NOTE NUMBER 14 May 2017 LESSONS LEARNED e Global Partnership on Output-Based Aid Uganda Grid Based Output-Based Aid Project DEVELOPMENT CHALLENGE co-financed Energy for Rural Transformation (ERT-2) project aimed at increasing access to modern energy In Uganda, one of the world’s poorest countries and services. also one with very high population growth, the grid electrification rate is only about 18 percent, and The OBA project, a public-private partnership, power shortages remain one of the biggest obstacles targeted poor households who could not connect to to economic growth. To address this challenge, the grid because they were unable to afford the costs the Government of Uganda established the Rural associated with wiring and connection fees but who Electrification Agency (REA) in 2001 and formulated could, if connected, afford energy consumption costs. a Renewable Energy Policy in 2006. Comprehensive The project subsidized the full cost of connection reforms have since focused on making the sector for (i) poor households near a low-voltage line that financially viable, creating independent regulation could be served with a no-pole service but that had of the electricity industry, and attracting private remained unconnected for at least 18 months after an investment to the sector. The Rural Electrification Fund area was electrified; and, (ii) eligible poor households was also established to help buy down the capital identified in newly electrified areas where poverty cost of electrification projects while supporting an mapping had been undertaken. The poverty mapping OBA Lessons Learned affordable tariff return on investment. However, while consultancy financed by Kf W was completed in the Series is a forum many more power lines were being put in place, actual last years of project implementation. for discussing and grid connections were not rising at a corresponding disseminating project The OBA facility was implemented by REA, in rate – due in large part to poor households being insights at the conclusion cooperation with eight licensed service providers. unable to afford initial connection fees. of projects in supporting The main service provider was Umeme, a private the delivery of basic operator and Uganda’s largest electricity distribution services to the poor. THE PROJECT AND ITS company. OBA subsidies were disbursed through GPOBA is a partnership PARTNERS REA, which reimbursed the utilities for 100 percent established in 2003 In 2012, the Global Partnership on Output-based Aid of the total cost of the connection. It was originally by the UK (DFID) and (GPOBA) approved a grant to make access to grid planned that the reimbursement would take the World Bank. Its electricity affordable for poor households in rural, place in two phases – a portion upon verification other donors are the peri-urban, and urban areas of Uganda. The GPOBA of installation of a working conventional meter International Finance contribution of $5.5 million was part of a larger $20.2 connection, and the remainder after an agreed Corporation (IFC), the million OBA facility funded by the World Bank; the period of service delivered and bills paid. As the Netherlands (DGIS), European Union and the Government of Germany service providers mainly used pre-paid meters, the Australia (DFAT), through the German Financial Cooperation (Kf W); project was restructured in 2015 to include one-time and Sweden (Sida). and the Government of Uganda. Out of the total subsidy payments for functional connections. For more information contribution, $17.2 million was applied to connection It was initially intended that while most customers visit www.gpoba.org subsidies and $3 million to technical assistance. The would receive a conventional household connection, or email us at pilot facility was embedded within an ongoing IDA poorer households (those who could afford monthly gpoba@worldbank.org. Supporting the delivery of basic services in developing countries partial subsidies for internal wiring (calculated on the basis of RESULTS ACHIEVED a household’s willingness to pay) or technical solutions, and the project originally planned to support access for these This project overcame initial implementation delays arising households through the use of ready boards. However, the from a long competitive selection process for the independent absence of institutional and regulatory procedures related to verification agents (IVAs), pre-financing constraints of smaller, the ready board technology prevented their use. community-based service providers, and low public awareness of the subsidy scheme to successfully achieve its targets. The strong engagement of Umeme (which completed 85–90 percent of connections) by the World Bank team, together 2 Small operators could play a bigger role in reaching remote, poor communities if they are supported in building their technical, financial, and scale-up with an IDA-funded consumer mobilization campaign, led to a capacities. Small service providers can play a valuable part considerable uptake in connections from 2015 onwards and a in project success, particularly in servicing sparsely populated strong finish to the project. areas where a large provider may not reach. In this project, however, some small providers lacked pre-financing capacity Grid connections. The OBA facility supported provision of for connection materials and were sometimes unable to meet over 105,000 grid connections for poor households (525,000 demand, as the number of new applications for connections residents) in urban, peri-urban, and rural areas, representing rose considerably because of the project; as a result, the larger about 10 percent of new connections country-wide from service provider, Umeme, accounted for 85–90 percent of total 2013–2016. The GPOBA grant, which was fully utilized four installed connections, and was the main driver behind project months before the closing date of June 2017, supported progress and the accelerated pace of electrification. Under the about 40,000 connections. Service providers reported that IDA-funded ERT-3, small service providers receive connection the project helped to reduce illegal connections and grow materials from REA, alleviating the pre-financing concerns. their customer base, which encouraged support within the management of the service providers for the OBA facility and for mainstreaming connection application procedures. 3 A public information campaign was critical to project success, but needed to be carefully tailored to the local context. Effective awareness campaigns, particularly Improved livelihoods and quality of life. With electricity in remote or sparsely populated areas, must be field-based replacing kerosene and candles, residents are enjoying a and hands-on (rather than, for example, through television reduction in indoor air pollution and a reduced risk of fires. or radio advertisements). Although an initial campaign was Children have sufficient light to study by in the evening, and slow to reach potential customers, a subsequent IDA-funded adults are able to expand the hours of their income-generation mobilization campaign was more effective and acted as a activities. Electric appliances are making women’s household catalyst for significant uptake in connections. The campaign’s chores easier, and women are also experiencing improved safety mobilization consultants worked closely with service providers in the community due to better lighting in many areas. Finally, as and households, increasing public awareness of the benefits infrastructure is critical to rebuilding economic structures and of electricity and accelerating consumer demand through communities devastated by conflict, the electrification supported engagement at churches and mosques and with local council by the OBA facility has contributed to the reconstruction and leadership, as well as by going door-to-door. The campaign recovery of areas affected by Uganda’s decades-long civil war, also supported internal wiring through mobilization of certified wiremen, reduced the involvement of middlemen who charged helping to facilitate the resettlement of displaced families and the households high fees for connection and wiring, and contributed growth and stabilization of communities. to a reduction in illegal connections by making potential customers aware of OBA subsidies for legal connections. electricity bills but could not afford internal wiring) would receive 4 The selection of the IVAs should be carefully planned, so that the competitive bidding process does not result in project implementation delays. Efficient IVAs are key metered connections, including ready boards. However, due to unforeseen regulatory constraints, the ready boards were not used to achieving progress in result-based projects. The IVAs in and the service providers often accepted partial internal wiring (i.e., this project were procured through a competitive bidding wiring of 1–2 rooms rather than a whole house) as a basis on which process, which takes time. As OBA subsidy reimbursement is based on the verification of outputs, service providers were to proceed with metered household connection. reluctant to provide connections until IVAs were on board, and Lessons Learned the delay in the IVA procurement resulted in implementation delays. Once the IVAs were in place, connections commenced and/or speeded up, and the IVAs played an important role 1 It is critical to identify potential implementation barriers, including any related to regulatory frameworks, and create measures to address them in documenting critical implementation issues, such as limited customer awareness of the OBA scheme, concerns related to the quality of connections and internal wiring, GPS identification at project design stage. While the OBA facility made of beneficiary households, and cumbersome connection connection charges affordable, the cost of internal wiring procedures, issues subsequently addressed by REA and service remained high and was a barrier to access for some poor providers. Proper documentation of the household connections households. Possible means of addressing this obstacle include facilitated the verification process. The case studies are chosen and presented by the authors in agreement with the GPOBA program management team and are not to be attributed to GPOBA’s donors, the World Bank Group, or any other affiliated organization, nor do any of the conclusions represent official policy of the aforementioned organizations.