National Rural & Renewable Energy Programme (NRREP)

Evolution

1996, the GoN established the Alternative Energy Promotion Centre (AEPC) with the purpose of developing and promoting renewable energy technologies in Nepal. Today, AEPC has positioned itself as an established national focal point for the Renewable Energy sector development in Nepal. The AEPC has hosted different project interventions through support from development partners in the past. Especially, the second phase of the Energy Sector Assistance Program (ESAP II) followed a more coherent and coordinated approach that led towards realization of the need of a more coordinated sector development. As its result, in 2011, the GoN and development partners jointly agreed to support formulation of a National Rural and Renewable Energy Programme (NRREP).

Development Objective

The development objective of the National Rural and Renewable Energy Programme (NRREP) is to improve the living standard of rural women and men, increase employment of women and men as well as productivity, reduce dependency on traditional energy and attain sustainable development through integrating the alternative energy with the socioeconomic activities of women and men in rural communities.

Strong Poverty Reduction Focus

NRREP has a clear emphasis on effectively reaching out to the more remote and poorest part of the country, it will apply demand led approaches actively involving beneficiaries in decision making, and support use of energy for productive purposes leading to income and employment increase in rural areas, and it has mainstreamed Gender and Social Inclusion (GESI) into the programme at all levels.

GESI mainstreaming is done by including it in the development objective, each of the immediate objectives, in relevant outputs and activities, in indicators and targets as well as in monitoring. It is expected that the Government of Nepal (GoN) will mainstream GESI in the energy sector through providing equal access to and control of renewable energy technologies (RET) for increasing contributions to rural women and men towards economic growth. This will be in line with the GoN commitment to mainstream GESI and empowerment of women in the interim 3 year (2010-2013) plan.

Single Programme Modality

A distinctive feature of NRREP is that it will be a single programme modality in which there will no other AEPC executed Development Partner supported renewable energy programmes or projects funded outside the NRREP. This is made to remove inefficiencies, duplication, lack of co-ordination, supply led projects and fragmentation of aid to the rural and renewable energy sector in Nepal.

Central Renewable Energy Fund

The immediate objective of the Central Renewable Energy Fund (CREF) Component is to institute the CREF as the core financial institution responsible for the effective delivery of subsidies and credit support to the renewable energy sector.

This objective will be reached through establishing the CREF as an independently resourced and managed organisation with the capacity to effectively deliver subsidies and credit financing support to help implement RET deployment at a household and community levels.

Technical Support

The immediate objective of the Technical Support Component is to accelerate renewable energy service delivery with better quality, comprising various technologies, to remote rural households, enterprises and communities, to benefit men and women from all social groups, leading to more equitable economic growth. Several RETs will be supported, each with their distinctive characteristics and implementation strategies, and institutional building support will be provided to AEPC and the decentralised structures as well as support to income generating and livelihood activities in catchment areas of community electrification schemes.

Within biomass, better quality Improved Cooking Stoves will be delivered to an increasing number of rural households, in particular to the poor in remote districts. Focus will be on strengthening promotion of biogas in the household market and expanding promotion into the institutional market. Within the area of solar energy, lower cost domestic solar electric systems will be delivered more efficiently to an increasing numbers of rural households, and solar thermal applications will be promoted in a GESI and poverty relevant manner. The financial viability of community electrification schemes will be increased, and it will be sought to maximise availability of productive electricity at the village level. The strategy is to assist the AEPC, through implementation of its Strategic Organisational Development plan, to become an effective, efficient and GESI proactive institution for the promotion and development of the Renewable Energy (RE) sector.

One of the potential effects of the Technical Support Component will be a strengthened RET supply sector in Nepal. Through the use of the private RET sector, its capability will be increased to supply more and better quality RETs as well as potentially carry out innovation activities. With the substantial support provided to the various RETs and with the high number of beneficiaries of NRREP, this green economy sector will be stronger at the end of the five years NRREP implementation period. This provides opportunities for RET suppliers to have a foundation for increasingly supplying to the non-subsidised markets.

Business Development for Renewable Energy and Productive Energy Use

The immediate objective of the Business Development for Renewable Energy and Productive Energy Use (PEU) Component is to contribute to an increase in income generation and employment potential for micro, small and medium sized enterprises (MSME) in rural areas, particularly for men and women belonging to socially and economically disadvantaged groups. This will be reached through three outputs: (i) Capacities of existing MSMEs are enhanced; (ii) New and innovative MSMEs are created and operationalised, with a specific emphasis on integrating women and marginalised section of the population, and (iii) Appropriate Business Development Services are available to MSMEs in renewable energy catchments areas.

Specific measures to address other issues

The NRREP will have a positive effect on environment and climate change in Nepal. Specific activities of NRREP are addressing opportunities for benefits accruing from the Clean Development Mechanism and other climate finance mechanisms, potentially leading to a stream of income being generated for the CREF. Where introduction and scaling up of RETs have negative environmental consequences (used batteries for solar systems, emissions from MSMEs in areas where micro hydro power is being developed or impact from micro hydro power from events such as flash floods) mitigation measures are part of the NRREP design.

Democratisation and good governance are addressed across the NRREP in different ways. The use of the local governance system in NRREP in principle addresses democratisation as lower levels of government will be involved. However, consideration should be given to the fact that there have not been held local elections and that there is no timeframe set for such elections. Transparency, as a method to promote good governance and accountability, will across components penetrate implementation, including the use of a public disclosure system especially where micro-hydro power systems are established.

HIV/AIDS are addressed across the NRREP in a number of ways including through capacity development activities among communities exposed to high risks of HIV/AIDS. Activities will include awareness rising on issues of HIV/AIDS, information provision, measures of prevention, and prevention of gender based violence and trafficking.

Budget

The total budget available for NRREP is distributed among components as follows:

COMPONENT USD Million
CREF 113.1
Technical Support 40.1
PEU 8.4
NRREP Management 5.1
Studies, audits, reviews 3.4
TOTAL 170.1

Of the total budget the Government of Nepal (GoN) contribution is 40%. The GoN contribution to CREF is expected to be 55%.

The funding made available for NRREP consists of non-earmarked and earmarked funding, including funds earmarked for provision of technical assistance in monetary and in-kind forms.

Management

The overall management of NRREP will be carried out by the NRREP Programme Steering Committee. With AEPC being the executing agency, the NRREP Programme Director will be the Executive Director of AEPC. Day-to-day management of the Technical Support and Business Development for Renewable Energy and Productive Use of Energy Components will be the responsibility of AEPC Programme Managers. The CREF will be managed by a Chief Executive Officer (CEO). A Senior Adviser as well as national advisers will be contracted for providing advice to AEPC. A Compliance and Quality Assurance Unit will be established for providing oversight and support to financial and procurement management as well as for quality assurance and support to Value for Money audits across NRREP. The Unit will be led be a Senior Fund Management Adviser, being posted in CREF, where the adviser also will provide support to the CEO of CREF. Advisers in NRREP will work across components where relevant in order to complement each other and increase the impact of the programme.

Monitoring and Evaluation

As a principle the NRREP Monitoring & Evaluation (M&E) system will be aligned to GoN monitoring requirements. The objective of the M&E system is to provide systematic feed back to NRREP management enable adjustments to be made to implementation strategies and outputs in order to effectively reach the expected outcomes and contribute to realisation of the development objective. Monitoring is in NRREP viewed as a management tool that enable result-based management. At the development and immediate objective levels, where indicators and targets have been defined, the M&E system will regularly make assessments on the degree of progress towards reaching the development impact and outcome. A baseline has been produced in 2011, and cover all the RETs delivered through renewable energy programmes and projects. Focus will be on result based monitoring of energy related climate change impacts and socio-economic impacts.

The design of the NRREP M&E system will benefit from and be done in conjunction with design of the system for monitoring of the Business Development for Renewable Energy and Productive Energy Use Component, which will be developed to be compliant with the “Donor Committee on Enterprise Development” standards on measuring and reporting results.

Key Assumptions

Key assumptions of NRREP are:

  • Continued high prioritisation given to the rural and renewable energy sector by the GoN
  • High degree of commitment to and cooperation with NRREP from the Ministries of Finance, Environment, Local Development and Energy
  • Continued decentralisation through the local governance system to strengthen the District Development Committees/Village Development Committees and District Environmental and Energy Units which plays an important role in NRREP implementation
  • The agreed financial resources are smoothly forthcoming from GoN and Development Partners to NRREP in order to avoid periodic funding gaps which potentially would lead to disruptions in NRREP implementation, including subsidy provision, and
  • AEPC is fully staffed with competent people in all its permanent (core) positions.

Major risks

The major risks of NRREP are:

  • The inherent GoN bureaucracy including a slow implementation of reforms to make AEPC autonomous
  • Other Development Partner supported renewable energy programmes or projects being implemented
  • The GoN commitment to revise the subsidy system and to provide a larger portion of the subsidies for RETs as an exit strategy for the Development Partner support is not honoured
  • A financially safeguarded CREF is not established, leading to risk of financial mismanagement
  • A slow establishment of an effective CREF will lead to delays and a less effective NRREP
  • The large amount of subsidies and credit to be provided is a driver of the market for RETs, potentially distorting the market and encouraging market inefficiencies, including increasing RET prices
  • Fiduciary risks for Public Financial Management in Ministry of Environment, Ministry of Local Government and AEPC, and risk of corruption, and
  • The new constitution of Nepal is yet to be finally decided upon. While Nepal will be a federal state the implications for the institutional set-up within the country will remain unclear for some time. The new constitution could have an influence on the future organisation of AEPC and hence influence NRREP.

 

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