Scoping Off-Grid Renewable Energy Opportunities in Myanmar

5/28/2018 Scoping Off-Grid Renewable Energy Opportunities in Myanmar

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Scoping Off-Grid Renewable Energy Opportunities in Myanmar

Asian Development Bank

""

The views expressed in this publication are those of the authors and do not necessarily reflect the views and

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ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility

for any consequence of their use.

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territory or area.

ADB encourages printing or copying information exclusively for personal and noncommercial use with proper

acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative words for

commercial purposes without the express, written consent of ADB.


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Table of Contents

ABBREVIATIONS ........................................................................................................................................ v

ACKNOWLEDGMENTS .............................................................................................................................. vi

1. Introduction and Background ................................................................................................................ 1

2. Study Method and Data Sources .......................................................................................................... 4

3. Socio-Economic Characteristics of Households ................................................................................... 7

3.1 Mandalay Region.......................................................................................................................... 7

3.2 Chin State ..................................................................................................................................... 8

4. Demand and Supply for Electricity and Lighting ................................................................................. 10

4.1 Mandalay Region........................................................................................................................ 10

4.2 Chin State ................................................................................................................................... 12

5. Household Ability to Pay, Manage, and Maintain Electricity Services ................................................ 15

6. Proposed Solutions to Improve Electricity Access for Mandalay Region and Chin State ................... 18

6.1 Component 1: Promoting Solar PV Home Systems in Mandalay Region and Chin State using

an Output-Based Aid Subsidy .................................................................................................... 18

6.1.1 Output-Based Aid (OBA) Subsidy to Promote Solar PV Home Systems ......................... 19

6.1.2 Business Model ................................................................................................................ 21

6.2 Component 2: Proposed Pilot Projects in Mandalay Region ...................................................... 22

6.2.1 Component 2.1: Solar Lantern Charging and Rental Station in Ywar Taw Village .......... 22

6.2.2 Component 2.2: Solar Lantern Charging and Rental Station in Than Taw Village .......... 23

6.2.3 Component 2.3: Solar Lantern Charging and Rental Station in Zawin Village ................. 26

6.2.4 Component 2.4: Solar PV Mini-Grid in Young Kyin Village .............................................. 29

6.2.5 Component 2.5: Solar PV Mini-Grid in Ye Ngan Village .................................................. 32

6.3 Timeline Moving Forward ........................................................................................................... 37

7. Conclusions and Next Steps ............................................................................................................... 38

APPENDIX A: Detailed Descriptions of Surveyed Villages in Mandalay Region and Naypyitaw Territory 40

APPENDIX B: Detailed Descriptions of Surveyed Villages in Chin State .................................................. 95

APPENDIX C: Summary of Surveyed Villages and Proposed Solutions by Villagers in Chin State ........ 104

APPENDIX D: Summary of Surveyed Village and ADB Proposed Renewable Technologies in Mandalay

Region ...................................................................................................................................................... 107APPENDIX E: Summary of Surveyed Villages and Proposed Renewable Technologies in Chin State .. 110

APPENDIX F: Operational Guidelines of the Output Aid-Based Program to promote Solar PV Home

Systems .................................................................................................................................................... 111

APPENDIX G: Technical Specifications for proposed SHS (30 Wp) ....................................................... 113

APPENDIX H: Technical Specifications for proposed SHS (70 Wp) ........................................................ 117

APPENDIX I: Technical Specifications for proposed SHS (110 Wp) ....................................................... 121


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List of Tables

Table 1: Range of Household Monthly Spending on Electricity and Energy for Lighting with Household

Wealth Classification .......................................................................................................................... 16

Table 2: Budget for Subsidy Requirements for Solar PV Home Systems (SHS) (USD) ............................ 21

Table 3: Financial Analysis for Solar Lantern Charging & Rental Station in Ywar Taw Village .................. 23

Table 4: Financial Analysis for Solar Lantern Charging & Rental Station in Than Taw Village .................. 25

Table 5: Financial analysis for 26% subsidy on upfront costs in Than Taw Village ................................... 25

Table 6: Financial Analysis for Solar Lantern Charging and Rental Station in Zawin village ..................... 27

Table 7: Financial analysis for 63% subsidy on upfront costs in Zawin Village.......................................... 28

Table 8: Financial Analysis for 40% subsidy on upfront costs in Zawin Village ......................................... 28

Table 9: Affordability for Electricity/Lighting Energy Classification (Zawin Village) .................................... 29

Table 10: Financial Analysis for Solar PV Mini-Grid in Young Kyin Village................................................ 30

Table 11: Financial Analysis for 79% subsidy on upfront costs in Young Kyin Village (US$) .................... 31

Table 12: Financial Analysis for 60% subsidy on upfront costs - Young Kyin village (US$) ...................... 32

Table 13: Financial Analysis for 70% subsidy on upfront costs - Young Kyin Village (US$) ...................... 32

Table 14: Financial Analysis for Solar PV Mini-Grid in Yengan Village...................................................... 34

Table 15: Financial Analysis for 88% subsidy on upfront costs in Yengan Village (USD) ......................... 35

Table 16: Financial Analysis for 70% subsidy on upfront costs - Yengan Village (US$) ............................ 36

Table 17: Financial Analysis for 60% subsidy on upfront costs - Yengan village (US$) ............................ 36

Table 18: Summary of Proposed Projects and Project Cost by Village/Location ....................................... 39

List of Figures

Figure 1: Map of Myanmar indicating the focus areas of Mandalay Region and Chin State ........................ 2

Figure 2: Map of villages surveyed in Mandalay Region .............................................................................. 5

Figure 3: Map of villages surveyed in Chin State ......................................................................................... 6

Figure 4: Sources of Electricity and Energy for Lighting in Mandalay Region............................................ 10

Figure 5: Flow Chart Describing the Proposed OBA Program ................................................................... 19

Figure 6: Schedule for current activities under Energy For All energy access projects in Myanmar ....... 37


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ABBREVIATIONS

AC - alternating current

ADB - Asian Development Bank

CFL - compact fluorescent lamp

DC - direct current

EUEI - European Union Energy Initiative

hh - household

kW - kilowatt

kWh - kilowatt-hour

LED - light-emitting diode

NPV - net present value

OBA - Output-Based AidO&M - operations and maintenance

SHS - Solar Photovoltaic (PV) Home Systems

UNDP - United Nations Development Programme

Wp - watt-peak

Currency: 900 Kyats = $1 USD


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ACKNOWLEDGMENTS

This report was developed by a team of consultants under the Asian Development Banks

Regional Technical Assistance (RETA) Grant, Technical Assistance for Energy for All Initiative(TA 6443-REG, TA-7512). The work presented in this report was conducted from September to

November 2013 in Myanmar. The team was led by Pradeep Tharakan (Senior Climate Change

Specialist, ADB) and Jiwan S. Acharya (Senior Climate Change Specialist, ADB). The study

was carried out by a team of ADB consultants consisting of Hussain Haider (Team Leader),

Voravate Tuntivate, U Kyaw Seynn, and U Kan Sein. This report was written by Voravate

Tuntivate and edited by Maura Lillis (Consultant, ADB).

This study has been conducted for the Government of Myanmar through financing from the

ADB. The study team wishes to thank the Ministry of Industry of Myanmar for its kind

collaboration.

Photo credits: Cover was designed by Charmaine Caparas with photo by Claude LeTien.

Photographs in the report were provided by the field team.


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Introduction and Background



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1. Introduction and Background

Myanmars new era of political and economic openness has initiated a wave of

development with the potential to have rapid benefits on a national scale. The government now

has the task of balancing the needs of its transitioning economy with the widespread poverty

which characterizes most of its population, particularly in the form of severely limited access to

clean sources of energy. The Asian Development Bank (ADB) has committed resources to

scaling up renewable energy access in rural Myanmar, where abundant natural resources

intersect with low local capacity across vast stretches of challenging terrain.

Myanmar has abundant energy resources, particularly hydropower and natural gas.

Unfortunately its power sector is considered to be one of the least developed in Southeast Asia.

With apopulation of about 60 million, Myanmars per capita electricity consumption is only 100

kWh per year, the lowest among ASEANs 10 countries. This low national average is due to the

countrys low electrification rate, low overall industrial development and lack of investment to

date. Although the countrys average electrification rate grew from about 16% in 2006 to 26% in

2011, it still lags far behind the countrys neighbors. Moreover, electrification in Myanmar tends

to be concentrated only in large cities: Yangon City has the highest electrification ratio (67%),

followed by Naypyitaw (54%), Kayar (37%), and Mandalay (31%). Beyond these city centers,

rural areas in Myanmar are still poorly electrified, averaging a rate of about 16%.1These areas

are also quite poor and often very difficult to physically access, posing a challenge to both the

economic acceptability and technical viability of energy technologies to poor communities

throughout the country.

Prior reports released by the United Nations Development Programme (UNDP), 2

European Union Energy Initiative (EUEI),3and Mercy Corps4,5have done much to advance our

understanding of the practices, resources and challenges of rural energy users in Myanmar, as

well as describe the current institutional makeup of the energy sector in Myanmars new political

landscape. The World Bank has estimated that it would take an investment of $444 million every

year until 2030 to achieve universal access to electricity in Myanmar6, and with needs this great,

it will take many years before the benefits of any national economic development can be seen

by the countrys full spectrum of citizens. At the same time, in the face of severe economic and

technical difficulty, these prior studies have documented both burgeoning demand and self-

starting enterprise in local energy markets. Channeling these strengths towards the productive

utilization of Myanmars abundant natural resources could do much to alleviate national

conditions of severe energy poverty.

1Asian Development Bank (ADB). 2012. Myanmar Initial Energy Assessment.October 2012. Manila, Philippines.

2UNDP.Accelerating Energy Access for All in Myanmar. United Nations Development Programme, Myanmar. 2013.

3European Union Energy Initiative. Mission Report: Energy Scoping Myanmar.April & Mary 2012.

4Mercy Corps. Myanmar Energy Poverty Survey. January 2011.

5Mercy Corps. Myanmar Household Energy Market Assessment. August 2012.

6World Bank and Australian Government. One Goal, Two Paths Achieving Universal Access to Modern Energy in

East Asia and the Pacific. Washington, DC: World Bank Group, 2011.

Scoping Off-Grid Renewable Energy Opportunities in Myanmar:

Mandalay Region and Chin State


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The Asian Development Bank (ADB) has implemented the Energy For All Initiative to

explore new approaches and methodologies for helping poor households gain access to reliable

and affordable modern energy services, and to scale up these efforts to levels that can later be

supported by investment through ADB operations. Under the Energy for All Initiative, the ADB

has launched an in-depth study of select villages in two focus areas of Myanmar, Mandalay

region and Chin State,7

to contribute to the Government of Myanmars plans to expand energyaccess nationally. The study, described in this report, investigated the energy poverty situation

in Myanmar by using conditions from the villages observed over the course of this study to

serve as illustrative case studies of current household practices and needs. The ADB will be

using this analysis to implement renewable energy-based pilot installations in Mandalay Region

and Chin state, also under the Energy for All Initiative.

The main objective of these pilot projects will be to

provide poor communities living in rural villages (more

than five miles away from the electricity grid) with

sustainable access to household energy systems,

community energy systems, and key public services

through clean off-grid solutions.

With this report, the ADB hopes to contribute

to the existing body of knowledge on energy poverty

in Myanmar, and assist the government of Myanmar

with its priority for developing sustainable off-grid

energy solutions. Data collection methods are

introduced in the first section, followed by an

overview and discussion of the socio-economic

characteristics of households in each region. The

report then examines the supply and demand ofelectricity as well as demand for lighting energy, and

follows by characterizing current total household

expenditures for electricity and lighting energy. This

section will describe and equate current expenditure

levels with users ability to pay, which is based on

household budget reallocation. Finally, the report will

present specific project proposals and their

associated proposed delivery models for piloting

renewable energy solutions to these households and

communities. The pilot projects described in this

report will be carried out in 2014 to test new businessmodels and funding mechanisms.

Figure 1: Map of Myanmarindicating the focus areas of

Mandalay Region and Chin State

7Since 20 August 2010, Myanmar has been divided into seven states, seven regions, and the Naypyidaw Union

Territory. The areas focused on in this study are: (i) twenty-two selected villages in Mandalay Region and neighboringNaypyitaw Union Territory, and (ii) eight selected villages in Chin State.


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This report will be the first of two released as part of these overall activities. Later in

2014, a second follow-up report will provide a geospatial least cost electrification plan for the

two focus areas, and outline the investment costs of providing energy access to the two regions

population. It is hoped that the process and outcome of these case studies will assist the

government with the critical planning needed to harness energy from the countrys rich

indigenous resources to benefit its large rural population.


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Study Method and Data Sources



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2. Study Method and Data Sources

Surveys were carried out in thirty villages in this study. The regions and villages were

selected in consultation with the government and determined according to its priorities. In

Mandalay Region, a total of 20 villages were studied representing about 3,867 households.Eighteen villages in this grouping are located in the Mandalay Region itself and two are located

in Naypyitaw Territory, which were included in the study based on their neighboring proximity to

Mandalay and recommendations from the government for their specific assessment. The

villages in Mandalay Region are spread out in seven of the regions districts (Meikhtila,

Kyaukse, Thazi, Kyauk Da Daung, Mying Yan, and Madaya), and the two Naypyitaw villages

are located in Tauk Gone Township, Daltaya Thi District, Naypyitaw Region. For the teams

study of conditions in Chin State, eight villages were selected representing about 1,091

households, all located Hakha District. These villages are Chun Cung, Lok Lung, Tipul, and

Tinam Village in Hakha Township, and Sopum, Thluanlan, Thlangrua A and B Village in

Thantalan Township. Detailed maps of the villages surveyed in Mandalay and Chin State are

included as figures on the following pages.

The team carried out a field visit to these villages from September to November 2013.

The main objectives of the field visit were to: (1) collect information regarding the overall socio-

economic characteristics of the villages and their households; (2) assess current electricity

demand and supply as well as demand for lighting of the village households; (3) collect current

household expenditure for electricity and lighting; (4) assess the history of communities abilities

to organize themselves; (5) identify other electricity needs in the village; and (6) develop pilot

projects to test appropriate delivery models for off-grid renewable energy technology.

Rapid appraisal methods were used to quickly assess the socio-economic

characteristics of the selected villages and their households, evaluate electricity supply anddemand for lighting and other energy needs, and determine current household expenditure

levels for electricity and other lighting energy. Data and information were collected through: (i)

interviews with village chair-persons and/or village officials of every village; (ii) interviews with

the head of the households and/or spouses; (iii) focus group interviews; (iv) group discussions;

and (v) interviews with solar PV and electric appliances shop owners in the District and

Township. Other sources of information include secondary data from the respective townships

and interviews with Township officials.

Pilot projects were developed by the team based on these findings. These proposed

solutions have been based not only on the needs and readiness of the households and the

communities to operate and maintain electricity services, but also on the prospect of sustaining

the provided electricity services by developing a permanent market for energy services. It is

hoped that the new business models and mechanisms tested through these projects will be able

to stimulate a growing market for private energy services in rural Myanmar.


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Figure 2: Map of villages surveyed in Mandalay Region

Shwe daung - Village Name634 - Number of households

Ywa daw -Village Name

84 -Number of households

Than daw -Village Name225 -Number of households

Zawin -Village Name


Yon gyin -Village Name


Ye ngan -Village Name40 -Number of households

Dwe hla -Village Name194 -Number of households

Nga Zu -Village Name

65 -Number of householdsKyi eik -Village Name270 -Number of households

As she nge do -Village Name35 -Number of households

Ale kan -Village Name


Seik Tein -Village Name227 -Number of households

Khar Pat -Village Name284 -Number of households

Wun tin gon -Village Name

145 -Number of households Tha bye eik -Village Name170 -Number of households

Te gon -Village name


Nga bu kyin -Village Name131 -Number of households

Lewe

Tatkon

Thazi

Singu

Thabeikkin

Yamethin

Pyinmana

Pyinoolwin

Mogok

Pyawbwe

Meiktila

Wundwin

Natogyi

Taungtha

Nyaung_U

Kyaukpadaung

Myittha

Ngazun

Myingyan

Madaya

Patheingyi

KYAUKSE

Tada-U

Mahlaing

970'0" E

97 0'0" E

960'0" E

96 0'0" E

950'0" E

95 0'0" E

230'

0"N

23

0'

0"N

220'

0"N

22

0'

0"N

210'

0"N

21

0'

0"N

200'

0"N

20

0'

0"N

Location Map of MANDALAY REGION area

Scale 1 : 1,800,000

0 10 20 30 40 50 60 70 80 90 1005

Kilometers


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Figure 3: Map of villages surveyed in Chin State


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Socio-Economic Characteristics of Households



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3. Socio-Economic Characteristics of Households

Accurate data and information about energy poverty and access levels across Myanmar

is limited to a few prior studies by international organizations. Aside from these studies, the

countrys current national energy habits, demand and electrification levels remain poorly

understood. A report published by the United Nations Development Program (UNDP),Accelerating Energy Access for All in Myanmar, characterizes Myanmar as an agrarian and

predominantly poor country. The report cites household survey results conducted in the 1990s

by the Central Statistics Organization which estimated the countrys poverty rate (i.e., the

percentage of both urban and rural households living on less than US$1 per day) to be 22.9

percent. The report also cites the UNDPs household living conditions survey conducted in 2004

and 2005 which concluded that about 32 percent of the population of Myanmar lives in poverty,

with 10 percent in extreme poverty, or unable to cover their basic needs.

Through this study, the ADB hopes to continue filling in major knowledge gaps about

rural energy use in Myanmar. This studys socio-economic assessment carried out in 22

selected rural villages in Mandalay, two villages in Naypyitaw Region, and eight villages in Chin

State confirms that, in parallel with national trends, significant numbers of households in the

selected villages were found to be very poor, many of whom having few means of supporting

their own livelihoods. This section will present an overview of the teams findings regarding the

socio-economic characteristics of these villages, first in Mandalay Region and then in Chin

State. For more detail beyond this overview, please refer to Appendices A and B for in-depth

descriptions of each observed village in the two areas.

3.1 Mandalay Region

This field survey has revealed that virtually all households in Mandalay Region engage

in some type of agricultural activity. The agricultural practices of almost all farmers in Mandalay

are considered to be subsistence farming. Although the region is considered to have among the

most fertile land in the country, a very small portion (less than one percent) of arable land in the

focus villages in Mandalay were found to have access to irrigation. Virtually all farmers in these

selected villages are only able to grow crops during the monsoon season. Typical crops grown

in Mandalay Region are rice, jute, sugar cane, and other dry zone crops such as maize, millet,

chili, sesame, ground nut, and pigeon pea. Since all agricultural activity relies almost exclusively

on rain water, drought during the past few years has had significant impact on the well-being of

many households. Despite having small arable land holdings averaging just one to three

hectares per farmer farmers plant several crops during each monsoon or growing season. The

main reasons for this practice are to reduce the risk of crop failure, ensure sufficient food cropsfor their own consumption, and protect against price fluctuation. Only a handful of well-to-do

households with relatively large arable land holdings can afford to use agricultural machineries,

which were found to include small ride-on, 3- or 4-wheel tractors, walk-behind tractors, and

diesel pump sets for irrigation.

The findings from this study confirm that a significant portion of rural households are

quite poor, many of whom are living in conditions of extreme poverty. With respect to arable


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land holdings in Mandalay, a crucial component of sustainable agricultural activity, interviews

with village chairpersons and village officials revealed that approximately 23 percent of

households in all 22 surveyed villages in the region are landless. 8The proportion of landless

households in these villages mirrors national trends wherein it is estimated that about one-

quarter of total rural households in Myanmar are landless.9The vast majority of these landless

households are quite poor, making modern energy access not only difficult a difficult task, butan urgent one. Findings from the field survey reveal that most landless farmers tend to earn

their living as farm laborers in their own village or villages nearby. The average wage for farm

labor is 2,000 Kyats (USD$2) per day for men and 1,500 Kyats (USD$1.50) per day for women.

Unfortunately the employment window as farm labor in the village (farming community) is very

limited. Most laborers can gain employment during the three months before and after monsoon

season, meaning that income-earning opportunities for landless adults is limited to just six

months out of the year. In a few villages, namely Tha Pyae Eait and Phae Pon Village in

Madaya, Than Taw Village in Thazi Township, and Yengan Village in Kyauk Da Daung

Township, landless households have additional opportunities to earn income by collecting

firewood, making charcoal for sale, and/or collecting forest products for sale. Although these

additional income earning opportunities may generate better income than farm labor, they are

also very difficult to carry out during the monsoon season, meaning that it is difficult for landless

persons in these selected villages to achieve year-round employment.

Other employment opportunities in the village include tending cows for large dairy

farmers, as practiced by landless households in Nasu and Dwehla Village in Kyaukse Township,

or renting palm trees to collect sap for making palm sugar or palm juice, as observed in Seint

Tain and Young Kyin Village in Kyauk Da Daung Township and Nga Bu Kyin Village in

Myingyan Township. Employment opportunities outside the farming sector are very limited. The

study only identified two villages (Pyaw Ywa and Pe Tauk Gone villages in Tauk Gone

Township) in which, due to their location near quarry industrial sites and close proximity toNaypyitaw (one hour), farmers and especially landless farmers could seek employment outside

the agricultural sector. More than a third of the households in these two villages are part-time

residents in the village over the course of a year, since many of them work as a migrant labor in

Naypyitaw.

3.2 Chin State

Chin State is located in the remote mountainous regions of Western Myanmar, sharing

borders with India and Bangladesh. Administratively, the State is divided into nine townships:

Tonzang, Tiddim, Hakha, Falam, Htantlang in the North and Kanpetlet, Mindat, Madupi and

Paletwa in the South. The data collection team only concentrated on eight select villages in twoNorthern townships (Hakha and Htantlang). Populations across the townships of Chin State are

generally considered poor relative to populations in other states or regions of Myanmar. The

livelihood activities of households in Chin State center on agriculture and shifting cultivation,

8Twenty surveyed villages are located in Mandalay Region and two villages are located Nay Pyi Taw Region. The

latter are located on the border between the Nay Pyi Taw and Mandalay regions.9United Nations Development Program (UNDP).Accelerating Energy Access for all in Myanmar. May 2013,

Myanmar United Nations Development Program. Myanmar.


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with most farmers practicing slash and burn to clear land for cultivation. Major crops include

maize, rice, and millet. Rice paddies are mainly grown on farmlands at lower altitudes, while

millet is the primary crop of areas at higher altitudes. Other crops and plants grown include

beans and pulses, potatoes, sunflower, cotton, sugarcane, tobacco, coffee, mulberry, various

kinds of vegetables, banana and fruits such as orange, apple, and avocado. Other livelihood

activities include raising livestock, weaving, small trade and seasonal labor. Since allhouseholds in the surveyed villages were found to be subsistence farmers, rice, maize, and

millet are usually planted for the households own consumption. Cash income is usually

generated from seasonal labor, or alternatively from the sale of livestock and agricultural and

forest products. Since the surveyed area is located in a very remote region, access among

villages and from villages to the Township capital is difficult. Employment opportunities in the

Township are thus very low, and villagers frequently trek across the border to seek seasonal

employment in India.

Access to land is not an issue in Chin State as households tend have access to large

plots of land through the shifting cultivation system. However, low yields are common due to the

key problems of poor soil quality, lack of labor, lack of seeds and capital, lack of livestock andequipment to plough or tilt land, and lack of access to irrigation and fertilizer. As a result, cash

income from agricultural activities tends to be limited, and in some years the food crops

produced are not sufficient to support a households basic consumption. Making a living is

becoming much harder economically due to rapid population increase and the unsustainable

agricultural practices of shifting cultivation, since the number of years between land rotation

have become shorter and shorter to allow soil properties to recover.

Since Chin State is located in a remote and mountainous range, access to the market is

a challenge for villagers. For example, although the villages of Chun Cung, Lok Lung, and

Tinam are located on the main road and thus should be accessible year round, difficult

mountainous terrain and poor road conditions still make it difficult to transport agricultural

products to the main market in the Townships.10Market accessibility in the other five villages

visited by the team is limited to the dry season using a four-wheel drive vehicle. Access to the

market for these villages is thus very challenging year-round. Although villages located along

the main road are in a better position to sell their agricultural products, as found in the three

villages mentioned above, such villages tend to have more limited land and natural resources

than villages located in more remote areas in the mountains. This can be attributed to rapid

population increase leaving newcomers and younger families in the village with fewer resources

with which to make a living.

10As an example, a trip from Hakha Township to Tinam Village took about 3 hours for a distance of 36 miles.


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Demand and Supply for Electricity and Lighting



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4. Demand and Supply for Electricity and Lighting

4.1 Mandalay Region

Based on interviews with village chairpersons and/or village officials, the field survey

team concluded that dry cell batteries and candles are the main sources of energy used forlighting by households in all 20 selected villages surveyed in and nearby Mandalay. As shown in

Figure 4 below, about 37 percent of the households rely mainly on D-sized dry cell batteries

used to power light-emitting diode (LED) lights, and supplement LED lighting with candlelight.

On the other hand, about 32 percent of the households rely solely on candlelight, and use

candles in combination with LED light powered by dry cell or small car battery. Diesel gen-set

mini-grid accounts for 14 percent. The field survey also reveals the significant penetration of

solar PV home systems (SHS). Approximately 11 percent of the households were found to use

SHS, with system sizes ranging from 80 watt peak (Wp) to more the 200 Wp. Interviews with

households using solar PV home system confirmed that these households tend to be among the

more financially better off households in their village. On the other hand, households relying

solely on candlelight, and candles in combination other energy sources, tend to be the poorer

households of the village. While households using only candlelight and candles with wick lamps

are considered the poorest household group in the village, it is important to note that these

households tend to spend money more on their lighting energy. This is because poor

households buy one or a few candles or a very small amount of diesel fuel (for wick lamp) at a

time, which can amount to considerable spending over time.

Source: Rapid Appraisal and interviews with Village Chair Persons/Officialsand Households, October 2013.

Figure 4: Sources of Electricity and Energy for Lighting in Mandalay Region


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Household interviews reveal that most households with access to a diesel mini-grid own

one electric lamp; a small minority of these households own two lamps. A typical electric light is

either a 20-watt compact fluorescent lamp (CFL) or a 20-watt fluorescent tube, with a small

minority using 8- to 10-watt T4-size fluorescent tubes. Households with solar PV home systems

also use these types and sizes of CFL and fluorescent tubes. The average number of electric

lights owned by households using solar PV home systems is about two. For households using

dry cell batteries, LED lighting is the most popular light source. The number of LED lights owned

and used by the household only averages to one. The most popular size of LED lights powered

by dry cell batteries requires only two D-size dry cell batteries; the second most popular is

slightly larger and requires three D-size dry cell batteries. Beside lighting appliances, a smallnumber of households using electricity from solar PV home systems or diesel-generated mini

grids own a small television, with the most popular model being a 9-inch television equipped

with DVD player. Examples of these technologies are found below.

Typical LED light powered by dry

cell batteries

Candle used by poor households

for lighting

Typical SHS using car batteries without controller


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With regard to LED light powered by dry cell batteries, households using this method

confirm that it is far better than candlelight, although all users complain about the quality and

reliability of the LED light. Based on interviews with users, the average lifespan of an LED light

is about three months, but many households complain that theirs break down easily and may

last less than one month. Public perception of LED light powered by dry cell batteries is not

positive overall, with one user saying, It breaks down easily and its lifespan is not predictable,even though it is much better than using candle.

In general, household demand for lighting in all selected villages centers on two time

periods. The first period occurs early in the morning before the sun rises and lasts for about one

to two hours, depending on when the sun rises and how early the household wakes up.

Traditionally, women wake up during this period to prepare food for other household members

and monks. The second period is in the evening after the sun sets, for about three to four hours

before going to bed. Lighting demand in the evening hours is the most crucial since it serves

lighting needs for everyone in the household, whereas demand for lighting in the morning is

much smaller since it only serves one or two people (mostly women) limited to the kitchen area

of the house. In sum, at present, each rural household uses electricity and/or needs lighting forapproximately four hours per day, one hour in the morning and three hours in the evening. In

households with access to diesel genset mini grids, these grids are able to provide electricity

supply for two to three hours in the evening.

4.2 Chin State

Unlike rural households in Mandalay, many rural villages in Chin State have constructed

micro hydro systems themselves to generate electricity for their villages for a few hours a day

during the rainy season.11In fact, all but one village (Thluanlan Village) were found to be using

or have recently constructed micro hydro to generate electricity for the village. These systems

have been constructed by villagers using their own funding with no technical support from the

government, though both central and local governments have encouraged their efforts. The

typical size of a self-constructed micro hydro in these villages is quite small, with a maximum

size per power generation unit of less than 40 kilowatts (kW) and total combined generation of

usually less than 50 kW. In addition to hydro power generation, villagers have also constructed

mini-grids to distribute electricity to households within the village.

The construction requirements for building a micro hydro plant are site-specific, and

these engineering challenges compounded with limited capital investment and technical

knowhow within the villages have been problematic to almost all the village-constructed micro

hydro systems. The most common problem is insufficient water to generate electricity,especially during the dry season. Moreover, even during the rainy season, there is not sufficient

water to generate electricity for more than 3 to 4 hours a day, and the system overloads due to

heightened demand for electricity. Interviews with electricity committees and villagers in all the

villages visited by the team confirm that none of the village electricity committees have

11Micro hydro is a type of hydroelectric power that typically produces up to 100kW of electricity. These installations

can provide power to a small village or community.


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13

introduced stringent load control measures to deal with heightened demand for electricity. Only

a few villages have implemented a ban on incandescent light bulbs.

Other problems identified during the field visit include artificial reservoirs constructed for

power production being too small and some leaking, improperly installed valves and turbines,

lack of technical capacity to re-install the system, distribution lines being too long and/orimproperly sized to the conductors, and sub-standard and un-safe distribution networks.

Solutions proposed by villagers from all the villages visited include utilizing new water sources

and constructing new artificial reservoirs located farther away from the village. Appendix C

provides a summary of problems and proposed solutions provided directly from each village in

Chin State which could be considered for implementation in this or upcoming phases of the

ADBs off- grid program.

Artificial reservoir in Chun Cung Village, Chin State Artificial reservoir in Sopum Village, Chin State

Electricity distribution lines in Tinam Village, Chin State


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14

It is important to note that hydroelectric facilities require a dependable flow and

reasonable height of fall of water. Any potential hydro power sites/sources must therefore be

thoroughly examined and studied. Moreover, as micro hydro planning is highly site-specific,

investment costs for the necessary civil engineering analysis as well as investment costs to

construct transmission and distribution lines to the village can be very high due to the long

distance and challenging terrain from the power house to the village. It is therefore consideredlogical to compare the cost of all alternative supplies of electricity, in addition to the micro hydro

plants, in determining the least cost of electricity supply. For the new micro hydro sites proposed

by villagers, the first and foremost upfront investment cost would involve securing a qualified

hydro engineer to determine whether water flow at the proposed site is sufficient, dependable,

and has reasonable height of fall of water.12Given the terrain and geographical location of each

village, and taking into account the number of households in each village, the cost of electricity

supply through a properly constructed micro hydro plant could be too high. The cost of

alternative electricity supplies such as SHS could be more competitive.

12The consulting fees and expenses for a qualified hydro engineer and support staff could be as high as US$500-

1,000 per day or more, and each engineer and support staff would need to survey the site one or two times. Theteam must spend at least five to ten days on each site, bringing overall consulting fees for one site to potentially overUS$20,000.


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Household Ability to Pay, Manage, and Maintain Electricity Services



15

5. Household Ability to Pay, Manage, and Maintain Electricity

Services

The range of household monthly spending on electricity and lighting in the surveyed

villages varies among the available sources of electricity and energy for lighting, as well as

among rich, medium-income, and poor households. Moreover, even within each category of

electricity and energy sources, household monthly spending varies depends on the appliances

available and different household habits. The low end of household monthly spending ranges

from 1,000 to 3,750 Kyats per month, but the high end varies significantly from 3,450 to 7,000

Kyats per month. Current monthly spending levels on electricity and other energy for lighting for

rural households is quite high compared to the amount of electricity and lighting the households

actually receive, or when compared to households with access to grid electricity. For example,

households with access to a diesel mini grid would pay 2,000 Kyats per month to power a 20-

watt CFL. The total electricity usage of a 20-watt CFL for 3 hours a day over 30 days amounts

to only 1.8 kilowatt-hours (kWh) per month, meaning that the cost of electricity is about 1,111

Kyats (US$1.23) per kWh. An average household with access to a diesel mini grid owns one ortwo lamps and occasionally a small 9-inch television. This means that the maximum total

electricity consumed by such a household is less than 7 kWh per month, for which the

household pays about 5,000 Kyats per month for two lights and one television at a rate of $.80

per kWh.13The average cost of electricity delivered to households through the national grid is

currently estimated to be around 75 Kyats (US$0.083) per kWh. Therefore, if electricity from the

grid were priced at 75 Kyats/kWh, rural households which are currently using electricity from

diesel mini grids could afford to pay for and use 36 to 72 kWh of electricity per month.14Given

current levels of monthly spending, it is evident that a household could afford to pay up to 1,000

Kyats (US$1.00) per kWh of electricity for alternative sources of electricity.15

If households were to be given an alternative source of power, they could reallocate theircurrent spending to acquire the new source of electricity. As shown in Table 1 below, poor

households (accounting for about 25 percent of all households in the 22 selected villages) could

spend between 1,000 to 2,000 Kyats per month on electricity. However, there are a few outlier

households that could spend more. Affordability of households with medium wealth, accounting

for about 49 percent of all surveyed households, ranges from 2,200 to 4,375 Kyats per month. It

is therefore evident that alternative sources of electricity costing outside these ranges of

affordability would require some sort of subsidy.

With respect to the ability to pay upfront costs or provide upfront investment in

households in Mandalay, interviews with households in this region confirm that about 11 percent

of households are able to purchase SHS directly from the market (see Table 1). Field

observations reveal that these households appear to be financially better off than other

households in the village. These households spend about US$80 to US$125 (72,000 Kyats to

13Electricity tariff for diesel mini grid usually give discount for two lights: 2,000 Kyats for one light, or 3,000 Kyats for

two lights.14

Currently, households with access to diesel mini grid are paying between 2,700 and 5,400 Kyats per month. At 75Kyats/kWh, household could use between 36 to 72 kWh of electricity each month.15

There is one exception: it is not possible to compare the cost per kWh of electricity from a dry cell battery.


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16

112,500 Kyats) to purchase one SHS, the sizes of which range from 50 to 80 watt-peak (Wp).

This information has led the team to conclude that financially better off households could spend

between US$80 to US$125 (72,000 Kyats to 112,500 Kyats) in upfront investments for

household energy.

On the other hand, most households in the observed villages in Chin State were found tobe using micro hydro mini grids. Delivery arrangements in all villages require that villagers

contribute to the construction of the villages micro hydro and mini grid. Average contribution

requirements per household range from US$55 to US$90 (50,000 Kyats to 80,000 Kyats).

Interviews with villagers and electricity committees in all villages reveal that at least 30 to 35

percent of the households in the village could pay the required contribution in full. The remaining

households pay by installment and/or up to as much as they can afford. Similar to Mandalay

Region, it appears that a significant portion of households in Chin State are able to spend

upfront investment as high as US$55 to US$90 (50,000 Kyats to 80,000 Kyats).

Table 1: Range of Household Monthly Spending on Electricity and Energy for Lighting

with Household Wealth Classification

Source of Electricity and Energy for

Lighting

Range of Monthly

Spending (Kyat)Percent of

Households

Wealth

ClassificationLow High

Solar PV Home System n/a n/a 11% Very High

Diesel mini grid 2,700 5,400 14% High

LED light powered by dry cell batteries and

some candlelight2,750 3,450 37% Medium

Car battery power T4 size fluorescent tube

or CFL or LED light2,200 4,000 5% Medium

Candle and LED light powered by dry cell

batteries or small battery3,750 4,375 7% Medium

Candle & wick lamp 1,000 6,000* 15% Low

Candle 2,000 7,000* 10% Very Low

Solar lantern n/a n/a 0.30% n/a

Source: Rapid Appraisal and Interviews with Village Chair Persons/Village Officials and Households, October 2013.*Households with very high spending number very few, and are considered to be outlier households.

Interviews with village chairpersons, village officials and households confirm that several

villages have significant experience with organizing themselves to manage projects and/or

activities sustainably. Most of these demonstrated experiences include street lighting and

community-owned, diesel-powered mini grids. Villages with such prior experience may be in a

better position to receive immediate help from any proposed assistance activities, since many of

the proposed projects providing renewable energy solutions require an operator to run as well


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17

as to manage and maintain the installations. These proposed renewable energy solutions

include solar lantern charging stations and solar PV mini grids. The field survey has confirmed

that seven villages in the Mandalay Region and all visited villages in Chin State have

demonstrated such self-organizing experience. For villages with no experience in organizing

themselves, additional assistance would be required to ensure that villages can manage and

maintain the energy services to be provided under this project. Technical training will beprovided in all cases to ensure that villagers are able to maintain any new equipment and

systems.


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Proposed Solutions to Improve Electricity Access for Mandalay Region and Chin State



18

6. Proposed Solutions to Improve Electricity Access for MandalayRegion and Chin State

As a result of this field study, the team has identified and developed several pilot

projects which will be implemented in Myanmar through the Energy For All Initiative. The largest

project, intended for both Mandalay Region and Chin State, will promote Solar PV HomeSystems (SHS) through an Output-Based Aid (OBA) subsidy with the objective of helping rural

households in both areas overcome the upfront cost of purchasing a SHS. Several smaller pilot

projects are also proposed which will be implemented in specific villages to test different

delivery mechanisms and business models, and help develop best practices for scaling up

renewable energy access in rural Myanmar. These pilot projects have been designed to be

flexible to several factors including least cost of electricity supply alternatives, the readiness of

households and the community to operate and maintain their own electricity services, differing

market approaches, and the sustainability of the provided electricity services. The technologies

and target communities of these smaller pilot projects are more diverse with the intention of

testing financing schemes for solar charging and rental stations and solar PV mini-grid systems

in select villages. This following section will describe these projects and their implementation,

with further detail about the target villages and projects can be found enclosed in Appendices D

and E for Mandalay/Naypyitaw and Chin State, respectively.

6.1 Component 1: Promoting Solar PV Home Systems in Mandalay Region and

Chin State using an Output-Based Aid Subsidy

Estimated Cost: US$85,000

The primary project proposed will be a bi-regional pilot program which uses an OBA

subsidy to promote solar PV home systems (SHS) in households in both Mandalay Region and

Chin State. The proposed SHS promotion will combine market mechanisms and an OBAsubsidy to help rural households overcome the upfront cost of purchasing a system, as well as

to stimulate and to enhance the overall SHS market in both regions.

A field rapid appraisal has confirmed that a market for SHS exists in many districts and

townships in Mandalay Region. Electronic shops in the main markets in Chin State have also

been found to sell SHS.16Rapid appraisal has also confirmed that 11 percent of the households

in the 20 selected villages in Mandalay Region are already using SHS, and some households in

Chin State were also found to be using SHS to supplement electricity derived from micro hydro,

or to be using SHS as their main source of electricity. A field rapid appraisal survey confirms

that most households currently using SHS are financially well off, while the main obstacle

among those not yet using solar energy is the high upfront cost of the system. In addition, themarket penetration of SHS is currently limited to villages located near larger townships and/or

districts, since electronic shops selling SHS and related equipment tend to be located in the

main market of larger townships, or in the main market of the districts.

16 The SHS market in Chin State is currently small since solar radiation during the monsoon season is low.

Households in Chin state recognize these limitations to SHS use in their region.


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19

While it is possible that the SHS market could expand to smaller townships with a larger

market base, it will take some time for the market mechanism to grow. The bi-regional pilot

project proposed herein could play a major role in helping the SHS market to expand and reach

a greater number of rural households. In addition, the present quality and technical standards of

SHS-related equipment, components, and parts available in the market vary widely. Households

and consumers are not provided with sufficient technical information to help them with makingenergy-related decisions, and they lack proper information about maintaining and operating any

systems they do buy. Interviews with rural households currently using SHS have confirmed that

they rely solely on information provided through sale pitches from shop owners and sale-

persons who are promoting SHS. All current SHS users interviewed during the field rapid

appraisal indicated that they just follow the verbal instruction provided by the shop owners and

sale-persons in connecting all of the components and installing the system by themselves. The

proposed pilot project will not only expand the use of SHS and enhance the SHS market, but

also help establish standards and higher quality for SHS-related equipment, and assist and

educate households/consumers to maintain these technologies once acquired.

6.1.1 Output-Based Aid (OBA) Subsidy to Promote Solar PV Home Systems

Through this pilot project, a subsidy will be provided using an OBA approach for every

SHS which is sold to a household/consumer. The amount of the OBA subsidy provided to each

rural household will be dependent on several factors, particularly the households ability and

willingness to pay and the current retail price of SHS, so that any new SHS sold under the pilot

will be able to compete with the SHS currently being sold in the market. The mechanism of the

proposed OBA program is presented in the flow chart in the figure below. Additional detail is

included as Appendix F.

Figure 5: Flow Chart Describing the Proposed OBA Program

!"#$%&'() +,- .)%/&"$01

Ministry of IndustriesADB

Private Supplier

Eligible Households for OBA - Beneficiaries

Installation ofSHS as per

agreed standards

Invoice to ADB forOBA subsidy after

verification

Payment of OBAsubsidy afterverification

IndependentVerification

Agent

Verification -Installation of SHS

Reports to ADB/MOI

4

5

2


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20

It is important to note that the solar systems now being sold in the market consist of low-

cost components and parts, usually using car batteries instead of deep cycle batteries and often

lacking a controller. This cheaper quality ensures that the retail price of SHS systems can be

kept low and affordable to the households, but results in significant operational shortcomings

once installed. Moreover, given the low technical standards involved, current market SHS are

more costly to operate than higher-quality SHS since households must frequently spend moneyon battery and parts replacement.17 In an effort to improve the standards of SHS sold in the

market in Myanmar, all parts and components of SHS which are sold to rural households under

this pilot project will meet higher and more reliable technical standards, which will also have the

effect of making these new solar systems more expensive than those currently available on the

market.

With respect to demand, the teams field visit to the Mandalay Region reveals that

households currently using SHS spend an average of US$80 to US$125 (72,000 Kyats to

112,500 Kyats) on purchasing a SHS. The typical size of the panel bought by households

ranges from 50 Wp to 100 Wp. In Chin State, the field survey team determined that households

contribute an average of US$55 to US$90 (50,000 Kyats to 80,000 Kyats) to construct microhydro and mini grid systems in their village. With respect to supply, the typical retail price of a

solar PV panel ranges from only US$1.00 to US$1.25 per one Wp, and the average price of a

car battery ranges from US$30 to US$50 (27,000 Kyats to 45,000 Kyats). Prices quoted by

potential suppliers for higher quality systems that meet international standards are significantly

higher than the typical SHS now sold in the market.

Taking into account current supply and demand in the energy services market, and

considering users ability to pay and the desire to make the pilots SHS price competitive, the

subsidy to be offered to each household will need to be relatively high. Table 2 outlines the

subsidy amounts required based on three pricing scenarios for two sizes of SHS: (i) a 30 Direct

Current (DC) SHS, which is sufficient to provide lighting needs and mobile charging; (ii) a 70 Wp

DC SHS, which could support a 7-9-inch TV and DVD in addition to lighting and mobile

charging; and (iii) a 110 Wp Alternating Current (AC) SHS, which could support a 21-inch LCD

TV and DVD in addition to lighting and mobile charging. As shown in Table 2, the level of

subsidy required for each SHS is about 30-40% percent of the total cost of the system. This

relatively high level of subsidy will be provided to ensure that rural households can afford to pay

for the system, and that the final price paid by the households is competitive to current market

SHS.

This pilot is only proposing to support 30 Wp, 70 Wp and 110 Wp SHS because these

three sizes provide a minimum level of lighting and electricity, and thus will serve the mainintention of the pilot to test the market for small systems which will benefit relatively poor rural

households. Both sizes will include a solar PV panel, a deep cycle maintenance free battery,

controller, mobile phone charger, and two or three LED lights depending on the size of the

17Car batteries are not designed for deep discharge, and will survive only 5 or 10 cycles, so they are not suitable to

store energy for solar PV application. For solar applications a battery needs to be capable of being dischargedhundreds or even thousands of times. This is the main reason why battery known as a deep-cyclebattery used tostore energy for solar PV application.


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system. The technical specifications of these proposed technologies are enclosed as

Appendices G, H and I for the 30 Wp, 70 Wp and 110 Wp systems, respectively.

Table 2: Budget for Subsidy Requirements for Solar PV Home Systems (SHS) (USD)

Size of SolarPV Home

System

EstimatedPrice of SHS

System

SubsidyRequirement

per System

Subsidy in

Percentageof Total

Cost

Per system

Household

Pays

TotalNumber

of Units

EstimatedSubsidy

Required

30 Wp, DC 134 54 40% 80 410 22,140

70 Wp, DC 225 100 44% 125 410 41,000

110 Wp, AC 408 122 30% 286 150 18,300

Total 970 81,440

As shown in Table 2, the total budget required for the OBA subsidy payment is

estimated to be US$81,440. This will cover approximately 970 households or systems. Asidefrom the OBA subsidy payment, another US$3,560 has been set aside to provide additional

incentives to suppliers selling SHS in Chin State, amounting to approximately US$10 to US$12

per SHS sold. This is intended to incentivize supplier by helping them pay for transportation and

related logistical expenses since most villages in Chin State are located in remote mountainous

regions which are difficult to access. This additional subsidy is only for Chin State and will be

covering approximately 300 installations.

6.1.2 Business Model

Subsidies will be provided to qualified sellers who sell SHS to the

households/consumers. However, to adhere to OBA principles, the sellers will only receive thesubsidy after it has been verified by an independent third party that the SHS has truly been

bought by a household/consumer. Sellers will be required to submit the name, address, and

contact information of each buyer to the project administrator, who will pass this information

along to an independent third party for verification. The independent third party will be required

to verify and confirm that the SHS has been bought by the household/consumer. To ensure that

the SHS being sold under the pilot project meets the projects required technical standards, an

expert from the ADB will develop specifications for the SHS and call for qualified suppliers to

propose an appropriate price of 30 Wp, 70 DC system, and 110 Wp AC systems, including

delivery and installation expenses, to the ADB. Selected suppliers will sell the systems directly

to the households and collect payment at that time which covers only the portion which

households are responsible for paying. Upon independent verification, the suppliers will receive

the balance from the ADB. To ensure competition, it is conceivable that more than one supplier

may be selected to supply SHS through the pilot project.


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6.2 Component 2: Proposed Pilot Projects in Mandalay RegionEstimated Project Cost: US$ 113,500

In addition to the bioregional OBA program (Component 1), a second component of

ADBs pilot activities will consist of five smaller sub-projects in Mandalay Region. These sub-

projects will be implemented in Thazi, Kyauk Da Daung and Kyoske District in MandalayRegion. The total cost for all five sub-projects is estimated to be US$113,500, which is budgeted

separately from the cost estimates of the OBA program. The following sections provide

additional information and cost estimates for each sub-project.

6.2.1 Component 2.1: Solar Lantern Charging and Rental Station in Ywar TawVillageEstimated Cost US$6,500

Ywar Taw Village is administratively part of Kyaukse Township, Kyaukse District in

Mandalay region. Ywar Taw village is located 1.5 kilometers from the main road and 39.5

kilometers from Kyaukse Township, giving villagers access to the main agricultural products in

the township. There are currently about 84 households living in Ywar Taw village, just two of

whom lack land holdings. Interviews with several villagers reveal that the gap between rich and

poor in Ywar Taw village is significantly lower than other nearby villages. This may be due to the

fact that most households in Ywar Taw village own land and some households own arable land

with access to irrigation.

About 34 households in Ywar Taw Village currently use SHS. The size of these systems

ranges from 80 to 150 Wp. Aside from SHS, about 50 households use car batteries to power

small T4 fluorescent tube, or compact fluorescent lamp or LED light and candle. Almost every

household owns LED light powered by dry cell batteries. Interviews with the households reveal

that there is a battery charging service available for villagers in the village. The battery chargingservice provider picks up batteries and takes them to the charging station. The fee for pick up

and charging for one battery is only 500 Kyats, suggesting that the charging station uses

electricity from the grid. Households using car batteries to power LED light indicate that each

charge would provide sufficient electric power for 40 hours for two LED lights. However, the cost

of a car battery could range from 25,000 for a used car battery to over 40,000 Kyats for a new

50 Amp car battery. A used car battery lasts only six months, but a new one lasts about a year.

This means that the cost of lighting using a car battery and two LED lights could range from

7,000-8,000 Kyats per month.

This pilot project proposes setting up a solar lantern charging and rental station to

reduce the financial burden of lighting on households in the village. The teams financialanalysis shows that the rental fee should be set at 2,547 Kyats (US$2.83) per month per

household, or a daily rental fee of 84.90 Kyats (US$0.094), in order to ensure that the total

revenue will meet total investment plus operation and maintenance cost over the lifespan of the

project (seven years); or the net present value (NPV) for the project is positive. Households

living in the village who are using LED lighting powered by dry cell batteries are currently

spending about 7,000 to 8,000 Kyats per month on lighting. Based on their current spending on


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lighting, subsidies are not needed because household monthly spending on lighting is much

higher than the calculated monthly rental fee.

Table 3: Financial Analysis for Solar Lantern Charging & Rental Station in Ywar TawVillage

Total equipment cost: US$6,500Interest rate: 15% per year

Project life: 7 Years

Total number LED lanterns: 50 Lanterns

Exchange rate: 900 Kyats=US$1

Rental fee at cost per month: 2,547.00 Kyats (US$2.83)

Household ability to pay based on current spending: Over 2,600 Kyats (US$2.83)

Total subsidy required per household/month: None

Financial Analysis (in USD)

Year Equipmentcost

O&M

% ofcost)

O&Mcost

Total

cost(PV)

Rental

fee atcost/mo

Total

Revenue(PV)

Afford-ability Subsidy/hh/month

1 6,500.00 0.01 65.00 6,565.00 2.83 1,698.00 >2.83 0.00

2 - 0.02 130.00 113.04 1,476.52

3 - 0.04 260.00 196.60 1,283.93

4 - 0.06 390.00 256.43 1,116.46

5 - 0.08 520.00 297.31 970.84

6 - 0.10 650.00 323.16 844.21

7 - 0.12 780.00 337.22 734.09

Total 6,000.00 2,795.00 8,088.76 8,124.05

NPV 35.29

Delivery and Business Model:Using a public-private partnership business model, the

project will work with private investors to invest in the solar lantern and charging and rental

station. In this proposed scheme, no subsidy is required since affordability levels are higher than

the calculated rental fee. However, to incentivize the private investor to establish the solar

lantern charging stations, the ADB will provide a 20 percent grant subsidy on its upfront cost.

The regional government of Mandalay is also willing to contribute 10 percent upfront cost and

provide land free of charge to set up the village charging station on a ten-year lease to the

private investor.

6.2.2 Component 2.2: Solar Lantern Charging and Rental Station in Than Taw

VillageEstimated Cost US$6,500

Than Taw village is part of Thazi Township is located about three miles off the District

Council road linking Pyaw Pwe and Windwin, situated at the foot of a mountain range near the

Shan State border. There are currently about 225 households living in Than Taw village with a

total population of around 1,117 people. About 100 households in the village do not have land to

plant crops. Landless households in Than Taw village tend to earn their living as farm labor


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within and outside the village, as well as by collecting forest products. The majority of these

households are relatively poor when compare with other households in the village. Currently,

only 15 households in the village are using SHS, almost all of which are used for lighting and

television. All other households use LED lights powered by dry cell batteries and/or candles.

LED lights are usually bought from the market in Thazi Township. A LED light costs around

1,500 to 2,000 Kyats depending on the size of the light (2, 3, or 4 D-sized dry cell batteries).Some household use up to nine dry cell batteries and spend about 2,250 Kyats per month for

dry cell batteries, though most households use fewer than nine batteries. For poor households,

candlelight is the only inexpensive option. Interviews with poor villagers confirm that most poor

households try to use only one candle per day. One candle costs 50 Kyats, indicating that poor

households spend less than 2,000 Kyats per month on candles. Typical lighting needs for the

household tend to be one to two hours in the early morning hours and a few hours in the

evening.

This pilot project proposes setting up a solar lantern charging and rental station to

reduce the financial burden of lighting on households in the village. Project financial analysis

shows that the rental fee should be set at 2,547 Kyats (US$2.83) per month per household, or adaily rental fee of 84.900 Kyats (US$0.094), in order to ensure that the total revenue will meet

total investment plus operation and maintenance cost over the lifespan of the project (seven

years); or the NPV for the project is positive. Poor households living in the village who are using

candles for lighting are currently spending slightly less than 2,000 Kyats per month. Based on

their current spending on lighting, a small subsidy estimated at 547 Kyats (US$0.61) will be

needed since household monthly spending on lighting is slightly less than the calculated

monthly rental fee (see Table 4).


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Table 4: Financial Analysis for Solar Lantern Charging & Rental Station in Than Taw Village

Total equipment cost: US$6,500

Interest rate: 15% per year



Exchange rate: 900 Kyats=US$1Rental fee at cost per month: 2,547.00 Kyats (US$2.83)

Household ability to pay based on current spending: 2,000 Kyats (US$2.22)

Total subsidy required per household/month: 547 Kyats (US$0.61)

Financial Analysis (in US$)

YearEquipment

cost

O&M

(% of

cost)

O&M

cost

Total

cost

(PV)

Rental

fee

(cost/mo)

Total

Revenue

(PV)

Afford

-

ability

Sub-

sidy/hh

/mo

Actual

revenue

per year

(PV)

Actual

subsidy

per year

(PV)

1 6,500.00 0.01 65.00 6,565.00 2.83 1,698.00 2.226 0.61 1,333.33 364.67

2 - 0.02 130.00 113.04 1,476.52 1,159.42 317.10

3 - 0.04 260.00 196.60 1,283.93 1,008.19 275.74

4 - 0.06 390.00 256.43 1,116.46 876.69 239.77

5 - 0.08 520.00 297.31 970.84 762.34 208.50

6 - 0.10 650.00 323.16 844.21 662.90 181.30

7 - 0.12 780.00 337.22 734.09 576.44 157.66

Total 6,500.00 2,795.00 8,088.76 8,124.05 6,379.31 1,744.74

NPV 35.29 0.00

To enable poor rural households to gain access to electric light, subsidies on the upfront

investment cost will be provided. This is to ensure that monthly service fees can be set at 2,000

Kyats (US$2.22) per month (or at the same monthly spending levels as households currently

spend on candles and diesel wick lamps). This will ensure that the net present value of theproject will be positive or at least equal to zero. Financial analysis reveals that a minimum 26

percent subsidy on the upfront cost would be required to ensure that monthly service fees are

set at 2,000 Kyats (US$2.22) and the NPV of the project will be positive (see Table 5).

Table 5: Financial analysis for 26% subsidy on upfront costs in Than Taw Village

Year

Subsidy

upfront 26%

(ADB 16% +

community

10%)

Equipment

cost after

subsidy

O&M rate

O&M

Cost

(PV)

Total

cost

Cost per

unit/mo (in

US$)

(high

affordability)

Total

revenue

(PV)

1 1,720.00 4,780.00 0.01 65.00 4,845.00 2.2200 1,332.00

2 - 0.02 113.04 113.04 1,158.26

3 - 0.04 196.60 196.60 1,007.18

4 - 0.06 256.43 256.43 875.81

5 - 0.08 297.31 297.31 761.58

6 - 0.10 323.16 323.16 662.24

7 - 0.12 337.22 337.22 575.86

Total 4,780.00 1,588.76 6,368.76 6,372.93

NPV 4.17


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Delivery and Business Model:Using a public-private partnership business model, the

project will work with private investors to invest in the solar lantern charging and rental station.

Since the affordability is relatively high and subsidy requirement is lower than the 30 percent

upfront cost subsidy threshold, the prospective investor will receive an upfront subsidy cost as

high as 30 percent of the total investment cost. Under the proposed business model, ADB is

proposing to provide a 20 percent grant subsidy on the upfront cost to incentivize the privateinvestor to invest in putting up the solar lantern charging stations. The regional government of

Mandalay is also willing to contribute 10 percent of the upfront cost and provide land free of

charge to set up the village charging station on a ten year lease to the private investor.

6.2.3 Component 2.3: Solar Lantern Charging and Rental Station in Zawin Village

Estimated Cost US$6,500

Zawin village is administratively part of Thazi Township, Thazi District, Mandalay

Region. Household interviews reveal that there are currently about 101 households living in

Zawin village, of which eight use SHS. All other households in the village can be classified into

three groups: (i) households using LED lights powered by dry cell batteries and somecandlelight, (ii) households using car/small battery to power LED light or T4 fluorescent tube,

and (iii) very poor landless households that rely mostly on candlelight. To provide better sources

of lighting and electricity to poor households which use candles as their main lighting source, as

well as to test business models for delivering inexpensive sources of electric light, this sub-

project proposes investing in setting up a solar lantern charging and rental station in the village.

The solar lantern charging and rental station will include 50 lanterns, batteries and charging

equipment. Total investment is this sub-project estimated to be about US$6,500.

Project financial analysis shows that rental fees should be set at 2,547.00 Kyats

(US$2.83) per month per household, or a daily rental fee of 84.90 Kyats (US$0.094), in order to

ensure that the total revenue meets total investment plus operation and maintenance cost overthe lifespan of the project (seven years); or the NPV for the project is positive. Analyzing

household monthly expenditure levels reveals that poor landless households living in the village

which use mostly candle for lighting spend about 1,250 Kyats per month on their lighting needs.

Based on these current spending levels, and to ensure that poor landless households can afford

to pay for the lantern rental fee, an appropriate subsidy would be 1,297 Kyats (US$1.44) per

month per household (12,547.00 - 1,250.00 = 1,297). Since the actual rental revenue per month

per household is only 1,250 Kyats (US$1.39) per month, the actual NPV of the rental revenue

over the life of the project is estimated to be 3,588,362.02 Kyats (US$3,987.07); and the total

NPV of the subsidy is estimated to be 3,723,284.43 Kyats (US$4,136.98).


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Table 6: Financial Analysis for Solar Lantern Charging and Rental Station in Zawin village

Total equipment cost: US$6,500

Interest rate: 15 Percent per year



Exchange rate: 900 Kyats=US$1Rental fee at cost per month: 2,547.00 Kyats (US$2.83)

Household ability to pay based on current spending: 1,250 Kyats (US$1.39)

Total subsidy required per household/month: 1,297.00 Kyats (US$1.44)

Financial Analysis (in US$)

YearEquipment

Cost

O&M rate

(% of

cost)

O&M

Cost

Total

Cost

(PV)

Rental

fee

(cost/

month)

Total

Revenue

(PV)

Afford-

abilitySubsidy/hh/mo

Actual

revenue

/hh/year

Actual

subsidy

/year

1 6,500.00 0.01 65.00 6,565.00 2.83 1,698.00 1.39 1.44 833.33 864.67

2 - 0.02 130.00 113.04 1,476.52 724.64 751.88

3 - 0.04 260.00 196.60 1,283.93 630.12 653.81

4 - 0.06 390.00 256.43 1,116.46 547.93 568.53

5 - 0.08 520.00 297.31 970.84 476.46 494.38

6 - 0.10 650.00 323.16 844.21 414.31 429.89

7 - 0.12 780.00 337.22 734.09 360.27 373.82

Total 6,500.00 2,795.00 8,088.76 8,124.05 3,987.07 4,136.98

NPV 35.29

To enable poor rural households to gain access to electric light, subsidies on the upfront

investment cost will be provided. However, to ensure that monthly service fees can be set at

1,250 Kyats (US$1.39) per month (or at the same monthly spending levels as householdscurrently spend on candles and diesel wick lamps), a subsidy on the upfront cost must be

provided. This will ensure that the net present value of the project will be positive. Financial

analysis reveals that a minimum 63 percent subsidy on the upfront cost will be required to

ensure that monthly service fees are set at 1,250 Kyats (US$1.40) and the NPV of the project

will be positive. Under this business model, private entrepreneurs who are interested in the solar

lantern charging and rental business could work with the project to provide services to villagers,

since prospective investors will be able to expect a reasonable return on his/her investment.


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Table 7: Financial analysis for 63% subsidy on upfront costs in Zawin Village

Year

Subsidy

upfront 63%

(ADB 53% +

community

10%)

Equipment

cost after

subsidy

O&M rate

O&M

Cost

(PV)

Total

cost

Cost per

unit/mo

(US$)

(high

affordability)

Total

revenue

(PV)

1 4,070.00 2,430.00 0.01 65.00 2,495.00 1.40 840.00

2 - 0.02 113.04 113.04 730.43

3 - 0.04 196.60 196.60 635.16

4 - 0.06 256.43 256.43 552.31

5 - 0.08 297.31 297.31 480.27

6 - 0.10

Documents

Scoping Off-Grid Renewable Energy Opportunities in Myanmar