GIZ NREEC IMPLEMENTATION PLAN

MINI HYDRO POWER PROJECT FOR CAPACITY DEVELOPMENT

July 2011 Update

GIZ NREEC Implementation Plan

Mini Hydro Power Project for Capacity Development (MHPP2) Contents
1. Project Background ................................................................................................................... 5 1.1. Indonesias Energy Situation ........................................................................................................ 5 1.2. The Role of Mini Hydro Power for Rural Electrification in Indonesia .......................................... 5 1.3. GIZ Involvement and EnDev ......................................................................................................... 7 1.4. Challenges Ahead ......................................................................................................................... 8 Objectives ............................................................................................................................... 10 2.1. Project and Programme Objectives ........................................................................................... 10 2.2. Indonesia and NREEC Objectives ............................................................................................... 11 Strategy .................................................................................................................................. 12 Areas of Intervention, Activities, and Indicators ....................................................................... 15 4.1. Policy Advise .............................................................................................................................. 15 4.2. Monitoring and Evaluation ........................................................................................................ 16 4.3. Capacity Building ........................................................................................................................ 17 4.4. Pilot Projects .............................................................................................................................. 17 4.5. Information Dissemination ........................................................................................................ 18 Organizational Setup ............................................................................................................... 19 5.1. Stakeholders .............................................................................................................................. 19 5.2. Coordination .............................................................................................................................. 19 5.3. Steering Structure ...................................................................................................................... 20

2.

3. 4.

5.

References...................................................................................................................................... 22 Appendix A: Objectives and Indicators............................................................................................. 23 Appendix B: PCNA - Areas recommended for support by MHPP2 ...................................................... 24

List of Figures and Tables

Figure 1 Electrification ratio in Indonesia provinces.................................................................................... 6 Figure 2 Micro Hydro Project activities of GIZ Indonesia, 2006-2012 (EnDev 1/EnDev 2) .......................... 8 Figure 3 MHP site projection per budget year from 2009 to 2012 under EnDev 2-TSU ............................. 9 Figure 4 Budget allocation for MHP/PV systems under Green PNPM and DAK 2009 to 2014.................... 9 Figure 5 National Energy Mix 2025 (as in Presidential Regulation No. 5/2006) ........................................ 11 Figure 6 Proposed scheme to establish a renewable energy centre for learning and innovation at NREEC which serves as a focal point for all stakeholders ..................................................................................... 13 Figure 7 Proposed learning and innovation model applied by the MHPP2 Project ................................... 14 Figure 8 Main stakeholders in Indonesia's MHP sector ............................................................................. 19 Figure 9 Proposed Project Organization MHPP2 ........................................................................................ 21 Table 1 Rural electrification and renewable target 2010 - 2014 ............................................................... 11

Abbreviations
ACE DAK DGEEU DVD EnDev GIZ HYCOM IDR KDP MoEMR MoF MoHA MHP MHPP MHPP2 NGO NREEC OPEC PCNA PLN PMD PNPM RE RELINC ToT TSU ASEAN Centre for Energy Dana Alokasi Khusus (Special Allocation Fund) Directorate General for Electricity and Energy Utilization Digital Versatile Disc Energising Development; a Dutch-German Energy Partnership to promote sustainable access to modern energy services in developing countries Gesellschaft fr Internationale Zusammenarbeit Hydro Power Competence Centre Indonesian Rupiah PNPM Kecamatan Development Program (kecamatan = sub district) Ministry of Energy and Mineral Resources Ministry of Finance Ministry of Home Affair Mini/micro Hydro Power Mini Hydro Power Project Mini Hydro Power Project for Capacity Development Non-Governmental Organization New and Renewable Energy and Energy Utilization Organization of the Petroleum Exporting Countries Participatory Capacity Needs Assesment Perusahaan Listrik Negara, the Indonesian National electricity utility DG for Community and Village Empowerment (Direktorat Jenderal Pemberdayaan Masyarakat Desa) National Programme for Community Empowerment (Program Nasional Pemberdayaan Masyarakat) Renewable Energy Renewable Energy Learning and Information Centre Training of Trainers Technical Support Unit

1.

Project Background

1.1. Indonesias Energy Situation

Indonesias existing energy mix reflects that the country was a founding member of OPEC with plenty of hydro-carbon based products available for domestic consumption. While still a net exporter of natural gas the country is now finding itself importing larger and larger quantities of oil and membership of OPEC has unilaterally been suspended. The response from the national utility PLN (Perusahaan Listrik Negara) has been to initiate a programme to switch from expensive oil to gas and coal of which Indonesia has large reserves. The Indonesian economy has weathered recent economic turmoil in the world well and PLN in response to an expanding economy is also faced with the need to increase capacity. In recent years consumption of electricity has increased by 7 per cent annually. These factors have sharply put the need for diversification of supplies into focus and Indonesia has an ambitious plan for renewable energy and in parallel are advancing plans for the use of nuclear energy. Subsidies to the energy sector are one of the biggest items on the national budget. The combined fuel and electricity subsidies totalled IDR 111.9 trillion in 2010. In the same year the government allocated IDR 57.46 trillion (USD 6.37 billion) for the fuel subsidy and the rest went to the state utility PLN as an operating subsidy in compensation for being compelled to sell electricity at below cost. Average generation cost in Indonesia is around 1,200 IDR/kWh and reaches up to 3,000 IDR/kWh for diesel power generation in remote areas. Average selling price is around 700 IDR/kWh. PLN is reputedly in need of substantial reforms, but its weak financial and technical performance can apart from below-cost tariffs set by government to some extent be explained by Indonesias unique geography. In the archipelago PLN currently operates 5,233 power plants with a combined capacity of 24,960 MW, which means that the average plant size is less than 5 MW and thus PLN must possibly have the most unfortunate structure of production costs in any large country in the world.

1.2. The Role of Mini Hydro Power for Rural Electrification in Indonesia
Indonesia has a comparatively low overall rate of electrification for a middle-income country. Figures and interpretations diverge, but as much as 30-35% of the population may not have access to electricity. This may well entail that over 75 million people may not have access to modern electricity services. Provisional energy sources such as diesel gensets, batteries, or kerosene are costly, require a high share of the household income and harm the environment. Insufficient energy supply also hampers the further development of small businesses and social infrastructure. Figure 1 gives an overview of electrification in Indonesian provinces.

1.Kalbar : 45,46% 2.Kalsel: 71,39%

3.Kalteng: 44,33% 4.Kaltim: 68,71%

1.Sulut: 66,62% 2.Gorontalo: 48,70% 3.Sulteng: 47,64% 4.Sulsel : 54,90% 5.Sultra: 38,21%

1.Papua + Irjabar : 32,05% 2.Maluku : 55,36%

3.Malut : 47,81%
U

200

400

Kilometers

1.NAD : 74,91% 2.Sumut : 69,32%

3.Sumbar : 68,72% 4.Riau + Kepri : 54,66% 5.Sumsel : 49,80% 6.Jambi : 48,85% 7.Bengkulu : 50,08% 8.Babel : 72,45% 9.Lampung : 47,66%

1.DKI Jaya : 100% 2.Banten : 72,11% 3.Jabar : 64,95% 4.Jateng :70,60% 5.DIY : 79,64% 6.Jatim : 71,08%

1.Bali : 74,42% 2.NTB : 31,99%

3.NTT : 24,24%

RE seluruh Indonesia : 64%

Source: Blueprint Rural Electrification Program (MEMR, 2008)

Figure 1 Electrification ratio in Indonesia provinces

The majority of un-electrified people in Indonesia are actually living in (already) electrified areas and would need grid intensification programmes (World Bank, 2009). However, there is also a significant number of people living in non-electrified villages, which are mostly found in remote rural areas. Such areas can either be targeted through grid extension or dedicated off-grid solutions. Insights are revealed in the recent World Bank Regional Electrification Master Plan (Indonesia). The report estimates least-cost expansion options and concludes: Grid expansion is the least-cost means of electrification up to distances of around 7 km where good micro-hydro resources are available (of course assuming that sufficient grid-connected generation capacity is available, which unfortunately is not often the case). Where this is not the case, grid expansion is least-cost up to distances of around 16 km, where biomass isolated grids become lower-cost. In cases where good micro-hydro, biomass (and geothermal) resources are not available, then grid expansion remains least-cost at distances up to 28 km, where diesel isolated grids are to be preferred. Household level solutions are only to be preferred where practical constraints on access prevent the use of isolated grids or for smaller villages where it is not economic to install isolated grids. This study shows the economic advantages of MHP electrification in remote areas, however does not take other advantages of MHP into consideration like creating local employment. Indonesia, however, possesses abundant water resources of which currently only about 10% have been exploited. By properly harnessing this clean and cost effective energy source, the development of rural areas can be moved forward. The Mini Hydro Power Project (MHPP) has been supporting the Indonesian government either directly or indirectly to increase the electrification ratio particularly in rural areas. Micro hydro technology

introduced by MHPP has been used extensively in many parts of Indonesia. Currently the extension of MHPP, which is called MHPP for Capacity Development (MHPP2), is expected to able to transfer knowledge about MHP to the local institutions so that Indonesia remains to be one of the centres of excellence for micro hydro in the world.

1.3. GIZ Involvement and EnDev

Since the late 80s, GIZ has been active in providing technical assistance to the Indonesian Government and non-Government institutions active in micro hydro power (MHP) project development. This technical assistance prioritised the introduction of standardised technology packages to institutions, companies and individuals actively engaged in MHP project development and covered all the main technical aspects of stand-alone MHP project design, construction, and post operation capacity building (mechanical, electrical, civil, institutional etc.). These technology transfer efforts have had a significant impact on the development of the Indonesian MHP sector over the past 10 years. During that period, close to 150 MHP installations with capacities up to 150 kW were taken into operation in WestJava, Sulawesi and Sumatra. Efforts, however, have been largely limited to regions in western Indonesia (Java, Sumatra). The accumulated experience and know-how that have resulted from this intervention provides now a solid basis for a wider spread dissemination of the know-how across remoter areas in Indonesia, where the greatest demand and the largest natural potential remain under-exploited. In Eastern Indonesia for example not only villages but also many district and sub-district cities still remain without a modern energy source. In 1999, the MHPP was started, jointly implemented by GIZ and the Directorate General for Electricity and Energy Utilization (DGEEU) under the Ministry of Energy and Mineral Resources (MoEMR). Between 2006 and 2009, MHPP has supported the implementation of 96 MHP sites in Sulawesi and Sumatra with capacities ranging between 5 and 80 kW. These activities have been funded as part of the first phase of the German-Dutch Energy Partnership Energising Development (EnDev), an output oriented programme that aims at providing modern energy to 6.1 million people in 21 countries. Two kinds of EnDev 1 project sites can be distinguished, in exceptional cases a mix of the two exists. On the one hand, there are sites funded by the Indonesian government. On the other hand, a World Bank Trust Fund (formerly KDP programme, now PNPM) provides money for projects for community empowerment. Within this framework, communities can apply for funding for self-defined community development projects, which also include MHP, the so-called Green PNPM. The lead executive agency of the program is the Ministry of Home Affairs (MoHA). The community empowerment program already exists since the end of 1990s. However, due to the lack of operational support and maintenance, many MHP sites did not perform properly. In 2007 the GIZ started to cooperate with the community empowerment program via MHPP in order to improve the sustainability. The project supported both the government and KDP financed sites during the implementation. In May 2009, EnDev entered into its second phase (EnDev 2) where under the country measure Indonesia two complementary projects are implemented: The Micro Hydro Power Technical Support Unit (MHP-TSU), which is directly supporting the planning and implementation of MHPs in the villages financed through block grants of the Green PNPM Programme and the policy oriented Mini Hydro

Power Project for Capacity Development (MHPP2). The expected outcome of EnDev 2 is to provide 170,000 people with electricity. The MHP-TSU Project is jointly implemented by GIZ and the PMD (Directorate general for Community and Village Empowerment) under MoHA. The MHPP2 is jointly implemented with the MoEMR. Recently, MHPP2 directed its attention towards a systematic scaling-up of MHP-based rural electrification beyond demonstration efforts.
EnDev 1 2006 2007 2008 2009 2010 EnDev 2 2011 2012

MHPP

TSU MHP Technical Support Unit PNPM-financed sites government-financed sites

- support application and commissioning process - supervise implementation - introduce operation, maintenance and management procedures - capacity building

- support community preparation - facilitate institutional & legal set-up - introduce operation, maintenance and management procedures - promote productive, income-generating end use of electricity

MHPP2
- consolidation and institutionalization of know-how and experiences

Main cooperation partner:

= Ministry of Energy

= Ministry of Home Af f airs

Figure 2 Micro Hydro Project activities of GIZ Indonesia, 2006-2012 (EnDev 1/EnDev 2)

Figure 2 gives an overview of GIZ activities from 2006 to 2012. MHPP2 was initially started with the DGEEU as counterpart, but has been shifted at the end of 2010 to the newly established Directorate General for New and Renewable Energy and Energy Conservation (NREEC). The shift in the counterpart organization required a revision of the project planning. This inception report shall insure that the Project's activities and indicators are in line with the objectives, targets and activities of NREEC. In cooperation with NREEC, the project promotes sustainable access to clean energy by maximising the utilisation of hydro power resources that are available in Indonesia. At its early stage, the IndonesianGerman Cooperation focused on introducing robust and easily applicable technology packages for the design of turbine and civil works construction to NGOs, private companies and individuals engaged in the MHP sector.

1.4. Challenges Ahead

Figure 3 shows the planned installations under the Green PNPM Programme. It is presently the biggest MHP implementation programme in the country. From the 26 sites which have been allocated under the 2009 budget, 8 sites have been completed by end of April 2011. It becomes obvious that reaching 80 or more sites per year is a big challenge, especially because Green PNPM as a village empowerment programme depends significantly on village contribution.

Endev2 MHP Site Projection vs budget year

(total 236 sites)

90 80 70 60 50 40 30 20 10 0
2009 1 2010 2
3 2011 4 2012

Figure 3 MHP site projection per budget year from 2009 to 2012 under EnDev 2-TSU

Budget Allocation for MHP/PV under GNPM & DAK in Million Euro
60 50 40 30 20 10 0 2009 2010 2011 2012 2013 2014 GPNPM DAK DAC

Figure 4 Budget allocation for MHP/PV systems under Green PNPM and DAK 2009 to 2014

However, this challenge is still small compared to the ones ahead. A new promotion programme financed under the Special Allocation Fund (DAK), is providing up to 60 Million Euro annually to electrify remote rural areas in underdeveloped areas with renewable energy (RE), compared to the 4 Million Euro under the Green PNPM programme. In Figure 4 the budget allocations for Green PNPM and DAK are subsumed. This way the challenges the DAK is facing becomes obvious.

2.

Objectives

2.1. Project and Programme Objectives

The EnDev 2 country measure in Indonesia consists of two projects, MHP-TSU and MHPP2 that complement each other, and support the overall objective of sustainable rural off-grid electrification thru MHP. The overall objective of EnDev 2 Indonesia Developing 250-300 micro hydro power plants and Supporting the relevant institutions to have the capacity to independently implement further schemes The first part of the objective is mainly supported through the MHP-TSU Project, which provides technical support to the planning and implementation of MHPs in Sulawesi and Sumatra under the Green PNPM Programme. The second part of the objective is clearly in the focus of both projects, MHPP2 and MHP-TSU. The success of the EnDev 2 country measure is directly measured on the micro level. Three indicators have been defined to indicate the access to modern energy services in the electrified villages. Indicators EnDev 2 Indonesia Energy for lighting and electrical household appliances: 170,000 people until September 2012, 340,000 until 2015. Electricity for social infrastructure: 160 schools, 60 health centres, 90 community centres. Energy for productive use/income generation: 150 agro-processing, 400 metals and wood working, 250 household applications. These indicators reflect the second part of the objective only so far, as a target of another 170,000 electrified people defined for the period from 2013 to 2015 after the envisaged end of the projects in September 2012. In line with the overall objective of the EnDev 2 country measure a separate objective has been defined for the MHPP2 Project. Objective of the MHPP2 Project MHPP2 aims to the institutionalization of know-how and experiences in MHP implementation within NREEC. Building on achieved successes in the sector the current focus is to disseminate and exchange know-how and experience throughout the country and to consolidate best practices in implementing sustainable hydro power plants. MHPP2 will support a systematic model of knowledge dissemination, which could provide the new arrivals in micro hydro sector to obtain the necessary information.

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2.2. Indonesia and NREEC Objectives

The Presidential Regulation No. 5 of 2006 about National Energy Policy has target to achieve the energy mix which comprises 17% share of new and renewable energy by the end of 2025. The share for MHP itself is relatively low less than 5%. Figure 5 shows the energy mix target based on this regulation.

Coal > 33%

Hydro 2%
Mini hydro 0.2%

Geothermal 5% Solar 0.2% NRE 17% Biofuel 5% Wind 0.05%

Biomass 0.5%

Gas >30%

Liq. coal 2% Nuclear 2%

Fuel cell 0.05%

Oil <20%

Figure 5 National Energy Mix 2025 (as in Presidential Regulation No. 5/2006)

With the growing importance of new and renewable energy, the government has an ambitious new target to increase electrification ratio to more than 90% in 2020. Based on Vision 25/25 set out by the NREEC, renewable energy's utilization should be increased to 25% of the energy mix by 2025. Therefore, the role of renewable energy to augment electrification ratio and to improve the welfare of society is very important. However, this new target has not been elaborated into roadmap with comprehensible clusters. Table 1 shows the national governments strategic plan of electrification. The government aims to improve the ratio to 70.4% by the end of 2011. Regarding the ratio of villages electrified, the figures should be scrutinized. The issued statistics states that in 2010, 94.6% of the villages in Indonesia is electrified. Through some discussion it is revealed that the definition if electrified does not reflect the actual rate of rural electrification. Therefore, further discussion on the matter is needed.
Table 1 Rural electrification and renewable target 2010 - 2014

Indicators
National electrification ratio (%) Villages electrified (%) Market share for new renewable energy (%) Installed capacity for MHP (MW)

2010 67.2 94.6 8.3 1.53

2011 70.4 95.6 10.2 10.42

Target 2012 73.6 96.7 12.2 10.90

2013 76.8 97.8 14.1 11.38

2014 80.0 98.9 16.1 11.94

Source: Strategic Plan of Ministry of Energy and Mineral Resources 2010 2014

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3.

Strategy

To improve the capacity and the institutional framework of Indonesia's MHP sector is a challenging task, since it is a very diverse sector with many different players on the central governmental as well as on the local level. Indonesia's unique geographic position as the biggest archipelago in the world, spanning 6,000 km from east to west makes it even more challenging. MHP schemes are supported by at least half a dozen ministries and implemented with hardly any coordination, each time setting new implementing structures, rules and regulations and capacity building measures. Improving capacity building and the institutional framework of the sector requires an institution which can play a strong coordinating role and ensures that there is an effective mechanism to learn from best practices and to maximize the use of financial and human resources. The newly established NREEC is seen to be in the best position to take over this role and it will be a core activity of MHPP 2 to support NREEC to establish the needed capacity and to set favourable frame work conditions. The implementation concept lines out the strategy of the project, who the key actors in this strategy are and what their roles and interactions in order to reach the MHPP2 are, as well as EnDev 2 objectives and indicators. It describes how maximum synergies can be gained by coordinating and integrating the MHPP2 and the MHP-TSU Project. It suggests what project organization would best support the strategy and what resources are needed to implement it. To stimulate learning and innovation is the core of the concept to improve capacity and institutional framework of the MHP sector and renewable energies in general. NREEC, supported through MHPP2 should take a leading role in the implementation of this strategy. It is proposed to establish a centre for learning and innovation at NREEC that comprises all types of renewable energies including hydro power. The main role of this centre would be: To establish a monitoring and evaluation system which supports a continuous improvement of applied technologies, business models and promotion schemes, To pilot test new technologies, business models and promotion schemes, To compile best practice case studies and serves as a centre for information dissemination to the RE sector, and To initiate and support application oriented capacity building programmes implemented through private and public training providers. Finally the expertise gained through this centre should provide an important input to design practical policies to promote renewable energy in Indonesia, which show lasting impact.

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Figure 6 Proposed scheme to establish a renewable energy centre for learning and innovation at NREEC which serves as a focal point for all stakeholders

Since the hydro power sector is the most developed sector among all renewable energy technologies in Indonesia it could play the role of an incubator for the other RE sectors. The role of the MHPP2 could be to support NREEC to establish a kind of precursor for a learning and innovation centre at NREEC using the MHP sector as a pilot and example for other RE technologies. Within the limited framework of the Project it would be essential to limit the field of interventions. It is suggested that MHPP2 provides certain core elements for the learning and innovation centre with an exemplary status. The main areas of intervention should support the objective of EnDev 2, MHPP2, and institutional and capacity building within NREEC so that it can fulfil its role as focal point for learning and innovation. The activities should focus on the following five areas: 1. Policy Advise 2. Monitoring and evaluation 3. Capacity building 4. Pilot projects 5. Information dissemination

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Figure 7 Proposed learning and innovation model applied by the MHPP Project

A cornerstone of the EnDev 2 Indonesia implementation strategy is to systematically explore synergies between the MHPP2 and the MHP-TSU Project, which are seen as complementary measures. With the help of MHPP2 the learning experience from MHP-TSU Project shall be systematically extracted and be made available in an appropriate form to the complete MHP sector via the NREEC. The implementation of MHP village electrification schemes under the Green PNPM Programme with support of the TSU is seen as pilot project for large scale dissemination of renewable energies to rural Indonesia. This pilot project will provide valuable lessons for the implementation of other schemes which are implemented or going to be implemented via other ministries e.g. under the DAK scheme, which means another scaling up by a factor 10 (see chapter 1.4).

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4.

Areas of Intervention, Activities, and Indicators

From October 2009 to January 2010 a participatory capacity needs assessment (PCNA) of the Indonesian MHP sector has been carried out under the MHPP2 Project. The report was published in April 2010. Appendix B summarizes the areas recommended by the PCNA study for support by the MHPP2. The proposed activities of this inception report picked up on many of the PCNA recommendations, dropped others to maintain a sharper focus on EnDev2 indicators and added economic aspects, which had not been considered under the PCNA, in order to achieve long term sustainability of the intervention measures.

4.1. Policy Advise

Policy advise to establish sustainable MHP promotion schemes (establishment of Special Allocation Fund (DAK) to promote MHPs, criteria how to apply it, advise/support on implementation, decentralized and grid connected MHP schemes; economics of MHP schemes). Result 1: NREEC's new or revised policies and guidelines help to improve economics and sustainability of MHP promotion schemes. Indicator 1: At least one concept for sustainable MHP promotion developed and pilot tested. Presently there are many scattered MHP schemes for rural electrification which are implemented via various ministries without common guidelines and policies. Nearly all MHPs are 100 percent subsidized by government with hardly any incentive to increase the economic return of the projects through increased performance of MHPs and better utilization of electricity. In addition, there is no coordination between the grid connection plans of PLN and the decentralized electrification schemes implemented via various organizations. However, in many cases the grid has come already close to villages, so that a grid connection of MHPs could be considered. It is suggested to focus on the following 3 areas: Guidelines and regulations for the implementation of off-grid MHP promotion schemes (and to a lesser extent on grid). These guidelines can greatly draw on the experiences gained from the TSU with the implementation of the Green PNPM rural electrification programme. After sharing this experience with other stakeholders and implementers it shall be distributed to relevant organizations. These guidelines will then form the foundation for the DAK implementation. Based on the experience with the Green PNPM it remains unclear how the much bigger DAK scheme can be implemented in a timely manner. A policy regarding the grid connection of existing stand-alone MHPs, where the grid has come already close to the village, so that a connection makes economical sense. The grid is continuously expanded and has reached many formerly remote areas. Keeping villagers off-grid may hamper not only their economic development, because MHPs in many cases cannot provide sufficient electricity for bigger productive users. On the other side, the performance of the MHPs and the utilization of electricity can be greatly increased if MHPs are grid-connected and can sell electricity to the grid.

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Based on the analysis on MHP data, experience from the field, and a real case study, a cost benefit analysis of grid connecting MHPs shall be worked out which leads to practical policy recommendations. A third field of activities could be the productive use of electricity generated by MHPs. In many cases MHPs are underperforming, the generated electricity is wasted and opportunities to utilize excess electricity are not systematically explored. Through a stronger linkage between MHP programmes and rural development programmes e.g. for processing agricultural goods the value added to each kWh generated and the economic return of the MHP could be strongly increased, which in turn enhances the motivation and capacity of the villagers to operate and maintain the system well.

4.2. Monitoring and Evaluation

Monitoring and Evaluation (M&E) to ensures continuous improvement of MHP schemes and plants (metering of MHP performance and electricity utilisation, baseline and impact studies, analysis of electricity demand, excess power, PC based data acquisition, and M&E system for MHPs) Result 2: A Monitoring and Evaluation system is developed which supports continuous improvement of MHP schemes. Indicator 2: Pilot test proves suitability of monitoring system. So far a systematic monitoring and evaluation of off grid MHP or other schemes does not exist. In many cases not even meters have been installed to measure the generated and utilised amount of electricity. A systematic analysis of technical performance and impact on the target group does not exist either, nor any systematic cost benefit analysis has been conducted for the various schemes. Since a systematic monitoring is not in place, innovation and learning is hampered. Monitoring and evaluation activities will comprise: Define key performance indicators jointly with stakeholders, covering technical performance, economics, and utilisation of electricity and how to measure them. Design a concept for a systematic monitoring and evaluation of MHP schemes, which draws on the experience of the MHP-TSU project. Carry out a metering and monitoring programme at selected sites to determine the technical performance of the system and to analyse the level of electricity utilization. Establish and pilot test a computer based system for data collection and evaluation. Compile an example of annual monitoring report on status of MHP implementation in Indonesia to be published by NREEC.

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4.3. Capacity Building

The activity consists of capacity building for relevant public and private institutions and actors in MHP sector (identification of suitable training institutions; further education concept for MHP professionals, concept for MHP management training, pilot training; train the trainers; capacity building NREEC). Result 3: A concept for capacity building is developed and pilot measures implemented. Indicator 3: Two training modules tested with target group. It will be difficult to improve capacity and the institutional framework of Indonesia's MHP/RE sector without establishing a focal point for innovation and learning. As elaborated in Chapter 3, a core element of the Project's implementation strategy would be to support NREEC to establish a Renewable Energy Learning and Innovation Centre (RELINC) using MHP as a pilot sector and precursor. The activities of MHPP2 which focus on the support of core elements to this centre consists of: Develop a draft concept for RELINC under involvement of various stakeholder groups and support capacity building at NREEC. Develop a concept for systematic capacity building in the MHP sector which is demand driven and implemented through public and private training providers. Support the Hydro Power Competence Centre (HYCOM) in Bandung to become a centre of excellence and leading institution for training of trainers (ToT) programmes in the MHP sector in order to scale up capacity building in the country. Systematically adapt training courses developed under the MHP-TSU Project for other MHP implementation schemes and make them through RELINC available for other training providers. Support the development and pilot testing of new training modules in key areas in order to increase sustainability of MHP schemes.

4.4. Pilot Projects

Pilot projects shall be conducted to promote innovation and increase economics of MHP (new concepts, business models and technologies are tested before scaling up; productive use; economics, power utilization, cost benefit of grid connection; pilot training; performance benchmarking; metering and monitoring). Result 4: Pilot projects help to promote innovation and economics of MHPs. Indicator 4: 3 pilot projects are carried out, monitored and case studies disseminated. The efficiency of many promotion programmes suffers because they start with too ambitious targets which need to be reached in a too short time. This does not allow carrying out pilot tests of implementation schemes, business models and new technologies. A lack of funding is rarely the bottleneck. Many promotion programmes could be carried out more efficiently, if the feasibility and

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effectiveness of concepts, regulations and procedures, business models and technologies would have been tested beforehand in well-monitored and documented pilot projects. Pilot projects therefore play a key role in MHPP2's strategy to accelerate innovation and increase economics of MHP schemes. The activities should focus on: Pilot testing MHP promotion schemes: The TSU which provides assistance for MHP village electrification through MHPs in Sulawesi and Sumatra can serve as a pilot model for other larger implementation schemes e.g. the DAK. The experience from the MHP-TSU Project will be compiled in a case study report, which analyses key performance data, summarises lessons learned and gives recommendations to policy makers and implementers. Testing the functionality and effectiveness of the DAK procedures for a typical MHP site. The results will be compiled in a case study with recommendations for improvement. Carry out studies and pilot test of productive use applications in order to increase the value added to each kWh of generated electricity. This activity will include a survey and assessment of potential productive use applications and the pilot test of at least one application type. Implement a pilot project on grid connection of a standalone MHP. This will start with a survey of potential sites, cost benefit analysis as function of capacity and distance to the grid, pilot project of a suitable selected site, compilation of a case study.

4.5. Information Dissemination

Information dissemination aims to promote best practices of MHP (network concept for information dissemination, internet based information platform, concept for training resource and information centre, multimedia DVD). Result 5: Best practices are promoted through systematic dissemination of information. Indicator 5: Network concept for information dissemination is developed and two pilot products are disseminated via the network. Presently, information on MHP is difficult to access since it is only available in a scattered way with various stakeholders, which are not interlinked. Again the NREEC, linked to a network of MHP stakeholders, is seen as the focal point for information dissemination and as the key entry point for accessing information on MHP. The Project could support NREEC with the following activities: Develop a networking concept for information dissemination jointly with key stakeholders, defining roles and cooperation model. Providing pilot packages for information dissemination via the network, meeting the needs of various target groups and stakeholders in the MHP sector which can serve as an example for further expansion and a later extension to the whole RE sector. This might include: best practice case studies, guide books, training manuals, tool box for MHP professionals, and multimedia DVD.

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5.

Organizational Setup

5.1. Stakeholders
There is a wide landscape of stakeholders in the MHP sector in Indonesia, which is listed in detail in the PCNA report. An overview of the main stakeholders is given in Figure 9. On the central government level there are at least 6 ministries involved in the implementation of rural electrification schemes. The biggest MHP village electrification scheme is presently implemented under the Green PNPM programme within MoHA and supported by the MHP-TSU Project. The biggest technical expertise is located at the newly created NREEC under the MoEMR. Other Ministries involved are the Ministry of Finance (MoF) that is providing the fund under the DAK scheme, State Ministry for Development of Disadvantaged Regions, Ministry of Economy, Ministry of Forestry, and Ministry of Agriculture. The technology and service providers have a strong centre in Bandung. The national utility PLN is the biggest implementer of on and off grid rural electrification schemes. There are also numerous players and funds on the regional and local level.

Stakeholders MHP Sector Indonesia

Government
MoEM/NREEC,MoF/DAC,MoHA/PMD MoDR, MoFo, MoAg,..

Service Providers
Consultants, Training, Financing, Research

Utility
PLN

Asean -RESP
ACE

MHPP2
MoEM/NREEC

Technology Providers
Manufacturers, Suppliers

TSU
MoHA/PMD

Local & Regional Stakeholders

Dinas,

Villagers
Head, operators,

Figure 8 Main stakeholders in Indonesia's MHP sector

5.2. Coordination
The three projects MHPP2, MHP-TSU, and ASEAN-RESP which are jointly implemented by GIZ and its counterparts NREEC, DG for Community and Village Empowerment (PMD), and ASEAN Centre for Energy (ACE) are strategically placed in the stakeholder landscape to facilitate interactions between the

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stakeholders and to mobilise national, regional, and international expertise. There are cooperation opportunities with various other development projects implemented with support from GIZ or other organizations. While GIZ will focus to gain synergies through a strong interaction and coordination among the activities of the three projects, the coordination between the Indonesian ministries and stakeholders will rest mainly with the NREEC. To fulfil this task better, it is advised to establish a centre for learning and innovation (RELINC) at NREEC, as a focal point to monitor and evaluate the promotion schemes and to extract and share the lessons learnt with all stakeholders.

5.3. Steering Structure

The organizational structure of MHPP2 is formulated in order to implement the project in an effective way. The Project consists of two teams, one from NREEC and one from GIZ, which cooperate closely. The NREEC team consists of a small core group of experts with a team leader, which can draw other NREEC resources into the project on a case-by-case basis when needed. On GIZs side the team consists of a full time project manager, a coordinator between TSU and MHPP2 to ensure synergies, two local experts to support the various project activities and to facilitate close cooperation with NREEC and a project secretary for administrative tasks. The GIZ team will work under the guidance of the GIZ principal advisor who is also responsible for the overall implementation of the MHP-TSU and ASEANRESP project. The NREEC team is supervised and coordinated by its team leader and works under the guidance of the NREEC Director who will ensure coordination with other government institutions. The team leader is responsible for the management of NREEC's project contributions and is reporting to the NREEC director. The Director provides guidance to the project implementation and ensures support for the project from NREEC's top management. The team leader should be experienced in implementing MHP schemes and be closely involved in the project design, implementation, monitoring and evaluation. Besides, he also coordinates with stakeholders and reports the project progress to the director who steers the project jointly with the principal advisor with involvement of major stakeholders of the MHP sector.

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Project Organization
DG NREEC Policy advise Director Team Leader Member 1 Member 2 Member 3 Principal Advisor Project Manager Expert 1 MHPP2-TSU Coordinator Expert 2

NREEC Project Team

GIZ Project Team

ASEAN RESP HYCOM

other NREEC

other GIZ

TSU

NREEC Resources

GIZ Resources
2

Figure 9 Proposed Project Organization MHPP

The principal advisor, project manager, MHPP2-TSU coordinator, experts and administrative staff are employed by GIZ and working in a project office which should be provided by the counterpart and is ideally located in close vicinity or within NREEC's building. The GIZ project manager and NREEC's team leader are jointly responsible for the day-to-day implementation of the project. The GIZ team is working closely with the NREEC team that should benefit as much as possible from this cooperation for their normal assignments within NREEC. The GIZ team reports to the principal advisor. The MHPP2-TSU coordinator ensures that the lessons learnt, information, and training material from the TSU project are transferred to NREEC and from there are made available for all MHP stakeholders. The local experts are crucial in the implementation of all project activities, especially to bridge the language gap and to foster capacity building. The project secretary is responsible for the operation of the project office and is active in providing administrative supports to the project team and the core team members. In order to proceed with the work efficiently and to achieve the goal of this project, it is recommended that a fortnight meeting of the core team should be arranged to follow up the project implementation. A quarterly progress report should be submitted to the NREEC director and GIZ principal advisor followed by a meeting chaired by the NREEC director for follow up and decision making. Based on the quarterly progress reports and lessons learned from the MHPP2 and TSU project, executive summaries highlighting policy issues will be prepared by the Principal Advisor and submitted to the Director and Director General of NREEC.

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References
Assessment of Indonesia's Energy Sector, USAID 2008 GDP per capita (PPP): USD4,300 (2010 est.). Source: https://www.cia.gov/library/publications/theworld-factbook/geos/id.html GIZ (2010): Participatory Capacity Needs Assessment (PCNA) in the Subsector of Micro/Mini Hydro Power in Indonesia, Jakarta. PCNA Report can be downloaded at the following link: http://www.MHPP2.or.id/index.php?option=com_phocadownload&view=category&id=6:laporan&Item id=17 GIZ: Guidelines for MHP rural electrification can be downloaded at the following link: http://www.mhpp2.or.id/index.php?option=com_phocadownload&view=section&id=3&Itemid=18 http://esdm.go.id/index-en/83-energy/4150-its-time-to-optimize-non-fossil-energy-utilization.html http://www.thejakartapost.com/news/2011/02/24/pln-spend-15b-build-gasfired-power-plants.html MEMR (2008): Blueprint Rural Electrification Program MEMR Regulation on Technical Guidelines for the Use of Specific Allocation Fund for Rural Electricity Sector Fiscal Year 2011 Regional Electrification Master Plan Studies, World Bank; Final RE Master Plan (28 March 2009, Project 60027774/109)

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Appendix A: Objectives and Indicators

Overall objective of EnDev 2 Indonesia: 250 to 300 micro hydro power plants have been developed and the relevant institutions have the capacity to independently implement further schemes Indicators: 1. Energy for lighting and electrical household appliances: 170,000 until September 2012 and 340,000 until 2015 2. Electricity for social infrastructure: 160 schools, 60 health centres, 90 community centres 3. Energy for productive use/income generation: 150 agro-processing, 400 metals and woodworking, 250 household applications.

Objective of MHPP2: The capacity and institutional framework (e.g. feed in conditions) of the micro hydro sector is improved. Proposed main areas of intervention and indicators: 1. Policy advise to establish sustainable MHP promotion schemes (establishment of a special allocation fund (DAK) to promote MHPs, criteria how to apply it, advise/support on implementation; decentralized and grid connected MHP schemes; economics of MHP schemes). Indicator 1: at least one concept for sustainable MHP promotion developed and pilot tested 2. Monitoring & Evaluation to insure continuous improvement of MHP schemes and plants (metering of MHP performance and electricity utilization, baseline and impact studies, analysis of electricity demand, excess power, PC based data acquisition and M&E system for MHPs). Indicator 2: Monitoring and evaluation system developed and pilot test proves suitability. 3. Capacity building of relevant public and private institutions & actors (identification of suitable training institutions; further education concept for MHP professionals, concept for MHP management training, pilot training; train the trainers; capacity building NREEC). Indicator 3: At least two training concepts developed and pilot tested with target group. 4. Pilot projects to promote innovation and increase economics of MHPs (new concepts, business models and technologies are pilot tested before scaling up; productive use; economics; power utilization, cost benefit of grid connection; pilot training; performance benchmarking; metering and monitoring). Indicator 4: At least three pilot projects are carried out with M&E, case studies disseminated. 5. Information dissemination to promote best practices (network concept for information dissemination, internet based information platform, concept for training resource and information centre, multi media DVD). Indicator 5: Network concept for information dissemination is developed and at least two pilot products are disseminated via the network.

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Appendix B: PCNA - Areas recommended for support by MHPP2

Priorities
Off-Grid On-Grid Manufacturing & Construction R&D Training Overall Sector Development and Coordination 1. Develop a vision for the MHP sector in collaboration with stakeholders

Policy

1. Mainstream sustainable program designs 2. Improve the program monitoring system

1.Streamline the implementation of the gridconnection of MHPs

1. Set up a 1. Create research funding demand for concept qualified personnel by an accreditation and certification 2. Support the 2. Introduce system establishment of incentives in the a feedback government system programs 3. Install a person 3. Develop an at DGEEU acting improved repair as focal point and spare parts service structure in the regions 2. Create a network of MHP research institutions and knowledge exchange tools 2.Build up an institutionalized network for micro hydropower specific training

1. Introduce standards and a certification system

Organization/ 3. Install a coordinating Coordination unit at DGEEU

2. Installation of a stakeholder forum 3. Create a Coordinating Unit for MHP sector at DGEEU 4. Trainings for staff

Human Resources Other

4. Training of selected staff

4. Training of selected staff

4. Training of selected individuals 5. Evaluate possibilities for the local manufacturing industry

3. Train applied 3. Training of researchers trainers

5. Improved Access to information

4.Develop a training portfolio to serve training demands by the different stakeholders Not recommended

Highly Recommended

Potentially

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Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ) GmbH

Mini Hydro Power Project f or Capacity Development (MHPP 2) ASEAN Centre f or Energy (ACE) Building 6 th Floor Jl. HR. Rasuna Said Blok X-2 Kav. 7-8 Jakarta 12950 Indonesia T +62 21 527 8025 F +62 21 527 7762 I www.giz.de; www.mhpp2.or.id