John Holmes & Bernie Jones Smart Villages in South Asia: Kathmandu Works hop Report The Smart Villages Initiative, working with its local partner Practical Action Consulting South Asia, held a workshop in Kathmandu, Nepal on 10th April 2015. The aim of the workshop was to learn lessons from Nepal’s experience of micro/mini-hydroelectric schemes for off-grid rural communities and associated initiatives to stimulate productive enterprises which could be shared with other stakeholders in the South Asia region.

1. Interactions Between
Productive Use of Energy and
Access to Markets

2. What is Productive Use
Of Energy (PUE)
“Agricultural, commercial and industrial activities
involving energy services as a direct input to the
production of goods or provision of services” PRODUSE
“Activities that involve the utilization of energy – both
electric, and non-electric energy in the forms of heat,
or mechanical energy - for activities that enhance
income and welfare. These activities are typically in
the sectors of agriculture, rural enterprise, health and
education.” World Bank

3. Rationale for PUE Promotion
• Energy projects with productive use components are
more likely to lead to rural economic development.
• Rural electrification projects with a productive use
component are more likely to achieve economic
sustainability:
1.Enterprises that generate profits through
electricity use have a higher ability to pay for
energy services than private households who use
electricity for purely consumptive purposes.
2.PUE produces a more even demand profile
3.Obtaining financing may be easier if rural financing
agencies see that productive investments
materialize from their credits.

4. Electricity
access
provided
Enterprises take
up and use
electricity access
Enterprise incomes
and/or profits increase
Incomes rise
= poverty
reduced
Households take
up and use
electricity access
Time made
available by
electricity use is
employed for work
activities
PUE Impact on Poverty:

5. Energy for PU necessary
but not sufficient:
 Knowledge and skills are needed to use energy for
profitable enterprise.
 Access to credit is needed to finance productive tools
and equipment.
 A policy and institutional environment conducive to
business development is required.
 Complementary infrastructure services, such as
transport, water supply and ICT services also needed.
 Access to markets for additional or new products or
services enabled by access to energy is critical.

6. Need for Access to Markets
for Energy-Enabled Products:
Research indicates that without access to external
markets:
 demand in rural areas is unable to absorb additional
production => new and newly electrified enterprises
simply competing with existing and un-electrified
firms for the same overall “pool” of value.
 additional labour freed-up by electrification is likely
to simply drive down wages and the prices of goods
and services produced informally so that even those
able to use additional time productively may well not
see any increase in incomes.

7. Need for Quality &
Continuous Supply of Goods
For a Market System to Function Smoothly:
 Enterprises that use electricity need to produce
quality goods and also need to continuously supply the
goods in order for market to function smoothly and as
a result for the enterprise to be sustainable in the
long run.
It is very important to reach an
Equilibrium point between
Production and
Consumption

8. Need for Use of Electricity
throughout the day
For a minigrid system (MHP) to be economically
sustainable:
 Demand (and hence revenue) from users must
be sufficient to cover costs => need for
productive use of electricity through the day.

9. Hence…
For all the stakeholders to be sustainable in
the Energy Supplier & Enterprise value chain
it is essential that:
 There is regular supply of electricity
 All enterprises have access and linkages
with external market.
 Enterprises supply quality and continuous
goods to markets.
 Enterprises use electricity throughout the
day (not just at peak times).

10. PUE in Case of Micro Hydro
Sustainability is the primary concern of all
MHPs in Nepal
Causes
Policy
• Procurement
based
approach
rather than
end use
approach
Institutional
• Grid and off
grid divorce
• High potential
consideration
• Highly subsidy
based
Financial
• Utilization
(25-40%)
• Lower
demand based
tariff
• 10% PUE
criteria
Technical
• Repair &
Maintenance
• Capacity
building
• Quality of
workmanship
and
equipment

11. Practical Action’s Approach
to Address Sustainability
 Making Micro Hydropower Plants
(MHPs) Sustainable by
 Improving supply reliability
 Realising sustainable energy-based rural
enterprises
 Achieving Impact at Scale through
influencing the government programme
(NRREP) adopt process and tools of the
approach for promotion of energy-based
rural enterprises

12. What we are Doing
Reliable
Electricity
Supply
Regular
Payment of
Electricity
Bill

13. Why are we Doing it?
 Majority of MHP installed in Nepal (2,500+ in
number) are not able to ensure reliable
supply due to weak cash-flow performance
and hence poor access to electricity.
 Rural IGA and enterprises has very low
productivity and efficiency because of lack
of proper technical, management skill and
lack of access to modern energy.

14. How are we doing it
 Making MHP management aware of
opportunities of better income by selling
reliable electricity to ABC clients and hence
sustainable MHP
 Help establish or strengthen rural
enterprises with proper analysis of market
system (shift from production focus).

15. Project Focus
 Market mapping to understand & design
intervention to strengthen market
systems of Micro Hydro Projects and
Rural Enterprises
 Ensure churning of three wheels of
change through various activities
 Help network & interaction among
market actors
 Leverage funds from NRREP for
capacity building & funding partial
initial investment for rural
enterprises

16. Project Constraints
 Generic constraints:
– Policy, geography, socio-economic,
economic, among others
 Structural constraints: Project required to
focus on two market systems
– Market system of MHP electricity
– Market system of sub-sectors that use
electricity from MHP

17. MHP and Energy-Based Rural
Enterprises Interrelationship
MHP market
system
Processing 1
End Market
Supporting
Actors
Market system of MHP is one of service provider for
other market system of subsector
Raw material
supplier - 1
Raw material
supplier - 2
Policy
environment
Tax
regime
Subsidy
and Grants
Quality
Standards
Processing 1
Raw material
supplier - 2

18. Addressing the Issue of Access
to Markets
Participation
 Wider range of relevant stakeholders comprising
government officials, local bodies, private sectors
and their associations, Micro hydropower
management committees, Local enterprise
development committee, local entrepreneurs,
teachers, political representatives, potential
beneficiaries etc. participated and provided their
inputs in different stages of project.
 Alternative Energy Promotion Center (AEPC)
actively participated in design, implementation
and monitoring of project activities.

19. Addressing the Issue of Access
to Markets
Preparation
 Training on PMSD: 28 participants from AEPC (9), Practical
Action and local partner organization (Sr. Mgmt.) to develop
them as Champions of PMSD.
 Business Counselling and PMSD training to Enterprise
Development Officers and Local Enterprise Development
Facilitators. Total 86 participants participated.
 ToT on Enterprise Development for Local Resource Persons.
Total 18 people selected as trainer. They went on to train
LEDC members (400) at village level

20. Addressing the Issue of Access
to Markets
Preparation
 District Project Advisory Committee
formed at project districts
 Project inception meeting at district
level to inform relevant stakeholder
about project.
 Brainstorming among AEPC, Practical
Action and local project partners for
pre-selection of MHPs and possible
market systems

21. Addressing the Issue of Access
to Markets
Sub-Sector or Market Identification in
MHP cluster areas
Subsector having potential to drive village economy
– Lokta (Nepali Paper)
– Stone
– Milk
– Herbs: Essential oil
Other enterprises that supply to local market
Furniture, mobile repair, computer institutes, bakery,
photo studio, masala industry, metal industry, cold
store, huller/grinder, water pumping

22. Addressing the Issue of Access
to Markets
Implementation
Empowering Marginalized Actors for Engagement
Financial and Organizational
Management training to MHPs
managers, operators and
accountant
Repair and Maintenance
Training to Operators of
MHPs

23. Addressing the Issue of Access
to Markets
Implementation
Empowerment for Engagement
Business startup and business plan
development
Village level mass gathering to provide
information on project, government
policies on rural energy and enterprise
Discussion with potential entrepreneurs
on their business ideas and how they are
planning to implement it.

24. Addressing the Issue of Access
to Markets
Implementation
Hands-on skill development
Empowerment for Engagement

25. Addressing the Issue of Access
to Markets
Implementation
Interaction of Key Actors for Transformation
Right Effort
Interaction among MHP management committee and
electricity buyer (next villagers and entrepreneurs)
making them realize and understand benefits to
both parties by developing interdependence

26. Addressing the Issue of Access
to Markets
Implementation
Interaction of Key Actors for Transformation
Facilitating market
actors to collectively
identify obstacle
opportunity affecting
their market system
Sub-sector analysis with relevant stakeholders
(buyers, entrepreneurs, technical experts, local
bodies etc.)

27. Addressing the Issue of Access
to Markets
Implementation
Interaction of Key Actors for Transformation
 Interaction between local entrepreneurs and
regional and national buyers to make a business
deal.
Lokta buyers dealing with local entrepreneurs on
quality and price at Santada, Accham

28. Addressing the Issue of Access
to Markets
Implementation
 Interaction of Key Actors for Transformation
– Interaction among Nepal Telecom, AEPC and MHP
management committee to sell MHP electricity to
Telecom tower
– Interaction between AEPC and Department of
Irrigation to support MHP operated lift irrigation
System.
– Interaction between dairy cooperation and villagers
– Interaction between local saving and credit
cooperative and entrepreneurs
– Interaction between District Forest Officials, Natural
Conservation Officials and entrepreneurs that are
based on NTFP and natural resources

29. Thank You
trishakti.rana@practicalaction.org.np
www.practicalaction.org/consulting