The report argues that public investment must be mobilised upfront to remove such capacity barriers. It shows that, while considerable upfront public investment is needed to develop local and national capacities for scaled-up rural energy service delivery, once made these investments can help drive down the cost-per-output and attract substantial financing from private sources at later programme stages.
For both the Nepal programmes, funding from public sources played a dominant role at the very beginning (well over 90 per cent), much of which was dedicated to capacity development. The share of public financing gradually declined to about 50 per cent at a later stage, suggesting that the pivotal role of public investments in developing national and local capacities subsequently attracted private financing.
The report takes lessons from two decentralized energy projects in Nepal that brought modern energy services to almost a million people in remote rural communities. The projects enabled 250,000 people to be reached by micro hydropower supplying electricity for lighting and mechanical power for agro-processing and other productive activities; and 580,000 people with access to improved cooking stoves.
According to the report, the key to the programme’s success was early public investment in capacity development, which developed local and national capacities required to deliver, manage, operate and maintain the solutions to providing energy access in rural areas.
Once made, these investments can help drive down the cost of utilities and attract substantial financing from communities and the private sources at later stages, as is the trend in Nepal.
According to the report, decentralized energy-access plans and budgets often do not adequately take into account the capacity development activities required for adoption of off-grid energy technologies by poor and rural populations, especially in areas where traditional delivery mechanisms, such as central utilities, are limited by geographical remoteness and small and/or fragmented markets. In such circumstances, national governments, local authorities, private entities, civil society organizations, and communities, all need substantial guidance regarding assessment of opportunities, mobilization of financing and resources, and design, implementation, and monitoring of energy access programmes.
Key capacity development efforts for the two Nepal programmes have focused on: (1) planning, oversight, and monitoring; (2) policies and regulations; (3) situational analysis; (4) stakeholder dialogues, communication, and community mobilization; (5) setting up and enhancing institutions; (6) training programme implementers and community members; and (7) implementation and management. Developing capacities in all these areas is essential for making the scale-up of rural energy access a reality.
Capacity development costs represent a significant portion of the overall costs of decentralized energy access programmes, especially in the initial stages, and must be fully taken into account in planning programme budgets.
Capacity development costs amounted to well over half of the total programme costs for both the Nepal programmes. Total programme costs for the Micro-Hydropower Programme over the study period (i.e., 1996–2006) were USD 14.3 million (at USD 110 per beneficiary, on average). Capacity development costs represented 56 per cent of the total costs. For the Improved Cooking Stoves Programme, total costs were USD 1.5 million between 1999 and 2004 (at about USD 2.6 per beneficiary, on average). Capacity development costs accounted for 68 per cent of the total.
According to the report, reductions in per-unit programme costs over time were driven by progressive declines in capacity development costs. For the Improved Cooking Stoves Programme: the cost per stove fell by about 60 per cent during the study period (from USD 27 in 2000 to USD 11 per stove in 2004), with a decline in per-unit capacity development costs of 70 per cent, compared with a reduction in hardware costs of only 20 per cent.
