PIMS 179 CC FP Wind Energy Application in Eritrea

Report Cover Image
Evaluation Plan:
2007-2011, Eritrea
Evaluation Type:
Project
Planned End Date:
11/2007
Completion Date:
09/2007
Status:
Completed
Management Response:
Yes
Evaluation Budget(US $):
3,900

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Title PIMS 179 CC FP Wind Energy Application in Eritrea
Atlas Project Number:
Evaluation Plan: 2007-2011, Eritrea
Evaluation Type: Project
Status: Completed
Completion Date: 09/2007
Planned End Date: 11/2007
Management Response: Yes
Focus Area:
  • 1. Crisis Prevention & Recovery
Corporate Outcome and Output (UNDP Strategic Plan 2014-2017)
Evaluation Budget(US $): 3,900
Source of Funding:
Joint Programme: No
Joint Evaluation: No
Evaluation Team members:
Name Title Email Nationality
HEIKKI NORO PAROLA INTERNATIONAL ASSOCIATES Team Leader
GEF Evaluation: Yes
Evaluation Type:
Focal Area:
Project Type:
GEF Phase: GEF-null
PIMS Number:
Key Stakeholders:
Countries: ERITREA
Comments: Mid Term Evaluation
Lessons
Findings
Recommendations
1 RECOMMENDED ACTION The findings of this review assignment would warrant the following recommended immediate action as critical for the successful completion and potential replication of the wind energy applications in Eritrea. The action refers both to the remaining tasks within the project framework as well as those facilitating the potential replication and roll-out of the pilots after the project completion. 1. Concluding the procurement for the decentralised systems PMU should make all efforts in expediting the delivery of the equipment, now that the contract has been finally signed (was concluded after the MTR mission). The villages should be left sufficient time for the installation, commissioning and establishment of the performance measurement before the project is completed. Given the probability that the delivery will not take place before April 2008, a further extension of 6 months of the project completion date in connection with this component would seem more than necessary and justified. 2. Involvement of the pilot villages and their administration in the process PMU, ERTC and EEC should take immediate action to involve the pilot village administrations in the planning and preparation process for introduction of the wind generation units. Insufficient ground work has been done so far and the villages are very much in the dark. PMU should take the lead in establishing a work plan for each village for the introduction of the wind generators within the existing hybrid diesel backed systems or building green-field stand-alone wind-powered grids and generation. The plan should include at the minimum: physical and technical plans and blueprints for the sites and installations, responsibilities within the villages re. operations, maintenance and between the villages and ERTC, operating rules, O&M plans, cost recovery principles (investment and user tariffs), financing arrangements, time-line, identification of the trainees and O&M training plans. Otherwise there will be a big danger to lose the required ownership by the villages and the efficiency and sustainability of the wind power generation systems. 3. Ensuring the grid installations for two villages (Beylul, Gizgiza) and ensuring appropriate wind measurement arrangements for three villages (Beylul, Berasole, Rahaita). PMU/DoE has to receive the firm commitment by the Regional Administrations covering the two villages and establish the time-frame and plan for and ensure imminent physical installation of the transmission grids within the two pilot villages (oral commitment by the Governor has been received for Beylul and early indication for Gizgiza). ERTC should take the necessary steps to ensure that sufficient additional site-specific wind data can be obtained on the sites with no on-the-spot historical data. Change of target village should be still considered an option in case of uncertainty of sufficient wind availability over the entire year to meet with the demand. 4. Establish the performance, measurement and impact evaluation systems and methodology for the two main applications (international wind systems operation specialists) DoE should invite assistance from an experienced international wind farm and or small wind generation system operator to establish a performance monitoring methodology and system for both the grid-based larger and the decentralised pilots, ignored in the project design. The establishment of credible technically, operationally and economically viable measured and proven cases for potential replication is critical for convincing the decision makers and financiers. The monitoring systems have to be based on proven operations experience, not academic research. PMU should take action in having draft Terms-of-.reference for such additional task prepared, financing ensured from the remaining budget savings or from additional funds and suitable TA providers identified and quickly recruited. The task would require inputs from both wind generation, technical/operations as well as economics/financial specialists, estimated in total of 4 person-months. The costs are estimated not to exceed USD 100,000 allowing for direct selection procedure, as the task is critical and urgent. The unused balance originally intended to cover the TA contract in the GoE contribution could be used for this purpose. 5. Fill the gaps in institutional support and training (international large and small wind generation systems operation technical specialists) The remaining training should be closely focused on the requirements for the installation, operation and maintaining the wind generating systems in order to complement the remaining technical equipment related training to be provided by Vergnet for the Assab wind farm and by the supplier(s) of the equipment for the decentralised pilots. This gap, intended originally to be covered by the TA, should be given by wind generating systems specialists, not currently available in Eritrea. The additional required international expert inputs are estimated at minimum 5 person-months. The remaining raining budget (approximately USD 54,000) should be allocated for this purpose, and topped-up with other savings (GoE contribution) or additional funding. A service contract combining these tasks with action item 4 above would be the most efficient avenue to implement this task. 6. Extend the completion date and increase the budget if required The performance measurement and monitoring of the decentralised systems will have to take place after commissioning, which is foreseen in May 2008 at the earliest. The establishment of a sufficient basis for operational data for the result assessment requires the extension of the project until end 2008 for that purpose. The O & M training given by the equipment suppliers is part of the contract. The additional wind systems operations training (new TA) complementing the former would also be extended over that period due to the delays in procurement. The required financing for the two tasks above would require a budget of another USD 200-300,000. If GoE cannot cover the required amount from the balance under budget item 71200: Technical Advisor, additional financing by UNDP, GEF or from other donor sources would be necessary. The sustainability of the project would otherwise be in serious danger. 7. Start immediately the bridging to replication and involve the key donors As expressed earlier in this report, the roll-out of any new investments in medium and small scale wind power generation would require a substantial grant financing element. As the Assab plant will start commercial operations this October, this time in place provides a good showcase and demonstration to the potential donors, especially the ones with active presence, i.e. the World Bank and the European Union. Both have expressed their interest and potential, if this is an item of high priority within the Government and is taken up in programming negotiations relating to their future assistance. The key for the former are the forthcoming negotiations in September 2007 coinciding the IDA supervision mission regarding the use of the USD 50-55 million uncommitted grant window, and for the latter the negotiations regarding the finalisation of the next 2008-2013 programming cycle support and a budget of EUR 122 million. DoE should take action to discuss the potential inclusion of roll-out investments within MME and with the President's Office in these financing frameworks. Just to illustrate the maximum investment conservative estimate for the framework for medium term covering the replacement of 75 per cent of the Assab grid capacity (including the 5 MW replacement of the old diesel generation with new) at USD 2500/kW would be USD 12-15 million ingeneration capacity, and covering 30 % of the potential of the 300 villages at 15 kW per village (average of the pilots) at USD 6000/kW another USD 9 million in wind generation capacity, totalling USD 21-24 million, i.e. USD 10-15 million of donor contributions in the next two-three years (expecting their 50 % share). The interest of the other potential donors should be explored. African Development Bank (and their FINESSE renewable energy programme) already supporting e.g. the fisheries sector with ice-making capacity financing, SIDA with interest and earlier support in the wind energy sector are both in the forefront and should also be explored at early stage and invited to the commissioning of the Assab Wind Farm. Other bilateral donors, UN specialised agencies (e.g. FAO, UNICEF) supporting the related sectors in villages, private foundations as well as international energy firms active in wind energy support (e.g. Shell) fall within realistic potential. 8. Stepping- up of the awareness creation and reach out towards stakeholders PMU should decisively step-up with the awareness creation work at central, but especially on the regional and community levels, where the level of awareness of wind energy technology, its significance and potential are almost non-existent. The Assab Wind Farm commissioning as well as the imminent action related to the pilot village wind generation should be used as a platform to spread the word and knowledge. PMU and ERTC should prepare the necessary reference material for potential users, beneficiaries as well as service providers, as expected in the project design. This is also the high time to step-up proactive interaction with the stakeholders and informing them of the progress, implementation requirements and early results of the pilots. 9. Select the next round of villages PMU should take action in identifying the next group of villages for the roll-out programme together with the concerned regions and ERTC, as expected in the Project Document. Initial sourcing of grant financing (e.g. EU ongoing program cycle, the World Bank, UN agencies ongoing village programs) should also be carried out by DoE. 10. Consider the testing of other potential hybrid applications and wind technologies The project excluded at the outset testing of some applications which could also contain potential down the line. PMU should consider what steps can still be taken within the project scope on testing the hybrid solar-wind applications e.g. in the wind-rich highland valley regions, in order to assess the technical and financial viability of such applications in practice. The same applies to the use of small vertical turbine unit sets, ruled out from the pilots due to the limited international experience of such technology. The potential benefits due to lower investment costs, easier assembly and maintenance and other such factors would speak in favour of field testing of such new applications of future potential. 11. Reviewof the PPA draft critical policies and incentives towards larger independent producer models for the future DoE should already now start preparing the basis for the future, especially with regard to major expansion of wind generation and supply to ICS and the Assab grids, given the limited available public financing resources foreseen in the medium term. The draft Power Purchase Agreement model prepared by TA under the project is only the modest starting point, and should still be vetted by local legal experts and EEC suitable to the local legislation (the evaluator has some doubts in this respect, e.g. legal system applied, despite having no legal background). Although the short-term prospects for private sector and foreign investor interest in setting-up IPP wind generation operations are considered rather slim, DoE should make use of the project as a catalyst and take steps among the concerned authorities to review the enabling environment, e.g. legislation, investment, pricing, taxation, fiscal incentive policies to attract the potential interest for the replication of the commercially viable sized operations especially in large scale wind generation units and parks, foreseen within the wind power potential (estimated in the order of 100 MW based on wind data). The internationally prevailing and accepted public investment subsidy levels of 25-40 per cent would require the clarification of national policies also to that extent. The present Energy Policy and Strategies already emphasise this task in broad terms. Tangible action and foot-work is a prerequisite for any chances in attracting private capital to the industry in the future and belongs to the issues faced during the expected replication. 12. Assist in laying the foundation to integrate wind energy application policy and plan sections within the relevant energy investment programs The project should provide the replication potential and should help DoE to bring their plans further for the integration of viable wind generation into the concrete power sector investment programmes. The village pilots should be well integrated and harmonised into the forthcoming phases in the Rural Electrification Programme. Once operational results start to be available towards the completion of the project, such policy and planning links have to be created by DoE and EEC. Otherwise the potential benefits from the pilot projects will be lost. DoE and UNDP should take the lead in establishing this bridging link, involving the stakeholders, before the project is over, in order to maintain the critical momentum. 13. Clarify the financing arrangements and alternatives for the replication phases, including the potential links to the Rural Electrification Fund PMU and DoE should conclude the work intended for TA (and only superficially and academically covered) and devise together with GoE a realistic financing strategy and plan for the replication phase. The task would involve extensive consultation within the Government appropriate agencies and sales work among the already active as well as potential donor community in order to establish a credible and realistic picture for financial planning purposes of the ensued investments. 14. Establish an Advisory Committee, a Technical Working Group and twinning arrangements with capable foreign institutions to support project completion and the following bridging and replication phases. The highest levels of the Government including the President's office, MEE and the relevant line ministries, private sector apex bodies and key donors should be involved in case the pilot results warrant replication of large scale. An Advisory Committee or a relevant body integrated into the energy policy formulation would be advisable not only on the wind power but also in the renewable energy questions in general. A technical support group among the stakeholders DoE, ERTC, EEC (including specialists trained under the project) would be advisable to continue with the work started under the project to support further efforts in developing the local capacities in wind energy technologies, applications as well as in implementing investments and running existing facilities. Continuous technology links and support for wind power programmes should be ensured to keep up with the rapid international technical and operational development in the sector. Establishment of a twinning arrangement with a suitable, qualified and interested foreign wind power operator could provide such a link, supporting successful replication operations. Such long-term co-operation basis would provide the required continuity. Donor financial support would make such twinning arrangements possible and such a possibility should be investigated. 15. Consider imminent replacement of the old diesel generating equipment at Assad Power Plant. The majority of the installed generators require replacement within the next two years, whereas the remaining life time for the two newest ones can be extended over five more years. The existing demand level, the high operating costs and inefficient output already justify this investment as imminent requirement. The needs for back-up power for the forthcoming pilot phase of the Assab Wind Park will require full-time matching back-up capacity as it starts operations. Any increased wind generating capacity would also need corresponding back-up arrangements. Therefore, the two investment decisions are bound together, should be made soonest and presented to potential (donor) financiers as one package.
1. Recommendation: RECOMMENDED ACTION The findings of this review assignment would warrant the following recommended immediate action as critical for the successful completion and potential replication of the wind energy applications in Eritrea. The action refers both to the remaining tasks within the project framework as well as those facilitating the potential replication and roll-out of the pilots after the project completion. 1. Concluding the procurement for the decentralised systems PMU should make all efforts in expediting the delivery of the equipment, now that the contract has been finally signed (was concluded after the MTR mission). The villages should be left sufficient time for the installation, commissioning and establishment of the performance measurement before the project is completed. Given the probability that the delivery will not take place before April 2008, a further extension of 6 months of the project completion date in connection with this component would seem more than necessary and justified. 2. Involvement of the pilot villages and their administration in the process PMU, ERTC and EEC should take immediate action to involve the pilot village administrations in the planning and preparation process for introduction of the wind generation units. Insufficient ground work has been done so far and the villages are very much in the dark. PMU should take the lead in establishing a work plan for each village for the introduction of the wind generators within the existing hybrid diesel backed systems or building green-field stand-alone wind-powered grids and generation. The plan should include at the minimum: physical and technical plans and blueprints for the sites and installations, responsibilities within the villages re. operations, maintenance and between the villages and ERTC, operating rules, O&M plans, cost recovery principles (investment and user tariffs), financing arrangements, time-line, identification of the trainees and O&M training plans. Otherwise there will be a big danger to lose the required ownership by the villages and the efficiency and sustainability of the wind power generation systems. 3. Ensuring the grid installations for two villages (Beylul, Gizgiza) and ensuring appropriate wind measurement arrangements for three villages (Beylul, Berasole, Rahaita). PMU/DoE has to receive the firm commitment by the Regional Administrations covering the two villages and establish the time-frame and plan for and ensure imminent physical installation of the transmission grids within the two pilot villages (oral commitment by the Governor has been received for Beylul and early indication for Gizgiza). ERTC should take the necessary steps to ensure that sufficient additional site-specific wind data can be obtained on the sites with no on-the-spot historical data. Change of target village should be still considered an option in case of uncertainty of sufficient wind availability over the entire year to meet with the demand. 4. Establish the performance, measurement and impact evaluation systems and methodology for the two main applications (international wind systems operation specialists) DoE should invite assistance from an experienced international wind farm and or small wind generation system operator to establish a performance monitoring methodology and system for both the grid-based larger and the decentralised pilots, ignored in the project design. The establishment of credible technically, operationally and economically viable measured and proven cases for potential replication is critical for convincing the decision makers and financiers. The monitoring systems have to be based on proven operations experience, not academic research. PMU should take action in having draft Terms-of-.reference for such additional task prepared, financing ensured from the remaining budget savings or from additional funds and suitable TA providers identified and quickly recruited. The task would require inputs from both wind generation, technical/operations as well as economics/financial specialists, estimated in total of 4 person-months. The costs are estimated not to exceed USD 100,000 allowing for direct selection procedure, as the task is critical and urgent. The unused balance originally intended to cover the TA contract in the GoE contribution could be used for this purpose. 5. Fill the gaps in institutional support and training (international large and small wind generation systems operation technical specialists) The remaining training should be closely focused on the requirements for the installation, operation and maintaining the wind generating systems in order to complement the remaining technical equipment related training to be provided by Vergnet for the Assab wind farm and by the supplier(s) of the equipment for the decentralised pilots. This gap, intended originally to be covered by the TA, should be given by wind generating systems specialists, not currently available in Eritrea. The additional required international expert inputs are estimated at minimum 5 person-months. The remaining raining budget (approximately USD 54,000) should be allocated for this purpose, and topped-up with other savings (GoE contribution) or additional funding. A service contract combining these tasks with action item 4 above would be the most efficient avenue to implement this task. 6. Extend the completion date and increase the budget if required The performance measurement and monitoring of the decentralised systems will have to take place after commissioning, which is foreseen in May 2008 at the earliest. The establishment of a sufficient basis for operational data for the result assessment requires the extension of the project until end 2008 for that purpose. The O & M training given by the equipment suppliers is part of the contract. The additional wind systems operations training (new TA) complementing the former would also be extended over that period due to the delays in procurement. The required financing for the two tasks above would require a budget of another USD 200-300,000. If GoE cannot cover the required amount from the balance under budget item 71200: Technical Advisor, additional financing by UNDP, GEF or from other donor sources would be necessary. The sustainability of the project would otherwise be in serious danger. 7. Start immediately the bridging to replication and involve the key donors As expressed earlier in this report, the roll-out of any new investments in medium and small scale wind power generation would require a substantial grant financing element. As the Assab plant will start commercial operations this October, this time in place provides a good showcase and demonstration to the potential donors, especially the ones with active presence, i.e. the World Bank and the European Union. Both have expressed their interest and potential, if this is an item of high priority within the Government and is taken up in programming negotiations relating to their future assistance. The key for the former are the forthcoming negotiations in September 2007 coinciding the IDA supervision mission regarding the use of the USD 50-55 million uncommitted grant window, and for the latter the negotiations regarding the finalisation of the next 2008-2013 programming cycle support and a budget of EUR 122 million. DoE should take action to discuss the potential inclusion of roll-out investments within MME and with the President's Office in these financing frameworks. Just to illustrate the maximum investment conservative estimate for the framework for medium term covering the replacement of 75 per cent of the Assab grid capacity (including the 5 MW replacement of the old diesel generation with new) at USD 2500/kW would be USD 12-15 million ingeneration capacity, and covering 30 % of the potential of the 300 villages at 15 kW per village (average of the pilots) at USD 6000/kW another USD 9 million in wind generation capacity, totalling USD 21-24 million, i.e. USD 10-15 million of donor contributions in the next two-three years (expecting their 50 % share). The interest of the other potential donors should be explored. African Development Bank (and their FINESSE renewable energy programme) already supporting e.g. the fisheries sector with ice-making capacity financing, SIDA with interest and earlier support in the wind energy sector are both in the forefront and should also be explored at early stage and invited to the commissioning of the Assab Wind Farm. Other bilateral donors, UN specialised agencies (e.g. FAO, UNICEF) supporting the related sectors in villages, private foundations as well as international energy firms active in wind energy support (e.g. Shell) fall within realistic potential. 8. Stepping- up of the awareness creation and reach out towards stakeholders PMU should decisively step-up with the awareness creation work at central, but especially on the regional and community levels, where the level of awareness of wind energy technology, its significance and potential are almost non-existent. The Assab Wind Farm commissioning as well as the imminent action related to the pilot village wind generation should be used as a platform to spread the word and knowledge. PMU and ERTC should prepare the necessary reference material for potential users, beneficiaries as well as service providers, as expected in the project design. This is also the high time to step-up proactive interaction with the stakeholders and informing them of the progress, implementation requirements and early results of the pilots. 9. Select the next round of villages PMU should take action in identifying the next group of villages for the roll-out programme together with the concerned regions and ERTC, as expected in the Project Document. Initial sourcing of grant financing (e.g. EU ongoing program cycle, the World Bank, UN agencies ongoing village programs) should also be carried out by DoE. 10. Consider the testing of other potential hybrid applications and wind technologies The project excluded at the outset testing of some applications which could also contain potential down the line. PMU should consider what steps can still be taken within the project scope on testing the hybrid solar-wind applications e.g. in the wind-rich highland valley regions, in order to assess the technical and financial viability of such applications in practice. The same applies to the use of small vertical turbine unit sets, ruled out from the pilots due to the limited international experience of such technology. The potential benefits due to lower investment costs, easier assembly and maintenance and other such factors would speak in favour of field testing of such new applications of future potential. 11. Reviewof the PPA draft critical policies and incentives towards larger independent producer models for the future DoE should already now start preparing the basis for the future, especially with regard to major expansion of wind generation and supply to ICS and the Assab grids, given the limited available public financing resources foreseen in the medium term. The draft Power Purchase Agreement model prepared by TA under the project is only the modest starting point, and should still be vetted by local legal experts and EEC suitable to the local legislation (the evaluator has some doubts in this respect, e.g. legal system applied, despite having no legal background). Although the short-term prospects for private sector and foreign investor interest in setting-up IPP wind generation operations are considered rather slim, DoE should make use of the project as a catalyst and take steps among the concerned authorities to review the enabling environment, e.g. legislation, investment, pricing, taxation, fiscal incentive policies to attract the potential interest for the replication of the commercially viable sized operations especially in large scale wind generation units and parks, foreseen within the wind power potential (estimated in the order of 100 MW based on wind data). The internationally prevailing and accepted public investment subsidy levels of 25-40 per cent would require the clarification of national policies also to that extent. The present Energy Policy and Strategies already emphasise this task in broad terms. Tangible action and foot-work is a prerequisite for any chances in attracting private capital to the industry in the future and belongs to the issues faced during the expected replication. 12. Assist in laying the foundation to integrate wind energy application policy and plan sections within the relevant energy investment programs The project should provide the replication potential and should help DoE to bring their plans further for the integration of viable wind generation into the concrete power sector investment programmes. The village pilots should be well integrated and harmonised into the forthcoming phases in the Rural Electrification Programme. Once operational results start to be available towards the completion of the project, such policy and planning links have to be created by DoE and EEC. Otherwise the potential benefits from the pilot projects will be lost. DoE and UNDP should take the lead in establishing this bridging link, involving the stakeholders, before the project is over, in order to maintain the critical momentum. 13. Clarify the financing arrangements and alternatives for the replication phases, including the potential links to the Rural Electrification Fund PMU and DoE should conclude the work intended for TA (and only superficially and academically covered) and devise together with GoE a realistic financing strategy and plan for the replication phase. The task would involve extensive consultation within the Government appropriate agencies and sales work among the already active as well as potential donor community in order to establish a credible and realistic picture for financial planning purposes of the ensued investments. 14. Establish an Advisory Committee, a Technical Working Group and twinning arrangements with capable foreign institutions to support project completion and the following bridging and replication phases. The highest levels of the Government including the President's office, MEE and the relevant line ministries, private sector apex bodies and key donors should be involved in case the pilot results warrant replication of large scale. An Advisory Committee or a relevant body integrated into the energy policy formulation would be advisable not only on the wind power but also in the renewable energy questions in general. A technical support group among the stakeholders DoE, ERTC, EEC (including specialists trained under the project) would be advisable to continue with the work started under the project to support further efforts in developing the local capacities in wind energy technologies, applications as well as in implementing investments and running existing facilities. Continuous technology links and support for wind power programmes should be ensured to keep up with the rapid international technical and operational development in the sector. Establishment of a twinning arrangement with a suitable, qualified and interested foreign wind power operator could provide such a link, supporting successful replication operations. Such long-term co-operation basis would provide the required continuity. Donor financial support would make such twinning arrangements possible and such a possibility should be investigated. 15. Consider imminent replacement of the old diesel generating equipment at Assad Power Plant. The majority of the installed generators require replacement within the next two years, whereas the remaining life time for the two newest ones can be extended over five more years. The existing demand level, the high operating costs and inefficient output already justify this investment as imminent requirement. The needs for back-up power for the forthcoming pilot phase of the Assab Wind Park will require full-time matching back-up capacity as it starts operations. Any increased wind generating capacity would also need corresponding back-up arrangements. Therefore, the two investment decisions are bound together, should be made soonest and presented to potential (donor) financiers as one package.
Management Response: [Added: 2008/01/03]

RECOMMENDED ACTION The findings of this review assignment would warrant the following recommended immediate action as critical for the successful completion and potential replication of the wind energy applications in Eritrea. The action refers both to the remaining tasks within the project framework as well as those facilitating the potential replication and roll-out of the pilots after the project completion. 1. Concluding the procurement for the decentralised systems PMU should make all efforts in expediting the delivery of the equipment, now that the contract has been finally signed (was concluded after the MTR mission). The villages should be left sufficient time for the installation, commissioning and establishment of the performance measurement before the project is completed. Given the probability that the delivery will not take place before April 2008, a further extension of 6 months of the project completion date in connection with this component would seem more tha

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