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Private Sector Participation in Clean Energy Development, Management and Operations

Power Sector Distribution Reform in India

India 's power sector is characterized by inadequate and inefficient power supply. Given the shortfall in energy supply, the Government of India, in the early 1990's, opened up the power sector to private investments in new generating capacity. Investment was inhibited, however, due to the inability of investors to mitigate the risk associated with major projects in the country. This was largely due to poor management practices - especially in collections, performance monitoring, and operational control - that had long been ingrained in the State Electricity Boards (SEBs), the state-level distribution utilities.

The USAID Mission in India has been working in support of reforms in power sector distribution in order to address issues of weak financial performance, high T&D losses, low energy efficiency, and mitigating environmental impacts. In an attempt to advance these reforms the Mission launched planning for a distribution reform initiative jointly with the Ministry of Power in India . The thrust of this initiative is to better understand the various technical, commercial, and social issues impacting the power distribution system in the country. In support of these efforts, CORE conducted a detailed review and assessment of the distribution problem and developed a framework for potential opportunities for distribution efficiency reform in the country. CORE's work confirmed that the power distribution problem is multi-dimensional. CORE highlighted technical problems indigenous to the distribution system as well as outlined the economic, social, and political dimensions that need to be addressed. CORE evaluated a number of distribution reform projects - both urban and rural - that were being planned and noted that very different approaches are required for reform of rural versus urban distribution systems. CORE also visited a number of State distribution companies to gain insight into the distribution problem. CORE's report highlighted various approaches to reform in rural versus urban settings. The analysis showed that the proposed urban reform projects had an average payback period of less than four years while the rural projects had payback periods of eight to twelve years. Also, the investment level per unit of energy input and per unit of energy savings in rural projects was 3-5 times more than for urban projects. This analysis provided USAID with a more informed basis for developing its interventions and defining activities to support reform initiatives.

USAID employed CORE's report for extensive discussions with India 's power sector officials which led to the creation of the Distribution Reforms Upgrades and Management (DRUM) Project, based largely on CORE's recommendations. The DRUM Project is being launched with the purpose of demonstrating best commercial and technological practices for improving the quality and reliability of "last mile" power distribution in selected urban and rural Indian distribution circles. The overall goal of DRUM is to demonstrate commercially viable distribution systems that are able to provide reliable and high quality power and to establish a replicable framework and methodology to allow for non-recourse financing of distribution projects. Report on India Electricity Distribution Review and Assessment. (PDF)

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Energy Sector Policy and Institutional Reform in Albania

Due to the deteriorating state of its power industry, the government of Albania in recent years has undertaken efforts to reform and develop the sector. The pace of reform, however, has been slow due to (i) the ownership and management of the sector as a monolithic fully integrated state-run company, (ii) the lack of strong institutional and regulatory mechanisms in the sector, (iii) demand growth in excess of available generating capacity, and (iv) tariff rates below the cost of production, which has necessitated significant government subsidies and mounting debt levels.

To accelerate the rate of reform, Albanian authorities developed with the assistance of CORE International a Power Sector Policy Statement (PSPS). During its first Task Order assignment (2001-2003), CORE assisted Albanian energy sector officials in the development and implementation of the PSPS. In order to improve the government's institutional capacity to address power sector reform in the country, CORE designed and conducted a number of targeted training and capacity building initiatives on key topics of power sector reform. CORE's activities included the following:

• Assistance to KESH (the state utility) in reform and restructuring activities to improve operational efficiency, to unbundle its generation and transmission business segments, and to prepare the power sector for private investment.
• Support to the Ministry of Industry and Energy in terms of national energy policy and strategy development, preparation of action plans, and related training.
• Development of capacity building within the investment community and enhancing dialogue with the donor agencies to facilitate external investment including private sector investment.
• Performance of various technical assistance activities including a needs assessment survey and provision of advice on the Athens Memorandum process.

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This assistance continued as an additional Sub-Task under this Task Order. Specific activities conducted by CORE as part of this Task Order included additional capacity building at KESH, the Ministry of Industry and Energy (MI&E), and the National Agency of Energy. The assistance included on-the-ground work by CORE experts, together with the development and execution of a four-day Workshop on Program Management: Planning, Monitoring and Control . CORE's activities included the following specific initiatives:

• Planning and policy implementation management support to MI&E in the implementation of the Power Sector Policy Statement (PSPS) and regional market participation.
• A Resident Advisor for financial and accounting capacity building at KESH.
• Planning and advice for the implementation of Athens MoU I & II requirements.
• Technical advisory services to the MI&E on Power Sector Restructuring and the Restructuring Plan prepared by KESH.

CORE's overall assistance in Albania 's power sector over the last four years has resulted in a significant reform of the country's power sector. As mentioned earlier, distribution losses have reduced to 12-13 percent and collections are in excess of 85 percent. Albania is increasingly becoming an important member of the Southeast Europe Electricity Market and an important player in the Athens MoU I and II process. Report on the USAID Support in Commercialization, Training, and Utility Advisor to Albania.(PDF)

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