Energy Needs Assessment and Energy Policy Formulation for Pro-Poor Community

PUSAT STUDI PENGELOLAAN ENERGI REGIONAL

Pusat Studi Pengelolaan Energi RegionalCentre for Regional Energy ManagementPUSPER

Universitas Muhammadiyah Yogyakarta

Energy Needs Assessment and Energy Policy Formulation for Pro-Poor Community

Technical Working Group (TWG) V Meeting Works Progress

Semarang, July 10 2011


Activities (TWG V) Oct Nov Dec Jan Feb Mar Apr May Jun July

Selected suitable communities-Pre study &PRA material & methodology Co

mpleted

Merapi

Volcano Haza

rd (Eru

ption) in

Yogyakart

a Region

Conduct needs assessment-FGD-PRA surveys

Identify options of needs-Evaluation

Review of available pro-poor energy policy- FGD and communication with stakeholders

Policy Energy Formulation and Program-Energy formulation program -Economic Analysis-Workshop,FGD,Data Analysis and Compilation

FGD1

FGD2

Report writing up and completionDraft

1Draft

2Final


Design of Activities in TWG V


Methodology of Study


Design of Participatory Rural Appraisal (PRA)• The information will be collected during the FGD and PRA survey (semi-

structured interview) based on the following issues for set of guideline questions.– Average daily or monthly income of rural communities, and

daily/monthly energy and other needs expanses– Form of energy which is currently used for domestic activities,

community services and local entrepreneur,– Renewable energy potentials, accessibility and constraints,– Socio-economy conditions,– The lifestyle, community social characteristics and cultural

background,– Willingness and ability to pay by community in terms of energy

installation in their household.


• HOUSEHOLD– To assess the daily/monthly income and expenses.– To get a better insight in current energy related problems. – To calculate the energy need and its consumption (cost) for energy

and other needs.– To evaluate the energy priorities for households.– To evaluate socio-economy condition: potentials and limitations.– To formulate the available energy potentials surrounding their

village(s) that can be used as alternative energy for household.– To assess the willingness and ability to pay of community for RE

installation in household.


• LOCAL ENTREPRENEURS– To get a better insight in current energy related problems. – To calculate the energy need and its consumption (cost) for energy.– To formulate the energy potentials surrounding their village(s).– To evaluate the priority of energy use in ranking according to the

urgency of a problem for local entrepreneurs. – To identify possible economic activities (development) that can be

operated if the new energy have been supplied to the sites. – To evaluate the willingness and ability to pay for RE installation in their

industries/production.


• LOCAL STAKEHOLDERS (LOCAL AND REGIONAL GOVERNMENT)

– To evaluate the energy problems and energy potential source– To list the available energy policy and program– To evaluate the stakeholder rules in energy/economic program– To evaluate possible financial (credit) scheme for energy installation (if

any).


FGD (focus group discussion)• The main issues were discussed in this activity was:

– energy needs : summary from PRA– energy priorities in community and business opportunities

in the village(s) – willingness to pay for energy installation


PRA Survey• PRA Survey

– Conducted in two different locations of dusun/desa.

– Involved on field-survey: in depth interview and stakeholder analysis, sampling to households, local entrepreneurs and stakeholders.

• Stakeholders and community representative meeting


Sampling of Respondents in PRA• Group 1 : Low income, household, work: farmer/

services• Group 2 : Medium income, household, work:

farmer/ services with additional income• Group 3 : Medium income, household, work: officer

(government)• Group 4 : Medium income, local entrepreneur in

various sectors


Location of TWG 4 and 5

Location 1:Dusun Srumbung Segoroyoso Village Pleret DistrictBantul RegencyYogyakarta Region

Location 2:Dusun WirokertenBotokenceng Village Banguntapan DistrictBantul RegencyYogyakarta Region


Cow-skin crackers industry

Cow-skin crackers are still cooked using fire-wood stove. Proposed RE project will be implemented to reduce the use of fire-wood stove.


Conventional drying process? Can RE energy give the solution?


Potential renewable energy sources: animal dung from chicken, horse and cow husbandries.



Energy Use in Community

Activity

Type of Energy Supply/Source

REElec. Fuels Wood LPG Elect. Fuels Wood LPG

Cooking - - BuyBuy &

Collected

Buy -

Lighting - - PLN Buy - - -

Ironing - - - PLN - - - -

Transportation - - - Buy - - -Entertainment - - - PLN - - - -Washing - - - PLN - - - -Sewing - - - PLN - - - -Production (Local Entrepreneurs)

PLN BuyBuy &

Collected

Buy -


Kerosene used for cooking

Cluster and class Average monthly income/production

Percentage of kerosene use from all energy

expenses

Household 1 IDR 750,000 46 %

Household 2 IDR 1,500,000 20 - 40 %

Household 3 IDR 2,000,000 0 % (only uses LPG)

Entrepreneur group 1 IDR 30 – 100,000,000 45 %

Entrepreneur group 2 IDR 5 – 15,000,000 10-12 % (some cases may up to 80 %)


Comparison of energy use in each cluster of household and entrepreneur

Cluster and class Average monthly income/production

Percentage from monthly income or production

Household group 1 IDR 2,000,000 10 – 15 % (avg. 12 %)

Household group 2 IDR 750,000 43 %

Household group 3 IDR 1,500,000 16 %

Household group 4 IDR 1,500,000 52 %

Entrepreneur group 1 IDR 30 – 100,000,000 4 – 10 % (average 8 %)




Energy Usage Priority: HouseholdPriority in Activity Energy Type

Priority 1Energy Type

Priority 2Energy Type

Priority 3

1. Cooking LPG (liquefied petroleum gas)

Firewood ---

2. Lighting Electricity Kerosene (blackout) ---

3. Transportation Petrol Solar ---

4. Ironing Electricity --- ---

5. Entertainment Electricity --- ---

6. Washing Electricity --- ---

7. Sewing Electricity --- ---


Energy Usage Priority: Local Entrepreneurs

Priority in Activity Energy TypePriority 1

Energy TypePriority 2

Energy TypePriority 3

1. Production (cattle breeder)

Firewood Electricity ---

2. Production (cracker industry)

Firewood LPG (liquefied petroleum gas)

Direct sun (for cracker producer)

3. Lighting Electricity Kerosene (blackout)

4. Transportation Petrol Solar (mass transport)

---


Willingness to Pay

Cluster and class Possible Investment Monthly payment (credit scheme)

Monthly Gross Income / Production

Percentage energy

expanses from monthly

income or production

Household group 1 IDR 1 – 5 millions IDR 10 – 20 thousands IDR 2,000,000 10 – 15 % (average 12 %)

Household group 2 < IDR 1 millions IDR 20 thousands IDR 750,000 43 %Household group 3 IDR 1 - 2 millions IDR 25 thousands IDR 1,500,000 16 %Household group 4 IDR 1 - 4 millions IDR 40 thousands IDR 1,500,000 52 %Entrepreneur group 1 IDR 10 millions IDR 60 – 80 thousands IDR 30 – 100,000,000 4 – 10 %

(average 8 %)

Entrepreneur group 2 IDR 5 millions IDR 20 – 50 thousands IDR 5 – 10,000,000 25 %

Entrepreneur group 3 IDR 15 millions IDR 60 – 100 thousands IDR 7 – 15,000,000 52 %


FGD Result: Energy problems• Increasing fossil fuel price, i.e., petrol, solar and kerosene, has

directly burdened to the community. • The energy price increase, the goods also increase. • Household must decrease the spending for energy sector,

e.g., reducing transportation activities, changing the kerosene to other type of energy for cooking, i.e., firewood and LPG; and energy saving for example limited lighting in household at night.

• For local entrepreneurs, increasing energy price causes production cost increases. As a result, they must change to other type of energy to reduce the incremental cost.


FGD Result: Energy problems• Community in study area is still fearful to use LPG due to

increasing explosion cases in use of 3kg gas cylinder. It causes the LPG conversion program this village is not totally successful. In addition, the use of LPG for cooking activities is more expensive compared to the energy mix of LPG and firewood.

• The electricity connected from PLN grid often blackout. It may cause the disturbances in their activities at night and business. As a result, they use the kerosene for lighting when the electricity is blacking out.


Concept of Energy Program (Policy) Formulation

Needs of energy

Energy Potential

Proposed Programs/

Policies

Economic Analysis & Technology

Local Wisdom

Non & Government& Programs

LocalStakeholders

Energy Infrastructure


Formulation Scheme on Energy Policy

Most energy priority or need

WTP

Energy potential/ source

Energy technology

ATP

Financial scheme & cash flow analysis

Energy Need

Energy program

Energy policy

Roadmap Action Plan Community Participation

Local wisdom/culture/ condition

Stakeholders analysis


Alternative Renewable Energy Program

• Biogas for households and local entrepreneurs– Saving in cooking and production costs– (side effect) benefit from residual biogas material

of fertilizers • Jathropa Stove for households and local

entrepreneurs• SHS for house lighting

– Saving in electricity


Schema of first proposed RE Project-Needs-Potential

Cow-skin cracker industry

Household – foods cooking

Animal manures


Scheme of third proposed RE Project-Needs-Potential

Available Unproductive Lands

for Jatropha Cultivation

Cow-skin cracker industry

Household – foods cooking


Schema of second proposed RE Project-Needs-Potential

Household – lighting

Adequate solar radiation


Price of Proposed Biogas

4m3 6m3 8m3 10m3 12m3

Cow 3 4-5 6 7-8 9Estimated biogas production (m3)

1 1.5 2 2.5 3

Construction cost(million IDR)

4.720 5.290 5.920 6.890 7.400

Source: BIRU Program


Solar Home System (200W)• 1 unit solar panel 50 wp • Cable 7 m and jack, • 1 unit electric box system (ebs) 200 w, • 1 set of electrical installation (35 m wire, fuse, etc.), • 4 set led 12 v - 2,5 w• 1 unit florescent lamp 220 v - 10 w• Price: IDR 5,000,000.00


Jatropha StoveNo Remark Specification1 Dimension 28 x 28 x 27 cm2 Tank capacity 1.8 - 2 liter3 Fire flame Blue and red4 Fuel

consumption138 ml/hour

5 Water boiling 14 minutes/2 literPrice: IDR 175,000 – 200,000


Investment cost of Jatropha stove

No Remark Volume Price Unit Estimated Cost

1 Roller/Presser Equipment for Jatropha Oil

1 unit Rp. 2,000,000 Rp. 2,000,000

2 Jatropha cultivation- Land 0.2 ha - -- Seed 0.4 kg Rp. 50,000 Rp. 20,000

3 Wick Stove 1 unit Rp. 200,000 Rp. 200,000Investment Total/Cost Rp. 2,220,000

Note : Land used in the proposed program is the marginal land that does not cultivated by agricultural plants for food or commercial purposes.


Workshop and Focus Group Discussion on Proposed Energy Programs

• Workshop:– Solar panel (SHS)– Biogas

• Focus Group Discussion:– Stakeholders– Community (representatives)– Local entrepreneurs


Response from Community (Household) on Option of Proposed Energy Programs

B. Jatropha Stove for cooking (household)

C. Solar Home System (SHS) for lighting

A. BIOGAS for household and local entrepreneurs.

87%

10%3%

ABC


Reason for choosing the biogas• Household has the energy potential for biogas, i.e., cow (1-4

cow) and chicken (10-30 chicken).• Biogas installation also produces the additional economic

values, i.e., organic fertilizer from the biogas.• The energy potential is provided in household and

surrounding area.• Biogas installation can be managed (constructed and

maintained) easily compared to others RE installation.• Investment cost is not quite expensive.• Operation cost is not high and the maintenance is

effortlessness.


Some notes from FGD (Community and Local Entrepreneur Response) for RE installations

• Biogas– community gives the impressive response for biogas

installation, but they need to look at the real example on the success story of biogas directly.

– for this installation, the subsidy scheme is preferred.

• SHS– The technology is quite complex, they concern in the

maintenance.

• Jatropha– The supply of Jatropha seed is not adequate in the market.


Willingness to Pay• WTP is the maximum amount of money that

individual/household states that they are willing to pay for a good/services.

• The three methods:1) observation in the price that people pay for goods or services in

various market/cases.2) observation in individual expenditures of money, labor, etc. to obtain

the particular goods or services3) asking the people directly what they are willing to pay.


Willingness to Pay (WTP)Cluster and class Possible Investment Monthly payment

(credit scheme)Monthly Gross Income /

Production

Household group 1 IDR 1 – 5 millions IDR 10 – 20 thousands IDR 2,000,000

Household group 2 < IDR 1 millions IDR 20 thousands IDR 750,000

Household group 3 IDR 1 - 2 millions IDR 25 thousands IDR 1,500,000

Household group 4 IDR 1 - 4 millions IDR 40 thousands IDR 1,500,000

Entrepreneur group 1 IDR 10 millions IDR 60 – 80 thousands IDR 30 – 100,000,000




Ability to Pay (ATP) for Biogas• Some measure of "ability to pay" is typically used for

determining the level of community capability to provide their own money to contribute in the program and for estimating the subsidy, grants or loans to be made available to projects.

• The "ability to pay" analysis is a definition based on the amount that households pay for energy cost in cooking relative to "residual income". Residual income is defined as the amount remaining from household income after payment of housing costs.


Equation• ability to pay factor = average energy cost paid

for cooking ÷ residual income in IDR• residual income = household income - home

payment – non-cooking utilities – tax (etc.)


No Analysis Cost Annual Cost

1 Income 1,050,000 12,600,000

2 Expenses

a. Housing costs 775,000 b. Taxes 25,000 c. Energy costs 170,000 d. Others 0

Total: 970,000 1,1640,0003 Residual income 80,000 960,0004 Energy for cooking 52,000 624,0005 ATP factor 0.65

6 90 % Percentile of Annual ATP - cost of energy (cooking) per residual income (1) 0.677

7 Annual ATP 649,920

8 ATP to biogas (monthly)1 54,160

9 Design formulation: Annual ATP - cost of energy (cooking) per residual income (2) 0.423

10 Annual ATP 406,08011 ATP to biogas (monthly)2 33,840


(1) Percentile Analysis:Sample data from survey of annual residual income and annual

cost of energy cost for cooking

No. Household Monthly Income Annual Income Annual Cost for

CookingAnnual residual

income

Annual “energy cost for cooking"

per IDR 100 residual income

1 1500000 18000000 432000 924000 46.75324675322 970000 11640000 888000 1212000 73.26732673273 1050000 12600000 624000 960000 65.00000000004 1220000 14640000 432000 2088000 20.68965517245 2850000 34200000 864000 5376000 16.0714285714… … … … … …… … … … … …


Percentile computation for annual "cost for cooking" per IDR 100 residual income

10 20 30 40 50 60 70 80 90 1000.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Annual cost for cooking per IDR 100 residual income


(2) Equation

Design of ATP factor = average ATP – 1.28

Computation Example:• Average ATP factor = 61.84• Deviation = 15.30• Design of ATP factor = 0.42


Calculation of ATP

No. Group Annual Income ATP factor

Ability to Pay (IDR)

Percentile Formulation1 < IDR 1,000,000.00 0.623 60,591.50 37,858.502 IDR 1-2,000,000 0.878 50,726.64 31,694.793 > IDR 2,000,000 0.161 303,296.00 189,504.004 All income class 0.755 77,956.55 48,708.45


Stakeholder Analysis• Participation and rule of

stakeholder involved in the program.

• SWOT Analysis: Planning to Implementation

• Evaluation on Project Sustainability


Energy program

Tujuan: Meningkatkan akses energi di masyarakat dengan memanfaatkan potensi energi

yang ada disekitarnya.Target: Masyarakat dapat memanfaatkan energi

(EBT) dalam aktivitas kehidupan sehari-hari sehingga bisa dapat mengurangi pengeluaran.

Community

Energy Policy

Bentuk (finansial) program:1Program pemerintah

2Swadaya masyarakat3Subsidi-Grant & swadaya masyarakat

Government

Local stakeholder

Community leader

Community org.

LSM

University

Donor

Bank/Financial Inst.

Stakeholders

Diagram 1: Keterikatan stakeholder dalam kebijakan/program

TOPIK DISKUSI 1: Apakah setuju dengan unsur stakeholder yang terlibat untuk kebijakan/program uang diusulkan?


Policy Program Implementation

Strength Weakness (Constraint)

Opportunity Treat

SWOT ANALYSIS


Strengths (internal) Weaknesses (internal)1. Availability of Renewable energy potential (EBT) in

village2. Mutual cooperation (social-gathering) in community 3. Possible community participation (limited) in providing the

funding and material

1. Lack of knowledge in renewable energy technology.2. No example of successful pilot project.3. Very limited funding for investment (household).4. Lack of knowledge in renewable energy potential in

surrounding area and its utilization.5. No example for energy program contributes directly

to community economic improvement.6. No institutional coordination for renewable energy

development in region.7. Uncertainty in credit scheme for renewable energy

installation by financial unit /bank.8. Limited own-funding by community.9. Lack of awareness in energy saving and renewable

energy (community).10. Distance of house and stall location (biogas)11. Lack of practical knowledge in biogas.


Opportunities (external) Threats (external)1. Federal and regional government have expressed

interest in renewable energy development to be priority in recent years.

2. Universities are looking for internship opportunities for their students for community development.

3. Restructuring in Federal government (initiating the directorate general in renewable energy sector).

4. BIRU program for biogas development in village (household scale).

5. National and regional renewable energy target in energy mix for 2025.

6. Renewable energy technology is more accessible and not expensive.

7. Energy self-sufficient village is potential program can be initiated.

8. RE technologies and installation have been developed in line with the community development in economic.

9. Community development for residual product of biogas for fertilizer

1. Less market on biogas fertilizer 2. The demand for biogas exceeds the supply of

potential skilled labors and capability of subsidy (funding)

3. There is less federal and regional subsidy money available for biogas installation in villages.


Stakeholder participationStakeholder Participation

Regional government Socialization and campaign in energy saving and renewable energy.

Provide the RE pilot project for model and example successful installation.

Provide subsidy in RE investment and give the solution on credit rule for RE installation.

Provide the community assistance in RE development.

Supervising the implementation of the proposed energy project.

Local stakeholder Socialization and campaign in energy saving and renewable energy.

Provide the community assistance and development in RE development.

Provide effective communication and supervision in the implementation of the proposed energy project.


Stakeholder participationStakeholder Participation

University Provide training and education facilities for capacity building in development of energy alternative.

Mentoring and assisting in operational of energy alternative.

Improving an applied research, technology (practice) and development of energy alternative.

Provide the community assistance, empowerment and development in RE development

NGO Socialization and campaign in energy saving and renewable energy.

Provide the community assistance, empowerment and development in RE development.

Finding the alternative funding and subsidy for RE development.


Proposed Financial Scheme

A: Subsidy/Grant from government and donor institution.B: Limited investment from community own-funding.C: Credit/soft loan with soft-interest rate.D: Total community own-funding.

Scheme PercentageResponse

from community

Percentage

A : B : C 30 % : 30 % : 40 % Agreed 26 %A : B 30 % : 70 % Agreed 8 %A : C 30 % : 70 % Agreed 66 %D 100 % Rejected ---


Soft-loan financial calculationLoan (IDR)

3,7000,000

Interest Rate 5.00%

Period 8 years

Month Payment Monthly Loan Interest Main Loan Residual Loan1 46841.70404 31425.03738 15416.66667 31425.03738 3668574.9632 46841.70404 31555.97503 15285.72901 62981.01241 3637018.988

3 46841.70404 31687.45826 15154.24578 94668.47068 3605331.529… … … … … …94 46841.70404 46261.02841 580.6756302 3606898.877 93101.1228395 46841.70404 46453.7827 387.9213451 3653352.66 46647.3401396 46841.70404 46647.34013 194.3639172 3700000 0


Comparison with conventional loan

Conventional Loan

Rate of interest: 12.5 %

Loan: IDR 3.7 million

Period: 6 Year

Monthly Payment:IDR 89,930.56

Soft-Loan

Rate of interest: 5 %


Period: 8 Year


PRA & FGD

ATP: IDR 48,708.451

WTP: IDR 40,0002

1 ATP calculation for all household income2PRA survey (the maximum value ranging from IDR 10 – 40,000)


Comparison with “Without Biru Program Scenario”

Without Biru Subsidy-1



Period: 8 Year


Soft-Loan with Biru



Period: 8 Year


Without Biru Subsidy-2



Period: 13.5 Year



“Arisan” scheme

Month Collected money per month Collected money received by

1 IDR 3,000,000 HH 12 IDR 3,000,000 HH 2

3 IDR 3,000,000 HH 3

… … …60 IDR 3,000,000 HH 60

• Involved household 60 households (HH)• Payment per month per household IDR 50,000.00• Target per collected money IDR 3,000,000.00• Period (at one round, each household only has opportunity to

receive one “collected money”) 60 months


Recommendation: Roadmap Instruments on Energy Policy for Community

Community Response

Financial Scheme

Roadmap of Energy

Policy

Economic Analysis

Local Wisdom

SWOT

StakeholderParticipation

Analysis

Ener

gy

Infra

stru

ctur

e


Next activities• Completing the final report: correction, revision and

finalization (July – 8 August 2011)• Submit the final report (August/September 2011)


THANK YOUENERGY FOR PROVERTY ALLEVIATION

Energy Needs Assessment and Energy Policy Formulation for Pro-Poor Community

Documents

energy problems

dailymonthly energy

energy priorities

alternative energy

new energy

available energy potentials

energy policy formulation

available energy policy