Joint UNDP/World Bank Energy Sector Management Assistance Program Activity Completion Report No. 052/86 Country: BURKINA Activity: TECHNICAL ASSîISTANCE PROGRAM MARCH 1986 Report of the joint UNDP/World Bank Energy Sector Management Assistance Program This document has a restrictecl distribution. its contents may not I e disclosed without authorization from the Government, the UNDP or the World Bank. RNBRGT SECTOR NANAGElNET ASSISTANCE PROGRAN The Joint UNDF,IWorld Bank Energy Sector Management Assistance Program (ESMAP) started in April 1983, assiste countries in implementing the main investment and policy recommendations of the Energv Sector Assessment Reports produced un4er another Joint UNDP/World Bank Program. ESMAP provides staff and consultant assistance in formulating and justifying priority pre-investment and investment proiects and in providing management, institutional and policy support. The rc iort9 producad under this Program provide governments, donors and potential investors with the information needed to speed up proiect preparathib% and implementation. ESMAP activities can be classified broadly into three groups: - Energy Assessment Status Reports: these evaltiate achieve- mente in the year following issuance of the original assessment report and point out where urgent action is still needed; - Proiect Formulation and Justification: work designed to accelerate the preparation and implementation of investment projects; and - Institutional and Policy Support: this work also frequentlv leads to the identification of technical assistance packages. The Program aims to supplement, aclvance and strengthen the impact of bilateral and multilateral resources already available for technical assistance in the energy sector. Fundlng of the Program The Program ie a major international effort and, while the core finance has been provided by the UNDP and the World Bank, important financial contributions to the Program have also been madc by a number of bilateral agencies. Countries which have now made or pledged initial contributions to the programs through the UNDP Energy Account, or through other cost-sharing arrangements with UNDP, are the Netherlands, Sweden, Australia, Switzerland, t'inland, United Kingdom, Denmark, Norway, and New Zealand. Further Information For further information on the Program or to obtain copies of completed ESMAP reports, which are listed at the end of this document, please contact: Division for Global and OR Energy Strategy and Interregional Projects Preinvestment Div. I United Nations Development Energy Department Program World Bank One United Nations Plaza 1818 H Street, N.W. New York, N.Y. 10017 Washington, D.C. 20433 UIINA TECHNICAL ASSISTANCE PROCRAN MARCH 1986 LABLE OF CONTENTS Page INTRODUCTION .................................................... I. ASSISTANCE FOR AN URBAN HOUSEHOLD ENERGY PROJECT ............ 1 Background and Objectives ...................... .......... 1 Scope of Work . . . . ..... 2,. , , .......... 2 Phase I- Project Preparation........................... 2 Phase II -PossibleComponents.......................... 2 Organization and Timing7 . . . . . . . *.. . . . .* . . . . ........*..*.*...*.....*.7 II. PRJTROLEUM MANAGEMENT ASSISTANCE..... ............... 8 Background and 8bjectives .. ...................... 8 Scope of Work .......*. ................ 440404444*44 * 8 Task I - Least-Cost Procurement......................... 8 Task Il - Review of Petroleum Product Pricing and Financial Control ................... * 9 Task III - Institutional Review of the Petroleum Sector.........*................................................. 10 Organization and Timing................i444044404 40....... 1 l III. DIAGNOSIS OF REPAIR REQUIREMENTS OF THE OUAGA-2 FUEL OIL-FIP-s DIESELS..** ....... 12 BackgroL.-. and Scope o f Worf.............................. 12 Organization and ..................... ...........4...... 12 IV. ASSISTANCE TO POWER PLANNING ............ .............. 14 Background and Objectives .................. ..... 14 Scope of Work ................................ 15 Task I - Review of Short-Term Strategy.................. 15 Task II - Evaluation of Key Investment Options.......... 15 Task III - Tariff Review................................ 16 Timing and ....................... ................ ........ 16 V. REVIEW OF THE SUGAR AND EThANOL OPERATIONS .................. 18 Background and Ojcie ............................... 18 Scope of ....... ................. ....*............4.444 ....19 Task I - Review of the SOSU-BF sugar complex............ 19 Task II - Assessment of the Viability of the Ethanol Production.. . ................. 444444 19 Task III - Ethanol Marketing............................ 20 Organization and Timing.... ............... 21 VI. AIR-CONDITIONING SYSTEM MANAGEMENT AND ARCHITECTURAL DESIGN 22 Background and Objectives 4044444*4444444*4*444**444*4 .... 22 Scope of Work ........... , 22 Task I - Design of Technical Specifications for Individual Air-conditioning Units.... 22 Task II - Evaluation of Humidification Systems.......... 23 Page Task III - Evaluation of the Sahelien Experience of "Passive r Archi tecture.......................... 23 Organization and Timing.................... 24 VII. CREATION OF AN ENERGY PLANNING UNIT IN THE MINISTRY OF PLANNING.*** . . . . . . ............ 25 Background and Obj ec t i v e s 25 Scope of Woor ...... ...25 Organization and Tilg.......... .....27 IUTRODUCTION 1. The Burkina Energy Assessment Report (January 1985), based on the findings of a mission which vas fielded in September 1984, identified a cote of priority areas for technical assistance in the energy sector and ranked them in terms of their urgency. 2. The present document, completed as part of the UNDP/World Bank Energy Sector Management Assistance Program (ESMAP), presents terms of reference for each of the technical assistance activities identified. The proposed projects have been ranked in a priority order> based on their urgency anti their expected benefits for the national energy balance in relation to their costs. This priority order vas discussed and confirmed with the government of Burkina (COB) during a follow-up mission tv Ouagadougou in October 1985. 3. The proposed technical assistance activities are briefly described below in an energy sector action prc ram that has been prioritized according to the folloving major strategic concerns: (a) Burkina's agricultural and forest resource base, which is the lifetline of its economy, is increasingly threatened by erosion and the loss of soil fertility caused by the use of fuelwood, crop residues and dung as household fuels. The most important part of the Government's energy strategy will be the measures taken to relieve the pressure of household energy on the agricultural sector. (b) Burkina has a very limited energy resource endowment to meet its needs. Domestic biomass cannot continue to satisfy the requirements of household cooking; hydro resources are limited and there is no serious prospect of discovering exploitable reserves of fossil fuels or petroleum in the medium-term. More efficient use of energy sources and least cost petroleum imports therefore will remain the key elements of Burkina's energy strategy for the foreseeable future. (c) The shortage of investment resources and the severe budgetary limitations call for improved management of existing energy facilities and careful optimization of project returns and scheduling of investments. In view of these criteria, three activities were deemed to require immediate implementation: household energy, improved petroleum procurement, rehabilitation of thermal plant. The remainder are listed in approximate order of priority and should be implemented over the period 1986-1988. 4. Al, of the projects identified by the ESMAP mission are described below and in the followinl chapters. These technical - Ji - satance projects and their associated terme of reference are presented to the Covearmnt as an instrument for channaling assistance into priority areas and to the international donor community to provide a tool for preparing technical assistance programu in the energy area. The activities do not have to bs executed au one package but tan be implemented individually vith separate donor financing. 8ome tutdies could also be executed under ESMAP. Immediate Implementation Household Enerpy Project 5. This is to be carried out in two phases -- a proparation phase and an implementation phase -- as followa: (a) Promotion of urban household energy conservations In order to relieve the pressure of fuelvood exploitation around the main urban areas, the project aima to promote the dissemination of efficient woodstoves. Large-scale production and dissemination of improved metal voodttoves vill be launched through training of local metalworking artisans, adequate quality control, and promotion of efficient marketing channels. (b) Kerosene promotion: The project vill also investigate the economic and social feasibility of substituting kerosene for fuelvood and vill identify technically and financially acceptable kerosene otoves for Burkina conditions. (c) Support to forestry policy: Given the increasing over- exploitation of wood resources in Burkina, there is an urgent need to implemunt a vigorous forestry strategy based on carefully chosen and closely monitored investment projects and on improved management of fuelvood production. Possible actions includes -- Support to forestry investient planning and monitoring. -- Assistance to DAFR in rationalizing fuelwood exploitation around the large consumption centers and investigating alternative supply options. This vouLd include strengthening the tax collection mechanism, developing an exploitation monitoring system, and investigating new supply options such as transporting fuelwood from areas of forest surplus. -- Investigation of the role of bush fallows and village reserves in fuelwood supply in order to research and promote rational exploitation mechods. - iii - Assistance for Petroleum Management 6. Petroleum product importe have absorbed about one half of Burkina's recorded export earnings in recent years. Significant savings could be achieved through the development of least cost procurement, transport, storage and distribution strategies. On the demand side, improved product pricing mechanisms and better financial control over the sector would allow a more accurate and timely reflection of changes in economic costs. An institutional review of the sector should be carried out to estabiish management mechanisms and formulate training requirements necessary for the government agencies to effectively execute their responsibilities in the petroleum supply strategy. Rehabilitation of the Oua&a-2 Fuel Oil-Fired Diesels 7. The project vould determine the reasons for the plant's frequent breakdowns and develop a costed plan for implementing a repair program. Other Projects to be Implemented in 1986-1988 Assistance to Pover Planning 8. Because of the poor economic performance since 1980, growth in e1ectricity demand has slackened to the point where SONABEL (la Société Nationale Burkinabè d'Electricité) must nov consider a significant rescheduling of its investment program. At the same time, this lull vill enable SONABEL to complete a series of preinvestment studies that are needed for the subsequent design of a long-term master plan. The proposed technical assistancs vill therefore help SONABEL to: (a) reevaluate demand forecasts and determine resulting project reschedulings; (b) modify the tariff structure to improve demand management at medium voltage; and (c) complete prefeasibility studies of transmission links vith the Ivory Coast and Ghana. Review of the Ethanol Industry 9. The GOB has recently established, next to the Banfora sugar mill, a distillery designed to produce ethanol from molasses; it is also in the process of investigating the feasibility of a sorghum-based ethanol plant. The proposed project would establish the economic and financial viability of these operations through calculation of input and output costs, and would attempt to maximize bagasse-derived energy supply both to the sugar plant and to the molasses distillery. In a second - iv - step, the project vould design an appropriate marketing and distribution system to ensure least-coat and technically efficient uee of the ethanol produced as a gasoline extender. Improved Air-conditioning System Management and Architectural Design 10. Air-conditioning is a large component of electricity demand in Burkinas The introduction of more energy efficient equipment would result in significant load reductions for the generat'ion system. Moreover, several interesting options exist to reduce airconditioning needs and/or to substitute partial airconditioning. The proposed assistance therefore aimo at: (a) improving the average energy efficiency of the stock of indivitual air-conditioning units in Burkina; Urban household energy project Phase 1 60,000 3 Phase Il, consistlrg of: 1,100,000 n/O - Improved woodstoves (400,000) - kerosene prootion (300,000) - support to forestry pollcy (400,000) Petroleum management 71,000 3 Diagnosis of repair requiremsnts of the Ouaga-2 fuel ol-f ired dieseuls 20,000 1 Power planning 106,000 6 Review of the sugar end ethanol oporation 38,000 2 Air conditioning end architectural design 80000 3 Energy planning 9S000 S TOTAL 1,570,000 a/ These estimates are boased on: (1) USS12,000/month for consultant fees wIth the exception of US$18,000/month for petroleum experts; (ii) US$100 par diem; end (lii) USS4,000 per round trip, the estimates do not include the costs of project supervision end report productioon. - 1 - I. ASSISTANCE FOR Au UnA OUESPOLD SUBRCY PROJECT Background and Objectives 1.1 Fuelvood is the main source of residential energy required in Burkina, mainly for cooking, and represented over 30% of net energy supply in 1983. Housebold energy consumption, ever in urban and semi- urban areas, relies almost exclusively on fuelwood. The Energy Assesument noted that fuelwood covered 962 of national domestic energy consumption, while agricultural residues and kerosene absorbed respectively only 3% and 1X of total consumption. Overall residential consumption of electricity and LPC (butane) is insignificant. 1.2 This almost complete dependence on fuelwood has led to overexploitation of the meager forest resources, which are already severely depleted under the joint pressure of recurring droughts, agricultural and pastoral clearing, and lack of commitment of local populations to forest protection. The Energy Assessment astimated that, as a consequence of these population growth-related pressures, the fuelvood deficit (i.e., consumption over and above the sustaitable production) vill be multiplied by three over the next decade and will reach 25% of consumption in 1995 if nothing is done to stop this tiend. Overexploitation of wood resources is particularly serious around the main urban centers of the densely populated Mossi plateau. 1.3 In order to rationalize supply and demand of fuelwood in the large urban centers, there is a need for: (a) increased fuelwood supply from improved forestry planning and management, and rationalized fuelwood production and transport; (b) fuelwood conservation by means of large scale production and marketing of improved woodstoves both for household cooking and for craft activities; and (c) adaptation of kerosene stoves to the local cuisine, followed by promotion of kerosene to upper income households. 1.4 In order to address these issues, in 1985 the GOB launched a new and far-reaching forestry strategy entitled the "Three Struggles". This was designed to protect the natural forest resources from bush fires and animal encroachment and to control urban supply of fuelwood. As part of an integrated policy package the government also Launched a major fuelwood conservation campaign through large scale dissemination of improved woodstoves. Substitution of other fuels for wood has also been encouraged; early efforts have mainly been concentrated on butane. This vigorous strategy should be supported by a flexible technical assistance project integrating both supply and demand components in the priority urban areas. 1.5 In order to ensure a good match of the project with specific requirements identified during implementation of the current forestry - 2 - program and to ensure close coordination vith projecto financed by other donors, the proposed project ahould be implemente4 in two phases. During the firet phase a preparatory mission vould draft detailed terme of reference and the bud.qt for a project to be implemented ovGr a tvo to three year second phase. This vould include the folloving three componentst (a) marketing of lmproved woodstoves (about US$400,000)1 (b) kerosene promotion (about US$300,O00); and (c) support to forestry policy (about US$400,OOO). Scope of Work Phase I: Project Preparation 1.6 This phase vill be carried out by one or tvo speciarista in fuelwood/household energy during a six week stay in Burkina, during which time he (they) vill review the urban household energy situation in close cooperation with all relevant organizations in Burkina. The purpose of this phase is to prepare complete and detailed project documents. The consultants' tasks will be tot (a) review existing data on residential energy demand and socio- economic parameters; (b) review current household energy conservation and substitution projectf in close cooperation vith the Service des Foyers Ameliores (SFA), the Institut Burkinabè de l'Energie (IBE), and donors active in this area; (c) evaluate the resources available vithin the central and provincial forestry services to implement their forestry program and determine with them the institutional changes and concrete actions needed to improve management of urban fuelwood supply. This exercise should take into account the lessons available from current and planned projects financed by other donors. 1.7 Following this review, the consultant(s) will draft in agreement with the GOB and in coordination vith the donors, detailed complete budgeted and schedule terme of reference for each of the three components described below. Phase II: Possible Components 1.8 Preliminary terme of reference are outlined below. Phase I vill define the most appropriate areas and the scope for policy action. 1.9 Component 1: Production and Marketing of Metal Stoves in Urban Areas. A large-scale production and marketing system for improved woodatoves should be established. Modela chosen for dissemination should be produced at competitive costs -- for example, by the use of scrap - 3 - metal instead of new metal, and by folding instead of velding -- to facilitate the unsubsidized sale of the stoves at price levels that households can afford. A large scale training program should be set up (through the CNPAR, the Artisan Center, for instance), along vith a credit support system for artisans, if necessary. 1.10 It vill be necessary to monitor stove producers to ensure that quality standards and efficiency of the stoves are maintained. The two main problems encountered in small-scale stove production are quality control and standardization. In order to address this problem, the IBE vill be responsible for checking a sample of products. 1.11 In order to accelerate the penetration of improved woodstoves, several informational and educational activities should be launched simultaneously. The project should finance: (a) the training and deployment of extension workers; and (b) a sales promotion campaign, 1.12 To evaluate the actual impact of the project and improve its effectiveness, it vill be necessary to carry out a longitudinal survey and monitor a permanent sample of usera. The SFA vill be able to carry out this task and vill be helped by an expert such as a socio-economic supervisor to design, implement and analyze the surveys. The IBE vill use the results of these surveys to improve and possibly diversify the inital series of models to be marketed. The "Burkina mixte" model, which can burn either fuelwood or charcoal, appears to be an interesting option to pursue, for example. 1.13 The project vill also look into other policies for Government support -- for example, to ensure uninterrupted supply of metal sheet and aluminum pans. For metal sheet the project should investigate the availability of scrap metal and the options for coping with a possible shortage. 1.14 Some 25% of total wood supply is consumed for craft work in some urban areas. Dolo beer brewing, metal work, and various food processing activities are the main fuelwood consuming crafts. Institutions (schools, army barracks) also often consume large amounts of fuelwood for cooking. A different approach than the one used for household stoves is needed to design and market improved stoves for artisans or communities. On the one hand, artisans are more attuned to cash savings than households and their technical concern for stove operations (installation, maintenance) is higher. On the other hand, there is a need to clearly identify artisans and their markets and to design stoves that are adapted to each specific craft/purpose. A craft- specif:c program therefore is needed and will be included in the project. Dolo-brevers are the first target because they are the main wood users. 1.15 Component 2: Promotion of Kerosene for Cooking. The main objective of this project is tO determine the scope for introducing kerosene into the present urban household energy mix and to develop an adequate kerosene and stove marketing system. To do so, the project vilt identify infrastructural, cultural, and socio-economic obstacles to the introduction of keroeene. It will then design an appropriate promotion strategy taking into account hardware requirementsp financial constraints, alternative uses of kerosene and cooking practices. The appropriate role of the governaent in kerosene promotion vill also be determined. The scope of vork vill include three main taskoS study of the economic context; review of kitchen technology; and design of a market development strategy. (a) Economic context. This activity will review kerosene supply arrangements (procurement, storage and distribution), assess the market potential (target market segments in view of household income distribution and consumption patterns), and study the fiscal and economic issues associated with kerosene development -- possible subsidy requirements, impact on government revenues and balance of payments.