TERMS OF REFERENCE FOR THE FEASIBILITY STUDY ON PRODUCTIVE USE OF ELECTRICITY FOR SMALL BUSINESSES CONNECTED TO MWENGA HYDRO POWER

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1 TERMS OF REFERENCE FOR THE FEASIBILITY STUDY ON PRODUCTIVE USE OF ELECTRICITY FOR SMALL BUSINESSES CONNECTED TO MWENGA HYDRO POWER Please submit the proposal by 25 th April 2016 to Mr. Abishek Bharadwaj at the following BACKGROUND 1.1. Rift Valley Energy Ltd. (RVE) is a privately owned renewable-energy project development company, dedicated to own and operate renewable energy infrastructure projects in Eastern and Southern Africa (with current focus on Tanzania). In Tanzania RVE has already established a solid presence, with one combined generation and distribution business implemented ( Mwenga Hydro Project ) and an adjacent rural distribution project currently under development ( Mwenga s Rural Network Expansion into the Kihansi basin ). The Mwenga Hydro Project (developed in cooperation with the EU/ACP Energy Facility and the Rural Energy Agency of Tanzania) is a comprehensive, state of the art renewable energy generation and distribution project, located in the Mufindi district, Southern-Tanzania. It currently operates a 4MW hydro-power-station and 145 km of rural distribution network, supplying (as back-up facility) the local tea industry, 17 villages and the national utility (TANESCO), with an annual generation out-put of 21,5 GW/h of grid-quality, renewable electricity (approx. 0.5% of the national usage). The project has developed and deployed an innovative state of the art cell-phone based, pre-paid-electricity-vending-system, supplying to date more than 1,600 rural households with cheap, green, on-demand electricity (it is anticipated that another 1000 households will be connected in this area). Mwenga Hydro's Rural Network Expansion into the Kihansi basin (in cooperation with the EU/ACP Energy Facility): This project is currently expanding Mwenga Hydro s rural network through the construction of an additional 180 km of distribution network, with the aim to supply further 15 villages (3.000 households) located in the neighbouring Kihansi Basin (currently with no access to permanent/grid electricity) GVEP International is a non-profit organization working to increase access to affordable and sustainable energy services and reduce poverty in developing countries. GVEP is involved in assisting RVE in enhancing the productive use of electricity by businesses connected or being connected in these 32 villages and promotion of electricity usage amongst the domestic consumers. Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 1

2 1.3. The Forestry Development Trust (FDT) is an independent institution set-up to work with the public and private sectors to drive a long-term programme ultimately aimed at transforming the sector. It plans to: a) Increase the supply of higher-value wood products and energy from sustainable sources; b) Increase smallholder planting and employment in sustainable private forestry; c) Raise net incomes for the sector s smallholders; and d) Ensure quality services and industry functions are provided sustainably. FDT is working to promote the sustainable growth of Tanzania s forestry sector and ensure large and small-scale growers can exploit compelling opportunities in commercial timber and energy markets, 2.0 OBJECTIVE The main project objective is to support 160 micro-businesses, some to be clustered together in productive use centers, using electricity from the Mwenga grid. The targeted businesses would likely be in the areas of wood manufacturing (i.e. carpentry workshops), metal and welding workshops, eggs incubations, chicken rearing, grains mills, mechanical and repair garages, timber dealers, tailoring marts, LUKU and MPESA agents. These are our initial ideas but the consultant should use their independent judgement in recommending appropriate business activities to focus on. The project will also aim at attracting around 20 SMEs into the area covered by the Mwenga grid. These will be larger businesses, employing at least 10 people and operating at some scale. Forestry related activity is likely to be an area of focus for many of these SMEs. A second objective of the project is increasing domestic connections, through more effective promotional activity and customer engagement. Currently around 1,600 households in the area covered by the Mwenga grid are connected to a power supply. The project aims to increase that to 2500 households, and to connect a further 3000 households in the Kihansi basin villages. In order to plan and execute the project successfully, it will be important to undertake a feasibility study of the local business opportunities as well as investigate innovative ways to stimulate the uptake of household connections. This will assist us to achieve the project objectives and targets. Therefore, the consultant along with GVEP will undertake a study for 4-5 weeks in April/May SCOPE OF WORK The Consultant will undertake the tasks listed below for the feasibility study: i. Technical analysis of the current infrastructure An analysis will be carried out on the social/load profiling of the current customers catered to by the plant. Review existing infrastructure and conditions, including operational considerations Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 2

3 Technical characteristics like generation data, auxiliary consumption, seasonality, etc. Existing load profile/consumption pattern through the day by customer segment there are two tariff levels Mapping of the customers by consumer segment along the project area both domestic and business customers Evaluate the payment/recharge history of the current consumers by segment and area on the prepaid metering system ii. Evaluation of the project area Detailed understanding of the project area covering the 32 villages across Mufindi and Kihansi basin. To study the geography, locations and characteristics of the project area covering the 32 villages, including proximity to main roads and local market centres Mapping of the villages and focus on the occupation and livelihood activities Identify the location for potential productive use centers within the project area Mapping the market opportunities in each of these target villages iii. Domestic connections To assess the consumption patterns of the domestic users as they use modest amounts of electricity and investigating the scope to increase the consumption, perhaps through encouraging the purchase of modern appliances. To survey a sample of 50 households connected to the Mwenga project and 50 households not connected to the project within the existing distribution network The output of the survey should be analysed to provide an informed view of the following key indicators: Ø Motivation for connecting Ø Current patterns of energy use/appliances Ø Barriers to connecting Ø Scope of innovative packaging of costs and electricity use Ø Safety concerns Defining the promotional strategy in the existing network and the planned network based on the aforementioned analysis iv. Micro-business opportunities To assess the potential of business expansion amongst the already connected businesses and the potential of new businesses within the project area, especially as a part of the productive use centers through surveys Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 3

4 To interview 60 micro-businesses which use Mwenga electricity to operate their business. Key parameters to assess: Ø Business case including cost, revenues and expenditure on electricity Ø Challenges with the supply, if any. Includes dependence on other alternatives Ø Potential and willingness to use other power consuming equipment to enhance their business. Ø Capacity/willingness to use 3 rd party financing to invest in this kind of equipment To interview 40 households not in business about: Ø Occupation and skills Ø Awareness of using electricity beyond lighting, phone charging and TV/radio Ø Assess the awareness of the socio-economic benefits of setting-up businesses Ø Willingness to start a business with adequate training support Ø Capacity/willingness of investing in start-up capital, using 3 rd party financing and/or potential savings. Note: These 40 household survey would be in addition to the 100 households surveyed in the domestic connections section. Ideally, these households should be connected households. v. SME opportunities To assess the potential of business expansion amongst the already existing SMEs and the potential of new SMEs within the project area through surveys. To interview 20 SMEs in Mafinga Town covering a wide range of areas like wood/carpentry workshops, metal and welding workshops, eggs incubations, chicken rearing, grains mills, mechanical and repair garages, timber dealers, tailoring marts, LUKU and MPESA agents. Areas of investigation: Ø Business cases, including cost, revenues and expenditure on electricity Ø Challenges with power supply and their dependence on alternate sources Ø Potential or willingness to be a part of the project within the existing network Ø Potential and willingness to use other power consuming equipment to enhance their business for the ones already connected vi. Other key stakeholder consultation Consultation with other key stakeholders having a direct or indirect influence over the business ecosystem within the project area. This is critical to understand the business challenges and the market opportunities. A few of them are: Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 4

5 The major industry in the area is timber and the project will draw on economic analyses and other work undertaken by the Forest Development Trust based in Iringa. The consultant should review FDT s analysis of the economic potential of the timber sector and how this might be developed, with particular reference to possible location of sawmills close to the Mwenga grid In coordination with FDT to conduct interviews with 10 timber dealers and 2 timber associations of Mafinga and Mufindi. To visit other project stakeholders including government agencies and local offices (i.e tea board, irrigation board, etc.) To visit and conduct interviews with 4 micro-finance institutions based in Mafinga town To visit and conduct interviews with 8 equipment and machinery suppliers in Mafinga, Iringa and Dar es Salaam 4.0 DELIVERABLES The primary outcome sought from this work is a full feasibility study. Opportunities to enhance to utilization of the existing plant through increased business activity may arise, subject to the delivery of the feasibility studies. Detailed study guidelines are attached as Annex A; a summary of the structure of the study is provided as below: Introduction Purpose, project history Methodology Approach, Primary & secondary data collection activities and techniques Project details Technical details, Load profiling, Customers by segment including domestic and enterprises Enhancing domestic connections Consumption patterns, barriers, innovative packaging Micro-business potential (Existing customers) - Business model, challenges, potential Micro-business potential (New customers) Market, willingness, challenges and potential SME potential - Classification of existing industries, power source, expenditure patterns, willingness to connect Potential areas of cooperation with Forest Development Trust Stakeholder opinions Business trends, challenges, mapping the ecosystem, favourable conditions, value chains Total Potential Micro-businesses and SMEs Implementation plan Conclusions 5.0 PERIOD OF PERFORMANCE Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 5

6 The timeframe for the feasibility study is estimated at 5 weeks, with the duration of specific activities as follows: Surveys, data collection and meetings 3 weeks Mapping & Analysis 1 week Report writing and finalization 1 week 6.0 QUALIFICATIONS AND EXPERIENCE The project is seeking a reputable firm to undertake feasibility studies for one or more of the project sites. Collectively, the study team will have a strong background in rural electrification and in the following areas: Research and sales expertise Experience in the rural electricity sector and understanding of technology is preferable Strong skills in surveys and consultation Strong analytical and drafting skills Fluency in English and Swahili Knowledge of the Mufundi area is ideal 7.0 RESPONSIBILITIES i. Consultant The Consultant will be responsible for organizing the work and delivering the outputs of the assignment. They will work closely with the GVEP to collect and analyse data and undertake all necessary measurements, and report on the progress of key activities. The milestones and reporting mechanisms will be determined upon the start of the assignment in coordination with RVE and GVEP. Prior to the completion of the assignment, the Consultant will hand over the feasibility study and data behind it to RVE and GVEP. ii. Rift Valley Energy RVE will assist the Consultant with data collection related to the plant and can provide selected data regarding their current rural / commercial customers. iii. GVEP International GVEP International will oversee and monitor overall progress, ensure that deliverables are completed to a high standard, and provide input and guidance on the final report. GVEP may also accompany the consultant in a few stakeholder meetings. iv. Forest Development Trust FDT will provide information on the economic potential of the timber sector and advice on how the industry might best be developed. Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 6

7 ANNEX A. STUDY GUIDELINES FEASIBILITY STUDY The project is expected to contribute significantly to social and economic development of the communities around the project site. Expansion and diversification of income generating activities, jobs creation, and migration of SMEs and investors to the area will increase due to the accessibility and stability of electricity in the area. The exact number of businesses we aim to attract into the project will be determined after the feasibility phase. Through the feasibility study, sufficient details and working mechanisms for the project area could be established. The survey will identify realisable benefits and opportunities for businesses and for RVE. RVE will be able to sell a greater percentage of their generated power to these businesses. The proposed structure for the feasibility study is outlined as below: i. Introduction - Purpose of the study - Scope of work - Project history ii. Methodology - Approach - Primary data collection activities and techniques - Secondary data collection activities and techniques iii. Project details - Generation - Distribution layout - Capacity utilization & load profiling - List of customers by segments iv. Domestic connections - Consumption patterns - Barriers - Innovative packages - Promotional strategy v. Micro-business potential (Existing customers) - Business model - Expenditure on electricity - Feedback on power supply - Design and implementation plan for an on bill financing tool (if feasible) - Challenges vi. Micro-business potential (New customers) - Market opportunities - Use and expenditure on alternatives - Willingness of businesses to pay for power - Potential of productive use centers - Design and implementation plan for an on bill financing tool (if feasible) Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 7

8 vii. SME potential - Classification of existing industries - Current sources of power - Incomes and expenditure patterns - Ability and willingness to connect to the power line - List of potential connections through SMEs viii. Rural households connection uptake - Classification of target clusters - Design and implementation plan for an on bill financing tool (connection costs/ready-boards) ix. Stakeholder opinions - Delivery & performance of the business ecosystem - Trends in occupation - Challenges with power supply and alternatives - Conditions favourable to businesses (Policy, demand, etc.) - Sustainable value chains - Challenges/constraints in the area for businesses x. Total potential - Potential for expansion of micro-business already connected - Project demand growth of new micro-businesses - Potential demand growth of SMEs - Potential of more rural households connected xi. Implementation plan xii. Conclusions Feasibility Study ToR Productive use of electricity Mwenga Hydro Power Project Page 8