World 0 Bank 0 Sri 1 Nal 0 Resources 0 Group 0

World Bank/Sri Lanka
Energy Services Delivery Project

Impacts Assessment and Lessons Learned
International Resources Group

March 2003
Acknowledgements
This document was prepared for the Asia Alternative Energy Program (ASTAE) of the World
Bank under a contract with International Resources Group (IRG). The principal author of the
report is Mr. Matthew S. Mendis of IRG. Rohitha Ananda of LGA Consultants (Pvt) Ltd of Sri
Lanka carried out the field data collection and survey work. Sriram Iyer, Mac Cosgrove-Davies,
Chandra Govindarajalu and Johannes Exel of the World Bank provided guidance and extensive
review comments. Susan Quinn of IRG provided editorial support for the final report.
Contents
Acknowledgements ........................................................................................................................................i
Acronyms ......................................................................................................................................................v
Executive Summary ................................................................................................................................ES-1
1.
Background for Impacts Assessment and Lessons Learned Document..............................................1

1.1 Objectives and Scope of Impact Assessment ...........................................................................1
1.2 Methodology for Conducting Impacts Assessment..................................................................1
1.3 Structure of the Report .............................................................................................................2
2.
Overview of the ESD Project..............................................................................................................5

2.1 Objectives and Scope ...............................................................................................................5
2.2 Objectives of GEF Support ......................................................................................................5
2.3 Major Components ...................................................................................................................5
2.4 Project Cost ..............................................................................................................................6
2.5 Expected Outputs .....................................................................................................................6
2.6 Institutional Set-Up and Implementation Arrangements..........................................................7
2.7 Project Stakeholders .................................................................................................................8
3.
Expected Outputs vis--vis Accomplishments .................................................................................11

3.1 Credit Component ..................................................................................................................11
3.2 Pilot Grid-Connected Wind Farm Component.......................................................................13
4.
Assessment of Technical Performance/Overall Implementation......................................................21

4.1 Implementation of the Solar Home System Component ........................................................21
4.2 Off-grid Village Hydro Component .......................................................................................22
4.3 Grid-connected Hydro Component ........................................................................................23
4.4 Pilot Wind Farm Component..................................................................................................24
4.5 Capacity Building Component ...............................................................................................24
5.
Addressing Cost Barriers ..................................................................................................................27
6.
Assessment of Institutional Effectiveness ........................................................................................29

6.1 Participating Credit Institutions..............................................................................................29
6.2 Borrowers of ESD Credit .......................................................................................................29
6.3 Administrative Unit (AU), based at DFCC Bank...................................................................30
6.4 Ceylon Electricity Board ........................................................................................................31
6.5 GOSL Agencies......................................................................................................................31
6.6 Effectiveness of Other Relevant GoSL Agencies...................................................................31
6.7 Effectiveness of Bank Management and Supervision ............................................................32
7.
Assessment of Consumer Satisfaction and Socio-Economic Impacts ..............................................33

7.1 Methodology Used in Field Surveys ......................................................................................33
7.2 Summary of Survey Results ...................................................................................................33
7.3 Socio-Economic Impacts........................................................................................................36
8.
Lessons Learned ...............................................................................................................................39

8.1 Institutional.............................................................................................................................39
8.2 Technical/Implementation......................................................................................................40
iii
WB Sri Lanka Energy Services Delivery Project
8.3
Annex.
Financial/Economic................................................................................................................42
Statistical Results of Field Surveys.........................................................................................A-1
Tables
2-1
ESD Project Financing Plan................................................................................................................6
2-2
ESD Project Stakeholders ...................................................................................................................9
3-1
Cumulative No. of Households Served by SHS, per district (as of June 2002)................................12
3-2
Grid-Connected Minihydro Projects Installed ..................................................................................13
3-3
Summary of ESD Project Accomplishments....................................................................................15
3-4
Interventions Carried Out Following Mid-Term Review to Address Project Weaknesses ..............17
4-1
Issues Involved in Implementation of SHS Component...................................................................21
4-2
Issues Involved in Implementation of OGVH Component...............................................................23
Figures
E-1 ESD Project Partnership .................................................................................................. ES-1
E-2 Growth in Grid-Connected Minihydro Capacity (19982002) ....................................... ES-2
E-3 Growth in SHS Sales (19982002) ................................................................................. ES-3
E-4 Growth in No. of Households Served by Off-Grid Village Hydro Systems ................... ES-4
E-5 Social Impacts of ESD Project on SHS End-users .......................................................... ES-7
E-6 Social Impacts of ESD Project on Off-Grid Village Hydro End-users ........................... ES-9
2-1 ESD Project Set-up................................................................................................................ 8
Boxes
E-1 Accomplishments Under the CEB DSM Component ..................................................... ES-4
E-2 ESD Administrative Unit................................................................................................. ES-5
E-3 Private Sector Equipment Vendors and Project Developers ........................................... ES-5
E-4 SEEDS Accomplishments ............................................................................................... ES-6
ES-iv
Acronyms
AU
BII
CAPS
CB
CboC
CBSL
CEA
CEB
DSM
ESD
EVC
GCMH
GCSPDA
GCSHDA
GEF
GoSL
HNB
IDA
ITDG
LSB
MFI
MoFP
NDB
NGO
OGVH
OOPP
PCI
PEU
PGCWF
SHS
SIA
SEEDS
SELCO
SLBDC
SPPA
SPPT
TOR
UNDP
Administrative Unit based at DFCC Bank

Bureau of Infrastructure Investment
Consultancy and Professional Services Pvt. Ltd.
Capacity Building
Commercial Bank of Ceylon
Central Bank of Sri Lanka
Central Environmental Authority of Sri Lanka
Ceylon Electricity Board
Demand-Side Management unit of CEB
Energy Services Delivery Project
End-user village cooperatives
Grid-connected mini hydro
Grid-connected small power developers association
Grid-connected small hydro developers association
Global Environment Facility
Government of Sri Lanka
Hatton National Bank
International Development Association
Intermediate Technology Development Group
Licensed Specialized Banks
Micro finance institutions
Ministry of Finance and Planning
National Development Bank
Non-governmental organization
Off-grid village hydro
Objective-oriented project planning
Participating credit institutions
Pre-electrification unit (Ceylon Electricity Board)
Pilot grid-connected wind farm
Solar Home Systems
Solar Industries Association
Sarvodaya Economic Enterprises Development Services
Solar Electric Light Company Inc.
Sri Lanka Business Development Centre
Small Power Purchase Agreement
Small Power Purchase Tariff
Terms of reference
United Nations Development Programme
Executive Summary
Introduction
The Sri Lanka Energy Services Delivery (ESD) Project, a uniquely designed and implemented
project, can serve as an excellent model for other rural electrification initiatives with renewable
energy and energy efficiency components. In particular, it applies a multi-stakeholder approach
in overcoming the financial, institutional and market barriers traditionally associated with the
implementation of small-scale renewable energy and energy efficiency options. Through the
establishment of strategic and working partnerships between the government of Sri Lanka, the
Ceylon Electricity Board, commercial banks, a microfinancing institution, private developers,
equipment vendors, rural electricity cooperatives, and end-users, significant gains have been
made to commercialize grid-connected minihydro and wind power, off-grid village or
microhydro power, and wide scale use of solar home systems. Additionally, the ESD Project has
also helped strengthen the basis for adopting demand side management (DSM) options to help
reduce consumption of grid-based electricity. By successfully achieving its objectives, the ESD
Project has laid the foundations for a wider-scale commercialization program for renewable
energy and energy efficiency in Sri Lanka. Technical, financial, policy, and information barriers
have been addressed by the project, and many lessons can be learned from how these barriers
were overcome. Figure E-1 provides an overview of how the different project stakeholders
interact.
ES-1
Figure E-1. ESD Project Partnership
Project Objective and Components

The main objectives of the World Bank and Global Environment Facility (GEF) assisted ESD
Project are to:
Promote the provision by the private sector, NGOs and cooperatives of grid-connected and off-grid
energy services using environmentally sustainable renewable energy technologies;
Strengthen the environment for demand side management (DSM) implementation; and
Improve public and private sector performance to deliver energy services through renewable energy
and DSM.
The ESD Project has three principal components. They include the following:
The ESD Credit Component, which has an estimated cost of $48.9 million, is designed to provide
support for medium- and long-term financing of private sector firms, NGOs, and cooperatives for offgrid SHS and village hydro projects and grid-connected mini-hydro, wind, and other renewable
energy investments.
The Pilot Grid-Connected Wind Farm Component, which has an estimated cost of $3.8 million, is
designed to demonstrate the commercial viability and long-run economic potential of wind power in
Sri Lanka and to catalyze future private sector wind farm development.
The Capacity Building Component, which has a total cost of $2.5 million, is designed to provide
training and technical support for renewable energy and energy efficiency initiatives by both the
World Bank/GEF
$
Sri Lanka ESD Project
$
Govt of Sri Lanka
Ministry of Finance/Central Bank of Sri Lanka
$
DSM
Grid Connected
PEU
Participating Credit
Institutions
Comml Banks
& LSBs
SPPA
Grid -connected
hydro
MFI
(SEEDS)
Pilot wind project
Future commercial
wind projects
- Minihydro
Developers
-SHS Vendors
SHS End -Users

OGVH Electricity Coops
ES-2
public and private sector.
Total project costs were estimated at $55.3 million. Project financing includes US$24.2 million
from IDA and $5.9 million from the GEF. The remaining project financing includes $13.7
million from private sector Participating Credit Institutions (PCIs), $9.6 million from renewable
energy project developers/entrepreneurs/energy end-users and $1.9 million from the Ceylon
Electricity Board/Government of Sri Lanka.
Figure E-2. Growth in Grid-Connected Minihydro
Capacity (19982002)
Installed Capacity (in MW)
The ESD Project had an original target

of fostering 21 MW of grid-connected
minihydro power by the private sector.
35
By mid-2002, ESD accomplishments
30
included installation of 31 MW of gridconnected minihydro power (Figure E25
2). In the process, at least six serious
20
private-sector minihydro developers
15
now operate in Sri Lanka and are
planning more minihydro development.
10
Instrumental in attaining these
5
achievements was the resolution
0
between the Ceylon Electricity Board
Start-up
Mid-term
Mid 2002
(CEB) and the minihydro developers of
the basis for determining the tariff that
Target
A ctual
is defined in the standardized small
power purchase agreement (SPPA) that was developed under the ESD project.
Pilot Wind Farm
To demonstrate the viability of windpower in Sri Lanka, the ESD project, in association with the
Ceylon Electricity Board (CEB), had a component to build and operate a 3-MW wind farm. The
pilot 3-MW wind farm was commissioned on February 1999 and certified in May 2000. Its
success has stimulated the interest of the private sector to develop more windpower, which was
also one of the projects stated objectives. At present, several private companies, with
international backing, are actively pursuing plans for windpower development in Sri Lanka.
Projects as high as a 30 MW wind farm have been proposed. As a result, the CEB has recently
issued an open tender for windpower electricity to stimulate this development. Additionally,
some of the windpower developers are exploring the possibilities of accessing the financial
support of the Clean Development Mechanism (CDM) to enhance the financial viability of their
proposed projects.
Solar Home Systems
Thousands of systems sold
Figure E-3. Cumulative Growth in SHS Sales

(19982002)
20
15
The ESD Project, which had a

revised target of installing
15,000 solar home systems
(SHS) for off-grid electricity
supply, has already supported
the installation of 18,619 SHS
10
5
ES-3
0
98
99
00
01
Mid 02
No. of households served
in rural homes throughout Sri

Lanka (Figure E-3). In the
process, at least four major SHS
Figure E-4. Growth in Number of Households Served
by Off-Grid Village Hydro Systems
vendors have invested significant
sums to established extensive
3500
sales and distribution networks in
Sri Lanka and are now installing
3000
SHS at the rate of over 1,300
systems per month. Additionally,
2500
the ESD Project has helped define
2000
and establish a workable microfinance institution (MFI) model
1500
with the participation of a key
1000
NGO: Sarvodaya Economic
Enterprise Development Services
500
(SEEDS), which has a rural
0
network and a grassroots
2000
End-2001
Mid-2002
orientation that enables it to reach
a greater number of rural
consumers. This MFI, working in close partnership with the SHS vendors have helped overcome
the SHS consumer financing barrier that plagued the start-up of this component of the ESD
Project.1 Without the support and flexibility demonstrated in the ESD Project, it is unlikely that
the SHS component would have succeeded. However, as the rate of SHS sales is now increasing,
there is a clear need to diversify and increase the number of participating MFIs in the project.
Additionally, the support provided by the GEF grant for this component has also been
instrumental in supporting the development of the market. It is not immediately clear how a
reduction in the grant will impact the growth in sales of SHS.
Village Hydro Systems
The ESD Project has already supported the installation of 574 kW village hydro systems serving
2,897 households. This is far in excess of the original ESD target of developing 250 kW and
serving 2,000 rural households. This success has been due primarily to the active involvement of
the ESD project working in partnership with NGOs and community based organizations (CBOs)
to identify, organize and develop the village hydro projects. Additionally, the involvement of
SEEDS as the microfinance institution has recently helped bridge the financing needs of the
small electricity cooperative societies that are formed to build, own and operate the village hydro
projects. However, like the SHS component, there is a need for the involvement of more MFIs if
village hydro and other similar small-scale isolated grid/cooperatives are to evolve. With the
exception of the Hatton National Bank, the approved PCIs did not aggressively pursue financing
of these projects.
The ESD Project had an initial SHS target of 30,000 rural households. However, at mid-term (February 2000) less than 1,000 SHS were
installed. The mid-term evaluation of the ESD identified the unwillingness of the SHS vendors to borrow from the ESDs approved participating
credit institutions (PCIs) and provide consumer financing and the constraint faced by most of the PCIs in extending micro-finance directly to SHS
consumers as the principal reasons for failure of this component. As a result, the SHS target was revised to 15,000 and alternate approaches to
consumer finance were explored.
ES-4
Demand-side Management
The ESD Project also had the objective of supporting the CEB to promote and implement
demand-side management (DSM) programs. Specifically, the ESD supported the CEB in: (a)
developing of code of practice for energy efficient commercial buildings; (b) developing the
technical capacity to carry out energy audits and provide advice on energy efficiency measures
for commercial and industrial clients; (c) carrying out a load research study; and (d) instituting
an appliance energy labeling program. The CEB continues to work in promoting energy
efficiency and DSM. A recent analysis provided by the CEB indicates that its promotion
programs for energy efficiency and DSM should result in savings of approximately 82 GWh/yr
of energy and 32.5 MW of demand capacity by the year 2006. While it is not clear if these
targets will be met, it is evident that the ESD project has assisted the CEB in initiating its energy
efficiency and DSM programs.
Project Organization and Management
From an institutional perspective, one of the most
important elements of the ESD Project was the
effective functioning of the Administrative Unit
(AU). The AU played a pivotal role in the
administration of the ESD credit, including
processing of loan disbursement requests,
maintaining of disbursement records and accounts,
compiling program-related statistical records, and
submitting quarterly reports. Establishing the AU
within one of the PCIs (the DFCC) was a bold yet
prudent move. Equally important was the creation of
an effective wall between the AU and it parent
organization so that the AU was able to operate
independently and without prejudice. By having the
AU drawn from one of the PCIs, the AU was familiar
with the prevailing banking rules and procedures and
was administratively adapt in matters relating to
the application and disbursement of the credit and
the GEF grant. However, the AU was initially not
as effective in matters relating to development and
promotion of the ESD components it was
responsible for. To its credit, the AU recognized
this requirement and has actively worked to meet
this objective. The success of the ESD Project is in
part due to the performance of the AU and,
specifically, the skills and dedication of the AU
Manager, Mr. Jayantha Nagendran. The AU has
actively reached out to all ESD Project
stakeholders and regularly meets with key
stakeholders to identify issues and resolve
problems. Equally important was the long-term
Box E-2. ESD Administrative Unit
Established within one of the PCIs (DFCC),

making it familiar with prevailing banking
rules and procedures and administratively
adept in matters relating to credit application
and disbursement, BUT carried out
operations independently and without
prejudice
Overcame initial difficulties in development
of promotion of ESD components it was
responsible for
Identification and solution of issues through
regular interaction and consultation with
project stakeholders
Broke even financially in 4th year and now
operating profitably
Box E-1. Accomplishments Under

CEB DSM Component
Development of a code of practice for energy

efficient commercial buildings
Development of technical capacity to carry out
energy audits and provide advice on energy
efficiency measures for commercial and
industrial clients
Conduct of a load research study
Institution of an appliance energy labeling
program
Projected savings of approximately 82
GWh/year of energy and 32.5 MW of demand
capacity by the year 2006
ES-5
view taken by the DFCC in operating the AU. The DFCC demonstrated a willingness to initially
sustain losses from AU operations for the first three years as the ESD Project ramped up. The
AU broke even financially in its fourth year and is now reported to be operating profitably. This
model of an effective, efficient and proactive AU with a long-term commitment and able
leadership is an important element in the success of the ESD.
The commercial licensed specialized banks (LSBs) that were approved as PCIs, for their part,
proved to be effective partners primarily in the development of grid-connected hydro projects.
However, the commercial banks were not well suited to address the financing needs of off-grid
SHS and village hydro components and the SHS vendors and village hydro developers were
unwilling or unable to assist their consumers with
financing. Thus, it became evident at an early stage
in the ESD Project that effective rural based microBox E-3. Private Sector Equipment
finance institutions (MFIs) were needed. The
Vendors and Project Developers
involvement of SEEDS at about the mid-point in
OGVH developers had their initial share of
the project and the eventual approval of SEEDS as
struggles in organizing themselves, meeting
the requirements of the commercial banks,
a PCI/MFI were instrumental in the success of the
and dealing with members, but overall proved
off-grid village hydro and SHS components of the
to be effective borrowers of credit
project. SEEDS capability to function as an MFI, its SHS vendors did NOT prove to be effective
established rural network and its community based
providers of credit as shown by their
performance during the start of the project, but
approach are all critical elements in addressing the
this was addressed by the accreditation of a
financing needs of the SHS and village hydro
microfinance institution so that they could
components.
concentrate on marketing, distribution,
installation, and servicing of SHS systems
The OGVH developers had their initial share of
Hydro industry association effectively voiced

struggles in organizing themselves, meeting the
out concerns of project developers during
requirements of the commercial banks, and dealing
negotiations with CEB concerning small power
with members, but overall proved to be effective
purchase tariff issue
borrowers of credit from the microfinance
institution. The SHS vendors did not prove to be
effective providers of credit as shown by their
performance at the start of the project, but this was
addressed by accrediting a microfinance institution
Box E-4. SEEDS Accomplishments
so they could concentrate on marketing,
Enabled SHS and OGVH components to take
distributing, installing and servicing the SHS. To
off with its accreditation as a participating
credit institution in the project
date, 50 service and distribution centers have been
Approved a total of Rs 199 million worth of

set up by the SHS vendors throughout the target
SHS loans as of June 2002
areas. It is crucial that this is maintained and even
Approved a total of Rs 0.7 million worth of
expanded to ensure continued reliable operation of
OGVH loans as of June 2002
the SHS systems.
It also bears mentioning that the local industry
association was crucial to the success of the minihydro component of the project as it was able to
effectively voice out the concerns of the hydro project developers concerning the small power
purchase tariff with the Ceylon Electricity Board.
ES-6
Project Impacts
Macro Level
The ESD project was conceived at a time of lagging public sector investments in power
generation vis--vis growing demand. Investments in core infrastructure had been increasing
only marginally since 1990 to about 4.5% of GDP while demand for power was increasing at a
rate of 8% or more annually. Daily power cuts in 1996 underscored the urgent need for new
generating capacity and improved efficiency. In order to address the situation, the government of
Sri Lanka (GOSL) adopted two strategies: (1) creation of a regulatory and policy environment
which encourages private investments to supplement public resources; and (2) improving the
efficiency of energy services delivery. The ESD project was aimed at addressing the serious
issues of capacity and efficiency in the sector by fostering private provision of energy services.
The ESD project enhanced the enabling environment for (1) private investments in
renewable energy services through the application of a standardized small power purchase
agreement and non-negotiable tariff (the lack of which effectively impeded development of
small grid-connected power projects; and (2) implementation of DSM by building capacity
within the CEB.
End-Users
A detailed survey of 100 SHS customers and 50 off-grid village hydro (OGVH) consumers was
carried out to determine the social, economic and quality of life impacts of receiving off-grid
electric services. When interviewed about the impact of the ESD project on their lives, SHS and
OGVH customers all acknowledged the improvement in their quality of life as a result of having
a cleaner, more reliable source of electricity (see Figure E-5). All were pleased about the
extended entertainment hours and improved family interaction. Women in particular, highlighted
the usefulness of having lights to continue their household work at night. Parents indicated that
their children have also been able to study better at night and perceive improvements in the
educational performance of their children. There is also increased feeling of safety and better
health conditions with the elimination of the fumes from their old kerosene lamps. However,
there appears to be little evidence that access to SHS or OGVH has significantly increased
economic or income generating activities. Interestingly, SHS consumers surveyed indicated an
expected increase of discretionary income once their SHS payments were completed. However,
OGVH consumers did not appear to have the same perception. In the case of SHS, the amount of
energy available is barely sufficient to meet basic household lighting and entertainment service
needs. There appears to be more potential for income generating activities with OGVH.
An important impact that the project has also had on end-users, but which they did not
specifically identify during the surveys was improvement in local capabilities to organize
themselves and to collectively manage and monitor projects. This was especially true for the
OGVH component wherein residents had to form rural electricity cooperatives/societies and then
assume responsibility for the day-to-day operation of the project.
Local Business
The ESD project has also had a significant impact on local business. For vendors of solar home
systems, the project has made it possible for existing ones to expand their current market, and
new ones to be established to respond to growing demand. The same is true for local hydro
consultants who have grown in number as a result of growing demand for their services. For
ES-7
private developers, the project has made hydro project development more attractive, especially
with the implementation of an SPPA and the resolution of the tariff issue.
Financial Community
The ESD project has given member of the Sri Lanka financial community a better appreciation
of and actual exposure to renewable energy and rural electrification projects. The experience
under the project has enabled financial institutions to better appreciate the importance of
innovative financing mechanisms for such projects, and the fact that not all renewable energy
projects fall under the high-risk category.
Figure E-5. Social Impacts of ESD Project on SHS End-users
Income-Generating Activities
Better Quality of Life
Better Informed
V
W
F
D
S
P
,
O
D
L
F
R
6
Increased Safety
Other Activities at Night
More Time for Schoolwork
Longer Entertainment Hours
Increased Discretionary
Increased Income
Income
0
10
20
30
40
50
60
70
80
90
100
% of Households Surveyed
Lessons Learned
Implementation of the ESD project has brought to light several lessons in the sustainable
provision of rural energy services.
Institutional
On the institutional aspect, it has shown that local or community participation is crucial to
project success as it ensures project ownership on the part of the communities involved and also
promotes improvement of local capabilities, strengthening of community relations and aids in
cost recovery. The involvement of a wide range of stakeholders in the implementation of the
different components of the project (e.g. both commercial banks and microfinance institutions
accredited as participating credit institutions in order to reach a broader group of customers) also
resulted in project targets being attained and even exceeded. On a macro-level, the institutional
structures should be in place, and the general policy framework should be conducive for the
growth of the industry. Government commitment is crucial, and this should be reflected in
consistency of national and sectoral objectives. Two elements that facilitated the growth of the
ES-8
grid-connected hydro market are the standardized power purchase agreement and the tariff
ceiling, which significantly lessened transaction costs and risk on the part of investors, and gave
them a more defined framework within which to operate. The ESD project has also shown that
the administration of a project, especially one with a credit component, is best handled by a
group that is highly familiar with the financial sector, has the administrative capabilities, and
possesses sufficient experience dealing with the private sector. This was demonstrated by the AU
experience.
Implementation/Technical
On the implementation/technical aspect, some of

the key elements of a successful project include
a viable distribution and servicing infrastructure
and sufficient market development activities.
Flexibility on the part of project implementers is
also very important. One of the major reasons for
the current success of the ESD is that project
implementers were flexible enough to make
some significant changes in project design when
it was determined during mid-term that some
issues were preventing the attainment of specific
targets. Experience under the project has also
shown that the most common technical problems
result from system overuse. This points to the
need to better educate end-users on the
limitations of their systems and on the basics of
proper operation. In terms of
marketing/information dissemination, the ESD
project has demonstrated that word-of-mouth
seems to be the most effective medium in
attracting potential customers.
Financial/Economic
Key Lessons Learned

Policy and regulatory framework should be
established and clear;
Institutional framework should be in place;
Involve key stakeholders in project design,
development and review;
Include local and community participation to
support project implementation;
Ensure viable distribution and servicing
infrastructure;
Encourage flexibility and adaptability of
project implementers to changing conditions;
Educate end-users on the operation and
limits of their energy systems;
Communal communications is effective
marketing medium;
Good micro-finance institutions are critical to
success of solar home and village hydro
systems;
Rural households in Sri Lanka are willing to
pay a premium for clean and reliable energy
services;
Economic development is not guaranteed by
only providing access to energy.
Energy services improve the quality of life but
not necessarily income generation.
On the financial/economic aspect, the

involvement of micro-finance institutions in
financing solar home systems and village hydro
projects has been crucial in the expansion of
both markets. Unlike the common perception that rural customers represent high-risk, the project
has demonstrated that end-users are willing to pay more than they usually do for energy
expenditures, as long as the energy supply is reliable and safe. End-users place a higher premium
on the reliability and safety offered by sources like hydro and solar energy. However, it should
be noted that even with the current credit facilities extended by the ESD project, it is still the
middle to upper rural class who are benefiting from the project. How the needs of the lower
income rural groups thus remains an issue that has to be resolved. The project also demonstrates
that economic development is not guaranteed by providing access to energy alone. For rural
development to take place the necessary supporting infrastructure needs to be developed and
there should be a focused effort on the development and promotion of specific income-
ES-9
generating activities. The ESD project has shown that although the general lifestyle of the
beneficiaries has improved, there are no clear and concrete economic benefits that can be linked
to the project. This is an area being addressed by the follow-on RERED project.
Figure E-6. Social Impacts of ESD Project on Off-Grid Village Hydro End-users
Income-Generating Activities
Social Impacts

Better Informed
Increased Safety
Other Activities at Night
More Time for Schoolwork
Increased Discretionary
Income
Increased Income
0
20
0.2
40
0.4
60
0.6
80
0.8
100
1
% of Households Surveyed
ES-10
Background for Impacts Assessment

and Lessons Learned Document
Sri Lanka has a population of 19 million people with a per capita GNP of US$900 per annum.
Approximately 75 percent of the population lives in the rural areas. It is estimated that only 54
percent of the population has access to electricity resulting in approximately 2 million
households that do not have access to electricity from the grid. Power demand in Sri Lanka is
growing at over 8 percent per annum and the CEB is unlikely to be able to keep up with this
rapid growth. Currently, the CEB has had to institute load shedding to cope with its increasing
demand. Given the relatively high costs associated with the expansion of rural electric services, it
is unlikely that the CEB will be able to significantly increase its rural electric service coverage in
the coming decade and beyond. The government of Sri Lanka places high priority on rural
electrification as a component of its overall economic, social, and regional development strategy.
The basic premise is that by providing reliable energy access to rural populations, economic
growth will increase and general social well-being will improve.
The Energy Services Delivery (ESD) project was conceived to support the government of Sri
Lankas energy strategy. The basic objectives of the ESD Project include the development of
energy sources in an economically least-cost and environmentally sound manner, improving
institutional capacity to manage the energy sector, promoting rational energy pricing, promoting
energy conservation, and diversifying energy sources and reducing dependence on imported
energy sources. As part of its basic approach, the project promotes active involvement by
community organizations and the private sector in rural energy service provision and
management.
Objectives and Scope of Impact Assessment
The ESD Project is scheduled to officially close by 31 December 2002. The project has been
consistently rated satisfactory and has made impressive progress towards the achievement of the
project development objectives. After the last supervision mission the project was upgraded to
highly satisfactory. In view of the innovative project design and limited renewable energy
experience within Sri Lanka at the start of this project, this achievement is commendable. Recent
Bank/GEF renewable energy projects have in fact already begun incorporating elements of the
ESD project design. In order for wider dissemination among the donor community and clients, it
is important that an independent, comprehensive assessment be undertaken to document the
impacts, implementation experience and lessons learned under this project. Also, the independent
review can support the design of the follow on project in minimizing the risk of replication of
sub-optimal features in the ESD project.
The main objective of the impacts assessment is to comprehensively assess the results achieved.
The report also seeks to identify key lessons learned during implementation and map out best
practices for cost-effective and sustainable delivery of energy services to rural populations.
Methodology for Conducting Impacts Assessment
This report builds on an independent evaluation report of the ESD Project completed in April
2002 and the results of a field study conducted in May 2002. The field study included interviews
with the different stakeholder groups, including equipment vendors and industry associations,
participating credit institutions, government institutions involved, the ESD Administrative Unit,
and the end-users at the village level.
Discussions with the equipment vendors and industry associations were carried out to get some
insights on the technical performance of the systems installed, problems encountered in the field,
and issues pertaining to the credit component of the project, particularly any problems
encountered with the participating credit institutions as well as matters involving policy, such as
the small power purchase agreement (SPPA) and the tariff ceiling, which was one of the key
issues during the earlier parts of the project.
The participating credit institutions were a good source of insights on how the project has fared
from a financial point of view by discussing issues such as adequacy of IDA credits as well as
affordability of the OGVH and SHS projects on the basis of repayment performance. The
interviews also provided a look into how financial institutions perceive renewable energy
projects, i.e. which ones were viewed as risky, viable/sustainable, etc.
Discussions with the government institutions focused on the effectiveness of the capacity
building component and obtaining general insights on how the project has fared. Interviews with
the ESD administrative unit (AU) were likewise a good source of general insights on the
projects performance.
A local (Sri Lanka) consultant, LGA Consultants Private Ltd, was hired to assist with the field
study at the village level. Standard questionnaires were provided for the interviews conducted
(attached as Annex 1). The data collected included
Background information on each household
Information on purchasing decisions, consumer financing
Economic impact of new energy service on household, e.g. new employment generated by the project
Social impact of new energy service on household, e.g. improvements in lifestyle
This information was obtained mainly from end-users (to get a close look at how the project has
affected individual lives). Key informants from concerned rural electric cooperatives were also
a source of information. In the conduct of the interviews, emphasis was given to identifying
specific benefits from the project, such as employment generation, income generation, and any
other factors that directly contribute to the development of the rural economy. The key results of
this survey are discussed in Chapter 7. Annex 2 contains the full text of the field report results.
Structure of the Report
The report is structured to present the results of the stakeholder consultations on the projects
impacts and then identify lessons learned and best practices that will promote replication on a
larger scale in other projects and countries.
Chapter 2 gives an overview of the ESD project.
Chapter 3 outlines the main accomplishments vis--vis expected outputs.
Chapter 4 is an assessment of the projects implementation/technical performance.
Chapter 5 is an assessment of how the project addressed the cost barriers typically associated
with rural electrification projects.
Chapter 6 is an assessment of the projects institutional effectiveness and impacts on the various
stakeholders.
Chapter 7 is a more focused assessment of consumer satisfaction and socio-economic impacts,

using as a basis the results of the household surveys conducted.
Chapter 8 outlines lessons learned and best practices.
The main conclusions and recommendations of the evaluation are presented in the Executive
Summary of the report.
Overview of the ESD Project

Objectives and Scope
The World Bank and Global Environmental Facility (GEF)-assisted Sri Lanka Energy Services
Delivery (ESD) Project commenced on 22 July 1997 with the Ministry of Finance and Planning
(MOFP) and Ceylon Electricity Board (CEB) named as the executing agencies.
The principal objectives of the project include:
Promoting the provision by the private sector, NGOs and cooperatives of grid-connected and off-grid
energy services using environmentally sustainable renewable energy technologies;
Strengthening the environment for demand side management (DSM) implementation; and,
Improving public and private sector performance to deliver energy services through renewable energy
and demand side management (DSM).
The Project was expected to result in the addition of about 26 MW of environmentally

sustainable generating capacity, including a Pilot Wind Farm, grid-connected mini-hydro, and
electricity services to up to 32,000 rural customers through solar home systems and village hydro
schemes. Another key objective of the project was to strengthen demand side management and
energy conservation capabilities within the CEB and the Sri Lankan architecture/ engineering
community.
Objectives of GEF Support
Global Environment Facility (GEF) grant funds have been made available to off-grid (i.e. solar
home systems and village hydro) sub-project developers who signed a sub-loan agreement with a
participating credit institution (PCI). The grant funds have been used to co-finance the initial cost
of equipment installed through the project and are available to sub-loan beneficiaries. They are
released on a reimbursement basis, after installation of the off-grid system.
Part of the GEF grant is also allocated to providing technical assistance for the preparation of
off-grid subprojects. Specifically, it finances consultant services to help project developers
prepare feasibility studies, business plans, and bank loan documentation. The GEF grant is also
available to PCIs to supervise off-grid village hydro and solar home system subprojects.
Major Components
The ESD Project has three principal components, namely:
ESD Credit Component. This provides support for medium and long-term financing of private
sector firms, NGOs and cooperatives for off-grid solar home systems (SHS) and village hydro
(OGVH) projects, grid-connected mini-hydro (CGMH), wind and other renewable energy
investments. It makes funds available for energy subprojects up to 5 megawatts (MW) through PCIs.
Support for the ESD credit program and associated technical assistance is available under IDA credit
as well as the GEF grant.
Pilot Grid-Connected Wind Farm Component. This component has an estimated cost of $3.8
million and is co-financed by $2.23 million of IDA credit and a GEF grant of $0.88 million. The 3-
MW pilot wind farm project is designed to demonstrate the commercial viability and long-run
economic potential of wind power in Sri Lanka and to catalyze future private sector wind farm
development.
Capacity Building Component. This component has a total estimated cost of $2.5 million and is cofinanced with $1.0 million of IDA credit and $1.05 million of GEF grant. This component is to
provide training and technical support for renewable energy and energy efficiency initiatives by both
the public and private sector.
Project Cost
The total project cost is US$55.3 million. The project financing includes US$24.2 million from
IDA and $5.9 million from the GEF. The remaining project financing includes $13.7 million
from private sector Participating Credit Institutions (PCIs), $9.6 million from renewable energy
project developers/entrepreneurs/energy end-users and $1.9 million from the Ceylon Electricity
Board/Government of Sri Lanka. A summary of the projects financing plan is presented in
Table 2-1.
Table 2-1. ESD Project Financing Plan (in US$MM)
Project Component
IDA
GEF
PCIs
Entrepreneurs
CEB/GOSL
Total
14.4
10.1
6.3
0.1
30.8
ESD Credit Program

Mini Hydro
Village Hydro
0.3
0.1
0.1
0.1
0.1
0.7
SHS
5.0
2.9
3.5
3.0
14.4
Business Devt
0.3
0.2
0.5
Off-grid Support
0.5
0.7
1.2
Subtotal
19.7
3.8
13.7
9.6
0.9
47.7
Wind Farm
2.1
0.8
0.6
3.5
0.3
0.2
0.5
DSM Unit
1.0
0.7
0.2
1.9
Subtotal
1.0
1.0
0.4
Capacity Building
PE Unit
PPF*
0.3
Unallocated
1.1
0.3
Total Project Cost
24.2
5.9
2.4
0.3
1.4
13.7
9.6
1.9
55.3
*The PPF is US$340,000.
Expected Outputs
The principal performance indicators for the Project include:
Installation of at least 26 MW of grid and off-grid renewable energy capacity including service to up
to 32,000 off-grid rural customers through solar home systems (SHS) and village hydro schemes;
Development of a 3 MW pilot grid-connected wind farm project;
Issuance by the Ceylon Electricity Board (CEB) of a comprehensive Energy Efficient Commercial
Building Code of Practice (EECB); and
Support by the CEB for the development of small-scale grid connected renewable energy projects by:
Annually updating the Small Power Purchase Tariff (SPPT);
Signing of least 5 SPPA contracts by mid-term evaluation, and 12 by project completion; and
Incorporating intermittent, non-dispatchable renewable energy generating sources in the generation

planning models prepared by the CEB.
Institutional Set-Up and Implementation Arrangements

Credit Program
For the ESD Credit Program Component, the Ministry of Finance and Planning on-lends the
proceeds of the credit component to eligible PCIs, which would in turn on-lend these proceeds,
along with complementary financing from their own resources to eligible sub-borrowers. These
include project developers, SHS equipment vendors, electricity cooperatives, and SHS end-users.
An Administrative Unit (from the Development Finance Corporation of Ceylon (DFCC))
manages the other credit program. Its other responsibilities include: administration of the GEF
grants and technical assistance related to off-grid subprojects. The GEF grants are used to (1)
support off-grid subproject preparation activities; (2) co-finance off-grid subprojects; and (3)
provide support through promotion activities, provision of grant funding for verification of solar
home systems; and consumer education and protection. The technical assistance is available to
help project developers prepare feasibility studies, business plans, and bank loan documentation
for off-grid sub-projects.
Grid Connected Pilot Wind Farm Component
The Ceylon Electricity Board is responsible for implementing the pilot grid connected wind farm
component on an engineering, procurement, and Construction (EPC) basis. The CEB is
responsible for monitoring, operation and maintenance of this facility.
Capacity-Building Component
The Ceylon Electricity Board is also responsible for overseeing the capacity-building activities
of the Pre-Electrification Unit and the DSM unit. In the PEU, this includes procurement of
equipment as well as retaining local consultants to develop and conduct training courses for CEB
staff as well as private sector and NGO personnel, and assist CEB staff in feasibility study
preparation and other services related to off-grid project support. In the DSM Unit, this includes
the issuance of an Energy Efficient Building Code of Practice, development of institutional
capacity in the energy-related public and private sectors to incorporate the Code of Practice into
building design and operations and to monitor the energy savings, demonstration of energy
efficiency building design through design competition incentives, and implementation of a DSM
strategy and load research program.
Figure 2-1 is a diagram of the basic project set-up.
Figure 2-1. ESD Project Set-Up

World Bank/GEF
$
Sri Lanka ESD Project
$
Govt of Sri Lanka
Ministry of Finance/Central Bank of Sri Lanka
$
DSM
Grid Connected
PEU
Institutions
Comml Banks
& LSBs
SPPA
Grid - connected
hydro
MFI
(SEEDS)
Pilot wind project
Future commercial
wind projects
- Minihydro
Developers
- SHS Vendors
SHS End - Users

OGVH Electricity Coops
Project Stakeholders
Table 2-2 lists the various stakeholders in the ESD project.
Table 2-2. ESD Project Stakeholders

Suppliers/Developers/
Consultants
Institutions
Industry
Associations
Government/Other
institutions
SHS Suppliers
Access International Ltd
Alpha Thermal Systems (Pvt) Ltd.
SELCO Solar Lanka Ltd.
Shell Renewables Lanka Ltd.
Solar Project Developers/
Consultants
Energy Forum
ITDG South Asia
LLGA Consultants Ltd
Natl Engg Research and
Development Centre (NERD)
Resource Management Associates
Ltd
Village Hydro Project Developers/
Consultants/ Suppliers
Amanda S P R K
Consultancy and Professional
Services (Pvt) Ltd
Enexe (Pvt) Ltd
ENCO (Pvt) Ltd
ETC Lanka (Pvt) Ltd
Integrated Development Association
(IDEA)
Infotechs-I/D/E/A/S (Pvt) Ltd
ITDG South Asia
Redco Ltd
Sarvodaya Rural Tech Services
Sri Lanka Business Devt Centre
Udayaratne Hydro Power Engg
Grid-connected Mini-hydro
Developers
Ecopower Ltd.
Zyrex
Wind
NEG Micron A/S Denmark
Development Finance
Corporation of Ceylon
(DFCC)
Sarvodaya Economic
Enterprises
Development
Services (SEEDS)
National Development
Bank
Sampath Bank
Commercial Bank of
Ceylon
Hatton National Bank
Grid-Connected Small
Power Developers
Association
Solar Industries
Association (SIASL)
Village Hydropower
Developers
Association
Sri Lanka Business
Development
Centre
ESD Administrative Unit

Central Environment
Authority
Dept of External
Resources
Energy Conservation
Fund
Energy Forum
Ministry of Power and
Energy
Ministry of Science and
Technology
Pre-electrification Unit,
Ministry of Finance
and Planning
Board of Investments
(BOI) and Bureau of
Infrastructure
Investment
Local government
institutionsprovincial
councils and divisional
secretariats
Expected Outputs vis--vis Accomplishments

By December 2001, it was apparent that the ESD project had already achieved success in
meeting its original targets, with the installation of 30 MW grid-connected minihydro capacity,
287 kW from off-grid village hydros, and some 13,300 solar home systems (at a monthly rate of
1,300 systems), and that it was going to exceed targets by the time the project was finished. This
contrasted greatly with the status at mid-term wherein the project was being bogged down with
many issues concerning off-grid components. With the implementation of key interventions,
weak areas in the project design were successfully addressed and appropriate adjustments were
made. This chapter discusses the projects accomplishments vis--vis the targets set out in the
original project design. It includes a discussion of the problems encountered in the different
components and the interventions made mid-term in order to improve project performance.
Credit Component
Solar Home Systems (SHS)
As of mid-term, sub-loans approved by the PCIs were expected to support the installation of a
little more than 6,000 SHSs. However, by February 2000, the total number of approvals totaled
only 723 systems. The poor performance of the SHS sub-component of the project was being
inhibited by a number of technical and implementation issues. From the point of view of the
PCIs, the SHS sub-loans were too small to justify the costs involved in loan processing, and SHS
borrowers were also perceived as being high-risk. From the perspective of the SHS vendors and
MFIs (intermediate borrowers of SHS sub-loans), the costs involved in securing SHS sub-loans
with PCIs and administering micro-loans to SHS end-users were too high, and there was no
dealer network to speak of, which made it difficult to market the product to the rural areas. For
SHS end-users, the difficulty was in accessing affordable loans, given the high initial costs of
SHS installation. They also had limited awareness of the SHS option, and had misguided notions
as to its reliability.
In order to address the above issues, it was recommended that microfinance institutions be
encouraged to participate in the project in order to increase the number of SHS customers. This
resulted in the accreditation of the SEDS as a PCI and the introduction of a private partnership
model for market development financing. The job of financing SHS was left to the MFIs, while
vendors were encouraged to concentrate on selling systems.
As a result of this intervention, sales followed a nearly exponential projection, from less than 30
systems per month in 1998 to about 1,000 systems per month in June 2002, with an accumulated
number of systems installed of more than 18,000. The three main companies in the Sri Lankan
SHS market have reported monthly sales in the range of 400 to 800 systems, while a fourth
company has reported sales of about 100-120 per month. A commercial distribution and service
network including fifty centers is also in place.
11
Off-Grid Village Hydro (OGVH)

Table 3-1. Cumulative No. of Households
Served by SHS, per district (as of June 2002)
As of June 2002, a total of 56 off-grid

village hydro projects have been
District
No. of Households
approved. The mini-grids range from 41. Ampara
699
45 kW and serve 2,897 households with
a total installed capacity of 574 kW and
2. Anuradhapura
1,473
are under implementation with credit
3. Badulla
2,284
and grant support from ESD project.
4. Batticaloa
24
This blend of financing has led to a
5. Colombo
114
reduction in grant funds per project of
6. Galle
473
nearly 50% or serving twice as many
7. Gampaha
60
households with the same amount of
8. Hambantota
421
grant funds. In terms of capacity, this
9. Jaffna
15
already exceeds the project target of 250
10. Kalutara
103
kW.
11. Kandy
225
This contrasts greatly with the situation
during mid-term, wherein there were
12. Kegalle
236
only 7 projects approved, servicing 400
13. Kurunegala
2,311
households and representing around 58
14. Mannar
11
kW capacity. There was very little
15. Matale
633
incentive for developers to participate,
16. Matara
487
given the very high costs of coordinating
17. Moneragala
4,854
and organizing village cooperatives to
18. Mullaitivu
4
develop, own, and operate OGVH
19. N-Eliya
278
systems.
20. Polonnaruwa
746
From the perspective of the PCIs, the
21. Puttlam
693
OGVH project loans were small and
22. Ratnapura
2,215
entailed high costs and thus not very
attractive. There was also some question
23. Trincomalee
203
as to the reliability of OGVH borrowers.
24. Vavuniya
57
From the point of view of project
Total
18,619
consultants/organizers, the barriers
Source: ESD Project Quarterly Statistical Report (June 2002)
included the long lead-time required to
organize OGVH cooperatives and obtain approvals, coupled with the risks involved in project
organization and development work. The timing of the GEF grant release to compensate for
project development and organization work was also unsatisfactory, and sustainability of the
project organization and development work without the ESD Project remained unclear. For the
cooperatives and end-users, the biggest problem was accessing project financing. Other issues
included O& M of the OGVH projects, and finding productive uses for the OGVH power during
the daytime when demand was not as much.
To address the situation, the CEB initiated an open solicitation process where consultants were
asked to submit proposals on how to address the existing technical, financial, and sustainability
issues pertaining to this particular component. To ensure that the process would lead to concrete
achievements, the consulting contracts were tied to actual deliverablesa set-up that worked
well and resulted in increased participation and more funding to OVGH projects by commercial
banks.
12
Grid-Connected Mini-Hydro (GCMH)
Sri Lankas minihydro capacity has

risen from about 1 MW in 1997 to 31
MW in June 2002. At mid-term, the
progress of this component was onschedule, but the tariff-setting issue
between the CEB and project
developers remained unsettled. The
main issue from the perspective of the
project developers was providing
adequate compensation for the actual
capacity value of the GCMH systems
in setting the SPPT.
To address the situation, the
government employed the services of
an independent consultant to review
and report on the tariffs set by the CEB
for the purchase of power from small
power producers. Based on his
findings, a tariff ceiling that was
acceptable to both the CEB and private
developers was set, and the issue is
now considered resolved. Table 3-2 is
a list of GCMH projects (and
corresponding capacity) as of June
2002.
Table 3-2. Grid Connected Minihydro (GCMH)

Projects Installed as of June 2002
Name of Project
Capacity
Bambara Batu Oya-Ratnapura
3200
Erapura Ganga-Kolonna
750
Carolina Estate-Watawala
2500
Panakura Oya-Minuwanella
320
480
Ellapita Ella - Maliboda Estate
550
Delgoda
2400
Glassaugh
2526
Mandagal Oya - Maliboda Estate
1271
Galaththa Oya-Pussellawa
1200
10
Medapiti Oya Deegalahinna
1500
11
Rat ganga Hapugastenne 1
4650
2150
12
Nividu
2000
13
Naya Ganga Mini Hydro Power Project
cancelled
14
Upper Watawala
1300
15
Niriella
3000
16
Deiyanwala, Gantelgoda Ela
1400
TOTAL
31,197
Pilot Grid-Connected Wind Farm Component

The pilot grid-connected wind farm component required that the CEB build a 3-MW pilot wind
farm on an Engineer, Procure and Construct (EPC) basis in the Hambantota district by May
1998. This component was completed not too far off the original schedule, with commissioning
taking place in February 1999 and certification in May 2000. The plant consists of five 46-meter
towers with 600 kW turbines designed to supply a total annual capacity of about 4.5 GWh. Total
project cost amounted to US$1,200/kW, which is acceptable for a first grid-connected wind farm
operation in a country. Wind speeds have also been found to be as projected during project
design. The CEB continues to monitor and record operational data from the wind farm and learn
from this experience the issues that must be addressed for integrating non-dispatchable and
intermittent renewable power.
At mid-term, there was concern that the CEB had not undertaken any measures to attract private
sector development of wind power in Sri Lanka. To address this, regional wind resource
measurements supported by UNDP/GEF and specific evaluations of sites were conducted by a
commercial company in order to facilitate project identification by private developers.
Consequently, there is now a favorable regime in Sri Lanka to develop and implement wind
projects. Several private companies, with international backing, are actively pursuing plans for
windpower development and projects as high as a 30 MW wind farm have been proposed. As a
13
result, the CEB has recently issued an open tender for windpower electricity to stimulate this
development. Additionally, some of the windpower developers are exploring the possibilities of
accessing the financial support of the Clean Development Mechanism (CDM) to enhance the
financial viability of their proposed projects.
Capacity-Building Component
The capacity-building component was programmed to be carried out in the Pre-Electrification
Unit (PEU), and in the Demand-side Management (DSM) unit of the CEB.
In the CEB Pre-electrification unit (PEU), the program was aimed at enhancing in-house
expertise in off-grid project preparation and to facilitate and promote technically and
economically viable renewable energy subprojects as part of the ESD credit and the pilot wind
farm components. It was also targeted at enhancing the ability of PEU staff to train staff from
CEB, the private sector, and NGOs in the areas of renewable energy project design and
development.
This broad objective was met by the PEU by actively engaging in:
Improved rural electrification coordination;
Preparation of materials describing off-grid electrification options
Training of CEB area staff in disseminating information and promotion of off-grid electrification
options
Coordination between CEB and off-grid project developers on CEB rural electrification plans
including indication of areas not likely to receive grid service in the near term
Preparation and dissemination of a guide for practical implementation of grid interconnection

/integration requirements;
Off-grid renewable energy project development training;
Non-dispatch able power source modeling and planning; and
Mini and village hydro project development assistance.
Meanwhile, capacity building in the CEB Demand-Side Management (DSM) Unit consisted of:
Design and implementation of a Code of Practice for Energy Efficient Commercial Buildings;
Development of institutional capacity in the energy related public and private sectors to incorporate
the Code of Practice into building design and operations and to monitor the energy savings;
Demonstration of energy efficiency building design through design competition incentives; and
Support CEB in implementation of a DSM Strategy and Load Research Program.
The concepts of energy efficiency/demand side management and renewables have been accepted
within the CEB and the capacity to design and execute DSM programs is firmly in place. Energy
efficient building codes have been developed and are in use and several energy service
companies (ESCOs) are now operating in Sri Lanka, in part due to efforts by the CEB. The
framework for power purchase from grid-connected small hydropower is likewise in place, and
14
training and awareness generation program for renewables has been conducted internally among
utility staff.
At mid-term, the observation was that the CEB was carrying out the capacity-building activities
in isolation of its general activities, i.e. there was little real coordination between the activities of
the ESD capacity building components and the normal day-to-day activities of the CEB.
Clearly, there is a stark contrast between the current project situation compared to the status at
mid-term wherein the project was basically on schedule with the grid-connected activities, but
was bogged down with many issues concerning off-grid components. With the implementation
of key interventions aimed at addressing weak areas in the project design, targets for the off-grid
components are being accomplished, and even exceeded
It has been estimated, in fact, that by project closure in December 2002, the following shall have
been accomplished:
Additional 22 MW from private sector mini-hydro projects
Additional 765 kW through village hydro projects
Additional 10,000 solar home systems (with current monthly sales at 1,300 units per month)
These are expected to translate into a shortfall of US$1.2 million to maintain credit off-take at
the current level, and to maintain the current SHS sales of 1,300 units per month. For the GEF
co-financing grants on the other hand, there is an estimated shortfall of US$400,000.
Table 3-3 traces the accomplishments of the ESD project both at mid-term and as of June 30,
2002. Table 3-4 lists in greater detail the status of the various projects as of mid-term, the
different recommendations made after the mid-term review, interventions carried out, and
corresponding results as of June 2002.
Table 3-3. Summary of ESD Project Accomplishments
Objectives
Key Performance
Indicators/Expected
Outputs
Accomplishments/ Status
as of Mid-term (Dec 1999)
Accomplishments as of
June 30, 2002
1. Promote the
provision by the
private sector, NGOs
and cooperatives of
grid-connected and
off-grid energy
services using
environmentally
sustainable
renewable energy
technologies
1.1 Installation of at least

26 MW of grid and off-grid
renewable energy capacity
by end of 2002, including
service to 32,000 off-grid
customers by end of
project
Grid-connected: 14.7 MW
minihydro capacity
Off-grid: 682 SHS units
installed; seven (7) OGVH
projects amounting to 58 kW
capacity, 2000 households
Grid-connected: 31 MW
minihydro capacity
Off-grid: 18,619 SHS units
and 56 approved OGVH
projects (equivalent to 574
kW installed capacity, 2,897
households) for village hydro
systems
1.2 At least one power

purchase agreement for a
private wind power project
signed by CEB
Pilot wind farm completed;

awaiting final certification in
May 2000.
No power purchase
agreement for a commercial
project yet.
As a result of successful 3MW demonstration project

and wind resource
assessment studies
conducted, a number of
investors have entered the
picture, with one already
investing in on-site wind
measurement and feasibility
studies, and in seeking
financing from carbon trading
mechanisms and investors.
2. Strengthen the
environment for DSM
2.1 CEB issuance of

Energy Efficient
Code already drafted;

expected to be ready by
EECB codes developed and

in use, although still rather
15
Objectives
Key Performance
Indicators/Expected
Outputs
Accomplishments/ Status
as of Mid-term (Dec 1999)
Accomplishments as of
June 30, 2002
implementation
Commercial Building
(EECB) Code of Practice
March 2000 and implemented

by July 2000.
limited; to be expanded under

RERED Project
3. Improve public and

private sector
performance to
deliver energy
services through
renewable energy
and DSM
3.1 CEB annual update of

Small Power Purchase
Tariff
Ongoing discussions between

private developers and CEB
re: small power purchase
tariff
Annual updates being carried

out. Tariff issue between CEB
and small power producers
considered resolved with the
setting of a tariff ceiling.
16 minihydro refinance
approvals, and 15 more under
consideration
3.2 Signing by CEB of at

least 5 SPPA contracts by
mid-term evaluation; 12 by
project completion
3.3 Generation planning
models prepared by CEB
which incorporate
intermittent, nondispatchable renewable
energy generating sources
Preparation of generation
planning models ongoing.
CEB continues to monitor and

record data from wind farm
and grid-connected minihydro
projects to become more
familiar with issues that must
be addressed for integrating
non-dispatchable renewable
energy generating sources.
16
Table 3-4. Interventions Carried Out Following Mid-Term Review To Address Project Weaknesses
Mid-Term Status
Off-grid SHS
As of end-Dec 99, only 682 SHS

approved for GEF grant
disbursement (vis--vis 30,000
target); only 9% of IDA credit
disbursed; 2.4% for related GEF
grant approvals disbursed
SHS vendors reluctant to serve
as consumer financing
institutions due to the necessary
institutional network, high costs
and risks associated with
administering micro-loans to
low-income isolated rural
households.
Interest rates paid by the endusers in excess of 24 percent
per annum and in some cases
as high as 33 percent per
annum
Recommendations
Participation of more MFIs that can
service potential isolated rural SHS
customers should be increased. This
can be achieved by:
assisting potential MFIs in
qualifying as PCIs for the ESD
Project;
considering less stringent criteria
for MFIs to qualify as PCIs; and
encouraging existing PCIs to
work with and provide loans to
MFIs that have proven outreach
capabilities in the targeted rural
areas.
ESD Project also needs to
investigate the possibility of using the
GEF grant to provide loan insurance
coverage to enhance MFI financial
security thereby allowing MFI to
access the available ESD credit.
Interventions
Microfinance (with the

accreditation of SEEDS as a PCI)
and private partnership model for
market development and financing
introduced and actively promoted
The job of financing was left to
MFIs, while vendors were
encouraged to concentrate on
selling systems.
Results/Status, June 2002
Over 18,000 SHS in place

Now 4-5 commercial
suppliers, with 50 sales and
service centers across the
country
More banks now involved in
financing SHS
Several provincial
governments now adopting
solar programs
Technical standards in
place
17
Mid-Term Status
Off-grid
village hydro
(OGVH)
Costs of coordinating and

organizing village cooperatives to
develop, own and operate the
OGVH systems very high
Recommendations
The option to allow private sector

or NGO developers who build,
own and operate OGVH systems
and sell the electricity service to
consumers should be considered
within the ESD Project.
GEF grant could be used to
attract the participation of the
private sector through competitive
bidding for specific franchise
areas
Interventions
Open solicitation process was initiated
to get proposals from consultants on
how to address policy, technical, and
sustainability issues pertaining to the
OGVH component. To ensure that the
process would yield actual
accomplishments, consulting contracts
were tied to deliverables.
Grid
Connected
Mini-hydro
(GCMH)
Progress generally good, with

approvals/ disbursements as of midterm exceeding targets. Specifically,
disbursements are at US$6.0MM
(out of the total 14.4 million IDA
credit)
ESD Project should work with the

CEB and GCMH developers to
ensure that tariff-setting issue is
settled, i.e. the actual capacity value
of the GCMH systems are
adequately compensated for in the
setting of the SPPT
Independent consultant hired to

review and report on the tariffs set by
the CEB for purchase of power from
small power producers. Based on
consultants findings, a ceiling that
was acceptable to both the CEB and
private developers was set on tariffs
for minihydro projects
56 projects approved,
serving 2897 households
Total grant dependence has
been eliminated
Private sector capacity to
implement OGVH projects
through communities has
been developed
8-10 developers currently
involved
Hydro resource study
available
Commercial banks now
lending to OVGH projects
31 MW in place, and
approximately 40 MW are in
advanced stage of
development and lodged
with PCIs for financing
More private developers
now in the picture
Tariff no longer an issue
between CEB and
developers
18
Mid-Term Status
Pilot wind
farm
component
CapacityBuilding
Component
Recommendations
3MW pilot wind farm

commissioned in February 1999
and certified May 2000.
CEB monitoring and recording
the operational data from the
wind farm and learning from this
experience the issues that must
be addressed for integrating
non-dispatchable and
intermittent renewable power.
CEB has not undertaken any
measures to attract private
sector devt of wind power in Sri
Lanka.
Implementation of capacitybuilding activities proceeding

without any major problems
However, CEB appears to be
carrying out these activities in
isolation of its general activities,
i.e. there is little real
coordination between the
activities of the ESD capacity
building components and the
normal day-to-day activities of
the CEB
Interventions
CEB should undertake detailed

study of energy and capacity
value of wind electricity for the
CEB grid and actively develop
and disseminate wind resource
data to help attract private sector
developers for Sri Lankas wind
energy resources.
CEB should more actively

integrate the results of the DSM
and PEU activities into its
mainstream activities, i.e.
clearly define an implementation
program for the results of the
DSM studies and building energy
efficiency standards; and
have the PEU actively identify
and promote off-grid rural
electrification options in areas
that are clearly not going to
receive grid electricity in the next
five years
Regional wind resource

assessment (supported by UNDP)
and specific evaluations of sites
carried out.
Potential projects identified to
facilitate increased private sector
participation in this area.
CEB drafted implementation plan

for energy efficient building codes.
CEB actively pushed for and
assisted in the actual development
of ESCOs
There is currently a
favorable regime to develop
and implement wind
projects
Several private investors
are in the picture
Concepts of EE/DSM and

renewable energy now
accepted within utility
Capacity to design and
execute DSM programs in
place
Energy efficient building
codes developed and in
use, although still rather
limited; to be expanded in
proposed follow-on project
3 ESCOs now operating in
Sri Lanka
19
Assessment of Technical Performance/

Overall Implementation
Implementation of the Solar Home System Component
As of the end of June 2002, a total of 18,619 solar home systems had been installed, with an
average of 1000 systems being installed per month. This contrasted greatly with the situation at
mid-term when only 682 applications had been approved for GEF grant disbursement (vis--vis
30,000 target). The main issues that cropped up in the implementation of this component
(categorized according to stakeholder) were as follows:
Table 4-1. Issues Involved in Implementation of SHS Component
Institutions
Limited rural network

High transactions costs
High risks associated with low-income, isolated households
SHS Vendors
High costs of securing SHS sub-loans with PCIs

High cost of administering micro-loans to SHS end-users
High risks posed by SHS end-users
Lack of developed dealer network
Distraction from principal functions (i.e. selling systems)
End-Users
Limited access to affordable loans

Initial high costs of SHS installation
Lack of awareness of SHS option
Perceived lack of credibility of SHS vendors
Participating Credit Institutions
A number of the commercial banks reiterated a long-standing and commonly shared view among
traditional lending institutions that lending to solar home systems was high-risk and unprofitable.
They expressed preference for the grid-connected hydro projects, which they perceived to be
significantly less risky. SEEDS, for its part, recognized the need for it to expand its operations to
keep up with the growing demand. It also acknowledged the need to streamline the process so
that the release of funds could be carried out faster.
SHS Vendors
Since the start of the project, SHS vendors had been reluctant to serve as consumer financing
institutions due to the required institutional network, high costs and risks associated with
administering micro-loans to low-income isolated rural households. High interest rates were also
an issue as end-users had to pay in excess of 24 percent per annum and in some cases as high as
33 percent per annum.
In order to address these issues, microfinance and private partnership model for market
development and financing were introduced and actively promoted. The job of financing was left
to the MFIs and vendors were encouraged to concentrate on selling systems. As a result of these
interventions, sales increased at an exponential rate.
During consultations in May 2002, most of the equipment vendors acknowledged that the entry
of SEEDS, the lone microfinance institution accredited as a PCI, was highly instrumental in
21
increasing access of consumers to financing, and as a result, expanding the SHS market. Aside
from relieving the vendors of the role of financier, SEEDS also has a rural network, which
enabled it to reach a greater number of end-users in remote areas. Most vendors expressed the
need for more MFIs to be accredited as PCIs in the future as SEEDS has been unable to keep up
with the growth in demand for SHS loans, resulting in a growing backlog and delays in the
release of funds to vendors.
End-users
During the surveys conducted among end-users, majority expressed satisfaction with the energy
service they were receiving under the SHS component (more details in Chapter 7). The most
common technical problem cited involved battery failure stemming from over-use of the system.
Defective lamps have also been identified as an issue. Other problems stem from wiring defects,
loose connections, and incorrect placing of the PV module. Some expressed strong concern
about the future when the warranty period ends and field offices of the vendors are closed.
Others also mentioned incidents of parts supply shortages and the lack of enough knowledgeable
field personnel. In terms of overall level of service for repair/maintenance, however, eighty (80)
percent of those surveyed indicated satisfaction.
The success of the SHS component was clearly facilitated by the entry of a microfinance
institution that had a rural network and had a grassroots orientation that enabled it to reach and
be more responsive to a greater number of rural customers. In order to sustain the gains made
under this component, it is essential that more MFIs participate in the program, especially as the
experience under ESD showed that commercial banks are not inclined to go into micro-lending.
Off-grid Village Hydro Component
The off-grid village hydro installations are built, owned, and operated by the communities
through electricity cooperative societies that were set up specifically for that purpose. Assistance
is provided by the ESD project in retaining consultants to prepare these installations. Project
preparation assistance usually includes social mobilization, society formation, preparation of
feasibility studies that cover both technical and socio-economic aspects, submission of business
plans, and other documentation for bank loan negotiations and some amount of project
implementation support (Gamata Light Electricity for Villages, 2002).
The main issues that cropped up in the implementation of this component (categorized according
to stakeholder) were as follows:
Table 4-2. Issues Involved in Implementation of OGVH Component
Institutions
Small size of OGVH project loans

High transactions costs
High risks associated with OGVH borrowers
OGVH Project
Consultants/Organizers
Long lead times required to organize cooperatives and obtain approvals

Risks associated with project organization and development work
Timing of GEF grant release to compensate for project developers work
Sustainability of project organization and development work without the ESD
project
OGVH Cooperatives/
Societies/End-users
Limited access to affordable loans

Timing of release of GEF grant
Operation and maintenance of OGVH project
22
Productive use of OGVH power
The commercial banks participating in the project generally view off-grid village hydro projects
as high-risk, and prefer the grid-connected hydro projects. The principal borrowers for the
OGVH projects are village societies or cooperatives specifically formed to undertake the project.
As such, they do not have an established banking record. The commercial banks also admitted to
not having the rural network to serve small end-users who make up the electricity cooperatives.
As in the case of the SHS component, it was the entry of a microfinance institution that enabled
the OGVH component to take off. SEEDS had a better understanding of the rural situation, a
wider rural network, and was able to respond more effectively to the needs of rural electricity
cooperatives.
OGVH Project Consultants/Organizers
The most important catalysts for the development of the OGVH projects have been the OGVH
consultants/organizers. Their main responsibility is to identify and develop potential village
hydro sites, a role they have been performing long in various rural areas in Sri Lanka before the
ESD project. The project, therefore, only served to assist them in their development efforts and
expand the applications of village hydro in the country. The main concern of this group has been
the long lead time and tremendous effort required to organize target households to a functioning
village society that is capable of qualifying for a loan.
OGVH Cooperatives/Societies/End-users
Most of the end-users expressed satisfaction over the energy service provided under this scheme
(see Sec 7 for more details) and expressed desire to expand their current usage and acquire more
appliances. This contrasted greatly to the situation at the start of the project when there was a
pervasive lack of awareness about the potential of the proposed OGV projects (as well as their
limitations). The most common technical problems faced by customers were power failures
caused by over usage. Normally this occurs between 6pm to 10pm. Those consumers who are at
the end of the distribution line also face the problem of low voltage on occasion.
Grid-connected Hydro Component
The implementation of the grid-connected minihydro component has been progressing well since
the start of the project. As of June 30, 2002, 16 loans representing a total of 31 MW installed
capacity had been approved. An additional 15 loans are currently under appraisal, representing
an additional 53 MW. The original target at project inception was 26 MW of both grid and offgrid renewable energy capacity.
A meeting with the ESD Administrative Unit and representatives of the Grid Connected Small
Power Developers Association in May 2002 revealed that private developers are generally
satisfied with the way the grid-connected hydro component of the project has been implemented.
The small power purchase agreement and the resolution of the tariff issue were both identified as
being crucial in attracting more developers to enter the market. The SPPA, in particular, meant
reduced transaction costs, risks, and a clearer framework for investors to operate in.
Prior to this, there had been long-running debates/discussions between the CEB and the gridconnected small hydro developers association (GCSHDA) regarding the level of the tariff, the
23
provision of a capacity credit to small power producers, etc. The eventual resolution of these
issues made it possible for turning the situation around.
ECOPOWER, one of the private companies that have played a major role in setting up grid
connected hydro projects, cited the resolution of the SPPT and the long-term money made
available under the ESD project, as crucial factors in their decision to pursue several projects.
Prior to ESD, terms offered by financial institutions were for considerably shorter periods.
Commercial banks participating under the project perceive this component to be the least risky,
largely because of the small power purchase agreement (SPPA).
Clearly the success of this component was due largely to the resolution of the SPPA and tariff
ceiling issues. This serves as an example of how crucial it is to have a conducive institutional and
policy framework in place to attract private sector participation.
Pilot Wind Farm Component
The implementation of the 3-MW pilot wind farm component has proceeded with no major
barriers to implementation. The pilot project was commissioned in February 1999 and certified
in May 2000. The plant consists of five 46-meter towers with 600 kW turbines designed to
supply a total annual capacity of about 4.5 GWh. Total project cost amounted to US$1,200/kW,
which is acceptable for a first grid-connected wind farm operation in a country. Wind speeds
have also been found to be as projected during project design.
The success of any pilot project is determined by its ability to stimulate a commercial market. As
of mid-term, there were no prospects for commercial wind farm projects, largely because of the
expected high costs of electricity to be generated from. The prevailing sentiment was that the
level of the SPPT was not sufficient to support the commercial wind development of wind farms
in Sri Lanka.
Two years later, there are now clear indications of success with the expression of interest and
preparatory activities undertaken by several private companies in developing wind farms.
Following the conduct of regional wind resource assessment, the evaluation of sites, and
identification of specific sites, several private investors have expressed their interest to develop
and implement wind projects. The most advanced is a proposal for a 30-MW wind farm, to be
developed by NEG Micon A/S of Denmark & Kentec Denmark in Kalpitiya, in the North
Western part of Sri Lanka. The project is also being developed to qualify for funding under the
Clean Development Mechanism (CDM), one of the flexible mechanisms under the Kyoto
Protocol.
Capacity Building Component
The capacity-building component was programmed to be carried out in the Pre-Electrification
Unit (PEU), and in the Demand-side Management (DSM) unit of the CEB.
In the CEB Pre-electrification unit (PEU), the program was aimed at enhancing in-house
expertise in off-grid project preparation and to facilitate and promote technically and
economically viable renewable energy subprojects as part of the ESD credit and the pilot wind
farm components. It was also targeted at enhancing the ability of PEU staff to train staff from
CEB, the private sector, and NGOs in the areas of renewable energy project design and
development.
Capacity-building in the CEB Demand-Side Management (DSM) Unit consisted of:
24
Design and implementation of a Code of Practice for Energy Efficient Commercial Buildings;
Development of institutional capacity in the energy related public and private sectors to incorporate
the Code of Practice into building design and operations and to monitor the energy savings;
Demonstration of energy efficiency building design through design competition incentives; and
Support CEB in implementation of a DSM Strategy and Load Research Program.
As of mid-term the concepts of energy efficiency/demand side management and renewables had
been accepted within the CEB and the capacity to design and execute DSM programs is firmly in
place. Energy efficient building codes had also been developed and are in use and several ESCOs
are now operating in Sri Lanka, in part due to efforts by the CEB. The framework for power
purchase from grid-connected small hydropower is likewise in place, and training and awareness
generation program for renewables has been conducted internally among utility staff.
At mid-term, the observation was that the CEB was carrying out the capacity-building activities
in isolation of its general activities, i.e. there was little real coordination between the activities of
the ESD capacity building components and the normal day-to-day activities of the CEB. During
the field mission in June 2002, the CEB appeared more receptive to consider energy efficiency
and renewable energy initiatives though it is still not seriously incorporating these options in its
overall planning process.
25
Addressing Cost Barriers

Renewable energy technologies often represent the least-cost option when it comes to
electrifying populations that are small, dispersed, and located too remote for connection to the
grid to be a reality in the foreseeable future. But from the point of the view of the potential user,
the affordability of these technologies remains a fundamental concern. Even with the use of
subsidies, end-users still face many cost-related barriers, including:
1. High capital costs
2. Lack of access to credit; and
3. High transactions costs in purchasing or servicing solar home systems due to limited
supply, sales outlets, technicians, and financing infrastructure in rural areas
The ESD Project has attempted to address the first concern (high capital costs) by providing a
subsidy to reduce the consumers first cost and a refinance facility to support consumer financing
in order to address the issue of affordability.
In order to address the lack of credit, particularly for OGVH and SHS customers, the
involvement of SEEDS at about the mid-point in the project and its eventual accreditation as a
PCI was instrumental in reaching a broader base of customers. SEEDS capability to function as
an MFI, its established rural network and its community based approach were all critical
elements in addressing the financing needs of the end-users.
To assist the private sector, the project provided technical assistance for promotion and business
development and for transparent administration of rules for technical standards and subsidy
payments. The aim was to provide a framework that would elicit private investments in rural
distribution of SHS, catalyzing a circle of increasing sales volumes-falling unit costs and
pricesincreasing affordability that would lead to commercial sustainability.
A key feature of the grant subsidies provided to companies was that they were based on sales
performance, and not linked to costs or retail prices. While there is a project-level intention that
the grant should contribute to increased affordability, actually, they form a fungible part of a
companys cash flow, with the company free to set its own prices. The GEF grant now
approximately represents 20% of the sales revenue of the companies. In addition to this, the cofinancing grant was also aimed at allowing the intermediaries to develop a delivery mechanism
that would allow the project to be sustainable in the long-term.
As a result of these efforts targeted at increasing private sector participation, three companies
have made investments estimated to be 1.0 to 1.5 million dollars to develop the systems,
physical infrastructure and human resources for a commercial distribution network of 50 sales
and service outlets with motivated sales forces, trained technicians (roughly 500 were trained),
and good product and brand awareness. The three main SHS companies have also reported sales
of 400-800 per month, while the fourth SHS company has reported 100-120. Most importantly,
the companies are now operating on a profitable basis.
The project has also worked hand in hand with the Uva provincial government, which provided a
supplementary SHS subsidy and effectively created a competitive market-enhancing framework
that has resulted in the installation of roughly 8,000 units between 2001-2002. This partnership
serves as a model for other provincial governments or government agencies planning similar
initiatives in the future.
While the project has scored significant successes in terms of addressing cost barriers, there
remains a large untapped potential market, which consists mostly of lower income households.
They household survey that was conducted in May-June 2002 revealed that even with the current
27
credit facilities made possible by the ESD project, it is still the middle to upper rural class who
are benefiting from the rural electrification project since the technology involved is not cheap,
and these are the groups that have the willingness and ability to pay. To financing institutions,
they also represent sound risk. Under the ESD project, SHS and OGVH customers typically fall
under the middle-income category (on the basis of actual income and expenditures data obtained
through the field surveys). More than half are involved in agriculture and have seasonal incomes.
Around 25% hold either government or private sector jobs and earn monthly incomes. How the
needs of the lower income rural groups thus remains an unresolved issue.
In trying to penetrate markets comprised by lower income households, the issue of affordability
will expectedly become stronger. The follow-on RERED project needs to address this
fundamental issue.
From the point of view of the private sector, withdrawal of the GEF grant may result in a drop in
current sales levels. There is also uncertainty if companies will continue to reinvest future profits
in further development, or if the SHS loan portfolio of SEEDS, the lone microfinance institution
operating under the project, will be able to sustain its present level of meet increases in demand.
To date, the MFI seems to have reached its saturation point. These are also issues that the
RERED project should seek to address.
28
Assessment of Institutional Effectiveness

The main role of the participating credit institutions is to extend loans to project developers,
cooperatives, and individual end-users under the ESD project.
The commercial banks have been effective partners for the ESD credit applied for the
development of minihydro projects, but not for SHS or OGVH. The outreach network of
commercial banks not geared towards serving requirements of small-scale end-users, resulting in
significant administrative and processing costs. Thus, it became evident at an early stage in the
ESD Project that effective rural based micro-finance institutions (MFIs) were needed. The
involvement of SEEDS at about the mid-point in the project and the eventual approval of SEEDS
as a PCI/MFI were instrumental in the success of the off-grid village hydro and SHS components
of the project. SEEDS capability to function as an MFI, its established rural network and its
community based approach are all critical elements in addressing the financing needs of the SHS
and village hydro components. The OGVH developers had their initial share of struggles in
organizing themselves, meeting the requirements of the commercial banks, and dealing with
members, but overall proved to be effective borrowers of credit from the microfinance
institution. The SHS vendors did not prove to be effective providers of credit as shown by their
performance during the start of the project, but this was addressed by the accreditation of a
microfinance institution so that they could concentrate on marketing, distribution, installation
and servicing of the SHS.
The importance of the PCIs and the longer term, near commercial financing offered by IDA only in very close collaboration could this financing be offered by other institutions like IFC.
Borrowers of ESD Credit
This category includes the following stakeholders: GCMH developers, who are responsible for
the design/development and implementation of GCMH projects; OGVH developers, whose
main role is to organize small electric cooperatives and then as a single entity apply for credit
under the ESD; SHS vendors whose main role is SHS delivery, installation, and operation and
maintenance; they were also initially expected to organize SHS sub-projects, borrow funds from
PCIs and then provide consumer financing to SHS customers; microfinance institutions (MFIs)
whose main role is implementation of the credit component, mainly to off-grid customers; and
the SHS end-users.
Developers of grid-connected mini-hydro projects have proven to be effective borrowers of ESD
credit, especially with the resolution of the power purchase tariff issue with the CEB. It was also
their aggressive effort in presenting their views and recommendations on the SPPT, which led to
the resolution of the long-debated tariff issue with the Ceylon Electricity Board.
Some OGVH cooperatives, usually made up of low-income households, were unable to meet the
basic standards of borrowers required by commercial banks and provide adequate security and
guarantees. With the accreditation of SEEDS as a PCI, the cooperatives were able prove
themselves as effective borrowers of credit. They also proved to be effective project managers,
due in part to the technical assistance provided to them to the AU in the areas of finance and
management.
29
SHS vendors, for their part, were not institutionally organized to provide direct consumer
financing. Fortunately, this was a role that they were no longer expected to perform after the
mid-term review, when the job of financier was deemed better left to MFIs. This enabled the
SHS vendors to concentrate on selling the systems. As far as providing after-sales service is
concerned, a total of 50 service and distribution centers are now in place in Sri Lanka. A total of
around 500 technicians have also been trained, and big solar companies like Shell, Access, and
Selco, have entered the market and helped trigger the take-off in sales and general improvement
in after-sales service. In spite of this, the survey among SHS customers revealed some
dissatisfaction as to the quality of after-sales service being provided, citing long waiting times
for technician visits. This is one area where an improvement needs to be made.
SHS end-users, for their part, initially represented a high-risk to participating credit institutions,
as they were unable to meet the requirements of commercial banks and provide the necessary
guarantees. When they were able to have access to micro financing, they proved to be effective
borrowers of credit, and effectively changed the perception of rural areas not being viable
markets for SHS vendors.
On the whole, the contribution of the intermediaries, e.g. minihydro developers, solar dealers,
and village hydro NGOs was very critical to the success of the project as their experience now
provides a blueprint for successful replication elsewhere in Sri Lanka.
Administrative Unit (AU), based at DFCC Bank
The responsibilities and roles of the Administrative Unit include the following:
1. Administration of the ESD credit program including ensuring that the ESD Credit
Program meets the current agreed Operational Guidelines, processing of requests for PCI
approved loans, maintaining of disbursement records and accounts, informing IDA of
project progress, maintaining relevant statistical records, submitting quarterly statistical
and progress reports, and preparing, submitting sub-project completion reports and
undertaking other tasks as necessary to achieve the ESD Project objectives;
2. Administration of the GEF grant funds including processing requests for disbursements,
maintaining disbursement and submitting quarterly statistical reports as required by the
GoSL and the GEF; and
3. Providing off-grid project support for off-grid project promotion, verification of proposed
SHSs for conformance to project approved specifications, verification of actual SHS
installation and publicizing and administering a Consumer Protection Service that
would help identify and investigate consumer complaints against dealers and seek
appropriate resolution.
The AU seems to have effectively carried out its administrative responsibilities as outlined in its
terms of reference. There have been no major issues relating to administration of ESD Credit,
including processing of loan disbursement requests, maintaining of disbursement records and
accounts, compiling program-related statistical records, and submitting quarterly reports.
Establishing the AU within one of the PCIs (the DFCC) was a bold yet prudent move. Equally
important was the creation of an effective wall between the AU and it parent organization so
that the AU was able to operate independently and without prejudice. By having the AU drawn
from one of the PCIs, the AU was familiar with the prevailing banking rules and procedures and
was administratively adapt in matters relating to the application and disbursement of the credit
and the GEF grant. However, the AU was initially not as effective in matters relating to
30
development and promotion of the ESD components it was responsible for. To its credit, the AU
recognized this requirement and has actively worked to meet this objective. The success of the
ESD Project is in part due to the performance of the AU and, specifically, the skills and
dedication of the AU Manager, Mr. Jayantha Nagendran. The AU has actively reached out to all
ESD Project stakeholders and regularly meets with key stakeholders to identify issues and
resolve problems. Equally important was the long-term view taken by the DFCC in operating the
AU. The DFCC demonstrated a willingness to initially sustain losses from AU operations for the
first three years as the ESD Project ramped up. The AU broke even financially in its fourth year
and is now reported to be operating profitably. This model of an effective, efficient and proactive
AU with a long-term commitment and able leadership is an important element in the success of
the ESD.
The CEB was responsible primarily for the implementation of pilot grid-connected wind farm
and capacity building components of ESD. Indirectly, it also had responsibility in the
implementation of credit component by its actions relating to the SPPA, tariffs, and the preelectrification unit.
The organization seemed to be effective in carrying out its responsibilities related to the pilot
grid-connected wind farm component and the DSM tasks of the capacity-building component.
For the latter, it has been successful in (a) developing of code of practice for energy efficient
commercial buildings; (b) developing the technical capacity to carry out energy audits and
provide advice on energy efficiency measures for commercial and industrial clients; (c) carrying
out a load research study; and (d) instituting an appliance energy labeling program. The CEB
continues to work in promoting energy efficiency and DSM.
GOSL Agencies
Apart from the CEB and the MOF, which were the main implementing agencies of the ESD
project, the other government agencies involved in the ESD project were the Ministry of
Finance, the Central Bank, the Ministry of Irrigation and Energy, and the Ministry of
Environment. Their individual roles were not defined explicitly, but they were expected to
provide some general project oversight.
Effectiveness of Other Relevant GoSL Agencies
Ministry of Finance
The commitment to the ESD Project of the Ministry of Finances Director General of External
Resources (DGER) has been very strong since the start of the project. During the mid-term
review, the DGER had expressed concern that the CEB and the GCMH developers had not
reached agreement on establishing a SPPA that was agreeable to both parties. The DGER had
also indicated concern with the slow pace of the SHS component and indicated a willingness to
consider expanding the eligible PCIs to include MFIs that have a more extensive reach to rural
households. It was in part because of the DGERs assistance that both of the above issues were
eventually addressed.
31
Central Environment Authority
The Central Environment Authority (CEA) was found to be conducive to the development of
OGVH and the GCMH projects. Developers stated that they had no major problems in dealing
with the CEA and that the agency was generally helpful.
Effectiveness of Bank Management and Supervision
The importance of the technical/knowledge support provided by the World Bank/ASTAE team
members i.e. intensive supervision during initial stages of project implementation, was very
crucial to the success of the project. They have maintained a good, close working relationshipi
with the AU, and the AU has expressed no difficulties in accessing the Banks staff. Similarly,
no concerns regarding the Banks management and supervision were raised by the CEB staff
managing the Pilot Wind Farm component and the Capacity Building component of the ESD
Project.
32
Assessment of Consumer Satisfaction

and Socio-Economic Impacts
In order to assess consumer satisfaction and determine the social impacts of the ESD project, a
field survey was carried out by a local consultant among SHS and OGVH customers in
May/June 2002. This chapter discusses the methodology used in the field surveys and the results
obtained. Using this information, as well as information obtained through consultations with
other stakeholders (discussed in previous chapters), socio-economic benefits brought about by
the project are identified.
Methodology Used in Field Surveys
In June 2002, a local team of experts conducted a series of surveys among customers of the solar
home systems (SHS) and off-grid village hydro (OGVH) projects. The SHS surveys were
conducted in 100 households in 5 districts, and the survey sample consisted of SHS installed by
four (4) different companies. The micro hydro surveys were conducted in 4 projects based in 2
districts, and the survey sample included a total of 50 households.
Sample selection for the SHS customers was done randomly, but some assistance was also
extended by the private vendors in identifying areas with high concentrations of installations.
Once contact was made with a few households in a specific area, other households were
contacted on a random basis. This was done in order to minimize the influence of the vendors in
the selection of households to be surveyed and ensure greater objectivity. The micro hydro
households were selected from the Ratnapura and Kegalla districts, which have the largest
number of ESD-supported projects.
The surveys were conducted using structured questionnaires specifically designed to suit the
local conditions, with feedback from stakeholders including the Energy Forum, solar PV
companies and micro hydro project facilitation consultants. The survey respondents included
heads of each household, their spouses or other adult family members.
Main issues encountered in the conduct of the survey included the limited time available to finish
administering the questionnaires, and problems in logistics given the dispersion of households in
large areas in the case of SHS. Due to cultural sensitivities, it also proved difficult to get direct
answers from the respondents, particularly concerning questions on income. This required the
field surveyors to make judgments about income level based on type of dwelling and
expenditures on energy and other items.
Summary of Survey Results
Solar Home Systems Customers
The survey of SHS customers confirmed much of what has been known within industry in terms
of the target market being the higher end of the income scale in rural areas. The survey does shed
light on the extent of the relative affluence of this market segment based on the percentage of
people (more than 75%) who purchased systems that cost more than Rp30,000. However, it
bears noting that 94% of the respondents obtained financing, mainly from SEEDS. Easier access
to financing has clearly been crucial in accelerating the sales of SHS. This is proven by the fact
33
that most of the systems surveyed were installed after the year 2000 when SEEDS was
accredited as a PCI.
The main motivation for people to purchase a SHS, in spite of the costs involved, was the safety
and reliability that the systems represented vis--vis the kerosene lamp. A SHS also gives the
additional benefit of operating a TV. Prior to acquiring the SHS, most people used rechargeable
automotive batteries to power their TVs and dry-cell batteries to power their radios.
Most customers admitted that the availability of credit made the decision to purchase much
easier, as it not only enables the customer to spread the cost, but also to minimize the risk of the
SHS not performing to expectation. The survey showed 51% of the consumers as being highly
satisfied with the SHS performance, with
36% satisfied while 13% are not satisfied.
Mr. K.W. Kirimenika lives with his wife and four
The most common reason cited for the
children in a permanent house at Badanadura village
dissatisfaction is that the system does not
in Ratnapura District. He works as a farmer, with help
meet the electricity needs of the household.
provided by his wife, Sisilawathie. Prior to the ESD
In most cases, the end-users were not made
project, his family used to spend roughly Rs. 600 for
aware of the limitations of the system. The
kerosene, Rs. 200 for recharging the battery and
survey also indicated that 20% of the
Rs.100 for dry batteries. In 1999, he got a chance to
householders were not satisfied with the
attend an ESD promotional program called Gamete
after sales service provided by the vendor
Light organized by a local NGO. There, he met a
companies.
company salesman and purchased a 32-watt solar
Clearly, the reasons for dissatisfaction can
home system in July of that year through a loan from
be addressed by improving user education
Sarvodaya SEEDS. Now, the Kirimenika family
and the level of after-sales service. In a
enjoys longer hours of power every night. Their
business where most sales happen through
energy expenditures have decreased as they no
recommendations (neighbors influenced
longer need to purchase kerosene and pay for
48% of the sales), meeting customer
battery recharging. The savings is around Rs. 700
expectations is very essential.
per month, as total energy cast is less than Rs. 200.
The surveys indicated that majority of solar
home system customers, who used a
I never believed that the sun could make our life brighter
and safer even at night said Mr. Kirimenika. The SHS
combination of batteries (re-chargeable and
makes kitchen work easy, and save my day time. Now I
dry cell), firewood, and kerosene prior to
can prepare meals even at night. My husband is old now.
the project, are satisfied with the
Before SHS, he has to carry the battery to the town to
performance of the solar home systems.
recharge it. The solar home system changed all that. It is a
Few indicated plans of expanding the
great convenience in our lives, agreed Sisilawathie.
current system and stated that future
expansion will depend on future needs as
well as income. Most customers are spending more than they did before the project, but do
acknowledge the fact that they will save money once the loans are paid off.
Close to 96% of those interviewed said that their quality of the life improved with the solar home
system. Ninety six percent also said that SHS gives them a safe environment by avoiding
accidents from kerosene lamps. They also acknowledged the better health effects from not
breathing kerosene fumes.
Women in particular highlighted the usefulness of lights to fulfill their tasks of cooking and
cleaning at night. Sixty five percent said that it helps their children to study. The time they spend
for entertainment also improved as well as family better family interaction. Even though 60%
indicated increase in income, this is not direct but anticipated income from saving money that
34
would have been spent on fuel and batteries in the future. About 8% indicated a direct income
enhancement from opening a shop for longer hours as well as from small businesses such as
sewing. Ninety seven percent of the consumers said that their overall lifestyle improved because
of the SHS.
Most consumers indicated that there should be more government support to reduce the cost to of
the system. They indicated that government should intervene in the same manner that they do
with the housing sector where loans are provided at lower interest rates and longer repayment
periods. Annex 1 shows the actual questionnaires used for the conduct of the surveys.
Off-Grid Village Hydro Customers
Unlike individual SHS households, village hydro requires community involvement. As such,
there are fundamental differences in the way a household gets access to electricity service. It is a
participatory process, which requires leadership, teamwork and coordination. Usually, the ESD
supported projects have a catalyst (i.e. a consulting company) facilitating project development.
This process involves developing technical assessments, feasibility studies, the business plan and
a bankable proposal. The three projects that were surveyed were developed in this manner.
The village hydro surveys show that the 80% of the households were very good (in terms of
quality of house construction). Yet their stated income seems to be generally lower than the SHS
households. This also corresponds with the monthly expenditure where close to 60% of the
people spend between Rp3,000 and Rp5,000 per month. In the SHS sample over 75% of the
people spend between Rp5,000 and Rp9,000.
Like the SHS customers who were surveyed, 98% of the respondents owned their dwelling. The
respondents were also mostly influenced to participate in the project by their neighbors.
78% expressed satisfaction over the way operation and maintenance was being carried. The
remaining 22% cited the several days waiting time for technicians to come over to carry out
small repairs as the main reason for their dissatisfaction. One problem the respondents seemed
most concerned with was shortage of water that resulted in shutting down the system several
times in the past. Some fear that this may become commonplace in the future because of weather
pattern changes.
With 230 Volt AC power generated with a
I have been running my business for the last 10
micro hydro (as opposed to a 12 Volt DC
years and I have grid electricity. But it was difficult
system with SHS), householders have the
for me to run the business especially at nighttime
opportunity to use a wider range of
with the power cuts currently being imposed by the
appliances such as color TV and electric
CEB. I thought solar is a good solution to overcome
irons. All respondents used the power for
this problem. Four months ago, I went to the
lights and about 50% used it black & white
Access Solar Centre at Atalugama and discussed
television, while another 25% used it for
with them and bought an 8-bulb system, which can
color TVs.
also operate a TV and a radio (65 W panel). We
While there is a higher potential for income
pay Rs1,000 monthly, spread over a period of 3
generating activities with the microhydo
years.
systems (vis--vis SHS), the survey does not
indicate that this potential is being realized.
Now, we are using it not only during the power
20% feel their income has increased, but this
cuts, but also during daytime for lighting purposes.
is mostly due to perceived savings in energy
Its really good for my business and my electricity
expenditures once the loan has been fully
bill has been considerably reduced because of the
paid up, rather than actual income generating
solar home system.
productive activities.
Proprietor, Shan Hotel in Thukinda
Theligama Kegalle
Source: GAMATA Light
35
Most of the respondents revealed plans to purchase more appliances such as color television sets
and water heaters.
Very few respondents responded to the question of whether they were expecting the CEB grid to
come to their area in the near future, as they had no idea as to the CEBs plans/timeframe. When
asked what they intend to do if the grid does come to them, 68% said they are willing to use both
MH power the grid together.
Majority of the respondents are currently paying more to the electricity coops that what they
used to spend, but were also aware that they will start to save money once their loans have been
paid off.
As the ECS are cooperative in structure, they present the additional advantage of enabling
community members to mobilize savings, and extend welfare and other micro-credit loans to
society members. From this, there is the potential for the future development of incomegeneration activities. Also, during the day, there is excess energy generated by the MH systems,
which currently is not being utilized, but offers opportunities for productive activities.
Socio-Economic Impacts
The ESD project has generated positive poverty reduction, gender, and other social impacts.
These are discussed in detail below.
Poverty Reduction. The provision of energy has also been identified as key in improving the
prospects for income generating activities that help break the cycle of poverty in rural areas and
stimulating local investment and thus, employment. In terms of employment generation, the ESD
project has resulted in the growth of the local solar PV and hydro industries. Existing solar
companies have expanded and new ones have been created as a result of the expanding market
while developers of hydro projects have also increased in number, especially with the
implementation of a small power purchase agreement. With the creation of service and
distribution centers in the rural areas, new employment opportunities for rural residents have also
emerged. Although the exact number of jobs created as a result of the project is difficult to
estimate at this point, it is clear that the project has resulted in significant employment
generation.
Gender. In the rural setting, energy is utilized for household uses, such as cooking, lighting,
space heating, and other appliances; for agricultural uses such as tilling, irrigation, and postharvest processing, and for rural industry uses such as milling and mechanical energy and
process heat. Energy is also an input to water supply, communications, commerce, health,
education, and transportation in rural areas. Much of this energy use and production is by
women. Energy, simply put, has a huge gender impact in the rural context, especially in
developing countries like Sri Lanka. In the survey conducted among SHS end-users, most, if not
all of the respondents acknowledged how the project had enabled women to work during the
evenings, and how it gave them better access to information.
Strengthened urban-rural linkages and enhanced capacity to access information and
external resources. Rural villages are able to have stronger linkages with urban areas through
the operation of televisions and radios. SHS customers living in remote areas are now able to
have access to what is going on in the cities and the rest of the region/world. Rural residents have
increased access to information through television and radio. This helps them keep abreast of the
latest news, and information that can help improve their livelihood, e.g. agricultural methodology
improvements, farm product market trends, weather information.
36
Improved health facilities. Clinics and hospitals are now able to store vaccines and medicines
in refrigerators and are better able to respond to the health needs of rural residents. This was also
one of the most common positive impacts cited by residents who participated in the field surveys
conducted in May and June 2002.
Improved education. The ESD project has made it possible for rural residents to work or study
at night. Education, in particular, is improved through extended study hours through good quality
light and by distance education through television.
Increased security. There is also a greater sense of security on the part of residents since their
homes are now better lit. The risk of fires caused by kerosene lamps and candles has also been
eliminated. As mentioned earlier, safety is one of the biggest reasons residents decided to make
the switch to SHS or OGVH.
Reduction in pollution. The replacement of kerosene lamps translates into a significant
reduction in emissions. Residents who participated in the survey all acknowledged that the
kerosene lamps emitted many fumes, which were posing a health hazard.
Increased community-level interaction/cooperation. For communities served by the off-grid
village hydro systems, one benefit is the increased interaction within the community by working
together in rural electricity cooperatives that develop and implement projects. As the ECS are
cooperative in structure, they present the additional advantage of enabling community members
to mobilize savings, and extend welfare and other micro-credit loans to society members. From
this, there is the potential for the future development of income-generation activities. Also,
during the day, there is excess energy generated by the MH systems, which currently is not being
utilized, but offers opportunities for productive activities.
Saved time and labor. By eliminating or minimizing the need to transport generators or
batteries to urban centers, a significant amount of time and labor is saved that can be channeled
towards other productive and income-generating activities.
37
Lessons Learned
Institutional
Local or community participation in the implementation and monitoring of off-grid
projects is a crucial element to project success at it ensures project ownership on the part of
the communities involved, promotes improvement of local capabilities, strengthening of
community relations, and also aids in cost recovery. In Sri Lankan society, there is the unique
concept called shramadana which basically means voluntary work in exchange for payment.
Under the village hydro component of the ESD project, which involved the performance of civil
works and erection of distribution lines in the villages, families contributed their time to assist in
these tasks. Although the amounts of time expended were assigned equivalent cash amounts and
deducted from their actual required payments, their assistance was also brought on by a sense of
project ownership and desire to ensure successful implementation. This is proven by other
contributions of the villagers e.g. poles, sand, etc for which they asked for nothing in return. In
the survey conducted for village hydro customers in the districts of Ratnapura and Kegalla in
June and July 2002, 43% of the households interviewed contributed between 20 to 39 days to the
project, and 33% contributed more than 60 days of sharamadana.
For a renewable energy program to succeed the institutional structures in place must be
effective and the policy framework must be conducive. Commitment by the government is
very important, and this should be reflected its willingness to ensure consistency among national
and sectoral objectives, e.g. making sure renewable energy can compete with other technologies
on a level playing field. During the initial consultations conducted by the World Bank with the
Government of Sri Lanka concerning the ESD project, the GOSL agreed to rationalize import
duties on photovoltaic modules, removing one of the major barriers to widespread utilization of
this technology. In the course of project implementation, the government also introduced its new
Rural Electrification Policy, which aims to promote sustainable market-based provision of rural
services. It is also currently in the process of finalizing electricity reform legislation, which is
expected to reinforce incentives and institutional structures for the continued development of
small stand-alone electricity generation and distribution projects, including mini-grids.
The establishment of strategic and working partnerships among government, utility,
banking, private sector, and non-governmental organizations was critical in the successful
attainment of targets under the ESD project. The involvement of a wide range of stakeholders
who could best get the job done under the different components of the project resulted in all
project targets being attained and even exceeded. For instance, in the SHS component, the
accreditation of a micro-finance institution as a participating credit institution led to a sudden
upsurge in SHS installations because it was able to better perform the credit provision functions
that vendors were originally expected to do (in addition to the task of selling the systems) in the
original project design. Also in the SHS component, the smart subsidies provided by one of the
provincial governments triggered high sales in their particular area by lowering the high initial
costs of acquiring a solar home system. In the context of the grid-connected hydro, it was the
constant dialogue and consultations between industry and government (i.e. CEB) that led to the
eventual resolution of the tariff issue under the SPPA in a way that was acceptable to both sides.
Administration of a project, especially one with a credit component, is best handled by a
group that is highly familiar with the financial sector, has the administrative capabilities,
and possesses sufficient experience dealing with the private sector. The Administrative Unit
39
(AU) of the ESD project played a pivotal role in the administration of the ESD credit, including
processing of loan disbursement requests, maintaining disbursement records and accounts,
compiling program-related statistical records, and submitting quarterly reports. The fact that it
was drawn out of one of the PCIs (the DFCC) ensured that it was familiar with the prevailing
banking rules and regulations and that it was administratively adept in matters relating to the
application and disbursement of the credit and the GEF grant.
Technical/Implementation
For off-grid projects, especially those involving the installation of solar home systems,
establishing a viable distribution and servicing infrastructure is essential. Under the SHS
component of the ESD project, one of the factors behind the current success it is enjoying is the
presence of some 50 sales and services facilities. Strengthening this infrastructure through
continued human resource development is also desirable.
Demonstration of commercial renewable energy technologies can remove information
barriers and facilitate widespread replication. This is best exemplified by the 3-MW wind
demonstration project under the ESD project, which has paved the way for the creation of a
market for private wind power development in Sri Lanka. The successful commissioning and
certification of the pilot project resulted in several private companies (with international backing)
actively pursuing plans for windpower development. Projects as high as 30-MW have been
proposed, and as a result, the CEB has issued an open tender for windpower electricity to further
stimulate the market. Additionally, some of the windpower developers are exploring the
possibility of securing financing under the Clean Development Mechanism (CDM) to enhance
the viability of their proposed projects.
Investment in market development activities is crucial to the success and sustainability of a
renewable energy program. This can take the form of technical assistance directed at
enhancing the capacity of the private sector, concerned government agencies, NGOs, etc to first,
learn about the technologies and the associated issues, and then how to properly implement and
monitor projects. Under the ESD, the Administrative Unit provided technical support and
training to subproject developers and PCIs for ESD credit operations. Assistance was also
provided to village cooperatives to enable them to properly manage the sub-projects. These have
been making a difference insofar as the sustainability of the project is concerned. It also bears
mentioning that a process like this requires time to build the framework and perseverance (about
two to three years) but after that acceleration is much faster, up-scaling much easier at lower
cost.
The largest density of SHS in an area can be attained if end-users have a wider choice in
the size and type of system available. This was reflected in the design of the ESD project
whereby end-users are not constrained by a one-size-fits-all scheme typical of other SHS rural
electrification schemes. Different end-users have different needs. Under the ESD project, the
range in system size varied from 32 watt-peak (Wp) to 160 Wp, with the most common system
sizes availed of being the 45, 55, and 65 Wp.
Reliable after-sales service is critical in ensuring project sustainability. Under the ESD
project, many of the end-users were concerned about the availability of long-term support after
warranties expire and some vendors opt to close their field offices, especially in the saturated
areas. They also expressed willingness to pay extra for the continued presence of an entity that
would ensure reliable servicing of the systems, revealing how they view this as key to using their
40
systems for the long-term. Currently, there are fifty service sales and service outlets throughout
Sri Lankamostly developed through foreign and local private investment estimated to be in the
range of $1.0 to 5.0 million.
Flexibility in the implementation of a project is important. One of the major reasons for the
current success of the ESD is that project implementers were flexible enough to make some
significant changes in project design when it was determined during mid-term that some issues
were preventing the attainment of specific targets. For instance, with the off-grid SHS
component of the project, it was recommended at mid-term that more MFIs that can service
isolated rural areas should be increased specifically through (1) the provision of assistance to
potential microfinance institutions (MFIs) to qualify as a PCI for the project, (2) consideration of
less stringent criteria for MFIs to qualify as PCIs, and (3) encouraging existing PCIs to work
with and provide loans to MFIS that have proven outreach capabilities. This resulted in the
introduction of microfinance (with the accreditation of SEEDS as a PCI) and private partnership
model for market development and financing. For the village hydro component of the project, on
the other hand, coordinating and organizing village cooperatives to develop, own, and operate
the OGVH systems (as provided in the original project design) proved to be very costly. To
address the situation, an open solicitation process was initiated to get proposals from consultants
on how to address policy, technical, and sustainability issues. And to ensure that the process
would yield concrete accomplishments, consulting contracts were tied to deliverables. As in the
SHS component, the interventions resulted in the attainment of original targets. Section 3 of this
report discusses in detail the other specific interventions for the grid-connected mini-hydro,
wind, and capacity building components of the project that ultimately resulted in the
achievement of targets.
The most common technical problems encountered by SHS users usually involve the
batteries, and are often caused by over-usage. Other technical problems involve wiring
defects, loose connections, and incorrect placing of PV module. These are problems that can be
avoided if customers are made more aware about proper use and of the limitations of their
systems. For minihydro users, most of the technical problems encountered (including low
voltage, power breakdown, lack of water, flickering bulbs) are also due to over-usage. These can
also be avoided if the necessary measures to educate the end-users on the limitations of the
system are taken. It is important to note that the vast majority of the systems were installed in the
last two years, so there have been no major servicing needs, which are bound to arise as the
systems grow older and components start failing. It is already felt that some companies are not
providing adequate service, although this is partially kept in check by the ESD-AU inspections
for grant disbursement. It is essential to think about how product and service quality can be
maintained once the GEF grant ends.
The principal sources of information that seems most effective in reaching potential nonuser groups were word-of-mouth or observation of SHS installed in a contiguous area or in a
house of a villager of the immediate environs. SHS demonstrations at village fairs and
presentations by sales personnel were the other sources. Some non-user groups knew the
mechanism of SHS. They were aware of the need for a battery and had a rudimentary idea of the
load-capacity of SHS. However, this knowledge was acquired from individuals rather than from
institutional sources.
41
Financial/Economic
Rural end-users are willing to pay more for their energy expenditures, as long as the
energy supply is reliable and safe. Even if it costs more than what they are used to paying, endusers place a higher premium on the reliability and safety offered by sources like hydro and solar
energy. As revealed in the field survey conducted among SHS and OGVH customers, their
current energy expenditures are higher than when they were using kerosene as the main energy
source for lighting, but they prefer to continue doing so because SHS and OGVH do not pose the
same health risks that kerosene use does, and provide continuous, more reliable energy supply.
Unlike the widely held perception that rural areas are not viable markets for retail companies to
operate in, rural people do have purchasing power and can be good credit risks in energy
products/services.
Even with the current credit facilities made possible by the ESD project, it is still the
middle to upper rural class who are benefiting from the rural electrification project since
the technology involved is not cheap, and these are the groups that have the willingness and
ability to pay. To financing institutions, they also represent sound risk. Under the ESD project,
SHS and OGVH customers typically fall under the middle-income category (on the basis of
actual income and expenditures data obtained through the field surveys). More than half are
involved in agriculture and have seasonal incomes. Around 25% hold either government or
private sector jobs and earn monthly incomes. How the needs of the lower income rural groups
thus remains an unresolved issue.
Innovative financing schemes are essential to the success of renewable energy projects, and
they should also be flexible to the kind of technology involved. For instance, for solar home
systems projects, making credit facilities available at the consumer level through microfinance
has proven to be effective. This is well demonstrated by the ESD project where the accreditation
of SEEDS, a microfinance institution, as a participating credit institution led to a sudden upsurge
in SHS sales. For grid-connected projects like mini-hydro, on the other hand, active private
sector involvement seems to be the key to widespread dissemination.
Microfinance institutions are a crucial element in successful rural energy service provision
as they are more experienced in rural outreach vis--vis the commercial banks. They also
incur lower transactions costs and are basically more capable of handling financing (rather than
dealers/energy service providers, who were doing the lending in the initial stages of the ESD
project). The average size of the OGVH sub-loans is also small in comparison to the commercial
lending practice of the PCIs. As a result of the difficulty of securing the loans with the village
cooperatives, the off-grid sub-loans are not considered attractive by the commercial banks. It
bears noting, however, that in spite of the success of the ESD project in the use of microfinance
to increase SHS sales, the solar portfolio of SEEDS, the lone MFI currently accredited as a PCI
in the project, is now filled to a level where it can no longer expand significantly. Companies are
beginning to see a backlog in payments from SEEDS, and this is beginning to create cash flow
difficulties. This points to the need for RERED, the follow-on project to ESD, to focus on
enticing more MFIs to participate, and also to tap the potential role of development banks in this
field. Development banks have a potential role provided proper awareness of what such projects
entail is carried out through capacity-building activities.
There is a big incentive to reduce the first-cost barrier associated with solar home systems
through grants and credit schemes as their operating costs are lower than most alternatives (such
as small gensets), and they represent the least-cost option when small quantifies of electricity are
required (which is usually the case in rural areas). This also paves the way for the development
42
of a wider market since more people will be able to avail of the systems if some assistance in
bringing down the initial capital costs is extended. Under the ESD project, part of the $5.9
million GEF grant was used to co-finance the off-grid SHS and village hydro projects.
In order to have a sustainable and efficient small power market, the implementation of a
standardized power purchase agreement and tariff based on avoided cost principles should
be ensured. A standardized small power purchase agreement reduces transaction costs, risks,
and provides a clearer framework for investors. In the case of the ESD project, installation of 31
MW of grid-connected minihydro power capacity was due largely to the development of a small
power purchase agreement, which served as an incentive to private sector companies to enter the
market.
Economic benefits to communities resulting from rural electrification projects are usually
indirect, i.e. accrued by the community as a result of the rural electrification effort apart from its
direct social benefits. An example would be saved time and labor that can be utilized for
productive purposes because residents no longer have to travel far to have their batteries charged.
Under the ESD project, SHS and OGVH customers who were included in the field survey all
acknowledged an improvement in their overall well being. They also cited the accrual of
economic/financial benefits, but mainly in the form of future savings once their loans are fully
paid off. For a rural electrification project to have a direct impact on economic development, the
project design should have an integrated approach where specific activities targeted at economic
development are incorporated, e.g. improvement of local infrastructure, local capacity-building,
etc. This is being addressed in the follow-on RERED project, which has a pronounced focus on
promoting rural development through electricity access. Specifically, project developers will be
encouraged to include income generation components in designing their renewable energy
projects. Organizations involved in providing rural services in the areas of health and education
will likewise be engaged to find activities with opportunities for integrating energy provision.
Cooperation with other initiatives that combine energy provision with income generation will
also be pursued.
SHS vendors are unwilling to serve as financial intermediaries due to the high costs of
securing SHS sub-loans and administering micro-loans to consumers. In the original project
design, the SHS vendors were expected to perform the function of financial intermediary (in
addition to their traditional role of selling the systems). Given the additional costs and risks
involved, this served as a disincentive to many vendors from participating in the project and
consequently, low sales. Later, when the role of administering loans was assumed by a
microfinance institution and vendors were able to concentrate on doing what they did best, sales
increased dramatically.
Aside from increased availability of consumer finance (through microfinance institutions),
the low affordability barrier associated with SHS technology can also be successfully
addressed through lower prices and expansion of the participation of public sector
subsidies. Part of the reason sales have been on the upswing in the Uva Province, one of the
areas covered by the ESD project, is because of lower prices made possible by the supplementary
subsidy from the provincial government. Such subsidies bring down the high first cost associated
with SHS systems and enable more households to avail of the technology. It is crucial, however,
that such subsidies are designed to enhance, not distort the market. In general, the price of SHS
systems has not yet declined, and this is due to the large untapped market in Sri Lanka. It is
expected that over the next years, with the main market served, increased competition will drive
prices down.
43
Local innovations can drive prices down. Unlike prices of SHS which have not yet gone down
as a whole, village and mini hydro system prices have come down. For mini hydro, it was
because of a local innovations in construction and design, use of local experts and labor,
competitive solicitations for equipment that prices came down to one of the lowest in the world
(around US$650 per installed kW).
Economic development is not guaranteed by providing access to energy alone. For rural
economic development to take place, the necessary infrastructure needs to be developed, and
there should be a focused effort on the development and promotion of specific incomegenerating activities. Under the ESD project, although the general lifestyle of the beneficiaries
has improved, the general economic benefits that can be directly linked to the project are difficult
to pinpoint or quantify at this stage. The promotion of livelihood-generation activities is an area
being addressed by the follow-on RERED project.
44
Annex.
Statistical Results of Field Surveys
Annex 1
SRI LANKA: ENERGY SERVICES DELIVERY PROJECT

Household Impacts Survey Results
July 15, 2002
Independent Evaluation, Results Assessment and Best Practice Dissemination
TABLE OF CONTENTS
BACKGROUND
INTRODUCTION
I
SHS HOUSEHOLD IMPACT SURVEY
1
Background Information
2
ESD Project Information
3
Economic Impact of SHS
4
Social Impact of SHS
II
MICRO HYDRO HOUSEHOLD IMPACT SURVEY
1
Background Information
2
MH Project, Awareness, and Financing
3
Economic Impact on MH Households
4
Social Impact on MH Households
III
ANALYSIS OF SURVEY
1
SHS Survey
2
MH Survey
IV
GENERAL CONCLUSIONS AND TRENDS
1
Positive Impacts of ESD Project
2
Negative Impacts of ESD Project
ANNEX 1 - Background Information on Survey Team
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ANNEX 2 - SHS and MH Survey Questionnaires
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Background
This survey was conducted as a part of an independent assessment of impacts, implementation
experience and lessons learned from the World Bank and Global Environment facility assisted
Sri Lanka Energy Services Delivery (ESD) Project which was implemented from July 1997 till
July 2002. The focus of the surveys was the off-grid renewable energy component with solar PV
and micro hydro technologies. The survey was conducted for IRG by the local consultant for the
project, LGA Consultants (Pvt) Ltd.
Introduction
The main objectives of the Sri Lanka Energy Services Delivery (ESD) Project are:
1) Promoting the delivery by private sector, NGOs and cooperatives of grid-connected and
off-grid energy services using environmentally sustainable renewable energy
technologies
2) Strengthening the environment for demand side management (DSM) implementation;
and;
3) Improving public and private sector performance to deliver energy services through
renewable energy and DSM.
The project targeted to install 26 MW of additional generation capacity to the Ceylon Electricity
Board grid through a Pilot Wind Farm, grid connected mini hydros and electricity services for up
to 32,000 rural off-grid customers through SHS and micro hydro schemes.
The purpose of the study is to:
Examine the role of the ESD project in the market development process for households with SHS and
village hydro beneficiaries;
Assess both the social and economic impacts of electrification of rural households in this manner,
and;
Examine the longer term sustainability of off-grid electrification programs.
The SHS surveys were conducted in 100 households in 5 districts. The survey sample consisted
of SHS installed by 4 companies, which have been participating in the ESD project. The micro
hydro surveys were conducted in 3 projects based in 2 districts. A total of 50 households were
surveyed. The surveys were conducted in June 2002 by an experienced team headed by Rohitha
Ananda.
The sample selection of the SHS was random, but assistance to locate areas with most systems
was obtained from the companies. Once a few households were located in an area, others were
located with assistance of area residents on a random basis. Therefore, the influence of the
companies in locating the households was minimal.
The micro hydro households were selected from 4 projects in 2 districts (Ratnapura and
Kegalla). These two districts have the largest number of ESD supported projects.
The surveys were conducted using structured questionnaires specifically designed for the SHS
and micro hydro households. The questionnaire originally designed by IRG was modified to suit
A-3
the local conditions with feedback from stakeholders including the Energy Forum, solar PV
companies and micro hydro project facilitation consultants. The head of the household, spouse
or any adult family member participated in the survey.
There were limitations to conduct this survey stemming from the short time available and
difficulties in locating households as they are dispersed over a large area in the case of SHS.
Also due to cultural sensitivities, if is difficult to get direct answers to questions such as income.
This required the invigilators to make a judgment about the income based on type of dwelling
and expenditure on energy etc..
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I.
SOLAR HOME SYSTEM HOUSEHOLD IMPACT STUDY
This survey was conducted for the ESD Review from (05th June 2002 to 05th July 2002). 100
households with SHS were surveyed in 5 districts for the purpose of determining the social and
economic impacts of SHS electrification at the household level. All households surveyed were
beneficiaries of the ESDP Project. Results of the survey are analyzed and presented here.
Five districts were selected for conducting the
Solar Survey
survey as follows:
Districts
Hambantot
Ratnapur
This survey was conducted in 5 districts. They
a 19%
a
23%
were selected by considering the following
reasons:
To cover the dry seasons and wet seasons and the

related differences in weather. (Hambantota,
Kurunegala & Monaragala are dry areas. Ratnapura
& Kegalle represents wet and intermediate climate)
Monaragal
a 20%
Kegalle
10%
Kurunegal
a 28%
Most of the SHS were purchased under the ESD

project
Higher density of the SHS in these areas covered
Monaragala area had the innovative UVA Provincial Council SHS project which was an example of
public-private-NGO partnership
The survey consists of four sections:

1. Background information on household
2. Information on SHS purchasing decisions, type of systems, consumer financing.
3. Economic impact of SHS on household
4. Social impact of SHS on household
The results are presented along with the survey questions in a graphical format. Overall trends
and impacts are discussed in the conclusions provided at the end.
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1. Background Information
a) How many members live in the household?
The above bar chart represents the distribution of the members in a typical solar powered
household. Most of the households have in between 3 & 6 members. With a very few exceptions,
the majority of households have at least one member currently studying.
b) What is the type of dwelling?
Categories for Very Poor, Poor,

Good and Very Good were set as
follows:
One point was given for the presence

of each of the following household
features (if not present, zero points
were allocated), and total number of
points were added up. Houses with
cemented floors, plastered walls, and
permanent roof were deemed Very
Good.
Very Poor households had none of these, Poor had one and Good had two.
Almost 85% of the surveyed householders had a permanent structure and considered Very Good.
About 2% of the Very Poor houses were in the process of building a new permanent house.
A-6

Number of Rooms in a House
No. of Households
30
c) How many rooms are there in the

house?
25
20
Most houses have a range of 3 to 8 rooms.

The size of SHS depends on the number of
rooms in a house. The most common SHS
are between 5 light to 8 light systems.
15
10
5
0
1
10
11
12
Ownership of the House
13
Rooms
Rented
1%
d) Is
the house owned or rented?
Almost all the houses in a village are owned by the inhabitant.

Often property is inherited by the children or government
property has been provided to families to farm and live in
rural areas.
Owner
99%
2. ESDP Information (SHS Purchasing Decision, System Details, and Consumer

Financing)
Information of SHS was obtained
through;
a) How did you obtain the idea of installing

a solar home system in your home?
Company promotions are first of all important to

get the SHS into a new area. After that most
people obtained a system through the
recommendation from a neighbor. The most
popular media is the radio as the chart below
illustrates.
Comp. Prom.
17%
Other Prom
2%
Other Method
1%
Gamata light
9%
Neighbors
48%
ESD Prom
9%
Adv. Media
3%
The Most Effective Media for Advertising SHS
Family/Relatives
11%
No of SHS sales
3.5
3
2.5
2
1.5
1
0.5
0
News Papers
Radio
Media
TV
Others
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Reason for Purchasing SHS
b) What was the main reason for

purchasing a SHS?
Neighbors Using
Most of the customers are from the

Some body
middle class income group. The SHS
convinced
price is affordable to this segment.
They also require an alternative to the
Affordable Price
kerosene lamps. Almost 95%
purchased a SHS as they need a
Reliable Ene. Sup.
reliable energy source. Around 25%
20
40
60
80
0
brought a SHS because of the
neighbors had a system and another 25% were convinced by family member or relatives.
c) Did you purchase your system through a
field salesperson or did you purchase it
directly from the dealer?
This business still requires outreach from the

companies to make sales. Also the customers
are located in remote areas and do travel often to
towns where the sales centers are located in.
Usually the sales people are retained on a
commission basis, so they have to locate
customers by traveling around the area.
100
SHS Purchased Through
Directly from
Solar Centre
32%
Sales Person
68%
d) System configuration of SHS

Installed Module
Capacity (Wp)
32
35
36
40
45
50
55
60
65
70
80
100
160
No. House holds
10
15
16
14
17
According to the above table, the most common type of module capacities are 45W, 50W and
65W. Out of these systems surveyed, only 4% had two parallel modules connected together. All
the others were single module SHS.
No. of lights
per HH
10
12
13
15
No.
Households
23
24
23
The most common SHS are configured in 5 light, 7 light and 8 light systems. This is consistent
with the number of rooms in a typical middle level household.
Battery Capacity of the System
(Ah)
60
70
90
100
120
140
240
No. of House holds
27
27
29
11
The most common battery capacities for the SHS are 70Ah, 90Ah and 100Ah batteries. Out of
these 60% are locally made batteries (Exide and Lucus) and rest are imported (Incoe, GS etc.).
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e) Do you use an inverter?
Only 2% uses an inverter to watch color TV. The capacity of the inverter is 175W.
The other appliances powered by SHS are electric bells and mobile phones.
Technical Problems Experienced
(f) What technical problems have you

experienced with the solar home
system, if any?
The most common technical problems are with

batteries. Often this stems from over-use of the
system. Defective lamps are also an issue.
Other problems stem from wiring defects,
loose connections and incorrect placing of PV
module (shading). The PV module had the
least defects.
20
18
16
No of Problems
f)
14
12
10
8
6
4
2
0
Def.
Batt.
Def.
lamps
g) How would you rate the level of service

for system repair/maintenance?
46% of the respondents are highly satisfied with the

customer service provided by the company while 20% are
not satisfied. Here, the companies had not visited a
customer, at times, up to six months.
Def.
Cont.
Problem
Def.
Panel
Other
Prob.
O & M Satisfaction with the SHS
Not satis.
20%
h) What is your level of satisfaction with regard to the

overall performance of the SHS?
Highly satis.
46%
satis.
34%
51% of the consumers are highly satisfied with the SHS

performance, while 13% are not satisfied. The major
reason for the dissatisfaction is that the system does not
meet the electricity needs of the household. In most cases,
the SHS installed is of lower capacity and the customer has
not been informed of the systems limitations.
i)
What are your plans to expand the current system, if any?
Most of them have no plans of expanding the system. This will depend on their future needs as
well as income. Less than 10% were willing to get one more module in increase capacity to use
more equipment such as color TV, Inverter and a telephone.
j)
(i) Do you feel like you are saving money or spending more with your SHS?
When compared with the present monthly payment for the SHS, they are paying more than what
they spent for energy before they purchased the SHS. However, 74% acknowledge the fact that
they will save money once the loan payments are completed.
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k) Are you expecting the CEB grid to come in the near future? When?
Very few people answered the above question as they do not know when the CEB would extend
the grid to the area. Only 10% think that they will get CEB grid connection in the near future.
l)
Do you plan to continue to use your solar PV system, if the grid arrives?
Only 53% are willing to use both SHS and grid power together. Again, this will depend on the
reliability of the grid. Experience shows that most people re-sell the SHS after about 6 months
after linking to the grid. 30% expressed that they do not need two electricity sources and they
are willing to sell the SHS.
3. Economic Impact of SHS on Household
m) What is your
expenditure ?
Monthly Expenditure (Rs.)
monthly
No. of households
30
25
20
15
10
5
0
Less than
1000
Bet. 1000
Bet. 3000
Bet. 5000
Bet. 7000
Over
& 3000
& 5000
& 7000
& 9000
9000
Expenditure Range
The data was collected under five

headings. Monthly expenditure
for food, education, transport,
energy, others (medicine,
entertainment, etc.) and the sum
of these amounted to the total
monthly expenditure. 75% of the
SHS consumers can be
categorized as middle level
income group. These
householders are the target
customers for SHS. They also
represent a sound risk for micro financing.

n) What is your average total household income per month?
The monthly income pattern reported differs from the

expenditure pattern. This is due to people not
providing their actual income due to various reasons.
Based on this data, 59% of these customers would be
considered as target customers for SHS having
earnings over Rs. 5,000 per month. The 8% who have
indicated earnings less that Rs. 2,500 in actual fact are
living in poverty conditions, but observations showed
otherwise. In some cases, the lower income
households SHS was a gift from a family member.
o)
Monthly Income Pattern of the Consumer (Rs.)

Grater than
10000
20%
Less than 2500

8%
Bet. 7500 & 9999

10%
Bet. 2500 & 4999

33%
Bet. 5000 & 7499

Income Pattern
29%
Other
7%
Is your income periodic?
25% of the customers are getting monthly salary.

These householders were employees of the
government or private companies. The seasonal
Weekly
12%
Monthly
25%
Seasonal
56%
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income households (56%) are engaged in farming. Others who have irregular income are in
business or they do not have permanent employment.
p) Is your income sufficient to meet your regular
expenditure?
72% of the SHS customers indicate that they can balance

their income with their monthly expenditure.
q) Do you borrow money to cover the deficit?
r) Who are your credit sources?
Most people in the village have access to interest

free loans from family and friends for small
amounts (up to Rs. 5,000) of funds in the short
term. This is a part of the social support system
in the village. They also have credit from the
village grocer (usually one month). The village
cooperative will be a source of micro credit for purchasing of seeds and fertilizer on a seasonal
basis. For larger purchases such as motorcycles and tractors, people go to a finance company or
a bank. Sometimes vendors provide in-house financing for these items at higher interest rates.
Most SHS customers received micro
financing, in this case from SEEDS.
s) How much do you presently spend
on household energy including your
monthly solar PV installments
96% of the consumers spend more than Rs.

500.00 per month for their energy
requirements. This includes the SHS monthly
payment that will end as the loan is paid.
Those who have finished the monthly
payments for the loan now spent less than
Rs.250.00 per month. Amount paid for the
SHS varied with the size of the system.
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t)
What were your energy sources before you started using the SHS, and how much did
you spend on each?
Energy Sources used before the SHS
98% of the SHS customers used

Batteries (rechargeable)
kerosene as their main lighting energy
source. 2% of them have used a
Batteries (dry cell)
generator. 97% of the consumers used
Firewood
dry cell batters for the radio as well as
Generator
their flashlight. 88% used rechargeable
automotive batteries specially to power
Candles
the black and white TV and radio.
Kerosene
However, none of them used the
20
40
60
80
100
120
0
rechargeable battery for lighting
No.
of
households
purposes. Battery users would be the
target market for SHS. All the consumers use firewood for cooking. However, firewood has no
cost.
Followings charts show the monthly expenditure prior to obtaining the SHS;
Monthly Expenditure for Kerosene
Monthly Kerosene Cost before SHS (Rs.)
53% of the households spend over Rs. 300 per
month for kerosene. SHS would replace this
cost.
Monthly Expenditure for Dry-cell
Batteries
Dry cell batteries are used for radios and
flashlights. The need for dry cell batteries for
radios will diminish with a SHS and can be
estimated at a 50% reduction of the total. 89%
of the households spent more than Rs. 50 per
month on batteries.
Monthly Expenditure for Rechargeable Automotive Batteries (not capital cost)
27% of the households spent between Rs. 100 and Rs. 200
monthly for re-charging. 43% spent more than Rs. 200 per
month. This cost would include the charging fee as well as
transport costs.
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The Companies that Sold the SHS

SELCO
17%
Alpha Thermal
9%
u) Which company did you buy the SHS from?

Shell Ren.
48%
The above are the main companies selling SHS with

micro financing under the ESD project.
Access Sol.
26%
v) Did you need

credit from any lending institution/credit source in order to
purchase the SHS ?
94% customers obtained credit facilities. Only 6 % purchased the

SHS as a cash sale. Some of them credit customers are willing to pay
the loan fast as possible.
w) What was the total cost of the SHS?
The most common (75%) of the SHS is in the

range of Rs. 30,000 to Rs. 50,000. It is also
interesting to note that 19% of the sample had
paid over Rs. 50,000 for a system indicating
clearly that the SHS market is the upper
economic class in rural areas.
x) What was your initial down payment?
63% of the customers paid between

Rs. 6,000 to 10,000 as their down
payment for SHS. This is consistent
with the 75% of the customers having
paid over Rs. 30,000 for a SHS.
In practice most of the companies
allow their customers to pay the down
payment within a two month period,
even though most stipulate this at 21
days from system installation.
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y) How much are your

installments payments?
monthly
63% of the customers pay between Rs. 750

to 1500 per month for the installment. On
average, this would be more than the
monthly energy cost per household prior to
getting the SHS. However, this will
reduce significantly once the loan is repaid.
z)
What
are the terms of the

Interest rate? Loan period?
Greater than 2000

12%
Bet 1750 & 1999
2%
0
6%
Less than 499

3%
Bet 500 & 749
5%
Bet 1500 & 1749

9%
Bet 1250 & 1499
19%
loan?
32% of the SHS customers obtained a 3 year loan.

29% got a 5 year loan. The longer the period the
lower the monthly payment, but the company has
to provide good after sales service to ensure the
continuation of the payment. Only 15% of the
households could afford the monthly payment for 1
or 2 year loan periods.
Bet 750 & 999

24%
Bet 1000 & 1249

20%
Variation of Loan Period for SHS

0 Years
6%
0.5 Years
1%
5 Years
29%
1 Years
5%
2 Years
10%
4 Years
17%
3 Years
32%
aa) Name of organization/bank you received a

loan from?
74% of the loans were given through Sarvodaya

SEEDS. SEEDS have a partnership with Shell
Renewable Lanka, Alpha Thermal and Selco Sri
Lanka. Access Solar have their own loan scheme
and very recently a scheme through the Bank of
Ceylon. Access has now linked with SEEDS also.
4. Social Impact of SHS on Household
bb) What changes have taken place in your life
since you started using the SHS ? (check
all that apply)
Almost 96% said that their quality of the life

improved due to SHS. 96% also said that SHS
gives them a safe environment by avoiding
accidents from kerosene lamps. They also
acknowledged the better health effects from not
breathing kerosene fumes. Women, especially,
highlighted the usefulness of lights to fulfill their
tasks of cooking and cleaning at night. 65% said
that it helps their children to study. The time they
spend for entertainment also improved as well as
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family better family interaction. Even though 60% indicated an increased income, this is not a
direct income but an anticipated income from saving money on fuel and batteries in the future.
About 8% indicated a direct income enhancement from opening a shop for longer hours as well
as from small businesses such as sewing.
cc) How much has your life been affected by the SHS ?
97% of the consumers said that their life style improved

because of the new source SHS. The 2 households who said
their life got worse as they were virtually forced a SHS when
they could not afford it and cannot repay the loan, but vendor
has not come to remove it nor service it, so the system is also
not operating. This is a very unique situation.
Has Life been Affected by the SHS ?
Improved
97%
dd) Are you aware that this a government supported

program?
Most people do not know about the ESD project and think
of the selling of SHS as a private sector initiative. They
do not know the Sri Lankan government and the World
Bank links to the project. Only 25% knew that this is a
government supported project.
Worse
2%
Same
1%
Awareness on ESD as a Government Project

Yes
25%
No
75%
ee) Do you believe that this is a good way for the Government to provide electricity for
households that will not get electricity from the grid for many years?
99% believe that this is a good way to supply electricity to remote areas that will not get
electricity for next 5 to 10 years.
ff) What more support do you think that the Government should provide?
Most of respondents said that the cost of SHS is

very high. Poor people in rural areas cannot
benefit from SHS. If there is a mechanism to
reduce the cost and the down payment, more
people can be benefited. They compared this with
the available low income housing loans and said
government has to get involved to lower the costs.
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II. VILLAGE HYDRO HOUSEHOLD IMPACT STUDY

1. Background Information
The micro hydro (MH) surveys were conducted in 4

projects based in 2 districts (Ratnapura and Kegalla).
A total of 50 households were surveyed. Results of
the survey are analyzed and presented here.
This survey was conducted in 2 districts. They were
selected by considering the following reasons
To cover two districts which have a lot of Micro

Hydro (MH) projects operating since 1994.
Under the ESD project most of the MH activities are in these two districts. Most of the functioning
MH projects are in Kegalle and Ratnapura districts. .
According to the ESD Hydro Potential study the highest potential is in Ratnapura and then in Kegalle
Sabaragamuwa Provincial council is actively developing projects with the ESDP Micro Hydro project
by providing necessary government approvals as well as financial support to the consumer societies.
The survey consists of four sections:

1. Background information on household
2. Information on MH purchasing decisions, type of systems, consumer financing.
3. Economic impact of MH on household
4. Social impact of MH on household
The results are presented along with the survey questions in a graphical format. Overall trends
and impacts are discussed in the conclusions provided at the end.
2. MH Project Awareness, Performance and Financing
gg) How did you get the idea of
connecting your home to the
village hydro grid?
Neighbors appear to be the most

effective communication media for
the MH. TV and news papers are not
commonly used in rural areas. Other
sources of information like leaflets,
politicians, Grama niladaris,
Samurdhi niladaris (local government
representatives) have also played a
significant role in promoting MH to
their villagers.
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Effective Information Medium to the Customer
25
21
20
15
10
5
3
1
0
News Papers
Radio
TV
Others
hh) What was the main

reason
you
decided to sign
up?
Most of the MH customers

are in the middle income
group. So the price is
generally considered
affordable. Because they
need a reliable energy
source almost 96% opted
for MH power.
ii) What equipment are you using in your home?
Almost all the houses use incandescent bulbs. Very few use CFL and Tube bulbs. 74% of the
consumers are using black and white and color TV. 86% use radio. People also use other
appliances such as iron, heaters, fan, VCD players, mobile phones, mostly during daytime.
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jj) What technical and other problems have you experienced?

Technical Problems Experienced
60
No of Problems
50
40
30
20
10
0
Bulb
flickering
Low
Voltage
Power
Breakdown
Lack of
water
Other Prob.
The common technical

problems faced were power
failures mostly due to over
usage. Normally this occurs
between 6pm to 10pm. Those
consumers who are at the end
of the distribution line face the
problem of low voltage. For a
period of one week to one
month per year, all four
projects were stopped due to
lack of water to operate the
system.
Problem
kk) How would you rate the level of service for system
repair/maintenance?
42% of the consumers are highly satisfied with the service

provided by MH while 22% are not really satisfied. In some
cases people have to wait several days to get the installers to
do small repairs of the system.
O & M Satisfaction of the MH Project
Not satis.
22%
Highly satis.
42%
Satis.
36%
ll) What is your level of satisfaction with regard to the

overall performance of the village hydro system?
52% of the consumers are highly satisfied with MH

project performance, while 2% are not satisfied with the
system performance. The reason for that is the lack of
understanding of MH projects limitations. This also
related to some social issues within the particular
Electricity Consumer Society and the customers.
mm)
What are your plans to expand, if any?
Most of the people surveyed expect to get Color TV, water heaters etc. Some of them are aware
of energy efficient appliances such as CFL, Tube bulbs etc. and they are willing to use them in
future.
nn) (h) Do you feel like you are saving money or spending more compared to before?
When they compare their present monthly payments to the MH consumer society, they are
paying more than what they spent before they were connected to the MH power. But 58% of
respondents believe that they will save money once they have completed their loan repayments.
A-18
oo) (i) Are you expecting the CEB grid to come in the near future? When?
Very few people answered the above question, mostly because they really do not know. 18%
think that they will get CEB grid, but they dont know when.
pp) (j) Do you plan to continue to use your MH system if you get the grid?
Even if they get the CEB grid, 68% are willing to use both MH power and the grid together.
18% clearly expressed that they do not need two electricity sources and they would wish to use
the CEB grid only.
A-19
3. Economic Impact of MH on Households

qq) What are your monthly expenditures?
The data was collected

separately for monthly
expenditures on five
different items - Food,
Education, Transport,
Energy, Others
(medicine,
entertainment, etc.), and
totaled to get overall
monthly expenditure.
The above bar charts
represent the
expenditure pattern of
the MH powered
consumers. 50% of the
MH powered consumers have the expenditure level of Rs. 3,000 to Rs. 5,000.
rr) What is your average total household income per month?
The monthly income pattern does not correspond

with the expenditure pattern. Again, this is due to
people not giving the correct income level.
About 52 % of the customers fall in the income
range of Rs. 2,500 to Rs. 5,000. 34 % have an
income above Rs. 5,000. 14% has less than Rs.
2,500 per month.
ss) Is your income

seasonal or other?
weekly,
monthly,
59% of the customers get a monthly salary. Most of these

are working in government or private companies. Only 5%
of respondents have a seasonal income pattern and most
are farmers. Others are engaged in business or not
permanently employed.
A-20
tt) Is your income sufficient to meet your

regular expenditures?
54% of the MH powered households can balance

their income with their monthly expenditure, as
they are middle-income households. 46% need
some financial help to carry on their day-to-day
activities. These households commonly obtain
loans informally from friends and family or
through a rural cooperative.
Income Sufficient to Meet Expenditure

No
46%
Yes
54%
uu) Do you borrow money to cover the deficit?

vv) Who are your credit sources?
62 % need to borrow money to cover the

monthly expenditure, which they mostly obtain
from their relatives interest-free. Getting credit
for food items and others daily items from the
village shop is a very common in a village.
These loans are settled at the end of the month or
when they get funds. It is not common to get
loans from banks and finance companies.
Do you borrow money to cover deficit ?

No
38%
Yes
62%
ww)
How much do you presently spend on household energy including your monthly
Present Energy Expenditure (Rs.)
payment to the Village Hydro cooperative?
58% of respondents pay more than Rs. 500.00 per

month as their energy expenditure. This includes the
monthly payment for the Electricity Consumer
Society (ECS), and other energy expenses like dry
cells. Those who have finished the monthly
payments now spent less than Rs.150.00 per month.
Less than 150

6%
Bet 150 & 249

20%
Bet 250 & 349
0%
Greater than
449
58%
Bet 350 & 449

16%
xx) (h) What were your energy

sources before you started
using MH Projects, and how
much did you spend on each?
94% of the MH customers used

kerosene as their main lighting energy
source. 6% of them used a generator as
their lighting source. All the consumers
use firewood (free) for cooking.
86% used dry cell batteries for the radio
and flashlight. 62% used rechargeable
A-21
car batteries to power the black and white TV and radio. None of them used the rechargeable
battery for lighting purposes.
Following are the major expenditures before they obtained MH power;
i) Expenditure for Kerosene
Kerosene Expenditure before the MH project
Bet 300 & 399

12%
Greater than
399
4%
Less than 100

8%
Bet 100 & 199
38%
Bet 200 & 299

38%
ii) Expenditure for Dry-cell Batteries

Dry-cell Battery Expenditure Before MH Project
Greater than
149
4%
Bet 100 & 149

16%
Less than 50
28%
Bet 50 & 99
52%
iii) Expenditure for Rechargeable Batteries

Rechargeable Battery Expenditure Before MH Project
Bet 150 & 199

10%
Bet 100 & 149

22%
Greater than
149
12%
0
38%
Bet 50 & 99
8%
Less than 50
10%
A-22
yy) How much are your regular

payments (monthly) to the
village hydro cooperative?
Monthly payment to the ECS

Monthly Payment (SLRs)
490
480
The monthly payment for the ECS

varies according to the amount of loan
and the period. The payment is always
less than SLRS 500. This payment
includes the loan repayment, and
operating and maintaining costs.
430
415
400
380
100
0
10
11
12
13
14
No. of households
zz) Did you get a personal loan to

contribute towards the construction of your
MH project?
70 % of the consumers did not get a personal loan

to pay the initial payment of the project. It was not
necessary for most people as the initial payment
was between Rs. 3,000 and Rs. 6,000. It was
possible to pay this in installments.
Did you get a personal loan to contribute

for the construction of MH project
Yes
30%
No
70%
aaa)
How much did you pay for the
society at the beginning of the project?
Initial Payment for the MH

Project
Less than
Initial payment varies from Rs. 1,000 to Rs. 6,000. Some

respondents did not participate in the Shramadana
(voluntary work, for which the project gives villagers some
financial credit in exchange), and had to pay a little more.
Greater than
6000
2%
Most of the construction work can be done by

the people in the community. The civil works
and erection of distribution line are the two main
tasks. The volunteers get credited for the time
spent based on the skill and this amount is added
to the equity contribution from the community.
ccc)
Did your family make any special
contribution to build the project?
Bet. 1000 &

2999
24%
Bet. 3000 &

5999
72%
bbb)
How many days did your family spend in
Shramadana (Work in exchange of payments) to
construct the village hydro project?
1000
2%
Number of Days Volunteered (Shramadana)

Less than 20
7%
Greater than 60
33%
Bet. 20 & 39
43%
Bet. 40 & 59
17%
People normally offer what they can give for the construction of the MH project. The piece of
land, poles, stones, sand etc. are given to the society free of charge by the householders.
A-23
4. Social Impact of MH Power on Households

ddd)
What changes have taken place in your life since you started MH project? (check
all that apply)
100% said that their quality of the

Change of Lifestyle from MH Project
life improved due to MH power
Lifestyle change
supply. Again 100% said that it is
Others
very beneficial for their safety. For
Income generating Activities
women, MH power is useful to do
housework at night, such as
cooking, cleaning etc. 50% said that
Better Informed
their children can do more school
Increased Safety
work. Light also improves the
amount of interaction between
Other activities at night
family members in the evening.
More time for School work
However, there is no significant
increase in income levels. However,
Increased Income
like SHS, there will be an indirect
increase their income in future with
10 20 30 40 50
0
the reduction of overall energy
No. of households
costs. About 20% use MH power
for some income generating activity
also, but the potential for this is far greater when compared to SHS.
eee)
60
How has your life been affected by MH power?
98% of the consumers said that their life style improved because of
the MH power. No body said that it is worse.
fff) Are you aware that this a government supported program?
Only 52%
knew that this is a government-supported
project. This is higher than for SHS as there
is intervention from a project facilitator to
mobilize the community. This information
would be conveyed during that process.
A-24
ggg)
Do you believe that this is a good way for
the Government to provide electricity for
households that will not get electricity from the
grid for many years?
100% believe that this is a good way to supply

electricity to remote areas which will not get electricity
for the next 5 to 10 years. They are encouraging
neighboring villagers to establish MH projects also.
hhh)
Is MH Project a good way of providing

electricity for remote areas
Yes
100%
What more support do you think the Government should provide?
Respondents feel that the government should give more grants to do such projects. Local
government especially needs to be more involved. The distribution lines of the MH projects are
not in very good condition at the moment. So respondents expect to receive a grant, or some
other support to repair the distribution lines. The government should give these projects as much
attention as any Ceylon Electricity Board project.
A-25
III. ANALYSIS OF FINDINGS

1. Solar Home System Survey
The surveys confirm much of what has been known within industry in terms of the target market
being the higher end of the income scale in rural areas. The survey does shed light on the extent
of the relative affluence of this market segment from the percentage of people (more than 75%)
who purchased systems that cost more than Rs. 30,000. However, 94% of the respondents
obtained financing, mostly from SEEDS. Having access to financing has accelerated the sales
of SHS. In fact most of the systems surveyed were installed after the year 2000 when the
SEEDS program accelerated.
The motivation for people to purchase a system at this cost stems from the importance they put
on getting away from the kerosene lamp. A SHS gives them the additional benefit of operating a
TV for which most used a rechargeable automotive battery and a radio powered by dry-cell
batteries.
Financing for most customers has made the purchasing decision much easier, as it not only
enables the customer to spread the cost, but also to minimize the risk of the SHS not performing
to expectation. The survey showed 51% of the consumers as being highly satisfied with the
SHS performance, with 36% satisfied while 13% are not satisfied. The major reason for the
dissatisfaction is that the system does not meet the electricity needs of the household. In most
cases, the SHS installed is of lower capacity and the customer has not been trained of the systems
limitations. Also survey indicated 20% of the householders not being satisfied with the after
sales service provided by the companies. Therefore, there are lapses in the customer service area
too.
Meeting levels of expectation can be improved with installing systems to meet the energy
demand and better after sales service. In this business where most sales happen through
recommendations (neighbors influenced 48% of the sales), meeting customer expectations is
essential.
Meeting customer expectations with the SHS has lead to improvement in quality of life. 96%
said that their quality of the life improved due to SHS. 96% also said that SHS gives them a safe
environment and avoid accidents from kerosene lamps. They also interpreted this as being better
for their health (for not breathing kerosene fumes). Women, in the households highlighted the
usefulness of lights to fulfill their tasks of cooking and cleaning at night and early hours of the
morning. 65% said that it helps their children to study. The time they spend for entertainment
also improved as well as better family interaction.
Even though 60% indicated an increased income, this is not a direct income but an anticipated
increase in income from saving money for fuel and batteries. About 8% indicated a direct
income enhancement from opening a shop for longer hours as well as from small businesses such
as sewing.
99% of the respondents also said that the SHS is an effective way of getting electricity. They
also understand that the grid extension is uncertain and they want to have the benefits of
electricity now to meet their immediate needs.
It is clear from the survey that SHS have a very positive social impact on the lives of these
householders. However, it has not had a significant economic impact. If at all, at the moment
as they service the loan they are spending more on energy on a monthly basis, but they expect to
save once the loan period is over. However, they have not factored in the replacement cost of
A-26
batteries as well as lamp circuits after 3 to 5 years of operation. Yet they expect a net saving
after the loan is repaid.
Finally, when asked What more support do you think that the Government should provide? Most consumers indicated that there should be more government support to reduce the cost to of
the system. They indicated that the government should intervene similarly to the housing loans
they provide with lower interest rates and longer repayment periods. Many said that poorer
neighbors could not afford to purchase a SHS at present costs.
Most consumers did not realize that the SHS they obtained came through the government
supported ESD project that provides a built-in subsidy to make the systems more affordable t
rural consumers.
2. Micro Hydro Survey
Unlike individual SHS households, village hydro requires community involvement. As such,
there are fundamental differences in the way a household gets access to electricity service. It is a
participatory process which requires leadership, teamwork and coordination. Usually, the ESD
supported projects have had a catalyst (a consulting company) facilitating the project
development where the technical assessments, feasibility studies, the business plan and the
bankable proposal is developed. The households that were surveyed are serviced by three (3)
projects that were developed in this manner.
The Village hydro surveys show that the 80% of the households were very good (in terms of
quality of house construction). Yet their income seems to be generally lower than the SHS
households. This also corresponds with the monthly expenditure where close to 60% of the
people spend between Rs. 3,000 and Rs. 5,000 per month. In the SHS sample over 75% of the
people spend between over Rs. 5,000 and Rs. 9,000.
As in the case of the SHS, 98% of the respondents owned their dwelling. The respondents were
also mostly influenced to participate in the project through their neighbors. 52% of the
respondents were highly satisfied with the service with 46% being dissatisfied. Projects have
faced technical problems but most technical problems get solved with repairs. However, there is
room for improvement with 22% indicating that they are not satisfied with the operations and
maintenance of the system. One problem they are concerned most with is the shortage of water.
Some fear that this may become commonplace in the future due to weather pattern changes.
With 230 Volt AC power generated with a micro hydro (as opposed to a 12 Volt DC system with
SHS), householders have the opportunity to use a wider range of appliances such as color TV
and electric irons. All respondents used the power for lights and about 50% used a black &
white television and another 25% used color TV.
While there is a higher potential for income generating activities with MH systems, rather than
SHS, the survey does not indicate that this potential is being realized. 20% feel their income has
increased, but this is mostly due to perceived savings in energy expenditures once the loan has
been repaid, rather than actual income generating productive activities.
Social impacts inside the house are very similar to SHS social impacts. However, with the MH
cases, there is the additional community-level social impact of working together in Electricity
Consumer Societies.
As the ECS are cooperative in structure, they present the additional advantage of enabling
community members to mobilize savings, and extend welfare and other micro-credit loans to
society members. From this, there is the potential for the future development of incomegeneration activities. Also, during the day, there is excess energy generated by the MH systems,
which currently is not being utilized, but offers opportunities for productive activities.
A-27
IV GENERAL CONCLUSIONS AND TRENDS

There is a fundamental difference between SHS and MH electricity delivery systems, both of
which have their advantages and disadvantages.
Advantages
Disadvantages
SHS
users have independence

system is reliable
system is modular and can
be expanded as needs
increase
High initial cost

12 Volt DC power incompatible with the
grid and requires special appliances
Limited power available
MH System
More power available

220 V AC power compatible
with grid
community has opportunity
to cooperate
opportunity develop income
generation projects
requires outside intervention and support

to develop projects
community has to cooperate, so social
issues could jeopardize project
poor reliability of electro-mechanical
equipment (due to poor local standards)
drought conditions can cause water
shortages and power outages
The main purpose of this study was to determine social and economic impacts of these
technologies. This brings us to broader questions regarding the type of rural development one
wishes to promote with rural electrification. If it is simply quality of life benefits, then this study
supports the fact that considerable quality of life benefits are accrued. However, if one wishes to
promote rural economic development, then additional investment needs to be made into setting
up systems to enable these to develop. SHS are definitely limited in their scope to promote
income-generating activities. MH systems, on the other hand, offer some potential, but this needs
to be actively harnessed.
1. Positive Impacts of the ESD Project
Both SHS and micro-hydro systems have become accepted as legitimate, well-functioning
technologies that can create considerable quality of life benefits in rural areas.
The development of rural energy enterprise which has created considerable amounts of rural
employment, and capacity development both in the private companies involved, and within the microcredit facilities.
The project has shown that public-private partnerships are necessary, and can work to achieve rural
electrification goals; this has been supported by survey results, where people have indicated that the
government should be more proactively involved with the private sector.
Before this project, the rural areas were not perceived to be markets which retail companies were
interested in. The ESDP has helped change this perception, and helped develop a much more
sophisticated understanding of rural peoples purchasing power abilities.
The project has helped legitimize the fact that rural people are good credit risks in Sri Lanka for these
products/services.
A-28
It has enabled people to make their own decisions and obtain their power sources; this is important as
before this project, people had to wait helplessly for the government to bring them electricity.
In the context of MH systems, the project showed that rural people can mobilize themselves to work
together as a team, and develop and manage Electricity Consumer Societies on a commercial basis.
2. The Negative Impacts of the ESD Project
It is important to note that even with current credit facilities, these technologies are still reaching only
the financially well-off of the rural population. It is very important to think about how the rest of rural
Sri Lankas power needs are going to be met.
As mentioned earlier, these technologies have not shown that they add to rural economic development
in any significant manner, although micro-hydro does have the potential to do so.
It is important to note that the vast majority of the systems were installed in the last two years, so
there have been no major servicing needs, which are bound to arise as the systems grow older and
components start failing. It is already felt that some companies are not providing adequate service,
although this is partially kept in check by the ESD-AU inspections for grant disbursement. It is
essential to think about how product and service quality can be maintained once the GEF grant ends.
Overall, the ESD project has been a catalyst to develop a commercially sustainable solar PV
business in Sri Lanka. It also helped in developing the micro financing partnerships with the
vendors. If not for the SEEDS partnership, the ramp-up of sales that was witnessed from 2000
to date (with a recorded 19,500 GEF grant issues) would not have happened. However, SEEDS
solar PV portfolio is now filled to a level where they cannot lend anymore in this area. The
companies are also seeing a backlog in payments from SEEDS which is creating cash flow
difficulties. The area of micro financing has to be a priority area for the next phase of the ESD
project, especially, if the project Renewable Energy for Rural Economic Development (RERED)
is going to focus on income generation activities.
On the other hand the ESD project has also opened the way for a true public-private-NGO
partnership with the Uva Provincial Council project. This is the way for the future for solar PV
as a technology, if it is to play a role in the lower income segments in rural areas.
The ESD project has also brought in a commercial sustainability feature to micro hydro
development. Even though there is a dependency on the technology assistance funds for project
facilitation, the ESD funded MH projects are creating a critical mass of development and
capacity to create continuity. This is also attracting the provincial governmentss participation
through public-private-NGO partnerships. Of the two technologies, MH could play a more
effective role in rural economic development in the future.
It is clear from the surveys that economic development is not dependent only on energy services.
For rural economic development, the countrys macro economic principals should be in place for
growth. Other policies are required to support the most important asset in rural areas, the
farmlands to become productive and profitable. There is also a need for policies to support
value addition industries for agri-based products, so money remains in the rural areas for
development. Government has to also develop infrastructure such as roads, telecommunication,
health care system, education and finally the system of justice to complete the circle.
The ESD project has brought credibility to technologies and the concept of decentralized
provision of energy services that were in the margins before. Therefore, it has played an
important role in this segment of the overall development process.
A-29
Annex I
Background of the survey team
Name
Education level
Experience
Rohitha Ananda
B.Sc. (Mech.) Eng. &

M.Eng. Diploma in
Energy technology
Solar four year,

Micro Hydro 6 Year
Working as a trainer on renewable energy.
Survey 3 Years
P.G. Ajith Kumara
B.Sc. (Mech.) Eng.
Solar two year,

Micro Hydro 6 Year
Working as a Co-trainer on solar.
Survey 1 Years
D.P.R.J
Raveendra
B.Sc. (Mech.) Eng.
Solar 1 year,
Survey 2 Years
N.G.R. Manjula
B.Sc. (Mech.) Eng.
Solar 1 year,
Survey 1 Years
B.G.S. Wijethilaka
Technical Assistant
Solar 2 year,
Micro Hydro 2 Year
Working as a Co-trainer on Solar.
Survey 5 Years
Water & sanitation 3
J.M. Yamuna
Subhashini
Technical Assistant
Micro Hydro 2 Year

Survey 5 Years
Water & sanitation 3
A-31
Annex 2
Sri Lanka Energy Services Delivery Project

Questionnaire for End-users of Solar Home Systems
Questionnaire No.
Date of Interview
Interviewer
District and Village
_______________________
_______________________
_______________________
_______________________
A. BACKGROUND INFORMATION
A1
Age
Occupation
Name of respondent
Other members of household:
A2
A3
Type of dwelling:
_____ Score 1 for each: cement floor/plaster walls/tile roof.
Number of rooms?
A4
Is your house:
Owned? _________
Rented? _________
B. ESD PROJECT
B1
How did you learn about the idea of installing a solar home system in your
home?
Neighbors
____________ Family/Relatives
____________
Advertisement____________ Other (specify) __________
____________
Media
Newspaper
Radio
TV
Others __________________________
ESD promotions
Other promotions
Company promotions
Gamata light Programme
A-33
B2
What was the main reason you decide to purchase a solar home system?
(Check all that apply)
Wanted more reliable
________
Convinced by
_________
energy supply
friends/family/relatives
Price was affordable
________
Most neighbors were
_________
participating
B3
B4
What is the date you purchased your solar home system? mm/yy
Did you purchase your system through a field salesperson or did you
purchase it directly from the dealer?
B5
System configuration (for solar home systems)
No. of solar panels
_____
Appliances connected
to system:
Total no. of watts
_____
_________________
Total no. of lights
_____
_________________
Battery Size/Type
Controller
_________________
_________________
Type/Manufacturer
A-34
B6
How many total hours in a day to you use the following:
Lights
____________ Other appliances (specify):
TV (bw/color)
____________ _____________________
Radio
____________ _____________________
B7
Do you use an inverter?
____________
____________
Type/Size/Manufacturer
B8
What technical problems have you experienced with the solar home
system, if any?
Defective lamps
____________ Defective battery
____________
Defective controller ____________ Defective panel
____________
Other
B9
How would you rate the level of service for system repair/maintenance?
Highly satisfactory
____________
Satisfactory
____________
Needs improvement
____________
B10
What is your level of satisfaction with regard to the overall performance of

the solar home system?
Highly satisfactory
____________
Satisfactory
____________
Unsatisfactory
____________
B11 What are your plans to expand the current system, if any?
Add more lights
____________
Add more appliances
____________
No plans for expansion
____________
B12
Do you feel like you are saving money or spending more with your solar
home system?
Saving money
____________
Spending more than
before
____________
B13 Are you expecting the CEB grid to come in the near future?
when?
B14
Do you plan to continue to use your solar PV system?
C. ECONOMIC
A-35
C1
What are your monthly expenditures for:

Food
Education
Transport
Energy
Others (medicine, entertainment, etc.)
C2
Is your income
C3
Is your income sufficient to meet your regular expenditures?

Yes _____
No _____
C4
If not, do you borrow money to cover the deficit? Yes ____ No _____
C5
Who are your credit sources?
Relatives
Cooperative
Weekly? ________
Monthly_________
Seasonal? _________
Other? __________
____________
____________
Moneylenders
Bank
____________
____________
C6
How much do you presently spend (or what percentage of your income do
you spend) on household energy including your monthly solar PV
installments? _____________
C7
What were your energy sources before you started using the solar panel,
and how much did you spend on each?
Kerosene
Candles
Generator
C8
____________
____________
____________
Firewood
____________
____________
____________
Which company did you buy the system from?

Company
______________________________
Branch
_____________________________
C9
Did you need credit from any lending institution/credit source in order to
purchase the solar system?
Yes _____
No _____
If yes, who?
Relatives
____________ Moneylenders
____________
Cooperative
____________ Bank
____________
A-36
C10
What was the total cost of the solar home system? _______________
C11
What was your initial down payment?
C12
How much are your monthly/periodic installments payments?
C13
What are the terms of the loan?
C14
Name of organization/bank you received a loan from?

Organization/bank ____________________
Branch
____________________
C15
What is your average total household income per month? _______________
Interest rate?
Loan period?
D. SOCIAL
D1
What changes have taken place in your life since you started using the
solar home system? (check all that apply)
Increased income
Longer entertainment hours
More time for schoolwork
Other activities possible at night, e.g. cooking, sewing
Increased safety
Better informed (e.g, news, health, agriculture, etc.)
Quality of life generally better
Income generation activities
D2
How much has your life been affected by the solar home system?
Improved
Same
Worse
D3
____________
____________
____________
Are you aware that this a government supported program?
Yes
No
D4
___________
___________
___________
___________
___________
___________
___________
______________________
______________________
Do you believe that this is a good way for the Government to provide
electricity for households that will not get electricity from the grid for many
years?
A-37
D5
What more support do you think that the Government should provide?
D6
Other comments?
- End of survey -
A-38
Sri Lanka Energy Services Delivery Project

Questionnaire for End-users of
Off-grid Village Hydro Customers
Questionnaire No.
Date of Interview
Interviewer
District & Village
_______________________
_______________________
_______________________
_______________________
A. BACKGROUND INFORMATION
A1
Age
Occupation
Name of respondent
Other members of household:
A2
A3
A4
Type of dwelling:
_____ Score 1 for each: cement floor/plaster walls/ tile roof.
Number of rooms? ____________
Is your house:
Owned? _________
Rented? _________
B.
ESD PROJECT
B1
How did you learn about the idea of having your home connected to the
hydro grid?
Neighbors
AdvertisementMedia
Newspaper
____________
____________
Family/Relatives
Other (specify) __________
Radio
Others __________________________
Gamata light Programme

ESD Promotions program
TV
____________
____________
ESD Consultant (Facilitator)
B2
What was the main reason you decide to sign up? (Check all that apply)
Wanted more reliable
________
Convinced by
_________
A-39
energy supply
Price was affordable
B3
________
friends/family/relatives
Most neighbors were
participating
_________
When did you connect your house to the hydro grid? mm/yy
_______/_______
B4
What are the equipment you are using in your home
Lights
____________ Other appliances (specify):
TV (BW/Color)
____________ _____________________
Radio
____________ _____________________
B5
Lights
TV
Radio
How many hours in a day to you use the following:
____________
____________
____________
Other appliances (specify):

_____________________
_____________________
____________
____________
B6
What technical and other problems have you experienced, if any?
Flickering of lights
____________ Due to water shortages
____________
during use
System breakdown ____________ Other (specify)
____________
System voltage
____________
drop
B7
How would you rate the level of service for system repair/maintenance?
Highly satisfactory
____________
Satisfactory
____________
Needs improvement
____________
B8
What is your level of satisfaction with regard to the overall performance of

the village hydro system?
Highly satisfactory
____________
Satisfactory
____________
Unsatisfactory
____________
B9
What are your plans to expand, if any?
Add more lights
____________
Add more appliances
____________
No plans for expansion
____________
B10 Do you feel like you are saving money or spending more compared to before?
Saving money
____________
Spending more than
before
____________
A-40
B11
Are you expecting the CEB grid to come in the near future?
When?
B12
C.
C1
Do you plan to continue to use Micro Hydropower system?
ECONOMIC
What are your monthly expenditures for?

Food
Education
Transport
Energy
Others (medicine, entertainment, etc.)
C2
Is your income
C3
Is your income sufficient to meet your regular expenditures?

Yes _____
No _____
C4
C5
If not, do you borrow money to cover the deficit? Yes ____No ____
Who are your credit sources?
Relatives
Cooperative
Weekly? ________
Monthly_________
Seasonal? _________
Other? __________
____________
____________
Moneylenders
Bank
____________
____________
C6
How much do you presently spend (or what percentage of your income do
you spend) on household energy including your monthly payment to the
Village Hydro cooperative? ____________________
C7
What were your lighting and heating sources before you were connected to
the village hydro unit, and how much did you spend on each?
Kerosene
Candles
Generator
____________
____________
____________
Firewood
____________
____________
____________
A-41
C8
How much are your regular payments (monthly) to the village hydro
cooperative? ___________________
C9
Did you get any personal loan to contribute the construction of your
village hydro project? Yes/ No _____________
If Yes from whom you get the loan
Relatives
____________
Moneylenders
____________
Cooperative
____________
Bank
____________
C10
How much did you pay for the society at the beginning of the project? ____
C11
How many days did your family spend as Sramadana (Work without
getting payments) to construct the village hydro project?
C12
Any special contribution from your family to built the project? ___
C13
What is your average total household income per month? _______
D.
D1
SOCIAL
What changes have taken place in your life since your house was
connected to the hydro grid? (Check all that apply)
Increased income
Longer entertainment hours
More time for schoolwork
Other activities possible at night, e.g. cooking, sewing
Increased safety
Better informed (e.g, news, health, agriculture, etc.)
Quality of life generally better
Income generation activities
D2
How much has your life been affected by this new source of electricity?
Improved
Same
Worse
D3
___________
___________
___________
___________
___________
___________
___________
____________
____________
____________
Are you aware that this a government supported program?

Yes ______________________
No
______________________
A-42
D4
Do you believe that this is a good way for the Government to provide
electricity for households that will not get electricity from the grid for many
years.
D5
What more support do you think that the Government should provide?
D-6
Other comments?
- End of survey -
A-43
General Project Questionnaire

Survey ECS President or Secretary
Size of system
Number of households in the Village:
Number of Members of ECS:
Type of organization: (ie. Cooperative or incorporated company)
Total cost of system:
Community contribution:
Bank Loan:
Equity:
Date of Commissioning:
Who provided consulting (with ESD TA funds) support for technical design, feasibility
and developing bankable business proposal:
How long after project was implemented did they continue to support:
Participating Bank:
Is there room to increase the capacity:
What are others outside the membership in village using for lighting and are they
interested in getting linked:
General social situation in the village:
General economic situation of village (ie, agri based or rubber processing)
Is their potential for income generation activities with the current system:
Specific Questions on Performance of Systems and environmental issues:
Have you faced any technical problems to date and how have you handled them ?
Are their any environmental issues or problems resulting from the project ?
- End of survey -
A-44

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World Bank/Sri Lanka

Energy Services Delivery Project

International Resources Group

Background for Impacts Assessment and Lessons Learned Document..............................................1

Overview of the ESD Project..............................................................................................................5

Expected Outputs vis--vis Accomplishments .................................................................................11

Assessment of Technical Performance/Overall Implementation......................................................21

Addressing Cost Barriers ..................................................................................................................27

Assessment of Institutional Effectiveness ........................................................................................29

Assessment of Consumer Satisfaction and Socio-Economic Impacts ..............................................33

Lessons Learned ...............................................................................................................................39

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

ESD Project Financing Plan................................................................................................................6

ESD Project Stakeholders ...................................................................................................................9

Grid-Connected Minihydro Projects Installed ..................................................................................13

Summary of ESD Project Accomplishments....................................................................................15

Issues Involved in Implementation of SHS Component...................................................................21

Issues Involved in Implementation of OGVH Component...............................................................23

Administrative Unit based at DFCC Bank

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

Figure E-1. ESD Project Partnership

Project Objective and Components

Ceylon Electricity Board

Ministry of Finance/Central Bank of Sri Lanka

Pilot wind project

SHS End -Users

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

public and private sector.

Installed Capacity (in MW)

The ESD Project had an original target

Thousands of systems sold

Figure E-3. Cumulative Growth in SHS Sales

The ESD Project, which had a

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

No. of households served

in rural homes throughout Sri

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

Box E-2. ESD Administrative Unit

Established within one of the PCIs (DFCC),

Box E-1. Accomplishments Under

Development of a code of practice for energy

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

Hydro industry association effectively voiced

Approved a total of Rs 199 million worth of

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

On the implementation/technical aspect, some of

Key Lessons Learned

On the financial/economic aspect, the

WB Sri Lanka Energy Services Delivery Project

Impacts Assessment and Lessons Learned

Better Quality of Life

Background for Impacts Assessment