Somin MukherjiSenior Financial Analyst
ADFD/WB Project Preparation and Appraisal Workshop Abu Dhabi, April 2010
Electrification for Rural Yemen
Rural Energy Access Project (REAP)
Key Characteristics - Yemen
Country of 22.4 million people with a high population growth rate of about 3%
Yemen is among the poorest countries in the Middle East Region with per capita income of less than US$870
The GDP is US$ 22.5 billion and the economy grew at an average of about 4.1 % per annum during 1997-07
Oil exports have been the main source of Government revenue but reserves will decrease significantly without new discoveries
Other key sectors of economic activity include Agriculture, Industry, Manufacturing and Services
Source: The World Bank
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Power Sector Key Indicators
PEC - Commercial Report 2005 MW GWh
Installed Generation Capacity (interconnected)Fuel: HFO + Diesel
774 4.064
Isolated Generation CapacityFuel: HFO + Diesel
276 714
TOTAL 1050 4.778
Rental Generation (since 2007)(interconnected)Fuel: Diesel
210 1.472
PEC Consumers (2005) Consumers (Mio - %) GWh (Sales)
Urban 1.05 - 93.5% 3.202 / 97%
Rural 0.072 - 6.5% 92 / 3%
TOTAL 1.122 3.294 / 100%
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Why Rural Electrification?
Yemen’s population is predominantly rural
Fragmented government investment in rural electrification
Subsidy-dependent national electric utility
Environmentally unfriendly diesel used for isolated generation
Most rural schemes are unsustainable due to lack of institutional mechanisms
Significant disparity between urban and rural electrification
Yemen's Population Division
5,733,00027%
15,267,00073%
Urban Rural
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Urban vs. Rural Electrification
Population With vs. Without Access
12,600,000 60%
8,400,000 40%
Access No Access
Urban vs. Rural Electrification Rate
1,932,000 23%
6,468,000 77%
Urban Rural
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A Familiar Institutional Challenge
Power sector dominated by state owned Public Electricity Corporation (PEC), undergoing gradual, difficult reform
Rural electrification until recently attached to PEC
Project decisions influenced by political pressure and social compulsions
Tariffs well below cost of service; collection performance unsatisfactory, RE is a drag on PEC’s financial recovery
Result: only 1 in 5 rural households have electricity today – that too of a poor service quality.
Order of the day: Implement adopted National RE Strategy - Rationalize investment planning, Demonstrate a model that can rapidly increase coverage, Apply least cost service options
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Yemen´s RE Approach
Yemen´s Electricity Law of 2008 defining the pillars of the Power Sector Reform adopted by Parliament (March 2009)
Comprehensive grid and off-grid Rural Electrification Strategy adopted by the Government (July 2008)
Development of enabling Institutional framework underway (Creation of an independent Public Authority for Rural Electrification - April 2009)
Parallel Subsidy Reform Program being prepared
Strong donor interest catalyzed; AFD, USTDA, CIM, IsDB, and World Bank
Shift from PEC ad hoc project approach to developing scaled, regulated rural electric service providers
Actively engage communities in program ownership of rural electric service providers.
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RE Implementation Strategy
The RE program will electrify about 540,000 households and is expected to increase access in targeted rural areas from 20% to 37%
Phase-1 (Rural Energy Access Project - REAP) will provide access to about 195,000 households (175.000 new consumers, 20.000 SHS), at a cost of app. US$120 million funded by IDA, AFD, IsDB, USTDA and CIM
Significant additional Investments (Phase-2 and Phase-3) required for achieving the program goals ~ US$150 million
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Service Territories and Off-Grid Target Areas
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RE Institutional Framework
Service ProvidersCooperatives, contractors, or renewable energy service providers
Rural Electrification Agencyprogram management, financing
Regulatory Agency
Tariffs, qualityof service,
environmental review
Policy setting Program financing
Project identification, project analysis,technical oversight, standards, & licensing
Project selection,financing, & monitoring
Ministry of Electricity
Government/Donors
Institutional Framework for Rural Electrification
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REA Organizational Structure
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Thank you!