Report No. 63735-LR Options for the Development of Liberia’s Energy Sector Africa Energy Unit (AFTEG) Energy Sector Policy Notes Series Copyright © 2011 The International Bank for Reconstruction and Development/THE WORLD BANK GROUP 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. africaenergyunit@worldbank.org All rights reserved Manufactured in the United States of America First printing October 2011 The text in this report may be reproduced in whole or in part and in any form for educational or nonprofit uses, without special permission provided acknowledgement of the source is made. Requests for permission to reproduce portions for resale or commercial purposes should be sent to the AFTEG Manager at the address above. The AFTEG Manager would appreciate receiving a copy of the publication that uses this publication for its source sent in care of the address above. 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Photo Credits Cover | ©Kristin Stroup, The World Bank Pages 30 and 50 | Slewion T-Toe, ©LEC Pages ii, 6, 25, 42, 71, 96 and 106 | ©Kristin Stroup, The World Bank Page 66 | ©Zayra Romo, The World Bank Designer The Word Express, Inc. Production Editor Marjorie K. Araya Report No. 63735-LR Options for the Development of Liberia’s Energy Sector AFTEG Energy Sector Policy Notes Series October 2011 Africa Energy Unit (AFTEG) Sustainable Development Department Africa Region The World Bank “Traveler, your footsteps are the road, nothing more; traveler, there is no road, you make the road by walking. By walking you make the road, and when you look back you see the path that you’ll never walk again. Traveler, there is no road, only wakes in the sea.� «Caminante, son tus huellas el camino, y nada más; caminante, no hay camino, se hace camino al andar. Al andar se hace camino, y al volver la vista atrás se ve la senda que nunca se ha de volver a pisar. Caminante, no hay camino, sino estelas en la mar.» (By Antonio Machado) Contents Abbreviations and Acronyms. ........................................................................................................................................................vii Scope of the Paper. ............................................................................................................................................................................. ix Acknowledgements.............................................................................................................................................................................. xi Executive Summary......................................................................................................................................................................... xiii PART I – Fundamentals of Liberia’s Energy Sector 1.  The Beginning of the Road. ............................................................................................................................................. 1 2.  Liberia’s Projected Electricity Demand 2010–2040...............................................................................................7 3.  Liberia’s Energy Supply Options 2010–2040......................................................................................................... 21 4.  Petroleum Fuel Supply for Power Generation. ....................................................................................................... 31 5.  Sector Financials.......................................................................................................................................................... 43 PART II – Options for the Development of Liberia's Energy Sector 6.  Least-Cost Energy System Expansion in the Medium-Term. .............................................................................. 47 7.  Least Cost Energy System Expansion in the Long-Term..................................................................................... 51 8.  Models for Providing Modern Energy Services in Rural Liberia....................................................................... 67 9.  Establishing a Supportive Policy Framework for Implementation................................................................... 97 Annex: Summary of Postconflict Demand Analyses for Liberia. ................................................................................... 103 References.......................................................................................................................................................................................... 107 iii Boxes Box 1 Tax Incentives for Renewable Energy Development in the United States............................91 Figures Figure ES1 Average Cost of Generation..................................................................................................................... xvi Figure 2.1 Liberia’s Rubber Concessions.................................................................................................................... 12 Figure 2.2 Liberia’s Oil Palm Concessions.................................................................................................................. 13 Figure 2.3 Areas Considered Suitable for Logging Concessions.......................................................................... 15 Figure 4.1 Historical Oil Product Consumption........................................................................................................ 32 Figure 4.2 Liberia’s Offshore Exploration Blocks. .................................................................................................... 33 Figure 4.3 Oil Product Import and Consumption 1979–2009............................................................................... 35 Figure 5.1 Power Tariffs in Sub-Saharan Africa.......................................................................................................45 Figure 6.1 Supply-Demand Forecast for the Medium Term, 2010–15. ................................................................ 48 Figure 6.2 Supply-Demand Forecast for the Medium Term, 2010–15, with HFO..............................................49 Figure 6.3 Average Generation Cost with and without HFO.................................................................................49 Figure 7.1 Scenario 1 (Conservative Demand Growth) Peak Capacity. ...............................................................54 Figure 7.2 Scenario 1 (Conservative Demand Growth) Average Cost of Generation...................................... 55 Figure 7.3 Scenario 1 (Conservative Demand Growth) Sensitivity Analysis Considering WAPP Higher Supply Capacity and Lower Electricity Cost. ........................................................................... 56 Figure 7.4 Scenario 1 (Conservative Demand Growth) Sensitivity Analysis Considering Limited Hydropower Development......................................................................................................................... 57 Figure 7.5 Scenario 1 (Conservative Demand Growth) Sensitivity Analysis Considering Biomass Benchmarking Costs...................................................................................................................................58 Figure 7.6 Scenario 1 (Conservative Demand Growth) Sensitivity Analysis when Power Trade is not Possible.......................................................................................................................................................... 59 Figure 7.7 Scenario 2 (High Demand Growth) Peak Capacity..............................................................................60 Figure 7.8 Scenario 2 (High Demand Growth) Average Cost of Generation.....................................................60 Figure 7.9 Scenario 2 (High Demand Growth) Sensitivity Analysis Considering WAPP Higher Supply Capacity and Lower Electricity Cost. ........................................................................... 62 Figure 7.10 Scenario 2 (High Demand Growth) Sensitivity Analysis Considering Limited Hydropower Development................................................................................................................................................. 62 Figure 7.11 Scenario 2 (High Demand Growth) Sensitivity Analysis Considering Biomass Benchmarking Costs................................................................................................................................... 63 Figure 7.12 Scenario 2 (High Demand Growth) Sensitivity Analysis when Power Trade is not Possible....64 Figure 8.1 Rural Electrification Intervention Options. ............................................................................................ 75 Figure 8.2 Liberia’s Potential Hydropower and Rubber/Oil Palm Resources....................................................80 Figure 8.3 A Sample Organic Grid Development Scenario. ...................................................................................86 Tables Table ES1 Supply Options to be Considered.............................................................................................................xv Table 1.1 Availability of Infrastructure Services...................................................................................................... 2 Table 1.2 Evolution of LEC Tariff Brackets between 1974 and 1991......................................................................3 Table 2.1 Assumptions of Households’ Increase in Electricity Access................................................................9 Table 2.2 Estimated Energy Demand for Iron Ore and other Mining. ................................................................. 11 Table 2.3 Liberia’s Agricultural Production.............................................................................................................. 14 Table 2.4 Aggregated Electricity Demand from Agriculture................................................................................ 14 Table 2.5 Logging Contracts in Liberia. ..................................................................................................................... 16 iv Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 2.6 Total Estimated Electricity Demand in Liberia, 2010–40, Slow Growth Scenario........................ 17 Table 2.7 Total Estimated Demand for Liberia, 2010–40, High-Growth Scenario.......................................... 19 Table 3.1 Potential Availability of Hydropower in Liberia and Timeline for Earliest Plant Commissioning................................................................................................................... 26 Table 3.2 WAPP CLSG Pricing and Capacity Scenarios........................................................................................28 Table 3.3 Power Supply Alternatives and Cost Estimates for Liberia.............................................................. 29 Table 4.1 Liberia Preconflict Oil Production Consumption................................................................................. 34 Table 4.2 Product Storage Terminal (PST) Capacity, September 2004........................................................... 35 Table 4.3 Liberia Electricity Corporation Storage Tank Capacities, Bushrod Island..................................... 37 Table 4.4 Price Ceiling for Petroleum Products (US$/gallon, effective June 26, 2009)............................. 38 Table 5.1 Operating Revenues....................................................................................................................................44 Table 5.2 Cash Operating Expenses as a Percentage of Operating Revenues...............................................44 Table 5.3 Evolution of the Liberia Electricity Corporation Tariff since July 2006. .......................................45 Table 6.1 Supply-Demand Balance and Generation Options by Year.............................................................. 48 Table 7.1 Supply-Demand Balance and Generation Options per Year, with HFO. ........................................... 51 Table 7.2 Upper Bound of Supply Alternatives’ Capacity.................................................................................... 53 Table 7.3 Scenario 1 (Conservative Demand Growth) Installed Capacity and Peak Demand...................... 55 Table 7.4 Scenario 1 (Conservative Demand Growth) Total Capacity and Demand if Limited Hydropower Plants are Developed....................................................................................... 57 Table 7.5 Scenario 1 (Conservative Demand Growth) Total Capacity and Demand when Power Trade is Not Possible. ..................................................................................................................... 59 Table 7.6 Scenario 2 (High Demand Growth) Total Capacity and Demand...................................................... 61 Table 7.7 Scenario 2 (High Demand Growth) Total Capacity and Demand if Limited Hydropower Generation is Developed............................................................................................................................ 63 Table 7.8 Scenario 2 (High Demand Growth) Total Capacity and Demand when Power Trade is not Possible...............................................................................................................................................64 Table 7.9 Discounted Costs for Liberia’s Least-Cost Expansion Plans under Different Scenarios....................................................................................................................................................... 65 Table 8.1 Best Practices of Successful Rural Electrification Programs. ........................................................... 69 Table 8.2 Renewable Energy Services for Off-Grid Applications....................................................................... 76 Table 8.3 Costs of Useful Energy in Liberia............................................................................................................ 79 Table 8.4 Theoretical Potential for Biopower and Biofuels from Existing and Potential Biomass Resources Assuming 30% of Available Cropland is Planted............................................................82 Table 8.5 Potential Sites for Small Hydroelectric Development, Reported March 1988. ............................. 83 Table 9.1 Relationship of Liberia’s National Energy Policy to its Poverty Reduction Strategy................. 99 Table 9.2 Translating the NEP Access Targets for 2015 into Connections to be Achieved per Household by the LEC and RREA................................................................................................... 100 Table A.1 Total Load Forecast for Liberia Based on IFC Scenario for Monrovia.......................................... 104 Table A.2 Total Load Forecast for Liberia Based on LEC Scenario for Monrovia. ........................................ 104 Contents v Abbreviations and Acronyms AC alternating current HFO heavy fuel oil ACRE average coverage rural electrification HV high voltage AGO automotive gas oil ICB international competitive bidding BAPA Barangay Power Association (Philippines) IDA International Development Association bcf billion cubic feet IEA International Energy Agency BMC Bong Mining Company IFC International Finance Corporation BOM Belgische Maatschappij N.V. IPP independent power producer CFL compact fluorescent lamp JICA Japan International Cooperation Agency CIF cost, insurance, freight kV kilovolt COUF Crude Offshore Unloading Facility kWh kilowatt-hour CSET Center for Sustainable Energy Technologies LEC Liberia Electricity Corporation CLSG Côte d’Ivoire, Liberia, Sierra Leone, and LISGIS Liberia Institute of Statistics and Geo- Guinea Information Services CST crude storage terminal LNOC Liberia National Oil Corporation DC direct current LPG liquefied petroleum gas DPC decentralized power company LPRC Liberia Petroleum and Refinery Company ECOWAS Economic Community of West African States LV low voltage EIA U.S. Energy Information Administration MCI Ministry of Commerce and Industry EPO Equatorial Palm Oil MLME Ministry of Lands, Mines and Energy EPP Emergency Power Program MOTC Monrovia Oil Trading Corp ERB Energy Regulatory Board MPA Monrovia Power Authority ESCO energy service company MSW municipal solid waste ESMAP Energy Sector Management Assistance MUV manufactures unit value Program MV medium voltage FOB free on board MW megawatts GAMS General Algebraic Modeling System NACUL National Charcoal Union of Liberia GDP gross domestic product NEA National Electrification Administration GIS geographic information systems (Philippines) GOL Government of Liberia NEC National Energy Committee GWh gigawatt-hours NEP National Energy Policy HDI human development index NGO nongovernmental organization vii NOCAL National Oil Company of Liberia SIF Société Nationale de Raffinage NORAD Norwegian Agency for Development SIR Société Africaine de Raffinage Cooperation SME small and medium enterprise NPA National Port Authority SNE Servicio Nacional de Electricidad NPV net present value (Costa Rica) NREL U.S. National Renewable Energy Laboratory SP-1B St. Paul River 1B Hydropower Plant O&M operation and maintenance SP-2 St. Paul River 2 Hydropower Plant PEA Provincial Electricity Authority (Thailand) SPPAs small power purchase agreements PMS premium motor spirit oil SSMP Sustainable Solar Market Packages PPA purchasing power agreement STEG Société Tunisienne de l’Electricité et du Gaz PRS Poverty Reduction Strategy UN United Nations PST product storage terminal UNDP United Nations Development Programme PUA Public Utility Authority UNIDO United Nations Industrial Development PV solar photovoltaic Organization RE rural electrification UNMIL United Nations Mission in Liberia REB Rural Electrification Board (Bangladesh) USAID United States Agency for International REC rural electric cooperative Development RESCO rural energy services company USTDA U.S. Trade and Development Agency RREA Rural and Renewable Energy Agency WAPP West African Power Pool SHS solar home system WFP World Food Program viii Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Scope of the Paper T he purpose of this paper is to present stakeholders available and to bring international lessons to bear on in the Liberian energy sector—and the Liberian the case of Liberia. There are several potential pathways citizen in general—with options that might to consider, though the aim is one: supporting the expand access and modernize energy services. To this sustainable development of access to energy services end, the authors have attempted to analyze the data for the people of Liberia. ix Acknowledgements T his paper was prepared by Fanny Missfeldt-Ringius, Norwegian Agency for Development Cooperation Zayra Romo, Kristin Stroup, Errol Graham, Manuel (NORAD), and Paul Smith of the European Commission. Berlengiero, Bill Matthews, and Ju-Sung Park. We are also grateful for suggestions received from The authors are grateful for the support received from peer reviewers including Isabel Marques de Sa of the the officials of the Government of Liberia and the International Finance Corporation, and Mudassar Imran, many stakeholders who have made this paper possible. Karen Bazex, Sameet Shukla, and Nataliya Kulichenko We are especially grateful to the following people of the World Bank. Finally, we would like to thank who were instrumental in shaping this report during the current administration at the Ministry of Lands, its development: Dr. Eugene Shannon, then Minister Mines and Energy, in particular Minister Roosevelt of Lands, Mines and Energy (MLME); Chris Neyor, Jayjay, Deputy Minister for Operations Sam Russ, and Energy Adviser to the President; Joseph Mayah, then Assistant Minister for Energy Beauford Weeks, as well Managing Director of Liberia Electricity Corporation; as the management contract team in place in LEC, in Rufus Tarnue, then Director, Department of Energy, particular Nigel Wills and CEO Shahid Mohammad, for Ministry of Lands, Mines and Energy; and Augustus their continuing support and their leadership in the Goanue, Acting Executive Director of the Rural and sector. Special thanks to Marjorie K. Araya (ESMAP), Renewable Energy Agency. Further, we are thankful for who coordinated the editing and production of the final comments received from Liberia’s donor community, report. especially from Tony Carvalho and Mac Homer of the United States Agency for International Development We thank Chris Neyor for drawing our attention to the (USAID), Ryan Anderson and Thorvald Boye of the poem by Antonio Machado that has guided our report. xi Executive Summary I n mid-2011, Liberia has possibly the lowest rate of almost exclusively on charcoal and firewood. To maintain access to public electricity in the world. While the annual charcoal production levels of 36,500 tonnes, average rate of access to electricity in Sub-Saharan about 960,000 trees are being cut around Monrovia Africa is 28.5 percent, and in neighboring Sierra alone every year, which is fast depleting Liberia’s Leone and Côte d’Ivoire 6 percent and 43.7 percent, rich forest stock. For lighting, households expend a respectively, Liberia’s rate of access to publicly provided significant amount of their income on inferior sources electricity is close to zero. An urban access rate can such as candles, flashlights, small battery-operated only be derived for Monrovia: of an estimated 210,619 LED lamps, and kerosene or oil lanterns. Production households, 1,217 are supplied with public electricity activities, notably agriculture, rely primarily on human (as of late 2010), corresponding to 0.58 percent of power. Some households have small generators of 500 Monrovia’s population. With the exception of a very to 900 watts to serve larger processing loads such as limited municipal mini-grid in Gbarnga, Bong County, no rice mills. publicly supplied electricity service is available outside of Monrovia. While the electricity services available in Liberia are poor, the cost of these services is nevertheless high in The root cause of this situation is Liberia’s civil war. comparison with other Sub-Saharan African countries. In 2003, at the end of 14 years of warfare, Liberia’s In April 2010 the price of electricity from the grid power sector emerged seriously damaged. By 2005 was US$0.43 per kilowatt-hour (kWh), possibly the what remained had been destroyed by looting. This highest in Sub-Saharan Africa. People without access included the complete destruction of the hydropower to public electricity pay even more: the use of dry-cell plant at Mt. Coffee and Liberia’s entire transmission batteries costs US$74.01/kWh, car batteries US$8.43/ and distribution network. Operations of the Liberia kWh, candles US$8.27/kWh, generators US$3.96/kWh, Electricity Corporation (LEC) ceased completely. As and kerosene for lighting US$1.53/kWh. a result, Liberia faces the challenging task of fully reconstructing its power system. Since elections in 2006, achievements are clearly visible in the energy sector. The Government of In early 2010 the high costs of electricity and low Liberia (GOL) has been working systematically toward quality of energy services in general imposed a the reconstruction of the electricity sector at the urban, significant barrier to Liberia’s long-term economic rural, and regional levels. A National Energy Policy development. Over 80 percent of Liberia’s household (NEP), endorsed in June 2009, set clear development energy requirements are met using thermal energy goals for the short, medium, and long term. For the for cooking, and both urban and rural households rely first time in Liberia’s history, since early 2010, a Rural xiii and Renewable Energy Agency (RREA) has dedicated Supplying adequate fuel for thermal power plants is its services solely to rural areas, including the rural a challenge in Liberia. In early 2010 there were no poor. facilities to supply heavy fuel oil (HFO), and diesel fuel supply facilities were in need of repair or replacement. By April 2010 the basic functions of LEC had been The prices of supplying fuel to Liberia are considerably restored and the supply of electricity to about 2,500 above the regional average, as suppliers mark their customers in Monrovia established. In July 2010 a prices up to account for any remaining perceived civil management contractor Manitoba Hydro International instability, the poor conditions of the receiving terminal took over the operation and further build up of the at the Monrovia port, and the lack of acceptable LEC against clearly defined connection targets and international safety standards. The diesel fuel jetty, timetables. While the LEC’s overall financial situation owned by the National Port Authority (NPA), and the is precarious, its operating revenue growth has been HFO supply facilities have been slated for rehabilitation substantial, and it has developed a clientele with with World Bank financing, but this is not expected to be comparatively good payment discipline since its early completed before 2012. days of operation. Following a complete decline in petroleum fuel use in the 1990s, demand for automotive In an environment of high uncertainty, this paper gas oil and premium motor spirit oil again reached attempts to lay out an optimal development pathway for levels seen in the early ’80s (during which the Liberian Liberia’s energy sector between now and 2040. To this economy was at a high point) in early 2010. This marks end, two main demand scenarios were specified and a the return of economic activity in Liberia. set of possible supply options analyzed. Using the linear general equilibrium model called General Algebraic Yet challenges remain. In the context of the NEP, Modeling System (GAMS), a least-cost expansion plan clear timetables for the implementation of policy that meets the projected demand was derived. The plan recommendations need to be established. These include indicates what power facilities should be constructed translating the NEP into a national regulatory framework. at what point in time to meet projected demand across The RREA and its Rural Electrification Fund (REFUND) five-year intervals until 2040 at least cost. To derive need to become fully operational. At the LEC, average the optimal sector development plan for the medium revenue falls well short of the average operating cost, term, until 2015, an additional bottom-up analysis was which was US$0.63/kWh in 2009, even though average performed. revenue rose from US$0.42/kWh in 2008 to US$0.45/ kWh in 2009. While the LEC’s tariff methodology appears The electricity demand estimate for Liberia has been appropriate, operating costs, including administrative based on available data, including that collected costs, should be reduced. Customer connections need to during Liberia’s 2008 census. According to the type increase if the target of 33,000 connections by 2015 is to of consumption (residential, commercial, public, or be met. Under the policies now in place, the NEP targets of industrial), demand is projected using population connecting 30 percent of Liberia’s urban and peri-urban growth, gross domestic product (GDP) growth, and population and 15 percent of its rural population by 2015 industry-specific demand drivers. Conservative and seem out of reach. high-demand scenarios are distinguished. In the high- demand scenario, economic growth is assumed to be In the context of petroleum fuels, Liberia does not more pronounced and to spur demand for electricity in have any official product specification standards. These the commercial and mining sectors. Demand reflects all are left to oil landing terminals, such as the Liberian demand, including suppressed demand. Petroleum and Refinery Company’s (LPRC’s) product storage terminal, to specify. To ensure that safe fuel of The supply options under consideration cover all satisfactory quality is landed, it is recommended that options that appear technically feasible for Liberia in standards are enforced in accordance with international 2010. Among the thermal options, diesel, HFO, and practices as follows. biomass power are considered. Further, construction xiv Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series of hydropower plants and the import of electricity to close the medium-term gap between power demand are also considered and export of excess power is and supply by installing 10 MW in 2013, and a further allowed for. Table ES1 provides an overview of all 5 MW in 2014. Further, an HFO plant would provide a technologies that have been considered. Going forward stable thermal backup beyond 2015 to make up for the it will be important for the GOL to update the studies more intermittent hydropower. Due to the small size of on potential hydropower sites, most of which were the power addition, public financing would be preferred. prepared in the 1980s. It is also important to consider Advantages of public financing include the flexibility what additional energy technologies might be used in of dispatching power without hampering the financial/ Liberia in the future. economic development of the power system through fixed purchasing power contracts for which dispatch The bottom-up analysis undertaken for the medium has to be maximized. Further, plant procurement is term indicates that in the time frame of 2009 to 2015 generally fast once financing is available. a gap in the supply-demand balance will occur starting from 2012. Measures need to be taken to close this The least-cost modeling suggests that for both medium-term supply gap. The emerging gap increases conservative and high-growth scenarios, a least-cost from about 4 megawatts (MW) in 2012 to about 13 MW expansion plan for Liberia until 2040 would include the in 2014. Only in 2015, when the West African Power Pool construction of a range of hydropower candidate plants, (WAPP) transmission interconnection for Côte d’Ivoire, including rehabilitation of the Mt. Coffee hydropower Liberia, Sierra Leone, and Guinea (CLSG) is expected to plant by 2015 and construction of the St. Paul River become operational, will the gap be bridged. Assuming development (SP-1B and SP-2) and Mano hydropower that financing is found, construction of an HFO-fired plants by 2020. In addition, the WAPP transmission power plant presents a feasible and least-cost measure interconnection of Côte d’Ivoire, Liberia, Sierra Leone, Table ES1  |  Supply Options to be Considered Earliest Possible Total Levelized Cost Power Source Commissioning Date MW Capacity (US$/kWh) Diesel existing system 2010 13 0.32 Diesel system, learning curve 2012 1 0.29 Leasing diesel generation 2010 10 0.27 HFO 2012 10 0.16 Core biomass 2012 36 0.21 Biomass benchmarking 2012 31 0.11 WAPP phase 1 Low 2015 28 0.17 WAPP phase 2 Low 2020 23 0.11 WAPP phase 1 High 2015 50 0.17 WAPP phase 2 High 2020 47 0.11 Hydro 1: Mt. Coffee, phase 1 2015 66 0.10 Hydro 2: Mt. Coffee + Via Reservoir 2020 66 — Hydro 4: SP – 1B + SP2 + Via Reservoir 2020 198 16–23 (11) Hydro 3: Mano River 2025 90 16–23 (10) Source: Authors’ calculations. Executive Summary xv Figure ES1  |  Average Cost of Generation build on independent institutions such as the RREA, 0.35 involve highly reputed authorities or bodies, and include $0.318 the broad participation of the rural population. The 0.30 RREA needs to take clear leadership on these issues by 0.25 developing a rural energy master plan. (US$/ kWh) 0.20 0.15 $0.139 $0.124 With Liberia’s limited financial resources and urgent $0.120 $0.108 $0.108 $0.116 needs for reconstruction (and not only in the 0.10 energy sector), the question is how energy sector 0.05 reconstruction can best be financed and investment 0.00 priorities set. Modern electricity infrastructure is a 2010 2015 2020 2025 2030 2035 2040 key ingredient for economic growth, including job Source: Authors’ calculations. creation. Since economic activity is concentrated in urban areas, large-scale infrastructure investments should be prioritized there. Where possible, and Guinea are part of the plan from 2015. Thermal enhancing the availability of lower-cost, off-grid complements include both HFO-fired and diesel plants. applications in rural areas should be pursued in Diesel is selected due to the low capital cost required parallel with a social justice agenda. It is often to provide for the operating margin of the system. The maintained that in an environment with few public average cost of generation is expected to decrease resources, private financing of electricity services significantly over time (as Figure ES1 indicates) for the should be introduced. While this notion is generally low-demand scenario. valid, the rebuilding of Liberia’s electricity sector will require substantial public and concessionary Power supply options for rural areas. As the financing over the next 5 to 10 years. Private sector interconnected system in Liberia increases, citizens— power suppliers require stringent payment conditions especially residents of Monrovia and the adjacent that will be difficult for LEC to meet as long as it counties—will have increasing access to electricity. Larger remains a power utility under reconstruction. To cities located nearby the proposed WAPP transmission rebuild the electricity grid, especially in Monrovia, line would also gain access to the interconnected grid. initial investments should be based on public sector Nonetheless this would still leave slightly more than or concessionary financing until a solid and solvent half of Liberia’s rural population (about 53 percent) customer base can be established. In parallel, a without access to modern energy services. Given the regulatory environment should be established that limited range of the grid over the coming years and the will facilitate future private sector interventions. The relatively low load requirements of the current rural post-2015 involvement of private partners—such as population, decentralized off-grid solutions (including the mining industry, for example, to provide part of mini grids and stand-alone systems designed for small the thermal load—should be investigated. Once big loads and single applications) appear to be the best private sector off-takers become interconnected with strategy for bringing modern energy services to rural the WAPP CLSG transmission line, leveraging their areas. Renewable energy technologies are particularly resources for the construction of large hydropower well suited to an off-grid, distributed generation candidate plants may be considered. scenario, and Liberia is endowed with significant renewable energy resources such as solar, biomass, To move forward with the above-mentioned options, it and hydropower. Based on international experience, is important that Liberia, together with its government private sector service delivery models, including dealer and multilateral partners, forge a path of strategic sales and fee-for-service models, are suitable for rural development with the aim of achieving concrete and areas. Government policies and measures in support visible results. Although the country’s achievements of these models need to be developed, which should in infrastructure rehabilitation, social services, and xvi Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series governance since 2006 have been commendable, in energy infrastructure will require time. It is therefore many areas of the country the evidence of these recommended that parallel activities be undertaken in changes is small. While the development of sound policy the immediate term—such as outreach, education, and frameworks and technical underpinnings is critical for a small interventions in urban and rural communities—so sustainable energy sector, it takes time. Similarly, the that the government’s intentions for the development of large-scale investments required to build the needed the sector are known. Executive Summary xvii Part Fundamentals of Liberia’s I Energy Sector The Beginning of the Road 1 L iberia suffered successive armed conflicts from such as health care, education, water and sanitation, 1989 to 2003 that devastated its economy, roads, and telecommunications requires electricity, infrastructure, human capital, and institutions, making it a crucial element of economic revival—and, including those of the energy sector. The Accra Peace as previously noted, one that will require significant Agreement of August 2003 marked a transition toward investment. national reconciliation and stabilization that allowed the country to hold elections in 2005. The newly elected International lessons learned from postconflict Government endorsed programs and policies aimed at reconstruction indicate that developing countries face improving governance, building capacity, and managing major financial challenges to increased access to basic postconflict recovery through stabilizing the economy services due to lack of investment during conflict and and supporting economic reconstruction. low income levels before conflict. While the poor in all developing countries suffer from lack of access to Since President Sirleaf took office in 2006, infrastructure services, those in postconflict countries reconstruction efforts have been substantial; increased suffer the most (Table 1.1). price stability and structural reforms have reinforced public financial management. But the country still faces The GOL further intensified its commitment to the several challenges. The economy contracted by more provision of electricity through the adoption of the NEP than two-thirds in real terms between 1980 and 2003, in 2009, which calls for universal and sustainable access and average per capita GDP is far from the prewar level to affordable and reliable energy supplies to foster the of US$890. In 2008 per capita GDP was estimated at economic, political, and social development of Liberia. US$240, with almost two-thirds of the population living The four pillars of the NEP are: (i) universal energy below the extreme poverty line, making Liberia one access, including the development of an energy master of the world’s poorest countries (Republic of Liberia, plan; (ii) least-cost production of energy and protection 2008). of the most vulnerable households; (iii) the adoption of international best practices in the electricity sector; and Investment in human capital and reconstruction (iv) the acceleration of public and private partnership in of physical infrastructure are the central pillars of the sector. Liberia’s government reform agenda, which aims to promote equitable economic development. A plan for Before the war, the development and management recovery and reconstruction has been formulated for of the energy sector was squarely in public hands. each sector, with a focus on both immediate needs Until 1960 the provision of electricity services was and long-term development. Access to basic services the responsibility of the Department of Public Works. 1 Table 1.1  |  Availability of infrastructure services Sub-Saharan Africa Non-conflict- Conflict-affected Affected South High-income Infrastructure services Liberia Countries5 Countries5 Africa5 Countries5 Electricity (kWh per capita) 871 96 384 3,793 8,421 Telecommunications (fixed and 1932 19 67 410 1,283 mobile lines per 1,000 people) Roads (percentage paved) 73 13 27 20 93 Water (percentage of population 254 52 67 86 96 with access to improved sources) Sources: 1 Authors’ calculations; 2 ICT At-a-Glance, World Bank, 2008; 3 World Bank, Database, 2008; 4 World Bank, Database, 2008; and 5 Schwartz and Halkyard, 2006. In 1960 the GOL established the Monrovia Power The LEC system was constrained from expanding Authority (MPA). After two years the responsibility due to financial difficulties that were largely caused of supplying electricity was transferred to the Public by technical and commercial inefficiencies. Average Utility Authority (PUA), which was also responsible for combined technical and commercial losses from 1979 to telecommunications, broadcasting, and water supply. On 1984 were around 34.8 percent (UNDP and World Bank, July 12, 1973, the PUA was transformed by a legislative 1987). While blackouts and load shedding were common, act into three different corporations dedicated to the LEC was unable to improve or maintain facilities communications, water and sewerage, and electricity. due to lack of financial resources. For example, in the Among those, the LEC received the mandate to oversee financial year 1983–84, the LEC supplied electricity the country’s generation, transmission, and distribution valued at US$47.4 million while its revenue was only of electricity. US$23.7 million. From 1973 until late 1989 and before Liberia’s civil war Technical losses were primarily due to the lack of (1989–2003), electricity was mainly provided in the resources needed to conduct routine maintenance and capital of Monrovia; around 35,000 customers—almost improvement; the inadequate reactive power equipment 13 percent of the population—were served by 1989. needed to compensate for the low power factor from Total installed electricity capacity was 191 MW. The the industry, which ranged from 0.62 to 0.75 percent;1 generation mix was composed of hydropower from the and the overloading of equipment due to unplanned plant at Mt. Coffee—with a supply capacity of 63 MW extension of the distribution network. Technical losses during the wet season and 5 MW during the dry season were estimated at about 13 percent in 1984. (six months)—and 31 percent HFO and 21 percent diesel. LEC also handled the electricity supply of rural areas Commercial losses were also high and for the most outside Monrovia through 10 small isolated power part explained by illegal connections, lack of payment, systems with a total installed capacity of 13 MW. the LEC’s inability to enforce service disconnection, and tariffs that did not cover even short-run marginal The unreliability of the LEC-provided system during the costs. In 1984, for example, commercial losses were 22 dry season stimulated the private sector (industries, percent. mining, and commercial services) to secure its own generation, which equaled 216 MW. Of this 81 percent was based on HFO, 17 percent on diesel, and 4 percent on hydropower. 1 Best practices recommend a load factor of 0.90 percent. 2 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Arrears by governmental departments and public around US$0.025/kWh. Gas turbines fired with diesel facilities weighed most heavily on the LEC’s commercial fuel reached a generation cost of US$0.12/kWh. performance. Public entities were responsible for 27 percent of the electricity bills issued but only 50 Access to electricity in rural areas was very limited. percent of these were paid. Residential and commercial The LEC was in charge of maintaining and operating 10 consumers represented 65 percent of the electricity isolated HFO-fired generating units with a total installed bills issued and paid around 75 percent of the revenue capacity of 13 MW. Most rural households depended received. on the natural resources available to them, including charcoal and firewood for cooking and kerosene and Liberia’s tariff structure was divided into five levels candles for lighting. Generation costs in rural areas were differentiated by consumption and type of customer. higher than on the interconnected system due to the size Table 1.2 shows the evolution of the LEC’s tariffs from of the system, the fuel source (diesel), and operational 1974 to 1991. Because they lacked an automated tariff- logistics. Rural operation costs were between US$0.10 adjustment mechanism, such as an index that adjusts to US$0.30/kWh (Geoscience, 1998), and few consumers tariffs to fuel prices changes, the LEC’s operations had meters. The tariff in off-grid areas was subsidized have been continuously exposed to fuel price changes. at US$0.015/kWh. In 1982 around 75 percent of rural A fuel adjustment charge of US$0.001/kWh was customers did not have meters and were charged either introduced in 1978, followed by an additional US$0.050/ a flat tariff of US$10/month or according to usage, at a kWh adjustment charge in 1981. The LEC’s financial rate of US$0.08/kWh. situation became more complex between 1987 and 1991 when Liberia’s currency was subjected to progressive By the end of the civil war in 2003, the power sector devaluation. Tariff adjustments were not sufficient to had been seriously damaged. The remainder was cover even short-run marginal costs. As a result, the destroyed by looting until 2005. The hydropower LEC did not have enough cash flow to buy fuel and spare plant at Mt. Coffee and the entire transmission and parts, conduct maintenance, and pay and maintain distribution network were completely destroyed. LEC experienced and qualified staff. operations ceased. The new government elected in 2006 has been working toward the reconstruction of Tariffs were set and approved by the GOL based on the electricity sector at the urban, rural, and regional the LEC’s proposal, which was calculated on the basis levels. of production costs, although reported costs in 1987 did not likely include depreciation and debt payment With the help of an emergency program, LEC operations (Geoscience, 1998). For HFO, the LEC reported a were resumed and basic electricity supply to government generation cost of US$0.05/kWh, while for hydropower buildings, commercial operations, hospitals, schools, generation based on the Mt. Coffee plant it reported streets, and some private consumers in Monrovia Table 1.2  |  Evolution of LEC Tariff Brackets between 1974 and 1991 Public Government Industrial Commercial Corporations and Embassies Residential Consumption Levels (>2,000 kWh) (>1,500 kWh) Not specified Not specified (<400 kWh) 1974 0.055 0.080 1979 0.081 0.101 1981 0.081 0.094 0.094 0.094 0.100 1987–91 0.114 0.093 0.064 0.064 0.043 Source: Geoscience, 1998. The Beginning of the Road 3 was restored. The emergency program supported the average historical generation costs in Africa of US$0.18/ construction of a small grid comprising four substations kWh (Foster and Briçeno-Garmendia, 2009). The high and distribution lines of 400 volts, 11 kilovolts (kV), 22 kV, costs are explained by the small scale of the LEC’s and 9.6 MW of installed capacity run by high-speed diesel current operations and the use of high-cost diesel as the generators in four locations as follows: Kru Town, 5 MW; sole source of power supply. Paynesville, 0.64 MW; Congo Town, 2 MW; and Bushrod Island, 2 MW. This emergency assistance was financed To improve LEC operations, still in emergency mode, by the European Union, the United States Agency the GOL decided to bring in outside expertise. The for International Development (USAID), the Norwegian decision was made to select a management contractor Agency for Development Cooperation (NORAD), and who would bring the LEC to a level of full functionality the World Bank through the Emergency Power Program as a power utility with fully trained staff, and build up (EPP I and EPP II). the customer base to a target level of approximately 33,000 customers within a 5-year horizon. To achieve As of end-year 2010, LEC’s system provided electricity this expansion of services, the management contractor to 2,762 customers as follows: commercial, 50.5 would: (i) manage system expansion and connection of percent; residential, 44 percent; government buildings, new loads expected to come on stream within 5 years; 4 percent; nongovernmental organizations (NGOs), 1 (ii) progress toward the GOL’s objective of providing percent; and the LEC and other corporations, 0.50 access to electricity to 30 percent of the population in percent. About 0.58 percent of Monrovia’s households Monrovia by end 2015, including middle- to low-income were covered in 2010. The remainder of the population households; (iii) manage technical and commercial depends on costly, inefficient, and polluting resources losses and operating and capital costs to minimize such as small gasoline and diesel generators, firewood, costs of service; and (iv) strengthen the LEC, enabling charcoal, candles, kerosene, and palm oil. it to become a financially and operationally sustainable utility even after completion of the management Limited distribution infrastructure, high tariffs, and contract. Competitive international bidding led to the lack of financing for new connections have constrained selection of Manitoba Hydro International (MHI) as the LEC’s ability to increase its customers and fully management contractor for LEC. MHI began operation utilize all generation capacity. The system in place in July 2010 and has been able to quickly improve LEC reached a peak load of 13.8 MW in February 2010. The operations. most recent additions were 3 MW of NORAD-financed diesel generator and 10 MW of USAID financed diesel The GOL has committed itself to creating the generator. To address the underutilization of capacity, conditions necessary for the successful operation of NORAD and USAID are financing a 66 kV transmission the management contract, which will be financed by line and a 22 kV distribution line. NORAD. A grant-financed investment program is being put together to include overall financing of up to US$50 In mid-2011, the LEC’s board has set a single tariff of million and will be provided by NORAD, the World Bank, US$0.48/kWh. The tariff is determined according to a and USAID. The management contractor is expected to revenue requirement approach, which considers the take full control of the LEC’s operations and investment total revenues required to meet all expenses and capital program. costs of the utility. The tariff is calculated on a quarterly basis taking into account the price of equipment, This report seeks to identify options for the service schedule, cost of overhauls, 20 percent of development of Liberia’s energy sector, options that technical and nontechnical losses, US$0.02/kWh for would enable the people of Liberia to gain access to distribution operation and maintenance costs, the modern energy services in a timely and cost-effective LEC’s administrative costs, and a 93 percent efficiency manner. In the first part, Liberia’s underlying energy in collections. The generation cost is estimated at sector fundamentals will be delineated. The discussion US$0.32/kWh, which is high when compared with will review the demand for electricity, assess possible 4 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series energy supply options for Liberia, review the availability based on least cost principles both for on-grid and of petroleum fuels, and assess the state of the sector’s off-grid technologies. We will consider what options financials. In the second part of the paper we review are best suitable for closing the medium-term and what options for development present themselves long-term gap, and what measures would be helpful in for Liberia’s energy sector, based on the underlying closing the gap for supplying modern energy services to power sector fundamentals that were established in those rural areas that are likely to remain remote from the previous part of the paper. The options are selected the grid. The Beginning of the Road 5 Liberia's Saint Paul River holds significant hydropower resources. Liberia’s Projected Electricity Demand 2010–2040 2 I n early 2010, Liberia had possibly the lowest rate of even postwar figures cannot be used as a basis for access to public electricity among all world nations. projecting actual demand. While the average rate of access to electricity in Sub-Saharan Africa is 28.5 percent—and neighboring Although a number of demand assessments have been Sierra Leone and Côte d’Ivoire have electricity access undertaken, most of them postwar, no comprehensive rates of 6 percent and 43.7 percent, respectively— assessment has been undertaken that would cover Liberia’s rate of access to publicly provided electricity Liberia as a whole. In this section an attempt is made is close to zero (IEA, 2008). An urban access rate can to provide such an assessment based on available data be derived only for Monrovia: of the estimated 210,619 sources. The assessment presents demand estimates households, 1,217 are supplied with public electricity, for different geographical and sector segments that corresponding to 0.58 percent of the city’s population. are aggregated using a bottom-up approach. Where No public electricity service is available outside of applicable, it builds on the demand analyses conducted Monrovia with the exception of Gbarnga City in Bong since civil strife ended. A summary of those analyses is County, which has a limited municipal mini-grid based presented in Annex I. on diesel generation. While the demand in Monrovia and its surrounding areas Central to any projection of future energy systems has been studied, including by the International Finance is an understanding of demand. One can usually rely Corporation (IFC) and Liberia Electricity Corporation on long uninterrupted time series of demand for (LEC), the industrial, commercial, and household sectors electricity, and project these trends into the future. outside Monrovia are for the most part unknown. For In Liberia the case is different. While there are time purpose of this assessment we aggregate from various series for demand preceding the nation’s civil strife, data sources to produce a bottom-up forecast for both the population changed in terms of geographical Monrovia and non-Monrovia demand. In what follows distribution, number and social stratification during we distinguish among the following geographical and the war years. Further, many sectors of the economy sectoral demand segments: have been completely destroyed. As a result, data from the ’80s cannot be used to project demand in 2011 or Segment 1: Monrovia electrical on-grid demand beyond. Moreover, due to the extremely low volumes of Segment 2: Other anticipated on-grid demand publicly supplied power—which are more a reflection Segment 3: Urban and rural off-grid demand of existing supply constraints than actual demand— Segment 4: Non-Monrovia industrial demand 7 Segment 1 will be broken down in the following sectoral excess of 5,000 persons). Subsequently, population categories for demand: governmental/public demand,2 estimates were aggregated into urban and rural areas. commercial demand, industry demand, and residential The census provides for the number of households, demand. It will be forecasted based on two cornerstone which is very useful, because we can estimate that existing estimates: IFC (2008) representing the low- one household is equivalent to one connection on the growth scenario, and LEC (2008) representing the electricity grid. high-growth scenario. Demand was then projected to 2040 on the basis of Segment 2 covers residential, public, commercial, and four drivers: (i) population growth; (ii) consumption of other sectors in towns benefiting from the following electricity per household; (iii) increased use of electricity two projects: (i) the West African Power Pool (WAPP) among those who already have access to it; and (iv) the low-voltage cross-border electrification project with estimated increase of the rate of access to electricity. Côte d’Ivoire, which covers Nimba, Grand Gedeh, and The percentage increase employed for the population Maryland county in eastern Liberia; and (ii) the WAPP was 2.8 percent per year, which in accordance with the Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (CLSG) Human Development Report (UNDP, 2009) was Liberia’s transmission interconnection, which will enable access average population growth from 2005–10. to power through four substations planned in Yekepa, Buchanan, Mt. Coffee/Monrovia, and Mano. For consumption of electricity per household, we use a figure of 444 kWh/year for urban areas, including Segment 3 covers residential, commercial, public, and Monrovia, which was provided by IFC (2008). For rural other sectors for those parts of the population that are areas annual consumption is estimated at 173 kWh/year. not covered under segments 1 and 2. Segment 4 covers This estimate was derived translating the annual use non-Monrovia-based industrial demand, including the of basic lighting, a radio, and a cell-phone charger into mining (iron ore, gold), agriculture (rubber, oil palm, kilowatt-hours. food production), and forestry (saw mills) sectors. In terms of urban areas it includes the city of Gbarnga. The increased use of electricity among those who have already access to it is forecast using a 1.5 percent rate of For all of these segments a high- and a low-growth increase per year. In the case of Liberia this corresponds scenario are evaluated. The following sections provide to the rate of increase of 1 in every 10 households more detail on the data sources, methodology, and acquiring a television set in the first five years of access assumptions by demand segment. More details on the to electricity.3 methods used in this demand assessment are provided in Annex II. If more data were available, the demand curve would be estimated using a willingness-to-pay analysis. While While most sector categories are clearly understood, in mid-2011 a willingness to pay analysis for Liberian the “other sectors� category requires explaining. This households is underway, this analysis comes too late category essentially captures structures that cannot be for this report. Therefore the rate of increase of readily assigned to any other category. It includes ports, airports, houses of worship, radio stations, post offices, and cell-phone towers. 2 The public demand for electricity outside of Monrovia is aggregated on the basis of a bottom-up approach considering public government buildings, street lighting, and other public Except for Monrovia, where the report relied on structures such as ports, airports, houses of worship, radio the data gathered by IFC (2008) and LEC (2008), stations, post offices, and cell-phone towers. demand has been estimated on the basis of Liberia’s 3A television consumes about 185 kWh per year. Since the 2008 census, based on which population figures were estimate for Liberian households assumes basic lighting, radios, and cell-phone charging, the addition of television is recorded and stratified by county, county capitals, both a minimal and expected increase in energy intensity in the and major towns (that is, towns with a population in postconflict setting. 8 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series access to electricity is used as a proxy for deriving the Assumed increases in household access to electricity number of people who can afford to pay for electricity. is summarized in Table 2.1. For urban non-Monrovia Access to electricity here is meant broadly, as access household access, the figures for 2015 coincide with to both public and private electricity. Access to private the electrification goal of 30 percent set by the GOL electricity refers to those people who use their own in its National Energy Policy (NEP). The 2015 figure generators at home to produce electricity because they for Monrovian households of 20 percent is based on cannot gain access to public electricity. Put differently, an estimate by the IFC (2008). By 2040 Monrovia’s they reveal their preference/demand for electricity by population, with an 80 percent access rate, is expected actually accessing it themselves. Thus, implicitly, the to have reached levels of urban electrification that are rate of access to (public and private) electricity is a on par with Ghana’s and Côte d’Ivoire’s access rate in proxy for their willingness to pay. early 2010. There is no confirmed figure of the percentage of Liberia’s population with access to public and private Demand Segment Analysis electricity, which reflects effective demand. The only figures available were provided by the Government Segment 1: Monrovia electrical of Liberia (GOL) as stated in the Poverty Reduction on-grid demand Strategy (PRS): “less than 2 percent of rural residents and 10 percent of urban residents have access to The demand estimate for the Monrovian electrical electricity.� In the absence of any other data we use this on-grid demand aggregates estimates from the as a starting point for our demand estimate. residential, commercial, public, and industrial sectors. Further it is conservatively assumed that effective For the residential sector, estimates were derived taking demand for electricity will catch up with the average into account both projected population growth, the electricity access rate of Sub-Saharan Africa in 2011 increase of energy usage among those who already by 2030, and then exceed those standards on a linear have access to electricity, and increase in access rates. basis thereafter. The current average access rate for The IFC’s (2008) estimate of current use at 444 kWh/ Sub-Saharan Africa is 28.5 percent, with 57.5 percent year per household is used for Monrovia. electrification in urban areas and 11.9 percent in rural areas (IEA, 2008). But in urban areas it is as high as 85 For the commercial, public, and industrial sectors, two percent in Ghana and 78 percent in Côte d’Ivoire. Rural demand-growth scenarios are considered: a low- and electrification rates are as high as 23 percent in Ghana high-growth scenario. These are based on forecasts and 18 percent in Côte d’Ivoire. provided by the IFC (2008) and LEC (2008), respectively. Table 2.1  |  Assumptions of Households’ Increase in Electricity Access Percentage of Households with Access to Electricity 2010 2015 2020 2025 2030 2035 2040 Monrovia households 10 20 32 44 56 68 80 Urban non-Monrovia 5 30 38 46 54 62 70 households (on-grid) Urban non-Monrovia 5 30 34 38 42 46 50 households (off-grid) Rural households 5 15 22 29 36 43 50 Source: Author’s calculations. Liberia’s Projected Electricity Demand 2010–2040 9 Both forecasts are based on thorough assessments of transmission line will enter through Yekepa in the commercial and industrial sectors in Monrovia and the north, and will provide power to Yekepa. It therefore are suitable for the purposes of our demand will continue to Buchanan on the coast of Grand forecast (for more details see Annex I). Bassa County, and then extend west near Monrovia, through the prewar hydropower plant at Mt. Separate estimates for street lighting were derived Coffee. From there it will cross through Bomi for this and the following segments.4 Street lighting and Grand Cape Mount counties to Mano on the is assumed to be the same for both the low- and border, and then into Sierra Leone. The main load high-growth scenarios. Public institutions and those centers benefiting from the WAPP transmission facilities included in the other category (for example, line will therefore be where the transmission lines’ ports, airports, and so on) in Monrovia are included substations are located in Yekepa, Buchanan, Mano, in the IFC and LEC estimates, and are therefore not and Monrovia. separated out. »» The demand assessment for the non-Monrovia on-grid scenario includes a low- and high-growth Table 2.6 shows the forecasted demand for the scenario for the commercial sector, which is Monrovia electrical grid under the low-growth scenario, modeled based on the same range as Monrovia’s in megawatts (MW) and gigawatt-hours (GWh), and commercial sector. This segment also includes the Table 2.7 shows the forecasted demand under the high- “other sectors� category. The low- and high-growth growth scenario. scenarios are shown in Tables 2.6 and 2.7 (in MW and GWh). Segment 2: Other anticipated on-grid demand Segment 3: Urban and rural off-grid demand There are two key projects currently under way that promise to provide electricity to towns outside of The remaining off-grid areas include those counties Monrovia: the WAPP low-voltage cross-border and county capitals that will not gain access to a electrification program, and the West African Power Pool Côte d’Ivoire, Liberia, Sierra Leone, and Guinea (WAPP CLSG) transmission interconnection. 4 Currently no estimates are available for street lighting for Monrovia or Liberia’s other urban centers. Therefore estimates for electricity usage from streetlights were derived. According »» WAPP low-voltage cross-border electrification to the Poverty Reduction Strategy (PRS), Liberia has 9,917 program. The low-voltage interconnections with kilometers (km) of road, 734 km of which are paved; 100 km Côte d’Ivoire’s distribution network will benefit the of paved roads are in Monrovia. The GOL has pledged to pave 241 km of roads in the county capitals during the PRS period. counties of Nimba, Grand Gedeh, and Maryland in Based on these amounts, the study assumed that 341 km of eastern Liberia. In Nimba, Sanniquellie, the county paved county capital and Monrovia roads could be lined by streetlights by 2040. In addition, we assume an additional 50 capital, will be connected, along with the towns km of paved roads in large non-county-capital urban centers of Logouato, Saclepea, Duoplay, Karnplay, and such as Ganta. Ganta. In Grand Gedeh, the capital, Zwedru, will Based on the assumption that one streetlight illuminates an area of 50 square meters, 143 streetlights would need to be connected, along with Toe Town, Blodiala, Zleh be installed per kilometer. Because many of these will not be Town, and Tapeta. In Maryland, the capital, Harper, grid connected in the near or medium term, the streetlight will be connected, along with Rock Town, Plebo, power demand estimate was based on the use of solar LED streetlights—currently the most efficient and cost-effective Fish Town, Fish Town City, Cavalla Town, Cavalla option. Such streetlights consume 17 watts of power per hour Rubber Concession, Kablaken, and Whole Graway. of use. Assuming 12 hours of operation per day, the total »» WAPP CLSG transmission interconnection. This demand would be 4.15 GWh/year for all of Liberia. Street lighting for Monrovia is considered to be on-grid. One-third of project will interconnect Liberia, Guinea, Sierra the street lighting for county capitals and other large towns is Leone, and Côte d’Ivoire. From Côte d’Ivoire the considered on-grid and the remainder off-grid. 10 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series grid through the two above-mentioned WAPP projects. Range, Lofa County (Wologisi), Nimba County, and These areas include both urban centers and rural areas. Grand Gedeh (Putu Range). They also include parts of Montserrado County that are just outside of Monrovia. Tables 2.6 and 2.7 show the Table 2.2 shows the name and size of iron ore mining estimated demand for segment 3 for both low- and high- concessions under discussion. An assessment of the growth scenarios. potential energy demand is derived based on the assumption that an expected production volume of 15 to 20 million tonnes per annum will need about 100 MW Segment 4: Non-Monrovia industrial of power. The lifetime of the mines is assumed to be demand 25 to 30 years, which fits within the time frame of the analysis. The non-Monrovia industry scenario includes the following sectors: mining, agriculture, and forestry. The estimate for the gold mines is based on information provided by AmLib, which is undertaking feasibility Mining. Liberia has considerable low-grade iron ore analysis in Bong County. There are also many small reserves remaining at the sites of the abandoned mining licenses under discussion that cover a range of prewar iron ore mines. Deposits have also been found at minerals. Altogether, the potential mining demand is Wologisi, Putu Range, Bea Mountains, and Goe Fantro, estimated to be 842 MW. which have not yet been developed. Liberia’s remaining reserves are estimated at almost 3 billion tonnes. The The potential demand estimate considers two scenarios main deposits are found in the Western Cluster, Bong to be forecast: low and high growth. Both scenarios Table 2.2  |  Estimated Energy Demand for Iron Ore and other Mining Production Volume Estimated Mine Type and Name County (tonnes/annum) Demand (MW) Iron Ore Western Cluster Cape Mount, Bomi, Gbarpolu (could be on-grid) 15,000,000 100 Putu Range Grand Gedeh 20,000,000 100 Kitoma and Goe Fantro Nimba 15,000,000 100 Nimba Nimba 20,000,000 100 Wologisi Lofa 20,000,000 100 Arcelor Mittal Yekepa (could be on-grid) 15,000,000 132 China Union, Bong Mines Bong (could be on-grid) 15,000,000 100 Gold Bea Mountain/New Liberty Nimba Gold 5 Cestos River Cess Gold 5 20 potential locations for gold, gems, Various Various 100 and other minerals (that is, barite) Total 842 Source: Author’s calculations. Liberia’s Projected Electricity Demand 2010–2040 11 Figure 2.1  |  Liberia’s Rubber Concessions This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. LIBERIA Voinjama G U INEA RUBBER CONCESSIONS SIERRA L EO NE LOFA RUBBER PLANTATIONS COUNTY CAPITALS NATIONAL CAPITAL COUNTY BOUNDARIES GBARPOLU INTERNATIONAL BOUNDARIES Sanniquellie GRAND CAPE Bopolu LIBCO MOUNT Gbarnga Salala Tubmanburg NIMBA Robertsport BONG BOMI Kakata MARGIBI MONROVIA GRAND BASSA MONTSERRADO Firestone Zwedru Lac RIVER CESS GRAND GEDEH CÔ T E Buchanan D ’IV O IR E Cestos City SINOE RIVER GEE LIBERIA Fish Town SRP Greenville GRAND KRU MARYLAND Barclayville ATLANTIC Cavalla 0 80 KILOMETERS OCEAN Harper 0 50 MILES IBRD 38391 MAY 2011 Source: Milbrandt, 2009; World Bank Map Unit, 2011. assume a starting demand of 10 MW off-grid for 2010, and east, while the middle parts of Liberia, particularly based on the actual operations of ArcelorMittal. The through the Bong and Nimba corridor, are dominated conservative-growth scenario assumes that half of by cropland. the potential demand is relaized by 2040; the high- growth scenario assumes that the full potential demand In early 2010 seven rubber concessions were in is practicable by 2040. The mines at Yekepa, Bong operation in Liberia (Figure 2.1), ranging from about Mines, and the Western Cluster are considered potential 2,200 to 25,000 hectares, and covering an area of on-grid locations, but neither estimate assumes the full approximately 58,000 hectares in total (Milbrandt, load from those mines will be on grid by 2040. 2009). Firestone, with 25,000 hectares, has a current energy demand of about 4.8 MW, which is supplied by Agriculture. Rubber concessions, oil palm concessions, a 4 MW hydropower plant on the Margibi plantation, and other agricultural farming operations such as for along with additional supply from diesel generation. rice, cassava, and coffee are accounted for under this Firestone also practices load shedding, especially sector. Liberia’s land is dominated by forest in the west during the dry season when the production from 12 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 2.2  |  Liberia’s Oil Palm Concessions This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. LIBERIA Voinjama G U INEA OIL PALM PLANTATIONS Foya PLANTED AREA (hectares) SIER RA LEO NE LOFA Above 5,000 2,500 - 5,000 1,000 - 2,500 555 - 1,000 GBARPOLU Below 500 GRAND Sanniquellie COUNTY CAPITALS CAPE Kpatawee Wangekor MOUNT Bopolu NATIONAL CAPITAL Gbarnga COUNTY BOUNDARIES BONG NIMBA Robertsport Tubmanburg INTERNATIONAL BOUNDARIES Fendell BOMI Kakata MARGIBI Mount Coffee Zleh Town MONROVIA GRAND BASSA MONTSERRADO Zwedru LIBINCO GRAND GEDEH Dubwe CÔ T E RIVER CESS Buchanan D ’IV O IRE Cestos City Butaw SINOE RIVER GEE LIBERIA Fish Town Greenville GRAND KRU MARYLAND Barclayville Decoris 0 80 KILOMETERS ATLANTIC OCEAN Harper 0 50 MILES IBRD 38390 MAY 2011 Source: Milbrandt, 2009; World Bank Map Unit, 2011. Firestone’s hydropower plant is reduced to about 1 MW. and current operations elsewhere, that a 5-ton oil mill Based on the known production volume of Firestone requires between 750 kW and 1 MW of power. For lack and a few other concessions, and the energy demand of data, this study assumes that the eventual potential of Firestone, an estimated demand of about 30 MW is of the oil palm sector is 10 MW, allowing one mill per assumed to be the potential demand from the rubber current concession by 2040. For the near-term forecast sector, which is assumed to be reached by 2040 with a only EPO’s plans are accounted for. gradual increase from the current 5 MW. Most of Liberia’s agricultural activities are carried out As shown in Figure 2.2, Liberia has 10 oil palm concessions, by small farmers, but the production of some crops is of which most are not operating. Equatorial Palm Oil significant, as shown in Table 2.3. Not much information, (EPO) in mid-2011 was rehabilitating its concessions in however, exists on the potential energy needs of such Grand Bassa and Sinoe counties, and had a tentative operations. Currently almost all agricultural production plan to produce crude palm oil at the Grand Bassa is done by hand, with some small farmers utilizing location. EPO estimates based on prewar operations diesel-powered rice mills in rural areas, and one large Liberia’s Projected Electricity Demand 2010–2040 13 Table 2.3  |  Liberia’s Agricultural Production of agricultural demand is assumed to be on-grid post- 2015 (Table 2.4). Production volume Commodity (tonnes) Forestry. Liberia has significant forest cover. As shown Rice 110,000 in Figure 2.3, a large share of Liberia’s forest cover Coffee (green) 3,200 is available for logging under forest management Cassava 490,000 contracts and timber sales contracts. In 2009, 13 logging contracts were active or pending in Liberia, Other root and tuber crops 64,500 with a total of over 1 million hectares, as shown in Groundnuts 4,800 Table 2.5 (Milbrandt, 2009). Prior to the war, there Maize 15,000 were 70 logging companies operating in Liberia, but Cacao (beans) 3,000 at present only a few logging companies are active. Immediately prior to the civil conflict, however, there Oil palm (fruit) 183,000 were 22 sawmills operating in Liberia. Because data on Coconuts 81,000 current operations is not known, this assessment takes Bananas and plantains 152,000 the prewar sawmilling activities as the potential energy Sugarcane 255,000 demand from the forestry sector in Liberia. Source: Milbrandt, 2009. An average mid-sized sawmill has an output of 1,300 cubic meters (m3) of logs per day, which would equal 474,500 m3 per year for one sawmill. If all 22 prewar rice production project recently instigated in Lofa sawmills were producing at this rate, the output would County with donor support. have equaled over 10 million m3 per year. A study conducted by TechnoServe (2008) that investigated Due to lack of information regarding the power needs of sawmilling opportunities in Liberia estimates that these agricultural activities (rice, cassava, coffee, cacao, energy use in sawmills varies from 97 to 1,304 kWh and other farming and associated milling activities), the per cubic meter of timber production. Kiln drying has study assumes the agricultural load to be approximately the biggest effect on this variation, and most kiln- half the load of oil-palm-processing activities, resulting drying techniques in Liberia have historically been in 5 MW by 2040. conventional, based on combustion of wood. Therefore, the assessment is at the low end of the potential It is assumed that the majority of the agricultural range. Assuming that all 22 sawmills operational prior demand will be off-grid due to its distance from the to the war were to become operational again, and interconnected grid that will be constructed. One-fifth assuming they were mid-sized sawmills, the potential Table 2.4  |  Aggregated Electricity Demand from Agriculture Sector Estimated Energy Demand (MW) Year 2010 2015 2020 2030 2040 Rubber 5 8 15 20 30 Oil palm 1 2 3 6 10 Food agriculture 0 1 2 4 5 Total 6 11 20 30 45 Source: Author’s calculations. 14 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 2.3  |  Areas Considered Suitable for Logging Concessions This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. LIBERIA Voinjama G U INEA AREAS SUITABLE FOR LOGGING CONTRACTS SIER RA LEO NE LOFA FOREST MANAGEMENT CONTRACTS (FMC) TIMBER SALE CONTRACTS (TSC) GBARPOLU COUNTY CAPITALS Sanniquellie NATIONAL CAPITAL GRAND COUNTY BOUNDARIES CAPE Bopolu Gbarnga INTERNATIONAL BOUNDARIES MOUNT Tubmanburg BONG NIMBA Robertsport BOMI MARGIBI Kakata MONROVIA GRAND BASSA MONTSERRADO Zwedru RIVER CESS GRAND GEDEH CÔ T E Buchanan D ’IV O IRE Cestos City SINOE RIVER GEE LIBERIA Fish Town Greenville GRAND KRU MARYLAND Barclayville 0 80 KILOMETERS ATLANTIC OCEAN Harper 0 50 MILES IBRD 38392 MAY 2011 Source: Milbrandt, 2009; World Bank Map Unit, 2011. eventual demand for power would be about 116 MW. auspices of the WAPP in the near term. Though the The demand assessment assumes that this demand feasibility study for the interconnection did not include level of 116 MW will be reached in 2040 but that due logging activities in its demand profile, the potential to the location of logging contracts, very few would for near-term demand from the sector in these on-grid be on-grid. The assumption is that one-fifth of the areas should be considered. area will eventually be grid accessible. Given current logging activities and the expected timeline of grid Tables 2.6 and 2.7 show the demand estimate for both expansion, the near- and medium-term demand for the low- and high-growth scenarios for this segment. logging is expected to be low. Only mining is assumed to be subject to different growth rates across the two scenarios. As previously But it should be noted that Liberia’s timber resources described, a portion of these sectors is assumed are located largely in the southeast, including in areas to be grid accessible in the medium to long term. that will benefit from the low-voltage interconnection Therefore, each scenario includes an on-grid and off- with Côte d’Ivoire’s distribution network under the grid estimate. Liberia’s Projected Electricity Demand 2010–2040 15 Table 2.5  |  Logging Contracts in Liberia County Ownership Area (hectares) Gbarpolu and Lofa Alpha Logging and Wood Processing, Inc. 119,240 River Cess EJ and J Investment Corporation 57,262 River Cess Liberia Tree and Trade Company 59,374 Grand Gedeh and River Gee Pending 253,670 Grand Gedeh and Sinoe Pending 131,466 Nimba, Grand Gedeh and River Cess Pending 266,910 Grand Kru, Maryland and River Gee Pending 119,344 Grand Bassa Tarpeh Timber Corporation, Inc. 5,000 Grand Bassa Tarpeh Timber Corporation, Inc. 5,000 Bong and Gbarpolu B&V Timber Company, Inc. 5,000 Gbarpolu Bargor & Bargor Enterprise, Inc. 5,000 Grand Cape Mount B&V Timber Company, Inc. 5,000 Grand Cape Mount B&V Timber Company, Inc. 5,000 Total 1,037,266 Source: Milbrandt, 2009. Tables 2.6 and 2.7 also display the aggregate demand of the 2040 demand is in areas that are considered off- across all sectors. Under the low-growth scenario, grid, while in the high-growth scenario about 55 percent total demand is expected to increase from 36.51 MW in of the total demand is considered off-grid. Future 2010 to 740.02 MW. Under the high-growth scenario, studies will no doubt better assess whether it is not total demand is expected to increase from 37.79 MW to economical to connect at least some of the industrial 1,519.62 MW, which is double the demand in the lower- load centers to the grid. growth scenario. This indicates that demand estimates are sensitive to the underlying assumptions. In absolute terms, the overall demand increase still appears modest. For example, countries such as Benin Over the time period of the modeling exercise, which and Togo, which have about double Liberia’s population, spans 30 years, it is remarkable that a significant share in mid-2011 have a level of power peak load that of the demand may not be readily met through the corresponds to Liberia’s peak load under the slow- interconnected grid due to the remote location of this growth scenario in 2040. demand. In the low-growth scenario about 60 percent 16 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 2.6  |  Total Estimated Electricity Demand in Liberia, 2010–40, Slow Growth Scenario Liberia Electricity Demand (MW) Slow Growth 2010 2015 2020 2030 2040 Monrovia Electrical Grid 18.66 34.30 41.98 63.15 127.28 Household 1.13 2.43 4.19 8.51 14.11 Commercial and public 3.60 6.50 10.00 15.97 36.45 Industrial 13.90 25.30 27.70 38.50 76.45 Street lighting 0.03 0.07 0.09 0.16 0.27 Other On-grid (WAPP, Côte d’Ivoire Interconnection) 0.37 1.70 2.51 5.00 9.54 Household 0.13 0.81 1.11 1.83 2.76 Commercial 0.04 0.61 0.93 2.13 4.86 Public 0.10 0.08 0.15 0.36 0.77 Street lighting 0.03 0.07 0.09 0.16 0.27 Other (ports, airports, cell towers, radio stations, post, churches) 0.07 0.13 0.22 0.51 0.89 Urban and Rural Off-grid 0.98 4.84 7.26 14.61 27.62 Household 0.54 2.36 3.29 5.58 8.50 Commercial 0.08 1.37 2.10 4.79 10.93 Public 0.17 0.76 1.23 2.76 5.54 Street lighting 0.01 0.04 0.09 0.21 0.42 Other (ports, airports, cell towers, radio stations, post, churches) 0.18 0.32 0.55 1.28 2.22 Non-Monrovia Industrial: Off-grid 16.50 71.00 191.00 324.00 443.47 Mining 10.00 50.00 150.00 250.00 315.00 Agriculture (rubber, oil palm, food production) 6.00 11.00 16.00 24.00 36.00 Forestry 0.50 10.00 25.00 50.00 92.47 Non-Monrovia Industrial: Potential On-grid 0.00 0.00 59.00 91.00 132.12 Mining 0.00 0.00 50.00 75.00 100.00 Agriculture (rubber, oil palm, food production) 0.00 0.00 4.00 6.00 9.00 Forestry 0.00 0.00 5.00 10.00 23.12 Total On-grid 19.02 36.00 103.49 159.15 268.93 Total Off-grid 17.48 75.84 198.26 338.61 471.09 Total eEectricity Demand 36.51 111.84 301.75 497.76 740.02 Liberia Electricity Demand (GWh) Slow-Growth Scenario 2010 2015 2020 2030 2040 Monrovia Electrical Grid 117.46 216.89 268.70 553.18 1,114.95 Household 9.88 21.29 36.70 74.54 123.58 Commercial and public 22.08 39.86 61.32 139.93 319.30 Industrial 85.23 155.14 169.86 337.27 669.69 Street lighting 0.27 0.60 0.82 1.45 2.38 (continued on next page) Liberia’s Projected Electricity Demand 2010–2040 17 Table 2.6  |  Total Estimated Electricity Demand in Liberia, 2010–40, Slow Growth Scenario(continued) Liberia Electricity Demand (GWh) Slow-Growth Scenario 2010 2015 2020 2030 2040 Other on-grid (WAPP, Côte d’Ivoire Interconnection) 2.98 14.46 21.51 43.29 82.99 Household 1.10 7.13 9.73 16.04 24.14 Commercial 0.37 5.31 8.18 18.66 42.57 Public 0.85 0.73 1.30 3.19 6.70 Street lighting 0.04 0.18 0.37 0.94 1.82 Other (ports, airports, cell towers, radio stations, post, churches) 0.61 1.10 1.93 4.46 7.76 Urban and Rural Off-grid 8.62 42.41 63.62 128.02 241.91 Household 4.77 20.66 28.86 48.84 74.48 Commercial 0.74 11.96 18.40 41.98 95.79 Public 1.50 6.68 10.78 24.15 48.57 Street lighting 0.09 0.36 0.75 1.88 3.64 Other (ports, airports, cell towers, radio stations, post, churches) 1.54 2.76 4.83 11.17 19.42 Non-Monrovia Industrial: Off-grid 101.18 435.37 1,171.21 1,986.77 2,719.38 Mining 61.32 306.60 919.80 1533.00 1931.58 Agriculture (rubber, oil palm, food production) 36.79 67.45 98.11 147.17 220.75 Forestry 3.07 61.32 153.30 306.60 567.05 Non-Monrovia Industrial: Potential on-grid 0.00 0.00 361.79 558.01 810.15 Mining 0.00 0.00 306.60 459.90 613.20 Agriculture (rubber, oil palm, food production) 0.00 0.00 24.53 36.79 55.19 Forestry 0.00 0.00 30.66 61.32 141.76 Total On-grid 120.44 231.35 652.00 1,154.48 2,008.09 Total Off-grid 109.80 477.79 1,234.83 2,114.79 2,961.29 Total Electricity Demand (GWh) 230.24 709.13 1,886.83 3,269.27 4,969.37 Source: Author’s calculations. 18 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 2.7  |  Total Estimated Demand for Liberia, 2010–40, High-Growth Scenario Liberia Electricity Demand (MW) High Growth 2010 2015 2020 2030 2040 Monrovia Electrical Grid 19.66 54.50 75.58 149.99 417.78 Household 1.13 2.43 4.19 8.51 14.11 Commercial and public 12.50 31.40 38.20 69.36 179.89 Industrial 6.00 20.60 33.10 71.96 223.50 Street lighting 0.03 0.07 0.09 0.16 0.27 Other On-grid (WAPP, Côte d’Ivoire Interconnection) 0.44 3.97 5.09 12.06 28.60 Household 0.13 0.81 1.11 1.83 2.76 Commercial 0.15 2.93 3.57 9.25 23.99 Public 0.10 0.08 0.15 0.36 0.77 Street lighting 0.00 0.02 0.04 0.11 0.21 Other (ports, airports, cell towers, radio stations, post, churches) 0.07 0.13 0.22 0.51 0.89 Urban and Rural Off-grid 1.19 10.07 13.18 30.63 70.65 Household 0.54 2.36 3.29 5.58 8.50 Commercial 0.29 6.59 8.02 20.81 53.97 Public 0.17 0.76 1.23 2.76 5.54 Street lighting 0.01 0.04 0.09 0.21 0.42 Other (ports, airports, cell towers, radio stations, post, churches) 0.18 0.32 0.55 1.28 2.22 Non-Monrovia Industrial: Off-grid 16.50 121.00 341.00 574.00 770.47 Mining 10.00 100.00 300.00 500.00 642.00 Agriculture (rubber, oil palm, food production) 6.00 11.00 16.00 24.00 36.00 Forestry 0.50 10.00 25.00 50.00 92.47 Non-Monrovia Industrial: Potential On-grid 0.00 50.00 109.00 216.00 232.12 Mining 0.00 50.00 100.00 200.00 200.00 Agriculture (rubber, oil palm, food production) 0.00 0.00 4.00 6.00 9.00 Forestry 0.00 0.00 5.00 10.00 23.12 Total On-grid 20.10 108.47 189.67 378.05 678.50 Total Off-grid 17.69 131.07 354.18 604.63 841.12 Total Electricity Demand (MW) 37.79 239.54 543.86 982.68 1,519.62 Liberia Electricity Demand (GWh) High-Growth Scenario 2010 2015 2020 2030 2040 Monrovia Electrical Grid 123.59 340.75 474.74 1,313.94 3,659.73 Household 9.88 21.29 36.70 74.54 123.58 Commercial and public 76.65 192.54 234.24 607.56 1,575.87 Industrial 36.79 126.32 202.97 630.39 1,957.90 Street lighting 0.27 0.60 0.82 1.45 2.38 (continued on next page) Liberia’s Projected Electricity Demand 2010–2040 19 Table 2.7  |  Total Estimated Demand for Liberia, 2010–40, High-Growth Scenario(continued) Liberia Electricity Demand (GWh) High-Growth Scenario 2010 2015 2020 2030 2040 Other On-grid (WAPP, Côte d’Ivoire Interconnection) 3.89 34.82 44.56 105.64 250.53 Household 1.10 7.13 9.73 16.04 24.14 Commercial 1.28 25.67 31.23 81.01 210.12 Public 0.85 0.73 1.30 3.19 6.70 Street lighting 0.04 0.18 0.37 0.94 1.82 Other (ports, airports, cell towers, radio stations, post, churches) 0.61 1.10 1.93 4.46 7.76 Urban and Rural Off-grid 10.44 88.22 115.50 268.31 618.88 Household 4.77 20.66 28.86 48.84 74.48 Commercial 2.56 57.76 70.27 182.27 472.76 Public 1.50 6.68 10.78 24.15 48.57 Street lighting 0.09 0.36 0.75 1.88 3.64 Other (ports, airports, cell towers, radio stations, post, churches) 1.54 2.76 4.83 11.17 19.42 Non-Monrovia Industrial: Off-grid 101.18 741.97 2,091.01 3,519.77 4,724.54 Mining 61.32 613.20 1,839.60 3,066.00 3,936.74 Agriculture (rubber, oil palm, food production) 36.79 67.45 98.11 147.17 220.75 Forestry 3.07 61.32 153.30 306.60 567.05 Non-Monrovia Industrial: Potential On-grid 0.00 306.60 668.39 1,324.51 1,423.35 Mining 0.00 306.60 613.20 1,226.40 1,226.40 Agriculture (rubber, oil palm, food production) 0.00 0.00 24.53 36.79 55.19 Forestry 0.00 0.00 30.66 61.32 141.76 Total On-grid 127.48 682.17 1,187.69 2,744.10 5,333.61 Total Off-grid 111.62 830.19 2,206.51 3,788.08 5,343.42 Total Electricity Demand (GWh) 239.10 1,512.36 3,394.20 6,532.17 10,677.03 Source: Author’s calculations. 20 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Liberia’s Energy Supply Options 2010–2040 3 A s Liberia’s energy sector develops, the GOL needs the principle source of power supply during the short to consider the options available to it for meeting term to respond to immediate electricity needs while the population’s demand for modern energy other supply options are developed. The generation cost services in a sustainable manner. While the debate in of producing electricity with these diesel units is high, recent years has focused on meeting Liberia’s short- at US$0.32/kWh, due to high fuel costs and the small term power supply needs, in this chapter we will review size and decentralized structure of the system, which options that are available to Liberia for the medium prevents the units from being fully dispatched. and long term, as well as the capacity to feed into an interconnected grid. We consider the time period until General experience in Africa shows that the costs of 2015 the medium term, and until 2040 the long term. temporary diesel power generation units typically range In general, the selected supply alternatives presented between US$0.20 and $0.30/kWh (Foster and Briçeno- here are based on potential or actual projects that have Garmendia, 2009). In the case of Liberia, any additional been previously analyzed in feasibility studies, and that capacity expansion for diesel generation is likely to in principle appear feasible in Liberia. Further below, we provide power at lower costs than the system currently will use the generic supply data presented in this section installed for the following reasons: (i) the implementation to project least-cost supply-side development paths for of a management contract is expected to substantially Liberia. improve the LEC’s operational performance; and (ii) the improved dispatch of the diesel generation units will follow an increase in load. For the modeling exercise, Diesel Generation the generation cost is conservatively estimated at US$0.29/kWh, and no capacity constraint is given for The existing generation system in the base year for any additional capacity based on diesel generation. our analysis–2010—is composed of high-speed diesel generation units with an installed capacity of 9.7 MW. The system was implemented in two phases through the Leasing Diesel Generation Emergency Power Program. An additional capacity of 3 MW has been put in place in early 2011 and financed by Numerous countries in Africa have responded to the the Norwegian Agency for Development Cooperation power crises experienced over the past several years by (NORAD). Diesel generation was the most immediately leasing power plants to avert the social and economic available option for Liberia, especially given that heavy impacts engendered by frequent and persisting power fuel oil (HFO) cannot currently be delivered. Liberia’s blackouts and load shedding. Postconflict requirements power utility, the LEC, is expected to maintain diesel as for emergency power, supply-constrained systems, 21 unanticipated shortages of generation capacity, weather- generation cost is therefore assumed at US$0.27/kWh related damage to existing facilities, and droughts (2009). (resulting in diminished hydropower production) have forced power utilities to lease diesel generation on a temporary basis. Environmental Considerations Emergency power supply, through a leasing contract, Among the different supply options, diesel generators temporarily helps power utilities to stabilize their are arguably the most problematic in terms of systems to cope with unanticipated shortages of supply environmental consequences, mainly due to the capacity in the short term. The leasing units are limited possibility of mitigating potential impacts. The commonly in place within 6 to 12 months, taking into main problems of diesel combustion are noise and air account the process of procurement, mobilization, and pollution. Diesel generators release particulate matter interconnection to the electricity power network. Most and exhaust gases, which are often associated with an of the emergency supply alternatives are based on increase in morbidity relating to respiratory diseases diesel generators (sometimes with the option to run among local populations. In addition, diesel generators on HFO). Electricity prices vary widely depending on produce large amounts of greenhouse gas emissions commercial agreements. that contribute to global warming. The environmental risks associated with diesel generators also include Procurement of leased power is commonly undertaken potential leaking from storage tanks and the consequent in emergency situations and leads, in many cases, to contamination of land and waterways, which may last significant financial consequences for the electricity well after decommissioning unless proper mitigating utilities. First, these utilities’ lack of capacity and and cleaning measures are put in place. Social impacts limited experience in emergency procurement—and may include potential resettlement of communities the short time horizons within which they require living on or near a plant’s construction site and loss of power—have frequently led to unfavorable commercial access to land. But in Monrovia, site(s) for the setting agreements involving above-market rates for the up of a few futher diesel generators are available. The emergency power procured. Second, an emergency design of proper environmental and social management crisis often induces partial or full suspension of normal plans help ensure that these mitigating measures are procurement procedures, leaving more opportunity identified early in project design. for the mishandling of funds. Third, high variable costs impose higher cash flow requirements to ensure the running of leased generation units. Therefore, leasing Heavy-fuel-oil-fired Generation emergency generation is not advisable for periods in excess of two years, since, for longer periods, the HFO-fired generation is also commonly used for fixed costs can usually cover the costs of procuring emergency power situations or as base load power. equipment on a permanent basis. HFO-fired generation units generally reduce fuel costs by about 50 percent when compared with diesel fuel. For the purposes of our modeling exercise, Uganda’s We have benchmarked HFO power plant costs using recent experience was taken into account. In 2003–06 data from the literature and from a recently finalized Uganda suffered serious power shortages due to HFO-fired generation independent power producer delays in developing additional generation capacity, (IPP) in Sub-Saharan Africa. We use an estimate for drought in the region, and significant technical losses the average generation cost based on HFO of US$0.16/ in the distribution system. The World Bank supported kWh. an emergency power supply program based on leasing diesel generation units of 50 MW. For the purpose of 5 In 2006 oil prices were US$57 per barrel. In January 2010 the this analysis, a fuel price escalation was applied since oil price stood at US$75.2/per barrel. The leasing generation the Uganda project was developed in 2006.5 The cost in Uganda was about US$0.23/kWh in 2006. 22 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series In mid-2011 HFO can neither be landed nor stored in generated for electricity consumption. Liberia has a Liberia. Before the war, HFO was imported and handled significant agriculture potential, estimated at 3.7 million by the Liberian Petroleum Refinery Corporation (LPRC) hectares of arable land, which represent 38 percent at the product storage terminal (PST) close to the Free of the total land area. Also, according to independent Port of Monrovia. As a result of the war, the facilities reports (Aah-Kee, 2009; Krishnan, 2009), a scoping were destroyed and partly dismantled and now require study has identified five sites for rubber plantations, rehabilitation and expansion work. Part II of this report with a power generation potential to support 80 MW will discuss the issue of fuel supply in more detail. of biomass-fired power, which represent around 2,500 hectares of rubber trees per year. But the economic and financial feasibility of biomass power options depends Environmental Considerations on the type of technology used, the size of the power plant, and the transportation cost of the fuel (Wiltsee, HFO-fired power plants share most of the environmental 2000). risks associated with those that use fossil fuels. The most problematic issue is air pollution. Similar to diesel In terms of technology, there are two main options generators, HFO-fired power plants emit greenhouse for combustion boilers: pile-burner-utilizing stationary and by-product gases and particulate matter, which or travelling grate combustors, and fluidized-bed cause climate change and potentially harm to the health combustors. For size, a biomass-steam electric power of local communities. In addition, waste management plant from 30 to 100 MW is recommended (ESMAP, should be carefully considered in the design, 2007). The impact of fuel transportation costs on the construction, operation, and decommissioning of such feasibility of a power plant becomes significant at plants. Environmental risks associated with HFO-fired distances greater than 32 km, and usually becomes power also include potential spills during transportation restrictive beyond the 160–320 km range (Wiltsee, and storage of the fuel. In general, however, there is a 2000). For the purpose of the long-term least-cost large spectrum of mitigating measures that may be put expansion model, three potential biomass power plant in place to significantly reduce the potential impacts scenarios were considered, of which two were retained of HFO-fired power plants. Social impacts may include as modeling options. Further analysis of the adequacy potential resettlement of communities living on or near and supply security of the main feed stocks would be a plant’s construction site and loss of access to land. needed to evaluate the power production potential. But in Monrovia, the site for the potential construction Some feed stocks require a long rotation period to of an HFO-fired power plant and associated facilities harvest and replant. For example, in the case of is already devoted to industrial use and resettlement rubber plantations, rotation periods of 25–30 years are is not envisaged. The design of proper environmental needed. and social management plans help ensure that these mitigating measures are identified early in project design. Core Biomass Power Plant Scenario Under this scenario we assume that the plant would, at Biomass Power Generation full dispatch, result in a tariff of US$0.185/kWh, fixed for 3 years, which could subsequently escalate to US$0.225/ Another option for providing power to Liberia’s grid is kWh over 25 years. The unit capital costs of the project through the combustion of biomass energy. In Milbrandt are assumed to be US$4,167 per megawatt installed, (2009) Liberia’s biomass resources and their potential with an installed capacity of 31 MW. Construction of a for power generation and as fuel for transportation biomass plant is estimated to take between 30 and 36 have been analyzed. The study estimated that if only months. As the least-cost simulation is based on 5-year 10 percent of the available cropland were dedicated to steps from 2010, the model allows for commissioning oil palm, coconut, or sugarcane, 27,452 GWh could be the biomass plant in the period 2015 to 2040. Liberia’s Energy Supply Options 2010–2040 23 The biomass project would provide a less expensive market price in Liberia could be even lower than this. generation option than the existing high-speed diesel Therefore, this possible scenario was not considered. generation units, and the electricity production cost would be less dependent on fuel price fluctuations. Under this scenario biomass is priced conservatively. Environmental Considerations Managing the environmental and social impacts Benchmark Biomass Power Plant associated with biomass projects is not trivial. For Scenario example, a 36 MW biomass project will need around 380,000 tonnes of wood chips per year, requiring the Two independent studies commissioned by the NORAD harvesting of about 910 hectares of rubber trees per and the United States Agency for International year. Therefore, postharvest operations to rehabilitate Development (USAID) indicate that based on the land and to replant new rubber trees are essential international experience the price per kilowatt-hour to avoid the risks associated with logging operations, of biomass plants could be as low as half the price of which can lead to soil erosion. However, if biomass the proposed core biomass scenario (Aah-Kee, 2009; is grown sustainably, the greenhouse gas balance of Krishnan, 2009). In these studies, typical unit capital biomass-fired power plant could be neutral. costs for biomass-fired power plants are quoted as between US$1,600–$2,400/MW (Aah-Kee, 2009; ESMAP 2007).6 All cost estimates provided by the Energy Sector Hydropower Generation Management Assistance Program (ESMAP) study were developed for a single reference location in India with Historic studies, conducted over the period 1976 to 1983, the purpose of avoiding any site-specific discrepancies have assessed Liberia’s hydropower resources for both when comparing technologies. A conservative approach large and small hydropower plants (Norconsult, 2008). was taken into account for this indicative planning. Recent studies do not exist, and there is a great need Thus, an upper-bound capital unit cost of US$2,419 per to update the findings from these earlier studies and installed megawatt and an installed capacity of 31 MW to evaluate data and data measurement for Liberia’s were assumed. We use this as an alternate biomass hydrology to confirm the earlier findings, especially for scenario for the project discussed above. those sites where no hydropower plants were built. The historic studies indicate that Liberia is endowed with significant hydrological resources. Due to the absence Biomass Power Generation of elevated hinterland, the preferred technological Benchmarking Based on Wood Chips option for large-scale hydropower would be run-of-river in International Markets plants. Run-of-river hydropower plants are typically built on rivers with a consistent and steady flow that is This scenario assumes that biomass power generation either natural or maintained by an upstream reservoir in Liberia is not restricted by the availability of local that serves to compensate for seasonal fluctuations. fuel resources and that wood chips can be imported. Liberia’s hydrological resources for power generation But fuel availability is contingent on wood chip prices in international markets. Aah-Kee (2009) prices costs for affordable wood chips at US$35 to US$39 per ton 6 Aah-Kee (2009) refers to six projects implemented in Brazil, from the United States, using a U.S. port. When adding Chile, Guyana, India, Mali, Mauritius, and Uganda. The ESMAP transportation costs, the price at the Monrovia port (2007) report gives US$1,700/MW as the reference value. would be around US$95 per ton. This price is higher Detailed cost estimates for the biomass-steam electric power than the price range for domestic biomass, which has plant in India were: a levelized capital cost of US$2.59/kWh, a fixed operation and maintenance (O&M) cost of US$0.45/ been quoted as US$37–US$60 per ton, and which is kWh, a variable O&M cost of US$0.41/kWh, and a fuel cost of assumed for the core biomass scenario. The actual US$2.50/kWh. 24 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Powerhouse of Mount Coffee Hydropower plant in July 2010. View of St. Paul River from the powerhouse of Mount Coffee hydropower plant in July 2010. vary greatly between the wet season (July to November) and the construction of a storage reservoir near the and the dry season (December to June). Thus, proposals confluence of the Via and Saint Paul rivers. For Mt. for a hydropower plant for Liberia include a combination Coffee, the study recommended the installation of four of dams and storage in upstream reservoirs. For the Francis turbines, with an individual capacity of 16.5 MW, purpose of the least-cost expansion model, we are into the existing turbine pits, and the reconstruction considering three potential scenarios for the build-up of of the powerhouse, intake structure, and substation. hydropower potential in Liberia. The idea of the proposed reservoir was to increase the availability of the plant and to offset the impacts of the The Mt. Coffee hydropower plant was the only large- dry season. The study also reviewed the hydropower scale hydropower plant constructed before the war, development potential upstream of the Saint Paul and was conveniently located on the Saint Paul River River to identify opportunities for exporting power to approximately 27 km northeast of Monrovia. The plant the proposed regional WAPP CLSG interconnection was commissioned in 1966 with an installed capacity of transmission line. 30 MW, and its capacity was increased to 64 MW in 1972. This plant was the main source of power supply in Liberia, For modeling purposes, one supply scenario envisages a and was managed by the LEC. Because of the seasonal reconstructed Mt. Coffee hydropower plant operating at fluctuations of the Saint Paul River, however, the plant prewar levels with a total installed capacity of 66 MW. On could only supply about 5 MW of electric capacity during its own, Mt. Coffee is estimated to generate a minimum the dry season. Under civil unrest, the plant was shut down annual energy production of 255 GWh, a maximum annual and the pool gradually rose until August 1990, when the energy production of 425 GWh, and an average annual Forebay Dam 1 was breached, rendering the power plant production of 342 GWh. The estimated cost of electricity inoperable. Since 1990 the powerhouse and substation of generation is US$0.11/kWh (Stanley Consultants, 2008). Mt. Coffee have been looted, and the hydropower plant is For the purpose of modeling, it is assumed that the plant in need of full reconstruction. will be operational in 2015. It is more realistic to assume that Mt. Coffee will be available from 2016, but the model In 2008 the U.S. Trade and Development Agency allows for 5-year intervals only. Moreover, Mt. Coffee’s low (USTDA) commissioned a study by Stanley Consultants, cost of electricity generation relative to other operations the firm that developed the original design of Mt. in Liberia, its proximity to Monrovia, Liberia’s main load Coffee, to assess the technical feasibility of the center, its favorable geology, and the low environmental reconstruction of the Mt. Coffee hydropower plant and social impacts expected indicate that this project is Liberia’s Energy Supply Options 2010–2040 25 a suitable candidate for meeting Liberia’s demand in the about 57 percent and the plant availability increases by long term (Ciampitti, 2009). about 25 percent. Mt. Coffee Hydropower Plant and Saint Paul River Hydropower Construction of Via Reservoir Development Since the hydrological conditions of the Saint Paul River Stanley Consultants suggest a sequential implementation vary by season, several alternatives have been analyzed of two hydropower projects along the Saint Paul River. to offset this high seasonal variability. As indicated, The first plant is Saint Paul-2 (SP-2), which is located the construction of a new storage reservoir near the 60 km downstream of the Via storage project, and confluence of the Via and Saint Paul rivers was analyzed would provide an estimated annual average energy as a second phase (Stanley Consultants, 2008). The production of 1,330 GWh assuming the Via reservoir is construction of the Via Reservoir is designed to support constructed. The second plant is Saint Paul-1B (SP-1B), electricity production with better distribution across located 40 km downstream of SP-2. SP-1B would provide the wet and dry seasons. As a result of the Via reservoir an estimated annual average energy production of 630 construction, the Mt. Coffee power plant supply would GWh, assuming the Via reservoir is constructed. increase its average energy production from 342 GWh/ year to 435 GWh/year. Given the project’s complexity and the need for further research, it is assumed that these power plants will be The optimum location for the Via storage project is constructed post-2015. For the purpose of the least- approximately 3.5 km upstream of the confluence of cost expansion plan this means that they are available the Via and Saint Paul rivers and about 150 km north options in the power mix from 2020, as the model is of Monrovia, where it would maximize the storage in 5-year steps. To consider this option we assume potential of the reservoir while minimizing the earthen that the SP-1B, SP-2, and Via reservoir are built and embankment sections. This location would require an operated jointly, as is shown in Table 3.1. The costs and in-depth analysis to assess the potential impact on the energy gains associated with the Via reservoir are thus environment and the people affected, which is likely to imbedded in the SP1-B and SP2. be complex. The parallel construction of the Mt. Coffee hydropower Mano Hydropower Plant plant and the Via reservoir is considered as a long-term alternative to rebuilding the Mt. Coffee hydropower This plant would be located on the Mano River, which plant alone. When compared with only rebuilding the delineates the border between Liberia and Sierra plant, the unit capital investment costs increase by Leone. Its construction would require high levels Table 3.1  |  Potential Availability of Hydropower in Liberia and Timeline for Earliest Plant Commissioning Total cumulative Mt. Coffee SP-1B SP-2 Mano hydropower capacity 2015 66 MW — — — 66 MW 2020 — 78 MW 120 MW — 264 MW 2025 — — — 50 MW 314 MW Source: Ciampitti, F.; Stanley Consultants; Main; and Geoscience. 26 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series of coordination between both countries and could Further due diligence such as advisory expert panels conceivably be developed under the auspices of are commonly also required. the WAPP. Several studies indicate that hydropower generation can be economically attractive, although the lack of transmission interconnection has been West African Power Pool the main deterrent for its development. But once the Transmission Interconnection for proposed WAPP CLSG interconnection transmission Côte d’Ivoire, Liberia, Sierra Leone, line has been built, the site can be directly connected and Guinea (WAPP CLSG) to the grid. The goal of the WAPP is to establish a well-functioning, Analyses regarding the optimal level of installed cooperative power-pooling mechanism for West Africa capacity vary from 37 MW to 143 MW, suggesting the as a means of increasing access to stable and reliable need for further study of this hydropower option. To electricity at affordable costs to the citizens of the be consistent with the feasibility study for the WAPP Economic Community of West African States (ECOWAS). CLSG regional transmission line, it is assumed that the To reach this goal, the WAPP is promoting regional optimal installed capacity for the Mano River is 90 MW, priority projects. Among these is the transmission with an annual average energy production of 397 GWh. line interconnection between Côte d’Ivoire, Liberia, As this is a cross-border hydropower power plant, it is Sierra Leone, and Guinea, (CLSG). The objective of further assumed that of the 90 MW a maximum of 50 this project is to provide access to least-cost (hydro) MW would be available to Liberia, with the remainder power options for the subregion and to enable the being available to Sierra Leone. pooling of power resources across these four countries. Project preparation is well advanced, with feasibility and environmental studies in draft form. The World Environmental Considerations Bank, European Investment Bank, African Development Bank, Kreditanstalt fuer Wiederaufbau, and ECOWAS Several factors influence the potential environmental Bank have all indicated their interest in financing this and social impacts of hydropower projects that are transmission line. The main obstacle remaining is the highly site specific. Characteristics affecting these establishment of a special purpose company that would impacts include the size of the dam, the size of the own and operate the transmission line on behalf of the associated power plant, and the presence of a reservoir. four countries. But independent from the characteristics of the specific project, the main gain in terms of the environment The WAPP CLSG project is proposed as a regional is the total absence of air pollution. Environmental transmission line of 220 kilovolts (kV) double circuit impacts may include changes in river ecosystems, with a power capacity of 300 MW. To avoid the erosion patterns, river flows, and vegetation clearings. implementation of an oversized solution and to reduce When a reservoir is needed, hydropower projects may the initial investment costs, a two-stage implementation often cause the inundation of portions of land, which plan has been adopted. In the first phase, a single circuit include wildlife habitats, farmland, forests, cultural will be strung with a power transmission capacity of 150 heritage monuments, and villages. Hydropower has MW by 2015. In the second phase an additional circuit also some inherently benign features, which include providing a total power transmission capacity of 300 the lack of air pollution such as by-product gases or MW will be strung in 2020. particulate matter. Greenhouse gas emissions are limited to methane and vary with the size and type The implementation arrangements are being studied of the plant’s reservoir. In general, it is fundamental and indicate two main phases for generation supplied to manage the potential impacts early in the project through the transmission line. First, energy surplus cycle by designing proper environmental and social from Côte d’Ivoire will supply the CLSG transmission management plans and a resettlement action plan. line in 2015 at an expected cost of US$0.17/kWh. Liberia’s Energy Supply Options 2010–2040 27 Second, hydropower potential in Guinea is foreseen to for the construction of a distribution network and the be developed to the point that an energy surplus will connection of about 33,000 new customers up until supply the WAPP CLSG with an expected generating cost 2015. Beyond 2015, more transmission and distribution of US$0.11/kWh after 2020. These two alternatives are investments become necessary. For the sake of explored in the indicative plan with sensitivity scenarios simplicity, these investments have not been considered for power capacity available for Liberia through the in this report. A benchmarking analysis indicates that CLSG transmission line. the investments requirements for transmission are in the order of US$15/MWh. Because of the significant uncertainties related to the pricing of electricity on the WAPP CLSG transmission line and the availability of power to Liberia, the least- Environmental Considerations cost modeling includes a number of sensitivity analyses. Power availability can be divided into two phases Transmission lines have limited environmental and social depending on how much power can be supplied from impacts that are often transitory. The main issues are the neighboring countries to Liberia, as is shown in related to the resettlement of local communities living Table 3.2. A conservative scenario implies that only 28 within the right of way, the clearing of vegetation, the MW would be available for the Liberia power system in optimization of line routing to avoid protected areas and 2015. The capacity would increase over time and reach cultural heritage monuments, aesthetic impacts, and the a maximum of 50 MW by 2020, when the transmission potential leaking of chemical products used in electrical line is strung with double circuits. An optimistic scenario equipment. The proper design and implementation of would set initial capacity of 50 MW in 2015, which would mitigating measures early in the project cycle would increase to a maximum of 97 MW available from 2020. easily ensure the minimization of such impacts. In addition, a large environmental benefit of transmission lines is a reduction in greenhouse gas emissions due Transmission and Distribution to the optimization of power generation along an beyond the WAPP CLSG interconnected network, which allows for a reduction in Transmission Line the use of the most polluting supply options. As stated earlier, Liberia’s transmission and distribution network has to be reconstructed to ensure that power Costing of Supply Options can be adequately distributed to potential customers. A basic system is expected to be built for Monrovia Investment and operational costs for different under the leadership of LEC’s management contractor. generation technologies are based on international Donor financing of US$50 million has been identified references and benchmarking of projects implemented Table 3.2  |  WAPP CLSG Pricing and Capacity Scenarios Scenarios 2015 2020–40 Estimated cost Energy surplus from Côte d’Ivoire Energy surplus from Guinea based on hydropower mainly based on gas-fired power development plants Estimated energy price: US$0.11/kWh Estimated energy price: US$0.17/kWh Low capacity available for Liberia 27.6 MW (total: 83 MW) 50.6 MW (total: 152 MW) High capacity available for Liberia 50 MW (total: 150 MW) 96.7 MW (total: 290 MW) Source: AETS-SOGREAH, 2009. 28 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 3.3  |  Power Supply Alternatives and Cost Estimates for Liberia Total Expected variable Total earliest possible Capital Expected cost (fuel + levelized commissioning MW cost (US$ Unit cost availability O&M) (US$/ cost (US$/ Power source date capacity million) (US$/kW) (%) kWh) kWh) Diesel (existing system) 2010 13 12 934 70 0.28 0.32 Diesel (learning curve) 2012 1 1 934 70 0.26 0.29 Diesel (leasing) 2010 10 24 2,388 80 0.24 0.27 HFO 2012 10 15 1,470 80 0.12 0.16 Biomass 2012 36 150 4,167 85 0.08 0.21 Biomass benchmarking 2012 31 75 2,419 85 0.06 0.11 WAPP phase 1 Low 2015 28 160 1,659 85 0.15 0.17 WAPP phase 2 Low 2020 23 160 1,659 85 0.09 0.11 WAPP phase 1 High 2015 50 160 1,659 85 0.15 0.17 WAPP phase 2 High 2020 47 160 1,659 85 0.09 0.11 Hydro 1: Mt. Coffee 2015 66 162 2,455 59 0.01 0.10 phase 1 Hydro 2: Mt. Coffee + 2020 66 383 5,803 75 0.01 — Via Reservoir Hydro 4: SP-1B + SP-2 + 2020 198 879 4,438 75 0.01 16–23 (11) Via Reservoir Hydro 3: Mano River 2025 90 257 2,856 50 0.01 16–23 (10) Source: Based on Geoscience (1998); Ciampitti (2009); Stanley Consultants (2008); ESMAP (2007); and personal communications. Note: — Not available. in Africa. This assessment does not model technological An argument could be made that this report does not change over the period analyzed but it does assume consider significant power supply options for Liberia’s ongoing improvements in operational performance. future such as a liquid natural gas (LNG) power plant, The latter corresponds to an operational learning curve on-grid wind power, or on-grid solar photovoltaics. and to the ability of the system to dispatch the supply The reason for this is that, to date, there has been alternatives under normal conditions (and without no analysis undertaken as to whether these options any load shedding) as the demand increases. This could be sensibly deployed in Liberia. Using them as assumption leads to an operational cost reduction. part of a possible power mix even for a scenario post- The supply alternatives were computed on the basis 2030 would therefore amount to mere speculation. of capital investment cost, variable generating and Certainly further work is needed to explore supply fuel costs, maximum net power, and plant availability. options beyond the ones that have been analyzed Table 3.3 summarizes all supply options and their here. associated cost considered in this report. Liberia’s Energy Supply Options 2010–2040 29 Wroto town, Monrovia. Petroleum Fuel Supply for Power Generation 4 K ey energy supply options depend on the Until 1982 petroleum products were produced at availability of reasonably priced petroleum fuels the government’s refinery in Monrovia under the in sufficient quantities. In this chapter we analyze management of its wholly owned Liberia Petroleum the availability of petroleum fuels in Liberia with a focus and Refinery Company (LPRC). The refinery was closed on power generation. at the beginning of 1983 due to the LPRC’s inability to make major payments for crude oil. Subsequently the GOL decided not to reopen the refinery because Upstream Petroleum Sector further evaluation indicated that it was cheaper to import petroleum products than to refine them There are no known hydrocarbon reserves in Liberia. locally. But LPRC staff had little experience in product Potential petroleum resources have, however, been procurement and frequently bought too late and paid identified in small sedimentary basins onshore and in above-market rates. the extension of this sedimentary sequence offshore. Exploration for hydrocarbons offshore first took From 1990 through mid-2003 the country’s demand place in the early 1970s and ended in 1985 when the diminished almost to the point of collapse due to seventh and last offshore well was drilled. No further ongoing conflict. After 2003 demand picked up, but the exploration was carried out until 2000–01, when the economy and attendant oil product consumption are TGS-NOPEC Geophysical Company of Norway acquired still a long way from complete recovery. Figure 4.1 shows approximately 9,500 km of new geophysical data. the official import/consumption figures from preconflict It is this database that forms the foundation for the years through the first two years of the civil war.7 It exploration of offshore Liberia in mid-2011. shows total oil product consumption over the three historical periods since 1979. The preconflict peak and all-time high was in 1980 at some 579,000 tonnes, when Downstream Petroleum Product the mining sector was thriving. The mining sector then Supply and Consumption declined such that preconflict, in 1989, the consumption was 226,000 tonnes. During the conflict years total The most important factor determining Liberia’s petroleum consumption pattern is the performance of the mining sector, which accounted for about 49 percent 7 Data for 1979 through 1983 were obtained from World Bank of petroleum demand in 1983. The 30 percent decline in (1988). The years 1988 onward were obtained from LPRC. The petroleum product consumption since 1980–83 was due four years 1984 through 1987 are missing from these data mainly to reduced iron ore production. series. 31 Figure 4.1  |  Historical Oil Product Consumption petroleum exploration and development activities (in tonnes) through the state-owned National Oil Company of Liberia 700,000 (NOCAL). The NOCAL has been charged with managing the nation’s petroleum resources since 2000. It has 600,000 wide-ranging powers that enable it to both manage 500,000 these resources while hiring others to perform the actual 400,000 exploration activities. Even though it can theoretically 300,000 engage in those exploration activities itself, it has no technical or financial capacity to conduct oil exploration, 200,000 especially in deep water. Figure 4.2 illustrates the Liberian 100,000 offshore exploration blocks that have been delineated. 0 Exploration commitments have been agreed on by the 2009 1979 1980 1981 1982 1983 84–87 N/A 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 following companies on twelve of these blocks, as shown: »» Hong Kong Tongtai 6, 7 Year »» European Hydrocarbon Ltd 8, 9 Source: World Bank, 1988 and personal communication from LPRC, 2010. Note: Liberia’s conflict period lasted from about 1989 to 2003. No data were available »» Anadarko 10, 15, 16, 17 for the period of 1984 to 1987. »» Chevron 11, 12, 14 »» Broadway Consolidated Plc 13 In addition, a third bidding round with submissions for apparent8 consumption declined to as low as 20,000 blocks 1, 2, 3, 4, and 5 on January 31, 2010, and bid tonnes in 1991. Following the end of the conflict in opening February 19, 2010, resulted in bids on all the mid-2003, in the “recovery� phase, total consumption blocks. increased to some 215,000 tonnes by 2009. Most of the fuel oil was consumed in power generation Downstream Sector Organization by slow-speed generating units at the public utility, the LEC, or at the three mining operations that operated at In its capacity as the overseer of downstream activity, the time. The LEC also consumed a significant amount the Ministry of Commerce and Industry (MCI) registers of diesel-using gas turbines or high-speed diesel sets. companies and issues commercial operating licenses. The LPRC, a parastatal company, has the only legal right to import oil products into Liberia and distribute Sector Organization them. It is the owner and operator of the only marine receiving storage terminal for oil products in Monrovia. The Ministry of Lands, Mines and Energy (MLME) controls It does not import any products directly at the moment, upstream, resource-related areas such as petroleum nor distribute, but in early 2010 franchised its right to exploration and development while the Ministry of import to eight companies who have met the franchising Commerce and Industry (MCI) is the controlling ministry criteria: for downstream petroleum, including the import, storage, and distribution of oil products. »» Aminata & Sons, Inc. »» Conex Petroleum Upstream Sector Organization 8 These conflict-era figures represent “supply� through formal (mostly LPRC) channels. There was undoubtedly some informal In its capacity of overseeing upstream activity, the supply through other channels, but the volumes were not Ministry of Lands, Mines and Energy (MLME) supervises significant in the large picture. 32 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 4.2  |  Liberia’s Offshore Exploration Blocks Voinjama This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information LOFA LIBERIA G U INEA shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any OFFSHORE OIL endorsement or acceptance of such boundaries. EXPLORATION BLOCKS SI ERR A LEO NE LIBERIA BLOCKS GBARPOLU LIBERIA BLOCKS ON OFFER GRAND Sanniquellie COUNTY CAPITALS CAPE MOUNT Bopolu NATIONAL CAPITAL Gbarnga BONG NIMBA COUNTY BOUNDARIES Robertsport Tubmanburg INTERNATIONAL BOUNDARIES BOMI Kakata MARGIBI LB-17 MONTSERRADO MONROVIA GRAND BASSA LB-16 LB-15 Zwedru RIVER CESS GRAND GEDEH CÔ T E LB-14 Buchanan LB-13 D ’IV O IRE Cestos City LB-12 SINOE RIVER GEE LB-11 Fish Town LB-10 Greenville LB-09 GRAND LB-08 KRU MARYLAND Barclayville LB-07 Harper LB-06 LB-05 LIBERIA LB-04 LB-03 LB-02 LB-01 0 80 KILOMETERS ATLANTIC OCEAN 0 50 MILES IBRD 38393 MAY 2011 Source: National Oil Company of Liberia (www.nocal-lr.com); World Bank Map Unit, 2011. »» LibAfric distributors authorized by the LPRC to sell through »» Monrovia Oil Trading Corp (MOTC) service stations and to bulk clients in Liberia. All service »» Oando stations must, by law, be owned by Liberian nationals. »» Srimex The MCI, in collaboration with the LPRC, also establishes »» TOTAL Liberia Inc. regular ceiling prices for oil products. »» Westoil Developments The requirements that must be met by a franchisee Petroleum Market include: (i) a capacity to import at least 3,000 tonnes per shipment and sell 7,000 tonnes per quarter, (ii) the Over the past several years—because of conflicts, payment of a one-time application fee of US$5,000, disruptions, and ongoing recovery efforts—the (iii) the payment of an annual franchise fee of US$25,000, Liberian petroleum product market has not been that and (iv) the maintenance of a minimum strategic stock of a normally functioning economy. Figure 2.3 and of 500 tonnes of total products. There are some six Table 4.1 summarize the evolution of the total import Petroleum Fuel Supply for Power Generation 33 Table 4.1  |  Liberia Preconflict Oil Production Consumption (in tonnes) Type of Fuel 1978 1980 1981 1982 1983 84–87 1988 1989 1990 1991 PMS 89,450 83,211 71,193 69,358 65,780 56,000 64,929 43,428 8,023 N/A AGO 198,224 171,028 133,645 115,607 123,271 61,034 53,238 29,729 8,280 KEROSENE 9,174 8,349 7,064 4,771 4,954 8,000 8,048 3,242 1,673 JET A-1 42,202 30,000 26,697 26,881 27,890 21,000 45,445 15,843 FUEL OIL 231,683 286,634 210,891 200,396 179,109 49,718 54,475 3,018 2,410 Total 570,733 579,221 449,490 417,013 401,004 N/A 195,752 226,135 95,259 20,386 Source: World Bank, 1988; and Personal communication from LPRC, 2010. and consumption of oil products from 1979 through risk to the country’s fuel supply. Options for alternative 2009, though data are missing for 1984–87. fuel supply to Liberia in any significant volume are limited. Figure 4.3 provides individual product detail for this same data series. It shows some 579,000 tonnes of Oil Jetty total consumption in 1980, the peak year preconflict, with roughly half of the consumption being HFO. This The oil jetty has the following characteristics: two bottomed out in 1991 at some 20,000 tonnes. The mooring dolphins and an island berthing pier connected Figure also illustrates the complete disappearance of to shore by a piling causeway upon which there is a HFO consumption in the absence of centrally generated personnel access walkway and product receiving lines. power and the collapse of mining activity. The almost The port specifications/limitations are: complete disappearance of Jet A-1 consumption during the conflict years is also highlighted. »» Dead weight maximum 25, 000 MT »» Maximum tanker length 160 meters It is interesting to note that the total consumption of »» Maximum tanker width 25 meters two products—premium motor spirit oil (PMS) and »» Draft 9.5 meters automotive gasoil (AGO)—of some 200,000 tonnes in 2009, exceeds the immediate preconflict volumes and There are two 8-inch receiving lines in service. One roughly equals the demand volumes for these fuels in is used exclusively for jet fuel and the other for PMS the early ’80s, when the Liberian economy was strong. and AGO. The latter is flushed with seawater between pumpings of the two different products and at the completion of tanker unloading. Infrastructure The existing pipelines are corroded to the extent that Monrovia’s bulk-handling infrastructure for oil products operating pressures have to be reduced to prevent consists of an oil jetty connected by receiving lines to leakage and product losses. This results in excessive a product storage terminal (PST) on Bushrod Island in discharge delivery times, so that excessive ship Monrovia. Both the LPRC PST and the refined products demurrage costs are incurred. In addition, the pipe jetty owned by the port of Monrovia suffered from a supports are deeply corroded while the walkway grating severe lack of maintenance during the conflict years. Since and railings are largely absent due to pilferage. The oil the conflict ended in 2003, the LPRC has performed some jetty is owned by Liberia’s National Port Authority (NPA) basic maintenance, but both facilities have deteriorated to and will be replaced by a new oil jetty, which is being the extent that they are unsafe and represent a serious financed by the World Bank. 34 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 4.3  |  Oil Product Import and Consumption 1979–2009 (tonnes by product) 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 84–87 1983 1982 1981 1980 1979 0 100,000 200,000 300,000 400,000 500,000 600,000 PMS AGO KEROSENE JET A-1 FUEL OIL Source: World Bank, 1988; and Personal communication from LPRC, 2010. Monrovia Product Storage Terminal Table 4.2  |  Product Storage Terminal (PST) (PST) Capacity, September 2004 Total Capacity, The storage terminal potential capacity is 16 tanks with Number of tanks tonnes a total capacity of some 44,000 tonnes. Although the PMS 4 10,200 LPRC has been engaged in a rehabilitation program since the end of the conflict, there are still several tanks Jet/kerosene 3 5,600 out of service with bad foundations, deteriorated floors AGO 4 18,400 and roof plates, and multiple bullet holes. An estimate of Total 11 34,200 the present serviceable capacity is given in Table 4.2. In Source: Personal communication from LPRC. mid-2011 no HFO can be landed. Note: PMS = premium motor spirit; AGO = automotive gas oil. Petroleum Fuel Supply for Power Generation 35 Besides the storage tanks, there are major deficiencies The three tanks have a total capacity of some 46,000 in all the elements necessary for the proper working of tonnes. an oil storage terminal, such as: »» Supply pipelines from the jetty Main Refinery Site »» Piping networks within the terminal »» Truck-loading racks There are some 50,000 tonnes of crude and product »» Environmental protection storage at the site of the former refinery near Monrovia. »» Fire protection The tanks are not in good condition and would require »» Power generation extensive rehabilitation and cleaning to be returned to »» Safety and security serviceable condition. The pipeline connecting the PST »» Product laboratory to the refinery tankage is out of service and would also require an expensive repair program to be brought back In 2007 a detailed study of the terminal was performed. into service. This included an estimate of the physical requirements and capital costs of the rehabilitation of the PST. It also included a product demand study to identify the Ganta Storage Terminal additional storage capacity and other elements that will be required to meet a 2013 time horizon. The The LPRC owns a PST in Ganta near the Guinea border study recommended the construction of three new about 300 km northeast of Monrovia. This was built in fuel storage tanks to increase the terminal’s capacity 1989 and has 13 horizontal tanks of 1,136 barrels capacity from 45,000 to 60,000 tonnes to meet projected 2013 each, for a total of 14,768 barrels, and has never been volumes, one new slop tank, the rehabilitation of 14 used. The tanks appear to be in reasonable working order. existing storage tanks, the installation of new piping Supporting infrastructure such as loading racks, pumps, throughout the terminal and along the shoreline to and electrical and other equipment has, however, been a new oil jetty, the construction of a water tank and looted and vandalized. A complete detailed inspection installation of a sprinkler system and other fire-fighting and rehabilitation of this equipment would be required equipment throughout the terminal, the modernizing to render the PST serviceable. An investigation should of the loading rack, the installation of modern be made into possible commercial exploitation of the environmental protection systems, the installation of terminal, preparatory to privatization. lighting and security surveillance equipment, and the construction and equipping of a new laboratory to test products. When completed, the terminal would comply Buchanan with applicable international standards. In mid-2006 the estimated cost for these measures was US$14 million. There is a marine storage terminal on the south coast at Buchanan, previously owned by the Liminco Mining Company. The original configuration was 13 tanks with a Crude Oil Jetty and Shore Tankage total capacity of 218,000 barrels, but much of this was heavily damaged during the conflict. There is another large jetty in Monrovia located on Bushrod Island. It is known as the Bong Mine pier. This very solid, impressive dock served as an ore shipment Aviation Storage Sites facility but also has two crude oil lines connected from the dock to a nearby tankage. The lines appear to be out The Robertsfield International Airport, some 45 miles of service, and the two crude oil tanks are surrounded from Monrovia, is served by a total storage facility of by black oil sludge within their firewalls. Apparently they some 16,000 U.S. gallons. Jet fuel is brought by road were damaged during the conflict, and oil leaked out. tanker from the LPRC PST from Monrovia. There is 36 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series also an old U.S. military storage facility at Robertsfield. Table 4.3  |  Liberia Electricity Corporation Information on the condition and capacity of this Storage Tank Capacities, Bushrod Island tankage was not available. TOTAL also operates an (barrels) aviation fuelling facility at the small Spriggsfield airport HFO 13,670 near Monrovia, which is used by United Nations Mission HFO 13,670 in Liberia (UNMIL) helicopters and World Food Program (WFP) air services. HFO 9,780 Total HFO 37,120 AGO 20,570 Liberia Electricity Corporation AGO 1,190 (LEC) AGO 1,190 At the old LEC central power station site located on AGO 240 Bushrod Island, about 1.5 km north along the shore from AGO 240 the Bong Mines pier, there are eight storage tanks that Total AGO 23,430 were used for HFO and AGO service. Their capacities Source: Personal communication LEC, 2010. and services are summarized in Table 4.3. The total HFO Note: HFO = heavy fuel oil; AGO = automotive gas oil. capacity in three tanks is 37,120 barrels. There also appears to be the remains of a receiving jetty on the shoreline near these tanks. It is not known what arranges the small tanker affreightment. MOTC takes relationship this pier had to the supply of oil products custody on a CIF Monrovia arrangement with BOM. In to these tanks. 2005, for example, a cargo of 3,500 tonnes of AGO came from Limbe, Cameroon. The usual cargo size for MOTC is in the 3,000 to 5,000 ton range, arranged on Supply and Procurement a cargo-by-cargo spot basis approximately once per month. BOM supports MOTC in the opening of a letter Since the Monrovia oil refinery shut down in 1983 and of credit for each cargo, but there is no ownership since then all petroleum fuels for the country have been relationship between BOM and MOTC. imported as finished products from the international market. The LPRC has the exclusive right to import, West Oil, a Liberian company, purchases through which it now cedes on a franchise basis to some TOTAL Trading on a delivered “in-tank� arrangement. seven importers who have met franchising criteria. The They import a 5,000 to 7,000 ton mixed cargo of PMS importers deal with traders on a CIF (cost, insurance, and AGO roughly every month. Supplies have come freight) basis in Monrovia, and the traders generally from Limbe, Cameroon, and prior to that from SIR, obtain supplies in the Gulf of Guinea area—most Abidjan. They open a letter of credit outside Liberia, commonly from the Société Africaine de Raffinage (SIR) which can cost them from 3–7 percent of the cargo refinery (Abidjan, Côte d’Ivoire) or Société Nationale amount, depending on whether it is through a bank or de Raffinage (SNR) refinery (Limbe, Cameroon). The a quasi-bank (for example, a forfaiting house). In 2005 Port Gentil refinery (Gabon) has also been a source for prices paid for the delivered product were Platt’s FOB Liberia in the past. Med9 (0.2 percent S gasoil) plus US$72 per ton for AGO and Platt’s FOB Med (premium unleaded) plus US$63 Monrovia Oil Trading Corp (MOTC,) a Liberian company with Belgian owners, purchases through a large Belgian trading group, Belgische Olie Maatschappij N.V (BOM) 9 The SPOT Reference FOB product price for the Mediterranean which arranges the free on board (FOB) purchase region as provided by the Platt’s European product price through another trader (usually Addax); BOM also assessment service on a daily basis. Petroleum Fuel Supply for Power Generation 37 per ton for PMS. Compared with the pricing in the a few examples it appears that ambiguities remain to subregion, this total CIF differential of US$60 to US$70 be clarified: per ton above Platt’s FOB Med is unusually high, even for these small 3,000 to 7,000 ton cargo sizes. »» Premium motor spirit (PMS). Essentially the SIR, Abidjan, specification (that is, max. 0.013 g/l) is The Liberian importers attribute the high costs to two used, but it seems that a 0.8 g/l maximum lead factors: content is still permitted. Most cargos received have a very low lead content or are practically unleaded. »» The high risk premiums for Liberia charged on It is recommended that an unleaded criterion be FOB price, marine freight, and cargo insurance. clearly established (for example, maximum 0.001 For example, cargo insurance charges of 2 percent grams Pb/USG per ASTM D526). of total CIF cargo value have been observed. »» Automotive gas oil (AGO). The only content-related Normal cargo insurance rates average about 0.15 specification is for sulfur. Specifications with both percent. Freight premiums to compensate risk are 1.0 percent maximum and 0.5 percent maximum common on all goods arriving in Liberia. Apart from sulfur content have been observed as the governing perceived security risks, the deteriorated condition limits. It is recommended that the 0.5 percent of the receiving terminal and lack of acceptable be clearly established (maximum sulfur content international safety standards contributes to risk percent with 0.5 per ASTM D1551). premiums. »» An extremely tight market for oil products prevails in the Gulf of Guinea region at the moment. It Pricing and Taxation appears that high Nigerian demand combined with a nonperforming refining sector in Nigeria has caused In broad terms, a ceiling price for each product sold the market to soak up all products in the region. For to wholesale and retail consumers is established in a example, there is no surplus supply to be had out of collaborative process between the MCI and LPRC. It the SIR refinery, Abidjan, which would be the most is roughly based on Platt’s FOB Med reference price logical, shortest haul source for Liberia. The marine for the product at a given time plus allowances for freight from Limbe, Cameroon, is more costly than FOB premium, freight and insurance, onshore costs that from Abidjan by some US$15 to US$20 per ton. such as the LPRC storage and handling, maintenance, operator margins, and applicable taxes and government levies. The structure and adjustment process lacks Product Quality and Specifications transparency, however, and suffers from a lack of predetermined, regular adjustment procedures. The final There are no official national product specifications in price is maintained at the same level through political Liberia. It is common for a terminal (such as the LPRC intervention for lengthy periods, even as international PST) with commingled, fungible products from several prices fluctuate. Approved pump prices for products as through-putters to establish its own specifications. The published on the MCI website effective as of June 26, LPRC states that such standards are in place, but from 2009 are summarized in Table 4.4. Table 4.4  |  Price Ceiling for Petroleum Products (US$/gallon, effective June 26, 2009) PMS AGO Kerosene/Jet A-1 Wholesale/distribution 3.07 2.92 2.97 Retail 3.25 3.10 3.15 Source: MCI Website. Note: PMS = premium motor spirit; AGO = automotive gas oil. 38 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Future of the Sector completely different. The upstream resource-related area requires more involvement, including some intervention The progress of the sector, particularly downstream, in operations, while the downstream activities involving over the next few years is inexorably tied to the the commercial trading of commodities should be left to economic recovery now under way. The assumptions the private sector—but with strong oversight, regulation, presented for downstream sector activity depend on and enforcement, particularly in areas of health, safety, this as well as on certain policy measures as found and environmental and consumer protection. in Liberia’s National Energy Policy (NEP). Upstream activity will depend on the results of exploration now As is common practice in most countries, the activity of under way on several offshore blocks. receiving, storing, and shipping products at Monrovia’s PST should be privatized, but with open access provisos built into legislation, such that the entry fee for Institutional Developments import and distribution operators is minimized. The privatization exercise would be conducted, inter alia, The NEP recommends that the GOL establish the with an eye toward initializing the significant investment Liberia National Oil Corporation (LNOC) as the required to bring the receiving and storage facilities up government’s implementing agency for both upstream to international standards. and downstream operations. The LNOC would be created from a merger of the operations of the NOCAL Any suggestion about renewed oil refining in Liberia and LPRC and would oversee activities not transferred should be treated with great caution. Small-scale to the MLME or an also-recommended Energy refining that serves a small market exposed on the Regulatory Board (ERB). For upstream operations, the coast to international trade simply cannot compete policy of the GOL is to bring the country’s investment with the import of finished products from spot markets climate in line with international best practices so served by large, efficient, complex refineries. Larger- that the extraction of petroleum resources will benefit scale refining involving a major export business is all Liberians, and exploration and development will questionable. What advantage would Liberia have in be conducted in an environment-friendly manner. this regard when compared with the huge refining The GOL, with technical and operational assistance complexes in the Mediterranean and the medium-sized from LNOC’s upstream operations department, plants in the West African region such as SIR, Abidjan? would establish a fully transparent and accountable process for petroleum exploration and commercial development, with regulatory oversight by the ERB. Upstream Expectations For downstream operations, the NEP recommends that Although the geological and geophysical information on the GOL, with technical and operational assistance the Liberian offshore is sketchy at the moment, regional from LNOC’s downstream operations department, successes indicate that the future of Liberia as an oil support competitive private sector investment or producer may be a bright one. What actual opportunities participation in new storage depot management or exist should become much clearer in two or three years as ownership, port management, off-loading facilities for results of the first exploration and drilling activities start petroleum products, up-country storage depots, tankers to come in from the awarded blocks. moving petroleum products around the country, and construction and operation of a refinery primarily devoted to exports. Downstream Developments It is recommended that the GOL’s involvement in the Based on the trend seen during the brief recovery downstream sector be minimized. It is important to period 2003–09 and the demands seen preconflict, recognize that upstream and downstream petroleum are it is not inconceivable that Liberia’s market could Petroleum Fuel Supply for Power Generation 39 reach 500,000 tonnes/year by 2015. This assumes margins. That said, if there is no agency to handle that major components of the economy recover, such these decisions, they may be left to chance. Since as mining, regulated timber exploitation, and rubber the volumes are small, it would be difficult to justify as well as a significant amount of centralized power seeking expert help in procurement. generation. »» Storage facilities. There are approximately 37,000 barrels (5,700 tonnes) of old HFO tankage at As previously stated, above the jetty, the receiving the LEC site on Bushrod Island. This is sufficient pipelines and main PST in Monrovia are in a for the procurement quantities mentioned above. dangerously run-down condition and jeopardize the In addition, there is more tankage at this site health and safety of Liberians as well as the viability of identified as AGO tankage. One tank in particular, the economy as there are no reasonable alternatives with a capacity of 20,570 barrels (3,100 tonnes), for importing oil products in bulk if the jetty/PST could be used for HFO. goes down. This must be addressed. The World Bank– »» Receiving and transfer. The possibility of mooring financed intervention to build a new oil jetty is HFO vessels of appropriate size at the shoreline expected to be completed by 2012. near LEC or further away at Bong Mine pier would have to be investigated. The appropriate receiving and transfer pipelines, with requisite controls and Import of Heavy Fuel Oil pumping, would have to be verified and designed (tanker pumps may be adequate for discharging to Currently there is no possibility of supplying HFO to shore tanks). Liberia. There are several technical, commercial, and »» Security for products and facilities. Securing supply issues that must be resolved to make the supply products against pilferage and facilities against of HFO and related equipment possible: vandalism must be a concern at the outset. The LPRC’s experience has shown the high cost of »» The grade and specifications of HFO to be used looting and the difficulty of overcoming the tacit (for example, viscosity, sulfur content, and so on). acceptance of malevolent activities that benefit This issue relates to the utilization equipment (for far too many people (including shippers) to be example, low- or medium-speed diesel) as well easily abandoned. It is best that strict measures be as environmental emissions. It can also relate to imposed from the start of operations even if they supply economics—what is available in the region? seem costly and superfluous. »» Quantity. For example, 12 MW of power at an 80 percent load factor and 35 percent efficiency would These comments relate to fairly modest volumes of require about 20,000 tonnes per year of HFO or HFO corresponding to limited central power generation about 3,300 tonnes of cargo every 2 months. The facilities, say 20 to 30 thousand tonnes per year. For basis for such decisions would have to be defined. this purpose a feasibility study is under way, financed »» Procurement modality. Would there be a local by the World Bank, to examine how HFO pipelines agency capable of procuring HFO using and storage could be rehabilitated. The study, to be international competitive bidding (ICB), say, on completed in mid-2011, will consider alternatives for fuel- a yearly multicargo contract or an equivalent handling facilities and piping that will enable HFO to be negotiated contract with an international supplier/ supplied to a future HFO-fired power plant on Bushrod trader? Or should procurement be put in the Island, Monrovia. This analysis includes technical and hands of a local multinational through an “all-in� operational feasibility, environmental assessment and supply contract to handle all the details, including environmental management plans, rehabilitation costs, scheduling, letters of credit, and possibly even and review of the legal agreements needed for each some involvement in the receiving and handling alternative. The unloading options contemplated in this of installation investment. In the latter case, the analysis are: the existing crude storage terminal (CST), multinational would take appropriate significant the Bong Mining Company (BMC) pier, and the former 40 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series crude offshore unloading facility (COUF). A combination If Liberia really wants to import HFO in preconflict of storage fuel facilities are also included with the volumes for both, central power generation and mining consideration of the following options: two tanks in the activities (around 100,000 to 200,000 tonnes per year), CST and a large HFO tank in the BMC yard, both located a much more ambitious project must be developed. about 1.5 km from the Bushrod power plant; existing Professional companies such as TOTAL or Addax would tanks at LEC’s Bushrod Island; and a new HFO tank to definitely have a place in such a scheme, as would be constructed near the BMC-CST site in a joint venture perhaps mining companies with the procurement and with the LPRC. handling expertise necessary for these import volumes. Petroleum Fuel Supply for Power Generation 41 Beauty salon in Greenville, Sinoe County, Monrovia. Sector Financials 5 Financial Background infrastructure—such as power plants, substations, and transmission lines—was damaged or destroyed during When generating electricity, at a minimum, costs the civil war, and LEC’s operations ceased. should be fully recovered in order for the operation to remain viable. The financial situation of any power The GOL started a program to revive the Liberian sector is therefore crucial to assess before deciding electricity sector in 2006. Subsequently LEC began to its sustainability. This chapter presents an overview generate revenue again. The LEC’s operating revenue of the financial situation of Liberia’s energy sector growth has been substantial, from US$4.9 million in just preceding the conclusion of LEC’s management 2007 to US$8.8 million in 2009 as can be seen in contract. Table 5.1. The LEC is responsible for the major public electricity The operating ratio, defined as the ratio of operating supply throughout Liberia. It was established in July expenses to operating revenues, improved in 2007, but 1973 as a subsidiary of the Public Utility Authority due to the increase in plant fuel costs and administration (PUA), but became autonomous when the authority was expenses, deteriorated in 2008. As can be seen in dissolved in February 1976. Table 5.2, cash operating expenses exceeded operating incomes in 2008 and 2009. Accordingly, operating Before the civil war in Liberia (1989–2003), the LEC was expenses also increased to US$9.1 million in 2009 from in serious financial difficulties due to high nontechnical US$4.6 million in 2007. To close the LEC’s operating losses and poor collections. In the mid-1980s the LEC gap, the government contributed US$1.9 million both in supplied energy worth US$47.4 million, but its revenue 2007 and 2008, and US$2.2 million in 2009. Plant fuel was only about half that amount (US$23.7 million). Its costs significantly increased from 2007 to 2008 due acute financial difficulties had five fundamental causes: to an increase in the fuel price. Salaries also increased (i) a lack of autonomy; (ii) the seriously depressed state marginally from 2007 to 2009. of the Liberian economy; (iii) poor payment of bills by government institutions and public corporations; (iv) an extremely poor public image; and (v) a breakdown of Electricity Tariff Calculation management systems. The electricity tariff has been set at a level to cover The fundamental challenges faced by Liberia’s energy operating costs, including streetlights. The current sector were never fully solved due to the civil war. tariff is based on full operation and maintenance To complicate matters further, almost all energy (O&M) cost recovery with direct full cost of generation 43 Table 5.1  |  Operating Revenues (US$ thousands) 2007 2008 2009 % of Operating % of Operating % of Operating (US$) Income (US$) Income (US$) Income Energy Sales 2,988.60 60.3 3,859.90 65.8 6,385.50 72.3 Government Contribution 1,903.20 38.4 1,949.50 33.2 2,201.90 24.9 Prepaid Meter Sales 15 0.3 15 0.3 12.6 0.1 Power Connection Fee 18.6 0.4 6.4 0.1 66.9 0.8 Reconnection Fee 1 0.0 0.1 0.0 21.1 0.2 Sales of Fixed Assets 1.6 0.0 1.6 0.0 0 0.0 Other Income 30.5 0.6 32.5 0.6 149 1.7 Total Operating Revenues 4,958.80 100 5,865.40 100 8,837.30 100 Source: Annual reports of Liberia Electricity Corporation. Table 5.2  |  Cash Operating Expenses as a Percentage of Operating Revenues (%) 2007 2008 2009 Plant Fuel Cost 45 70 68 Salaries 3 4 5 Maintenance Cost 7 4 6 Administration Expense 27 29 22 Other Operating Cost 11 8 3 Total Operating Costs 93 116 104 Source: Annual reports of Liberia Electricity Corporation. passed through and applied uniformly to all customers. The retail tariffs are set by the LEC Board since Liberia Since LEC is operating on a cost-recovery basis, all does not have a regulatory agency. The methodology customers are required to prepay a month’s estimated used to determine the retail tariff is based on revenue electricity usage in advance, and delinquent customers requirements, which are normally assessed on a are disconnected. quarterly basis, and consists of dividing the actual costs for a quarter by the projected sales of electricity (in Although only set at levels to cover O&M costs, the kWh) for the following quarter (for example, quarterly current electricity prices are high and in the range costs/quarterly kWh). Diesel is purchased from total of US$0.40–US$0.50/kWh, mainly due to fuel costs. under three-month contracts at the full retail price set But this is lower than the cost of self-generation, by the LPRC. which is estimated at not less than US$0.75/kWh. The GOL subsidizes the balance of the LEC’s costs The calculation of the Liberian tariff takes into and is expected to continue doing so during the consideration the following: transition. 44 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series »» Generation cost (77 percent)—fixed cost of the Table 5.3  |  Evolution of the Liberia Electricity equipment (10 percent of generation cost), fuel cost Corporation Tariff since July 2006 (80 percent of generation cost), and O&M cost (10 Date Tariff (cts/kWh) percent generation cost). »» Transmission and distribution cost (5 percent) July–Oct 2006 43 under 20 percent technical and commercial losses Nov 2006–Feb 2008 34 (including theft)—US$0.02/kWh. Mar–July 2008 43 »» LEC costs, including administration expenses (23 Aug–Sept 2008 53 percent)—US$0.09/kWh (which is offset by the GOL subsidy of US$0.02/kWh for salary). Oct–Nov 2008 57 »» 93 percent collections efficiency. Dec 2008–Apr 2009 42 May–Oct 2009 45 Source: Annual reports of Liberia Electricity Corporation. Current Tariff Levels Table 5.3 summarizes recent electricity tariffs in Liberia. Tariff levels have been kept in the range of US$0.34– 0.43/kWh, but remained at high levels during the including exchange rate distortions and differing second half of 2008 in response to the rapid increases electricity resource bases, a detailed comparison in world oil prices. of rates would not be meaningful. Nevertheless, we conclude that Liberian power tariffs seem to be Figure 5.1 shows average tariff levels for a wide range much higher than those in any other Sub-Saharan of countries in Sub-Saharan Africa. Even the rates in African country. This indicates that over time tariffs Chad, Cape Verde, and Uganda—otherwise among the in Liberian business have to come down if Liberian highest tariff levels in Sub-Saharan Africa—are below businesses are to become competitive in the African the rates charged in Liberia. For several reasons, context. Figure 5.1  |  Power Tariffs in Sub-Saharan Africa 35 30 25 US cents 20 15 10 5 0 Chad Cape Verde Madagascar Uganda Burkina Faso Senegal Kenya Rwanda Cameroon Niger Benin Côte d’Ivoire Namibia Ghana Lesotho South Africa Mozambique Tanzania Ethiopia Congo Malawi Nigeria Zambia Source: Foster and Briceño-Garmendia, 2009. Sector Financials 45 Options for Part the development of liberia’s II Energy sector Least-Cost Energy System Expansion in the Medium-Term 6 T he aim of this section is to derive an optimal from the current analysis, and large private projects (for energy system expansion path for Liberia’s supply example, in the mining sector) are assumed to generate options in the medium term, between 2010 and enough power to meet their own needs in the medium 2015. A potential gap between power supply and demand term. is expected over this period of time. Clarifying how this gap will be filled is critical to support the reconstruction The system is assumed to absorb the suppressed of the electricity system in Monrovia in the medium demand incrementally year by year. Suppressed demand term, and the entire country in the long term. in Monrovia is large and currently met mainly through the use of private generators. But once tariffs are A bottom-up approach has been used to forecast lowered due to increased generation capacity and the supply-demand balance for the medium term. distribution efficiency, a large part of this suppressed This approach reflects the supply options currently demand will be quickly absorbed by the system, creating available on the ground or envisaged to be accessible jumps in the demand curve. To simplify the analysis and economically viable over the next five years. The but capture suppressed demand, the demand values available options include: (i) diesel generation—existing have been obtained by linear interpolation between the system; (ii) diesel generation—additional capacity reference points in 2009 and 2015, whereby the figure of 3 megawatts (MW) financed by the Norwegian for 2009 reflects actual demand for public electricity Agency for Development Cooperation (NORAD); during that year, and the figure for 2015 reflects the (iii) diesel generation—an additional capacity of 10 MW projected demand in accordance with the chapter on financed by the United States Agency for International electricity demand. Development (USAID); and (iv) the West African Power Pool (WAPP) Côte d’Ivoire, Liberia, Sierra Leone, and Figure 6.1 and Table 6.1 show the supply-demand Guinea (CLSG) transmission interconnection from balance between 2009 and 2015. For this analysis, 2015.10 only power supply options that are certain of being implemented, as reflected in available funding, are The demand is based on the analysis presented in the considered. This implies that only the existing and earlier chapter on Liberia’s energy demand. For the the NORAD- and USAID-financed diesel power plants purpose of the medium-term analysis, we assume that are dispatched. Additional power is envisaged to be only part of the total demand—that is, only commercial and residential demand in Monrovia—will be required 10 Detailed capacity, availability, units, and variable and total to be met by the Liberia Electricity Corporation (LEC) levelized costs for the different generation options are outlined grid. Demand from residential rural areas is excluded in the chapter describing the supply options. 47 Figure 6.1  |  Supply-demand forecast for the 2014. Only in 2015, when the WAPP CLSG comes online, medium term, 2010–15 can the gap be bridged. Table 3.1 suggests that among 50 the options available by 2012, heavy fuel oil (HFO) is 45 least cost. Peak Supply/Demand (MW) 40 35 Assuming an HFO-fired power plant can be financed, 30 the gap between the power demand and the supply 25 can be filled, as shown in Figure 6.2 and Table 7.1. In 20 the supply balance it is assumed that 10 MW would 15 10 be dispatched in 2013, and increased to a total of 15 5 MW in 2014. Such additional capacity will allow the 0 phasing out and decommissioning of some of the 2009 2010 2011 2012 2013 2014 2015 oldest and more costly diesel generators and will also Year guarantee additional capacity during peak hours, thus WAPP US diesel generation Norad avoiding load shedding. Further, the HFO plant would Existing diesel Demand provide a stable thermal backup for more intermittent Source: Authors’ calculations. hydropower beyond 2015. Because of the small size of the power addition, public financing is recommended. Advantages of public financing include the flexibility available through the WAPP CLSG transmission project of dispatching power without hampering the financial/ for which preparation is under way, and which is economic development of the power system through estimated to come online in 2015.11 At the same time it fixed purchasing power contracts for which dispatch has to be assumed that the installed diesel generators has to be maximized. Further, plant procurement is will wear out in advance of their expected lifetime due to generally fast once financing is available. their heavy usage, and thus supply from available units would slowly decline by 2015. The addition of HFO to the supply mix in the medium term will also allow power to be generated at a lower Figure 6.1 depicts clearly that the committed power in cost within a shorter time frame compared with existing the time frame 2009–15 would leave a gap in the supply- demand balance starting from 2012. The emerging gap 11 For the medium-term analysis, the WAPP Phase 1 (low- increases from about 4 MW in 2012 to about 13 MW in capacity) scenario is considered. Table 6.1  |  Supply-Demand balance and Generation Options by Year (MW) Total demand Diesel – existing (MW) Total supply Balance system Diesel – NORAD Diesel – USAID WAPP 2009 5.82 9.7 3.88 9.7 0 2010 19.02 12.7 –6.32 9.7 3 2011 22.456 22.7 0.244 9.7 3 10 2012 25.852 21.7 –4.152 8.7 3 10 2013 29.248 20.06 –9.188 7.06 3 10 2014 32.644 19.06 –13.584 6.06 3 10 2015 36 39.76 3.76 2.06 2 8 27.7 Source: Authors’ calculations. 48 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 6.2  |  Supply-Demand Forecast for the Figure 6.3  |  Average Generation Cost with and Medium Term, 2010–15, with HFO (MW) without HFO 50 0.35 Average Generation Cost ($US/KWh) 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 45 0.30 Peak Supply/Demand (MW) 40 0.25 0.25 35 0.25 0.22 30 0.20 0.17 25 20 0.15 15 0.10 10 0.05 5 0 0.00 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 Year Year WAPP HFO US diesel generation System without HFO System with HFO Norad Existing diesel Demand Source: Authors’ calculations. Source: Authors’ calculations. diesel generation. The phasing out of older diesel compared with US$0.32/kWh until 2014 and US$0.22/ generators will create additional savings opportunities kWh in 2015 for a system based solely on diesel for the Government of Liberia (GOL) and lower tariffs generation. for consumers. Figure 6.3 shows the average generation costs with and without HFO power plant addition.12 12 The average generation cost for each year is calculated Opting for a HFO-fired power plant will reduce the by considering the sum of the total levelized costs for each generation cost from US$0.32/kilowatt-hours (kWh) supply option and the relative power dispatched for that year, to US$0.25/kWh in 2013 and to US$0.17/kWh in 2015, weighted by the total capacity for that specific year. Least-Cost Energy System Expansion in the Medium-Term 49 Neighborhoods such as these have benefitted from the recent efforts to extend the electricity grid. West Point, Monrovia. Least Cost Energy System Expansion in the Long-Term 7 B eyond 2015 choices become more complex. and the electricity production cost of the alternatives Despite the significant uncertainties involved in considered at any point in time. This optimization is making such projections, especially against the subject to meeting electricity demand within acceptable postconflict background of Liberia, they may provide reliability levels and subject to supply constraints. important information for the development of the energy sector. As will be shown, this information not For reconstruction of the electricity sector in Liberia, only relates to suggestions for concrete projects to be consistent long-term planning is required to prioritize prioritized, but rather to understanding what questions the best development options. In this case, planning to ask as the country moves forward. needs to incorporate the specific characteristics of Liberia’s electricity sector, such as seasonal dependence on hydropower generation, the need for Methodology Used full sector reconstruction postconflict, the small size of the sector (which does not allow for economics of In planning power expansion the main objective is to scale), the high uncertainty of demand and supply, define which generation options should be added to and the need for and availability of donor community the system while minimizing the capital investment cost support. Table 7.1  |  Supply-Demand Balance and Generation Options per Year, with HFO (MW) Diesel – existing Diesel – Total demand Total supply Balance system NORAD Diesel – USAID HFO WAPP 2009 5.82 9.7 3.88 9.7 0 2010 19.02 12.7 –6.32 9.7 3 2011 22.456 22.7 0.244 9.7 3 10 2012 25.852 21.7 –4.152 8.7 3 10 2013 29.248 30.06 0.812 7.06 3 10 10 2014 32.644 34.06 1.416 6.06 3 10 15 2015 36 43.7 7.7 1 0 0 15 27.7 Source: Authors’ calculations. 51 For the purpose of simulating a least-cost expansion this implies a high capital investment cost that many plan, a General Algebraic Modeling System (GAMS) systems, especially in West Africa, have not been able to has been chosen (Turvey and Anderson, 1977). The afford. Best practices recommend 15 percent. To strike a GAMS provides a linear programming approach to the balance between what is technically necessary and what economic planning of power systems. It solicits a least- can realistically be expected in the context of Liberia, we cost power supply expansion plan subject to meeting assume a 10 percent operating reserve margin.13 Liberia’s demand. The calendar year 2010 was chosen as the base year for modeling periods of five-year intervals Second, no plant can be operated above its maximum through calendar year 2040. availability factor. The availability factor is defined as the ratio of actual power available (excluding any The costs of the supply alternatives that are specified downtime due to plan failure, maintenance, and so on) include both fixed and variable costs: the capital divided by the maximum power output if the plant were investment cost, operation and maintenance cost, to run continuously. The availability factor is specific to and fuel cost. These cost parameters are subject each technology alternative and reflects the rationing to local conditions and affect the annual levelized of its capacity due to overhaul and routine maintenance. cost, which in turn determines the merit order of the plants. The cost parameters included in this modeling Third, hydrological conditions in Liberia need to be exercise are based on feasibility studies, benchmarking captured in the least-cost analysis since they vary reflecting conditions similar to the Liberian context, greatly from season to season. As described in the and a sensitivity analysis. The feasibility studies for chapter discussing Liberia’s energy supply options. hydropower generation need to be updated to reflect Several studies looking at the hydropower potential in more accurate costs. Liberia point out that the dry season is from December to June and the wet season from July to November. Considering a long-term horizon of 30 years, the Therefore, seasonal shortages of water inflow or modeling objective function is a cost function that is possible requirements for irrigation and flood control minimized subject to the overall electricity demand will restrict the amount of energy to be produced. and formulates an investment program by searching The modeling captures this seasonality through the for the least-cost solution. As previously stated, the load factor of the plant, which is the average energy search for an optimum (least-cost) investment program produced divided by the theoretical maximum energy is subject to a number of technical conditions particular over a period of time. to Liberia’s power system. Fourth, seasonal fluctuations need to be compensated First, sufficient available installed capacity needs to be by thermal power generation. The modeling exercise operating at all times to meet the instantaneous peak captures this compensation by limiting the amount demand. This will require a specific level of operating of hydropower that can be allowed in the system. marginal reserves that ensures that enough electricity This is set as a fraction of the peak demand that the will be available to meet the real-time demand in the hydrocapacity will represent in the energy capacity event of any generation failure or unexpected increase mix. For the purpose of modeling, it is assumed that in peak demand. This will be reflected in the reliability hydropower generation can contribute as much as of the system provided by a specific level of operating hydrological conditions and storage capacity allow. marginal reserves but also represents an increase in the least-cost generation expansion of the system. In more developed systems, regulatory bodies usually require 13 A standard practice is around 15 percent of operating margin producers to maintain a constant operating reserve reserve, for example, the Electricity Reliability Council of margin of within 10–15 percent of normal capacity to Texas, Texas (2008 summer) reported 12.5 percent, and the Pennsylvania, Jersey, Maryland Power Pool (2008 summer) prevent supply disruptions due to breakdowns in the reported 26 percent. In the case of Liberia, 10 percent was system or sudden increases in energy demand. But assumed. 52 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Fifth, a constraint is imposed for the maximum capacity meeting growing demand, power plant constraints, and available for each technology over the 30-year time required reliability levels. The capital and operating cost frame. Supply alternatives are to be implemented of each supply alternative are combined and discounted in phases to avoid an oversized power plant when to obtain a net present value (NPV) of the total capital compared to demand. Therefore, the power capacity of investment required for each least-cost generation some supply alternatives increases over time depending expansion scenario. on the expected demand. In the case of the regional transmission line and hydropower generation, installed capacity also depends on construction scheduling. For Macroeconomic Assumptions example, due to an expected expansion of the WAPP CLSG transmission line in 2020, capacity will increase All costs incurred in the expansion of the system from the originally installed level. For the operation are stated in 2009 U.S. dollars. Price escalation is of any HFO-fired power plant, an operational fuel based on the manufactures unit value (MUV) index, unloading and storage facility is required. On the other which is generally accepted as a proxy for the price hand, some alternatives are not expected to increase of developing country imports of manufactured their capacity, and these will provide the same capacity goods in U.S. dollar terms. For example, World Bank over the complete scenario. Table 7.2 shows the upper procurement also utilizes MUV in assessing prospective bounds of capacity for each supply alternative. cost escalation for imported goods for World Bank– financed infrastructure. Another important assumption Fifth, decommissioning of plants is also considered in is the interest rate for capital investment, which is the modeling exercise, subject to the life span of each applied to past and future costs to determine the NPV. technology. (The life span is the average length of time In this regard, the interest rate will depend on the risk that the power plant can be in operation.) of lending to a national utility, and the possibility of obtaining soft government loans or guarantees for The model determines the overall production cost for investments; in the case of Liberia 12 percent was taken any additional capacity installed over time, subject to into account. Table 7.2  |  Upper Bound of Supply Alternatives’ Capacity Plant 2010 2015 2020 2025 2030 2035 2040 Diesel existing system 9.64 9.64 NORAD diesel 3 3 New diesel inf inf inf inf inf inf HFO inf inf inf inf inf inf Biomass—core scenario 30 30 30 30 30 30 WAPP (CI-L) low capacity 27.7 50.7 50.7 50.7 50.7 50.7 WAPP (CI-L) high capacity 50 90.6 90.6 90.6 90.6 90.6 Hydro 1: Mt. Coffee, phase 1 66 66 66 66 66 66 Hydro 2: Mt. Coffee–Via 66 66 66 66 66 Hydro 4: SP – 1B + SP – 2+ Via reservoir 198 198 198 198 198 Hydro 3: Mano River 90 90 90 90 Source: Authors’ calculations. Note: inf = infinite expansion possible, CI-L = Côte d’Ivoire – Liberia, Mt. = Mount Least Cost Energy System Expansion in the Long-Term 53 Scenarios Analyzed, and Findings will thus be covered through tariff payments from consumers outside of Liberia. The analysis of future supply requirements to meet demand is based on two scenarios of high and low The capacity available from the WAPP CLSG project will demand growth. A sensitivity analysis was carried out be fully used, even with the conservative assumptions to determine the effects of different capital investment underlying this scenario. As far as thermal power costs for HFO and the cost of electricity associated with is concerned, the use of HFO and diesel increase the WAPP CLSG transmission line. over time when the capacity limits of the WAPP CLSG transmission line are reached. The operating margin reserve requirements are met by diesel power Scenario 1: Conservative Demand generation since the unit capital investment costs for Growth diesel are the lowest of all options and this alternative is only being dispatched in the case of unexpected supply- This scenario presents the most conservative demand imbalance. Figure 7.1 shows the peak power assumptions in terms of demand growth and that each supply alternative needs to meet to satisfy supply alternatives. The investment costs taken demand at minimum cost, and Table 7.3 shows the into consideration represent the upper value of the installed capacity needed to meet the demand, subject benchmarking supply analysis conducted. In the case to operation constraints. of the regional WAPP CLSG transmission line, this scenario assumes low capacity due to the limited The combined construction of the Mt. Coffee and Via surplus that the neighboring countries interconnected reservoirs, which aims at providing better hydrologic to the line can contribute in terms of electricity. The distribution between dry and wet seasons as compared cost of electricity for the WAPP CLSG line in this with the construction of the Mt. Coffee reservoir alone, scenario is considered at the highest value, assuming and the core biomass scenario are not selected by the that the initial cost of power, which is based on gas- model as part of the least-cost expansion plan. The model fired power plants in Côte d’Ivoire, would prevail over searches for least-cost solutions based on the unit capital the lifetime of the transmission line. cost and variable cost. The above-mentioned projects represent high capital investment costs and significantly The model results indicate that the most economic higher variable costs in the case of the core biomass options for expanding the interconnected power system is a mixture of hydropower generation composed of the rehabilitation of the Mt. Coffee hydropower plant, Figure 7.1  |  Scenario 1 (Conservative Demand Saint Paul River development, and Mano hydropower Growth) Peak Capacity project, and an addition of thermal power provided 300 by diesel power generation, HFO, and the WAPP CLSG transmission line. The modeling exercise suggests the 250 use of Mt. Coffee capacity of 36 MW, Saint Paul River Peak Power (MW) 200 capacity of 45 MW, and Mano capacity of 50 MW as the optimum solution for hydropower generation. 150 The low-demand scenario does not create conditions 100 sufficient to achieve the economics of scale needed for 50 full dispatch of these hydropower plans. Therefore, the model proposes that the capacity and energy surplus, 0 which the original project can provide, be supplied 2010 2015 2020 2025 2030 2035 2040 into the WAPP transmission line, which is capable of H. Mano H. St Paul H. Mt. Coffee WAPP HFO absorbing the excess demand. The costs associated Biomass Leasing diesel New diesel Existing diesel with the investments and the generation of this surplus Source: Authors’ calculations. 54 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 7.3  |  Scenario 1 (Conservative Demand Growth) Installed Capacity and Peak Demand (MW) Supply alternative 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 New diesel 2 6 9 17 24 Leasing diesel 0 0 0 0 0 0 Biomass 0 0 0 0 0 0 HFO 4 28 28 50 114 183 WAPP 8 30 33 45 50 50 H. Mt. Coffee 36 36 36 36 36 36 H. Saint Paul 45 45 45 45 45 H. Mano 50 50 50 50 50 Total installed capacity 13 61 141 198 237 312 388 Total peak demand 6 37 104 131 159 214 269 Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. H. = hydropower. scenario. In the case of the Via reservoir, the capital US$0.14/kWh to US$0.11/kWh over the time horizon of this costs are too high. The discounted cost of the scenario is model investment.14 US$465 million. The average cost of generation decreases significantly over time when providing a mixture of supply alternatives that are less expensive than generation costs Scenario 1: Sensitivity analysis— based on diesel. The generation cost, therefore, decreases HFO-fired power plant capital cost to around 55 percent when compared to the current cost. variation It is expected, as is shown in Figure 7.2 that with this supply mix the average generation cost varies between As discussed in the previous section, scenario 1 indicates that a significant share of the installed capacity in Liberia’s least-cost expansion plan will be based on an HFO-fired power plant. Since HFO plays a significant role in the Figure 7.2  |  Scenario 1 (Conservative Demand least-cost expansion plan, it is important to assess how Growth) Average Cost of Generation its deployment would vary if capital costs were different. 0.35 In this regard, a sensitivity analysis based on different $0.318 capital investment costs for the HFO-fired power plant 0.30 was conducted. The capital cost of the HFO-fired plant 0.25 in scenario 1 is US$1,470/kW installed, and at the very (US$ / kWh) 0.20 0.15 $0.139 $0.124 $0.120 $0.108 $0.108 $0.116 14 The average cost of electricity is based on the fixed costs, 0.10 represented largely by the capital investment costs and the variable costs reflecting the O&M and fuel costs. The fixed 0.05 generation cost is calculated based on a weighted average in which 0.00 each quantity of power is assigned a weight based on the capacity 2010 2015 2020 2025 2030 2035 2040 that each technology alternative contributes to the entire system. Similarly, the variable cost assigns a weight based on the power Source: Authors’ calculations. that is actually dispatched by each supply technology. Least Cost Energy System Expansion in the Long-Term 55 high end of these types of plants. The literature suggests dispatched, and the Mt. Coffee and Mano hydropower that investment capital costs range from US$1,100 to plants. The Saint Paul hydropower project is not selected US$1,320/kWh for HFO plant to be plausible. as part of the least-cost expansion plan. Diesel- and HFO-fired generation contributes significantly from Considering a lower investment cost of US$1,100/kW, 2030 to 2040, when the capacity limits of the WAPP the discounted cost of this scenario is US$427 million, CLSG transmission line are reached. Figure 7.3 shows 8 percent lower when compared with scenario 1. But the least-cost expansion plan. the model only selects as its least-cost expansion plan the HFO-fired power plants, the Mt. Coffee hydropower plant, the Saint Paul River project, and the Mano Scenario 1: Hydropower development hydropower plant. The WAPP CLSG transmission line limited to the Mt. Coffee plant is not selected as part of the least-cost solution since the unit capital cost is not competitive with the HFO Scenario 1 indicates that both the Mt. Coffee and unit capital costs. Therefore, this power supply mix is Saint Paul River projects will be needed to meet the heavily exposed to fuel price fluctuations, and larger demand. Therefore, this sensitivity analysis here aims at investments will be required to handle and store HFO— capturing the effects of only developing the Mt. Coffee especially by 2035, when HFO reaches about 50 percent project and no other hydropower plant. This sensitivity of the installed capacity. analysis shows that the discounted cost of expanding the system with limited hydropower contribution will be When using a US$1,320/kW investment cost for HFO, US$567 million, around 22 percent higher than the base the discounted cost of this scenario is US$462 million, scenario. Since only the Mt. Coffee plant is available, 2 percent less than the base scenario. The supply mix thermal capacity is compensating for the lack of this includes the Mt. Coffee hydropower plant, the WAPP CLSG energy and the operating costs increase significantly, transmission lines, the HFO-fired power plants, and diesel around 50 percent when compared with the base generation. The latter is only selected to meet the peak scenario. demand and as an operating margin reserve. Scenario 1: Sensitivity analysis—WAPP Figure 7.3  |  Scenario 1 (Conservative Demand CLSG transmission line—higher Growth) Sensitivity Analysis Considering WAPP capacity and lower cost Higher Supply Capacity and Lower Electricity Cost This scenario considers that the WAPP CLSG regional transmission line will provide higher capacity to supply 300 the power system of Liberia, and the cost of electricity 250 Power Dispatched (MW) will be reduced. This scenario is based on the assumption 200 that an energy surplus is available from neighboring countries, mainly Côte d’Ivoire and Guinea, and that the 150 cost reduction based on the hydropower development 100 in Guinea will lower the cost when compared to the cost related to gas power generation from Côte d’Ivoire 50 in scenario 1. As a result, this scenario provides a 0 discounted capital cost of US$449 million, 2 percent 2010 2015 2020 2025 2030 2035 2040 less than the base scenario. H. Mano H. St Paul H. Mt. Coffee WAPP HFO Biomass Leasing diesel New diesel Existing diesel The supply mix relies significantly on the power provided Source: Authors’ calculations. by the WAPP CLSG transmission line, which is fully Note: HFO = heavy fuel oil; WAPP = West African Power Pool. 56 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series In this sensitivity scenario, the energy mix is composed Figure 7.4  |  Scenario 1 (Conservative Demand only of Mt. Coffee, at 36 MW, the WAPP CLSG transmission Growth) Sensitivity Analysis Considering line (which is fully dispatched), HFO, and diesel. The Limited Hydropower Development latter is only selected to meet the operating margin 300 reserve. Figure 7.4 presents the energy mix of the peak supply to meet the peak demand, and Table 7.4 presents 250 Power Dispatched (MW) the installed capacity of Liberia’s interconnected system 200 if the Saint Paul River and Mano projects were not being developed. 150 100 50 Scenario 1: Sensitivity analysis— biomass-fired power plant capital cost 0 2010 2015 2020 2025 2030 2035 2040 variation H. Mano H. St Paul H. Mt. Coffee WAPP HFO Biomass Leasing diesel New diesel Existing diesel As discussed in the previous section, scenario 1 indicates that the core biomass scenario is not selected as part Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool; H. = hydropower. of the least-cost expansion plant due to the high unit capital cost, estimated at US$4,167/MW installed. Since Liberia is endowed with significant renewable energy resources, including biomass, and this fuel can play a costs for a biomass plant. In particular, an investment significant role in the least-cost expansion plan, it is capital cost of US$2,419/MW installed was assumed. As important to assess how its deployment would vary discussed in the supply energy options chapter, this is if capital costs were different. A sensitivity analysis considered to be within the usual range for this type of was conducted based on different capital investment plant. Table 7.4  |  Scenario 1 (Conservative Demand Growth) Total Capacity and Demand if Limited Hydropower Plants are Developed Supply alternative 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 0 0 0 0 0 New diesel 0 0 2 6 6 17 17 Leasing diesel 0 0 0 0 0 0 0 Biomass 0 0 0 0 0 0 0 HFO 0 4 52 84 123 150 211 WAPP 0 8 48 50 50 50 50 H. Mt. Coffee 0 36 36 36 36 36 36 H. Saint Paul 0 0 0 0 0 0 0 H. Mano 0 0 0 0 0 0 0 Total capacity 13 61 138 176 215 253 313 Total peak demand 6 37 104 131 159 214 269 Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. H.=hydropower. Least Cost Energy System Expansion in the Long-Term 57 Despite significant biomass resources in Liberia, there Saint Paul hydropower project is no longer selected is no consensus on the amount of power that can be as part of the least-cost expansion plan. Diesel- and generated from the various renewable resources in a HFO-fired generation contributes to power only from sustainable from. In assessing the power generation 2020 to 2040, since in 2015 there is sufficient capacity potential of selected crops, Milbrandt (2009) estimated provided by the Mt. Coffee plant and the biomass that if only 10 percent of the available cropland were benchmarking alternative. Figure 7.5 shows the supply dedicated to oil palm, coconut, or sugarcane, 27,452 mix found to be the most economic solution. gigawatt-hours (GWh) could be generated for electricity consumption, representing 3.7 million hectares.15 On the other hand, according to independent reports Scenario 1: Sensitivity analysis—No (Aah-Kee 2009; Krishnan 2009), a scoping study has trade available identified five sites of rubber plantations with a power generation potential to support 80 MW of biomass-fired This scenario is based on the assumption that no power plants, which represent around 2,500 hectares power exchange will be available with neighboring of rubber trees per year. Therefore, rubber trees have countries, and therefore no interconnection with the been selected as a type of fuel and, given the generation WAPP CLSG transmission line will be implemented. potential estimated for this fuel, a sensitivity analysis The purpose of this scenario is to derive the benefits has been undertaken assuming a maximum power of transmission interconnection for Liberia with its capacity of 80 MW. neighboring countries. The supply alternatives considered under this scenario include the Mt. Coffee The discounted cost of this scenario is US$380 million, and Saint Paul projects for hydropower generation, 1.2 percent less than scenario 1. At a lower capital and HFO, diesel, and biomass for thermal generation. cost, the least-cost expansion plan now selects the The Mano hydropower plan is not taken into account biomass plant at full capacity. The remainder of the since the development of the project is dependent supply mix relies significantly on the power provided on the construction of the WAPP CLSG transmission by the WAPP CLSG (fully dispatched) transmission line, line. The results indicate that the cost of the least-cost and the Mt. Coffee and Mano hydropower plants. The expansion plan under this scenario is 11 percent higher when compared with the base scenario: the discounted capital cost of this investment is estimated at US$516 million. Figure 7.5  |  Scenario 1 (Conservative Demand Growth) Sensitivity Analysis Considering The energy mix of this scenario relies significantly Biomass Benchmarking Costs on the construction of HFO and diesel. With respect 300 to hydropower, the model selects 36 MW of the Mt. 250 Coffee and 70.5 MW of the Saint Paul projects. The biomass supply option is not selected as part of the Peak Supply (MW) 200 least-cost expansion. Diesel generation is still heavily 150 used from the years 2030 to 2040 to compensate for the lack of power that the WAPP CLSG transmission 100 line or the Mano hydropower project would provide. 50 Figure 7.6 and Table 7.5 show the peak supply mix of the system. 0 2010 2015 2020 2025 2030 2035 2040 H. Mano H. St Paul H. Mt. Coffee WAPP HFO Biomass Leasing diesel New diesel Existing diesel 15 Liberia’s agriculture potential is estimated at 3.7 million Source: Authors’ calculations. hectares of arable land, which represent 38 percent of the Note: HFO = heavy fuel oil; WAPP = West African Power Pool. total land area. 58 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Scenario 2: High demand growth Figure 7.6  |  Scenario 1 (Conservative Demand Growth) Sensitivity Analysis when Power Trade The most significant drivers of energy demand in the is not Possible interconnected system are gross domestic product (GDP) 300 growth, the LEC’s ability to better attract large consumers 250 that can be connected to a more reliable and less expensive Peak Power (MW) electricity system than offered by self-generation, and the 200 interconnection of the mining sector with the system. In 150 scenario 2, high demand growth is considered. Further, the investment costs taken into consideration represent 100 the upper value of the benchmarking supply analysis. In 50 the case of the regional transmission line, the capacity is assumed to be low due to the limited surplus that 0 2010 2015 2020 2025 2030 2035 2040 the neighboring countries can contribute. The cost of H. Mano H. St Paul H. Mt. Coffee WAPP HFO electricity is assumed to be high since it is foreseen that Biomass Leasing diesel New diesel Existing diesel power will initially be provided by the Côte d’Ivoire power Source: Authors’ calculations. system, which is based significantly on gas-fired power Note: HFO = heavy fuel oil; WAPP = West African Power Pool; H. = hydropower generation. The most economic options for expanding the interconnected power system are a mixture of addition of thermal power provided by diesel power hydropower generation including the Mt. Coffee generation, HFO, and the WAPP CLSG transmission hydropower plant rehabilitation, the Saint Paul line. The least-cost expansion plan includes the River and Mano hydropower development, and an following hydropower mix: the complete capacity of Table 7.5  |  Scenario 1 (Conservative Demand Growth) Total Capacity and Demand when Power Trade is Not Possible 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 0 0 0 0 0 New diesel 0 5 35 35 35 35 35 Leasing diesel 0 0 0 0 0 0 0 Biomass 0 0 0 0 0 0 0 HFO 0 8 71 71 82 157 233 WAPP 0 0 0 0 0 0 0 H. Mt. Coffee 0 36 36 36 36 36 36 H. St Paul 0 0 0 0 71 71 71 H. Mano 0 0 0 0 0 0 0 Total capacity 13 61 143 143 224 299 375 Total peak 6 37 104 131 159 214 269 demand Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool; H.=hydropower. Least Cost Energy System Expansion in the Long-Term 59 the Mt. Coffee project at 66 MW, Saint Paul River significantly when providing a mixture of supply project at 124 MW, and Mano project at 50 MW. In alternatives that are less expensive than the generation this scenario, the capacity and energy surplus from cost based on diesel, as was the case in 2010. The the Saint Paul River can be supplied into the WAPP generation cost, therefore, decreases around 50 percent transmission line. The costs associated with the when compared to the cost in 2010. As is shown in investments and the generation costs of this surplus Figure 7.8, with this supply mix the average generation will be covered by customers outside of Liberia’s cost varies between US$0.17/kWh to US$0.15/kWh over interconnected power system. the model’s time horizon.16 The increase of the average cost of generation compared with the conservative Additional power will be provided by diesel power scenario relies on the investment requirements of the generation, HFO, and the WAPP CLSG transmission hydropower plants. line. Figure 7.7 shows the peak power that each supply alternative provides to the system to satisfy the demand at minimum cost, and Table 7.6 shows the Scenario 2: Sensitivity analysis— installed capacity needed to meet the demand subject HFO-fired power plant capital cost to operation constraints. variation The proposed core biomass scenario and the combined This high demand growth scenario will require Mt. Coffee and Via reservoir options are not selected by developing Liberia’s hydropower potential. But the the model as part of the least-cost expansion plan. The system will still rely on installed capacity based on model searches for least-cost solutions based on the HFO-fired power plants to compensate for the high unit capital cost and the variable cost, and both costs are significantly higher when compared to the other supply alternatives. Figure 7.8  |  Scenario 2 (High Demand Growth) The discounted cost of the entire scenario is US$1,135 Average Cost of Generation million. The average cost of generation decreases 0.35 $0.320 0.30 0.25 (US$ / kWh) 0.20 Figure 7.7  |  Scenario 2 (High Demand Growth) $0.165 $0.163 $0.160 $0.158 0.15 $0.147 $0.154 Peak Capacity 700 0.10 600 0.05 500 0.00 Peak Supply (MW) 2010 2015 2020 2025 2030 2035 2040 400 Source: Authors’ calculations. 300 200 16 The generation average cost for electricity is based on the 100 fixed costs, represented largely by capital investment costs 0 and variable costs reflecting the O&M and fuel costs. The fixed 2010 2015 2020 2025 2030 2035 2040 generation average cost is computed on a weighted average H. Mano H. St Paul H. Mt. Coffee WAPP HFO basis in which each quantity of power by each technology is Biomass Leasing diesel New diesel Existing diesel assigned a weight based on the capacity that each alternative contributes to the entire system. Similarly, the variable cost Source: Authors’ calculations. assigns a weight based on the power that is actually dispatched Note: HFO = heavy fuel oil; WAPP = West African Power Pool. by each supply technology. 60 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 7.6  |  Scenario 2 (High Demand Growth) Total Capacity and Demand 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 New diesel 0 26 26 31 71 79 79 Leasing diesel 0 0 0 0 0 0 13 Biomass 0 0 0 0 0 0 0 HFO 0 36 36 101 193 393 599 WAPP 0 28 28 50 50 50 50 H. Mt. Coffee 0 66 66 66 66 66 66 H. St Paul 0 0 124 124 124 124 124 H. Mano 0 0 0 50 50 50 50 Total capacity 13 169 280 422 554 762 981 Total peak demand 6 109 190 284 378 528 679 Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool; H.= hydropower. seasonality of hydropower in Liberia. Since HFO retains River, and Mano projects are selected as the most a significant share in the least-cost expansion plan, economic alternatives. The variation of the unit capital it is important to determine the sensitivity of this cost of the HFO-fired power plant will have an impact share in relation to the capital cost of this technology. on developing the Saint Paul River project, which A sensitivity analysis based on different capital is sensitive to the investment cost of the different investment costs for HFO-fired power plants was technologies. conducted. The assumptions for the investment capital costs for the sensitivity analysis range from US$1,100 to US$1,320/kWh. Scenario 2: Sensitivity analysis—WAPP CLSG higher capacity and lower cost Considering a lower investment cost of US$1,100/ kW, the discounted capital cost of this scenario is This scenario assumes that the regional transmission US$965 million, 14 percent less when compared with line will provide higher capacity to supply the power scenario 2 for high demand growth. But the model system of Liberia and that the cost of electricity will only selects, as the most economic option, HFO-fired be lower than in the previous scenario. The discounted power plants and the Mt. Coffee project, Saint Paul cost of this scenario is US$1,114 million, 1.3 percent River project, and Mano hydropower plant. The WAPP less than the base scenario for high demand growth. CLSG transmission line is not selected as part of the The hydropower mix of the least-cost expansion plan least-cost solution. comprises the Mt. Coffee project at 66 MW, Saint Paul River project at 91 MW, and Mano project at 50 MW. When using the US$1,320/kW investment cost, the Although this scenario reduces the need for capital discounted capital cost of this scenario is US$932 investment costs, the operating costs increase 20 million, about 17 percent less than scenario 2. The percent compared with scenario 2 for high growth. system requires complete utilization of the WAPP CLSG Figure 7.9 shows the supply mix found to be the most transmission line and diesel generation to meet the economic solution. operating margin reserve. The Mt. Coffee, Saint Paul Least Cost Energy System Expansion in the Long-Term 61 Figure 7.9  |  Scenario 2 (High Demand Growth) the Mt. Coffee project and evaluates the impacts in Sensitivity Analysis Considering WAPP Higher terms of investment in Liberia’s interconnected power Supply Capacity and Lower Electricity Cost system. This analysis shows that the discounted cost 700 of expanding the system with limited hydropower contribution will be US$1,174 million or only 3 percent 600 more than the cost of scenario 2. Power Dispatched (MW) 500 400 In this sensitivity analysis, the energy mix is composed 300 of the Mt. Coffee project at 66 MW, the WAPP CLSG (fully dispatched) transmission line, HFO, and diesel. 200 This scenario relies significantly on HFO and diesel 100 power generation, which exposes Liberia’s power sector 0 to fuel oil fluctuations. Figure 7.10 presents the energy 2010 2015 2020 2025 2030 2035 2040 mix of the peak supply to meet the peak demand, and H. Mano H. St Paul H. Mt. Coffee WAPP HFO Table 7.7 presents the installed capacity of Liberia’s Biomass Leasing diesel New diesel Existing diesel interconnected system if the Saint Paul River and Mano Source: Authors’ calculations. projects were not to be developed. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. Scenario 2: Sensitivity analysis— Biomass power plant capital cost Scenario 2: Hydropower development variation limited to Mt. Coffee plant As discussed above, scenario 2 indicates that the core This sensitivity analysis aims at capturing the effects biomass scenario is not selected as part of the least- of not developing any hydropower plant except for cost expansion plan due to the high unit capital cost, estimated at US$4,167/kW installed. In this sensitivity analysis, the impact of a different capital investment Figure 7.10  |  Scenario 2 (High Demand Growth) cost for the biomass plant is evaluated considering a Sensitivity Analysis Considering Limited maximum installed capacity of 80 MW for the biomass Hydropower Development plant. The literature suggests that an investment capital 700 cost of US$2,419/kWh installed is in the range that can be expected. 600 500 Peak Supply (MW) The discounted cost of this scenario is US$987 million, 400 13 percent less when compared to scenario 2. Under 300 this scenario, the biomass plant is fully dispatched. The supply mix relies significantly on the power provided 200 by the WAPP CLSG (fully dispatched) transmission line, 100 Mt. Coffee project, Saint Paul River project, and the 0 Mano hydropower plant. The HFO-fired power plants 2010 2015 2020 2025 2030 2035 2040 are still a significant share of the total installed capacity. H. Mano H. St Paul H. Mt. Coffee WAPP HFO Figure 7.11 shows the supply mix found to be the most Biomass Leasing diesel New diesel Existing diesel economic solution. Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. 62 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 7.7  |  Scenario 2 (High Demand Growth) Total Capacity and Demand if Limited Hydropower Generation is Developed 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 New diesel 6 18 60 60 60 79 Leasing diesel Biomass HFO 54 131 222 351 558 746 WAPP 28 50 50 50 50 50 H. Mt. Coffee 66 66 66 66 66 66 H. St Paul H. Mano Total capacity 13 154 265 397 527 733 941 Total peak demand 6 109 190 284 378 528 679 Source: Author’s calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. H. = hydropower. Scenario 2: Sensitivity analysis— lack of power that the WAPP CLSG transmission line or No trade available the Mano hydropower project would provide. Figure 7.12 and Table 7.8 below shows the peak supply mix of the This scenario assumes that no power exchange will system. be available with neighboring countries, and therefore no interconnection with the WAPP CLSG transmission line will be implemented. The supply alternatives considered under this scenario include the Mt. Coffee Figure 7.11  |  Scenario 2 (High Demand Growth) and Saint Paul projects for hydropower generation, and Sensitivity Analysis Considering Biomass HFO, diesel, and biomass for thermal generation. The Benchmarking Costs Mano hydropower plant is not taken into account since the development of the project is dependent on the 700 construction of the WAPP CLSG transmission line. The 600 results indicate that the cost of the least-cost expansion 500 Peak Supply (MW) plan under this scenario is 10 percent higher when 400 compared to scenario 2—the discounted capital cost of 300 this investment is estimated at US$1,254 million. 200 The energy mix of this scenario relies significantly on 100 HFO and diesel generation. With respect to hydropower, 0 the model selects the full capacity of Mt. Coffee (66 MW) 2010 2015 2020 2025 2030 2035 2040 and 170 MW of the Saint Paul River project. The biomass H. Mano H. St Paul H. Mt. Coffee WAPP HFO supply option is not selected as part of the least-cost Biomass Leasing diesel New diesel Existing diesel expansion. Diesel generation increases significantly Source: Authors’ calculations. from the years 2030 to 2040 to compensate for the Note: HFO = heavy fuel oil; H. = hydropower. Least Cost Energy System Expansion in the Long-Term 63 Table 7.8  |  Scenario 2 (High Demand Growth) Total Capacity and Demand when Power Trade is not Possible 2010 2015 2020 2025 2030 2035 2040 Existing diesel 13 13 New diesel 38 38 68 103 103 103 Leasing diesel Biomass HFO 54 54 151 248 454 661 WAPP H. Mt. Coffee 66 66 66 66 66 66 H. St Paul 170 170 170 170 H. Mano Total capacity 13 171 327 454 586 793 999 Total peak demand 6 109 190 284 378 528 679 Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool. H. = hydropower. Summary of scenarios analyzed Figure 7.12  |  Scenario 2 (High Demand Growth) (high and low scenarios) Sensitivity Analysis when Power Trade is not Possible Table 7.9 displays the overall discounted capital cost 700 for expanding the electricity sector of Liberia based on 600 the demand and supply assessment, as described in the 500 Peak Supply (MW) previous sections. 400 300 200 100 0 2010 2015 2020 2025 2030 2035 2040 H. Mano H. St Paul H. Mt. Coffee WAPP HFO Biomass Leasing diesel New diesel Existing diesel Source: Authors’ calculations. Note: HFO = heavy fuel oil; WAPP = West African Power Pool; H. = hydropower. 64 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 7.9  |  Discounted Costs for Liberia’s Least-Cost Expansion Plans under Different Scenarios (US$ millions) Discounted Discounted Capital Cost Operating Cost Scenario Demand WAPP Capacity WAPP Price 2010 2010 Total Scenario 1 Low Low High $172 $292 $465 HFO: US$1,100/kW Low Low High $172 $255 $427 HFO: US$1,320/kW Low Low High $163 $289 $453 WAPP high capacity Low High Low $143 $306 $449 Hydro only Mt. Coffee Low Low High $129 $438 $567 Biomass benchmarking 80 MW Low Low High $161 $236 $398 No trade (no WAPP) Low — — $188 $328 $516 Scenario 2 High Low High $447 $687 $1,135 HFO: US$1,100/kW High Low High $367 $598 $965 HFO: US$1,320/kW High Low High $308 $623 $932 WAPP high capacity High High Low $363 $751 $1,114 Hydro only, Mt. Coffee High Low High $276 $899 $1,174 Biomass benchmarking 80 MW High Low High $307 $680 $987 No trade (no WAPP) High — — $493 $760 $1,254 Source: Authors’ calculations. Note: — Not available. HFO = heavy fuel oil; WAPP = West African Power Pool. Least Cost Energy System Expansion in the Long-Term 65 Charcoal vendor at Old Road charcoal market, Monrovia. Models for Providing Modern Energy Services in Rural Liberia 8 A ccording to Liberia’s 2008 population and commercial connections from a diesel generator. As housing census, about 53 percent of the shown in the previous chapters, the supply scenarios nation’s population resides in rural areas, currently being planned or considered for Liberia with the remainder in urban areas that include will change this situation, particularly as the WAPP Monrovia, county capitals, and border towns with low-voltage, cross-border interconnection with Côte relatively large populations. For the purposes of D’Ivoire, which stands to benefit the residents of energy planning and analysis, though, there are two Maryland, Grand Gedeh, and Nimba counties, and the categories much more significant in Liberia than WAPP CLSG will be constructed. As the interconnected “urban� and “rural:� on-grid and off-grid. Prewar, power system in Liberia increases its supply options Liberia’s power grid was limited to Monrovia and through the installation of HFO, biomass plants, and/ three radial lines that reached Robertsport, Totota, or other alternatives, and as Mt. Coffee and other and Buchanan. In addition, there were small isolated hydropower schemes come online over time, residents power systems operated by the LEC in select county of Monrovia and the adjacent counties will also see capitals of the interior, including Zwedru, Greenville, expanded access to electricity services. Nonetheless, Harper, Sanniquellie, Gbarnga, Robertsport, and this still leaves a large swath of the country in the Voinjama, and a few other towns including Kolahun, dark. Cestos, Ganta, Bellefanai, and Yekepa. But the vast majority of the country depended on self-generation The purpose of this chapter is to consider strategies or lacked energy services entirely. that have worked for rural electrification in other developing countries, and to identify strategies that Liberia’s National Energy Policy (NEP) states that for will work for Liberia’s off-grid areas, be they urban or the purposes of energy planning all areas outside of rural. In the near term, the World Bank will assist the Monrovia are considered “rural,� as the national grid Liberian government in the development of an energy and its utility do not extend beyond Monrovia. For sector master plan, to include grid development, as well that reason, in this chapter “rural� will be considered as a rural energy master plan. It is outside the scope of synonymous with “off-grid.� this report to identify exact grid-extension scenarios, given the uncertainty of the supply strategy at present. Today the Monrovia power grid covers only a portion of Instead, this chapter will consider those general areas the city, and there are no other energy services offered that will not be grid connected in the foreseeable outside of Monrovia. One exception is the limited future, with a focus on technology, supply, and financing municipally run mini-grid in Gbarnga, which supplies options for meeting the needs of those areas with street lighting and a small number of residential and modern energy services. 67 Best Practices in Rural system could be established. This grid system would Electrification not necessarily be connected to a national system but might stand on its own. This mining company The recent literature indicates that there is not one would generate power from the source used for its proper way to do rural electrification. That said, an own operations. A distribution company based on underlying set of principles needs to be followed for the cooperative model could make connections and programs to be successful. Moreover, the institutional collect tariffs. In another area with less population form is not as important as the adherence to strict density, such as Cestos City, a private company based business principles in providing rural electricity services. on a dealer sales-and-service model could sell and install solar home systems (SHSs) for residential and The main principles that have proved successful in commercial customers far from the grid. countries with strong rural electrification programs such as Bangladesh, Chile, China, Costa Rica, Mexico, the Philippines, Thailand, and Tunisia are: Utilities and Main Power Companies (i) adherence to a sound financial and economic basis for electrification; and (ii) staying clear of politics and Successful in many countries—such as Mexico, Thailand, corruption. To ensure that these principles are adhered and Tunisia—utilities probably constitute the most to, it will be important to set out transparent criteria for common path to rural electrification when access rates prioritizing areas for electrification—whether through to electricity services are very low. Recently, many grid extension or off-grid mechanisms—as well as, for development practitioners have become blind to well-run off grid, criteria for choosing the technology and scope public companies, insisting that companies must become of electrification. Selection criteria need to incorporate private even under the most adverse circumstances. It is financial and economic principles, and results must be true that privatization of public companies is a worthy monitored and verified. goal, since many public companies are inefficient and driven by political agendas. But many public sector Many countries have successfully provided electricity to electricity companies were created because the private their rural populations, both on and off grid. In Thailand companies that they replaced were in the business of over 95 percent of rural people have electricity. In making profits rather than extending services to the Costa Rica cooperatives and the government electricity rural poor (Barnes, 2005). utility provide electricity to over 95 percent of the rural population. In Tunisia over 85 percent of rural The problem with using main power companies for rural households have access. Other success stories in the electrification programs is that they often have difficulty developing world include Bangladesh, Chile, China, meeting the special demands of rural distribution. For Mexico, and the Philippines. Thus, there are many good integrated power companies, the rural consumer makes examples of successful programs to counterbalance up such a small part of the business clientele, that those that have experienced problems. An overview of companies often do not pay attention to the numerous successful programs is presented in Table 8.1. ways it is possible to minimize the costs of servicing rural areas. The result is that rural electrification Access models for rural electrification are varied and becomes a tolerated loss maker, and ways are found to include utilities, rural electric cooperatives (RECs), cut corners in terms of customer service. For instance, decentralized electrification companies, and private rural customers are more often than not the first to be electrification companies, which include several models cut off when there are problems with power supply in themselves. Several approaches may be employed in developing countries. one country simultaneously. For example, in Liberia, a private concession such as a mining concession Success stories of public utilities that have undertaken might offer electricity to residents of one of the rural major rural electrification projects include the Provincial towns, where, due to the high population density, a grid Electricity Authority (PEA) in Thailand and Société 68 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 8.1  |  Best Practices of Successful Rural Electrification Programs Agency responsible Sources Service providers (Planning, fund for rural (Construction, management, and electrification distribution, Country so on) funds Subsidies Tariff billing, and so on) Chile PER—a RE program Government Subsidies cover 75–80% Cost- Private companies under the National budget of construction costs, with recovery Energy Commission a well-defined selection tariff process and criteria. Tunisia Regional offices Government Subsidy level increased from Universal Public utilities under STEG—a budget (90%) and US$350/connection 20 years tariff public vertically donors ago to US$1,600/connection. integrated utility Consumers and utility share the costs. Thailand Office of Rural Cross-subsidy, Soft loans from donors and Fixed Electrification in the World Bank, lower bulk supply rate. charge and Provincial Electricity donors increasing Authority (PEA)—a block rate public distribution company Mexico CFE—a public utility Government Operating subsidies to Increasing budget utilities. block tariffs Capital subsidies from the Social Infrastructure Fund to communities, who approach regional utilities. Bangladesh RE board under the USAID, World 3% loans and lower bulk Operation REC Ministry of Energy Bank supply rates. cost with 63 RECs TA grants and concessional recovery loans from donors. after 5 years The National USAID, Grants and concessional Cost- Philippines Electrification World Bank, loans. recovery Administration with government tariffs 36 RECs budget Costa Rica US National Rural USAID USAID loans—40 years with Cost- Electric Cooperative a grace period of 10 years recovery Association with 4 with an annual interest rate tariffs with RECs of 1–2.5%. break-even Communities pay 30% of after 5 years connection costs. China Ministries of Power, Government Government grants, Cost- Decentralized Water Resources, budget concessional loans, and low- recovery companies and Agriculture cost construction material. tariffs Source: Douglas Barnes, 2005. Note: RE = rural electrification; REC = rural electric cooperatives; TA = technical assistance. Models for Providing Modern Energy Services in Rural Liberia 69 Tunisienne de l’Electricité et du Gaz (STEG) in Tunisia. The While in most successful cooperative models the direct success of both utilities was due to the implementation of involvement of members is minimal in day-to-day strict business principles and steering clear from politics. operations, local people, not a remote bureaucracy, The STEG’s program, for example, had four factors of note: manage the operation. This fact seems to promote (i) private sector participation was encouraged during a sense of local responsibility, making it easier for the construction phase; (ii) local industry was developed members to accept that cooperatives in remote areas to supply equipment and material (these suppliers have must charge considerably higher prices than those been so successful that they are now turning toward operating under more favorable conditions. export markets); (iii) a sophisticated, computerized inventory management system was introduced; and Effective cooperative management requires careful (iv) rigorous commercial practices, including control of and objective choice of service areas, professionally nontechnical losses and effective billing and connection competent design of distribution systems, and effective payment procedures, were utilized. management thereafter. Because cooperatives are small organizations with limited technical and administrative Given that the LEC remains a small power utility with capacities, their personnel need to be trained regularly. great difficulty supplying Monrovia, this model does not They also need access to the skills and resources seem applicable to Liberia. required for dealing with emergencies and more specialized problems. The Rural Electric Cooperative Proper supervision and accountability are critical, since Model cooperative management tends to be relatively fragile and isolated, making it susceptible to local corrupting The REC model was derived from the experience of the influences. As long as a central support structure United States, and its application in developing countries remains effective, such as a rural energy agency, has been substantially supported by U.S. agencies, these problems can be detected and dealt with, or at including USAID. Examples of developing countries least kept within acceptable limits. Where leadership following this model include Bangladesh, Costa Rica, and discipline are lacking at the core, the system and the Philippines. Rural cooperatives are generally inevitably begins to break down. Examples of such organized as nonprofit membership corporations whose central support structures are Costa Rica’s national goal is to distribute electric power in designated areas regulator, Servicio Nacional de Electricidad (SNE), and where they act as regulated monopolies. All households the National Electrification Administration (NEA) in the and enterprises that are located in the franchise area Philippines. These support structures facilitate the start- of the cooperative are eligible to become members. up and operation of rural cooperatives by: (i) providing Well-functioning cooperatives are characterized by their concessionary start-up funds for putting a distribution independent, egalitarian, and public-service attitude, system in place; (ii) assisting in system planning as well as their deep and genuine belief in the value of (including expansion) and tariff setting; (iii) monitoring rural electrification. and evaluating the performance of cooperatives; and (iv) assisting in training and raising awareness. The cooperative model works well when the society where it is implanted has a generally egalitarian attitude. While some cooperatives generate electricity, many This is the case in Costa Rica, where the principles of purchase power in bulk from a power utility. This often “cooperativismo�17 are taught in schools. One strongly proves cheaper. In the Philippines, for example, the bulk held egalitarian principle in Costa Rica is that everyone of the approximately 116 cooperatives merely serve as in the service area of a cooperative is entitled to supply. distribution companies. In contrast to that, a consortium But such views do not override the cooperative’s role as a business enterprise in which full cost-recovery is a precondition for any supply. 17 Cooperative movement. 70 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series of four cooperatives in Costa Rica has joined forces to for example, women’s groups, farmers’ cooperatives, construct a hydroelectric plant. Financial analysis shows different ethnic groups, and so on. Where community that this plant will be able to deliver power at lower divisions are an issue, an intermediary organization costs than these cooperatives can purchase in bulk from (for example, the Rural and Renewable Energy Agency the main power company. in Liberia) will have to help the local planning process. Community electric cooperatives. These are small Liberia’s RREA is starting a first pilot venture with the community-based organizations that typically own and financial support of the World Bank, to reconstruct a operate small systems. Their success often depends micro-hydropower plant in the town of Yandohun in on the technical, personal, and political skills of one Lofa county. Before the civil war a 30 kW plant was in or more local entrepreneurs that have established the operation, which was completely destroyed during the power generation and distribution system. Community war. Yandohun is a community of about 2000 people electric cooperatives exist in Nepal, the Philippines, and that will be provided with the power from the plant. Central and South America. Construction began in June 2011 and completion is expected in June 2012. The micro-hydropower plant to Community participation is a prerequisite to ensuring be rehabilitated in Yandohun will be owned and run by the equity and sustainability of local infrastructure the local community, who has pledged in-kind manual investments under this model. It will depend on the labor support. The RREA will provide capacity building local culture and the extent to which all members of and training in the establishment and structure of the a community have been involved in decision making— community cooperative and ensure best practices are followed in setting and collecting connection fees and tariffs. It is hoped that this pilot project will provide a good example to be replicated elsewhere in the country. Decentralized Electrification Companies These are traditionally nurtured at the country level before they gain full independence over time. China’s electricity distribution program, for example, developed in a decentralized manner. Throughout China, both local and central governments have been important in promoting rural electrification. The role of the central government included the setting of policy objectives, support in financing, and technical assistance. Local electricity companies worked with county and regional governments and adapted these policies to their own rural electrification programs. The power companies servicing rural areas in China are quite diverse in terms of their size. Regional and provincial systems provide energy supplies primarily to large cities and towns. About 700 out of the 2,400 rural counties in China are directly supplied from the State Prewar power pole in Yandohun, Lofa County. Power Corporation, which owns and operates regional or Models for Providing Modern Energy Services in Rural Liberia 71 provincial networks. In rural areas and smaller townships and service, leasing, fee for service, and competitive outside the jurisdiction of these regional systems, concessions. These models would be pursued under the electricity supplies are usually the responsibility of direction and support of the RREA and Rural Energy decentralized power companies (DPCs). These companies Fund (REFund), respectively. are administered by the government at the township, county, or prefecture level. DPCs are not just in the The dealer sales and service model is useful when the power distribution business; they also own and operate technology used is free-standing/stand-alone such as subtransmission (35 kilovolt, kV) systems, medium- and solar photovoltaic (PV) and PV/wind microsystems. low-voltage distribution systems, and (in most cases) Local dealers (supplying PV modules, controllers, generation plants. But most are interconnected with batteries, lights, low-wattage direct current DC adjacent large grids, and about 1,000 rural counties appliances, and so on) are often consumers with access receive most of their supplies from these grids. to credit, and include an initial period (for example, six months) of after-sales service in the sales contract. In the case of financed sales, the equipment is owned by Private Rural Electrification or the finance company or the supplier until the loan is Service Companies paid off. The PV equipment often serves as the primary collateral securing the loan. Loan terms and conditions These are commonly private sector electricity are typically for three to four years, with a down distribution companies that are subject to a subsidy payment equivalent to 10 to 20 percent of the capital program to create an incentive to serve rural areas. cost of the installation. This is the business approach of Chile has had private sector electricity distribution Shell Solar, SELCO-India, SOLUZ Inc., and many others. companies for over 20 years, and has a unique subsidy The dealer either installs the system or contracts program to encourage these rural companies to serve with local system installers. This is to assure proper the rural populations. Such companies were established installation and applicability of the warranty. Dealer as investor-owned utilities and more than two dozen sales and service (direct and financed sales) operations smaller distributors in the early 1990s. These investor- are active in Bangladesh, Brazil, Central America, owned utilities have generally been better organized, China, India, Indonesia, Kenya, Mexico, Morocco, the better capitalized, and more aggressive than the Philippines, South Africa, Sri Lanka, Uganda, and cooperatives that have also been present in the market. Vietnam. It may be useful to note that most electrification Leasing also applies primarily to free-standing systems, processes started on the basis of private initiatives. but in principle could be used, for example, to lease a These were commonly transferred to public ownership hydroturbine to an energy service supplier, cooperative, when the quality of supply did not live up to required or community-based organization to power a local standards. The Marcos administration in the Philippines, minigrid. The equipment remains the property of the for example, developed a national approach to rural leasing company, unless there is a lease-to-own option electrification when it recognized the weaknesses of the available. SELCO and SOLUZ, among others, have used private franchise system in the mid-1960s. Similarly, in leasing as a way of lowering the monthly costs of SHSs Costa Rica there was early concern in the 1940s about for customers who could not afford a short-term (three- the private operation of the country’s largest power to four-year) loan. In many cases donor agencies and producer at the time, as its focus appeared to be more government agencies using international development on profit than public service. A constraint of this model assistance or other low-interest funds will subsidize is that dealers have high up-front costs, and that cash the interest rates to make such units affordable to flows take time to turn positive. consumers. Leasing programs (usually from dealers) exist in Bangladesh, Brazil, Central America, China, Of the private sector service delivery models, the India, Indonesia, Laos, Meixico, the Philippines, Sri following could be applied in Liberia: dealer sales Lanka, and Vietnam. 72 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Fee for service is the most common mechanism for business expenses of the RESCO). Public-private the provision of electricity services by electric utilities, partnerships are absolutely essential in Liberia if cooperatives, and rural energy service companies RESCOs are to provide reliable high-quality services. (RESCOs). In the latter case, the RESCO owns the »» The RESCO provides a mechanism to accept donor generation and power distribution equipment and supplies of equipment (rarely accompanied by provides an electricity service. This service can range funds or technical support for local training or from 0.1–1 kWh/day DC power from a PV system to full- maintenance) to minimize the need for a capital time alternate current (AC) power from a small hydro recovery component in the electricity services fees. minigrid. Customers typically pay an installation or »» Finally, the RESCO works with institutional and connection fee plus an electricity tariff. RESCOs can commercial customers to establish the most include community-owned small electricity cooperatives, efficient and effective basic electricity supply RECs, privately owned generation and distribution systems and services, tailored to the specific companies, and nongovernmental organization needs of clinics, schools, government offices, water (NGO)–owned and operated systems. Fee-for-service supply, public lighting, microenterprises, and small- organizations can be private, nongovernmental, public, scale agriculture. or parastatal; such organizations operate in many countries, including Bolivia, the Dominican Republica, For successful RESCO set-up and creation, the first task Ethiopia, Kiribati (a Pacific island nation), and Mali. is to identify potential energy service providers in rural areas based on existing skill sets. Potential providers The basic principles behind the RESCO include the could include entrepreneurs, small and medium following: enterprises (SMEs), community-based organizations, and cooperatives. The next steps include educating, training, »» The serviced household does not own the generation and supporting these entities in the development of a equipment; it is owned by an external organization RESCO. such as a government agency or the RESCO. »» The user does not participate in maintenance—all Competitive concessions are being offered in a few maintenance and repair service is provided by the countries to create electricity service markets for RESCO. private concessionaires (enterprises). In a competitive »» The RESCO establishes and supports equipment bidding process, proponents that can offer the required standards and quality control. level(s) of electricity service at the lowest life-cycle cost »» The user pays a periodic fee for the use of the or the lowest level of required subsidy have the first system, essentially a rental fee that covers the right of refusal for an exclusive time-limited franchise. capital repayment requirement and the cost of This is in essence the energy service company (ESCO) providing maintenance, repair, and replacement model under specific market and regulatory conditions. services. Often a RESCO uses a prepayment system In principle the concession approach can be used for (prepayment cards for energy and power services) free-standing, microgrid, and minigrid services. A pilot rather than attempting any kind of metering, billing, project in Argentina is supporting electricity supply for and collections approach. The latter almost always lighting, radio and TV to about 30,000 rural households fails. and 1,100 provincial public service institutions through »» The RESCO serves all customers in a geographic private concessionaires using mainly renewable energy area that will become a service territory. systems. Competitive concessions exist in Argentina and »» The RESCO meets customers’ priority energy Bangladesh. requirements, commensurate with their willingness and ability to pay (recognizing that donors and A variant of the concession approach is being piloted government will probably need to subsidize the in Liberia with World Bank financing and under capital costs of the equipment, and that customer implementation of the RREA. It is called the Sustainable fees will need to cover the full operating and Solar Market Packages (SSMP) approach and is catered Models for Providing Modern Energy Services in Rural Liberia 73 to the low population densities prevailing in rural Sub- only some of the energy needs. For thermal applications Saharan Africa. The SSMP approach was developed such as cooking, needs are most often met using under a World Bank funded project for the Philippines firewood or charcoal. and has also been applied in Tanzania and Zambia. This approach utilizes a combination of innovative In Liberia over 80 percent of household energy instruments to achieve expanded access to modern requirements are met using thermal energy for energy services in rural areas, including: cooking, and both urban and rural households rely almost exclusively on charcoal and firewood—the »» Clustering of local areas (e.g., villages, etc.) into United Nations Development Programme (UNDP) has commercially viable packages that are bid out on a estimated that 99.5 percent of the population relies on competitive basis; firewood, charcoal, and palm oil for their energy needs. »» Comprising the base load from community facilities For off-grid lighting, households expend a significant (e.g., schools, health clinics, administrative buildings, amount of their income on inferior forms such as police stations, and street lighting) and expanding candles, flashlights, small battery-operated LED lamps, from there for residential services; and kerosene or oil lanterns; they also create “jack-o’- »» Utilizing performance-based subsidies and financial lanterns�—crude lamps using milk cans, cloth wicks, incentives to improve affordability and to assist and palm oil, which create dense and harmful smoke. installation/service firms to address market Production activities, notably agriculture, rely primarily barriers; and on human power. Some households have small Tiger »» Including a strong focus on after-sales service and generators of 500–900 watts to serve larger processing continued marketing. loads such as rice mills. Off-grid businesses may be able to afford larger diesel generators for other uses, such Selection of geographic areas and communities for this as video clubs. The use of car batteries is also common. approach still adhere to the selection criteria applied to all rural energy interventions. The SSMP approach Worldwide, on-grid electrification is the most common has already been implemented in the Philippines, and most desired means of electricity supply. But in Tanzania, and Zambia. In these countries a single low-density or remote areas, on-grid electrification contract was possible that bundled supply, installation, is often not the least-cost option. Where population and three- to five-year maintenance, along with an densities are low, diesel generators, renewable energy obligation to provide a minimum number of systems on (solar, micro-hydropower, wind, and small biomass-fired a more commercial basis to households and businesses. generators), and hybrids of such options are often Contractors selected competitively are providing such more cost effective. Specific solutions depend on the services to over 250 villages in the Philippines. In organizations involved as well as the energy choices, Liberia the SSMP approach is being piloted as an early needs, and abilities of the local population: no solution is demonstration project of the RREA under the World applicable under all circumstances. Figure 8.1 lists rules of Bank’s “Catalyzing New Renewable Energy in Rural thumb for identifying the most appropriate intervention Liberia� program. option given a certain target group or population. In principle, for populations located within 10 km of an existing medium- or high-tension transmission line, the Technology Options grid connection is the best option. If the distance to the grid exceeds 10 km, off-grid/decentralized options are The electricity needs of Liberia’s population are likely to be least cost. relatively low, especially in rural areas. They mainly include home and community lighting, improved health- For Liberia, given the limited range of the current grid care and educational facilities, and communication tools and the relatively low load requirements of the current for access to information through radio, telephone (cell- rural population, decentralized off-grid solutions, phone charging), and television. Electricity provides including minigrids and stand-alone systems designed 74 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Figure 8.1  |  Rural Electrification Intervention Options Urban-and Population living under LV transmission Peri-urban YES NO Rural Line or less than 5 km from grid population population Specific Solutions Grid Extension Population lives Under MT or HV 1. Grid connection Conventional grid; Low cost grid Transmission Lines or in close 2. Prepayment systems Proximity (<10km) OR 3. Delegation of client management 4. Community meter 5. Retrocession of electricity YES Decentralized Solutions 6. Battery charging (a) Individual Solutions Buy PV panel, generator, wind system, AN etc.; Battery charging from nearest source; Specific Solutions D/ 1. Conventional grid Connection or OR Traditional options: battery, oil lamps, candles grid extension AND/OR 2. Private connection and delegation (b) Collective Solutions of management of grid allowing Provider of “electricity services�targeted the use of community meters etc. clientele (village, community); Electricity 3. Battery charging station concession at the village level Source: Author’s schematics. for small loads and single applications, appear the »» The resources indigenous to the area (solar best strategy. Serving the areas not accessible to insulation, rivers and characteristics, agricultural the Monrovia grid or regional interconnection with waste and other biomass sources, and so on) an integrated electric power network will be a long- »» Population (household) density term process, and this is impractical for the more »» Proximity to existing grid or other electrified remote areas of Liberia. Running power lines over long villages distances and between isolated households is costly, »» Size of demand, especially commercial and and it is unlikely that associated costs be borne by the industrial, and number of initial connections rural population past the donor support period. indicated »» The ability of households and the commercial Renewable energy technologies are particularly well sector to pay suited to an off-grid, distributed generation scenario, »» Existing infrastructure (water, roads) and access to and Liberia is endowed with significant renewable energy markets resources, including solar, biomass, and hydropower »» Existing industry including agricultural activities resources. Table 8.2 below provides an overview of the (rice mills and so on) and other productive uses (for renewable energy applications that are available as an power tools and so on) alternative to the conventional fossil-fueled or grid- »» Number of commercial establishments based approach, and the needs they meet. »» Local political support as well as community willingness to contribute toward labor, management, There is no single technology that is most suitable for and/or capital costs providing rural energy services in Liberia. Determining »» Existing public infrastructure facilities (schools, the appropriate technology, supply, and delivery options health clinics, and so on) will require consideration of the following: Models for Providing Modern Energy Services in Rural Liberia 75 Table 8.2  |  Renewable Energy Services for Off-Grid Applications Energy services Renewable energy applications Conventional alternatives Lighting and other small electric needs •• Hydropower (pico-scale, microscale, small-scale) Candles, kerosene, batteries, (homes, schools, street lighting, •• Biogas from household-scale digester central battery recharging, diesel telecommunications, hand tools, vaccine •• Small-scale biomass gasifier with gas engine generators storage) •• Village-scale minigrids and solar/wind hybrid systems •• Solar home systems (SHSs) Small industry •• Small hydro with electric motor Diesel generators •• Biomass power generation and electric motor •• Biomass gasification with gas engine Water pumping •• Mechanical wind pumps Diesel pumps (agriculture and drinking) •• Solar photovoltaic (PV) pumps Heating and cooling •• Biomass direct combustion Liquefied petroleum gas (LPG), (crop drying and other agricultural •• Biogas from small- and medium-scale digesters kerosene, diesel generators processing, hot water) •• Solar crop dryers •• Solar water heaters •• Ice making for food preparation Source: Draft Action Plan and Rationale for Renewable Energy and Rural Development. Ministry of Lands, Mines and Energy, Monrovia, Liberia, 2007. The rural energy master plan to be developed by the »» No national grid-extension plans for the next five RREA is expected to use geographic information system years at minimum (GIS) mapping, socioeconomic surveys, and resource »» No other off-grid plans assessments to determine which technology, delivery, »» Reasonable number of regional or district-level and supply options are most appropriate for Liberia’s public facilities to establish a substantial base diverse geographic areas. General technology delivery public load options include: »» General household density of ≥50 households per square kilometer in clusters »» Minigrids »» Overall population size of at least 2,000 persons »» Stand-alone systems »» Community commitment of in-kind support or »» Distributed appliances cofinancing of start-up costs »» Indication of willingness and ability to pay the Each is considered in more detail below. requisite tariff, allowing for cost recovery of operating and fuel (if applicable) costs »» Evidence of existing productive uses and robust Minigrids economic activity (such as in thriving border areas) »» Supportive political landscape A minigrid is technically a small electricity distribution »» Measures in place to prevent theft and manage the system providing grid-quality, AC power with self- electricity system contained generation, distribution, and transmission for an area separate from and generally smaller than that A multicriteria analysis should be performed covered by the national grid. It is often low voltage, but to consider and weigh the values for the above there is no threshold size that makes a minigrid “mini.� measures. Areas meeting the conditions should be In general, minigrids are suitable for areas where the considered for a minigrid. In Liberia these areas will following conditions are present: most likely include county capitals such as Gbarnga 76 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series and Voinjama, and other large urban areas such as Stand-Alone or Freestanding Systems Ganta and Zorzor. Stand-alone systems are dedicated to the space where The multicriteria analysis should be overlaid with a they are located. Examples include SHSs, which include, resource assessment to determine what natural assets typically, roof- or pole-mounted solar panels, batteries, are available, if any. Resource availability, together with and a controller/inverter; mechanical wind turbines to the load forecast and the ability of residents to pay, will pump water out of a well; household biogas systems that determine the least-cost approach to service provision. take methane from animal waste slurry and convert it In areas such as Zorzor, proximity of rivers may yield for cooking and/or electricity; and small generator sets a feasible hydropower approach. But in areas such that run on diesel, gas, or biofuel. Stand-alone systems as Gbarnga, diesel may prove the lowest-cost option. can also be used for community services, such as solar- Hybrid systems combining two or more technologies are powered battery charging stations where individuals likely the best approach for many areas (for example, can charge lanterns, cell phones, and car batteries. using a diesel backup for hydrosystems during the dry Stand-alone systems work well as hybrids, combining, season). for example, small solar and wind technologies, or solar, diesel, and a battery bank. A key element for the success of these minigrids is that the sale of electricity in the communities benefiting Stand-alone systems are in use all over Liberia. Most from minigrids has to generate enough revenue to commonly, households and businesses use diesel or gas finance the maintenance and extension of the network generators to run small appliances and power tools. But to other communities. As more communities meet companies such as Club Beer in Monrovia also use their the criteria to be provided with power, the financial own generators to run large industrial applications. In requirements will continue to increase. addition, SHSs are in use to a limited extent throughout Liberia by small businesses and a few homes. However, Though it may seem that the above criteria may solar home system prices are prohibitive compared necessitate the exclusion of poorer areas, it should be to diesel generation and as a result their use is very noted that electricity can only stimulate development limited. that is already taking place—it will not initiate development. Communities that are very poor and The challenge with such systems is maintenance: diesel have little economic activity are unlikely to derive much systems require constant maintenance as well as a economic benefit from an electricity supply, although consistent and costly supply of fuel and oil; solar systems they may derive substantial social benefits from require monitoring of voltage and battery discharge better lighting and communications. For this reason levels, load management, and some maintenance to smaller interventions, such as stand-alone systems keep panels clean. There are very few solar engineers and distributed appliances, are better suited for poorer in Liberia and all are located in Monrovia. Therefore, populations. the challenge for solar technology—and also for introducing new renewable energy technologies such When designing rural minigrids, potential issues of as wind for water pumping or biogas—is creating a electricity theft should be preempted, for example, network of service providers with sufficient knowledge by installing prepaid meters and considering other of installation standards, and maintenance and upkeep measures such as master meters that are shared by requirements. residential and commercial structures in close proximity, where a community representative collects payments Battery-charging stations are in use as well, to a from the group. Alternatively, simple wiring looms with limited extent, most popularly for charging cell connection boards have worked well in Nepal and South phones. These use small diesel generators. Through Africa. the World Bank/International Finance Corporation Models for Providing Modern Energy Services in Rural Liberia 77 (IFC)–supported Lighting Africa initiative, a private »» Kerosene (lighting) US$1.53/kWh sector–NGO partnership is providing microfinanced »» Grid tariff US$0.43/kWh solar lanterns and solar-battery-charging stations in Nimba, Bong, and Lofa counties. There is a good Facilitating access to improved sources of lighting opportunity to expand upon this model: solar-charging and battery charging can be accomplished through stations could be put to use in booths that currently distributed appliances for those with the least capital. sell scratch cards, and could be used to charge cell For example, solar lanterns that cost US$30 and last for phones as well as solar lanterns. These booths could 5 to 10 years, if made available through microfinance, then become lantern vendors (through direct sale or can save a significant amount of money for consumers lease) to expand upon their current business. Such who currently spend US$5 per month on candles and a model could also be put in place where cell-phone batteries (US$300–US$600 over 5 to 10 years), making companies have their signal towers. Such towers in their limited income available for other uses. remote areas currently spend an exorbitant amount on power generation for fuel and generator maintenance. Other distributed appliances include manually (crank)- Solar power for these remote stations would lower the powered lanterns, solar or crank-powered radios, cost of service, and could be combined with battery- prewired integrated solar PV systems with a 10 to 20 charging services to generate additional revenue for watt-peak PV module, battery, controller, two CFL or the company. LED lamps and built-in radio and speakers; solar phone chargers; improved cook stoves that reduce biomass inputs by 50 percent or more; and solar vaccine Distributed Appliances refrigerators. At the lowest end of the energy ladder are consumers who cannot afford generators or connections to the Renewable Resources in Liberia current grid, and whose electricity needs include basic lighting. Such consumers would depend upon dry-cell Liberia is endowed with significant renewable energy batteries for small radios, and communal charging resources, including biomass, hydropower, and solar stations for a household cell phone. Currently these energy. Milbrandt (2009) conducted a biomass resource consumers buy dry-cell batteries for small, usually LED, assessment for Liberia that concluded that Liberia has Chinese-made flashlights and desk lamps. The poorer a power production potential from biomass resources consumers buy candles and construct jack-o’-lanterns. of 21,600 GWh/year assuming up to 30 percent of the cropland were to be used for expanded cash crops The generally held assumption is that both within and production. In addition, a number of feasibility studies outside of Monrovia, the major barrier to facilitating carried out over the period of 1976 to 1983 identified expanded access to energy is a lack of ability to pay for significant hydropower resources, including 14 large- these services. But the evidence shows the contrary: scale schemes in 6 main rivers and 24 small hydropower residents without access to the grid pay more per schemes (up to 5 MW). kilowatt-hour for inferior sources of lighting than their counterparts with grid electricity—which, as of June Finally, despite the lack of national data on the solar 2011, costs US$0.55/kWh. Table 8.3 shows that Liberian resources, global weather data from NREL and other consumers at the bottom of the energy ladder actually sources show that the monthly average daily solar pay the most: radiation on horizontal surfaces in Liberia is between 4.0 and 6.0 kWh/ m2/day. This is supported by existing »» Dry-cell batteries US$74.01/kWh donor-funded pilot projects utilizing solar energy, »» Car batteries US$8.43/kWh which have proven a strong solar resource year round. »» Candles US$8.27/kWh The map in Figure 8.2 shows the hydropower resources »» Generator (Tiger) US$3.96/kWh identified in Liberia prewar, as well as the rubber and oil 78 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 8.3  |  Costs of Useful Energy in Liberia Wood Charcoal Charcoal Wood Kerosene Kerosene Kerosene SHS PV Generator 1. Fuel (rural) (rural) (city) (city) (>10 litre) LP gas (100 ml) Kerosene LP gas Grid PV Grid (100 ml) (cash) (Tiger) Car Batts Candles 2. Unit of [kg] [kg] [kg] [kg] [litre] [kg] [litre] [litre] [kg] [kWh] [kWh] [kWh] [litre] [kWh] [kWh] [Batt 80Ah] [pkt] sale 3. End-use cooking cooking cooking cooking cooking cooking cooking fridge fridge fridge fridge elec lighting elec elec lighting/ lighting TV 4. Price [LD] 1 5 13 10 60 162 120 60 162 32 105 32 120 105 250 408 60 (incl VAT) 5. Gross 17 27 27 17 37 49 37 37 49 3.6 3.6 3.6 37 3.6 3.6 2.8 20.7 energy [MJ] 6. 30% 30% 30% 30% 62% 78% 62% 120% 120% 190% 190% 90% 11% 90% 90% 90% 2% Conversion to useful 7. Useful 1 2 6 7 9 15 19 5 10 17 55 35 107 117 277 590 579 energy cost [LD/kWh] 8. Useful 0.01 0.03 0.08 0.10 0.13 0.22 0.27 0.07 0.14 0.24 0.79 0.50 1.53 1.67 3.96 8.43 8.27 energy cost [USD/kWh] Source: Calculations by Chris Purcell, 2009. Models for Providing Modern Energy Services in Rural Liberia 79 Figure 8.2  |  Liberia’s Potential Hydropower and Rubber/Oil Palm Resources This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank To LIBERIA RURAL ENERGY Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. Buedu Mendekoma Kolahun Voinjama G U INEA RUBBER PLANTATIONS SIERRA L EO NE Vahun Zigida OIL PALM PLANTATIONS POTENTIAL FOR PRE-WAR DEVELOPMENT HYDRO POWER PLANTS: LOFA >10 MW Zorzor 10 MW To Yekepa Nzérékoré 1,000 kW GBARPOLU 100 kV Wiesua Sanniquellie To Kongo Danané Bellefanai MAIN ROADS To GRAND Gbange Ganta Kahnple Zimmi Bendaja RAILROADS Kpein CAPE Bopolu Bo Palala Sagleipie COUNTY BOUNDARIES MOUNT Suakoko Gbarnga Zienzu Yela INTERNATIONAL BOUNDARIES Tubmanburg Bong Town NIMBA Butlo Robertsport BONG MAIN TOWNS AND VILLAGES Klay BOMI Kakata MARGIBI Kpeaple To Toulépleu COUNTY CAPITALS Tapeta NATIONAL CAPITAL Brewerville Kareysburg Gboyi Tobli MONROVIA Harbel GRAND BASSA Guata Marshall Poabli MONTSERRADO Debli Zwedru RIVER CESS Babu Buchanan GRAND GEDEH Dubwe Duabo CÔ T E Trade Town Shabli Cestos City Juazohn Yakakahn RIVER GEE D ’IV OI R E Kopo SINOE Fish Town LIBERIA Sehnkwehn Greenville Kodeke Nana Kru GRAND Nyaake KRU MARYLAND Barclayville Nemeke ATLANTIC Grand Cess Plibo 0 80 KILOMETERS To OCEAN Harper Tabou 0 50 MILES IBRD 38394 MAY 2011 Source: World Bank Map Unit, 2011. palm resources currently available under concessions. Biomass resources currently meet about 99.5 percent of The following sections provide more detail on each of the Liberian population’s energy needs and are therefore Liberia’s renewable resources. vital to basic welfare and economic activity. Traditional biomass products such as firewood and charcoal are the primary energy source used for domestic cooking and Biomass heating. But other more efficient biomass technologies are available that could open opportunities for agriculture The chapter covering Liberia’s demand assessment and rural development, and provide other socioeconomic reviewed the scope and size of the agriculture and and environmental benefits. forestry sectors. Liberia’s landscape is almost entirely either under forest cover or being used as agricultural A variety of biomass resources exist in the country in cropland. Between these two land uses, biomass large quantities and with opportunities for expansion. opportunities are significant. While the contribution of food crop residues, animal 80 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series manure, and municipal solid waste (MSW) is small in shows that charcoal production in Liberia in 2005 stood comparison with other resources at a national level, at 36,500 tonnes per year. There are no firm data on they could play a valuable role in stand-alone electricity firewood consumption in Liberia, but findings from a applications and be particularly effective for households survey conducted by the Center for Sustainable Energy in remote rural areas. On the other hand, cash crop Technologies (CSET) in 2004 indicated that scarcity of and forest residues, resulting mainly from medium and firewood is becoming a serious problem in most parts large enterprises, provide opportunities for large-scale of Liberia. Nationally, Liberia is harvesting above the centralized power generation. level that can be sustained annually without depleting the current stock and degrading the environment. It Considering the potential biomass resources or the is estimated that about 960,000 trees are cut down expansion of key existing resources such as oil palm, annually for charcoal to serve the Monrovia area alone. coconut, and sugarcane, Milbrandt (2009) evaluated fuel Forecasts for the country estimate an annual increase in and power production potential on available cropland. demand of about 0.6 m3 per household. The study estimated that of the total cropland in Liberia, only 6 percent is currently cultivated and that the Therefore, as Liberia’s dependence on its biomass remaining cropland amounts to some 3 million hectares. resources continue to evolve, it is critical that measures It is unrealistic to assume that all of this land would go to are put in place for sustainable harvesting and replanting cash crop cultivation—a portion of it may be needed to practices, as well as measures to reduce consumption. maintain forest ecosystems and their unique biodiversity, In addition, the impacts of firewood shortages need to or be used for food crop production and other agricultural be researched to formulate policy that will protect the activities, or be converted to urban land. resource. Without such a policy, demand for charcoal and firewood will continue to grow in the absence of Therefore, the study evaluated the fuel and power electricity and energy efficiency measures. The use production potential of biomass resources under three of woody biomass as a source of energy will continue scenarios: using 10 percent, 25 percent, and 50 percent to increase in relation to rural population growth and of the available cropland for cash crop expansion. poverty. If this demand is not met in a sustainable manner, Table 8.4 presents the results of using up to 30 it will eventually lead to deforestation, environmental percent of the available cropland for expanded cash degradation, and desertification in Liberia. crop production. These figures have to be considered with great caution and certainly only refer to the In addition, indoor pollution from cooking smoke and theoretically available resources evaluated largely on poor ventilation, and the time and effort required the basis of satellite imaging. to collect firewood, negatively impact the well-being of Liberia’s rural population, especially women and Beyond Milbrandt’s (2009) general biomass resource children. Kilns that increase the efficiency of charcoal assessment, a scoping study carried out by Schaffer production are one option for better biomass use, as well & Associates International in 2008 (Aah-Kee, 2009) as improved and clean-burning cook stoves. It is outside found that there is concrete potential to develop over the scope of this report to investigate technology 80 MW of power from rubber trees on five sites in options or recommend strategies for disseminating Liberia. The proposed sites include Kakata, Guthrie improved cook stoves, but this should be an early Plantation, Saint Paul River, the Fendell Campus of initiative of the RREA. the University of Liberia, and the Firestone Plantation. At the Guthrie Plantation site, there are sufficient Hydropower. Liberia has six major rivers, which drain confirmed supplies of water and rubber trees for a 20 66 percent of the country’s water. These include the MW wood-fired power plant. rivers Mano, Saint Paul, Lofa, Saint John, Cestos, and Cavalla. Short coastal waterways drain about 3 percent Fuel wood and charcoal consumption. The latest data of the country’s water. This intensive drainage pattern from the National Charcoal Union of Liberia (NACUL) indicates considerable potential for hydroelectric power Models for Providing Modern Energy Services in Rural Liberia 81 Table 8.4  |  Theoretical Potential for Biopower and Biofuels from Existing and Potential Biomass Resources Assuming 30% of Available Cropland is Planted Existing resources Biopower (GWh/year) Biodiesel (1,000 m3/year) Ethanol (1,000 m3/year) Food crop residues 188 n.a. n.a. Cash crop residues 5,889 n.a. n.a. Biogas from animal manure 219 n.a. n.a. Forest residues 15,248 n.a. n.a. MSW (biogenic material only) 52 n.a. n.a. Total 21,596 n.a. n.a. Potential resources Vegetable oils * 4,946 2,473 n.a. Sugarcane ** n.a. 1,527 Crop residues *** 26,923 5,385 Total 31,869 2,473 6,912 Source: Milbrandt, 2009. Note: n.a. = Not applicable; MSW = municipal solid waste; * Includes palm and coconut oil—using 10 percent of available cropland for oil palm and 10 percent for coconut; ** Using 10 percent of available cropland; *** Includes oil palm, coconut, and sugarcane residues—using 30 percent of available land (10 percent for each crop); 1 liter of vegetable oil = 2 kWh at 21 percent conversion efficiency; 1 ton of lignocellulosic biomass yields 300 liters of ethanol. In mid-2011, Liberia produces vegetable oils, which are mostly used in food consumption, medicinal, and few other purposes. Thus, it is unlikely that these resources would be used as a diesel substitute in the near future. in Liberia. A number of feasibility studies were carried Liberia’s small hydropower resources for minigrid and out over the period 1976–1983. At least 14 large-scale community electrification. schemes were identified in the 6 main rivers. The most significant of these are discussed in the chapter on Solar. Although Liberia has high rainfall, annual solar supply options. insulation shows good prospects for the application of solar technologies such as PV and solar thermal systems About 24 sites have been identified for small hydroelectric for health care, education, agriculture, community schemes. In 1988 the LEC sought investment capital livelihood, and microenterprises. Despite the lack of to develop six mini-hydropower schemes with total national data on solar resources in Liberia, global installed capacity of about 20 MW, which was intended weather data obtained from RET Screen International to supply 3 rural grids serving 14 major population of Canada and NREL show that the monthly average centers in the northern half of Liberia. This proposal daily solar radiation on horizontal surfaces in Liberia is was disrupted by the civil conflict. The 24 potential sites between 4.0 and 6.0 kWh/m2/day. During the summer identified are shown in Table 8.5, and span most of the months of the rainy season, insolation averages between country. 4.0 and 5.0 kWh/m2/day; during the winter months of the dry season it is higher—5.0 to 6.0 kWh/m2/day. In recent years UNDP, together with the United Nations Inland areas of Liberia receive slightly greater insolation Industrial Development Organization (UNIDO), have than coastal areas. conducted six prefeasibility studies on small hydropower resources included in Table 8.5. The results of these Because the sun does not shine with equal intensity studies have not yet been made available. An early every day, at night, and during inclement weather— initiative of the RREA should be the assessment of cloud cover, rain, and so on—a storage factor must be 82 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 8.5  |  Potential Sites for Small Hydroelectric Development, Reported March 1988 Installed kW River basin Site Design flow (m3/sec) Head (meters) potential Mano MR1 10.40 30.0 2,474 MR2 9.47 30.1 2,252 MR3 8.09 25.0 1,603 MR4 3.61 20.0 572 MR5 2.43 12.0 231 Lofa LR1 55.70 17.0 7,508 LR2 37.10 20.0 5,884 LR3 3.48 55.0 1,517 LR4 3.42 10.0 271 LR5 3.35 7.0 186 LR6 3.25 6.0 153 Farmington FR1 16.90 15.0 2,010 Saint John SJR1 60.40 33.0 15,806 SJR2 57.50 28.0 12,767 SJR3 37.70 28.0 8,370 SJR4 2.32 25.0 460 Timbo TR1 6.51 12.0 619 Cestos CR1 8.30 12.0 789 CR2 7.35 10.0 582 CR3 6.51 15.0 774 Sehnkweh SR1 5.78 12.0 550 SR2 3.47 12.0 330 Buto BR1 0.26 20.0 44 Cavalla GR1 0.66 25.0 130 Source: LEC. employed with solar power technologies. This is why considered highly suitable for widespread deployment PV systems employ batteries, which provide backup and for all seasons. for reliable system operation during periods of rain and after sunset. Most PV systems are designed with Wind. There are few data available on wind speeds sufficient battery capacity to allow for 3 to 5 days of in Liberia since no assessment has been performed. autonomy—that is, days without adequate sunlight. However, global and regional wind maps show a poor Even during the rainy season in Liberia the sun shines resource for West Africa. Mechanical turbines for for some amount of time on most days. Therefore, water pumping could nevertheless be well suited for with appropriate system design, solar technologies are Liberia. A wind resource assessment for Liberia would Models for Providing Modern Energy Services in Rural Liberia 83 help determine the applicability of wind energy for has attracted donor finance alone in excess of US$1 Liberia. billion over 1975–2001. Similarly, the Thai program has cost in excess of US$1.5 billion in the period 1977–96. Geothermal. There does not appear to be a geothermal The investments made under Tunisia’s program cost resource in Liberia. Though higher heat flow values approximately US$340 million between 1977 and 2001. are found offshore to the south and west in the Guinea and Sierra Leone Basins, and are attributed to possible Cofinancing, including by multilateral and bilateral tectonic activity, the thermal effects of the activity are donors, has been used to enhance available government not thought to extend inland to the Liberian Shield. finance. When Costa Rica’s cooperative COOPESANTOS, for example, started out in the mid-1960s, it benefited As of 2011 the potential of Liberia’s existing renewable from a major loan the nation signed with the USAID resources with the exception of traditionally used in 1966 for 40 years with a 10-year grace period at an biomass is hardly being harnessed. Modern renewable- annual interest rate of 1 percent and a 2.5 percent rate energy-based appliances are available on a limited during the amortization period. Loans on concessionary basis only in Monrovia, and there is no quality control terms such as these provide the basis on which rural for the products that are being imported. Similarly, electrification programs can prove to be financially and both technical and engineering skills in the area of new economically sound. renewable energy technologies are extremely scarce. Moreover, there is no financing mechanism in place A sound financial and economic basis for electrification that would be available either to individual consumers is determined by the following factors: (i) potential or communities for purchase and installation of new benefits being maximized; (ii) costs being minimized; renewable energy technologies or for private providers (iii) subsidies being used wisely; and (iv) an enabling of these technologies. The only two exceptions are environment. small pilot projects that the USAID funded during late 2006–early 2009 on a full grant basis, and the award of a grant to one of the few active renewable energy Maximization of Potential Benefits entrepreneurs through the Lighting Africa initiative. Different countries have selected different types of methods to evaluate such benefits. These range from Financing Modern Energy Services a purely quantitative analysis of projected revenue streams to a more indicator-based analysis, which takes Rural electrification requires a long planning horizon account of numerous qualitative benefits as well. But at and significant resources. A planning horizon of 30 the origin of revenue is the projection of how household years such as the one chosen in this report is typical demand in an area is likely to develop compared with for rural electrification programs, such as those in commercial or industrial activity. It is the latter that Thailand (25 years) and Bangladesh (ongoing since will bring the bulk of the revenue. Put differently, if 1978). Programs are often developed and adjusted along an area has little commercial/industrial prospect, it 5-year segments, such as in Ghana. An overall master might be more difficult to justify electrification by plan developed at the outset of a rural electrification any means other than the smallest interventions (SHS program is required to delineate the scope of rural and distributed appliances). This is not to say that electrification based on realistic criteria. The strategy revenues have to reach a break-even point immediately for how it will be financed over the long term is a crucial after following electrification. The principle of average part of the master plan. coverage rural electrification (ACRE), which was developed in the United States, suggests that the The funding requirements are huge, as is illustrated objective is to develop infrastructure that is expected to by some of the most successful programs highlighted lose money in the early years followed by profitability as in this chapter. Rural electrification in Bangladesh the load grows to cover the cost of service. 84 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series When considering the geographical reach for rural Minimizing Costs electrification, taking account of productive uses is important if economic viability of the extension is to be Cost savings can make significant contributions to reached. A rural expansion strategy should thus target a program’s viability. In Thailand, for example, an those areas that demonstrate existing or immediately additional 837 villages or 22 percent more than had been feasible and solid productive uses. This may require rural estimated could be electrified under the Accelerated agencies such as Liberia’s RREA to help in the creation Rural Electrification Project I. Where applicable, the of productive uses in many rural areas, where economic costs of grid extension can be minimized in numerous activities are stagnant or based almost exclusively on ways: (i) standardization of equipment and components; manual labor (for example, farming). (ii) reliance on locally manufactured materials; and (iii) provision of incentives to communities to contribute Once the areas for rural electrification are selected— to the costs of electrification. including all strata of technology interventions mentioned above—promotional strategies can be used In Thailand the Provincial Electricity Authority to increase the use of electricity and thus the revenue (PEA)—the national distribution utility charged with from rural areas. In Bangladesh, for example, the Rural electrification—opted to standardize all equipment Electrification Board (REB) promoted productive uses and components used for constructing the distribution such as irrigation, rice milling, and household power systems of all electrification projects. This enabled the looms. One of the ideas going into this initiative was project engineers to minimize the variety of equipment the fact that productive uses of electricity can help and components used. As a result, the PEA was generate the cash needed among rural customers able to reduce procurement, materials handling, and to support lighting and other lifestyle improvements purchasing expenses through bulk purchases. That afforded by electricity. gave the PEA control over an important component of overall project costs. It also significantly reduced In Liberia innovative strategies can be employed—for the risk of equipment and component shortages, example, where solar systems are placed on schools, providing project managers an efficient way to handle teachers can be offered the opportunity to manage a materials required for field construction. Because charging station for lights and possibly cell phones; they were familiar with the equipment and technical work with cell-phone companies to have their retail standards, field construction crews were better able agents offer cell-phone and LED lamp recharging to complete assigned tasks on time and within the services; and target lighting technologies at shops allocated budget. and outdoor markets to extend working hours and improve security. In the case of cell-phone companies, Similarly, the PEA in Thailand realized that imported despite the very high cost of powering cell-phone base materials were costly and might require a longer stations with diesel power (an estimated US$1,500 a procurement time. To reduce these costs they developed month for fuel per base station plus extremely difficult local capacity to produce wires and cables. The PEA supply conditions during the rainy season), none of purchased aluminum ingots from abroad, but also hired the cell-phone companies (Lonestar, Cellcom, and local contractors to process the imported ingots into so on) are using PV. But both Lonestar and Cellcom aluminum wire for project use. In Ghana similar cost- have indicated an interest in converting some of their saving measures were used by promoting the plantation “noncritical� base stations to PV. of teak trees to be used as poles in the distribution sector. Keeping payment discipline up in rural areas and establishing consumer confidence are also key to In many instances using innovative institutional keeping a satisfactory revenue stream. Both can be structures can also help reduce costs. In the Philippines, supported with the help of a responsive customer for example, the concept of the Barangay Power service regime. Association (BAPA) was developed and applied by many Models for Providing Modern Energy Services in Rural Liberia 85 cooperatives to reduce billing and metering costs. A Figure 8.3  |  A Sample Organic Grid BAPA consists of a cluster of 30 or more customers Development Scenario who draw their supplies from a common meter, which registers their overall consumption. These consumers, who also have their own individual meters, pay their bills to the BAPA; in turn, the BAPA pays the overall bill of the REC. The BAPA receives a quantity discount on the electricity supplied through it, thus reducing billing and collection costs. In addition, the BAPA acts to deter pilferage. In Liberia, though extension of the Monrovia grid may be a faraway prospect for many communities in the interior, Source: Matthew Troniak, 2007. the idea of organic grid development—whereby a number of separate or minigrids are developed in urban or border areas that meet the criteria, gradually expanding out to because of overexpansion to regions with very little potentially connect with other minigrids—should not be demand. Equity refers to the extent to which subsidies discounted. Establishment of minigrids should be carried should reach poor people that do not have electricity out based on the same technological standardization service. Effectiveness refers to the fact that, to be and other cost-saving measures mentioned above as justified, subsidies have to be for programs that work; traditional grid extension. otherwise they are poorly targeted. Figure 8.3 depicts an example of organic grid development. Often subsidies for the provision of affordable modern In this scenario the installation of minigrids is not seen energy services are well intentioned, but may have as a one-time or static measure. Rather, minigrids are counterproductive side effects. These include: (i) causing envisioned as seeds of eventual grid expansion. The grid the clients to not choose the least-cost option and thus grows with each additional minigrid, so that eventually limiting the range of access that could be reached within regions, especially those adjacent to the planned in the absence of subsidies; (ii) promoting fiscally WAPP CLSG interconnection, an entire grid develops unsustainable programs; and (iii) discouraging efficient and allows for connection to more remote communities energy use. In addition, subsidies can distort the market. that might not have been considered for a minigrid For example, if a private company is selling SHSs in initially. In this way the installation of remote grids can one community at full price, but the government is be seen as mobile grid development, whereby a near- subsidizing similar systems in the community next term economically feasible intervention translates into door, the cost of the systems will be perceived as too a long-term electrification strategy. high by those not receiving subsidies and free market development will be hampered. Use of Subsidies Subsidies generally work best if they are directly targeted to alleviate market failure. In the context of Effective rural electricity programs are generally developing countries this relates mainly to high start- based on good subsidy policies. Subsidy programs up costs and risks, and external costs and benefits. are efficient when they respond to the three criteria Costs of rural extension programs are often US$0.40 of efficiency, equity, and effectiveness. Efficiency to US$0.70 or more per kilowatt hour initially for refers to maximizing the social (or economic) benefits distribution extensions only, but such rates can decline by comparing the rural electrification program rapidly as densities rise toward levels found in urban to its opportunity costs. For example, many rural areas. To be sustainable, the financing of the access electrification programs have run into difficulties agenda ultimately needs to be resourced from within 86 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series the country. But the capital required up-front for the such as improved cook stoves and renewables. In this necessary infrastructure has in many of the success sense, coordination within the sector and across other stories in developing countries come from bilateral or sectors is critical to achieving optimal results. multilateral donors. Involving the future recipients of modern energy The problems posed by start-up costs and risks arise services. Local stakeholders such as county development partly from the real or perceived lack of creditworthiness committees and village leaders must be included in the of low-income consumers, and partly from a shortage planning and selection of electrification interventions of long-term credit. Solutions to lacking credit can from the very beginning. This could initially take the be found by establishing access to microcredit from form of focus groups to determine the needs, technical banks, the private sector, or electricity companies. and economic capacity, and priorities of communities Electricity companies, for example, can provide credit under consideration. Communities must be encouraged by including connection and service fees in consumers’ to articulate their own demand patterns and decide bills and spreading them over several years. External how these can best be met from a range of energy costs and benefits often stem from negative or positive supply options. Focus groups can also help educate environmental and health externalities that various communities on the potential uses of renewable sources of energy generate. While the taxation of energy and modern energy services. Rendering local, externalities is highly successful in developed countries, community, and individual cost sharing, whether in-kind rural education and extension services to inform people or actual, mandatory to supplement donor funding is about the poor health effects of traditional technologies key in facilitating local ownership (especially where local (generator fumes, open fires, and so on) have proven management is required) and sustainability. more effective in the developing world. Where energy sources provide global environmental benefits such as Providing information and enhancing access to good in the fight for climate change and the depletion of the technologies. Liberia does not as yet have a market ozone layer, international finances are now available to for renewable energy technologies, but the existence reduce the costs of technologies that generate these of a thriving market for LED lamps is evidence of benefits. a demand for better, low-cost lighting, even if the products currently offered in the market still lack in quality. Existing supply chains for kerosene, LED lamps, Enabling Environment compact fluorescent lamp (CFL) bulbs, cook stoves, and even generators could be utilized to introduce Even well-conceived investments in rural energy improved technologies to all areas of the country. The may falter, not because they are intrinsically wrong, RREA has an important role to play in making new and but because economic conditions may be working good quality products visible to the market through against them. For example, in rapidly developing its own network of contacts and through bringing agricultural regions, the provision of electricity helps demonstration products from a number of sources. to raise the productivity of local agroindustrial and Examples include: commercial activities by supplying motive power, refrigeration, lighting, and process heating. In turn »» Small portable LED lamps, such as those being increased earnings from agriculture, local industry, tested under the Lighting Africa program, from and commerce raise households’ demands for suppliers (such as Ammini, Cosmos Ignite, and electricity. But when development efforts fail because Thrive in India; Barefoot Power in Australia; Philips of, say, poor crop pricing and marketing policies, in the Netherlands; SunNight Solar in the United electricity supplies may be able to do little to remedy States; or Shanghai Roy Solar in China) that use the situation, nor will electricity or other modern LED cells that produce over 100 lumens per watt. fuels be in great demand. If it is to serve a purpose, These solar LED lights are priced in the US$10– electricity needs a market, as do other energy forms US$50 range. A product from “Thrive� is well suited Models for Providing Modern Energy Services in Rural Liberia 87 to a light rental arrangement—the kit comprises strife, lack of a legal and regulatory framework for both a 20 watt peak solar PV panel charging unit that the energy sector and private sector, and numerous can charge 5 lamps simultaneously and 25 small commercial barriers to private sector operations. In LED lamps, where each lamp can provide up to 12 addition, law enforcement is difficult and the security hours of lighting on a single charge. In addition, situation still challenging. As investing in rural energy Thrive provides a good model for establishing is itself considered a risky venture, any added risk manufacturing capability in-country. Under the requires careful attention. The RREA will have to play Lighting Africa program, this is being piloted in an important role in identifying these risks to private Kenya. sector participants and in developing strategies on how »» LED street lights that produce light intensity of 20 to mitigate these. lux on the road surface (recommended for street lighting) on a 50 m2 area—there are products now Providing services that are affordable. Technologies available that cost about US$900 each per street made available must be suited to the economic conditions light. of the target group and the context of the country. A »» Prewired integrated solar PV systems with a 10 to sustained switch to modern fuels and away from the 20 watt peak PV module, battery, controller, two rural use of fuel wood and charcoal, for example, has CFL or LED lamps, and built-in radio and speakers been shown to be only sustainable for a country as a from China in the US$80 to US$150 range. whole once annual per capita incomes reach US$1,000 »» Larger systems for public facilities using high- to US$1,500 per year (World Bank, 2005). Income levels efficiency LED lamps that produce 900–2,700 in Liberia are far below this, and far below the Sub- lumens per fixture with 100 lumens per watt LEDs. Saharan African average. For this reason, thermal energy interventions should focus on affordable option for the Overcoming the lack of population density to the provision of modern energy services. For example in the supply of modern energy services. The SSMP approach context of services for cooking, the focus should be on is designed to overcome the major constraints to the introducing improved firewood or charcoal-burning cook sustainable delivery of energy services in remote stoves instead of cooking with LPG until the economic areas with dispersed populations, which predominantly baseline indicates the country’s population has climbed characterize rural areas in Liberia. In many such areas, farther up the energy ladder. solar PV can be the least-cost means of providing basic electricity services for lighting and communications. Harnessing synergies. When development policies are By aggregating the PV applications (social service and such that they encourage synergies, they are more likely commercial) in a single market package, the provision to “work� and show better returns. When assessing the of PV electricity services can be commercially viable. prospects for policies and investments focused directly Donor support to this approach allows for a larger on improving energy supplies, therefore, one should ask number of packages and/or connections per package— whether local health and education programs are being thus contributing to increased rural access to modern put in place, whether complementary infrastructure energy services. If designed well, donor support will (roads, water supplies, sanitation) is being given proper contribute to leveraging both private investment and attention, and whether macroeconomic and pricing local public funding, as well as an overall deepening policies are such that the investments will function of the local solar PV markets. This approach has been and will serve useful purposes. Rural energy policies discussed in detail in the section on Best Practices of and investments are an adjunct to good general rural electrification under the concession model. development policies, and their chances of success are greatly enhanced when answers to such questions are Compensating for Liberia’s high risk environment: positive. Liberia is a country considered high risk especially from a private investor point of view. The reasons for In the international practice of rural electrification, this include the only recently overcome period of civil a number of generic lessons are emerging that point 88 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series toward the need for establishing an adequate enabling supplies. PV schemes may also be attractive for loan environment to guarantee a sustainable and sustained financing on an individual basis, since the equipment increase in access to modern energy services in rural may be removed if payments are not made. areas. Only then will markets for energy be stronger, including the supply of electricity, SHSs, improved Subsidies can be provided in a variety of ways: low cooking technologies, biofuels, and so on. interest rates on loans to rural energy service companies and/or their customers; government budgetary support for dedicated rural electrification funds—in Liberia’s Financing Liberia’s Energy Access case, the REFund is managed by the RREA; and financing and credit mechanisms that allow the initial costs for While the GOL works to improve its fiscal performance new customers to be spread over time so services are and national accounts, it will be reliant on a combination affordable to poor households. Subsidies are usually of donor funding and private sector interventions for more effective and sustainable when applied to capital the foreseeable future. Donor funding is envisioned as investment and should not be applied to ongoing critical in the near term for the capital cost of expanding operation and maintenance (O&M) costs. For example, the Monrovia grid as well as installing rural electricity in China, households wishing to purchase a stand-alone systems, be they minigrids for county capitals or stand- renewable energy system under the state electrification alone solar systems for public facilities. Donor funding program pay about one-third of the up-front cost; the will also be necessary to subsidize rural energy services rest is subsidized by the government. The household through capacity building and livelihood programs, is then responsible for paying subsequent equipment including microfinance and credit facilitation. As replacement and maintenance costs. incomes improve, rural consumers may begin paying small portions of rural electrification initiatives, as their Rural electrification is not the sort of activity that will ability to pay increases and as the quantity of energy attract private investors interested in maximizing their consumed grows. return on investment. Private investors are motivated by providing power for their own productive uses and The cost of operation and maintenance should be secondarily may be encouraged to provide power as borne by consumers from the beginning, through a public service at a low marginal cost. In the case of consumption-based tariffs. Tariffs should be designed Liberia, there is an opportunity to work with iron ore initially to be less than or equal to the amount rural and precious metal/gem mining companies, agricultural consumers already pay for traditional energy sources concessions, and others to develop concession such as candles, flashlights, diesel, and kerosene agreements toward this end. As the above demand lanterns. In many countries prepayment meters are assessment has shown, the majority of the electricity commonly used for those with the ability to pay, to demand forecast for Liberia in the next 30 years will encourage payment of services and conservation of come from mining, industry, and agriculture. resources. Private finance is more commonly a loan component Worldwide, all rural electrification programs have complementing a mix of government grant/subsidy involved some form of subsidy. The experience of and local equity capital. Where such private sources of most countries is that the market for decentralized credit are available there can be a role for development rural electrification of all models has required initial finance institutions to provide bank guarantees or stimulation to make it attractive to developers, credit packages specifically for energy intervention. consultants, manufacturers, and financiers. The initial There is currently little interest from conventional attraction for private developers may be in relation banks, but they may be encouraged to lend at least to specific productive end uses—for example, grain a proportion of the capital cost if the schemes are milling in Nepal and Zimbabwe, where the power unit accredited or supervised by an intermediary agency is also used for battery charging or domestic electricity (such as in Sri Lanka). The capital cost of decentralized Models for Providing Modern Energy Services in Rural Liberia 89 rural electrification in Liberia will be best met in the the king is a constitutional monarch, his public medium term from a mixture of local equity capital endorsement gave the PEA management and its staff (community or private) and a loan component from a confidence in their capacity to act independently. bank or other credit organization, at commercial rates To date Liberia’s current administration has yet to backed if necessary by loan guarantee funds. publicly highlight the establishment of the RREA, but the full vocal support of the president will be important in establishing the tone of the nation’s rural Regulation and Policy Development electrification efforts. Rural electrification programs are particularly subject to In the Philippines a potential problem of corruption within lobbying by politicians eager to demonstrate their ability the cooperatives was recognized and addressed at the to provide low-cost electricity to their constituents. outset. A public service ethic and need for dedication Once a program succumbs to such pressures, however, and honesty were emphasized in all training provided it is virtually impossible to maintain financial viability to staff and board members. Where appropriate, these because of the expense of providing electricity messages were reinforced by incorporating a religious to remote locations. Staying clear of politics and element and involving local religious leaders. corruption is fostered by: (i) independent institutions; (ii) involvement of highly reputed authorities or bodies; and (iii) broad participation. It is also fostered by basing Broad Participation the selection of sites on clear and transparent criteria, as previously stated. Participation enhances the transparency of processes. While participatory approaches are not a guarantee for success, they can over time significantly contribute Independent Institutions to the sustainability of programs. Cooperatives, NGOs, and local community organizations can be highly Independent institutions such as the RREA, recently effective vehicles for supporting the delivery of established in Liberia, can assist in the rural energy services of all kinds and for managing natural electrification process by staying clear of politics. resources. Such organizations are familiar with and Autonomous agencies such as the RREA are fully understand local resources and needs, and are often accountable for their own performance and have full willing to assume responsibility for implementing control over their own budget—therefore, they have an policies and projects. inherent incentive to reduce costs. The PEA in Thailand, for example, had been given full control over its costs and was fully accountable for its performance. In the face of Financial Incentives an intensive capital investment that the initial years of the program would entail, the PEA management made Financial incentives for renewable and/or efficient a concerted effort to ensure that rural electrification energy generation and supply include tax and fee would not jeopardize its own financing. exemptions, grants, and various forms of guarantees. Box 8.1 provides an example of supportive U.S. tax incentives. An example of another incentive is found Involvement of Highly Reputed in the Small Power Purchase Agreements (SPPAs), Authorities or Bodies which may be contracted between utilities and private generators for long-term (10- to 15-year) periods with This will reduce the risk of abuse of programs for set tariffs; such agreements protect both the investors political purposes and fraud. In Thailand, for example, in the project and the end-use consumers and are a the king issued a decree that publicly supported form of feed-in law. SPPAs have been used successfully rural electrification throughout the country. Although in small-scale hydropower projects in Sri Lanka and 90 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series such as the Clean Development Mechanism. Other Box 8.1  |  Tax incentives for renewable financial incentives include lease programs, whereby a energy development in the United States remotely located customer can lease renewable energy Tax incentives have often proven effective in encouraging equipment from a service company with the option of private sector development of renewable energy resources. purchasing the equipment after a certain period. They can be provided in several forms: corporate, income, property, and production. Corporate tax incentives allow Loan and microloan programs offer financing for corporations to receive credits or deductions or more against the purchase of renewable energy equipment at low the cost of renewable energy equipment or installation. or no interest, or innovative collateral, for example, Personal income tax credits are designed to cover the expense agricultural products. Production incentives provide of purchasing and installing renewable energy equipment renewable energy project owners with cash payments and may be limited to a certain number of years following based on electricity production either on a US$/kWh the purchase or installation. Property tax incentives take the form of exemptions, exclusions, or credits; most property tax basis for electricity or a US$/gallon basis for renewable provisions in the United States allow for property to be taxed fuels. Payments based on performance rather than based on conventional energy equipment prices. Finally, sales capital investments are often more effective and help tax incentives typically provide an exemption for renewable to ensure the efficiency and quality of projects. Finally, energy equipment from the typical sales tax. rebate programs provide incentives for the purchase and installation of specific renewable energy technologies. Source: Draft Action Plan and Rationale for Renewable Energy and Rural Development. Ministry of Lands, Mines and Energy, Monrovia, Liberia, 2007. Other promotional policies include public competitive bidding, which guarantees that contracts for energy generation and supply are publicly advertised and Nepal as well as large-scale wind farms in Germany and then awarded to the lowest responsible bidder in a elsewhere. transparent manner. This is often linked with obligations for suppliers to purchase renewable energy at a premium To increase the role of private sector investment in the price and pass the cost on to consumers as a small provision of renewable energy supply, infrastructure, additional tariff. Construction and design policies are and services, further policy development in Liberia also common, and include construction, green building should: programs, and energy codes. Construction policies are typically legislative mandates requiring an evaluation »» Encourage financing through the banking system of the cost and performance benefits of incorporating and other private sectors. renewable energy technologies into construction »» Provide selective sovereign guarantees for projects such as schools and administrative buildings. renewable energy or energy-efficiency projects of strategic importance. »» Provide fiscal and financial incentives for the Trade Incentives development of the renewables subsector. »» Put in place and implement administrative and Import duty reductions should be considered in the near regulatory measures that will attract private sector term. In Liberia current import duties are discouraging investment. to the development of renewable energy plants, biofuel processing facilities, and other alternative In addition to tax incentives and grants, supportive technology projects. Reducing import duties on parts financial policies include special benefits and tariffs and equipments used for renewable energy production to encourage community-owned stand-alone minigrids. facilities is particularly useful in the early stages of a For instance, exemptions from taxes (as in Box 8.1) and renewable energy industry, before a host country has regulatory obligations may be allowed, and grants may be its own equipment-manufacturing facilities and the obtained through participation in carbon credit programs technical knowledge to compete in the world market. Models for Providing Modern Energy Services in Rural Liberia 91 Regulatory Incentives The NEP provides a broad context for sector reform, but this needs to be translated into primary and secondary To ensure that small-scale renewable and rural energy legislation along with a strategic plan and timetable. generators are not hampered from entering the energy This will be necessary to achieve the reforms called for services market, it is recommended that small-scale by the policy. Since preparation of the NEP, the most projects below a predetermined capacity (such as 1 important follow-up action has been the establishment MW) be permitted to operate license free in rural areas of the RREA. The RREA was officially established under a special provision. Small-scale producers often by executive order in January 2010, based on prior lack both the financial and the human capacity to follow financial support of the USAID and both financial and the paperwork and procedures required of large-scale technical support of the Bank. producers, and regulating small producers is often more difficult to accomplish and costly due to their remote The next critical step is that the RREA should be fully location. Removal of licensing and regulatory bureaucracy endorsed by the legislature with relevant statutes, for small-scale generators and minigrids allows producers which include GOL budgetary support and creation of in rural areas to sell power “over the fence� to households the REFund, the proposed rural electrification fund. and enterprises, thus facilitating the ease of access to The World Bank is supporting the full establishment rural electrification. It is also important to note that and functionality of the RREA and assisting RREA in overregulation tends to facilitate corruption. piloting the implementation of renewables-based village electrification projects. Regulation and Policy Development It is critical that non-Monrovia residents begin to see in Liberia tangible results of this government intervention in the near term. In the context of the rural energy master plan Legislation establishing and supporting Liberia’s and urban non-Monrovia, clarity will be needed as to who energy sector and the expansion of energy services has the jurisdiction over operation and regulation of urban is nascent but under way. Prior to the outbreak of minigrids and regional interconnections in the interior. the civil war in the early 1980s, work on a NEP had begun within the Ministry of Land, Mines and Energy USAID has pledged to support the development of (MLME). Though this was halted by the war, Liberia did, an action plan toward establishment of the ERB. The with the support of the USAID, produce and approve NORAD plans to support capacity building of the its NEP in June 2009. The NEP stipulates facilitating MLME as its reorganization proceeds toward equal increased private sector investment in the electricity representation of energy capacities. Support of the sector through unbundling manufacture, generation, LEC in carrying out its newly defined functions and transmission, distribution, and retail sales, as well jurisdiction is being provided by the consortium of as establishing a transparent regulatory process and energy donors under the management contract which promoting regional cooperation. It calls for: (i) the took effect July 1, 2010. These are all positive steps creation of an Energy Regulatory Board (ERB) and toward further institutional and regulatory reform. But the RREA; (ii) reorganization of the MLME to expand additional policy and legislative measures need to be its capacity in and focus on energy; (iii) creation of a put in place to encourage expanded access and the Saint Paul River authority or other river authority; and deployment of sustainable technologies. (iv) changes to the legislation establishing the LEC, the National Oil Company of Liberia (NOCAL), and Liberia Components of a sound policy to support the above Petroleum Refining Corporation (LPRC), to separate principles and promote scaled-up energy access for policy making from operational functions and, in the sustainable development include: case of the LEC, to clarify jurisdiction over generation, transmission, and distribution according to geographic »» Allowing the private sector to operate in the energy area, generation type, and size. sector along with or in place of the traditional utility 92 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series »» Allowing minigrids to sell excess energy back to chapter. Liberia has the opportunity to avoid the pitfalls the grid should the grid be expanded subsequent encountered in other countries over the past 40 years to establishment of distributed generation (net by developing institutional and planning strategies metering) designed to avoid such costly mistakes. Ensuring sound »» Financial incentives such as tax and fee exemptions and principled development of the rural energy master »» Exemption from regulatory obligations for small- plan and overall sector master plan will help guide scale power producers (for example, under 1 MW) interventions and ensure monitoring and verification of »» Simplification of laws and regulatory procedures results. The establishment of the RREA is a solid first pertaining to rural energy producers step toward implementing principles of transparency, »» Feed-in laws whereby energy suppliers are paid a efficiency, and sustainability in Liberia’s rural energy premium for power produced by renewable energy program. generators »» Quotas or standards for the amount or percentage In accordance with its Executive Order, the RREA will of power to be produced from renewable energy work as an intermediary level institution between the »» Linking rural energy initiatives and policies with GOL and the targeted population. Its roles will include: agricultural programs and policies »» Establishing a regulation scenario whereby energy »» Provision of appropriate guidance and support for pricing reflects the purchase ability and energy policy formulation to the MLME needs of the rural population »» Advice on development of the national energy »» Ensuring the participation of women in energy strategy as well as direct development of the decisions and identification of appropriate rural energy strategy, including definition of grid technologies coverage and jurisdiction of the utility versus other service providers Finally, development of a national policy on biomass »» Development of networks within the sector to guide energy is recommended to foster the development communities on sources of advice, expertise, and of biomass power generation for off-grid rural areas equipment including the potential sites identified for rubber wood, »» Support and advice to local manufacturers, when and to ensure that the economic benefits of such and where appropriate development will accrue to Liberia. Properly designed »» Facilitation of financing through the REFund biomass projects can provide an important source »» Information brokering—acting as the rural and of low-cost energy for Liberia, with indigenous wood renewable energy information clearinghouse for substituting for imported fossil fuels, and can also Liberia in terms of projects, programs, technical provide an economic benefit to Liberian farmers. But to and service standards, and opportunities ensure that this is the case in Liberia, measures must »» Provision of some level of consumer protection to be put in place to ensure rubber plantation owners and ensure the market for off-grid systems can grow farmers are adequately compensated, and that they »» Creation of standard contracts and legal rehabilitate the land and follow sustainable forestry agreements for small projects, especially where practices. project administration and management costs are a significant proportion of the total project cost, such as that done in Sri Lanka for off-grid hydropower Roles and Responsibilities projects of the RREA »» Provision of guidelines to potential service providers on quantifying/qualifying energy service needs, Liberia’s rural energy program is only beginning, and presenting the technical options available and as such, offers limited lessons learned to date. along with their costs, benefits, advantages, and But there are ample lessons learned to be learned disadvantages from other developing countries, as presented in this »» Facilitation of community planning Models for Providing Modern Energy Services in Rural Liberia 93 »» Identification of training requirements, and running The emerging network of rural banks could provide a training courses for all actors in the sector (for potential institutional anchor. example, developers, operators, local government, communities, and manufacturers) In the near term the RREA’s mandate includes »» Development of technical standards and setting development of the rural energy strategy. The strategy of standard supplier contracts to include technical needs to take into consideration a number of important support and warranties factors: »» Setting the framework for tariff and subsidy options »» Promotion of rural electrification as well as »» Given the logistical difficulties of delivering fuel and renewable energy technologies, and their uses the increasing cost of crude oil prices, alternatives »» Coordination among other energy sector actors must be prioritized. The most logical alternatives and cross-sector for rural development are locally available renewable energy sources, in »» Coordination of research and development particular small or micro-hydro, biomass-based minigrids, and individual solar PV systems. As the financing facility of the RREA, the REFund will be »» Priority should be accorded to energy services that set up to provide for modern rural and renewable energy benefit the whole community, such as those needed services. Draft guidelines for the fund are available to deliver health, education, security, trading, and an account has been set up. It is planned that the communications, and administrative services. Next, REFund will be funded to provide for rural and renewable household-level services and energy for private energy services through both international sources businesses should be supported as they improve (traditional bilateral and multilateral loans and grants, productivity, and increase incomes and quality of and potentially carbon finance) and domestic sources life. (energy taxes, levies, and fees; general taxes; user »» There is limited knowledge of hydropower resources fees and capital contributions; and both voluntary and or year-round availability of biomass resources. mandatory corporate social responsibility contributions). Resource monitoring is important. Corporate social responsibility contributions include »» Given the limited capabilities in the energy a requirement that all companies operating under oil sector specifically, the RREA needs to consider exploration concessions with the GOL contribute a alternative energy service-delivery models, in certain percentage (a special levy or fee) to the REFund particular taking advantage of locally functioning for rural electrification projects. These contributions companies or institutions. For example, using are to be collected by the NOCAL and transferred to the cell-phone sales agents, schools, churches, or MLME for the REFund. As of mid-2011, one contribution administrative centers to offer solar recharging hadbeen collected in the amount of US$250,000. But services for lighting or cell phones; linking up with ensuring that the REFund is adequately funded to allow mining or commercial agricultural operations the RREA to achieve its mission will be a challenge for to offer rental or lease-to-own lighting and the foreseeable future, one that the government must basic electricity services to their employees or share with its multilateral and government partners. out-growers/artisanal miners; and establishing community-owned and operated minigrids. It is envisioned that the RREA will institute a credit »» While mobilizing and providing funding through support facility to involve the financial sector in the REFund facility for concrete project activities providing credit for rural electrification initiatives. In is important, equally important is the RREA’s support of this, a member of the financial sector will “market enabling� role in information/knowledge sit on the RREA’s board. Development of microcredit dissemination; development and piloting of facilities throughout the country to complement energy- nontraditional electricity service business access efforts and increase the potential interest in models; encouraging commercial businesses and energy of existing financial institutions—especially community service organizations operating in those targeted at off-grid investments—is also advised. rural areas to become partners in energy service 94 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series delivery; training and capacity building; supporting/ approaches. As mentioned previously, innovation will be cooperating with other government agencies to key as the RREA undertakes the challenges lying ahead, ensure consumers have access to affordable but for it cannot proceed along the lines of traditional rural good-quality products (and the knowledge and energy agencies amid the current challenges. ability to recognize quality); setting standards and undertaking bulk procurement when appropriate; The rural energy master plan that the RREA is preparing introducing new and improved technology; and will shed more light on the appropriate phased approach protecting consumers. for rural energy development in Liberia, but it may well be that in the beginning the more remote and In the near term it may be unrealistic to plan for the economically dormant areas of Liberia—such as the introduction of IPPs or true RESCOs, given the high risk southeast (River Cess, Sinoe, River Gee, Grand Kru, in the sector, the relatively small size of systems, and the and so on) will benefit most from small interventions economic situation of rural areas. Rural cooperatives may such as PV lighting and improved cook stoves in the be the best strategy, and Liberia has ample experience near to medium term. The northwest corridor (Bong, with cooperatives in the agricultural sector, from which Nimba, and Lofa) will benefit from minigrids and more the energy sector could draw important lessons. It substantial interventions in the near and medium terms, is recommended that, under the energy sector and since economic recovery and thus ability to pay of rural energy master plans, particular focus be given potential customers has been more pronounced in these to developing a practical strategy for REC facilitation, areas. development, and sustainability. Indeed, this strategy will form an integral part of the RREA’s business plan, for it To make these determinations, however, it is key that will bear the ultimate responsibility of ensuring its energy Liberia, together with its government and multilateral investments (Liberia’s rural energy service providers) are partners, begin the path of strategy development toward sustainable. achieving concrete and visible results. Though the country’s achievements in infrastructure rehabilitation, Rural service interventions will need to remain subsidized improvements in social services, and governance since in the near and likely medium terms, through the 2006 have been commendable, in many areas of the REFund for capital costs and guarantees and through country the evidence of these changes is small. Though the RREA for technical support and outreach. Though the development of the rural energy master plans is it is true that most rural electrification processes critical and necessary for further action, they will require worldwide started out as private initiatives, experience time. It is recommended therefore that parallel activities has shown that for maximum efficiency and equity some be undertaken in the immediate term—outreach, measure of public participation is necessary. Liberia’s education, small interventions with rural communities— best strategy may be one that combines the two so that the government’s intentions are known. Models for Providing Modern Energy Services in Rural Liberia 95 Over 50 percent of Liberia's population is age 18 or under. Most of these children are growing up in the dark, with only candles, flashlights, and kerosene or oil lamps by which to study. Yandohun, Lofa County. Establishing a Supportive Policy Framework for Implementation 9 L iberia’s current government, upon taking office in the early 1980s, it was halted by the war. The in 2006, inherited an environment lacking not white paper was therefore the first comprehensive step only public electricity infrastructure, a functioning toward a national energy policy in the country’s history. utility, and a petroleum company, but also a coordinated It was well received by the international community energy policy and strategy. President Ellen Johnson as well as officials within the GOL, and represented a Sirleaf recognized that access to modern energy shift away from the stance of self-reliance, especially services by both the urban and rural populations was within the electricity sector, to embrace the concept of the key to accelerating the reconstruction and economic opening the power sector to private participation. revitalization of the country. The government’s solution was to adopt a three-phase strategy—a short term, The energy sector approach of the GOL at the time emergency phase; a medium term, capacity-building of the white paper was driven by the urgent need phase; and a long term, development phase—and to expand services and restore infrastructure that to engage international partners to assist in the remained inoperable from the war, and by a severely implementation. An integral part of the solution was the constrained public budget. The president’s 150-Day development of a national energy policy to provide the Plan and Emergency Power Program helped to restore general guidelines for a legal and regulatory framework electricity to parts of Monrovia, but the white paper for the sector. and policy were oriented toward a long-term vision that incorporated development strategies, policy, The framework for the legal and regulatory activities environmental considerations, and economic reform. of the energy sector is nascent but moving forward. The NEP adopted by the cabinet in June 2009, which Other documents relevant to the GOL’s sustainable articulates the national vision for the energy sector, energy strategy are the National Environmental Policy, was a major step in this direction. The NEP suggests the Environmental Protection Agency Act, and the facilitating increased private sector investment in Environment Protection and Management Law, all the electricity sector, including through unbundling enacted in 2002. These documents recommended the generation, transmission, distribution, and retail sales, development and use of renewable energy resources, as well as establishing a transparent regulatory process energy conservation, and equitable access to energy. and promoting regional cooperation. But they do not include concrete recommendations for action. The NEP has its origins in the Energy Sector White Paper, published in February 2007. Though the MLME The aim of the National Energy Sector White Paper initiated a process for development of an energy policy was to formulate into a national energy policy the 97 recommendations that arose from a National Energy three principles: (i) demonstrating the GOL’s resolve for Stakeholder’s Forum, which was held in October 2006 good governance and ensuring financial transparency and addressed the overall state of the energy sector in in all sector transactions; (ii) overcoming the significant Liberia, as well as sector reforms, innovations, policies, obstacles to private sector investment in energy supply; and strategies for ensuring national energy access. and (iii) creating the requisite institutional and legal The white paper was to provide a strategic vision to framework and independent regulatory regime. address the energy-poverty relationship in Liberia. It recommended that the MLME be restructured to give As shown in Table 9.1, the NEP illustrates how energy the three functional areas—land, mines, and energy— policy issues cut across the four pillars of the Poverty equal prominence while providing for enhanced human Reduction Strategy (PRS), which is the government’s capacity. It recommended reinstituting the National blueprint for the overall socioeconomic development of Energy Committee (NEC), which was established in the country. 1984 but became inactive during the war. It proposed a rural energy authority (called a Rural Electrification and The NEP thus sets out an ambitious agenda, which Renewable Energy Agency in the paper) to be created highlights strong dichotomies that are not readily to support progressive electrification of underserved resolved within the context of the policy. For example, areas using sustainable sources of energy. Additional the NEP calls for the private sector to take on an recommended policy reforms included the creation important role as financier and agent for technology of a regulatory authority, and unbundling of LEC to and human capital transfer for both on-grid (IPPs) and allow for power production by IPPs including private off-grid (RESCOs) companies. But the policy does not corporations and concessionaires. Arguably, some resolve how the private sector could be incentivized to of the proposals made in the White Paper appear assume these responsibilities in a country that due to somewhat ambitious and possibly out of place in the its postconflict nature would inherently be somewhat context of post-conflict Liberia. less attractive for investment. Another example relates to the capacity constraints that exist in the energy The NEP effectively refined the recommendations of sector as highlighted in the NEP. By the same token the the white paper into expressions of policy. Development NEP advocates the establishment of a long list of new of the policy was initiated by evaluating local realities institutions, but it is difficult to see how these would and experiences, and then considering regional and be appropriately staffed or resourced when existing international best practices to come up with a draft institutions lack the requisite support. document, which was presented for validation in three regional workshops in the summer of 2008. Finally, the NEP sets out very ambitious targets, but Recommendations from the validation workshops were leaves it unclear how these are to be met and what incorporated in the final iteration of the policy. the budgetary implications would be. The key goals in the proposed policy related to the 2015 Millennium The objective of the NEP is ambitious: to achieve Development Goals include: universal and sustainable access to affordable and reliable energy supplies and thus foster the economic, »» The 40 percent of Liberian citizens living in rural political, and social development of Liberia. Key and periurban areas and using traditional biomass policy goals include: (i) restructuring the MLME to for cooking shall have access to improved stoves elevate the attention given to energy; (ii) creation and kerosene or efficient-gas cookers to cut indoor of a regulatory environment to facilitate private pollution. sector investment in the energy sector; (iii) creation »» Thirty (30) percent of the urban and periurban of a body dedicated to increased energy access in population shall have access to reliable modern rural areas that were marginalized in the past; and energy services, enabling them to meet their basic (iv) leveraging the WAPP for the development of the needs (lighting, cooking, communication, and small country’s hydropower potential. The NEP is based on production-related activities). 98 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Table 9.1  |  Relationship of Liberia’s National Energy Policy to its Poverty Reduction Strategy Energy stakeholder roles Energy Energy policy Policy Policy policy issue objective PRS pillar setting monitoring Policy operation Access Universal access I. Consolidating peace Licensing Licensing Delivery of energy products to modern energy and security (strong requirements: and licensee and services services (social interrelationships Ministry of supervision: (operators—as defined under equity; urban and between security, Lands, Mines Energy institutional framework) rural coverage) poverty, justice, and and Energy Regulatory peace) (MLME) Board (ERB) Cost Least-cost II. Revitalizing the Pricing Cost monitoring Price setting production and economy (reduce principles (ERB) (operators) utilization production costs (cost-recovery; (economic, [for] competitive affordability) financial, social, production) (MLME) environmental) Quality International III. Strengthening Product Enforcing Fulfilling standards best practices governance and the and service standards (operators) (safety, reliability, rule of law (building standards (ERB) security, a system of national (MLME) timeliness) integrity) Institutional Public/private IV. Rehabilitating Government Quasi- Public sector (LEC, RREA, framework sector partnership infrastructure and (MLME) government St. Paul River Authority, (involvement of delivering basic (ERB) LPRC, NOCAL), communities private sector services (appropriate (cooperatives, and so on), to the greatest frameworks for the private Sector (Producers, extent possible) maintenance and Transporters, Wholesalers, sustainability of Retailers, Contractors, infrastructure assets) Suppliers, Manufacturers) Source: Evaluation of the National Energy Policy as carried out under the USAID program Liberia Energy Assistance Program, 2008. »» Fifteen (15) percent of the rural population shall has a target to connect 33,000 customers by 2015 but have access to reliable modern energy services the NEP target would imply that 119,007 connections toward meeting the same basic needs. would have to be made to reach that target. It is unclear »» Twenty-five (25) percent of the schools, clinics, how the difference will be made up for. Similar questions and community centers in rural areas shall have hold for other targets, even though some programs access to modern energy services (for lighting, are arguably underway. No policy or measures beyond refrigeration, information and communication, and small pilot activities have been taken as of early 2010 so on) and shall be equipped with productive that would indicate any measures are under way for energy capacity. improved cook stoves. This makes the cook stove target the most difficult to reach. Table 9.2 translates the above targets into the number of household connections that need to be achieved on an Furthermore, the NEP states that these access targets annual basis until 2015 to meet the NEP target. Based on are to be achieved while reducing greenhouse gas the policies in place, it is not obvious how these targets emissions by 10 percent, improving energy efficiency are to be met. For example, the management contract by 20 percent, raising the share of renewable energy to Establishing a Supportive Policy Framework for Implementation 99 Table 9.2  |  Translating the NEP Access Targets for 2015 into Connections to be Achieved per Household by the LEC and RREA 2010 2011 2012 2013 2014 2015 Urban and Peri-Urban Electricity Access targets 1% 7% 13% 18% 24% 30% Population (household 3,455 24,154 46,009 69,069 93,385 119,007 connections) targets Rural Electricity Access targets 0.50% 3% 6% 9% 12% 15% Population (households) targets 1,814 11,190 23,006 35,476 48,626 62,484 Public Facilities Access targets 1% 5% 10% 15% 20% 25% # of facilities 101 507 1,013 1,520 2,026 2,533 Improved Cook Stoves Access targets 0.50% 8% 16% 24% 32% 40% Population (households) targets 2,429 39,951 82,139 126,659 173,607 223,085 Source: Authors’ calculations. 30 percent of electricity production and 10 percent of January 2010. Full legislative enactment is expected overall energy consumption, and increasing the level of later in 2011. biofuels in transport fuel to 5 percent. Beyond 2015 the »» Management contract for LEC. The GOL has been long-term strategy is to make Liberia a carbon-neutral able to attract a management contractor for country within a specified target period. Liberia indicating a first step toward public-private partnerships as spelled out in the NEP. With respect to greenhouse gas emissions it is to be »» Liberia has made big strides toward its integration noted that in mid-2011 no greenhouse gas inventory with the WAPP, which spans the ECOWAS region. of Liberia existed, and that therefore the proposed As a first step toward integration of its domestic greenhouse gas emission reductions appeared difficult energy policies with those of the ECOWAS, the GOL to verify. Moreover, the large forest cover of Liberia has both signed and ratified the ECOWAS Energy may actually be a net sink of greenhouse gas emissions Protocol. Further, preparations are underway for in mid-2011. This would mean, however, that the self- the construction of the WAPP CLSG transmission imposed greenhouse gas target could become a barrier line, and rehabilitation of the Mt. Coffee power for economic growth to Liberia. Similarly, the targets for station is also being discussed within the framework renewable energy penetration, energy efficiency, and of the WAPP. use of biofuels, while certainly desirable, need further underpinning to be credible. Important issues that remain on the agenda and might warrant a review of the NEP: Despite this incongruence the NEP has led to a number of concrete important developments on the ground: »» Restructuring of the MLME. In the current structure, the ministry has three deputy ministers responsible »» The Rural and Renewable Energy Agency, stipulated for operations, planning, and administration. The by the policy, was created by executive order in deputy minister responsible for operations is 100 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series subject to a heady workload, with four assistant and ownership of the electricity transmission and ministers responsible for lands, mines, minerals distribution systems. The suggestion that the LEC be exploration, and energy. To elevate the attention unbundled as proposed in the NEP appears removed given to the three functional areas of the ministry, from the reality on the ground at the time given the NEP suggests the appointment of three deputy that the LEC is among the smallest power utilities ministers responsible for lands, mines, and energy in the world. Best practice in this area suggests that respectively, and the downgrade of planning and with small power utilities the costs of unbundling, administration functions to the level of an assistant especially the increased transaction costs, outweigh minister. This new structure is intended to elevate the benefits. In the petroleum sector there will be the attention given to energy, thereby improving the a need to review legislation especially with respect ministry’s policy-making and supervisory role for to the functions exercised by NOCAL and LPRC. the energy sector. The GOL needs to decide whether In the upstream sector, the policy of the GOL is to the structure foreseen in the NEP is still preferred. If bring the country’s petroleum investment climate so, restructuring of the MLME should be advanced. in line with international best practices so that »» Regulatory environment for promotion of private the extraction of petroleum resources will benefit sector participation. The establishment of an all Liberians and exploration and development independent and transparent regulatory process will be conducted in an environmentally friendly is often considered essential for the creation of an manner. In the downstream sector, the NEP investment environment conducive to increased supports competitive private sector investment or private sector involvement in the energy sector. participation in new storage depot management or Independence and transparency are fundamentally ownership, port management, offloading facilities rooted in an overall institutional framework that for petroleum products, up-country storage depots, avoids conflicts of interest and overlapping roles tankers moving petroleum products around the by separating policy setting, policy monitoring, country, and in-construction and operation of a and policy implementation and operation. The refinery primarily devoted to exports. NEP prescribes that the government, through the MLME, define and review energy policy. A The NEP provides a broad context for sector reform, proposed Energy Regulatory Board (ERB) would but to ensure its due implementation, it needs to be monitor policy implementation by all operators translated into primary and secondary legislation along whether owned by the public and private sector with a strategic plan and timetable. These are among or local communities. The ERB would monitor the next steps that should be taken to ensure that the costs, review sector plans, define and uphold NEP is followed by uninterrupted progress in sector quality standards for equipment and services, reform: and promote fair competition, including dispute resolution among stakeholders. In mid-2011 USAID »» The timeline for implementation needs to be defined. is providing technical assistance to explore options On page 43 of the policy the following statement for setting up an ERB for Liberia. Given the small is made: “It is the policy of the Government to size of Liberia’s energy sector, the GOL may wish adopt an implementation timeline to serve as a to consider keeping the regulatory function with reference for performance measurement in the the MLME in order to reduce transaction costs and implementation of the NEP.� This remains to be aggregate human capacity in the sector. carried out. »» For the foreseeable future the LEC will be the »» The policy needs to be written into law. Reform primary electric power company in Monrovia and, of Liberia’s power sector must include adoption in consultation with the MLME, will be responsible of a new law expressly regulating the broad for national system expansion planning (both on principles that the NEP sets out. The legislation and off grid). In the medium and long term, the establishing the RREA need to be accompanied by GOL will consider other options for the operation an overarching energy law that writes the entire Establishing a Supportive Policy Framework for Implementation 101 policy into supportive statutes and ensures clarity »» As recommended in the NEP, the National Energy in overall institutional reform. This law should also Committee (NEC) should be reestablished. The address consumer protection, in the context of NEC is an important mechanism for facilitating the ERB, as well as clarify which entity would be multisector and multistakeholder (GOL, donor, NGO, charged with monitoring and planning the growth and so on) coordination. and development of the sector. It is critical that »» GOL needs better publicity of its energy sector the law clearly defines the duties of each energy developments and plans. In addition, it will be institution to avoid overlapping and conflicts of critical that the general public be aware of the interest. In addition, secondary legislation will be options available to them in terms of rural energy, needed to address issues such as rights over land which will require a comprehensive information required for development of energy infrastructure. campaign coordinated between the GOL and the »» Greater clarity is needed on the roles and RREA. jurisdictions of the government’s energy companies, particularly as the energy sector master plan and In the short term, Liberia will be dependent on donor other sector strategy documents are developed. It support for technical and financial assistance required will be important to clearly define which entity will to implement the NEP. The GOL, however, must take the be responsible for various developments, and to initiative in establishing the timeline and strategic road ensure that entity has the capacity to do so. map for implementation to guarantee continued donor »» A financing plan for developing the proposed support. Nearly two years have passed since the NEP institutional structure needs to be developed so that was adopted, so it is critical that progress on energy it can be demonstrated to be sustainable over time. policy is made. 102 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Annex: Summary of Postconflict Demand Analyses for Liberia S ince Liberia’s conflict ended, no comprehensive 3,000–5,000 connections would occur per year until demand assessment has been carried out that 2012, and 400 additional connections per year until includes all sectors or covers all of Liberia’s 2020. Growth in sector demand of 1.8 percent annually counties. A few studies have been conducted that due to demographic growth, and 1.8 percent annually have assessed Monrovia, including its residential, due to economic growth, was assumed. commercial, and industrial customers. A study carried out by the International Finance Corporation (IFC, 2007) For the commercial sector, the forecast included a peak included a survey of 1,000 households in Monrovia demand of between 15 kW and 40 kW per customer, and its environs, as well as large commercial and with 15–30 percent connected during the first year, public customers. A feasibility study conducted for the increasing 10 percent annually until 75 percent of the West African Power Pool (AETS & SOGREAH, 2010) sector is connected. Finally, for the industrial sector, the considered Liberia’s prewar energy consumption, forecast included 35 major consumers with an average Monrovia’s current consumption, and an estimate of load of 0.7 MW, all connected by 2010, and a 1.8 percent mining demand to conduct a brief assessment. A growth factor as a result of economic growth. Norconsult report (2008) reviewed demand studies by A3i Consortium & AETS (2005), Manitoba Hydro The LEC load forecast was based on the estimated International (2006), IFC (2007), IFC (2008), Stanley 2008 power demand of 63.1 MW, assuming all of this Consultants (2008), and LEC (2008) to carry out a would be met by 2013, when the management contract demand forecast. Except for the Norconsult report is to conclude. It assumed a gradual increase in demand (2008), none estimated demand outside of Monrovia. during the contract period, with a postcontract 4 percent The Norconsult (2008) demand estimate considered growth from 2013 figures from institutional, commercial, two scenarios: one based on the IFC assessment and and residential customers, and a postcontract 10 percent one based on the LEC’s assessment. These estimates growth from industrial customers. are summarized in Tables A.1 and A.2. Norconsult’s forecast for outside Monrovia was based IFC (2008) load forecast estimated that 20 percent of on increased mining activities, starting from a base of Monrovia’s households would connect to the Monrovia 50 MW in 2013 and reaching prewar levels (200 MW) by grid, and that 10 percent would connect in the first two 2015, then remaining constant. It assumed that rubber years of the anticipated management contract for the concessions would reach 5 MW by 2013 and remain there, LEC. This estimate was based on a willingness-to-pay with a gradual increase until that time. Agriculture, estimate derived from the survey of 1,000 households. forestry, and fishing jointly were assumed to account Based on this, the derived load forecast estimated that for 10 percent of total consumption. Commercial and 103 104 Table A.1  |  Total Load Forecast for Liberia Based on IFC Scenario for Monrovia (MW) Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Area 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Monrovia 19.0 30.4 31.6 32.5 33.6 34.6 35.7 37.0 38.2 39.6 41.0 Outside 3.4 4.5 6.2 62.4 117.5 227.6 227.7 227.8 227.9 228.0 228.2 Monrovia Total Liberia 22.4 34.9 37.8 94.9 151.1 262.2 263.4 264.8 266.1 267.6 269.2 Source: Norconsult, 2008. Table A.2  |  Total Load Forecast for Liberia Based on LEC Scenario for Monrovia (MW) Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Demand est. Area 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Monrovia 20.0 31.0 43.0 50.0 53.0 56.3 59.7 63.5 67.5 71.9 76.6 Outside 3.4 4.5 6.2 62.4 117.5 227.6 227.7 227.8 227.9 228.0 228.2 Monrovia Total Liberia 23.4 35.5 49.2 112.4 170.5 283.9 287.4 291.3 295.4 299.9 304.8 Source: Norconsult, 2008. Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series household demand outside of Monrovia was assumed Cola, Cemenco, and Club Brewery), fishing companies, to be approximately one-third of Monrovia’s, adjusted ministries and other governmental institutions, by an annual growth factor of 3.2 percent until 2013, nongovernmental organizations (NGOs), foreign thereafter increasing by an estimated GDP growth of 4 missions, and the commercial and household sectors. percent per annum. Including the load already connected by year-end 2009, the total peak demand is estimated at 46.1 MW, were all Data collected by LEC since these documented consumers to connect immediately. Aside from fishing assessments contain more detailed information for companies, the household sector accounts for the Monrovia, and include industry by company (Coca- lowest percentage of this load. Annex: Summary of Postconflict Demand Analyses for Liberia 105 Reading by the light of a solar street lamp, Nimba County. References A3i Consortium-AETS. 2005. Technical Assistance to Foster, V., and C. Briceño-Garmendia. 2009. Africa’s Provide Technical Support Related to Production, Infrastructure: A Time for Transformation. Distribution, and Customer Supply to the Washington, DC: World Bank. Tendering Process of the New Electricity Sector in Geoscience. March 1998. Electricity Supply in Liberia, Monrovia. Final Report, June. Florence, Italy. Funded by the European Aah-Kee, Felix, P. E. October 2009. 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World Development Workshop, Monrovia, Liberia. Bank, Washington, DC. October 30, 2007. 108 Options for the Development of Liberia’s Energy Sector  |  AFTEG Energy Sector Policy Notes Series Given the range of challenges the energy sector faces in Africa, the World Bank’s Africa Energy (AFTEG) team is actively engaged across the continent, working with governments, power utilities, rural energy agencies and other players to ensure more households, businesses and public facilities can be supplied with high-quality energy services. Our approach is characterized by three strategic entry-points: »» Power Trade | Harnessing lowcost, renewable energy via regional power trade. »» Improving Utilities | Improving the functioning of power utilities in “hybrid markets.� »» Access | Committing to scaling-up electricity access via sectorwide engagement. To learn more about the World Bank Africa Energy Unit (AFTEG), visit us at: www.worldbank.org/afr/energy THE WORLD BANK 1818 H Street, N.W. Washington, DC 20433, USA Internet: www.worldbank.org/afr/energy Email: africaenergyunit@worldbank.org