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REwiRE: Rural Electrification with Renewable Energy Kelcie Abraham, Himani Phadke, & Jonathan Strahl Milken Global Conference 2 May 2012
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REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

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Page 1: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE: Rural Electrification with Renewable Energy

Kelcie Abraham, Himani Phadke, & Jonathan Strahl Milken Global Conference 2 May 2012

Page 2: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Meet the REwiRE team

5/3/2012 2 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

MA International Policy Studies, Energy, Environment & Natural Resources

Fulbright scholar, 2007-08

Fluent in Bahasa Indonesia

MA International Policy Studies, Energy, Environment & Natural Resources

Financial consulting, UK Treasury and UN Foundation

Current research on cookstoves in India

PhD Civil & Environmental Engineering, Sustainable Design & Construction

Civil Engineering & Economics at MIT

Gabilan Stanford Graduate Fellow

MA International Policy Studies, Energy, Environment & Natural Resources

Goldman Sachs and IFC

Collaboratory on Global Projects, Stanford University

Jon Strahl Himani Phadke Kelcie Abraham Maria Riaz

Page 3: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Overview

Mission

Motivation

Technology

Business Model

Risk Mitigation

Next Steps

5/3/2012 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University 3

Photo credit: J. Strahl

Page 4: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Mission

Page 5: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will finance locally co-owned renewable energy mini-grids in rural communities of Indonesia

5/3/2012 5 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Photo credit: Jane Erickson

Page 6: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Motivation

Page 7: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Rural electrification is a 1.1 billion-person issue

Globally, 1.3 billion people lack access to electricity; 84% live in rural areas.

5/3/2012 7 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Image source: http://geology.com/press-release/world-at-night/

Page 8: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Rural electrification positively impacts welfare

Household income

Productivity of home businesses

Agricultural productivity

Public health

Educational attainment

Public good benefits (security)

Quality of life

World Bank estimates annual welfare benefits of electrification at $600 per household.

5/3/2012 8 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Photo credit: Erin McGough

Page 9: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Rural electrification efforts face many challenges

Extending the national grid can be expensive

Remote areas with low population density, low demand, and difficult geography

5/3/2012 9 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Image source: http://www.un.org/esa/sustdev/sdissues/energy/op/parliamentarian_forum/indonesia_sugiharto.pdf

Page 10: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Indonesia is an ideal country for REwiRE

Strong government support

Goal: 95% electrification by 2025!?!

Abundant renewable resources

Remote island populations

Archipelago has 18,000 islands

Fuel costs are high and diesel shipments are intermittent

23% of national electricity is produced from oil

Renewables at grid parity on remote islands

67 million citizens (28% of the population) still lack access to electricity.

5/3/2012 10 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Photo credit: Erin McGough

Page 11: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Past off-grid projects have experienced several problems

Limited local ownership

Electrification of productive activities neglected

Lack of technical and engineering expertise in remote areas

Inadequate financing for long-term sustainability and scalability

5/3/2012 11 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Image source: www.alibaba.com/product-free/115259576/broken_solar_panel.html

Page 12: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

IBEKA, our partner, has overcome classic rural electrification challenges in Indonesia

Local ownership of micro hydro facilities through community co-operatives

Community values electricity as an asset

Sustainable O&M model

Over 20 years of experience, with ample technical and engineering expertise

50 projects, 0.5M people

5/3/2012 12 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

However, as a nonprofit organization relying solely on grant funding, IBEKA has limited scale and impact.

Photo courtesy of IBEKA

Page 13: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Capital structure achieves scale with minimum transaction costs

13

Joint Venture Co-op & REwiRE

Village 1

Village 2

Joint Venture Co-op & REwiRE

Joint Venture Co-op & REwiRE

Village 3

Holding Company REwiRE LLC

Institutional Investors 40%

Senior

Founders 5%

Impact Investors 25%

SubTier1

MCC Grant 30%

SubTier2

Indonesian Island

Mini-grid

Capital flows

5/3/2012 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 14: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will pilot three micro hydro mini-grids on Sumba Island

Only 15.4% of 685,186 people living on Sumba have access to electricity.

5/3/2012 14 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 15: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Technology

Page 16: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Micro hydro is our technology of choice for the pilot project

Viability and low cost of micro hydro demonstrated by our partner NGO IBEKA

We seek minimal technology risk for the first 3 installations

After proving the financial model, we will expand to consider other technologies, seek new partners, and broaden our impact

5/3/2012 16 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Biomass

Wind

Solar

Micro hydro

Page 17: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Technology choice depends on system scale, available resources, and levelized cost of energy

Predicted Load

System Scale

Available Resources

LCOE Comparison

Model Verification

Technology Selection

5/3/2012 17 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

End-User Surveys Grid-Connected User Surveys Institutional Reports

Feasibility Studies Past Project Data Institutional Reports

Past & Comparable Project Data Institutional Reports

HOMER, Hybrid2, ViPOR

75 kWh/HH/month 250 kWh/village/day

Rated Capacity: 50 kW System: Mini-grid

Solar radiation: 5.9 kWh/m2/day Wind: Promising (NREL Map) Biogas: 56.7 MW (NTT) Micro hydro: 4.5 MW potential

Solar PV: 23¢/kWh Wind: 10¢/kWh Biomass: 6¢/kWh Micro hydro: 5¢/kWh

Biomass Wind Solar

Micro hydro

Page 18: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will lower costs and improve service with an integrated energy solution

Micro hydro

Biomass

Wind and Solar

5/3/2012 18 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Reliable

Inexpensive

Complementary

Page 19: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Business Model

Page 20: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE is cost competitive

5/3/2012 20 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Revenue:

Electricity sales to local co-op members at 10¢/kWh

Long term PPA with state owned utility (PLN) at 14.3¢/kWh

10 14.3

6 10.2

20

10

40

0

5

10

15

20

25

30

35

40

45

REwiRE co-opprice

REwiRE PLNPPA

Currentdiesel

30% cut todiesel subsidy

Un-subsidizedelectricity

WTP(World Bank)

WTP(Interviews)

Pri

ce (

¢/kW

h)

Price of electricity (¢/kWh)

Page 21: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Electricity is an asset that increases ability to pay

Alternatively, 120 hours of kerosene light costs $6.56-8.75. This is equivalent to 40¢/kWh!

5/3/2012 21 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Assume light is used to work from 6-10pm

1.5 hrs = $0.44 basket

30 hrs = $3.28 mat

At 10¢/kWh, monthly lighting bill is $1.64

4 extra hours per day = $13.12-21.87 per month = 10x monthly lighting bill

Photo credit: J. Strahl

Page 22: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

$1.42 million is needed to fund three mini-grids

Majority of funds used for transmission work (43%) and mechanical/electrical work (21%)

Explore design improvements to reduce upfront transmission and distribution costs

5/3/2012 22 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

5%

30%

40%

25%

Sources of Funds

Founding Partners

MCC

Institutional Investors

Impact Investors

Page 23: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Base case shows 15.4% IRR with NPV of $1.77 million for three mini-grids

5/3/2012 23 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Net Present Value $1,771,875

Co-op Revenues $303,542

PPA Revenues $1,736,260

CDM Revenues $293,990 O&M Costs

$561,920

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

Co

mp

oe

ne

nts

of

Net

Pre

sen

t V

alu

e (

20

13

)

Waterfall Chart for REwiRE Pilot Project (Base Case)

Page 24: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Capacity factor, PPA offtake share, and PPA rate are the most important uncertainties

Capacity factor, PPA offtake share, and PPA rate account for 90% of variance

Even with moderate fluctuations in uncertain values, IRR remains reasonable

5/3/2012 24 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

8 10 12 14 16 18 20

Capacity Factor

PPA Offtake Share

PPA Rate

Co-op Rate

CDM Rate

IRR (%)

Deterministic Analysis of Project Uncertainties

Page 25: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will have triple bottom line impacts

5/3/2012 25 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Social

• Welfare effects • Community participation • Measures: # of households and

businesses connected, # of JV employees, sustained electricity use

Economic

• Robust returns for investors • Measures: o IRR = 10-16% o NPV = $1.77 million

Environmental

• GHG emissions mitigated (CDM) • Measure: Diesel displaced

Page 26: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Risk Mitigation

Page 27: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will mitigate numerous risks

5/3/2012 27 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Political

Local ownership

Government support at the ministerial level

Local NGO partners

Aligned with PLN (state-owned utility)

Counterparty

“Skin in the game” at all levels

Incentives aligned Photo credit: Erin McGough

Page 28: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE will mitigate numerous risks

5/3/2012 28 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Technology

Partnership with IBEKA

Micro hydro is well-understood

Cash flow

Diverse assets mitigate risk

Demand and construction

Seek ADB/ OPIC credit enhancements

ADB: Guaranteed 6% return

Operation and maintenance

Community owned and operated

Photo credit: J. Strahl

Page 29: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Next Steps

Page 30: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

We have a four-stage growth strategy

1

• Connecting to large PLN grid that has baseload demand • Enough capacity factor

• Easily qualify for carbon offsets by displacing diesel

2 • Mini-grids connected to remote, state-owned diesel gensets

3 • Stand-alone mini-grids managed entirely by the co-op

4 • Expand to other islands and other countries with similar characteristics

5/3/2012 30 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 31: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

5/3/2012 31 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

WAIKABUBAK ANAKALANG

PLTM 1X0,8MW

Wanukaka Walakaka

Palla Wewewa

WAITABULA

Kodi

Malata Mamboro

Haharu

WAINGAPU Makamenggit Lewa

Kamanggih Melolo

K. Water

Mangili

Wejelu

Kakaha

Nggongi

Kananggar

Tanarara

Renc. SUTM 17 kms

Renc. SUTM 13 kms

Tabundung

Tanabanss Lenang

Napu

Langgaliru LINDIWACU

GHAURA

Road

Existing Transmission

Planned TM 2012 /2013

Planned TM 2014 / 2015

1

2

1

1

3

4 3

Image source: PLN Tambolaka Seminar presentation, Sumba March 15, 2012

We have a four stage growth strategy 1

• Connecting to large PLN grid that has baseload demand • Enough capacity factor

• Easily qualify for carbon offsets by displacing diesel 2 • Mini-grids connected to remote, state-owned diesel gensets

3 • Stand-alone mini-grids managed entirely by the co-op

4 • Expand to other islands and other countries with similar characteristics

Page 32: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Excellent growth potential within Indonesia

5/3/2012 32 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Region Electrification Rate Population w/o

Electricity Access

East Sumba 5.8% 214,620

Sumba Island 15.4% 579,667

Nusa Tenggara Timur 33% 3,107,996

Indonesia 72.0% 67,163,862

Electricity demand growth on Sumba for past 5 years averages 15.9%

REwiRE will quickly scale to develop 25 mini-grids on Sumba Island, with a required investment of about $11 million after proving concept in pilot phase

Universal electricity access by 2030 will require $498 million annually, 95% of which is for rural grid and off-grid development

Page 33: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Room to scale a proven model worldwide

Proven model could be applied to emerging economies with:

1. Populations in remote areas,

2. Similar grid extension issues, and;

3. Abundant renewable resources.

5/3/2012 33 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Country Electrification Rate Population w/o Electricity

Access (millions)

India 75% 289

Bangladesh 41% 96

Nigeria 51% 76

Kenya 16% 33

As of 2011, IEA estimates $275 billion in total investment is needed worldwide to connect 26 million people per year from now until 2030.

REwiRE’s model could enable $5-7 billion in large-scale capital deployment.

Page 34: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Why invest with us?

Renewables have reached “grid parity” on remote islands of Indonesia and remote areas (“electricity deserts”) in other countries

We will help to pioneer a new paradigm for decentralized energy systems and foster clean development of emerging markets

Electricity = access to information = informed citizens = a sophisticated and stable democracy

Earn 10 – 16 % returns on investment

The technology and willingness to pay for it exist. This is an institutional and financial challenge that we know how to solve!

5/3/2012 34 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 35: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

We are moving forward with this idea Prize money from International Impact Investing Challenge will finance

another site visit to identify specific pilot locations for three mini-grids

Present to social impact investors with Bank Danamon in Jakarta

Identify Indonesian companies and engineers with expertise in other renewable resources

Ongoing quest for seed funding

Stanford Graduate School of Business Social Innovation Fellowship – financing to pursue a social venture full-time for one year

Stanford SEED fund

Stanford Farmer’s Investment Club

Cherokee Challenge

Aspen Institute

Cleantech Open

Any recommendations?

5/3/2012 35 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 36: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Thank you for your help!

Government of Indonesia Umbu Hinggu Panjanji Umbu T. Terawalangu Kuntoro Mangkusubroto

HelioPower Ty Jagerson

IBEKA Staff

Tri Mumpuni Sapto Nugroho Adi Laksono Pradygdha Jati Petrus Lamba Awang

Stanford University Collaboratory for Research on Global Projects

Ryan Orr

Stanford Graduate School of Business Stuart Coulson Jim Patell

Stanford University Intrepid Field Assistant (International Policy Studies)

Erin McGough

5/3/2012 36 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 37: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

REwiRE Advisory Board

Ryan Orr Zanbato Group Stanford University

Ty Jagerson HelioPower

Gil Masters Stanford University

Ben Vitale (In-kind partner) The Climate Trust

5/3/2012 37 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Page 38: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Questions, Comments & Feedback Welcomed

Page 39: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Appendix

Page 40: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Technology

Page 41: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Many resource options exist for off-grid electrification projects

Photovoltaics, microhydro, and wind account for 82% of these projects.

5/3/2012 41 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

25%

40%

17%

7%

3% 8%

Projects with Off-Grid Components (1980 - 2008)

Microhydro

Photovoltaic

Wind

Biodiesel

Diesel

Diesel/Renewable Hybrid

Source: World Bank 2008

Page 42: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Sumba Island has diverse renewable energy resources

4.5 MW of potential micro hydro

Solar radiation of 5.9 kWh/m2/day

Promising wind potential

56.7 MW of biogas potential (NTT)

Flexibility to target lowest-cost, lowest-risk generation options

5/3/2012 42 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Image source: http://www.nrel.gov/gis/images/international_wind/id_sumba_50mwind.jpg

Page 43: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

Levelized cost of energy can be used to compare energy generation options

Micro hydro has the lowest LCOE at about 5¢/kWh

5/3/2012 43 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

22.55 20.00

10.00

6.00 6.00 4.85

0

5

10

15

20

25

Solar PV Diesel(Unsubsidized)

Small Wind Biomass Diesel(Subsidized)

Micro Hydro

LCO

E (U

S ¢

/kW

h)

Levelized Cost of Energy in Indonesia

Source: IBEKA, US AID

Page 44: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

System scale impacts optimal technology choice

5/3/2012 44 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Each village will require a mini-grid system with a rated capacity of about 50 kW

PicoPV Systems 1-10 W

Solar Home Systems 20-250 W

Wind Home Systems 0.1-5 kW

Mini-Grid 5-500 kW

Small-Grid 1-30 MW

National Grid 21.4 GW

$1

$10

$100

$1,000

$10,000

$100,000

$1,000,000

$10,000,000

$100,000,000

1.E-01 1.E+00 1.E+01 1.E+02 1.E+03 1.E+04 1.E+05 1.E+06

Cap

ital

Co

st (

USD

)

Impact (Number of People)

Page 45: REwiRE: Rural Electrification with Renewable Energy · SUTM 17 kms Renc. SUTM 13 kms Tabundung Tanabanss Lenang Napu LINDIWACU Langgaliru GHAURA Road Existing Transmission Planned

System scale impacts choice of optimal technology

5/3/2012 45 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Technology Power Output Resources Primary Applications Unit Cost

PicoPV System 1-10 W Solar DC – Light, TV, radio, mobile phone charger $10 (solar lantern); $65 to $200 (solar module)

Solar Home Systems

< 250 W Solar DC – Light, mobile phone charger, fan, ICT, cooling AC or mixed – Light, fan and cooling on DC AC DC – Light, mobile phone, ICT

$180 to $2,100

Solar Residential Systems

0.5 – 4 kW Solar

AC – Light, mobile phone charger, fan, ICT (radio, cassette player, TV), fans, large working instruments and machines that work on AC power (e.g. drilling machine, grain mill, sewing machine, mixer, etc.)

$4,000 to $32,000

Biomass Generator

15 kW Biomass Light, TV, radio, mobile phone charger, agricultural applications

$38,400

Pico Hydropower

< 20 kW Hydro Light, TV, radio, mobile phone charger, small business enterprises

$4,000 per kW installed

Small Wind Turbines

< 50 kW (typically 1-10 kW)

Wind Local businesses and telecommunication centers (productive uses of power); mostly project based

$3,250 to $9,800 per kW installed

Micro Hydropower

< 100 kW Hydro Domestic needs of a small community or small business enterprises in remote areas

$3,000 per kW installed

Mini Hydropower

< 1 MW Hydro May be either a stand alone scheme or feed into the grid $1,200 per kW installed

Small Hydropower

< 10 MW Hydro Usually feeding into a grid $1,200 per kW installed

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Financial

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REwiRE requires initial $1.42 million in funding

Securing MCC or a similar grant is important for funding

Transmission work dominates uses of funds

Explore ways to reduce upfront transmission and distribution costs

5/3/2012 47 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

10%

30%

25%

35%

Sources of Funds

Founding Partners

MCC

Impact Investors

InstitutionalInvestors

3%

19%

21% 43%

2% 6%

6%

Uses of Funds

Preparatory Work

Civil Work

Mechanical andElectrical WorkTransmission Work

House Installation Work

Feasibility and Design

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Millennium challenge = $332.5 million in RE in Indonesia over the next 3 years

JICA

Japanese Embassy

SKATT (for workshop empowerment)

GTZ (for tech dissemination)

HIVOS (NGO from Netherlands)

5/3/2012 48 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

ASHOKA

SOCIENTAL

GDF SUEZ - Rassembleurs d'Energie (France)

GPOBA

Also potential from: World Bank, ADB, Rockfeller Foundation, Bill & Melinda Gates Foundation

UN Sustainable Energy for All initiative

REwiRE is currently seeking grant funding from multiple parties

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REwiRE seeks patient capital for the pilot project

5/3/2012 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

8 year payback period for three mini grids

Initial investors will need to be patient

REwiRE will seek impact investors with patient capital: Acumen Fund, Rockefeller Foundation, Calvert Foundation, Bamboo Finance (Oasis Fund), Canopus Fund, Omidyar Network, Green Ventures

As REwiRE scales and diversifies assets investors can recover their investment over a shorter period

Other investors:

Indonesia: Bank Danamon, Bank Negara Indonesia (BNI)

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Expected grant from Millennium Challenge Corporation

$600 M Indonesia Compact signed November 19, 2011

$332.5 M Green Prosperity Project

MCC Website: “The Green Prosperity Project will provide technical and financial assistance for projects in renewable energy and natural resource management to raise rural household incomes.”

0% of available funds have been committed

Jon Strahl spoke personally with MCC representatives in Jakarta on March 29, 2012

5/3/2012 50 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

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REwiRE projects will qualify for carbon offsets under the Gold Standard

Gold Standard uses the “suppressed demand” methodology

Offset values are based on expected future demand, not current demand

Income effect

Energy cost effect

Lack of physical access to energy

High unit cost of energy

UNFCCC COP Durban 2011: Suppressed demand likely to enter CDM language

5/3/2012 51 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Development doesn’t have to be dirty before it can be classified as clean!

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Risk Mitigation

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Diverse assets help mitigate cash flow risk

53

Joint Venture co-op & REwiRE

Village 1

Village 2

Joint Venture co-op & REwiRE

Joint Venture co-op & REwiRE

Village 3

Holding Company REwiRE LLC

City/ Town

5/3/2012 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Cash flows

Existing state-owned utility grid

Mini-grid

Capital flows

Future transmission expansion

Institutional Investors 40%

Senior

Founders 5%

Impact Investors 25%

SubTier1

MCC Grant 30%

SubTier2

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Co-op model helps mitigate risk

Community ownership is essential to sustain operations and maintenance of the facility. As part-owners, community

members will value the resource and work to maintain it

Upfront investment in training saves having to send technicians to remote areas in the future

IBEKA has proven this model of ownership with successful installations operational for 20 years

Indonesia has over 130,000 community cooperatives across a variety of industries

5/3/2012 54 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Photo credit: J. Strahl

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Credit enhancements mitigate demand & construction risk

5/3/2012 55 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Holding Company REwiRE LLC

10%

10%

6%

6%

Credit enhancement from the ADB

Guaranteed 6% return to institutional investors

ADB favors guarantees over explicit capital commitments

Institutional Investors 40%

Senior

Founders 5%

Impact Investors 25%

SubTier1

MCC Grant 30%

SubTier2

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Strong government support mitigates political risk

March 2012 presentation to UKP4 and Presidential Advisory Council

Kuntoro Mangkusubroto – former CEO of PLN and current head of UKP4

UKP4 staff to encourage small-scale procurement by PLN

5/3/2012 56 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Photo credit: Erin McGough

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REwiRE has multiple strategies for mitigating technology risk

Focus on micro-hydro as core technology

IBEKA has developed expertise

Technology agnostic with respect to resource

Biomass

Wind

Solar

All technologies must be simple, modular, and inexpensive

5/3/2012 57 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

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‘Skin in the game’ at all levels minimizes counterparty risk

Founders

Impact Investors

MDFI

Local Government

Co-operatives

Consumers

5/3/2012 58 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Incentives aligned at all levels

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Strategy

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An Indonesian island is the perfect place for renewables to reach grid parity

5/3/2012 60 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Fuel costs are high although currently heavily subsidized, and diesel shipments are intermittent.

44%

23%

21%

7% 5%

Sources of National Grid Power Production in Indonesia (2011)

Coal

Oil

Natural Gas

Hydroelectric

Geothermal

Source: EDSM, Government of Indonesia

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Policy recommendation: PNPM should be involved during all stages of a project

5/3/2012 61 © K. Abraham, J. Strahl, H. Phadke

Educate citizens to evaluate renewable resource potential

Budget time and money for training community members and building a receptive social structure

Monitor the success of installed projects

Assess Design Build Operate Maintain Monitor

Social Capacity

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Financial Model

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Cash flow model

5/3/2012 63 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

-$1.5

-$1.0

-$0.5

$0.0

$0.5

$1.0

$1.5

Val

ue

($

mill

ion

s)

Mill

ion

s

Year

REwiRE Cash Flow

Total Operating Revenues Development and Construction Funding Total Operating Expenses Total Development Expenses

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Tornado diagram data

Uncertainty Low Value Base Value High Value Low IRR Base IRR High IRR

Capacity Factor 60% 85% 92% 8.99% 15.44% 17.09%

PPA Offtake Share 0 80% 100% 10.66% 15.44% 16.55%

PPA Rate $0.12/kWh $0.143/kWh $0.165/kWh 12.96% 15.44% 17.69%

Co-op Rate $0.08/kWh $0.10/kWh $0.20/kWh 14.91% 15.44% 18.00%

CDM Rate $7/mtCO2 $10/mtCO2 $15/mtCO2 14.62% 15.44% 16.80%

5/3/2012 64 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Uncertainty Swing (Swing)2 % of Variance Cumulative Variance

Capacity Factor 8.099 65.59 47.91% 47.91%

PPA Offtake Share 5.886 34.64 25.30% 73.21%

PPA Rate 4.732 22.40 16.36% 89.57%

Co-op Rate 3.085 9.52 6.95% 96.52%

CDM Rate 2.182 4.76 3.48% 100.00%

Sum 136.91

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Financial model operating assumptions

5/3/2012 65 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Operating Assumptions Value Units

Total size 150 kW

Co-op (for all the mini-grids) 30 kW

PLN PPA (for all the mini-grids) 120 kW

No. of mini-grids 3

Co-op (at full capacity) 262,800 kWh/year

PLN PPA (at full capacity) 1,051,200 kWh/year

Capacity Factor 85%

Inflation Rate 3%

No. of households/mini-grid 100

Usage / household 0.1 kW

PLN Factor 4 x

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Revenue and expense assumptions

5/3/2012 66 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Revenue Assumptions Value Units

Co-op Rate 0.100 $/kWh

Wholesale Price (PPA Rate) 0.143 $/kWh

PPA Escalator 3%

Contract Term 25 Years

CDM 10 $/mtCO2

Avoided CO2/year 2,792 mtCO2

Residual Value 0% of project cost

Expenses Assumptions Value Units

O&M Costs 283 $/kW

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Capital cost and other assumptions

5/3/2012 67 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University

Capital Costs Assumptions Value Units

Preparatory work 248 $/kW

Civil work 1,827 $/kW

Mechanical and Electrical work 1,977 $/kW

Transmission work 4,026 $/kW

House installation work 229 $/kW

Feasibility and Design 553 $/kW

Other + Contingency 586 $/kW

Other Assumptions Value Units

Discount Rate 8.00%

Exchange Rate 9,145 Rupiah / $

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Works cited and consulted

EUR 23284 EN – Joint Research Centre – Institute for Environment and Sustainability, “A New Scheme for the Promotion of Renewable Energies in Developing Countries: The Renewable Energy Regulated Purchase Tariff.” Moner-Girona, M., ed. Office for Official Publications of the European Communities, Luxembourg. 2008.

Martinot, E., et al. “Renewable Energy Markets in Developing Countries.” Annual Review of Energy and the Environment. 27: 309-48. 2002. Matser, E., de Groot, R. “Sumba: An Iconic Island to Demonstrate the Potential of Renewable Energy.” Hivos. http://www.hivos.nl/english/About-

Hivos/Focus/Iconic-Island-Sumba. 31 March 2011. Niez, A. “Comparative Study on Rural Electrification Policies in Emerging Economies.” Information Paper. OECD/International Energy Agency, Paris,

France. 2010. OECD/IEA. “Energy for All: Financing access for the poor.” Special early excerpt of the World Energy Outlook 2011. International Energy Agency,

Paris, France. October 2011. Republic of Indonesia. Ministry of Energy and Mineral Resources (EDSM). “Electricity Along 2011 was Better.” EDSM, Jakarta, Indonesia.

http://www.esdm.go.id/news-archives/electricity/46-electricity/5454-electricity-along-2011-was-better.html. February 2012.

Rolland, S. “Rural Electrification with Renewable Energy.” Alliance for Rural Electrification, Brussels, Belgium. June 2011. Rolland, S., Glania, G. “Hybrid Mini-Grids for Rural Electrification: Lessons Learned.” Alliance for Rural Electrification, Brussels, Belgium. March 2011. Tumiwa, F., Rambitan, H.I., Tanujaya, O. “Cinta Mekar Micro-Hydro Power Plant.” Institute for Essential Services Reform (IESR). www.iesr-

indonesia.org. 26 January 2011. World Bank Independent Evaluation Group. “The Welfare Impact of Rural Electrification: A Reassessment of the Costs and Benefits.” IEG Impact

Evaluation, International Bank for Reconstruction and Development/The World Bank, Washington, DC. 2008. World Bank Group. “Technical and Economic Assessment of Off-Grid, Mini-Grid and Grid Electrification Technologies.” World Bank Group, Energy

Unit, Energy, Transport and Water Department, Washington, DC. 2006.

World Bank, “Assistance to the Government of Indonesia’s Demand Side Management Program.” Econoliner International. January 2006. Yadoo, A., Cruickshank, H. “The value of cooperatives in rural electrification.” Energy Policy. 2010. Zerriffi, H. 2011. “Rural Electrification: Strategies for Distributed Generation.” New York, NY: Springer Science+Business Media.

5/3/2012 68 © K. Abraham, H. Phadke, M. Riaz, J. Strahl – Stanford University