Cost Efficiency and Effectiveness of the Sitio and Household Electrification Program

Philippine Institute for Development Studies

Cost Efficiency and Effectiveness of the Sitio

and Household Electrification Program

Dr. Adora NavarroPIDS Senior Research Fellow


Outline

• Overview• Findings • Recommendations


Why the study was commissioned• In 2012, the DBM sought the

assistance of the PIDS in informing the zero-based budgeting (ZBB) approach that the Aquino administration is adopting.

• The Department of Energy (DOE)’s household electrification program and National Electrification Administration (NEA)’s sitio electrification program were included in programs to be scrutinized for the 2013 ZBB.

Adora Navarro

In the ZBB approach, an entity that prepares the budget must assume that there is no remaining money from the previous budgeting cycle (i.e., zero base) and it must therefore prioritize its most essential tasks and activities. This approach “requires the analysis and monitoring of whether the project and program and the amounts allocated to them are being properly used according to the approved plan” and bad or ineffective projects will be discontinued during the year, and not the next year, so that funds could be added to the successful ones.


Overview of the Programs• Sitio Electrification Program

(SEP) of NEA• aims to energize sitios

through on-grid electrification

• 2015 target: 100% sitios energized; covering at least 648,820 households

Year Targets2011 1,500 sitios2012 7,500 sitios2013 7,500 sitios2014 7,500 sitios2015 8,441 sitiosTotal 32,441 sitios

Table 1. Annual Targets of SEP


Overview of the ProgramsA sitio is considered energized if it is successfully connected to the grid and at least 20 households are given electricity connections

A barangay which has at least 20 energized HHs is already considered an energized barangay. Given that a barangay can have as many as___ HHs, it is highly probable that there are still many HHs in a barangay which need to be connected. Example of energized brgy:

unenergizedHHs

unenergizedHHs

unenergizedHHs

20 energized HHs connected to the grid


Overview of the Programs

Visayas DivisionLuzon Division Mindanao Division

NEA

NEA Board

Electric cooperatives

subsidiesDBM

subsidies

ATEO(ad hoc)

subsidies

subsidies

Figure 4. NEA-SEP Institutional Arrangement


Overview of the Programs• Household Electrification Program

(HEP) of the DOE• energization of off-grid households

using mature renewable energy technologies such as photovoltaic solar home systems, photovoltaic (PV) streetlights and micro-hydro systems

• target: at least 2,000 households every year; 90% households electrified by 2017

• 2011: installed 2,750 households and 46 communal PV systems

• 2012: targeting 3,200 households and 75 communal PV systems.


Overview of the ProgramsDOE DBM subsidies

Renewable Energy Management

Bureau

projects

Households

Community associations

projects

DOE field personnel,Team Energy

Foundation(social preparation)

Figure 5. DOE-HEP Institutional Arrangement


Findings• NEA’s SEP:

cost efficiency ratio: Php530,809 per sitio or Php26,729 per household in 2011

cannot be compared with other programs because this is the first time that a sitio electrification program was implemented

• DOE’s HEP: cost efficiency ratios: Php11,100 to

Php14,500 per 25Wp PV (solar) system; Php18,300 to Php20,700 per 50Wp PV system; Php25,400 to Php27,700 per 75Wp PV system

average cost per unit: Php35,913 per household.

more cost efficient than the BEP (1999-2009) program which has average cost of Php42,029 per HH in 2010 prices

Adora Navarro

Note: Cost efficiency is cost per unit of output

Adora Navarro

Also, the DOE-HEP implementation in 2010-2011 is more cost efficient than the AMORE program, but this is probably because of the fact that AMORE reaches out to conflict-affected areas in Mindanao. This introduces certain peculiarities that raise the cost of the AMORE program.


FindingsBenchmarking relative to targets

• NEA’s SEP:– 2011 target: 1,500 sitios– 2011 accomplishment:

1,520 sitios• DOE’s HEP:

– 2011 target: 2,000 households

– 2011 accomplishment: 2,750 households

• Both SEP and HEP have surpassed their respective targets.

Adora Navarro

Note: Cost effectiveness is measured in terms of meeting or exceeding a non-financial performance.


Poverty impact assessment• SEP in 2006 and HEP in 2011: no direct poverty

impact assessment undertaken• Data on the poverty-related characteristics

of the household beneficiaries before and after they become recipients of the program are currently lacking; the gathering and compilation of these in standard formats had not been incorporated early on in the implementation design

• As an alternative: poverty impact of rural electrification in general, using data from the Annual Poverty Indicators Survey (APIS) 2010

• Finding - household access to electricity in rural areas tends to:

raise per capita income by nearly 36% raise per capita spending by nearly 34%.


RecommendationsNote: Expanded Rural Electrification Team (ER Team)

set-up in 2003 and reconstituted in 2006; currently inactive

fat bureaucratic setup; quite expansive ER Team with many established groups and committees

• Re-activate the ER Team • Streamline the setup in order to

give the team more focus and greater accountability

• Assign the responsibilities to positions in offices rather than specific persons


Recommendations

• Use household connections rather than sitios in target-setting and monitoring; sitios can be used as identifiers

• Include local economic development in the prioritization criteria

• On the connection fee acting as a barrier to the poor:

Include in the criteria: electric coop or community association to show evidence of having an affordable amortization package for the initial connection fees of households


Recommendations

• Come up with strategies to boost absorptive capacity of electric coops given the acceleration of meeting the targets

• Continued (but more targeted) rural electrification given its poverty reduction impact


Thank you!

Cost Efficiency and Effectiveness of the Sitio and Household Electrification Program

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