Assessment Of Haiti's Electricity Sector Chapter 1

INTRODUCTION This report summarizes the current state of the electricity sector in Haiti, to form a knowledge base from which to subsequently evaluate options for how best to increase electricity access in Haiti. Accordingly, this report summarizes the results of an extensive review of the publicly-available information on the electricity sector in Haiti, supplemented by targeted interviews with selected individuals known to be knowledgeable about electricity in Haiti based on their recent involvement in assessing the sector or in pursuing/supporting development opportunities. No interviews were conducted with representatives of: • Electricité d’Haïti (EDH), the company that serves as the de facto monopoly service provider of electricity across Haiti, or • Any part of the Government of Haiti (GOH), which owns EDH, or • Any part of the U.S. government or other multinational agencies that provide aid to the GOH This assessment was limited to profiling the activities of the primary entities involved in multi-customer electricity grids in Haiti. These can be grouped into three main categories, which also serve as the three main chapters of this report: • The monopoly utility, EDH • Independent power producers (IPPs) that generate and sell electricity to EDH • Developers of independent microgrids in locations not served by EDH Additionally, other approaches exist for providing electricity services to individual customers in Haiti – either generation/storage systems that supply a wired building or compound, or stand-alone unwired electricity devices (e.g., solar lanterns) enabled by generation/storage – but these were not evaluated for this study. A final but important caveat: the availability of data regarding the status of the electricity sector in Haiti is very limited, and what data that exists is of uncertain or poor quality, with considerable conflicting information. As a result, subjective judgment was often required in interpreting and drawing conclusions, and whenever possible, multiple sources of information were used for triangulation purposes. ELECTRICITE D’HAITI Status and Legal Basis of EDH and Alternative Suppliers Founded in 1971 when the Government of Haiti (GOH) nationalized the company and the assets that previously had been established for electricity service in Haiti, Electricité d’Haïti (EDH) is a vertically-integrated electric utility, owning and operating generation, transmission and distribution assets, and responsible for delivery and sales of electricity throughout Haiti. Electricity service in the Port-au-Prince (PAP) metropolitan area is provided by EDH through a centralized grid, with about 200 MW of connected generating capability. Outside of the PAP area, electricity service is very scarce, with roughly 10 regional grids each of 220 MW in size operated by EDH serving some of the larger towns and nearby areas, plus roughly 30 village-level grids each with less than 500 kW of generating capability. Although data is very imprecise, only about 20-40% of all Haitians have some access to electricity through EDH – and even then, no-one receives reliable electricity service from EDH on a 24/7 basis. As a state-owned enterprise, EDH reports to the so-called “Energy Cell” within the Ministry of Public Works, Transportation and Communication (MTPTC). In spite of some decrees and practices to the contrary, EDH has generally been viewed as possessing monopoly rights to produce, transmit and distribute, and sell electricity nationwide. This monopoly right was confirmed by a decree on August 20, 1989, though the fact that such an action was necessary at all indicates ambiguity about the reality of EDH’s monopoly position. i Somewhat paradoxically, the 1989 decree also appears to have allowed EDH to outsource electricity production to private parties. ii In any event, beginning in 1996, some new power generation assets have been developed by independent power producers (IPPs), which financed these projects based on long-term power purchase agreements (PPAs) signed with EDH. iii Today, the majority of electricity generated in Haiti is supplied by IPPs rather than from EDH generation assets. Moreover, as discussed below, a number of “microgrids” are being developed by independent enterprises to provide electricity service in rural communities never reached by EDH. These initiatives were enabled by a decree issued in 2006 allowing local communities not yet served by EDH to forge their own agreements with other entities for providing electricity service. iv Compounding the lack of clarity about EDH’s actual monopoly rights, there historically has been no regulatory agency overseeing EDH. v Accordingly, EDH has essentially acted as its own regulator, making most decisions unilaterally regarding investments, operations, finances and prices. vi Perhaps in part due to this lack of accountability, as discussed further below, very little EDH financial data is officially published, and even electricity tariffs (prices) remain unpublished, thus producing much ambiguity about the true economics of electricity provision in Haiti. The latest draft of a National Energy Policy for Haiti, written in 2012, articulates a vision to expand and improve energy services by reforming the country’s regulatory and institutional framework and developing renewables alongside fossil fuels. It includes targets for 2020 in the three key categories of energy efficiency, renewable penetration, and electrification. However, the policy was not enacted. vii The National Development Plan for the Energy Sector cites as a major challenge a lack of coordination within the GOH – specifically between EDH, the MTPTC, the Ministry of Economy and Finance, the Ministry of the Environment, and the Bureau of Mines and Energy. Stakeholders report spending a great deal of time struggling to begin constructive dialogue and reach consensus on any significant energy-related matter, in part because each player has its own distinct objectives and vested interests. viii In February 2016, a decree was issued indicating the intention of establishing a regulatory agency, l’Autorite Nationale de Regularization du Secteur de l’Energie (ANARSE), though no effective action to implement this declaration was immediately taken, presumably because the GOH transitioned through multiple Presidents in relatively quick succession. ix On October 31 2017, under the current President of Haiti (Jovenel Moïse), the GOH announced the funding of ANARSE and the appointment of its first leader, Evenson Calixte. x Assuming that ANARSE gets fully established in an effort to bring some discipline to the Haitian electricity sector, it will face a massive challenge. Outside observers generally consider EDH to be in very poor financial and operational condition, beset by management and staff that is corrupt and incompetent, operating under a political and governance umbrella of high ambiguity. The recent Haiti Priorise effort undertaken by the Copenhagen Consensus Center (with financial support from the Government of Canada) concludes that “the World Bank, IDB and US AID have failed in all attempts to improve [i.e., reform] the power sector” in Haiti. xi All of these factors make EDH exceptionally difficult to understand or work with in an effective manner. Overview of EDH System and Operations As of early 2014, EDH reported employing a staff of 2,544 to serve 240,444 customers nationwide, in a country with a population of about 10.5 million people. xii Across Haiti, EDH owns about 140 MW of generation assets, and roughly 1,700 km of transmission and distribution lines. Annual sales of electricity by EDH are estimated to be approximately 500 million kWh. Annual revenue collected from customers is estimated to be on the order of $50 million, which would suggest an average realized revenue of $0.10/kWh. xiii On top of this revenue, EDH receives subsidies from the GOH, which are estimated by some observers to be as high as $250-300 million per year. By various measures, about two-thirds of EDH’s operations are related to the ownership and management of an integrated power grid of approximately 200 MW primarily serving the PAP metropolitan area (shown in green in the map below). In addition, outside PAP, EDH owns and operates about 10 other isolated small (< 20 MW) power grids serving a few of the larger towns scattered throughout the rest of the country (also shown in the map below), plus about 30 very small (< 500 kW) village-level grids (not shown in the map below). At an estimated 36 kWh annual electricity consumption per person, Haiti’s per capita use of electricity is the lowest in the Caribbean, and one of the lowest in the world. xiv By comparison, Haitian electricity use is only 2% of per capita levels in the neighboring Dominican Republic. Only a minority of Haitians receive electricity service. Because of poor metering and data collection, the exact proportion of Haitian population served by EDH is unknown. Although EDH reports somewhere around 250,000 customers, some believe that as many as 600,000 households are actually connected to EDH lines. xv Most published estimates suggest that somewhere between 20% and 40% of Haitian households have some access to electricity. In the PAP area, which is by far the largest population and commercial center in Haiti, EDH serves an estimated 72% of households. In contrast, only about 15% of rural households have access to electricity. xvi In the map below, note the tiny fraction of area shaded green – primarily the most developed parts of the PAP metropolitan region – the only places in Haiti where over 75% of households have electricity access. Note further the prevalence of areas shaded in purple or black indicating effectively zero electricity available. Admittedly, many of these unelectrified regions have very low population density and little economic activity, in part because the terrain is so mountainous. Where EDH serves customers, it does not mean they receive electricity 24 hours a day, 7 days a week. Quite the contrary: in general, it is reported that most customers served by EDH only receive power about 5-20 hours per day, due to a variety of factors (discussed further below). Because of the poor availability and reliability of power supply from EDH, a large proportion of industrial and large commercial customers across Haiti have installed diesel generators on their premises. As of 2010, all 23 registered textile manufacturers in Haiti had installed generators on site. xvii This trend towards self-reliance for electricity has apparently accelerated in the past two decades. The aggregate capacity of customer-sited generators in Haiti is at least 200 MW and possibly as much as 500 MW, which would be more than the capacity of the generation resources under EDH’s direct control. xviii EDH estimates that there are 50,000 diesel gensets in PAP alone. xix Regarding prices for electricity service from EDH, there is considerable ambiguity, as tariffs do not appear to be published. And, because there is no regulatory authority to provide transparency to the process of price-setting, it is unknown how closely electricity prices reflect EDH’s actual cost structure. From various publicly-available sources, it is generally reported that electricity prices from EDH are in the range of $0.25-0.40/kWh. For instance, in 2015, NREL indicated the following price levels for different customer classes: • Residential: $0.28/kWh • Commercial, Public Authorities and Public Lighting: $0.37/kWh • Industrial: $0.39/kWh However, perhaps reflecting recent depreciation of the Haitian currency (the Haitian Gourde), some observers claimed in interviews that actual prices for electricity service from EDH are in fact somewhat lower, with residential prices possibly as low as $0.14/kWh. xx Indeed, review of EDH electricity bills from October 2017 to a residential customer and to a commercial customer suggest that prices more accurately can be said to be on the order of $0.15-0.25/kWh: xxi Meanwhile, EDH’s average costs for electricity generation (both EDH-owned and purchased from IPPs) have been recently estimated at $0.32-0.39/kWh, reflecting the costs of oil-based fuels, all of which are imported. xxii Fossil fuel imports for electricity generation represents 7% of annual GDP. xxiii Moreover, fuel purchases are made in US dollars while EDH revenues are collected in Haitian Gourdes, which places additional financial strains on EDH as the local currency depreciates in value. xxiv Electricity generation from EDH’s Peligre hydro facility is likely to be much less costly than the indicated average, but is typically limited in practice due to a combination of degradation of the hydro turbines, silt accumulation, transmission limitations, and insufficient water flow during droughts and dry season. With generation costs above average electricity prices, this means that EDH loses money on every kWh sold – even if there were zero losses, which is far from the case. “Losses” – which in Haiti includes technical losses of generated electricity during transmission and distribution, theft by unauthorized users, lack of payment (or persistent delinquency) from authorized customers, or “skimming” of proceeds collected from customers by agents working on behalf of EDH – are a major problem. Theft is especially pervasive. The recent Haiti Priorise initiative indicates that stealing electricity from EDH may not technically be illegal, and further some thieves may actually resell electricity. Moreover, some EDH employees may be complicit in this theft. xxv Virtually all observers suggest total losses in excess of 55%, with some observers estimating total losses to be as high as 80%. Moreover, evidence suggests that the magnitude of losses on the EDH grid is worsening, even after the World Bank launched a “Loss Reduction Program” about 10 years ago: Given the fact that generation costs are higher than average prices, and since 50-80% of electricity generated or purchased by EDH is unrecovered due to a combination of technical losses and theft, EDH consistently runs in fiscal deficit. Shortfalls in EDH finances between revenues and costs are covered by subsidies from the GOH. xxvi EDH financial losses were recently estimated to be on the order of $200 million annually, equivalent to 4% of the national budget. xxvii Some observers believe the actual subsidies to be even greater, and public reports of estimated subsidy levels appear to be on an upward trend over the past several years. As of the end of 2014, delinquent electricity bills from private customers to EDH were estimated at about $70 million. In addition, debt of municipalities (for public lighting) to EDH was estimated at about $30 million. xxviii A few years ago, it was estimated that 43,000 customers were behind in payments to EDH. xxix Haitians agree that EDH is highly problematic. In 2007, a Governance and Corruption diagnostic developed by the World Bank found that approximately 70% of Haitian households classified the services of EDH as “poor” or “very poor”. xxx EDH officially charges $65 to establish a new customer connection – or approximately 15% of the average per capita income in Haiti. xxxi Moreover, it can take several months to perhaps two years for EDH to complete the connection. In contrast, “black-market” service providers (often involving off-duty EDH employees) can unofficially make a connection much more quickly for an estimated $500. xxxii In June 2014, the GOH launched an open call for operators interested in acquiring EDH’s assets and rights in the Southeastern portion of Haiti. Apparently, there has also been interest by the GOH to expand such privatization efforts to other regions of Haiti, excluding the Port-au-Prince (PAP) metropolitan zone. xxxiii According to the U.S. Department of Commerce, a recent effort to attract investors for concessionary rights for electricity provision were unsuccessful, due to terms that were considered too onerous. xxxiv Under the new leadership of President Moïse (who assumed power in February 2017), the GOH is reported to have indicated interest in making EDH reform and restructuring a higher priority. As of early 2015, EDH was reported to be preparing a new Electricity Master Plan, to replace its last iteration from 2007, to be completed by late 2015. xxxv There is no evidence that this plan has ever been completed. Metropolitan PAP Grid With a population of roughly 2.7 million people, 25% of the national total, the PAP metropolitan area is by far the most important center of economic activity in Haiti. Over 136,000 of EDH’s roughly 244,000 customers are connected to the PAP grid. xxxvi Most industrial, institutional and commercial customers of electricity in Haiti are located in the PAP area. Correspondingly, the electricity grid serving the PAP metropolitan area is the main asset and focus of operations for EDH. As shown in the table below, the total nameplate capacity of the generation base supplying the PAP grid is approximately 230 MW. From the above table, it can be seen that only about half of the capacity mix is actually owned by EDH, with the other half owned by two IPPs, Sogener and E Power. Further, about 80% of the capacity mix is oil-fired, with the exception of only the EDH-owned Peligre, a hydroelectric facility. The electricity actually generated from this capacity base is also reported to be approximately 80% oil-fired, 20% hydro (Peligre). It should be emphasized that the effective operational capacity of the generation base on the PAP grid is somewhat lower than the capacity above, and is probably more on the order of 150-175 MW, due to a variety of technical (mechanical or electrical) issues. xxxvii In any event, Haitian generators are estimated to operate at a 25% capacity factor. Deteriorating condition of the generation base caused Haiti’s electricity generation to decline more than 30% between 2004 and 2010. xxxviii The central PAP commercial district is largely encircled by a 53 km 69 kV sub-transmission line (shown in red in the map below), serving as the backbone of the grid serving most of the load in the PAP area. Source: Haiti Feasibility of Waste-to-Energy Options at the Trutier Waste Site, National Renewable Energy Laboratory and HDR Engineering for USAID, August 2014 This 69 kV ring is connected to the Peligre hydro facility, located 56 km northeast of central PAP, by a dedicated 115 kV transmission line. The 69 kV ring circling PAP is comprised of nine substations, identified by the yellow arrows on the map above and listed in the table below. 900 km of 7.2/12.47 kV and 20 km of 2.4/4.16 kV distribution lines emanate from these substations. xxxix A tenth substation located at the relatively new (2011) E-Power IPP generation facility, just to the north of the top of the map shown above, is connected to the grid by a 72.5-kV transmission line. xl Electricity dispatch on the PAP grid is performed in a very rudimentary fashion. The EDH dispatch center is antiquated, and according to one observer who visited in 2014, many of its controls and gauges appeared to be out of order. System frequency is managed manually, and instead of balancing being achieved by throttling generation up and down, load is shed and later reconnected by human operators at substations when called upon. xli Until the 2010 earthquake, very little was known about the characteristics of the PAP power grid. The transmission system was mapped for the first time immediately following the earthquake and, as of late 2011, EDH still did not have the distribution system mapped. The map above was published by NREL only in 2014. xlii The PAP grid is not capable of handling all of the available generation (which in turn is operating at well below nameplate levels), or in consistently serving demand for the entire connected customer base. In contrast to effective generation capacity levels approaching 200 MW, EDH's delivery capability in the PAP metropolitan area varies between 105 MW and 120 MW, depending on the current state of the system. Repair and upgrades of substations in the PAP area has been identified as a high priority to mitigate system deliverability constraints. xliii In recent years, the World Bank has committed to investing $40 million in improving the transmission and distribution network in the PAP area, and the IDB and USAID is spending another $40 million on the rehabilitation of five substations in PAP: Canape Vert, Carrefour Feuille, Toussaint Brave, Croix-des-Bouquets, and Nouveau Delmas. xliv Meanwhile, demand levels on the PAP grid vary from about 75 MW overnight to about 120 MW during the day. However, this excludes electricity demand from customers who rely upon their own generation rather than buy from the grid, as well as the demand of customers that EDH interrupts to maintain system stability. When all are added together, the effective peak demand level of customers that are or easily could be served by the PAP grid is estimated at between 400-500 MW. xlv According to data from January 2014 reported by EDH, the PAP grid serves 136,139 customers, of which 1,761 were industrial customers. In that month, 30.6 million kWh were sold, which translates to estimated annual sales of 367 million kWh (assuming no seasonality of electricity demand). In contrast, EDH reported that the PAP grid received 65.8 million kWh of generation in the same month, suggesting losses of 35.2 million kWh – equal to 53% of total electricity generated. xlvi Regional and Village Grids Outside of PAP As noted previously, Haiti does not have a single centralized transmission and distribution system. Rather, in addition to the main “Metropolitan” grid serving the PAP region, EDH operates about 10 isolated regional grids, and there are approximately another 30 villages throughout Haiti with very small grids serving only a few buildings. The map and table below indicate most of the regional grids, each of less than 20 MW. These smaller local grids, based on 23 kV lines, serve some of the other larger population centers in the country, including Jacmel, Les Cayes, and Cap-Haïtien. xlvii Because of the distances involved, the rough terrain and the low customer density, it is unlikely that economics will justify activity to connect the regional grids that already exist. Excluding the PAP grid, EDH owns a reported 732 km of distribution lines, with the following regional distribution: xlviii • • • • Nord: 186 km Artibonite: 219 km Sud: 176.5 km Centre-Ouest: 150 km As is presented in the table above, EDH serves roughly 86 thousand customers on these smaller regional grids. According to data from January 2014 reported by EDH, 11.6 million kWh were sold on these smaller grids, which translates to estimated annual sales of 139 million kWh (assuming no seasonality of electricity demand). In contrast, EDH reported that the regional grids received 24.7 million kWh of generation in the same month, suggesting losses of 13.1 million kWh – equal to 53% of total electricity generated. xlix On the regional grids, the following generation assets are installed: From the above table, there are about 80 MW of generation assets on regional grids, of which EDH owns roughly 25 MW. When these are added to EDH’s generation ownership on the PAP grid, EDH is estimated to own about 140 MW of capacity across the entirety of Haiti. In addition to the above generation assets connected to the regional grids, there are also roughly 30 village-level grids scattered across Haiti, serving customers in the “downtown” (“centre-ville”) area of a village. A profile of three of these village grids is presented below: Electricity on these village grids is supplied by small diesel generators in the 60-350 kW range, as indicated in the table below: It is claimed that many of the above-listed generators are operating without meters to measure their output. l The operational, reliability and financial problems experienced on the PAP grid as described previously are magnified on the regional grids and (especially) the village grids, where EDH’s exact role can be unclear. Village grids tend to be owned by the municipality, rather than by either EDH, a private developer (if in a location not served by EDH), or the village itself. In some village grids, community involvement is present through a volunteer committee appointed by the mayor’s office responsible for operations and maintenance. However, in most cases, the committee is made up of the mayor’s staff or by a local NGO. In some cases, a technician paid by EDH who lives near these grids performs basic operations and maintenance. li Since EDH does not perform detailed load assessments when planning, generators on the regional and village grids are often oversized for the loads they serve by a factor of two to three. As a result, generators tend to run at low set-points and thus consume fuel at very low efficiency, driving up operational costs. lii The average costs of generation from individual diesel gensets varies depending on their size and efficiency, but typically ranges from $0.40/kWh to almost $2.00/kWh. liii Furthermore, reliability is low because modest maintenance issues (e.g., fuses, lubricating oil, gaskets) are often left untended due to shortages of funding. Poor service leads to customer non-payment, which in turn worsens service, which in turn increases non- payment further, often leading to complete cessation of service for months. Political favoritism often influences which grids get better or worse service. liv Set by local municipalities, village grid tariffs are highly insufficient relative to costs. Moreover, customers have three months to pay, and penalties (including service stoppage) are threatened, though not always enforced.