Intermediate strategy for renewable energy sources based integrated rural development by United Nations Development Programme

UNDP Tajikistan Energy and Environment Programme

Energy for development and poverty reduction

Intermediate Strategy for Renewable Energy Sources Based Integrated Rural Development FINAL DRAFT

Prepared by: Zoran Morvaj, Task Manager Vesna Bukarica Nikola Čupin Dušan Gvozdenac Ognjen Marković Slavica Robić

Dushanbe, August 2010

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Foreword The Republic of Tajikistan has abundant resources of hydro energy, which are still mostly untapped, particularly when it comes to small hydropower plants. At the same time, Tajikistan, despite its high electrification rate during the Soviet era, currently has an unreliable and often nonexistent power supply that compels much of its population to live in poverty stricken conditions. Because renovations to the power grid and the construction of large-scale hydro power plants require significant funding and time, it is unlikely that they will provide a solution to Tajikistanâ&#x20AC;&#x2122;s energy troubles in the short term. As a result, the strategic focus of Tajikistan in terms of renewable energy and energy efficiency utilization should be directed towards small, community based hydropower plants and low cost and implementable energy efficiency measures. The strategy should create an overall framework for improving conditions, stimulating economic development, and facilitating poverty reduction in the short term. Due to the complexities involved, is it imperative to emphasise this strategy as â&#x20AC;&#x153;Intermediateâ&#x20AC;?. Poverty in Tajikistan is markedly linked to the lack of access to a reliable energy supply, which in turn limits development opportunities. Thus the main goal of this strategy is to provide guidance in the creation of conditions that will increase both the reliability and availability of a power supply in the most poverty afflicted areas (and thus impacting the country as whole). There is a strong correlation between the potential of hydro resources in the production of electricity in (micro) hydropower plants, and the availability of such resources in the most poverty stricken areas. This offers a tremendous opportunity to utilize this vast energy potential to stimulate integrated rural development, ultimately leading to poverty reduction. The provision to utilize renewable energy positively impacts the rate of environmental degradation, an acute and concerning issue in the region. Therefore, the Strategy has three main objectives: 1) Poverty reduction by improving access to electricity and stimulating integrated rural development; 2) Provision of an impetus for economic development in the sectors related to renewable energy sources and energy efficiency by devising support mechanisms for rural renewable energy sources and energy efficiency schemes. 3) Building environmental resilience by decreasing the loss of the vegetation cover, occurrences of soil erosion and desertification, CO2 emissions (in the utilization of RES and EE), and by preserving valuable carbon sinks.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Table of Contents Executive Summary ......................................................................................................................................................... 4 1

Introduction .............................................................................................................................................................. 6 1.1

Overview of the energy situation in Tajikistan ................................................................................ 6

1.2

Energy statistics data for Tajikistan ...................................................................................................... 8

1.3

Energy prices ............................................................................................................................................... 13

1.4

Overview of RES potentials .................................................................................................................... 16

1.5

Overview of potentials for EE improvements ................................................................................ 19

1.6 Identification of the main barriers for the utilisation of RES and EE improvement in Tajikistan...................................................................................................................................................................... 19 2

POLICY, LEGAL AND REGULATORY FRAMEWORK ............................................................................... 22 2.1

Policy and legal framework for RES ................................................................................................... 22

2.2

Regulatory framework for RES............................................................................................................. 23

2.3

Policy, legal and regulatory framework for EE .............................................................................. 27

INSTITUTIONAL FRAMEWORK ..................................................................................................................... 28 3.1

Overview of baseline conditions for the implementation of RES regulation .................... 28

3.2 Strengthening governance and capacities to implement RES (and EE) policy at national level 29 3.3

Strengthening governance and capacities to implement RES and EE policy at local level 31

3.4 The role of the National Trust Fund for RES and EE in policy implementation at national and local levels ......................................................................................................................................... 32 4

FINANCIAL SUPPORT FOR RES AND EE .................................................................................................... 36

5 TECHNICAL CONDITIONS AND CAPACITIES FOR IMPLEMENTATION OF RES AND EE POLICY ............................................................................................................................................................................... 40 6

sHPPs AS A BACKBONE OF INTERMEDIATE RES AND EE STRATEGY ......................................... 42 6.1

sHPP role in poverty reduction and economic development of Tajikistan ........................ 42

6.2 National scaling-up: sHPPs for accelerating progress towards MDGs by stimulating integrated rural development ............................................................................................................................. 43 7

EXPECTED RESULTS OF THE INTERMEDIATE STRATEGY FOR RES AND EE ........................... 47

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

List of Tables Table 1 Consumption of electricity in Tajikistan in urban and rural areas* ............................................ 7 Table 2 HPP Classification according to Law on the Use of RES (General classification for all RES) .................................................................................................................................................................................................. 8 Table 3: Selected 2008 Indicators for Tajikistan ................................................................................................. 8 Table 4 Energy Balance for Tajikistan in thousand tons of oil equivalents on a net calorific value basis (2008) ........................................................................................................................................................................ 9 Table 5 Electricity/Heat in Tajikistan in 2008 .................................................................................................. 10 Table 6 Energy consumption per sector .............................................................................................................. 13 Table 7 Import prices of liquid fuels in 2008 (based on low calorific values) ..................................... 14 Table 8 Total Import and Cost for Imported Energy ...................................................................................... 15 Table 9 Tariffs for electrical and heat energy (without VAT unless otherwise stated) ................... 15 Table 10 Prices of the fuels available at the market in Tajikistan ............................................................. 16 Table 11 Energy prices ................................................................................................................................................ 16 Table 12 List of by-laws as envisaged by the Law on the Use of RES ...................................................... 22 Table 13 Overview of the most important stakeholders in Tajik energy sector ................................. 29 Table 14 Comparative analysis of different financing options for National Trust Fund for RES and EE................................................................................................................................................................................. 37 Table 15 Input data used in the scaling-up exercises..................................................................................... 44 Table 16 Scaling-up of integrated rural development through provision of electricity from sHPPs ............................................................................................................................................................................................... 45

List of Figures Figure 1 Share of total primary energy supply* in 2008 .............................................................................. 11 Figure 2 Total primary energy supply in 2008 ................................................................................................. 12 Figure 3 Energy production in 2008 ..................................................................................................................... 12 Figure 4 Electricity generation by fuel in 2008 ................................................................................................ 12 Figure 5 Consumption of oil products in 2008 ................................................................................................ 13 Figure 6 The percentage of industrial sectors in total production ........................................................... 15 Figure 7 Wind Atlas of Tajikistan............................................................................................................................ 18 Figure 8 Approach to strengthen capacities and improve cooperation at all levels ......................... 29 Figure 9 The system of guaranteed power purchase price for RES electricity producers.............. 34 Figure 10 Tajik vision: sHPP for local economic development and poverty reduction ................... 42 Figure 11 Energy and water balance in the Tajik rural household â&#x20AC;&#x201C; an illustration ......................... 44

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

List of abbreviations CFL

Compact Fluorescent Lamp

Energy Efficiency

GDP

Gross Domestic Product

IPP

Independent Power Producer

MDG

Millennium Development Goal

MEDT Ministry of Economic Development and Trade MEI

Ministry of Energy and Industry

Ministry of Finance

OJSC

Open Joint Stock Company

PPP

Purchasing Power Parity

PRS

Poverty Reduction Strategy

RES

Renewable Energy Sources

SCI

State Committee on Investment

sHPP

Small Hydro Power Plant (in the text used equally for micro, mini and small)

TPES

Total Primary Energy Supply

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Executive Summary Tajikistan has abundant resources of still untapped hydro energy, particularly where it concerns small hydropower plants (sHPP). There are a number of sHPPs already built and operated by local communities throughout Tajikistan that were made out of necessity; however, they are mostly improvised and inefficient. These sHPPs are critically important to local communities, who bear the entirety of operation costs during the winter months. Typically, these sHPPs operate off-grid during the winter, and remain idle during the summer seasons when electricity from the grid is available. Renewable energy sources (RES) and energy efficiency (EE) cannot solve all of the current electricity supply problems but they can certainly play an important role in the intermediate energy crises alleviation strategy. Their positive impacts become even greater when one considers that more than 70% of the population live in areas abundant in small hydro potential. Currently, these rural areas consume less than 9% of Tajikistanâ&#x20AC;&#x2122;s electricity, the supply of which is consistently unreliable particularly during winters. Therefore, the Strategy has three main objectives: 1) Poverty reduction by improving access to electricity and stimulating integrated rural development; 2) Provision of an impetus for economic development by devising support mechanisms for rural RES and EE schemes. 3) Building environmental resilience by using RES and EE and decreasing the loss of vegetation cover. As such, the Strategy focuses on community based micro to small HPPs (up to 1000kW of installed power), privately or community owned and operated, which will operate off-grid during winters, supply local communities at mutually agreeable terms and conditions, and in the cases where it is feasible, work on-grid during summers and sell all of the produced electricity to the grid. Selling electricity from sHPPs to the grid has already been enabled by an amendment to the Energy Law (2007), the recently adopted Law on the Use of RES (2010), and other related regulations to be adopted by the end of 2010. In the short to medium term, the involvement of non-community based independent power producers (IPPs) in sHPP development is unlikely. The reasons are as follows: -

The unreliable integrity of the power grid which would affect the annual number of operating hours (particularly during winters); Barki Tojik has excess power during summers, yet a transmission network has yet to be developed to the point that this power can be easily sold to neighbouring countries; hence, the question of excess power during the summer remains; Financial uncertainties: Lacking an appropriate regulation that guarantees private investors the ability to buy back produced electricity power at tariffs that will enable them a return on the investment, it is unlikely to expect sHPP to be a profitable business in Tajikistan. This matter could be resolved by a regulatory framework for RES based on the Law on the Use of RES. Yet due to the current lack of experience in this field, a significant amount of time would be needed to test the applicability of such regulations; community based sHPPs will serve this purpose as well. Once a regulatory framework is imbedded, private investors will likely perceive RES in Tajikistan to be a profitable investment opportunity.

Until these structural weaknesses are resolved, RES and EE Strategy should focus on community based sHPPs supported by basic, low cost EE measures to reduce electricity requirements, and provide adequate supply capacities that will enable improved standards of 4

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

living and support the implementation of poverty reduction measures as stipulated in the Governmentâ&#x20AC;&#x2122;s Poverty Reduction Strategy. At the same time, the community based schemes that will receive support under this Strategy will be required to use standardized solutions with inputs from local manufacturers and service providers, thus contributing to overall economic development. The cornerstones of the Strategy are as follows: -

Establishing a proper policy framework that will promote the utilisation of RES, especially community based sHPP and EE projects; Developing an adequate regulatory framework which will provide: o Technical regulations and conditions for the construction of RES power plants, especially sHPP and their connection to the grid; o A methodology for calculating costs for electricity from RES power plants, especially sHPP; o The ability to contract modalities for buying back electricity from RES power plants, especially sHPP; Establishing a National RES and EE Trust Fund that will financially and institutionally support development of RES in Tajikistan, place an emphasis on community based sHPPs, cover the price difference for electricity from these HPPs (i.e. between the premium price paid and the current average price in the Barki Tojik system) as well as support all other activities related to the usage of RES and improvement of EE in Tajikistan; Developing local manufacturing, engineering, operation and maintenance capabilities related to RES and EE; Standardizing several common sHPP designs and developing the capacity of local manufacturing and service companies with an aim to deliver at least 50% of the value of an sHPP as local goods and services; Strengthening capacity of national and local governments to implement, coordinate specific actions, and monitor the results of RES, EE, and related policies to incur poverty reduction.

The main goal of the Strategy is to create conditions for accelerated poverty reduction by providing a solution to the core underlying cause of weak development â&#x20AC;&#x201C; the unreliable access to the electricity.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

1 Introduction The population of Tajikistan is approximately 7.3 million, of which over 73% (or 5.3 million persons) live in rural areas. The country is 93% mountainous. As a signatory to the United Nations Millennium Declaration, Tajikistan has agreed to put forth efforts towards achieving the Millennium Development Goals (MDGs). As a result of Tajikistan’s efforts, and with the help of the international donor community, overall poverty reduced from 81% in 1999 to 53.5% in 2007. Despite significant progress, the poverty rate of 53.5% (2007), of which 17% were in absolute poverty, remains high. Further, the impact of the current economic crises may have augmented these figures. A one-third decrease in remittances, which has already occurred in the first quarter of 2009, is likely to accelerate the poverty rate by 2.5%. In 2007, the Government of Tajikistan adopted a National Development Strategy for the period 2006-2015. The objective of the Strategy is to reach the MDGs by strengthening social and political stability, and providing for economic prosperity and social welfare for the people of Tajikistan. The key drivers of economic development were cotton and aluminium export, and remittances from migrant workers. Together these accounted for 58% of the GDP in 2008. Two-thirds of the population depend on agriculture for their livelihoods. At the national and sub-national levels, there is a limited capacity to develop and implement sound public policies. While there is considerable assistance from the donor community for developing policies, little effort has been expended to strengthen government capacities to implement such policies. Due to overlapping and often ambiguous legislation, the division of powers between various levels of government in Tajikistan remains convoluted, leaving policy implementation difficult to achieve. In addition, budgeting and planning processes conducted by different levels of government are disconnected and uncoordinated, posing strong barriers to the achievement of MDGs and overall successful policy implementation. Consequently, the inefficient and inequitable delivery of public services, infrastructure bottlenecks, and the slow implementation of reforms in the agricultural sector are the key obstacles towards poverty reduction. A weak climate for private investment is a significant constraint for pro-poor growth.

1.1 Overview of the energy situation in Tajikistan 1 Tajikistan's electric power system has traditionally been split into a northern grid (in the Leninabad region) and a southern grid. Plans to link the two systems via the construction of a high-voltage 500 kV line “South-North” (Yug-Sever), already underway, and a power transmission line 220 kV “Lolazor-Khatlon” are being considered. Other relevant projects in the pipeline are the construction of a high voltage 220 kV line, “Tajikistan-Afghanistan”, and of a high voltage 500 kV line, “Rogun-Sangtuda-Kunduz-Puli Khumri-Kabul-Peshavar”, which should further strengthen the security of supply in Tajikistan and better enable electricity exports. The Government of Tajikistan has defined two priorities for energy sector development: reformation of the country’s internal energy sector and export market orientation2. The former involves reforms in the current pricing policies, financial discipline, the social protection system, as well as a host of other institutions. A number of steps have already been made to 1

Total area: 142,700 sq km; Capital: Dushanbe; Population: 7,320,815; Terrain: The Pamir and Alay Mountains dominate Tajikistan's landscape. The western Fergana Valley is in the north, and the Kofarnihon and Vakhsh Valleys in the southwest. The country's lowest point is at Syr Darya (300 m), and its highest point is at Qullai Ismoili Somoni (7,495 m); Energy resources: Hydropower, oil, gas, coal.

http://electricitygovernance.wri.org/files/egi/Tajik%20EGI%20Assessment.pdf

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

implement this strategy. With the financial assistance of international organizations, several projects are being carried out in the form of modernization and reconstruction of the existing energy system and the mitigation of energy losses. In spite of the positive steps forward, Barki Tojik, the national electric utility company, is struggling to maintain the current power system. There is a backlog of maintenance needs, particularly where they concern the fairly well developed but long since neglected distribution network. Barki Tojik is owed large sums of money, and in turn, owes others, which presents additional economic problems for the Government, and stymies the prompt improvement of the supply of electricity, particularly for rural areas. Despite the high electrification rate (90%), actual access to electricity (and energy) is considerably low and unreliable. The situation is exacerbated by unpredictable climatic conditions, such as those that occurred in 2008 when the extremely harsh winter hastened further damage to the power system, which resulted in the increased number of planned and unplanned electricity cut-offs. The lack of reliable energy services lead directly to severe lapses in school attendance and has caused multiple adverse and critical effects on the economy, health, and environment of the country. Further, depleting water level trends in the main water reservoirs caused by the overuse of power generation and irrigation needs in the downstream countries has serious consequences for Tajikistan, largely in the form of decreased electricity power generation and industrial production. It is important to note that the rural population, accounting for 73% of the total population, used only 8.58% of the total electricity consumed in Tajikistan in 2008 (see Table 1). Table 1 Consumption of electricity in Tajikistan in urban and rural areas*

Year

2006

2007

2008

kWh

Urban

1,841,137,710

13,49

1,786,097,913

12,79

1,744,547,432

13,94

Rural

1,473,058,684

10,79

1,258,152,836

9,01

1,073,692,712

8,58

Total population

3,314,196,394

24,28

3,044,250,749

21,80

2,818,240,144

22,52

Total consumed

13,651,676,973

13,966,707,650

12,514,921,593

*Source: Barki Tojik sales department As a result of the aforementioned conditions, access to reliable energy has become Tajikistanâ&#x20AC;&#x2122;s most critical issue. It is estimated that over 1 million Tajikistanis, primarily those in rural areas, have little or no access to adequate electricity/energy supplies, particularly during the winter, when it is common to have spells of more than 6 weeks without any electricity. Operation of the power system during the winter is particularly disruptive, with isolated islands of networks energized, while large swaths of the country are blacked out. One limited solution to the unreliable and often nonexistent access to the grid is presented in the form of small, micro and mini hydropower plants (hereafter denoted with the abbreviation sHPPs, but a clear distinction between small, micro, and mini is determined by legislation, as shown in Table 2).

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan Table 2 HPP Classification according to Law on the Use of RES (General classification for all RES)

Class

mark

Power range

micro

ÂľHPP

< 100 kW

mini

mHPP

101 -1000 kW

small

sHPP

1001 kW â&#x20AC;&#x201C; 30 000 kW

Although there is a significant number of sHPPs in Tajikistan, they are often improvised and inefficient and operate in off-grid mode. Such sHPPs in areas with access to the national electricity grid do not work during the summer months when the electricity supply from the grid is able to meet the requirements. If one considers that the average costs of generating electricity from sHPP schemes are greater than those from large scale HPP, the current level of electricity tariffs, the loss of integrity of the national power grid during winter months, the dire state of government and Barki Tojik finances, it is difficult to comprehend how independent power producers (non-community based) would be attracted to invest in sHPPs at the present time without the establishment of a proper regulatory framework and financial support. It is important to understand the close correlation between energy and poverty issues in Tajikistan. The underlying cause of poverty in the country derives from the current energy conditions, or energy poverty. Energy poverty in this case means the lack of access to and the inability to afford energy. Providing access to affordable and reliable energy is the key to alleviating poverty and fostering development in Tajikistan.

1.2 Energy statistics data for Tajikistan The most important indicators and compound indicators for Tajikistan are presented in Table 3. Table 3: Selected 2008 Indicators for Tajikistan

Key Indicators Population (million) GDP (billion 2000 USD) GDP (PPP)(billion 2000 USD) Energy Production (Mtoe) Net Imports (Mtoe) TPES (Mtoe) Electricity Consumption*(TWh) CO2 Emissions ** (Mt of CO2)

Compound Indicators 6.84 TPES/Population (toe/capita) 1.68 TPES/GDP (toe/thousand 2000 USD) 8.54 TPES/GDP (PPP)(toe/thousand 2000 USD) 1.49 Electricity Consumption / Population (kWh/capita) 1.01 CO2/TPES(t CO2/toe) 2.49 CO2/Population(t CO2/capita) 14.17 CO2/GDP (kg CO2/2000 USD) 3.03 CO2/GDP (PPP) (kg CO2/2000 USD)

0.36 1.49 0.29 2072 1.22 0.44 1.81 0.36

*Gross production + imports - exports - transmission/distribution losses **CO2 Emissions from fuel combustion only. Emissions are calculated using IEA's energy balances and the Revised 1996 IPCC Guidelines. Source: IEA http://www.iea.org/stats/indicators.asp?COUNTRY_CODE=TJ

Energy balance for Tajikistan is presented in Table 4.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan Table 4 Energy Balance for Tajikistan in thousand tons of oil equivalents on a net calorific value basis (2008) SUPPLY and Coal and Crude Oil Oil CONSUMPTI Peat Products ON Production 86 14 0 Imports 5 0 524 Exports -1 -2 -11 International 0 0 0 Marine Bunkers** International 0 0 -4 Aviation Bunkers** Stock 0 0 0 Changes TPES 90 12 510 Transfers 0 0 0 Statistical 0 0 0 Differences Electricity 0 0 0 Plants CHP Plants 0 0 0 Heat Plants 0 0 0 Gas Works 0 0 0 Oil Refineries 0 -12 11 Coal Transformati on Liquefaction Plants Other Transformati on Energy Industry Own Use Losses TFC Industry Transport Other Residential Commercial and Public Services Agriculture / Forestry Fishing NonSpecified Non-Energy Use - of which Petrochemic al Feedstocks

Gas

Nuclear

Hydro

Geotherma Combustible Electricity l Solar etc. RES and Waste 0 0 0 0 0 456 0 0 -380 0 0 0

Heat

Total*

24 419 0 0

0 0 0 0

1363 0 0 0

0 0 0 0

1487 1404 -394 0

-4

443 0 0

0 0 0

1363 0 0

0 0 0

75 0 21

0 0 0

2493 0 21

-1363

1363

-225 0 0 0

0 0 0 0

26 0 0 0

86 0 0 0

-113 0 0 -2

-14

0 90 0 0 90 0 0

0 0 0 0 0 0 0

0 520 0 89 430 0 0

0 219 0 11 207 0 0

0 0 0 0 0 0 0

-246 1225 556 2 667 267 26

0 86 0 0 86 0 0

-246 2140 556 103 1480 267 26

374

0 90

0 0

0 430

0 207

0 0

0 86

0 813

* Totals may not add up due to rounding. ** International marine and aviation bunkers are included in the transport sector for world totals. Source: http://www.iea.org/stats/balancetable.asp?COUNTRY_CODE=TJ

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Electricity and heat generation in Tajikistan are reported in Table 5. Table 5 Electricity/Heat in Tajikistan in 2008

Production from: - coal - oil - gas - biomass - waste - nuclear - hydro* - geothermal - solar PV - solar thermal - wind - tide - other sources Total Production Imports Exports Domestic Supply Statistical Differences Transformation** Electricity Plants Heat Plants*** Energy Industry Own Use**** Losses Final Consumption Industry Transport Residential Commercial and Public Services Agriculture / Forestry Fishing Other Non-Specified

Electricity

Heat

Unit: GWh

Unit: TJ

0 0 301 0 0 0 15846 0 0 0 0 0 0 16147 5297 -4421 17023

0 0 3587 0 0 0 0 0 0 0 0 3587 0 0 3587

243 0 0 0

164 2858

0 0

14244 6464 23

3587 0 0

3105

305

4347 0 0

0 0 3587

0 0

* Includes production from pumped storage plants. ** Transformation sector includes electricity used by heat pumps and electricity used by electric boilers. *** Energy Sector also includes own use by plant and electricity used for pumped storage. Source: http://www.iea.org/stats/electricitydata.asp?COUNTRY_CODE=TJ

The ratio between GDP and GDP (PPP) is much less than 1, a figure indicative of a weak economy. At the same time, energy intensity (TPES/GDP (PPP)) is quite high, which again signals a weak economy as energy is not sufficiently used for the creation of GDP.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Electricity consumption per capita is lower than the global average which demonstrates high levels of poverty. Electricity losses are 18.1%, whereas these losses should normally be between 6-8%; clearly there is a need for improvements to the transmission and distribution networks. The CO2/GDP (PPP) indicator is high but this is a consequence of low GDP (PPP) rather than a consequence of high levels of CO2 emissions according to TPES consumption. CO2 emissions in Tajikistan are still low compared to those of developed countries largely because the overall usage of energy is relatively low and there is a high share of hydro power in the energy mix. The share of Total Primary Energy Supply (TPES) in 2008 is presented in Figure 1.

Figure 1 Share of total primary energy supply* in 2008

In Figures 2-5, the historical changes of energy consumption and production in Tajikistan are depicted. The decrease of TPES is obvious, a consequence of a weakened economy.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan Figure 2 Total primary energy supply in 2008

Figure 3 Energy production in 2008

Figure 4 Electricity generation by fuel in 2008

Total TPES is much higher than domestic energy production and there is a high level of dependency on imports. It is evident that the majority of TPES derives from hydro power. Yet the participation of coal (reserves are proven and much higher than the amount used) is low. Tajikistan is heavily dependent on hydro power, with about 98 % of the total electricity generated in Tajikistan originating from hydroelectric sources. Domestic crude oil and natural gas participation in TPES is modest; research of these potentials has yet to be completed. 12

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Figure 5 Consumption of oil products in 2008

Tajikistan possesses comparatively small amounts of fossil fuel resources. In all, 18 oil and gas deposits (Kanibadam, Airitan, Niyazbek, Kichikbel, etc.) and 40 coal deposits (Nazarailok, Shurab, Fan-Yagnob, etc.) have been explored and registered in the country. Coal deposits are sufficient in Tajikistan and amount to 4 billion tons; however, according to estimates, these deposits are insufficient for industrial and energy related use in the current conditions. Until the 1990s, between 400 and 800 thousand tons of coal were mined annually in Tajikistan. In recent times, these figures have diminished to 15-20 thousand tons, less than 5-10% of the countryâ&#x20AC;&#x2122;s total energy needs. Increased production and utilization possibilities of these fossil fuels must be investigated and supported. Positive developments regarding the utilisation of coal are already being made with the reconstruction of district heating plants in Dushanbe and other cities to switch from imported gas to domestic coal. An analysis of consumption per sector reveals that there is a decidedly low consumption of fuels from the industrial sector, a figure indicative of a weak economy (see Table 6). The share of energy consumption of the industrial sectors should normally range from 25% to 30% (for developed countries) and up to 35% for energy intensive developing countries. Table 6 Energy consumption per sector Sector Industry Transport Other (residential, services, agriculture/forestry and non-specified)

Consumption [ktoe] 573 1348 1378

Consumption [%] 17.4 40.9 41.8

1.3 Energy prices In June 2009, the prices of gasoline and diesel fuel at gas stations were on average 3.3 Somoni per litre of gasoline (0.0832 US$/kWh) and 2.8 Somoni3/lit (0.0638 US$/kWh) for diesel. Import energy prices of the most significantly used fuels are presented for 2008 in Table 7.

1 TJS = 0.2300 US$ = 0.1600 EUR (average exchange rate in mid of 2009)

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

The price of liquid fuels is freely formed by the market. There are a dozen import companies specializing in liquid petrochemical products which are out of the Governmentâ&#x20AC;&#x2122;s direct control. Table 7 Import prices of liquid fuels in 2008 (based on low calorific values)

GASOLINE (Benzin) DIESEL (Dizel toplivo) JET FUEL (Toplivo reaktivnoe) BITUMEN (Bitum) OIL (Maslo) KEROSENE (Kerosen)

Price US$/kg 0.6845 0.7357 1.1050 0.4664 1.5206 0.7581

LCV MJ/kg 43.45 42.79 43.45 39.47 42.69 43.45

GCV MJ/kg 46.54 45.77 46.54 42.21 45.54 46.54

Density kg/l 0.7447 0.8366 0.7447 0.9912 0.8467 0.7447

Price US$/kWh 0.0567 0.0619 0.0916 0.0425 0.1282 0.0628

The price of natural gas in Tajikistan is $300 USD per 1000 nm3 of natural gas. The low calorific value of NG is 8000 kcal/nm3 (9.30 kWh/nm3 or 33.49 MJ/nm3) 4, which results in a price of $0.0322 USD/kWh (0.0224 EUR/kWh). The price of natural gas is controlled by the Government. OJSC Tajik Gas Company proposed that the price of natural gas follow the international market, and the Monopoly Commission of the MEDT, working in close cooperation with the Ministry of Energy and Industry, proposed a price correction to the Government. The price of coal is $35.65 USD/ton. Taking into account that the average lower calorific value of coal is approximately 9.7 MJ/kg (brown coal), the price of coal (in units of energy) amounts to $0.0132 USD/kWh. The price of coal is freely formed at the market, while the sale of coal is organized in the districts. In 2007 the price of electricity was only $0.005 USD/kWh. In 2009 the price rose to approximately $0.016 USD/kWh. The current plan is to increase gradually the electricity rate to $0.021 USD/kWh by 2015. The price of electricity is formed in a similar manner to the price of natural gas. A tariff system has been proposed to the Monopoly Commission of the MEDT. Currently, there is no high (daily) and low (nightly) tariff. The tariff system recognizes 6 groups of consumers: -

Industry; Population; Governmental institutions; Water supply systems; Irrigation systems;

The price of electricity is unnaturally low compared to the prices of natural gas and liquid fossil fuels. Although such a relationship is uncommon, it is an outgrowth of a combination of factors, most notably the fact that most fuels are imported and much of the electricity used derives from domestic production. Over the medium and long term, electricity prices should be increased to provide funding for the maintenance of the power system and the construction of new production facilities. Reliance on electricity as the main source of energy should be maintained and even increased to provide for the possibility of selling surplus electricity to neighbouring countries and simultaneously alleviate dependence on fossil fuel imports. Table 8 shows the participation of energy cost in total imports for 2007 and 2008.

Source: OJSC Tajik gas company (June 2009)

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Table 8 Total Import and Cost for Imported Energy

Total IMPORT, million US$ Total mineral products, million US$ Electricity Natural gas Petroleum products and coal

2007 2,547,192 542,314 65,790 64,726 411,798

21.3%

2008 3,269,803 729,636 87,518 74,348 567,770

22.3%

The percentage of industrial sectors with regard to the total production value ($945.15 million USD) is presented in Figure 6. The electricity generation industry contributes 15.2%. Data is not available for 2008. Assuming that electricity consumption was 15000 GWh in 2008, it can be estimated that the production price of electricity was $0.0096 USD/kWh.

25% 20% 15% 10%

Printing industry (полигрфическая)

Mill industry (мукомольно-крупяаная и комикормовая)

Food industry (пишевая)

Light industry (легкая)

Materials for industrial construction (промстройматериалы)

Wood industry (лесная и дервообрабатывающая)

Production of machinery and metal processing (машиностроение и металлообработка)

Chemical and petrochemical industry (Химическая и нефтхимическая)

Metallurgy (металлургическая)

Fuel (Топливная)

Electricity generation (Электроэнергетика)

Industry in total production, [%]

30%

Industry Figure 6 The percentage of industrial sectors in total production

Official electricity and heat energy prices are denoted in Table 9. The table provides the official prices of electrical energy and heat energy according to the applicable tariff system, and Table 10 outlines the energy prices of other fuels available in Tajikistan. Table 9 Tariffs for electrical and heat energy (without VAT unless otherwise stated) Electrical Energy

For industrial and non-industrial consumers

For SUE Tajik Aluminum Company (including VAT)

3. 4.

For consumers of budget (state) and municipal sector For water supply pumps, pump stations of machinery irrigation and electrical

Diram for 1 KWh 13.68 1.5 US cents 5.44 3.64

US$/kWh 0.0315 0.0150 0.0125 0.0084

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

5. 6.

transport (including VAT) For population (including VAT) For using electrical energy in electrical boilers and electrical settings used for hot water supply and heating For non-budget sector For state bodies and institutions Heat Energy

1. 2. 3.

For institutions and administration bodies financed from the state budget For wholesale buyers supplying population with heat energy For all other consumers

6.00

0.0138

33.75 10.00 Diram for 1 Gkal 24.37 3.19 93.75

0.0776 0.0230 US$/kWh 0.0561 0.0073 0.2156

1 TJS = 0.2300 US$ = 0.1600 EUR (average exchange rate in mid of 2009)

Table 10 Prices of the fuels available at the market in Tajikistan

Coal

155

TJS/t

US$/un it 35.65

EUR/u nit 24.80

LCV 9.7 MJ/kg

US$/k Wh 0.0132

EUR/k Wh 0.0190

Gasoline

3.2

TJS/l

0.7360

0.5120

43.45MJ/kg

0.0819

0.1177

Diesel

2.6

TJS/l

0.5980

0.4160

42.79MJ/kg

0.0601

0.0864

HFO

1523

TJS/t

350.29

243.68

42.79MJ/kg

0.0295

0.0424

for population

1327

305.21

212.32

0.0472

1327.1 4 1230.9

305.24

212.34

0.0328

0.0472

283.11

196.94

33.49 MJ/nm3 33.49 MJ/nm3 33.49 MJ/nm3

0.0328

for all enterprises and institutions

TJS/1000n m3 TJS/1000n m3 TJS/1000n m3

0.0304

0.0437

Natural Gas

for cogeneration plant and cement factory

The prices of electricity, natural gas, and heat energy are defined and controlled by the Government, while the prices of petroleum products and coal are freely formed by the market. The energy allocated for the general population is treated as a social category and thus the prices set for this group of consumers are low relative to the real market price. Currently there are no subsidies or incentives for the production of energy from renewable energy sources. Table 11 Energy prices

Electricity Natural gas Heat energy Petroleum products Coal

Range of price US$/kWh 0.0084 - 0.0776 â&#x2030;&#x2C6; 0.0322 0.0073 - 0.2156 0.0295 - 0.0819 0.0132

Max/Min 9.2 29.5 2.8 -

The current parities between energy prices are not financially viable. Moreover, artificially maintaining the price of heat energy to figures lower than the price of the fuel used for its production is not sustainable in the long term. Treating energy, and specifically electricity, as a social commodity is reasonable to some extent, but eventually it is likely to abate and decrease developmental possibilities for a host of vital sectors.

1.4 Overview of RES potentials In addition, looking into the distribution of shares of TPES and electricity generation, it is obvious that there is a complete absence of the use of renewable energy sources (except hydro, primarily large-scale). Despite the absence of RES, preliminary estimates regarding the potential of renewable energy resources is as follows: Hydropower

527 TWh/a (45314 ktoe/a) 16

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Solar energy

25 TWh/a (2150 ktoe/a)

Biomass

2 TWh/a (172 ktoe/a)

Wind energy

25-150 TWh/a (2150-12898 ktoe/a)

Geothermal energy

45 TWh/a (3869 ktoe/a)

These figures suggest that the total potential of renewable sources is approximately 60000 ktoe/a, a large potential when considering the total annual primary energy supply (TPES) is approximately 3600 ktoe/a. Tajikistan is endowed with rich hydropower resources; hydro potential is estimated to be more than 40,000 MW along the main rivers, of which only 10% is currently utilized. The major HPP development project (HPP Rogun) is underway, but due to financial difficulties, the date of completion remains uncertain. Further, the vast number of irrigation channels augments the potential to utilize sHPP capabilities. According to information obtained from Barki Tojik, there are approximately 340 sHPP built in Tajikistan; however, only one is connected to the grid. Recognizing this huge potential for sHPP, the Government has adopted the "Long-term Program for Building Small Power Plants for the Period 2009-2020"(approved by the Government of Tajikistan on February 2, 2009 â&#x201E;&#x2013; 73). According to this Program, approximately 100 MW will be installed in new sHPP, increasing the total annual production to 642 TWh/year. Due to its expected capability and success, the utilisation of hydro potential in sHPPs is the focus of this Strategy. In the short to medium term, the focus of national policy should be on community based sHPPs. They will serve multiple purposes, including: -

improving the security of electricity supply; stimulating economic development and job creation resulting in overall poverty reduction; they will test the regulatory framework for grid connection and incentivizing RES electricity production, which will enable improvements in regulation and a stabilization of the investment climate for RES, resulting in increased interest among private investors in the RES sector.

Although the most significant potential with the greatest possibility for utilization is the hydro sector, there remains the possibility to utilise solar potential. Annually, Tajikistan has between 280-330 sunny days, and the intensity of total solar radiation varies within a given year from 280 to 925 MJ/m2 in mountainous regions, and from 360 to 1120 MJ/m2 in highlands. The utilization of available solar energy in Tajikistan could satiate as much as 10-20% of national energy demand. This Strategy considers solar energy as the second most important RES in Tajikistan. The primary aim in this field is to develop programs for the utilization of solar thermal collectors for the preparation of hot domestic water. This technology is mature enough and its costs are constantly decreasing, while its utilization will reduce the consumption of both electricity and fossil fuels. As well, small-scale PV applications primarily for social institutions shall be promoted, particularly in very remote areas with low population densities where grid reinforcements or new connections are not considered feasible. The potential of biomass is modest, a result of poorly developed agriculture and forestry. The total equivalent units are slightly over one million, indicating a potential for the production of 17

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

biogas; however, the technology of biogas production by anaerobic fermentation of manure is expensive. More important, this technology requires large farms uncommon in Tajikistan. The “Master Plan of Wind Power Development of the USSR until 2010” published in 1989 included a country-level wind map. The terrain of Tajikistan is 93% mountainous and includes the foothills of the Himalayas. The Pamir and Alay mountains dominate the landscape; the western Fergana Valley in the north, the Kofarnihon and Vakhsh Valleys in the southwest. The complicated alpine relief of the country dictates a diversity of wind regimes. The wind potential suitable for power utilization (i.e. mountain peaks and slopes) is estimated to be roughly 1015% of the territory. There is no operational wind energy capacity in Tajikistan; however, supplementing the dominant hydropower with wind energy is justifiable in certain regions. The strongest winds penetrate the highland regions, such as Fedchenko and Anzob, and where the landscape of the country favours a convergence of air flows, such as in Khujand or Fayzabad. The average annual wind speed in these regions are approximately 5-6 m/s. Lower average wind speeds of 3-4 m/s are found in the open lowlands and wider valleys. In other lowlands, the mean annual wind speed may not exceed 1-2 m/s, a figure inadequate for the generation of wind energy. The most promising areas are the Pamirs northward, the Sarez Lake in the Gorno-Badakshan, the Turkmenistan Ridge in the Zeravshan River headwater, and the region from the Vakhsh Ridge to the border with Afghanistan. Only in smaller areas do wind speeds reach between 4 and 5 m/s; only one location generates an average speed in the range 5 and 6 m/s (Figure 7). Due to the inadequate opportunity for utilization (as compared to hydro and solar), wind energy will not be considered within the Intermediate Strategy.

5 – 6 m/s

4 – 5 m/s

Figure 7 Wind Atlas of Tajikistan

Geothermal resources are small and poorly studied in Tajikistan, and to date no assessment of the overall geothermal potential has been completed. Data accounting for thermal water sources are generally absent, though Tajikistan has planned to utilize the thermal water located within the vicinity of Khodja-Obi-Garm. An evaluation of this field’s thermal water resources has been performed and shows its temperature to be 90 °C, TDS 0.5 g/l; a total flow rate 280 l/s. Geothermal resources are also concentrated in the convective hydrothermal systems of the Tien Shan foothills. This Strategy will not deal with RES other then sHPP and solar energy due to the low possibility to utilise other RES, which is the result of the low potential and high financial

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

requirements and/or weak possibility to use local goods and services to trigger economic development.

1.5 Overview of potentials for EE improvements One of the most commonly used indicators to measure how efficiently a country uses energy is TPES/GDP (PPP) (expressed in toe/thousand 2000 $USD PPP). As can be ascertained from Table 6, energy intensity in Tajikistan is almost twice the world average. By comparison, this figure is three times higher than most developed countries, which actually means that Tajikistan needs three times more energy to produce one unit of GDP then highly developed countries. This indicator, however, masks many other problems unrelated to the efficient use of energy, a weak economy being the most significant. Still, this measure gives an indication that improvements in energy consumption efficiency in Tajikistan are both possible and necessary, especially given the countryâ&#x20AC;&#x2122;s insecure and unstable energy supply. It is difficult to quantify the potentials gained from EE improvements and it would not be justifiable to set exact targets for reducing energy consumption in the current conditions while the vast majority of people suffer from energy supply shortages. Yet when providing RES based solutions for Tajikistanâ&#x20AC;&#x2122;s energy (electricity) supply, it must be ensured that principles of the efficient use of energy are taken into account. Moreover, energy consumption growth in Tajikistan has escalated significantly during this decade; growth rates for the period 2003-2007 are approximately 7%. During this same period, the average GDP growth rate was 7.2%, indicating a strong link between economic growth and increased energy consumption, a common characteristic of developing countries. Measures for EE improvement should disrupt this linkage and reduce the energy consumption growth rate. Improving energy efficiency in developing countries requires a different approach than has become accustomed in the developed world. Further, due to drastically different conditions in rural and urban areas, EEI programmes must be customized to each environment. In rural areas, simple EE improvement measures shall be combined with the provision of electricity from RES (e.g. the use of CFLs, the replacement of single glazed windows with double glazed, improvements in the efficiency of building exteriors using ample, locally available materials, e.g. straw and mud, etc.). Due to the stark differences between the needs for EEI in rural and urban areas, this strategy shall focus solely on the implementation of intermediate EE measures, primarily in rural areas. This Strategy considers EE to be an integral component of poverty reduction. Until recently, EE has had a low priority in Tajikistan (although the Law on Energy Savings has existed since 2002, but has not been enforced), which does not come as a surprise when considering that a large share of the population lacks secure and reliable access to energy. EE in Tajikistan should be primarily considered as a measure to improve the quality of services, as well as living and working conditions, while at the same time the use of efficient equipment, materials, and practices will reduce the need for electricity and energy, a positive externality. The Strategy recognizes the need to prepare a comprehensive plan of actions and measures to improve EE. Therefore, by the end of 2010, the Energy Efficiency Master Plan (EEMP) will be drafted and proposed for government enactment. The EEMP will clearly distinguish measures to be implemented in rural areas and those needed in urban areas.

1.6 Identification of the main barriers for the utilisation of RES and EE improvement in Tajikistan Barriers for the utilisation of RES and EE improvement in Tajikistan can be divided into three groups: Legal and institutional barriers: 19

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

incomplete legislative and regulatory framework to support RES use; incomplete legislative and regulatory framework to support implementation of EE improvement measures; incompatibility of energy and environmental policies, i.e. environmental protection legislation does not promote development of cleaner energy supply options; unclear division of the roles and responsibilities of national authorities in the promotion of RES and EE, and poor coordination between the main stakeholders; dearth of governing capacities at all levels (national and local).

Financial barriers:

lack of domestic and foreign investment capital: Tajik companies that are interested in the development of RES have limited financial resources and insufficient access to finance RES investment projects. The participation of foreign capital is constrained due to the unstable business climate and unfavourable economic conditions, as well as the lack of appropriate legal and regulatory frameworks and effective enforcement of legislation requirements; lack of long-term credits on favourable terms: Commercial banks are reluctant to lend because the return of long-term investments is risky, especially when there are no state guarantees (a tariff system) that all electricity produced will be sold at the appropriate price, which assures the reasonable pay back of investments. In addition, financial institutions have no experience in financial analysis for investments in RES and EE. Foreign long-term loans are expensive due to the high risk perception held by foreign commercial banks; costs for preparing investment projects must be incurred before funding for the project to be assured, without a guarantee of actually obtaining the necessary funds for a particular project. The lack of projects with proven feasibility and profitability increases the costs associated with their preparation; special equipment for RES and EE utilisation is costly and mostly imported â&#x20AC;&#x201C; high costs remain due to an absence of sufficient demand; lack of state support financing mechanisms that are necessary to mitigate commercial risks related to RES and EE; RES electricity production is still uncompetitive in the electricity market and requires state support in the form of guaranteed electricity buy-back prices determined by regulation (tariff system).

Information/knowledge/expertise barriers:

lack of information to the general public on technologies and their potential use: there is no information on proven RES and EE technologies; lack of information to the general public on the benefits of RES (financial, social and environmental); lack of reliable information that would be useful for potential investors regarding the locations with high and exploitable renewable energy potentials (currently, there are only preliminary estimates of locations with potentially exploitable RES); insufficient number of specialists to implement RES and EE activities, especially in remote rural areas; inadequate capacities and capabilities of domestic industries to provide equipment and services related to RES and EE.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

As RES and EE are not the end goals, but rather tools for achieving the goals of poverty reduction and socio-economic development in the country, this Strategy shall be regarded as a supporting tool for other national strategies, especially the Poverty Reduction Strategy. The aim of the Strategy is to provide clear guidance for the removal of all identified barriers for the enhanced utilization of RES and EE improvement in Tajikistan. From that perspective, the Strategy proposes necessary developments or adjustments in the following spheres: Policy, legal and regulatory framework for RES and EE; Institutional framework and governing capacities for the implementation of RES and EE policy; Financial support mechanisms for RES utilization and EE improvements; Constructing technical capacities and capabilities within the country to provide equipment and services related to RES and EE. The main goal of the Strategy is to create conditions to accelerate poverty reduction primarily by providing a solution to the core underlying cause of paltry economic development â&#x20AC;&#x201C; the unreliable access to electricity.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

2 POLICY, LEGAL AND REGULATORY FRAMEWORK 2.1

Policy and legal framework for RES

The use of RES for electricity generation in Tajikistan is recognized as a national interest and a means to achieve poverty reduction and economic development goals by ensuring reliable access to electricity for all citizens. This is confirmed in several policy documents adopted by the Government: "Comprehensive target program for widespread use of RES, such as the energy of small rivers, sun, wind, biomass, energy, underground water sources" (approved by the Government of Tajikistan on Feb. 2, 2007 № 41); "Long-term program for building small power plants for the period 2009-2020 years "(approved by the Government of Tajikistan on February 2, 2009 № 73), "National Environmental Program of the Republic of Tajikistan for 2009-2010 "(approved by the Government of RT from October 31, 2009 № 602). Amendments to the Law on Energy were made in 2007, stating that electricity from small RES power plants should be taken over by natural monopolies (electric power utilities) at the price determined by the authorized organization for the regulation of natural monopoly activities. Although this is an important step towards the consolidation of a complete and favourable legal framework for RES utilization, much more must be enacted to ensure implementation. The most prosperous way is to enforce the newly adopted Law on Renewable Energy Sources, along with the appropriate implementation by-laws that will provide transparent terms and conditions for building and operating RES facilities, as well as garner the necessary financial support to compensate for the higher electricity production costs from small RES plants (as can be compared to the current average generation price in the Barki Tojik system). It is necessary to emphasize that the Law on the Use of Renewable Energy Sources was adopted in January 2010. Although the Law provides a general framework for RES in Tajikistan, it is absolutely crucial to adopt a series of by-laws which will enable actual implementation and the monitoring of RES installations in Tajikistan. The Law envisages a multitude of by-laws as shown in Table 13. Table 12 List of by-laws as envisaged by the Law on the Use of RES №

List of regulatory acts

National standards of RT (category of alternative energy): National standards of RT (category of alternative energy): National standards of RT (category of alternative energy): National standards of RT (category of alternative energy):

Indicative deadline for adoption December 20, 2010. December 20, 2010. December 20, 2010. December 20, 2010.

Solar photovoltaic modules. Types and basic parameters

National standards of RT (category of alternative energy):

December 20, 2010.

Informing of consumers about energy efficiency of municipal and domestic productions. General requirements. General provisions Energy efficiency. Structure of components. General provisions The rules of conducting inspection certification of electrical equipment and electric power

National standards of RT (category of alternative energy):

December 20, 2010.

National standards of RT (category of energy conservation): Statutory act

December 20, 2010. December 20, 2010.

Wind energy. Terms and definitions.

Small hydro power. Terms and definitions

Solar energy. Terms and definitions

Solar energy. Solar collector. General technical conditions. Testing methods

5 6

7 8

Type of act

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan №

9 10 11

12 13

15 16 17

18 19

20 21

List of regulatory acts

Instructions on connection order (connection) of facilities for using of renewable sources of energy to general power network. Instruction on communication with the system operator and energy RES producer Power and capacity purchase agreement

Regulations on tariff calculation for electricity produced by RES Regulations on the rules of safety engineering and operation of renewable sources of energy on a territory of RT Regulation on the order of definition of economic effect and amount of incentives for using of renewable recourses of energy and releasing them to environment Regulation on Cadastres of renewable recourses of energy on a territory of RT Regulation on Catalogues of of renewable recourses of energy on a territory of RT (p.9) Draft «Decrees of Government of RT «About introduction of amendments and additions to the Regulation of the Ministry of Energy and Industry of RT» An order of obtaining a permit for facilities and installation of RES (hydro power facilities, solar equipment). A draft Decree of the Government of RT «Оn introduction of amendments and additions to the Law of RT “About power system” A draft decree of the Government of RT «Оn introduction of amendments and additions to Water Code of RT» Studying of existing legal acts on the matter of establishment of Foundation for support of development of RES and preparation of appropriate proposals

Type of act

Board resolution of the Ministry of energy and industry of RT Board resolution of the Ministry of energy and industry of RT «Model contract», by Order of Antimonopoly agency of RT under the Government of RT By Act of Antimonopoly agency of RT under the Government of RT Board resolution of the Ministry of energy and industry of RT

Indicative deadline for adoption December 20, 2010. December 20, 2010. December 20, 2010. December 20, 2010. December 20, 2010.

Board resolution of the Ministry of energy and industry of RT

December 20, 2010.

Board resolution of the Ministry of energy and industry of RT Board resolution of the Ministry of energy and industry of RT Draft Resolution of Government of RT

January 10, 2011 January 10, 2011 January 10, 2011

Board resolution of the Ministry of energy and industry of RT Draft Resolution of Government of RT

January 10, 2011 January 10, 2011

Draft Resolution of Government of RT Proposals on the matter of establishment of Foundation for support of development of RES

January 10, 2011 January 10, 2011

2.2 Regulatory framework for RES In general, regulation will enable RES project developers sufficient and quality information on available RES potentials, provide guarantees (not only financial, but also technical) to the RES producers that their projects are feasible and will be supported. The regulation shall also prescribe accessible and expedient administrative procedures for the construction of RES power plants and the installation of other RES equipment. Although the list of by-laws provided in Table 13 is final, it must be noted that the high number of regulations may be an additional barrier towards further development of RES; investors will likely be forced to peruse a large number of documents in order to understand their responsibilities should they seek to implement their projects and become RES power producers. The following activities shall be addressed to create and establish fully a regulatory framework that will enable the higher utilization of RES: 1. All by-laws envisaged by the Law shall be adopted and implemented by the end of 2010; 2. The Competency Ministry (MEI), together with all other national authorities involved in the preparation of the by-laws, shall develop a clear and concise "Guide for construction of RES power plants" containing all relevant information and the sequence of activities

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

needed to be undertaken in order to build an RES power plant, connect it to the grid, and benefit from electricity production; 3. The implementation of regulation shall be regularly monitored by competent authorities, shortfalls shall be identified and documented, and amendments to the Law and regulation shall be proposed and adopted. This shall be a continuous process, the implementation of which could be facilitated by the requirements to the Competency Ministry (MEI) to report regularly (at least once a year) on the success of regulation (in terms of new megawatts installed in RES plants) to the Government, Parliament and President. In the process of preparing the by-laws defined in Table 13, general recommendations based on best world practices shall be respected. These recommendations are divided into several main areas and provided hereafter. They aim to address the main regulatory issues that need to be undertaken, and not simply define the content of every specific by-law listed in Table 12; this would significantly exceed the scope of the Strategy. Moreover, future recommendations on the content of RES regulation could be used to amend the existing by-laws and potentially mitigate their number. The by-laws on RES shall primarily define and regulate the following issues: -

procedures and principles for the construction of RES facilities, including the establishment of a cadastre of RES projects and facilities in Tajikistan to enable monitoring; connection of RES power plants to the electric power grid with all relevant technical conditions for the integration of RES in the electric power system (voltage, reactive power, frequency and power flow control ); procedures on monitoring and verifying electricity production from RES (system to guarantee the origin of electricity); rights and obligations of state bodies (ministries), investors (local communities and private IPPs), the national electric power utility, and consumers related to RES electricity production and use; a financial support framework for RES, particularly where it concerns a tariff system methodology and the establishment of a dedicated National Fund for RES and EE to manage and administer the scheme for electricity buy-back as a support to community based projects. Terms and conditions for construction of RES plants

Regarding the procedures and principles for the construction of RES plants, the by-laws should regulate the use of state-owned land for building RES power plants and/or heating stations. Investors must be sanctioned to use this land under favourable conditions (with limited or no rent due). In cases where investors are local communities, the use of such land should be permitted without financial compensation. The procedures for obtaining all permits should be defined; this process should be clear, simple and preferably performed as a "one-stop-shop" (one state body nominated as the focal point for obtaining all permits and licenses should be established to ease and expedite the process). For smaller installations (micro and mini plants), the procedures should be swift, simple, and straightforward. It is also important to establish a system capable of monitoring development of RES projects in Tajikistan via the establishment of a dedicated Cadastre of RES plants. The Cadastre could be led by the MEI Department that currently holds a jurisdiction to award a license.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

In order to prevent the installation of inefficient equipment (such cases have already occurred in practice), it is also important to prepare technical standards for equipment used in RES plants. In the process of preparing these standards, it should be noted that RES utilization in Tajikistan will play an extremely valuable role in poverty reduction and economic development. The aim is to enable local manufacturers to begin their own production of RES installation components, especially sHPPs. Certification of RES plants and RES electricity In order to eliminate abuse of the incentive system and maintain the ability to monitor whether eligible producers comply with regulatory and technical standards, it is necessary to establish a system of certifying RES plants and RES electricity produced; a system widely known as a guarantee of origin. The system could be run by the MEI. The established system will obligate certificate holders to provide the appropriate information to all relevant stakeholders (MEI, Fund, Barki Tojik). Grid access and connection issues Grid (transmission and distribution) operators, i.e. the electric power utility, shall be obligated to prescribe clear and transparent technical conditions in a specific regulation for the connection of RES power plants on their grids depending on the voltage level of the connection point. The utility companies shall also enable investors to connect to the grid and provide them with a clear estimation of grid connection costs, which shall be borne by the investor. The Ministry responsible for energy, however, may decide that the utility should bear the costs of grid connection when the RES power plant investor is a local authority or when it is considered to be of high national interest. The possible criteria might be the following: -

If the connection of sHPP is standardized (i.e. in line with the prescribed regulations and recommendations of the system operator) and if the capacity of the sHPP is less than 300 kW, the distributor shall cover the actual costs of the connection to the distribution network from the connection site and the actual costs of the changes made to the existing network. If the connection of sHPP is non-standardized, the investor shall cover the actual costs of the non-standard connection to the distribution network from the connection site and the actual costs of the changes made to the existing network. If the investor in sHPP is a local community, all of the costs related to grid connection shall be covered by the Trust Fund for RES and EE.

The utilities shall be forbidden to decline the right of grid connection in cases when grid reinforcements are needed. The investor shall not bear any costs for possible grid reinforcements needed for the grid connection of their RES power plant. Finally, the utility companies shall be obligated to give priority to RES power plants in dispatching. As far as technical conditions of the national electricity system operation permit are concerned, the following issues shall be taken into account: -

The eligible electricity producer with an installed capacity of less than 10 MW has a dispatch priority in accordance with the daily schedule reported to the operator (Barki Tojik) of the network to which the power plant is connected to; The eligible electricity producer with an installed capacity of less than 300 kW has a priority of access to the network without having to report the daily schedule to the operator of the network to which the power plant is connected to; The eligible electricity producer does not pay the balancing costs. 25

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

The regulation shall also address the off-grid mode of RES plants operation, which is particularly important for sHPP. In addition to grid connection rules, other technical issues should also be covered by regulation, in particular the quality of electricity produced from RES (voltage, frequency, reactive power, harmonics, etc.) Status of Eligible Electricity Producer Electricity producers from RES plants shall be awarded a special status guaranteeing them certain rights (based on the certification process). This regulation shall recognize two types of RES: community based, and privately built and owned plants, which is of particular importance for the development of sHPP. The legal or physical entity engaged in the activity of electricity generation may obtain the status of eligible producer should the following conditions be met: -

The generation facility stated in the application should posses a licence for executing electricity generation activities if such a licence is prescribed by law; Renewable energy sources are used in the facility for electricity generation; All environmental related provisions (including water use) in accordance with the appropriate administrative rules shall be met; Each generation facility shall have the necessary metering devices that measure the energy input and output in accordance with the appropriate rules; Each generation facility shall meet the technical and organizational requirements determined for the efficient and secure functioning of the generation facility in accordance with the technical regulations; Each generation facility shall meet any other condition or requirement in order to meet the necessary conditions for the secure functioning of the network.

The regulation shall also prescribe the procedure for acquiring the status of eligible producer as well as the terms, conditions, and duration of status validity. Tariff system for RES electricity First, eligible producers shall be guaranteed that all electricity produced during the gridconnected mode of operation is to be taken over by the electricity supplier (utility). Second, for the amount of electricity taken over, the producer shall be paid an incentive price calculated according to the justified costs of operation, construction, replacement, reconstruction, and maintenance of plants using RES and on the reasonable return rate of the investment. A tariff system should be enforced for this purpose. The criteria for determining the tariffs, i.e. electricity buy-back prices shall factor in the following issues: -

The electro-energy policy goals concerning electric power derived from renewable energy sources; An assessment on primary source availability, potentials, and possible annual generation; The required investments, and functioning, maintenance, and fuelling costs; An accepted pay-back period and rate of return on the investment; 26

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Size of the plant; Hours of plant utilisation; A period where the buy-back electricity price s guaranteed buy-back

The existing RES plants, especially sHHPs, shall not be forgotten, i.e. they shall be given the right to benefit from the new regulation and guaranteed electricity price; however, they shall comply with the technical requirements and standards established for equipment and plants. Organization of electricity buy-back form electricity producers - role of National Trust Fund for RES and EE The incentive price determined in the tariff system shall be paid to eligible producers by the recently established National Trust Fund for RES and EE. Roles and responsibilities of the Fund shall be prescribed by a special regulation. A detailed description of the Fund's operations is provided in Chapter 3.4. Other regulatory issues The by-laws on RES should also cover RES installations for thermal energy production. Namely, Tajikistan has august solar potential. Currently, solar energy is considered the most cost-effective for water and space heating purposes. For such applications, investment subsidies should also be ensured from the Trust Fund for RES and EE. Third, the by-laws on RES shall also provide a framework for stimulating and financially supporting research and development activities, pilot projects and their scaling-up, and the production and procurement of domestically manufactured electromechanical systems for RES use. These issues shall be addressed in the regulation establishing the Fund for RES and EE, which shall provide financial support for the above-mentioned activities. National expertise, it can be concluded, will be ensured and industrial production stimulated.

2.3 Policy, legal and regulatory framework for EE Tajikistan has recognized the importance of the efficient use of energy in the form of its 2002 promulgation of the Law on Energy Saving. Due to the specificities related to EE in Tajikistan, this Strategy will not discuss the EE framework in details. Instead, these shall be provided in the Energy Efficiency Master Plan as an official national strategy for the improvement of EE, complete with an elaboration of programs and projects to improve EE in both urban and rural areas.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

3 INSTITUTIONAL FRAMEWORK 3.1 Overview of baseline conditions for the implementation of RES regulation Using the Electricity Governance Toolkit as its foundation, the Report on Regulatory Processes in Tajikistan, outlines the following: -

Energy Law of the Republic of Tajikistan provides a description of authorities but does not clearly define the jurisdiction of regulatory bodies (ministries and departments) with regard to RES (and the power sector in general); Though the Ministry of Economic Development and Trade has been assigned to be the regulatory body under the indirect law, "On natural monopolies", a clear definition for how the ministry conducts regulation is not defined; The Ministry of Energy and Industry (MEI) lacks experience in licensing sHPPs. The document, a rationale for licensing sHPPs, is abridged and it does not provide licensing procedural guidelines. Further, it is difficult to assess the capacity and capability of the Licensing Department to award licenses for sHPPs. Although the Antimonopoly Committee has been designated the body to perform tariff proceedings and determine tariffs for sHPPs, legal and regulatory documents that define rules and regulations do not exist. Further, it is difficult to assess the capacity and capability of the Antimonopoly Committee to set tariffs and other relevant procedures for sHPPs and other RES.

For the purposes of successful policymaking and, in particular the implementation of RES, the following aspects shall be considered: Institutional setting for implementation of the regulatory framework Independent regulatory bodies or departments, as part of the ministerial structure, must exist to administer RES and EE issues. Their existence must be clearly denoted in both laws and regulations. Since different departments within the Ministry for Energy and Industry and the Ministry for Economy, Development, and Trade act as independent regulatory commissions, it is imperative to define the divisions of regulatory authority for these two ministries through either law, or government rules and regulations. Authority of the regulatory bodies It is essential that the regulatory body (departments) has sufficient legal authority. Therefore, the respective law and regulations must determine their full legal authority. If the regulatory bodies or departments which play the role of the regulatory commission do not have sufficient legal authority, they will not be able to determine relevant decisions; as well, stakeholders will likely not comply with the rules and decisions made by these departments. Jurisdiction of the MEDT and MEI departments Regulatory documents for RES (and EE) must define jurisdiction and the function of these departments. These functions may include, but are not limited to: (i) approval of tariffs; (ii) setting service, equipment, and building standards; (iii) protecting the interest of consumers and community based producers; (iv) awarding and revoking licensees; etc. Trained regulatory personnel Training of regulatory bodiesâ&#x20AC;&#x2122; personnel is necessary. The implementation of RES policy requires new regulatory knowledge and an adequate overall understanding of RES and policymaking. Thus, it is important to provide training and the transfer of knowledge from more experienced parties, perhaps with the aid of international cooperation. Capacities for implementation of RES (and EE) policy at the local level

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

It is a fact that policies are being implemented locally and that local authorities play a pivotal role in enabling the implementation of RES and EE projects within their territories. This fact is increasingly more important in Tajikistan, as the majority of RES projects would be implemented in remote rural areas and would likely be community based. It is critical that local authorities understand the problems of electricity supply and embrace RES, and in particular sHPPs, via the implementation of basic EE measures based on locally available technologies and materials as the most feasible solution. Therefore, it is necessary to work with local communities, understand their needs, and provide them information on the

most beneficial solutions for their problems. Figure 8 Approach to strengthen capacities and improve cooperation at all levels

Institutional capacities for the implementation of RES and EE policy must be strengthened in Tajikistan (Figure 8). In this process, all levels of jurisdictions must be included, i.e. actions at both the national and local level are required. Capacities and capabilities shall be strengthened at all levels and cooperation and communication between them shall be improved.

3.2 Strengthening governance and capacities to implement RES (and EE) policy at national level The key stakeholders in the Tajik energy sector are presented in Table 14. Table 13 Overview of the most important stakeholders in Tajik energy sector POLITICAL INSTITUTIONS /AGENCIES:

REGULATORY AUTHORITIES:

MAJLISI OLI OF RT

GOVERNMENT OF RT

PRESIDENT OF RT

MINISTRY OF ENERGY AND INDUSTRY OF RT (LICENSING)

GOVERNMENT OF RT

ANTIMONOPOLY DEPARTMENT AFFILIATED TO THE GOVERNMENT OF RT (TARIFFS) GOSSTANDART(STANDARDS)

MINISTRY OF ENERGY AND INDUSTRY OF RT MINISTRY OF ECONOMIC DEVELOPMENT AND TRADE OF RT

PUBLIC UTILITIES: OPEN JOINT-STOCK HOLDING COMPANY «BARKI TOJIK» ENERGY COMPANY «PAMIR-ENERGY» OJSC «SANGTUDA HPP-1» PRIVATE AND PUBLIC OWNERS OF MICRO, MINI AND SMALL HPPS

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan PLANTS FOR PROCESSING AND PRODUCTION OF ELECTRICITY/ENERGY Structural divisions: OJSHC «Barki Tojik» EC «Pamir-Energy» OJSC «Sangtuda HPP-1» private and public owners of micro, mini and small HPPs

ENERGY DISTRIBUTION ENTERPRISES Structural divisions: OJSHC «Barki Tojik» EC «Pamir-Energy» Power distribution networks of wholesale customers

ENERGY TRANSMISSION ENTERPRISES Structural divisions: OJSHC «Barki Tojik» EC «Pamir-Energy» Governmental power distribution network

Evidently, the Ministry of Energy and Industry (MEI) and the Ministry of Economic Development and Trade (MEDT) are responsible for most facets of the energy sector in Tajikistan. While the MEI is responsible for both RES and EE in general, an energy department exists within the MEDT which handles issues related to planning and statistics (e.g. statistics are also covered by the Office for Statistics under the Presidential Office). In addition, other ministries and institutions hold key jurisdictions for the energy sector. These include the Tajik Geological Survey and the Ministry for Nature. These institutions manage mineral resources; determine the terms and technological parameters of mining; issue mining lease documents and supervise deposit conservation; and monitor all terms of natural resource management. The Ministry for Nature Protection regulates the sustainable management of energy resources and monitors the observance of nature-use regulations (emissions, pollution, and waste formation). On the question of financial aid provision for RES and EE projects, the Ministry of Finance, which plays the pivotal role in providing financial aid for RES and EE projects, is another key institution involved in the decision-making process. The State Committee for Investments is tasked with creating a favourable climate for and attracting investments, inter alia in the energy sector. The issue of energy pricings and tariff establishment falls within the jurisdiction of the Antimonopoly Commission. Moreover, with the established EE policy (EE Master Plan) and legislative framework, it is evident that EE is an acutely interdisciplinary area of labour and will include other institutions as well, especially those responsible for construction, transport, and standardisation. Therefore, competent capacities and coordination of activities will only become more important over time. In this sense, it is important to emphasise that an Inter-Ministerial Task Force Group has recently been established, which coordinates the activities of the various ministries related to the implementation of integrated rural development projects. This Task Force, as officially appointed by the various ministries, should also serve as the core coordination body for all activities in the field of RES and EE as part of the Poverty Reduction Strategy implementation process. The existence of the Task Force is a particularly valuable asset for elevating the status of RES and EE issues in the political agenda. The Task Force should also assume responsibility for monitoring the policy implementation progress and report all findings to the Parliament and President. Capacity building activities shall be performed in the MEDT, the MEI, the Antimonopoly Commission, the State Committee for Investments, and Barki Tojik. The first step is to analyse the current situation (how many people are working on RES and EE issues, what is their professional background, responsibilities, etc.); identify roles and responsibilities and areas of overlap; and propose cooperation mechanisms, changes in the internal structures and training programmes to ensure the necessary competences needed to perform all of the required tasks. In the field of RES, training programs shall cover the following issues: (i) Technology for RES; (ii) Building RES; (iii) Environmental issue related to RES use; (iv) Investment and O&M costs for RES; (v) Tariff methodologies and calculation of feed-in tariffs; (vi) Incentives for the building of RES plants; (vi) Registration of RES plants; (vii) Management of the incentive fund for RES; (vii) Procedure to grant the eligible status for RES electricity producers; (ix) Technical 30

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

requirements to connect RES plant to the distribution network; (x) Technical and commercial requirements when RES plant works off-grid. Training programmes shall be based on the best world practices and employees of state institutions would also benefit from the transfer of knowledge derived from international cooperation programs. In the field of EE, it shall be noted that the existing Law on Energy Savings stipulates the establishment of the State Energy Supervision Body that will supervise the implementation of the Law and coordinate EE activities. Energy efficiency is a complex and multidisciplinary area that requires dedicated personnel. Since the above mentioned Law was prepared by the MEI, it is recommended that a special department/unit is established within the MEI and that it acts as an EE agency with powers prescribed by the Law. Finally, the institutional framework will not be possible without educated and competent administrators. Therefore, it is strongly recommended that changes be initiated in higher education systems. Curriculums shall be updated with courses that deal specifically with RES utilization and energy efficient technologies and practices. In summary, the primary activities that must be enacted in the short term to create a favourable and indispensable institutional framework for RES and EE policy definition and implementation are as follows:

define and document clearly the roles and responsibilities of the MEI and the MEDT, identify areas of overlap, and propose solutions for improving cooperation and the coordination of activities; analyse existing organisational structures and establish departments within the MEDT and the MEI that deal with RES and with EE; analyse the capacities and capabilities of employees in the MEI and the MEDT and propose training programmes to qualify them for their performance of the defined tasks; analyse roles and responsibilities, and the capacities and capabilities of other stakeholders at the national level relevant for the implementation of RES and EE policy and proposals; analyse the capacities of the state owned electric power utility (Barki Tojik) for the implementation of RES and EE policy and propose training programmes to qualify them for performance of the defined tasks; strengthen the role of the Inter-Ministerial Task Force, require it to monitor progress, and report to the Parliament and President on the results of RES and EE policy implementation. Capacity and capability building in state institutions and electric power utility shall be supported by international cooperation and transfer of knowledge programmes. Moreover, to ensure the placement of sufficiently competent experts in the field of RES and EE in the long term, changes in the higher education system shall be initiated to emphasise RES and EE issues in educational programmes.

3.3 Strengthening governance and capacities to implement RES and EE policy at local level As noted above, policies implementation occurs at the local level; therefore it is crucial to raise awareness within the local communities on energy issues, and in particular the benefits that RES projects would provide to the local community. Although there exists no formal structures dedicated to local energy problems in both districts and jamoats, evidence shows that local authorities are well aware that the origin of the problems lies in the lack of a reliable electricity supply. Therefore, and as a result of necessity, the level of awareness among local authorities on

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

energy issues is remarkably high and they support the construction of RES power plants, especially sHPPs. This momentum shall be utilised to further strengthen the capacities of local communities to initiate on their own, implement, and operate RES projects. It would be advisable that at the district and jamoat level, training courses for employees should be organised that cover the following issues: (i) Technology for RES and EE; (ii) Benefits of using RES (iii) Environmental issue related to RES use; (iv) Investment and O&M costs for RES; (v) Operation of RES power plants; (vi) Regulatory framework for RES (rights and obligations of local communities as RES electricity producers); (vii) State support for RES and EE (role of the National Trust Fund for RES and EE). It is important that local authorities and communities are able to recognise the benefits accumulated from RES and be able to identify direct opportunities for economic activities (the production of equipment for RES plants, construction and instalment works, operation and maintenance of RES plants) as well as indirect opportunities (establishment of small processing factories related to agricultural activities, greenhouses, etc.) and the consequence of RES and EE utilisation opportunities. To ensure the creation of a competent domestic workforce able to implement RES and EE projects in the future, it is fundamental to introduce new programmes in vocational (high school) education. In summary, institutional capacity building activities at the local level shall have two main focuses: 1. Provide local authorities sufficient information on the economic possibilities and the regulatory framework to enable them the ability to initiate construction of RES power plants themselves, especially sHPPs, in combination with the enforcement of EE measures as part of the overall integrated rural development mechanisms. a. This shall be accomplished by the workshops and training courses organised for district and jamoat representatives. At least at the level of district, it shall be insisted that there is a person or even department in charge for energy issues (Barki Tojik's electricity departments could be used for this purpose). 2. Investigate possibilities for starting up RES and EE related jobs at the local level and provide appropriate training and qualification courses for local inhabitants (e.g. revitalise existing manufacturing facilities to produce equipment needed for sHPPs, educate future installers of solar equipment, etc.) a. The conditions are not the same in every district and jaomat, thus the programmes shall be customized to best suit the respective local communitiesâ&#x20AC;&#x2122; requirements and potentials.

3.4 The role of the National Trust Fund for RES and EE in policy implementation at national and local levels Establishment of the National Trust Fund for RES and EE is considered to be an important step towards the full development of the capacities required for policy implementation. Since RES and EE policies in Tajikistan are in place to reach the goals of poverty reduction and economic development, it is fundamental to establish the Fund as a non-profit organisation created by the Government of Tajikistan and funded by them wholly, or at least partially. It should be governed by the Administrative Council, and composed of representatives of relevant state institutions as well as representatives of the civil society sector. The members of the Fund's Administrative Council shall be determined by the following criteria: -

One representative of the Ministry of Energy and Industry (MEI), 32

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

One representative of the Ministry of Economic Development and Trade (MEDT), One representative of the Ministry of Finance (MF), One representative of the State Committee on Investment (SCI) One representative of the State Environment Agency One representative of the Majlisi Oli of RT; One representative of the OJSHC “Barki Tojik” Two representatives of an NGO.

The Fund shall have the crucial role of creating incentives for community-based RES electricity production (see Figure 9)—it shall act as an intermediary institution between producers and the utility company (Barki Tojik) – and with competence given by regulation, it should ensure the regular payments and transfers of money. The employees of the Fund shall be technical experts, with knowledge of RES and EE to be used in the evaluation of projects and operation of the RES electricity incentive system. An administrative staff made up of persons holding a financial background will be in charge of managing capital flows and accounting procedures. The Fund will act as a body with the following responsibilities:

Collecting fees for incentivizing RES and EE from sources defined in the legislation of RT (for details please see Chapter 5); Managing the mechanisms that control the incentive electricity buy-back price for grid connected RES power plants (entering into contracts for the purchase of electricity with Barki Tojik on behalf of the independent power producer (community based, but if required, this service shall be provided to private investors as well. This will be based on the special agreement signed previously between the Fund and independent power producer). Managing the scheme includes the following responsibilities: finalize contracts on obligatory purchases with eligible electricity producers; manage the accounting and execute the fee payment to the eligible electricity producers; manage the accounting of the planned and actual generation, by means of invoicing and charging Barki Tojik for the electric power produced by the eligible producers; compile and process the data on electric power from the IPPs submitted by Barki Tojik. Allocation of financing to RES and EE projects not covered by the mechanism of the electricity incentive buy-back price - the following activities shall also be eligible for cofinancing from the Fund: Research and development studies on RES and EE (in full amount); Promotional campaigns for the use of RES and the more efficient use of energy (in full amount); Education programmes for professionals performing tasks related to RES installations and EE improvements (in full amount); Financial aid for the preparation of RES/EE project documentation, including investment studies (up to 40% of the total costs); Financial aid for thermal and off-grid RES installations, e.g. solar thermal collectors as well as for EE improvement projects (up to 40% of the total investment; in remote rural areas and in the public sector, up to 100%) Fund raising for RES and EE projects in Tajikistan and mediation related to the funding of RES and EE projects from monetary contributions provided by other states, international financial institutions and bodies, and domestic and foreign legal and physical persons; Cooperation with national and international financial institutions (banks) to ensure funding for RES and EE projects in Tajikistan; Initiation for and support from international cooperation in the field of RES and EE; 33

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Establishment and maintenance of a database on all RES and EE projects in Tajikistan, financed by the Fund, including the supervision of the financial means spent for this purpose. The payment principle and relations between stakeholders is shown in Figure 9. It must be noted that the difference between the incentive price, as stated in the tariff system, and the average electricity price in the system will be compensated by the Fund (i.e. the State, as this is a national interest), since electricity suppliers shall pay to the Fund the average system price for all electricity taken over. A detailed explanation of the scheme is provided in Box 1.

Figure 9 The system of guaranteed power purchase price for RES electricity producers Box 1. Explanation of the Fundâ&#x20AC;&#x2122;s role in the incentive scheme for RES power production

The scheme of incentive electricity buy-back price for grid connected RES power plants â&#x20AC;&#x201C; how does it work? Due to the lack of capacities (a common situation with local community based sHPP) or due to the desire to mitigate risk as much as possible, an RES power producer acquires assistance from the Fund to act as an intermediary between them and the system operator. A contract between an RES power producer and the Fund is then concluded which defines the terms and conditions on which the Fund will pay the incentive price to the RES power producer. The incentive price shall be in accordance with the regulation of RT. The Fund will then conclude the Energy Purchase Agreement with the System Operator in accordance with the regulation of RT, Based on the amount of electricity that RES power producer delivers to the System Operator, the System Operator pays the amount to the Fund. The price the System Operator pays should be the average electricity generation price determined by the State Department of Power System Control. This price is lower than the retail price at which electricity is sold to the final consumers, hence the System Operator is guaranteed to cover their operation costs and participate in the system without any loses. On the other hand, the Fund pays the incentive-guaranteed price to the RES power producer as specified in the contract and in line with the price for that type of RES power plant determined in the regulation. As

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

this price is higher than the average electricity generation price, the difference shall be covered by the sources of the Fund. Vision The overall concept presented above is based on the assumption that all RES power plants shall be grid connected. This is by all means the desired situation. The grid connection of RES power plants, especially community based ones, is extremely important since local communities could benefit from the sales of electricity to the grid and use the collected money for local economic development. Moreover, the constant and secure supply of electricity is the main precondition for enabling new business opportunities (e.g. small processing factories) in rural areas. Therefore, the stable and reliable electricity supply from the grid is the main postulate in the paradigm “RES for poverty reduction”. Problem issues The current situation is far from desired. There are a multitude of sHPPs in Tajikistan operating only during the winter months that provide electricity during shortages from the grid. They are not operational in the summer when there are surpluses of electricity in the system due to the current inability to transfer electricity to neighbouring power systems. As sHPPs and other RES power plants are the primarily tool for poverty reduction in Tajikistan, it shall be required that all existing sHPPs are connected to the grid, operational throughout the year, and included in the incentive scheme led by the Fund. During the period of transition many applications will be operating only in the off-grid mode and only during winters. In such cases, the Fund shall be included as an intermediary between the RES producer and final customers. The consumers should again pay the price as defined in the tariff system (consumers shall always pay the same price) to the Fund, while the RES producer will obtain the incentive price for electricity delivered as stated in the contract with the Fund and in line with the regulation.

Where it regards the Fund, special attention shall be given to the community based RES plants. The Fund shall develop a framework “takeoff” agreement that will address the following issues: -

Community based RES plants when working in both “on-grid” and "off-grid" mode will sell their electricity at the guaranteed price which will be paid by the Fund ; Local customers will always pay the same price regardless of the working mode of an RES plant; the price will be equal to the regulated tariff established by the regulation; The price difference between the regulated tariffs and the incentive price shall be covered by the Fund; The methods of measurement, billing, and payment will be determined in the framework arrangement; The obligation of all involved parties will be clearly determined in the document.

All these matters shall be specified in the Regulation establishing the Fund. The Fund will represent not only the financial, but also the strong institutional support for the implementation of RES and EE policy. In particular, the Fund will support rural, community based RES projects. Therefore, one of the most important goals set in this Strategy is to establish the National Trust Fund for RES and EE. For this purpose, a special Regulation on the Fund shall be developed as well as other documents needed for its operation, specifically: Statutes of the Fund; A work programme for the first four years of operation; A financial plan for the four three years of operation.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

4 FINANCIAL SUPPORT FOR RES AND EE Given the complex economic situation in the country, as well as the abject conditions of poverty and the limited access to electricity, a system for ensuring financial means for incentivizing the use of RES and improvements of EE must be customized for Tajikistan. In order to support financially RES and EE in Tajikistan, it is proposed by this Strategy to establish a dedicated National Trust Fund for RES and EE (as shown in Figure 9). The organization of the Fund and the rules of its operation shall be determined by a special legislation/regulation. In the short to medium term, however, the Fund should focus on providing financial support to electricity produced from community-based sHPPs, i.e. the Fund should act as an intermediary between utility and RES producer to ensure that in on-grid mode of work, the producer is paid for electricity delivered into the grid (see Box 1.). As well, the Fund, as a state body with legally prescribed competences, should be able to ensure payments of utilities for electricity taken over from RES producers. Depending on the funding available, the Fund should also provide financial support in the form of investment subsidies for other RES applications, especially solar thermal systems, and for EE activities according to the priorities defined in the EE Master Plan. The crucial issue for the Fund's operation is how to ensure a continuous inflow of financial means, while respecting the countryâ&#x20AC;&#x2122;s meagre economic situation, and without burdening citizens or the industrial sector. Various examples of funding sources for RES and EE purposes can be found worldwide. Most funding sources attempt to burden energy consumers and polluters, as such similar mechanisms outlined below are the most widely applied: -

Environmental charges for large polluters charged per tonne of pollutant (e.g. CO2) emission; Special charges for motor vehicles, paid yearly by vehicle owners according to the type and age of vehicle; Special charge for imported vehicles. Though it is not a wide spread mechanism, it is identified as a potentially suitable solution for Tajikistan; Petroleum products levy, paid by all consumers per litre of product bought; Electricity fee, paid by all consumers per kWh of consumed electricity; Direct state budget allocations.

Table 14 shows the results of a detailed comparative analysis of the above mentioned financing options performed in order to ascertain the best possible solutions for Tajikistan. Apart from state contributions to the Fund, it should be proactive in fund raising from other sources, especially from international financial institutions and donors.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Table 14 Comparative analysis of different financing options for National Trust Fund for RES and EE

Alternative

Approx. possible annual incomes to the Fund (USD)

Pro

Contra

Note/Recommendation

Environmental charges for pollutant emissions

Not available - the measure was not considered at all since it would heavily burden Tajik industry

Strong institutional framework for administration needed Strong and efficient control mechanisms needed; Additional burden to weak industry

Not applicable in Tajikistan for the time being due to economic situation and poor industrial conditions

Special charge for motor vehicles

875,000 from newly introduced charge If new charge is not introduced, but the existing ecological fee is allocated to the Fund - $1.75 M USD

Fairness - cost borne by those who caused pollution; Effectiveness - large amount of money could be collected; Stimulant for cleaner and more efficient technologies; In line with Kyoto Protocol Fairness - cost borne by polluters (vehicles) Collecting system already established because of ecological fee

Additional burden to car owners, since there is already a significant ecological fee imposed

The means collected will not suffice for incentivizing desired RES electricity production; however it is recommended to allocate the money collected from the existing ecological fee to the Fund

Special charge for imported vehicles

$17 M USD with the unit charge amounting only 1% of a vehicle selling price

Requires good functioning of customs control and financial inspection

Recommended for implementation in Tajikistan at the moment - coordination with Ministry of Finance necessary

Petroleum products levy

$4.6 M USD with levy amounting 0.01 Somoni / liter up to $13.8 M USD with levy amounting 0.03 Somoni / liter

Fairness - cost borne by polluters Does not contribute to poverty progression Very small increase in the selling price of a car Vast amounts of money might be collected Easy to implement Does not require complicated institutional support Polluter pays Burdens only those who can afford it (owners of vehicles) Effectiveness - possible to collect large amounts by very small fee

Increases costs of petroleum products; Possible (probable) increase in prices of transportation services and in prices of all other goods and products â&#x2020;&#x2019; could cause progression of poverty (since petroleum products are almost 100% imported and prices vary

Possible for future implementation in Tajikistanâ&#x20AC;&#x201C; easy to implement; significant amount of money could be collected and invested in RES and EE projects

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Electricity fee

$102.000 USD if the fee is imposed only to public sector $4.8 m USD if the fee is imposed to all electricity consumers

Fairness - RES electricity stimulated by electricity consumers; Effectiveness - possible to collect large amounts by very small fee

State budget allocations

Depends on tightness of the budget - allocations of existing petroleum taxes and ecological fees for vehicles could be made

Easiest to implement if there is political will

significantly, causing changes in prices of other products and services) Prohibited new taxes due to economic crisis Strong institutional framework for administration needed Requires reorganization of energy sector - stronger control of monopoly in payments Increases electricity price to final consumers Canâ&#x20AC;&#x2122;t be imposed to population with limited access to electricity Not sustainable measure in the long term

Not applicable in Tajikistan for the time being due to existent energy poverty of more than half of the population

Needed in any amount as a starter of RES and EE activities

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Recommendations for ensuring funding are as follows: Funding shall be provided from the state budget allocations, international donations, and chosen dedicated sources (from Table 15); Funding will be primarily used for supporting rural, community based RES power plants (sHPPs) according to programmes adopted by the Government; The Fund shall also provide investment subsidies for RES and EE projects if there are adequate resources; Investment subsidies shall be provided to both physical and legal entities according to the determined transparent rules and priorities defined in government programs related to RES and EE Master Plan to be adopted; Training, public awareness, energy management and monitoring as well as research and development activities shall be financed by the Fund in the whole amount.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

5 TECHNICAL CONDITIONS AND CAPACITIES FOR IMPLEMENTATION OF RES AND EE POLICY There are two main issues in the realm of technical barriers for the implementation of RES and EE policy in Tajikistan: 1. Conditions of electric power network; 2. Lack of technical knowledge and capacities to provide equipment and services related to the use of RES and the implementation of EE improvement measures. Although the electrification rate in Tajikistan is remarkably high, the lack of financing and regular maintenance in the previous period has rendered the grid in bad shape. It requires an enormous and comprehensive revitalisation on both its distribution and transmission levels. Stable grid conditions are one of the main preconditions for the development of RES as grid connection would provide RES power producers' the opportunity to sell electricity at the incentive price that would guarantee a return on investment. Moreover, regarding Tajik-specific conditions, the grid connection of RES power plants, and in particular community based sHPPs, would provide additional incomes to the local communities from the sales of electricity to the grid, which in turn would be used for economic development purposes. It is expected that the new regulation would solve this matter; however much effort and funding shall be put towards the improvement of the technical state of the distribution grid as it is, to a large extent, unattended. Refurbishment of lines and substations shall be on the priority list of actions of the distribution system operators. An additional problem derives from the practically island mode of the overall Tajik power system operation resulting from the weak or nonexistent connection with neighbouring systems. This significantly disrupts the security of electricity supply due to the inability to import electricity when needed (winter) and export when there are vast surpluses of production (summer). This problem shall be solved with the construction of new high voltage lines, but this is a extenuating process and exceeds the scope of this intermediate strategy. The second technical barrier â&#x20AC;&#x201C; the lack of technical knowledge and capacities - is the focus of the Strategy. Developing local manufacturing, engineering, operation, and maintenance capabilities related to RES and EE would contribute to the economic development in the form of job creation. The aim is to mobilise local manufactures and service providers related to RES and EE, and especially sHPPs, and to upgrade their capacity for delivering turnkey solutions for sHPPs with at least 50% of the value provided by locally made goods and services. For that purpose, it is recommended that typical sHPP designs be standardised in the rated capacities range of 33 - 500 kW to be applied in rural Tajik communities and to develop the capacity of local manufacturing and service companies to deliver equipment and services needed for the construction and operation of sHPPs. Manufacturing turbines and other mechanical equipment shall be promoted, while generators and electric equipment will primarily (but not exclusively) be imported. Manufacturing shall be promoted through the standardization of technology in order to achieve a reduction of costs and increase of domestic technologies and services. Services related to the construction, operation and maintenance of sHPPs and other RES plants as well as the installation of other RES equipment (e.g. solar thermal collectors or photovoltaic panels) shall be provided by local companies. For that purpose transfer of knowledge training courses shall be organised for local companies. In the field of EE, technical capacities are needed the most in the field of building construction. Construction workers shall be trained to install thermal insulation on new and existing buildings as this will be the basis of the urban EE improvement programme. 40

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Currently, two domestic companies are identified as having the necessary technical capacity and competence building - Energoremont and Tajiktekstilmash. Energoremont is a private company with approximately 100 employees and can deliver HPP up to 1 MW on a turnkey basis. Tajiktekstilmash, a state owned company with 500 employees, manufactures pelton turbine with an installed power of 33, 75 and 100 kW. These companies have in place expertise in the field of sHPP; however, they should be provided with additional training and knowledge to improve the quality of their work (therefore, the Strategy insists on standardisation). Apart from strengthening the capacities of existing companies, a start-up of new small craft workshops in local communities shall be promoted and local persons appropriately trained. In these endeavours there are no universal solutions, i.e. the solutions shall be customized according to the conditions and possibilities of each local community as well as the preferences and base skills of the people. Finally, financial mechanisms shall be used to stimulate domestic involvement in RES and EE. For example, the National Trust Fund for RES and EE can operate on the principle that it provides financing for community based sHPPs, but only under the condition that at least 50% of the value of sHPP is locally sourced. Such a provision would support the development of a supply chain and the market for RES products and services. In building technical capacities, design engineers of all professional backgrounds (electrical, mechanical and civil engineering, architects) should not be overlooked. They should also be educated in how to design RES plants and have particular knowledge of the EE requirements of residential and service buildings to ensure the adoption of best practice solutions in the early stage of RES and EE projects. Finally, all these needs shall be recognised in educational programmes. RES and EE should be integrated in higher education engineering programmes as well as in vocational education programmes to ensure the regeneration of a new and qualified workforce for the implementation of RES and EE policy. One of the key goals of the Strategy is to provide opportunities for economic development through the creation of new workplaces related to RES and EE. In order to achieve this goal the following actions are required: standardise several common sHPP designs in the rated capacities range of 33 - 500 kW to be applied in rural communities; create transfer of knowledge programmes for local companies to enable them to produce quality equipment and provide quality services related to RES and EE; initiate the establishment of small craft workshops according to the possibilities and needs of the local communities; provide additional state support from the Fund to ensure a high share of domestic contributions in RES and EE projects; integrate RES and EE in the national higher and vocational education programmes.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

6 sHPPs AS A BACKBONE OF INTERMEDIATE RES AND EE STRATEGY This Strategy rests on the following vision: RES and EE will enable local economic development and poverty reduction. In achieving this vision, hydro potentials particularly for the construction and utilization of sHPP play a pivotal role. The provision of electricity from sHPP will facilitate the development of economic activities in local communities and would also improve standards of living and environmental conditions. Grid connection of sHPPs is particularly important, as the surpluses of electricity produced can be sold to the grid at an incentive price and become an additional source of income for local communities. The provision of electricity form sHPP shall be combined with basic EE improvement measures in rural areas, e.g. the use of CFL lighting and efficient electric appliances that would replace fire wood for heating and cooking purposes. Local communities – model for integrated development

Private investors in small HPP: •Clear procedures and regulation;

MEDT MoEI SCI

•Methodology for setting tariffs •Conditions for connection to Barki Tajik network

IPP

Financial incentives!!!

Law on the Use of RES article 9. & article 14. obliges Government to provide financial support to RES

Dep. Of Statistics

MoEd, MoAg&Env, MoH Jamoat Resource Center, …

Coordination mechanisms for PRS stakeholders

Figure 10 Tajik vision: sHPP for local economic development and poverty reduction

To demonstrate the importance of RES, and in particular sHPP development, and their role in reaching poverty reduction, economic development goals and environmental protection, a simple calculation is provided below.

6.1 sHPP role in poverty reduction and economic development of Tajikistan First, it must be emphasized that according to experiences seen around the globe, the development of sHPP projects (less than 10 MW) has a very high potential to generate new workplaces, up to 40 direct and indirect workplaces per MW. This fact must be considered in the decision making process, particularly how it relates to the creation of a favourable financial framework that supports local communities’ investment in sHPP. Apart from creating workplaces through every installed MW of sHPPs, many other positive impacts result from the utilisation of hydro resources for energy production in Tajikistan. The provision of basic amounts of available energy positively impacts society by improving living standards (indoor lighting) and health conditions (heating). As most of rural households in Tajikistan still rely on traditional biomass resources (fuel wood and dung) for cooking and heating, the abatement of this reliance will preserve local biodiversity and reduce the effects of climate change. Deforestation, a burgeoning issue in Tajikistan, leads to other adverse consequences such as desertification and salinization, which can eventually result in the contamination of water aquifers and the sterility of agricultural land. Providing basic amounts of energy for the most vulnerable rural households in the form of electricity produced from sHPPs can alleviate all of these concerns. 42

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

In addition to the adverse environmental impacts resulting from biomass resource dependency, it also contributes to global climate change. Deforestation and the loss of carbon sinks, as well as the over-reliance on non-sustainable fuels results in increased carbon emissions, the main driver of climate change. Climate change already impacts Tajikistan; its most pronounced visible effect is the loss of glaciers, a crucial source of water flows. Given the concerns noted above, it is of crucial importance to emphasise the use of locally available renewable energy sources, especially sHPPs as part of the overall strategy to increase both the availability and reliability of energy. Rural areas, those that need reliable energy sources the most, represent the greatest potential for sHPPs and must be taken into account during the decision making processes. Further, solar energy, particularly the energy generated from solar-thermal installations, must also be considered, especially for larger municipal institutions such as schools and hospitals. Based on the complimenting the legal, institutional, and technical platforms established, the experience amassed from the pilot projects, a national scaling-up program shall be proposed. The National Scaling-up Program shall define scenarios for integrated rural development through the provision of energy produced from RES and the implementation of basic, affordable EE improvement measures. The program shall define the following: -

target groups (beginning with most vulnerable 1 million of citizens); methodology for defining the scaling-up scope (starting with the 1 million most vulnerable and increasing) and measures used (starting with the provision of 1 kW per household and increasing); assessment of the financial costs and benefits; technology recommendations (with a focus on the use of intermediate technologies rather than the state of the art; the use of intermediate technologies enables local production and maintenance rather than imports); assessment of the societal benefits in terms of finances and new workplaces, health and quality of life, and environmental aspects; recommendations for the implementation timeframe.

6.2 National scaling-up: sHPPs for accelerating progress towards MDGs by stimulating integrated rural development In addition to supporting an RES strategy for Tajikistan, the primary purpose of this Intermediate Strategy is to decrease poverty and accelerate progress towards the achievement of MDGs. For this purpose, the potential for a national scaling-up of the existing pilot sHPP projects shall be assessed and the National Program for RES based Integrated Rural Development (National Scaling-up Program) shall be developed. The National Scaling-up Program shall assess the costs and benefits of providing 1 to 3 kW of electricity to the most poverty stricken households. As has been shown throughout history, attempting to solve only one issue where there are many occurring simultaneously is likely to induce adverse impacts. Thus when seeking to eradicate energy poverty issues (and poverty) in Tajikistan, it is necessary to utilise the full breadth of early recovery principles and examine the whole of society and environment and their mutual dependence. The current dependency on traditional biomass and dung results in increased deforestation and land degradation triggering detrimental natural processes such as soil erosion, salinization, and desertification. Most of these processes result in increased water contamination. In addition, using dung for heating and cooking purposes decreases its availability for fertilizing crops, which subsequently have lower yields.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

Implementation of EE measures would: - reduce the overall energy requirements - increase the health and comfort standards RES would: - reduce the deforestation - increase the availiabity of dung for fertilization - provide electricity for water pumps and purification - increase the overall avalibability and affordability of electricity in rural areas

Improvements in indoor technologies and santiation would: - decrease the energy requirements while preserving the level of comfort (use of intermetiate technologies for i.e. cooking stowes) - improve the health conditions (sanitation)

Forest biomass

Cooking

Dung

Heating

Water (from open streams)

Poor insulation No sanitation High moisture levels Indoor smoke

Electricity

Lighting

Drinking/Washing

Responsibility for women Responsibility for children

Figure 11 Energy and water balance in the Tajik rural household â&#x20AC;&#x201C; an illustration

Some illustrative scenarios are shown in a preliminary scaling-up exercise below. In the immediate future, more detailed scaling-up scenarios shall be developed and more reliable data shall be used for inputs. It is strongly advisable that field estimates of fuel wood consumption per household are completed such that comprehensive national statistics (on the rates of deforestation, fuel wood consumption, and dung consumption) are developed. For the purpose of creating a scaling-up assessment, the following assumptions and data listed in Table 15 were taken into account. Table 15 Input data used in the scaling-up exercises

Population of Tajikistan

7.500.000

Living in rural areas

70%

Living in poverty

50%

Average number of household members Number of most vulnerable population Number of households Average size of sHPP [kW] Estimated investment costs for the average sHPP of 100 kW [US$]* Share of local goods and services related to HPP construction* Jobs created per 1 MW of HPP installed*

10 1.000.000 100.000 100 100.000 50% 40

On-grid time [h/a]

3500

On-grid price [US$]

0,03

Incentive for on-grid production [US$]

0,01

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

On-grid power [share of the nominal HPP power]

50%

Estimated per capita annual consumption of fuelwood for cooking [m3]

0,5

Estimated per capita total annual consumption of fuelwood [m3]

1,0

Estimated absorption of CO2 in trees [tCO2/m3]

1,8

*based on the existing pilot project

In the initial phase provision of 1 kW per household to the most vulnerable group (1 million of citizens most afflicted by poverty) should be the aim. As it is shown in Table 16, if the average size of 100 kW for sHPP installation is considered, approximately 1000 of such facilities should be constructed. Providing such a basic amount of energy per household would enable most inhabitants to have indoor lighting (with the possibility of some other minor services) which would improve their overall quality of life as they would be able to partake in more evening social activities; children would have improved conditions for studying. More significant benefits manifest when 2 kW or 3 kW of installed power per household is provided. Providing these amounts enables a reduced need for cooking and heating fuel wood. Table 16 Scaling-up of integrated rural development through provision of electricity from sHPPs

Energy provided [kW/household] 1 Total energy production required [MW] Total number of sHPPs needed

100

200

300

1.000

2.000

3.000

100

200

300

Total investment required [million US$] Financial return to the local economy [million US$]

100

150

Total jobs created

4.000

8.000

12.000

Annual amount of for incentives [million US$]

1.750

3.500

5.250

Annual decrease of fuelwood consumption [m3]

n/a

500.000

1.000.000

Emissions saved [tCO2]

n/a

900.000

1.800.000

As it can be seen in Table 16 the decreased reliance on fuel wood could result in significant CO2 emission reductions, which traditionally stem from deforestation. The preservation of forests means preservation of valuable carbon sinks, which positively impacts the overall emissions of the country. Decreased levels of deforestation (and dung usage for cooking and heating) also allow for soil preservation; the processes of soil erosion, salinization (and eventually desertification) are less likely to occur if the natural forest cover is preserved. All of these normally have adverse impacts on the fertility of the land, which is of essential value for agricultural areas, and may cause water contamination. The positive economic impacts, both local and national, are perhaps of even greater value as such a strategy will create jobs, utilize local industries and manpower, and incur significant transfers of capital to local communities (in the form of incentives and jobs). As has been outlined above, significant flows of money to local communities would be possible if the installed sHPPs would work on-grid during the summer months. Thus it is important to consider and establish adequate financing mechanisms (a tariff system and the National Trust Fund for RES and EE) and to improve the current state of the power grid. The provision of energy to rural households and the simultaneous stimulation of integrated rural development has positive impacts on all aspects of society, and in addition to the aforementioned, they have particular significance for the overall quality of life for women and 45

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

children. Women and children are primarily responsible for collecting firewood (and/or dung), which is both physically demanding and time consuming. Access to reliable energy would alleviate much of these burdens. Women could spend more time on profit raising activities, and could acquire some of the jobs created by the implementation of RES. Taking into account the above mentioned benefits, the establishment of the Trust Fund for RES and EE shall be initiated and all the relevant legislation and regulations shall be developed together with the aforementioned National Scaling-up Program as proposed by this Strategy.

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

7 EXPECTED RESULTS OF THE INTERMEDIATE STRATEGY FOR RES AND EE The Intermediate Strategy envisages both a "top-down" and "bottom-up" approach in stimulating development of RES and EE in Tajikistan. The "top-down" approach depicts the activities focused on creating RES and EE policies and related legislative, regulatory, and institutional frameworks. Even in the most developed countries, RES and EE are governed by laws that regulate the stimulation measures needed for their implementation, i.e. measures aimed at achieving energy efficiency improvements in all energy sectors and the large scale use of renewable energies. Globally, the introduction of guaranteed prices for energy produced from RES has been shown as a good practice for increasing the share of RES; hence, it is recommended as the main regulatory measure for Tajikistan. Another critical issue that will ensure the financial capabilities and policy support for the implementation of RES and EE policy in Tajikistan is the establishment of National Trust Fund for RES and EE. The main expected results of the "top-down" activities are as follows:

Completed and implemented legal and regulatory framework for RES (by-laws envisaged by the Law on the Use of RES adopted and tested in practice); Developed EE Master Plan for Tajikistan and initiated changes and additions to the existing legislation (amendments to Law on Energy Saving) and a regulatory framework for EE; Established and operational National Trust Fund for RES and EE. The Strategy's "bottom-up" approach takes into account the fact that policy implementation occurs primarily in local communities, the areas most afflicted by the lack of a reliable electricity supply, which subsequently obstructs economic and social development, endangers living conditions, and destroys the natural environment. Every local community must be approached individually to identify its needs and possibilities for integrated development. The components of an integrated development concept are as follows:

Provision of electricity to local communities from RES, predominantly sHPP; Implementation of basic EE and fuel-switch measures to reduce the need for electricity, consumption of fuel wood and dung, improving living, health, and environment conditions; Grid connection of sHPP to benefit from the sales of electricity surpluses at the incentive price determined by regulation; Education of local people and companies to manufacture RES and EE related equipment and provide construction, instalment, operation and maintenance services; Establishment of small processing factories related to agricultural activites in rural areas to create new work places in local community. In achieving the integrated rural development goals, the National Scaling-up Program based on the experiences of the already implemented pilot projects will be developed and implemented in the short-term. The Strategy clearly offers a win-win approach that will benefit the entire Tajik society:

rural communities will be able to secure electricity supplies at an affordable cost; 47

Intermediate strategy for rural renewable energy sources and energy efficiency in Tajikistan

local companies will enhance their capacity to provide goods and services for the development and implementation of RES and EE projects; the most vulnerable population of Tajikistan (local communities in rural areas) will gain raised standards of living, impulses for local economic development, increased selfsufficiency, and preserved environmental conditions.