tc 9,33 62.61 In the entry "Out of the Program", the transformation of households using kerosene candles in to PV Systems will produce 100% decrease in the emissions. The used of renewables promises an 80% decrease of the emissions due to the utilization of hybrid systems. This applies to projects implemented “in the program” and the “electrified” households. E-4 ANNEX F WORK PLAN WORK PLAN CHI00G32 PROJECT PROJECT OPERATING YEAR PROJECT ACTIVITIES BY OBJECTIVE 1 2 3 4 5 D1 Generation of a Portfolio of Rural Electrification Projects using NCRE Update prospective studies on the potential for NCRE use in rural electrification by 1.1 conducting field studies. Update official land registers on NCRE-based technology currently in use and cross- 1.2 reference this data with the information provided in prospective studies on their potential use. Develop a geographic information system to identify potential use of NCRE in rural 1.3 electrification. Identify the best locations for the development of pre-investment studies in the country for 1.4 the execution of rural electrification projects using NCRE during the period 2001-2005 Determine where pre-investment studies for projects with NCRE are to be conducted, and 1.5 prepare TORs for their execution. Contract and conduct pre-investment studies for projects with NCRE in coordination with 1.6 regional government authorities in areas with the greatest potential for NCRE-based electrification and less coverage. Develop a geo-referenced database of pre-evaluated rural electrification projects with NCRE, with estimated investment amounts, funding required, possible economies of 1.7 scale, infrastructure requirements, identification of households, evaluation of renewable resources, etc Conduct basic and detailed engineering studies for pre-investment projects that can be 1.8 financed with the Financing Mechanism Elaborate an initial portfolio of communities for execution of rural electrification projects 1.9 with NCRE, and obtain social information required for the projects 1.10 Prepare documentation and incorporate projects into the National Investment System. Prepare documentation for the bidding process for the execution of pipeline projects 1.11 considered in the pre-investment studies. Prepare institutional agreements with regional governments for the bidding process for 1.12 NCRE-based rural electrification projects that have been identified and assessed. D2 Elaboration of Technical Norms for Electrical systems with NCRE Study legal aspects regarding the application of technical norms for NCRE-based 2.1 electrical systems taking into consideration the national regulatory and control framework. Prepare and apply a standing procedures proposal for technical norms for systems with 2.2 NCRE. Conduct a country-wide and international study on existing technical norms for these 2.3 technologies, and on the possible application of general norms for this equipment Conduct a study aimed at identifying the technical aspects that require standardization in 2.4 order to ensure the success and sustainability of the operation of each of these technologies.. Analize current systems and procedures for incorporation and approval of norms by the 2.5 INN, and develop this process. Conduct the studies for defining norms and prepare the necessary documentation to draw 2.6 them up using INN or SEC standardization procedures 2.7 Carry out regulatory procedure through the INN or SEC 2.8 Apply standing procedures for the norms designed in Result D.2.1 Carry out a dissemination program of the set norms to encourage the sharing of 2.9 experience among promoters and executing agencies, the creation of new technological makets, and confidence in the technology of the NCRE electrification projects. D3 Elaboration of Certification Procedures for Electrical Systems with NCRE Analize the international experience in certification methodology and procedures for NCRE 3.1 equipment Define the relevant certification aspects of the NCRE equipment and power-house 3.2 according to the norms established in immediate objective D.2. 3.3 Establish certification procedures to ensure compliance with Chilean technical norms Analyze national certification capability, and study overall demand for certification 3.4 procedures. Sign cooperation agreements with universities to set up laboratories capable of conducting 3.5 certification procedures. F-1 D4 Implementation of a Promotional Campaign for NCRE Identify the objectives and applications of the promotional campaign. That is, design a 4.1 campaign in terms of objectives, coverage, focus, target audience, resources, and market. The campaign will include the promotion of training programs for users. 4.2 Execute the campaign according to its design. Annual evaluation of the campaign in each of the components and status of the target 4.3 market. Establish institutional agreements for the implementation of the project website, including 4.4 agreements with internet service suppliers and other relevant national institutions involved in NCRE. 4.5 Implementation and maintenance of project website. D5 Development of a Training Program 5.1 Determine available NCRE courses and training programs in the country and overseas Review and adjust training programs designed within the framework of the PDF B, and 5.2 determine if it will be implemented in Chile or overseas. Development of long-term institutional agreements with universities and training 5.3 institutions. 5.4 Execution of a training program for the different agents Application of the follow-up, monitoring and evaluation mechanism on developed 5.5 programs, to obtain feedback and thus enrich and modify contents according to the results D6 Design and Execution of a Large-Scale PV Demonstration Project Design the project and conduct an evaluation using the project evaluation method of the 6.1 Ministry of Planning and Coperation (Mideplan). 6.2 Present the project and apply for State funding in order to obtain FDNR subsidy. Award execution and construction concessions to private enterprise. Open bids will be 6.3 called internationally once State funding has been approved together with funding from users, private companies and GEF. Follow-up of the installation of PV systems and final evaluation of results considering 6.4 aspects such as user satisfaction, administration, operation and maintenance mechanism of the systems and participation in private campaigns Development of a Financial Mechanism of Risk Mitigation Investment in Projects D7 with NCRE Design of the Financial Mechanism by the UNDP Country Office, UNDP-GEF 7.1 Headquarters, and the CNE Develop specific evaluation methodology for selecting projects that will be candidates for 7.2 consideration by the Financial Mechanism Develop and establish the administrative regulations for the Financial Mechanism, 7.3 including participation of UNDP, CNE, banks and possibly beneficiaries, as well as all required legal documentation. Presentation and dissemination of the various agents involved, the objectives and nature 7.4 of the Financial Mechanism 7.5 Operation of Financial Mechanism Follow-up and evaluation of the Financial Mechanism's operation, and dissemination of 7.6 results Reduction of the CO2 Emissions by means of Hybridizing Projects with diesel- D8 fueled sistems currrently in operation Carry out an inventory of the communities having diesel installations in Chile, including 8.1 their characteristics Develop engineering studies to determine technological and financial feasibility to develop 8.2 these projects case by case, taking into consideration the implementation of adequate measurements of the resource in these locations D9 Creation of Technical Capacity to Evaluate Wind Resources in Chile Define the internal capacities and the preparation of the participants for the learning 9.1 process. 9.2 Define the areas where the accurate measurements are to take place 9.3 Gather existing data and information related to the resource 9.4 Process and analyze the data to evaluate and characterize the resource. 9.5 Purchase, install and provide training regarding the measuring stations 9.6 Operate and maintain the measuring stations 9.7 Gather and back-up the data gathered from the measuring stations 9.8 Provide training and conduct a final analysis of the data. 9.9 Dissemination of the results F-2 ANNEX G - COMPLEMENTARY MEASURES – LEGAL CONTEXT G-0 CONTEXTO LEGAL RESPONSABILIDADES GENERALES DEL GOBIERNO, DEL PNUD Y DEL ORGANISMO DE EJECUCION. 1. Todas las fases y todos los aspectos de la asistencia del PNUD al presente proyecto se regirán por, y se realizarán conforme a, las resoluciones y las decisiones pertinentes y aplicables de los órganos competentes de las Naciones Unidas, y se ajustarán a las políticas y los procedimientos del PNUD para los proyectos de esa índole, además de estar sometidos a los requisitos del sistema del PNUD de seguimiento, evaluación y preparación de informes. 2. El gobierno seguirá siendo el responsable de este proyecto de desarrollo que recibe asistencia del PNUD y de la realización de sus objetivos que se describen en el presente Documento de Proyecto. 3. Dado que la asistencia presentada en virtud del presente Documento de Proyecto va en beneficio del Gobierno y del pueblo de Chile, el Gobierno correrá con todos los riesgos de las operaciones en relación con el presente proyecto. 4. El PNUD se compromete a complementar y suplementar la participación del Gobierno y aportará por conducto del Organismo de Ejecución los servicios necesarios de expertos, la capacitación, el equipo y otros servicios dentro del límite de los fondos a disposición del proyecto. 5. Al comenzar el proyecto, el Organismo de Ejecución asumirá la responsabilidad primordial por la ejecución del proyecto, y a ese efecto gozará de la condición de contratista independiente. Sin embargo, esa responsabilidad primordial se ejercitará en consulta con el PNUD. En el Documento de Proyecto se estipularán las disposiciones a este efecto, así como al efecto de la transferencia de esta responsabilidad al Gobierno o a una entidad designada por el Gobierno durante la ejecución del proyecto. 6. Una parte de la participación del Gobierno podrá realizarse en forma de contribución en efectivo al PNUD. En esos casos, el Organismo de Ejecución prestará las facilidades y los servicios conexos y rendirá anualmente al PNUD y al Gobierno las cuentas de los gastos efectuados. G-1 (a) Participación del Gobierno 1. El Gobierno, o el Organismo de Ejecución autorizado por éste, aportará al proyecto los servicios, el equipo y las instalaciones en las cantidades y en las fechas que se especifiquen en el Documento de Proyecto. Las consignaciones presupuestarias - en especie o en efectivo - para la participación del Gobierno o del Organismo de Ejecución así especificadas, se enumerarán en el presupuesto del proyecto. 2. El Organismo de Ejecución asignará un Director del Proyecto a jornada completa. Incumbirán al Director las responsabilidades del proyecto que le asigne el Organismo de Ejecución. 3. El costo estimado de las partidas incluidas en la contribución del Gobierno o del Organismo de Ejecución autorizado por éste y detallado en el Presupuesto del Proyecto, se basará en la mejor información disponible en el momento de redactarse la propuesta del proyecto. Queda entendido que las fluctuaciones de los precios durante el período de ejecución del proyecto pueden requerir un reajuste de esa contribución en términos monetarios; esos reajustes se determinarán en todo momento conforme al valor de los servicios, el equipo y las instalaciones necesarias para la correcta ejecución del proyecto. 4. Dentro del límite de número de meses de trabajo de los servicios de personal descritos en el Documento de Proyecto, el Gobierno, en consulta con el Organismo de Ejecución, podrá introducir pequeños reajustes de misiones individuales del personal del proyecto aportado por el Gobierno, si se considera que ello va en beneficio del proyecto. Se informará al PNUD en todos los casos en que esos pequeños reajustes entrañen consecuencias financieras. 5. Respecto al personal nacional de contraparte en disfrute de becas del PNUD, el Gobierno, cuando corresponda, seguirá pagando los sueldos locales y los subsidios del caso durante su período de ausencia del proyecto. 6. El Gobierno, o el Organismo de Ejecución autorizado por éste, correrá con todos los derechos de aduana y otros costos relacionados con el despacho de aduanas del equipo del proyecto, su transporte, manipulación, almacenamiento y gastos conexos en el interior del país. Se hará cargo de su instalación y mantenimiento, seguros y sustitución si es necesario, después de la llegada de dicho equipo al lugar del proyecto. 7. El Gobierno facilitará al proyecto - a reserva de las disposiciones vigentes en materia de seguridad - todos los informes, mapas, historiales y demás G-2 datos, publicados o inéditos, que se consideren necesarios para la ejecución del proyecto. 8. Los derechos de patente, los derechos de copyright y otros derechos análogos relacionados con descubrimientos o trabajos como resultado de la asistencia del PNUD en relación con este proyecto pertenecerán al PNUD. Sin embargo, salvo que en cada caso las Partes convengan lo contrario, el Gobierno tendrá el derecho de utilizar en trabajos dentro del país cualquiera de esos descubrimientos sin pagar regalías ni ningún otro costo de índole análoga. 9. El Gobierno ayudará a todo el personal del proyecto a encontrar alojamiento adecuado a un alquiler razonable, cuando sea necesario. 10. Los servicios y las facilidades especificados en el Documento del Proyecto que ha de aportar el Gobierno, o el Organismo de Ejecución autorizado por éste, al proyecto mediante una contribución en efectivo, se enumerarán en el presupuesto del proyecto. El pago de esa cantidad se hará al PNUD conforme al calendario de pagos establecido por el Gobierno o el Organismo de Ejecución designado por éste. 11. El pago al PNUD de la contribución mencionada en el punto precedente, en las fechas especificadas en el calendario de pagos del Gobierno o del Organismo de Ejecución autorizado por éste o antes de ellas, es un requisito previo para el comienzo o la continuación de las operaciones del proyecto. (b) Participación del PNUD y del Organismo de Ejecución 1. El PNUD aportará al proyecto, por conducto del Organismo de Ejecución, los servicios, el equipo y las facilidades que se describen en el Documento de Proyecto. En el Presupuesto del Proyecto se establecerán los créditos presupuestarios para la contribución del PNUD. 2. El Organismo de Ejecución consultará con el Gobierno y con el PNUD acerca de la candidatura del Director Nacional del Proyecto 21, que, bajo la dirección del Organismo de Ejecución, se hará cargo en el país de la participación de éste en el proyecto. El Director Nacional del Proyecto supervisará a los expertos y al resto del personal del organismo asignado al proyecto así como la capacitación en el empleo del personal nacional de contraparte. Le incumbirán la gestión y la utilización eficiente de todas las 21 Al que también se podrá designar Coordinador del Proyecto o Asesor Técnico Principal, según proceda. G-3 aportaciones financiadas por el PNUD, comprendido el equipo aportado al proyecto. 3. El Organismo de Ejecución, en consulta con el Gobierno y con el PNUD, asignará al personal internacional y otro personal al proyecto conforme se especifique en el Documento de Proyecto, seleccionará a los candidatos y becas, cuando corresponda, y determinará las normas para la capacitación del personal nacional de contraparte. 4. Las becas, cuando existan en el proyecto, se administrarán de conformidad con las normas del Organismo de Ejecución en materia de becas. 5. El Organismo de Ejecución, de acuerdo con el Gobierno y con el PNUD, podrá ejecutar todo el proyecto o parte de él por subcontrata. La selección de los subcontratistas se hará, tras consulta con el Gobierno y con el PNUD, de conformidad con los procedimientos del Organismo de Ejecución. 6. Todo el material, el equipo y los suministros que se compren con cargo a recursos del PNUD se utilizarán exclusivamente para la ejecución del proyecto, y seguirá siendo propiedad del PNUD, en cuyo nombre lo mantendrá el Organismo de Ejecución. El equipo aportado por el PNUD irá marcado con las insignias del PNUD y el Organismo de Ejecución. 7. Se podrán adoptar disposiciones, en caso necesario, para la transferencia temporal de la custodia del equipo mediante comodato a las autoridades locales durante la ejecución del proyecto, sin perjuicio de la transferencia de propiedad definitiva de acuerdo con las normas del PNUD. 8. Antes de que termine la asistencia del PNUD al proyecto, el Gobierno, el PNUD y el Organismo de Ejecución celebrarán consultas acerca del destino que debe darse a todo el equipo del proyecto aportado por el PNUD. Normalmente, el título de propiedad de ese equipo se traspasará al Gobierno, o a una entidad designada por el Gobierno, cuando ello sea necesario para que el proyecto siga funcionando o para actividades que lo complementen directamente. Sin embargo, el PNUD podrá mantener, a su discreción, el título de propiedad de todo el equipo o parte de él. 9. En una fecha convenida después de terminar la asistencia del PNUD al proyecto, el Gobierno y el PNUD, y si es necesario el Organismo de Ejecución, estudiarán las actividades que continúan el proyecto o son una consecuencia directa de él, con miras a evaluar sus resultados. 10. El PNUD podrá comunicar a los posibles inversionistas información relativa a cualquier proyecto orientado a la inversión, salvo que el Gobierno haya pedido al PNUD por escrito que limite la publicación de la información G-4 relativa a ese proyecto, o hasta que el Gobierno haya formulado esa petición. Derechos, Facilidades, Prerrogativas e Inmunidades 1. De conformidad con el acuerdo concertado por las Naciones Unidas (PNUD) y el Gobierno acerca del suministro de asistencia por el PNUD, el personal del PNUD y de otras organizaciones de las Naciones Unidas relacionado con el proyecto gozará de los derechos, las facilidades, las prerrogativas y las inmunidades que se conceden al personal del PNUD. 2. El Gobierno concederá a los Voluntarios de las Naciones Unidas, en el caso de que el Gobierno solicite sus servicios, los mismos derechos, facilidades, prerrogativas e inmunidades que se conceden al personal PNUD. 3. El Gobierno concederá exención o sufragará los costos de todo impuesto, derecho, tarifa o gravamen que pueda imponer a cualquiera empresa u organización que contrate el Organismo de Ejecución o al personal de cualquiera de esas empresas u organizaciones, salvo por lo que respecta a los nacionales del país huésped de contratación local, en relación con: a) los sueldos o salarios devengados por ese personal en la ejecución del proyecto; b) todo el equipo, material y suministros introducidos en el país para los fines del proyecto o que, tras haber sido introducido en el país, se saque ulteriormente de él; c) toda cantidad considerable de equipo, materiales y suministros obtenidos localmente para la ejecución del proyecto, siempre y cuando los tipos y las cantidades aproximadas que serán objeto de exención y los procedimientos pertinentes que se habrán de seguir sean acordados con el Gobierno y, cuando proceda, mencionados en el Documento de Proyecto, y d) al igual que en caso de las concesiones que actualmente se efectúan al personal del PNUD y del Organismo de Ejecución, toda propiedad, incluido un automóvil de propiedad personal por empleado, introducida por la empresa o la organización o su personal para su uso o consumo privados, o que tras haber sido introducido en el país, sea ulteriormente sacado por él a la partida de ese personal. 5. El Gobierno se encargará de: a) el despacho aduanero rápido de los expertos y otras personas que presten servicios en relación con este proyecto, y b) la salida rápida de las aduanas de: i) el equipo, los materiales y los suministros necesarios en relación con este proyecto, y ii) las pertenencias del personal del PNUD, sus organismos de ejecución u otras personas que presten servicios en su nombre en G-5 relación con este proyecto, o destinadas a su uso o consumo privados, salvo por lo que respecta al personal de contratación local. 6. El Organismo de Ejecución podrá renunciar a las prerrogativas e inmunidades mencionadas en los párrafos precedentes a las que tengan derecho esas empresas u organizaciones y su personal, cuando, a su juicio o a juicio del PNUD, esa inmunidad se oponga al buen desempeño de la justicia, y esa renuncia podrá efectuarse sin perjuicio de la terminación con éxito del proyecto ni de los intereses del PNUD ni del Organismo de Ejecución. 7. El Organismo de Ejecución facilitará al Gobierno, por conducto del Representante Residente, la lista del personal al que se aplicarán las prerrogativas y las inmunidades enumeradas supra. 8. Ninguna de las disposiciones del presente Documento de Proyecto ni de su Anexo podrán interpretarse en el sentido que limiten los derechos, las facilidades, las prerrogativas ni las inmunidades conferidos en cualquier otro instrumento a cualquiera otra persona, física o jurídica, mencionadas en ellos. SUSPENSION O TERMINACION DE LA ASISTENCIA 1. El PNUD, mediante notificación escrita al Gobierno y al Organismo de Ejecución interesado, podrá suspender su asistencia a cualquier proyecto si a juicio del PNUD surge cualquier circunstancia que obstaculice la terminación con éxito del proyecto o el logro de sus objetivos. En la misma notificación escrita o en otra ulterior el PNUD podrá indicar las condiciones en la que está dispuesto a reanudar su asistencia al proyecto. Toda suspensión de este género continuará hasta el momento en que el Gobierno acepte esas condiciones, y el PNUD notificará por escrito al Gobierno y al Organismo de Ejecución que está dispuesto a reanudar su asistencia. 2. Si cualquiera de las situaciones mencionadas en el párrafo número 1 precedente continúa durante un período de 14 días después de la notificación por el PNUD al Gobierno y al Organismo de Ejecución y de la suspensión, en cualquier momento en que continúe esa situación, el PNUD, mediante notificación escrita al Gobierno y al Organismo de Ejecución, podrá dar por terminado el proyecto. 3. Las disposiciones precedentes deben entenderse sin perjuicio de cualquier otro derecho o recurso que el PNUD pueda tener según las circunstancias, sea conforme a los principios generales de derecho o de otro modo. 4. Las Partes convienen en que la responsabilidad en la ejecución de este proyecto recaerá exclusivamente en el Organismo Ejecutor identificado en la carátula del Documento de Proyecto. G-6 ANNEX H NATIONAL ENERGY COMMISSION MINISTRY OF ECONOMY, ENERGY AND MINING REPUBLIC OF CHILE RURAL ELECTRIFICATION PROGRAM (REP) 1. BACKGROUND The Rural Electrification Program (REP) was established at the end of 1994 by the National Energy Commission, in order to overcome the folowing objectives: the lack of electricity in rural areas, to reduce migrations, to promote productive development, and to ensure the constant flow of public investments to that end. Due to the success of the program, Chile holds the third place in Latin America (in relation to rural electrification coverage), preceded only by Costa Rica and Mexico. 2. IMPLEMENTATION SCHEME AND FINANING 2.1.Decentralized implementation scheme: From an administrative point of view, Chile is divided into twelve regions, plus a Mertropolitan Region (Santiago, the capital of Chile). Each region elaborates, evaluates, assigns and finances its own rural electrification projects, according to developmental priorities and to a pre-established project evaluation methodology. At a central governmental level, the National Energy Commission defines national objectives and supervises achievement. There is a pre-define sequence in relation to the elaboration, evaluation, selection and execution of rural electrification projects: a) Rural communities, through Resident’s Associations, or Pro-Light Committees, identify the need and request the town Council to become beneficiaries; b) Town Councils elaborate projects according to social profitability, and include budgets provided by distribution companies and/or local cooperatives; c) Regional Planning Secretariat revises the projects according to a General Project Evaluation Methodology provided by the Ministry of Planning, and then provides technical support to the projects that present a possitive social evaluation, and a private negative evaluation; d) Regional Government, through the Regional Council, prioritizes a portfolio of projects to be implemented, defines investment programs and signs an agreement with the Town Council; e) Town council signs an execution contract with the company that will supply electricity, according to what was established in the previous agreement, and takes over the supervision and the final acceptance of the construction. H-1 f) The company recipient of the subsidy is responsible for the execution, maintenance, operation and administration of the electrical distribution system for a determined period of years ( at least 30 years for a distribution system, and 20 for a renewable energies based system). 2.2. Co-financing in rural electrification projects: Rural electrification projects are co-financed by Government contributions ( 60 to 70% of total project cost), distribution companies (30 to 29%) , and by the beneficiaries (10%). Government funding for rural electrification projects is annually transfered through the National Fund for Regional Development (FNDR), this organization also invests on other sectorial projects, such as education, health, road construction, sanitation, etc. Additionally, in 1995, a special regional Fund for Rural Electrificationt (FNDR-ER) was added. This Fund has been kept stable in nominal terms and represents no more than 30% of the total public investment in the area. Governmental funding to rural electrification projects is a subsidy focus on investment (consumption is not subsidize); contribution from companies is always higher than cero, and it is calculated according to the Project Evaluation Methodology mentioned earlier; beneficiaries cover for inner household cost, meter and connections. Regional Planning Secretariat are responsible for revising private and social evaluation of projects, determining contributions from companies, and corresponding subsidy amount to projects. Subsidy is define in a way that the project’s internal private return rate (private TIR) is a 10%, subsidizing only the projects whose internal social return rate (social TIR), is higher or equal to a 12%. The operation of the systems is not subsidize, therefore, the amount of the subsidy cannot, ever, be higher than the investment amount. 2.3. Technological neutrality: There are no incentives to projects based on renewable energies, since the only projects selected are the ones with lower investment costs. The main technological alternatives for projects supplying energy to rural communities are distribution system extension projects (90% of the projects). Self-generation energy systems have been mainly based on diesel generators. Renewable energy based systems have been limited to small-scale pilot projects. 3. RESULTS OF THE FIRST RURAL ELECTRIFICATION PROGRAM (1995-1999) The existence of the R.E.P. allowed rural electrification coverage to increase from a 56.8 % in 1994 to a 76% in 1999, exceeding the objective proposed by President Frei. Electricity was provided to more than 90.000 households, with a public investment of 112 million during the period, and a total investment of 190 million dollars. Government subsidies over the total investment possitively evolutioned from a 70% to an 80% range of the total cost of the project, at the beginning of the program, to a 60% to 70% rate range at the H-2 end of the period, even when the solution cost tend to increase due to a higher isolation and dispersal of the rural communities. Notwithstanding the achievements, various regions were left behind in relation to coverage objective, that is, the ones with a higher rural ratio, and that present the lowest human development indicators. Regions have not always had the capacity to encourage the introduction of new suppliers, and national and foreigner operators into the market in order to detect and remove the existent barriers to the use of renewable energies, to control the quality of the service being provided to the communities, and to improve the mechanisms that transfer subsidies. Pilot projects based on non-conventional renewable energies have had a low sustainability due to the lack of knowledge on the part of national companies with respect to their efficient use, the non- existence of economies of scale, lack of training to the communities that have been benefited, and the non-existence of an efficient operational scheme. Therefore, even when the projects can be executed by means of extending distribution systems, companies favor the installation of systems based on diesel generators. 4. THE RURAL ELECTRIFICATION PROGRAM OF THE GOVERNMENT OF PRESIDENT RICARDO LAGOS (2000-2005) 4.1. Coverage goal The Government has set the goal of achieving a 90% rural household electrification coverage by the year 2005, at a national, as well as a regional level. That translates in the electrification of 100.000 households, with an approximate investment of 150 million dollars. The goal is particularly challenging since rural communities, which are not yet provided with electric energy are geographically isolated and disperse, making distribution system extension projects unprofitable; and at the same time, not achieving the goals jeopardizes the objectives of other governmental social programs, and definetely excludes an important number of people from acquiring the benefits provided by progress. 4.2. Qualitative goals The new Rural Electrification Program has also incorporated the following new objectives: To contribute to the improvement of Human Development Indicators in the poorest regions of the country, coordinating the efforts of the REP with other Poverty Overcoming Programs, in particular with the Rural-Connection Program of the Ministry of Education (providing computer tools coverage to 100% of rural schools in the country and training teachers during the period), with the Rural Accident and Emergency Centers Reinforcement Program from the Ministry of Health, with Productive Development Programs for the poorest communities from the Solidarity and Social Investment Fund, with Indigenous Development Support Programs from the Ministry of Planning, H-3 and with the Rural Telephone System and Social Investment Program from the Ministry of Public Works, Transportation and Telecommunications; To focalize investment efforts, training and difussion in regions lacking energy supplies in rural areas, in particular in the Xth, IXth, VIIIth, IVth, and XIth regions, which were not able to achieve the 76% coverage goal during the past administrative period. To promote the use of Non-Conventional Renewable Energies, reducing the existent barriers in relation to their utilization through the development of a wide group of activities22, by the elaboration of a portfolio of projects based on renewable energies; certification and normalization of equipment; training and dissemination of clean energy; the implementation of large-scale projects, etc. Among the implicated large-scale projects, there are: Installation, operation and maintenance of 6.000 photovoltaic estructures in households and isolated communities in the northern region of the country, in particular in the IVth region; The supplying of energy through diesel-wind generators to 3.500 families living under extreme poverty conditions in 32 islands of the Archipelago of Chiloe, in the southern part of the country. The supplying of energy through renewable energies to all Rural Accident and Emergency Centers and schools, which given their extreme isolation, have no access to the distribution system. To support the gradual replacement of energy systems based on diesel generators by hybrid systems based mainly in the utilization of renewable energies, so as to reduce greenhouse gases emissions and, thereby, lowering the prices of crude oil derivates. It is specially important, due to tourism and economic reasons, to replace diesel systems currently operating in the Archipelago of Juan Fernandez (Robinson Crusoe Island), Easter Island, Santa Maria Island, as well as in the San Pedro de Atacama region. 5. YEAR 2000 ADMINISTRATION RESULTS 5. 1. Coverage During the 2000, 13.901 new households were electrificated, bringing national coverage from a 76 to a 78%. 22 GEF-UNDP-Government of Chile, 2001-2005 H-4 Rural Electrification Coverage Evolution 100% 90% 76% 78% 80% 74% 70% 70% 66% 62% 59% 60% 55% 57% 50% 40% 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: CNE In regional terms, the northern regions of the country have reached a coverage over 90%. Eventhough, there are regions, such as the II region, where there is an important number of projects based on diesel generation (San Pedro de Atacama community – provided with archeology and tourism significance). In highly rural areas (between the VIIth and XIth regions) governmental goal electrification coverage is far from being attained, specially in los Lagos area (Xth region), which also presents the lowest human development indicators, a vast indigenous population and islands which make distribution system extension unaccessible. Regional RE Coverage Evolution 1994-2000 100 98 97 95 92 89 90 87 87 80 83 80 78 81 80 77 75 72 72 71 72 74 68 70 64 59 60 53 49 50 1994 42 40 2000 31 30 20 10 0 I II III IV V V VII VIII IX X XI XII RM H-5 5. 2. Renewable energies CNE in association with the corresponding regional governments has executed, by means of tender process, four demontrative projects based on renewable energies: a wind-diesel system in Tac Island, Archipelago of Chiloe, which has served as a pilot project for its indroduction in other islands of the Xth region (Los Lagos); and three small hydroelectric power plants in indigenous areas of the Bio- Bio (VIIIth region). A basic engineering and social-economic feasibility study, with regards to the execution of wind- diesel projects, was carried out for the 32 islands of the Archipelago of Chiloe in Los Lagos area (Xth region). Terms of reference were elaborated to iniciate basic engineering studies for the replacement of diesel energy systems by hybrid wind-diesel systems in: - Robinson Crusoe Island of the Archipelago Juan Fernández - Easter Island Terms of reference were elaborated to iniciate basic engineering studies for projects supplying electric energy to schools and Rural Accident and Emergency Centers utilizing renewable energies. Within the frame of reducing greenhouse gases emissions, the Global Environment Facility (GEF) endorsed, on general terms, the project “Removal of Barriers to the Use of Renewable Energies”. The document is in a final revision phase, awaiting to be signed by the Government of Chile, UNDP and GEF. The project should be initiated by the second half of the year 2001. CNE carried out a comparative study that presents the development of Rural Electrification in 20 countries of the continent. Solange Duhart National Coordinator Rural Electrification Program May 2001 H-6