Soaltee Crowne Plaza Kathmandu, Nepal

6 -7 January 2013

“The Power of the Future”

1

The PowerSource Group

Sharing Business Models and Scaling up Mini Grids in Asia and

the Pacific

“The Power of the Future”

2

The PowerSource Group

Private Project Developers Best Practices:

Land, Regulatory and Other

Project Development Issues

• Our Objective:

TO PROVE THAT PRIVATE SECTOR CAPITAL CAN BE MOBILIZED TO ACHIEVE SCALABLE

ELECTRIFICATION & SUSTAINABLE DEVELOPMENT IN OFF-GRID COMMUNITIES

IN SE ASIA

– WITHOUT SUBSIDIES

3

PowerSource & Rural Electrification

• With multiple projects throughout the Philippines, we have

proven that:

– Private sector capital can be mobilized with no requirement for matching

grant or multilateral funding or government subsidies

– Rural communities are able and willing to pay for electricity

– Electricity will be put to productive use and result in measurable growth

in per capita GDP

– The provision of basic, sound and reliable infrastructure will kick-start

growth

• But there is no “one-size-fits-all” model to achieve scale and

replication – i.e., sustainable financeability.

4

Good News & Bad News

• Community Selection

• Technical Configuration of Generation System

& Dispatch Regime

• Livelihood Stimulation & Money Velocity

• Transaction Costs & Regulatory “Lubricity”

• Scalability

5

Balance the Critical Variables

“Patient” Capital Does Not Equal “Forgiving”

Capital

• Is it to achieve basic electrification (e.g., household lights and a radio or television)?

or

• Is it to achieve increases in per capita income by providing 24-hour access to an enterprise-

level of electricity?

6

The Starting Point:

Assess the Objective of the Rural Electrification Program

There are gradations of “poor” communities:

Category 1: Poor communities unlikely ever to support enterprise-creation or become economically self-sustaining in power tariff terms

Category 2: Poor communities able potentially to support enterprise-creation and with properly designed catalysts to become self-sustaining in power tariff terms

7

Differentiate the Target Communities by Type

Different communities require different solutions:

Category 1: Ideally suited to stand-alone renewable systems

with limited power capacity & supported by capital cost

subsidies and/or grants

Category 2: Higher load levels dictate hybrid renewable/

conventional power models with enterprise-level capacity &

supported on an interim basis by consumption-based subsidies

8

Customize the Electrification Solution to the Community

Different solutions yield different results:

Category 1:

• Achieves minimum electrification where none would otherwise be available

• Non-dispatchable & focused on basic lighting needs

Category 2:

• Achieves increases in per capita income through enterprise creation & growth

• Dispatchable & scalable

9

The Outcome is Positive & Sustainable

10

1

Generation &

Services Platform: CEP™

2

Distribution

System

3

Service

Connection

4

Livelihood

Training

Objective: > Increase productive uses of electricity

> Increase community income

WATER

FILTRATION

MODULE

COLD STORAGE &

ICE-MAKING MODULE

ELECTRIFICATION MODULE

COMMUNICATION

MODULE

ENTERTAINMENT

MODULE

Micro-Business

Technical Training

Educational Support

Technology Transfer

THE FOUR ELEMENTS PowerSource Achieves Economic Sustainability By Addressing

Four Critical Components of Electrification

11

Vacant Community Land – Pre-CEP™ Installation (Southern Palawan)

12

PowerSource Community Energizer Platform™ (Rio Tuba)

13

CEP™ Power Module – Hybrid Diesel & Biogasification

14

2 x 260 kVa Volvo Generators, Control Room & Transformers

15

Small Modular Biopower Multi-Purpose Platform:

Scaled from Initial 60 kW Installation

GPM

GPM

GPM

Engine

Engine Generator

Biomass Heat for drying,

refrigeration, ice

making, etc.

Shaft power

Heat Electricity

GPM = gas production module

Combustor

PowerSource 60kW Biogasification System:

Hybrid Community Electrification System, Palawan

Solar PV Diesel-Displacement Program:

Scaled from Initial 100 kW Installation

17

18

Portion of 20 Circuit KM Distribution System (3-Phase, 13,800 Volts)

19

Barangay Power Association (BAPA) Offices – Local Operations,

Maintenance & Collections Staff & Facility Established by PowerSource

20

Barangay Power Association (BAPA) Operations – PowerSource-trained

21

Water Filtration & Purification Module

22

Before & After of Purified Water Supply

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

2005 2006 2007 2008 2009 2010 Year 2011

No

. o

f C

us

tom

er

Se

rve

d

CUSTOMER CONNECTIONS TO POWERSOURCE RIO TUBA GRID

Connections

Financial Highlights – Rio Tuba, Palawan Community Energizer Platform™

24

Financial Highlights – Malapascua, Cebu Community Energizer Platform™

25

• Modularization of Engineering, Procurement &

Construction (“Plug-and-Play”)

• Remote Dispatch & Monitoring Capabilities (Centralized,

Real-Time)

• Remote Management Pre-Payment/Post-Payment Systems

(Mobile Phone-Based)

• Accelerated Site Identification via Local Alliances

• Regulatory Streamlining via Templates & Cooperative

Redrafting

26

Challenges & Opportunities to Scale & Replicability

27

• Rural electrification typically addresses communities of less

than 1,000 households

• Excessive regulation & transaction costs make electrification

commercially non-viable or require higher subsidies

• To energize one small community in the Philippines now

requires two complex levels of development approvals:

– On-the-ground development at the regional & local level

– Regulatory approval at the national level

The Need for a One-Stop Shop – A Reality Check

28

• Level 1: On-the-ground development at the regional & local level

– Project Site Visits: Remote, Unreliable data, hard to find contacts

– Presentation Meetings: Barangay, Municipality, Provincial

– Resource/Logistics/Technical Survey Visits (2-3 per site)

– Resolutions (3-6 months):

• Barangay: 1-3 visits: presentations, discuss resolutions, approvals

• Municipal: 1-2 visits

• Provincial: 1-5, depending on site

• Electric Cooperative: 3-5 visits/presentations, depending on site

– Additional general/relationship building visits/meetings

– Coordination between local/provincial/national agencies

– Post-project “closing” meetings often required

The Need for a One-Stop Shop – A Reality Check

29

• Level 2: Regulatory approval at the national level

– NEA verification of the waived area

– DOE declaration of the area as a waived area

– DOE certification of QTP pre-qualification

– DOE endorsement of winning QTP to the ERC

– Legal opinion re: QTP qualifications/status

– QTP Service Contract with NPC/SPUG

– Distribution Utility Waiver Agreement

– Subsidy Disbursement Agreement (with NPC)

– ERC Operational Approval

– ERC Tariff Approval

The Need for a One-Stop Shop – A Reality Check

30

• The Inevitable Outcome:

– Development lead times become unpredictable

– Transactions costs spiral to unacceptable levels

– Project replication (economies of scale) comes to a halt

– Investment capital flows to other opportunities

– The private sector loses interest in an investment climate that is at

once over-regulated & unpredictable

The Need for a One-Stop Shop – A Reality Check

“The Power of the Future”

31

The PowerSource Group

Thank You!