Assessment Of Haiti's Electricity Sector Chapter 2

INDEPENDENT POWER PRODUCERS Overview of Active IPPs in Haiti Even though EDH technically has a monopoly on providing power for all of Haiti, most power sold by EDH is currently produced by independent power producers (IPPs). lv The first IPP to sign a power purchase agreement (PPA) with EDH was Interselect SA in Cap Haitïen on the Nord grid in 1996. lvi The current status of Interselect is unknown, and as discussed further below, may have been taken over by or renamed Sogener. Today, three companies with approximately 172 MW of total nameplate generating capacity, of which about 110 MW are located in the PAP area, have emerged as the leading IPP players in Haiti: lvii • • Sogener: Sogener is the largest IPP company in Haiti, with about 110 MW of generation: almost as much as owned by EDH, and roughly one-third of all capacity in the country. Sogener is wholly-owned by the Vorbe Group (reported to be one of Haiti’s largest enterprises) and led by Jean Marie Vorbe. lviii In 2002, Sogener signed PPAs associated with two power plant developments outside of PAP, originally an 8 MW project at Cap Haïtien (possibly involving the transfer of the above-mentioned Interselect plant) and another 8 MW project at Gonaives on the Artibonite grid. lix The Gonaives plant is said to have been operating without a meter for several years. lx In addition, Sogener operates the Varreux power generation facility in PAP, with an aggregate nameplate generating capability of about 82 MW comprised of various Wartsila, Caterpillar and Cummins diesel gensets. lxi All three power projects have been significantly expanded in capacity in the past decade as a result of favorable financing terms provided from a tripartite aid agreement between Cuba, Venezuela and Haiti (sometimes referred to as PBM, an acronym for PetionBolivar-Marti, which these three power plants are sometimes called in honor of legendary political leaders from the three countries). E-Power. Founded by 56 Haitian citizens and Haitian-Americans in 2005 (led by Daniel Rouzier, a Haitian businessman), E-Power owns and operates a 31 MW heavy fuel oil diesel power plant located in the Drouillard, Cite Soleil section of PAP. EPower sells power to EDH under a 15 year take-or-pay PPA signed in 2008, and was the first power project in Haiti to receive international funding, under a tendering process supervised by the World Bank and the IDB. The project was designed and built by Hyundai, commissioned in 2011, and employs a staff of 136. It is reported to be the most efficient and lowest-cost thermal power plant in Haiti, in part because it burns cheaper heavy fuel oil rather than more expensive diesel. lxii The • plant cost $57 million to build, of which the International Finance Corporation provided $17 million and FMO of The Netherlands provided $12 million. lxiii Haytrac: Founded in 1950, Haytrac (more formally, Haitian Tractor) is the Caterpillar distributor for Haiti. Although Haytrac’s website makes no mention of it, Haytrac is widely reported to be an active IPP player, and appears to currently operate two power plants on regional grids in Southern Haiti: Petit-Goâve (10 MW nameplate, 6 MW operational) and Les Cayes (10 MW nameplate, 6 MW operational). lxiv A recent article suggests that the Les Cayes project has been operating under an expired PPA contract since 2012 or 2013. lxv IPP Economics in Haiti Absent very much publicly-available information, and consistent with the overall ambiguity of EDH finances and economics, the level of prices paid to the IPPs under PPAs is not completely clear. A 2010 analysis conducted by Tetra Tech revealed base rates in the PPAs of between $0.16/kWh and $0.30/kWh, although fuel surcharges can drive the effective PPA price to be as high as $0.34/kWh. lxvi Perhaps reflecting these surcharges, various other accounts indicate that current PPA prices are on the order of $0.32-0.39/kWh. On the other hand, E-Power indicates that its power sales to EDH in August 2017 were at an “average price” of $0.149/kWh, reflecting underlying production costs of $0.138/kWh, and that EDH resold the power from E-Power at $0.2254/kWh. lxvii Based on guidance from the World Bank, the PPA between E-Power and EDH is based on two components: lxviii • • A capacity payment, covering the costs of operation, maintenance and financing, which was $0.0548/kWh in August 2017 An energy payment, based on the plant’s heat rate (fixed in the contract) and the fuel cost (indexed to oil prices), which was $0.0942/kWh in August 2017 In any event, PPA prices are heavily tied to the prices of fuel, all of which is oil-based and all of which is imported into Haiti. As of the summer of 2017, the variable generation cost associated with fuel burn was reported by Sogener to be $0.19/kWh. lxix This roughly corresponds to recent statements from EarthSpark International, which claims that the variable cost of IPP generation is $0.15-0.16/kWh for heavy fuel oil plants, and $0.22-0.26/kWh for diesel plants. lxx IPP cash flows appear to be largely insulated from currency risk: both fuel payments made by IPPs to fuel suppliers and PPA payments made by EDH are dominated in US dollars. In contrast, currency risk is a key contributing factor to EDH’s financial woes: while payments to IPPs are in dollars, receipts from customers are collected in Haitian Gourdes, which have depreciated significantly in recent years (from about 42 Gourdes per dollar in 2013 to about 63 Gourdes per dollar in late 2017). lxxi As of 2013, EDH was reportedly paying $144 million each year to pay for 88 MW of electricity from IPPs. lxxii More recently, while the IPPs themselves estimate total payments from EDH at about $118 million in 2016, at least one senior GOH official has claimed that EDH payments to the IPPs were actually $250 million per year. lxxiii EDH’s financial strains appear to be placing burdens and risks on the IPP companies. EDH’s stock of arrears with IPPs at end 2014 was estimated at $144 million (1.5% of GDP), while those with PBM (the counterparty underlying the Cuban/Venezuelan/Haitian tripartite trade agreement) were estimated at $142 million (1.5% of GDP). Arrears of IPPs and PBM for fuel purchases were estimated at about $220 million (2.4% of GDP). lxxiv E-Power ceased operations for three months in 2013 due to lack of payment from EDH, which was then in arrears by $12 million. lxxv One observer commented that payments to the IPPs are now actually being made by international debt guarantors, as EDH has been unable to make these payments on their own. lxxvi In any event, there has been considerable public controversy in Haiti recently about the payments made to the IPP companies for the power they produce. Several articles and letters to the editor appeared in the press in September 2017 complaining that the prices paid to IPPs under the terms of PPAs are too high. The Future for IPPs in Haiti There are a number of opportunities related to future IPP activity in Haiti that, on paper at least, appear to have economic merit. Alas, none appear to be active at present. First, the existing IPP generation fleet – all based on petroleum-based fuels – could theoretically be converted to liquefied natural gas (LNG) or liquefied petroleum gas (LPG, also known as propane) to achieve both economic and environmental benefits. In addition, given the sizable deficit between available generating capacity and electricity demand levels, there should be impetus for development of new IPP capacity in Haiti – whether based on cheaper and cleaner LNG/LPG, or based on renewable energy resources such as hydro, solar or wind. Although Haiti domestically produces no hydrocarbons of any type, it may be economically attractive to develop infrastructure in Haiti that would allow importation and storage of LNG or LPG, given the low prices now available from U.S. exports of LNG and LPG as a result of abundant gas and gas liquids production from shale resources. In 2013, Haytrac contracted with the engineering firm GasEner to develop a plan to construct a $123 million LNG import facility 14 km north of PAP, to support a new 40 MW power generation facility, as well as pipelines that would supply central PAP and a truck terminal to enable shipment of LNG to seven other cities around Haiti. lxxvii After a limited amount of construction, it appears that the LNG infrastructure project has progressed little if at all since 2014. On behalf of the World Bank, Nexant conducted an analysis in 2011 indicating the superiority of LNG over other fossil fuel options for new power generation: lxxviii Source: Caribbean Regional Electricity Supply Options, World Bank, 2011 As attractive as LNG may be as an option for Haiti’s electricity sector, renewable energy options are likely to be even lower cost. Rather than expanding Haiti’s reliance on imported fuels for electricity production with additional fossil generation, a strong case can be made for the development of incremental generating capacity that leverages abundant renewable energy resources available in Haiti. It is widely known that substantial opportunity exists in Haiti to develop renewable energy to produce electricity at lower cost than is now available from the current fleet of power generating capacity. According to estimates produced by Worldwatch in 2014: lxxix • • • Over 100 MW of incremental hydroelectricity potential can be developed in Haiti, with costs as low $0.05/kWh Only six square km of solar PV would be required to produce as much electricity as is currently generated in Haiti, with costs estimated to be on the order of $0.11/kWh Also at costs of approximately $0.11/kWh, viable wind energy resources are also available to be developed at several locations in Haiti Unfortunately, neither conversion of existing IPPs to lower-cost LNG/LPG or development of new generation capacity – whether fossil or renewable – appear to be actively under consideration at present. No official forward-looking electricity resource plan from either EDH or GOH has been developed for many years, so there is no current official consensus view outlining how future electricity needs in Haiti will or should be met. Although the lack of such a plan prevents any definitive statement, it is not believed that any IPPs – either the above three companies or any new entrants – currently have serious plans afoot to expand the Haitian power generation base, either from renewable resources or by building more fossil-fired generation. The absence of tangible future plans by IPPs in Haiti reflects several factors: • • The precarious state of EDH’s finances. Given EDH’s history of sometimes being unable to make PPA payments to IPPs, any project developer or financial sponsor would have significant concern about EDH’s ongoing ability to pay. With a counterparty of such poor credit rating as EDH, it will be very difficult to finance any new capital outlays associated with privately-owned power generation in Haiti. The apparent shift of multinational agency lending strategy away from IPP development. As is evident from the above, both Sogener and E-Power received substantial financial support and/or assurances from international financial aid sources to backstop the PPAs. However, it appears that these agencies (and their peers) have become less enthusiastic about lending to new IPP-related opportunities in Haiti – perhaps because the financial burden borne in recent years by these loan guarantors to make payments to pre-existing IPPs has been much higher than anticipated. Instead, the strategy for organizations to lend into the • • • • electricity sector in Haiti now appears to be focused mainly on microgrid development of the type discussed in the next chapter (and to some degree a continuation of efforts to reform EDH), as typified by the World Bank’s recent Renewable Energy For All program. The inability for EDH to manage well the generation it currently sources for its grid operations. As noted previously, EDH dispatches the electricity system very crudely, which results in many hours when EDF must keep power plants shut down even when plenty of demand exists. Indeed, it is reported that a French developer named Valorem ceased planning efforts on a wind project in Haiti a few years ago because assurances could not be made that EDH would be able to accept power from the windfarm on an as-available basis. lxxx The recent controversies about PPA payments from EDH to IPPs. In addition to producing unfavorable publicity for IPP companies, this development suggests that pressure may be building to revise PPA prices downward, which is a major disincentive for IPPs (or their financial backers) to committing any further capital to Haiti. The continuing depreciation of the Haitian currency, the Gourde. As long as loans for major energy projects are denominated in foreign currencies, and the underlying revenue streams from Haitian energy customers are based in Gourdes, currency movements will make it difficult to finance any long-term capital-intensive project that requires more than a very short period of time to pay back the initial investment. The uncertain nature of the future Haitian electricity regulatory regime – particularly in light of the recent announcement to create ANARSE – creates regulatory risk that any previously-negotiated agreements might be subject to alteration. Moreover, no precedents yet exist as to how ANARSE will make decisions with respect to any future agreements that might be negotiated between an IPP and EDH. For the meantime, it is likely that IPP players will wait for more clarity on how ANARSE will be implemented and how it will act on key matters. As a result of these various factors, the myriad economically-attractive opportunities for IPPs in Haiti remain untapped. While the current status quo for the existing IPPs may be tenable, uncertainties are significant enough to prevent any major new thrusts to be pursued by the private sector – current players or new entrants. INDEPENDENT MICROGRIDS Introduction to Microgrids in Haiti Haitian citizens that have little or no electricity access rely heavily on charcoal or wood burning and kerosene to meet their energy (primarily cooking and lighting) needs. Alas, these approaches for meeting household energy needs have many negative aspects: • • • • They are unhealthy and unsafe for households: burning kerosene, charcoal and wood have been demonstrated to significantly increase morbidity and mortality – not only from smoke inhalation, but also due to fire risk. They are burdensome: gathering wood is time consuming, and kerosene, candles and charcoal are very expensive to buy. According to research by EarthSpark International, the average rural small-town Haitian household spends an average of $10/month (6.5% of income) on kerosene and candles for home lighting. They don’t provide energy suitable to power many essentials taken for granted in the developed world in the 21st Century: refrigeration of food/medicines, computer use, Internet access, television, etc. They are environmentally damaging: charcoal production and wood gathering results in deforestation, and emissions from burning wood, charcoal and kerosene are both bad for local air quality and a significant contributor to global climate change. To illustrate, the Stockholm Environment Institute estimates that electrifying a cookstove in one rural household can reduce CO2 emissions by about 1-3 tons per year, implying a multi-million ton CO2 emission reduction opportunity across Haiti if significant conversion to electric cookstoves can be achieved. lxxxi With regards to the issue of deforestation, the satellite image below shows how badly foliage has been denuded in Haiti, relative to the neighboring Dominican Republic; only 3% of original forestland remains in Haiti. lxxxii For a crushingly poor country such as Haiti, the economic consequences of these inferior approaches for household energy supply are significant. When expenditures on primitive fuels are converted on an equivalent basis to electricity prices as typically denominated, the extraordinarily high costs becomes clear: approximately $20.00-45.00/kWh for kerosene lighting (depending upon whether a CFL or LED), respectively, and $60.00-115.00/kWh for cell-phone charging (depending on the size of the phone battery).lxxxiii Recognizing the humanitarian need to provide electricity access, the environmental benefits to enabling electrification of cooking, and the market opportunity in providing energy services at lower costs than the demonstrated willingness to pay amongst rural populations, many organizations have started independent microgrid projects in areas not serviced by EDH-run grids. Defining elements of an independent microgrid in Haiti include: • • • A grid connecting multiple customers to a set of electricity generation resources (often complemented by batteries to provide storage for backup) No or very restricted involvement of EDH Pay-as-you-go (PAYG) meters PAYG meters are an essential element of the business model for a financially-viable microgrid, for three reasons: • • • Elimination of credit risk, given the reliance on serving customers that are very poor and, unfortunately but inevitably, have high likelihood of payment delinquencies or defaults Reduction of working capital requirements, by eliminating the “float” between service provision and payment Reduced operational costs, by avoiding a variety of meter-reading, billing, and collections activities One of the most challenging aspects of microgrid development is how to surmount the fixed costs of building and maintaining the system to even be able to offer basic service levels to customers. No matter how small the microgrid is, fixed costs are non-trivial. Indeed, on a relative basis, smaller microgrids are the most difficult to finance, as they offer fewer customers and electricity sales over which to spread the fixed costs. Yet, these fixed costs need to be recovered by receipts from customers (often augmented by subsidies or grants), independent of how much electricity is used. Alas, the concept of “electricity customers” in as-yet unelectrified villages is daunting. Households in such villages have zero pre-existing ability to consume electricity: having never had access to an electricity grid, they literally possess no devices that rely on electricity. Even if a grid were brought to them, they probably cannot afford to buy appliances: households in these villages tend to be extremely poor, and while money is spent regularly on consumables like kerosene, credit facilities don’t exist to provide loans to finance the purchase of capital-intensive electricity devices. Thus, microgrids tend to start small, with few customers and small loads at each customer. PAYG is a critical element of an enabling financing strategy that supports a virtuous growth cycle. With PAYG, payments are secured from new customers (or from existing customers that want to consume more electricity) to help fund the growth of a grid until it reaches a self-sustaining level of ongoing revenue from sufficient levels of demand from enough customers to cover the system’s fixed costs. In addition to PAYG, successful microgrid development in Haiti also requires gaining the ability to proceed with minimal or no involvement from EDH, for the reasons discussed above. Developing a microgrid independently of EDH necessitates first securing appropriate support from both local community leaders and the central GOH. The organizations that have been successful in Haiti have secured long-term concessions granting rights to operate an electric system in the area in which they plan to do business, as allowed by a GOH decree issued in 2006. Those parties that have developed independent microgrids to date indicate confidence that they have all the necessary permissions and are therefore secure in at least their current projects. However, the process by which permission is granted can be perilous, given the uncertain nature of EDH’s monopoly on electricity supply, unclear public procurement processes, and the tobe-formed processes of establishing municipal-level public-private partnerships for community electricity grids. Furthermore, as is the case in many overseas markets, having local or insider knowledge is vital for successfully conducting business. In countries such as Haiti with unclear regulatory, reporting, and business structures, this knowledge is all but essential. An additional challenge for microgrids in Haiti – both for development and ongoing operations – is the lack of a trained workforce for installing and maintaining the equipment associated with microgrid systems. Various international institutions have provided some level of support for the microgrid concept, including the IDB, UNEP, NRECA International, and, most recently, the World Bank. The World Bank’s new Renewable Energy for All project (signed in October 2017) aims to expand access to 900,000 people in Haiti through a combination of upgrades and expansion of grids, microgrids, and stand-alone distributed off-grid systems. The World Bank report suggests that “over one million households (5 million people) can be reached through solar PV off-grid solutions and mini-grids.” lxxxiv For further corroboration, a study was recently conducted to evaluate the microgrid potential in Haiti, assessing the relative economic viability and attractiveness for 89 villages across the country for which microgrids were deemed plausible. Two different analytic approaches, each with multiple criteria and weighting factors, were used to make the assessment, and the two sets of results were then combined to produce a final assessment. The map below indicates the location of these villages and an approximate sense of their economic viability: larger green circles represent the most microgridfavorable towns, whereas smaller red circles represent towns less well-ranked. lxxxv Caracol: Initial Microgrid in Haiti As part of the response to the devastation wreaked on Haiti by the 2010 earthquake, the GOH and various international parties embarked upon a concerted effort to boost national economic output and export activity by developing the Caracol Industrial Park (CIP) in northeastern Haiti to host manufacturing businesses. Naturally, such an industrial park requires good access to electricity, which wasn’t previously present, even though one of the pre-existing regional EDH grids served areas near Caracol. Accordingly, a significant aspect of establishing the CIP was the construction of a dedicated microgrid to provide reliable electricity service to prospective customers. This initiative was soon expanded to extend the microgrid to some local communities nearby the CIP, and was renamed as the Caracol Community Electrification Program (CCEP), with a goal of providing electricity to 30,000 customers within 5 years. Backed by $2.5 million in funding from USAID and the National Rural Electric Cooperative Association (NRECA) of the U.S., CCEP was launched at the beginning of 2012, and was substantially completed by mid-2014, with much of the work performed under the oversight of NRECA (goods, equipment and services valued at approximately $1 million, including 5,000 hours of volunteer time). lxxxvi The CCEP involved building out the Caracol microgrid beyond the CIP, consisting of 10 km of 23 kV primary distribution lines and 40 km of 240 V secondary distribution lines, resulting in the ability to serve 2,269 potential customers. lxxxvii Located in the CIP, a 10 MW dual fuel (initially diesel, subsequently converted to heavy fuel oil) power plant consisting of six 1.6 MW Hyundai gensets supplies the Caracol microgrid. lxxxviii This power plant was installed as part of a $124 million grant from USAID to support the overall development of the CIP. lxxxix As construction of the Caracol microgrid neared completion in late 2013, the assets and operations were conveyed to a newly-constituted cooperative utility named the Pilot Project for Sustainable Electricity Distribution (PPSELD), which continues to receive considerable ongoing organizational and operational support from NRECA. After CCEP was formally completed in mid-2014, and under the control of PPSELD, the Caracol microgrid has been extended to four additional villages (Terrier Rouge, Limonade, Trou du Nord and Saint Suzanne), with a total of nearly 9,000 customers now being served. The locations served by the Caracol microgrid are said to be among the very few places in Haiti where electricity is available on a 24/7 basis. xc As of 2016, electricity prices on the Caracol microgrid were reported to be $0.30/kWh, comparable to prices offered by EDH where they serve customers. xci Of note, electricity losses on the Caracol microgrid are claimed to be much lower than typically experienced by EDH: collection rates are said to exceed 90%. xcii Although perhaps necessary for industrial operations, the 24/7 availability of electricity provided from the Caracol microgrid may be a higher standard of service than rural poor households truly need, want or are willing to pay for. It is said that considerable and ongoing engagement with local customers is necessary to justify the costs that they pay to PPSELD. xciii As is the case with many microgrids, a key economic challenge facing PPSELD in operating the Caracol microgrid stems from the fact that demand levels are low relative to the capacity of the installed infrastructure, which is capital-intensive. Whereas the Caracol microgrid has 10 MW of generating capacity, the average demand level from customers connected to date still only aggregates to less than 2 MW. xciv Peak demand for the Caracol microgrid is estimated to be approximately 4.5 MW. xcv The load profiles for industrial and household customers, and overall system load profile, relative to average demand for the Caracol microgrid, are presented in the charts below. As is evident, industrial demands are heavily weighted towards one-shift operation between 8 am and 5 pm, with a pronounced break for lunch. Meanwhile, the residential demand profile is fairly flat, with a slight peak during the evening hours. Since industrial demand dominates residential demand in volume, the overall system load profile looks more like the industrial load profile. xcvi The low level of demand on the Caracol microgrid makes for very low capacity factors (i.e., utilization rates) on the system, consequently worsening per-unit economics of both power generation and microgrid operation. It is also notable that PPSELD has received continued funding from USAID to support ongoing operations post-CCEP. Efforts are now underway to plan the transition of PPSELD to some kind of public-private partnership, in search of a more sustainable approach for financing and operations. xcvii According to news reports from mid-2017, a tender is being prepared jointly by USAID and GOH seeking an investor to take over PPSELD. The investor would secure a 30-year concession to operate the Caracol microgrid, but would be asked to make a $30 million commitment to expand the microgrid even further to other communities to the east, including Fort Liberte and perhaps as far east as Ouanaminthe on the border with the Dominican Republic. xcviii This so-called “Northern Development Corridor” potentially to be addressed by expansion of the Caracol microgrid is presented in the map below. xcix Notably, Fort Liberte is already served by one of the EDH regional grids, but availability of electricity is typically only 6 hours per day (6 pm to midnight). Thus, expanding the Caracol microgrid to supply Fort Liberte during other periods of the day could prove to be a “win-win” for both the Caracol microgrid (by improving utilization of its 10 MW of generation) and the pre-existing EDH regional grid serving Fort Liberte (by improving electricity availability). c Independent Microgrid Developers in Haiti While the Caracol microgrid was pathbreaking in many respects, it does not appear that it is serving as a highly-replicable model for further microgrid activity elsewhere in Haiti. For Haiti, the industrial park aspect of the Caracol development effort was a unique catalyst for electrification activity, since most rural villages across Haiti lack any industrial base and few if any others beyond Caracol are targeted for proactive economic development efforts of this type. Accordingly, three organizations pursuing a different business model not based mainly on industrial customers as “anchor tenants” have separated themselves as being most advanced in ongoing microgrid development activity in rural areas of Haiti: • • • EarthSpark International Sigora Solar Electric Light Fund (SELF) A fourth organization, OK Haiti, is also emerging to position itself for undertaking rural microgrid development in Haiti. These four organizations, and their microgrid development activity in Haiti, are profiled below. Beyond these microgrid developers, one interviewee commented that several small businesses – either locally-owned solar companies or general electricians – are selling and installing solar projects on buildings, primarily in the PAP area. While the size of these companies is unclear, their existence reinforces the hypothesis that solar energy – including solar home systems and solar-based microgrids – is a growth opportunity in Haiti. EarthSpark International A Washington DC based non-profit non-governmental organization working in Haiti since 2009, EarthSpark International initially partnered with UNEP to help a community organization in Les Anglais in southwest Haiti develop a store to supply clean energy technologies and training. Through this partnership, EarthSpark created a for-profit Haitian business, Enèji Pwòp, to serve as a retail store for clean energy technologies, training and education. Now a national brand, Enèji Pwòp has since sold over 18,000 small-scale clean energy products ranging from solar lanterns to efficient cookstoves. In 2012, EarthSpark launched a microgrid in Les Anglais, with an initial customer base of 14 households. By October 2013, this had expanded to 54 customers (48 households, 6 commercial), plus some streetlighting. By June 2015, this had expanded again to serve 449 households (over 2,000 people) with 24-hour electricity availability using a combination of 93 kW of PV, 410 kWh of battery storage, and a 30 kW backup diesel generator. As indicated in the load profile below, baseload or minimum demand on the Les Anglais microgrid is approximately 10 kW, with relatively brief daily peaks up to about 35 kW in the evening hours. As an outgrowth of its Les Anglais microgrid development, EarthSpark developed a pre-pay meter and has spun off a separate for-profit business called SparkMeter to sell these meters to microgrid and central grid operators both in Haiti and in other emerging economies globally. According to their website, SparkMeter has an installed base of thousands of meters operating in 15 countries. The SparkMeter meters that EarthSpark employs are customizable, enabling EarthSpark to segment customers into different user types with corresponding load limits. The dominant segments in Les Anglais are: • • • 30 watts, supporting an LED light and Internet access (“Lighting” customers) 120 watts, also supporting the use of television (“Lighting and TV” customers) 360 watts, also supporting the use of a small refrigerator (“Refrigeration” customers) According to EarthSpark’s website, the community-scale grid in Les Anglais is large enough to power small industrial activity while progressive enough to offer accessible service to every single resident living within the infrastructure’s footprint. EarthSpark claims that their notable innovation is their effort to pair residential and commercial loads in a viable business model through the SparkMeter meters, seeking to manage demand on a town-size scale in a way that makes the whole grid more efficient. Unfortunately, Hurricane Matthew in 2016 devastated Les Anglais. The grid experienced only modest damage – some solar panels were blown away and some poles were knocked down – but most of the village was destroyed. Even so, EarthSpark needed to raise money to repair and resume operations, which it has done, and the microgrid is expected to be back in service in January 2018. With the Les Anglais grid operational again, and with the further accumulation of operating experience, EarthSpark aims to pursue the following three-pronged strategy: • • • Derisk by doing – clarifying laws and regulations, codifying lessons learned Prove what is possible with microgrids – demonstrating high electricity availability Move microgrids towards market – establishing business model for subsequent projects With more results accumulated from the Les Anglais microgrid, EarthSpark sees the integrated town-scale approach as replicable and attractive to investors as a for-profit business opportunity. ci Accordingly, EarthSpark is seeking grant funding to build its next three microgrids (including one located in Tiburon) and, in parallel, to build the experience-backed fundable plan for the next 40 grids across Haiti, with a long-term goal of 80 microgrids by 2022. Sigora cii Based in California, Sigora undertakes for-profit activities and projects to bring electricity to less-developed economies around the world. Sigora’s Haitian subsidiary started with the goal of electrifying a public health clinic in Mole-Saint-Nicolas, and has since grown into a full-scale “Green Utility Project” in their words. Sigora Haiti connected its first customer in December 2015, and subsequently during 2016 engineered, financed and built its first microgrid system. Undertaken in conjunction with the IDB, Sigora currently has three active microgrids adjacent to each other in northwestern Haiti, providing 24/7 electricity access to around 2,000 active customers. By Sigora’s account, the grids are supplied by about 3.5 MW of wind and solar (although it is unclear how much of this has been completed to date), backed up by diesel generators. With a capital investment to date of $3.7 million, Sigora now employs about 70 linemen, contractors, and account managers. Sigora’s grids are located in a very poor rural region of Haiti, where Sigora has negotiated and obtained from the local municipalities a 25-year agreement for electricity service, covering an area with a potential of up to 27,000 connections serving 136,000 people. While the extreme poverty and limited commercial base of the region has been a challenge, Sigora claims to have been able to remain viable because: • • About 26% of payments to Sigora come from the Haitian ex-patriot diaspora, which sends money back to their relatives and friends in Haiti to purchase essentials. Sigora reduces customer acquisition and ongoing sales costs by utilizing in-village agents (typically, the owner of the local general store) to collect PAYG deposits from customers, wherein agents get to keep a 10-15% commission to incentivize sales activity. Of note, after finding the SparkMeter meters to be too small and insufficiently scalable, Sigora has designed their own energy meter with proprietary anti-theft technology and are considering creating a spin-off venture for smart meters. Sigora’s business model is completely for-profit, with a 10-year goal in Haiti to electrify 2 million people by 2025. They are generally averse to grants and donations, believing that the only way that electrification in Haiti will ultimately be successful at scale is through projects that generate positive returns, thereby attracting further investment capital. For its initial microgrid, Sigora claims a projected IRR of 18% over the life of the concession. Solar Electric Light Fund (SELF) ciii A non-governmental organization based in Washington DC, SELF is one of the world’s leading NGOs working on electricity access issues in developing economies. Among their various activities to improve energy provision in Haiti, SELF has been involved in two microgrid initiatives: • • CEAC. SELF was an important contractor during the 2013 implementation of the CEAC microgrid. A hybrid system consisting of 130 kW solar and 200 kW diesel generation, the CEAC microgrid is comprised of 54 km of distribution lines connecting to about 1600 customers across three towns: Coteau, Roche-a-Bateaux and Port-a-Piment. As was the case with the Caracol microgrid, the CEAC microgrid was built using substantial volunteer contributions (labor and equipment) from NRECA. Feyo Bien. SELF was the primary developer of the Feyo Bien microgrid, covering one village and with only 50 homes connected. Customers typically pay less than $10/month for their electricity service, equating to volumetric prices of $1.101.20/kWh. The economics work only because 9 commercial customers have been recruited to locate in a microfinance center, which is also where most of the microgrid operations are located. Indeed, the microfinance center itself first had to be established in order to both house the businesses and provide the lending capability to offer financing for the businesses to acquire electricity consuming appliances (e.g., refrigerators, freezers). Both of these microgrids have adopted a cooperative (i.e., not-for-profit) ownership and governance model. While this better assures local buy-in and reduces negative issues such as theft, it also adds a measure of implementation complexity. Not only does a cooperative structure take longer to form, but there is a general lack of management capability by local citizenry to professionally perform governance (i.e., Board) functions. Of SELF’s two microgrids, the CEAC experience was much more challenging, as the cooperative involved bringing together leadership from 3 adjacent communities, which in turn surfaced competing factions and assorted conflict. OK Haiti civ Led by Marc Raphael, a Haitian native based in New York, OK Haiti intends to develop a microgrid in Arcadins comprising 6 MW of solar generation and 4 MW of wind generation, augmented by 10 MW storage. Envisioning this as a pilot for their subsequent projects, OK Haiti aims to launch Arcadins microgrid development sometime in 2018, though it is believed that funding has not yet been secured. Beyond the first project, OK Haiti has set an ambitious vision of deploying ten microgrids across Haiti by September 2021, and a further ten microgrids (totaling twenty) by September 2024, supplied by 200+ MW of renewable energy, providing an estimated 3 million people with continuous energy access. SUMMARY From the preceding three chapters, the following conclusions can be drawn about the current state of the electricity sector in Haiti: 1. Electricité d’Haïti. EDH is in dire straits, operationally and financially. Although a monopoly responsible for electricity delivery nationwide, only about 20-40% of Haitians receive electricity service, and virtually none get reliable power on a 24/7 basis (unless they have their own backup generation). Due to “losses” of both a technical and commercial nature, EDH collects revenues on only about 20% of the electricity it sells, leading them to require increasingly large subsidies from the fiscally-strained GOH. To improve EDH accountability, the GOH has launched an effort to finally impose a regulatory authority (ANARSE) to drive some discipline. While that is a positive step, there is ample basis for skepticism, as many prior efforts by international agencies to reform the Haitian power sector have borne little fruit. 2. Independent power production. Now responsible for a majority of all electricity generated in Haiti, three IPP companies (Sogener, E-Power and Haytrac) play a major role in the Haitian electricity sector. Alas, they are not insulated from the challenges posed by EDH, who remains the only buyer of power produced by IPPs. The financial challenges of EDH mean that IPPs are likely reliant upon international agency guarantees for PPA payments, which in turn provide the cash necessary to import fuel from outside the country. Moreover, for a variety of technical reasons ultimately stemming from a lack of adequate capital and skill, EDH has difficulty in managing and delivering all the electricity that IPPs may be able to produce. Accordingly, additional IPP development appears to be on hold – even though substantial renewable resources offering low-cost energy potential without the need for imported fuel are untapped and available. 3. Independent microgrids. In large part because of the many difficulties associated with working with EDH, much of the incremental activity currently underway in Haiti to improve electricity access is focused on the development of microgrids to bring electricity to rural villages that have never been (and likely never will be) reached by EDH grid. Three organizations – EarthSpark International, Sigora and SELF – are the leaders in this arena. Though the problems posed by working with EDH are largely avoided, successful microgrid development requires overcoming three significant sets of issues: ensuring strong local buy-in from the host community, clarifying the legal and regulatory framework for microgrid development and operation, and achieving long-term economic/financial viability.