Innovative management approaches helping mini-girds to drive further towards long-term sustainability

There are various management models that can be implemented to address the existing problems of the MHPs and eventually ensure the sustainable operation of the MHPs.

Innovative management approaches helping mini-girds to drive further towards long-term sustainability  
Innovative management approaches helping mini-girds to drive further towards long-term sustainability

Background

Kathmandu / For more than two decades, the government of Nepal, together with various development partners, has been using subsidies as a tool to stimulate demand for off-grid renewable energy in the country. This fiscal tool coupled with community mobilization practices helped the uptake of various renewable energy technologies (RETs) that have transformed the lives of millions of poor households by providing them cooking, lighting and other energy-induced income-generating solutions. Isolated RETs such as micro hydropower, solar photovoltaic, biogas and improved cookstoves can substantially improve the rural economy. Specifically, micro-hydropower plants (MHPs) have been serving off-grid rural households in the hilly regions since they were introduced in Nepal in the 1960s. MHPs are contributing to uplift livelihoods of rural people and opening up other avenues for economic activities. With support from the Alternative Energy Promotion Center (AEPC is the national government agency for the decentralizes renewable energy sector in Nepal), more than 30 MW of micro/mini hydropower plants have been providing off-grid electricity to more than 400,000 rural households. But studies have shown that most of the micro/mini hydropower plants are not functioning properly to its full capacity due to poor governance systems including lack of accountability and transparency among the management committee. The tariff structures of the plants are not systematic and hardly been able to finance operation and maintenance (O&M). This causes long to indefinite down-times when even minor problems occur. Furthermore, a low level of awareness on productive uses of energy and insufficient skill and knowledge on O&M of MHPs have also increased the additional burden to operate the system more efficiently and steadily.

In this regard, to ensure the sustainability of those MHPs and to increase the attractiveness of the project, MHPs themselves should be operated and managed in a commercial way. It is foreseen that the existing problems of the MHPs could be addressed with strengthening/improving its managerial as well as technical aspects for the generation of reliable energy supply by operating MHP as an enterprise. This will help to improve the financial soundness of MHP and ensure a positive long-term impact for rural communities as well as help to increase the plant load factor.

Possible MHP Management models

There are various management models that can be implemented to address the existing problems of the MHPs and eventually ensure the sustainable operation of the MHPs. The following models can be adopted to shift MHP as a “social service” to “commercial operation” 

I. Community-Based Model (Business As usual Model)

A community-based model is widely applied while developing MHPs in Nepal. In this model, the community takes ownership of planning, installation, operation, and overall management of the MHPs. Under this model, Nepal has successfully established many MHPs, through strong community ownership from planning and decision making to equitable benefit sharing. However, the community based approached has failed to create a positive effect of rural electrification due to the poor governance structure of the management committee. This resulted in many problems - repair and maintenance, collecting adequate tariffs and long decision-making processes for the effective operation of the MHPs. The existing model needs to strengthen/revamp to effectively operate the MHPs. In this model, the existing management committee is dissolved/ or reformed and the newly formed management committee takes responsibility with new mandates and manages the MHPs. It has been experienced in most cases, that the success chances of this model are lower due to the absence of strong regulatory binding to address the existing problems of the MHPs and its commercial operation.

II. Cooperative Model

The cooperative model is one of the successful models in Nepal especially in the sectors of saving and credit. It helps to develop the ownership among the beneficiaries to strive for mutual benefits of the members. In this model, the existing management committee is dissolved and the MHP users are registered at the Cooperative Office and operate under the cooperative acts and bylaws. It ensures local communities' participation/ ownership and transparency for financial management. The cooperative model further cultivates good governance, ensure effective decision-making structure as well as bring improvement in the management structure.    

III. Private management model (Private Limited)

In this model, the present community management system is dissolved, and the ownership is based on the shareholder system. Individual shares will be distributed to all beneficiaries' households as per their interest and capacity to purchase the shares. This model is most suitable particularly at the time of new MHP development. However, this model requires a lengthy documentation process as per the Company Act of Nepal and takes more time. Furthermore, this model can be implemented easily for newly formed MHPs.

IV. Leasing out Management of the Plant (Community owned Privately Managed)

This model for the O&M of the plant could be the most commercially viable model in MHPs. Under this model, the management ownership of the plant for a certain time-period is transfer to the potential individual entrepreneurs, private companies or others. The selected entrepreneurs or company will be responsible for the O&M of the MHP for a certain period and subsequently handover the plant after completion of a contractual agreement between both parties. The ownership of the plants lies within the user committee and the private entity makes it's earning through the collection of tariffs from the beneficiaries. However, detailed terms and conditions will guide the operation of the plants. The terms and conditions have to be developed with the support of a legal expert. 

Implementation Strategy

The sustainability of MHPs is a major issue that requires serious attention. The main reason behind this is the weak cash-flow performance of MHPs and the poor governance structure. There are two approaches that will address the existing problems 1) By supporting existing MHP by adopting the proposed management models and 2) Develop new MHP based on new models. Systemic (holistic) thinking, participation and facilitation will be the three bases for the implementation of the aforesaid models. This is possible by building the capacity of the existing management committee and supporting the transformation of MHP towards business-like institutions for commercial operation. Furthermore, the support shall be coupled and look into in maintaining transparency, accountability and impartiality for the effective operation of the plants.

Implementation Plan

The following major key activities that are identified to strengthen the MHPs for commercial operation are outlined below in different phases. Each MHP is unique and the intervention period shall vary from MHP to MHP. However, it takes around 28-30 weeks to implement the various operational models as outlined above to operate and manage MHP in a commercially or MHP as an enterprise. Moreover, the ripple will be seen in additional 3-6 months after the interventions and the process is fully adopted.

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Distribution network of the MHP, providing energy access to remote location of Nepal

Outcome:

The following are the expected outcomes after adapting possible models for the commercial operation of MHPs:

  • Increased the operation hours of the MHP
  • Increased in revenue collection
  • Ensure a reliable power supply and reduced power outages
  • Improvement and change in the functionality of the management system

Bikash Uprety is a Technical Advisor at Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

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