Argentina: Project for Renewable Energy in Rural Markets (PERMER)
In 1999 the Argentinian government implemented the PERMER project to face the energy needs of its rural low-income population. After reforms in the 1990s, the sector could improve efficiency and quality of services, but little the access to rural population. Therefore at the beginning of the project electrification rate in Argentina was high in comparison to other developing countries, but with still 2.5 million people without electricity service in rural areas (3). To eliminate the existing economic and technical barriers, the goal of the project is the development of a sustainable energy market in cooperation with the private sector.
The main objective is to provide basic electricity service in a sustainable manner to communities that are still beyond the reach of the grid.
The target groups are families and public services in rural communities.
Output: 1999 - November 2011:
- The project served 11,489 households (7).
- In public buildings 1,598 solar home systems (SHS) were installed (7).
- Ten private concessionaires are participating in the project (7).
- The total installed capacity of solar home systems (SHS) is 1530 kW, of wind home systems 809 kW and of RET based home systems 58 kW (7).
- Better lighting and possibility to use mediums of social communication (1).
- Delivery model based on public-private partnership: The model is based on a combination of government funding of equipment and substitution of tariffs, while concessionaires are responsible for service and maintenance. The involvement of the private sector is important for a sustainable service.
- Competition model: Companies are in competition to bid for exclusive service contracts. This ensures that minimal subsidies are required.
- An emphasis is set on the implementation of renewable energies and the elimination of existing market barriers for their application. Nevertheless the project is technology neutral to achieve optimal individual solutions.
For the implementation of the project a high level of public investment and subsidies were necessary, according the high costs to electrify dispersed rural populations. A challenge was to implement a model that would minimize subsidies, but also allow fair returns for concessionaires. This was obtained by a competition model, where companies compete for exclusive zone rights.
Financial assistance for the realization came from international donors. World Bank loans to a total amount of US$50 million and a US$10 million GEF grant were the most important resources for financing. The remaining project costs were carried from the ministry of energy and provincial governments.
In respect to the Argentinian economic crisis in 2001 the role of financial flexibility was very important to prevent project failure. Rising solar PV prices, reduction of PERMER employees and budgets were a big problem for the project implementation progress. The conflict of increasing equipment costs for the concessionaires and less budget for subsidies led to change the delivery model. PERMER started to finance all capital costs of installations, which were funded before by concessionaires and opened up for public companies and co-operations. Regarding the crisis the World Bank agreed to extend financing of solar home systems.
The PERMER project was implemented in a context of national electrification reforms. As the project is government led, ministries and participating provinces take an active part in project management. The Ministry of Energy created a Project Coordination Unit (PCU), which coordinates and overseas activities. At a provincial level executive units manage the coordination with concessionaires and support the implementation of sub-projects.
The project is strengthening institutional capacity by providing technical assistance and training programs, especially in relation with renewable energy systems.
There are also other governmental activities that support indirectly the project objectives. The Ministry of Education established PROMER (Project for Improving Rural Education), a complementary project to PERMER, which provides equipment like TVs and computers for schools after the electrical installations. In 2006 also a new law for renewable energies was introduced, which established feed-in tariffs for renewable energies and encouraged domestic equipment supply.
The provincial staff was strengthening in its capacity to implement sub-projects and work with the concessionaires. Technical, economical, financial and institutional knowledge of renewable energies were themes of seminars and short study tours.
Further PERMER provided local communities information about possible services; with that they could decide whether and at what level of power they would like electricity access. Local beneficiaries got directly technology information and training from the concessionaires. Technologies used for the project like solar panels and wind turbines need little capacitation of the users, because they are not liable to break down and need no community coordination. There are other actors like the NGO EcoAndina in the region of Jujuy that noticed the importance of capacity building and involved communities in renewable energy development. The activities of this foundation also include trainings and workshops for local users and decision makers.
The PERMER program fallowed a top-down model, which provided community participation in information provision and decision making. The level of integration depended on different factors like the type of technology used. From the year 2008 the World Bank also required special and fuller consultation in cases where indigenous people were involved.
A focus of the participation was set in awareness-rising through meetings and workshops in the communities. The aim was to inform the inhabitants about the access possibilities and technical alternatives and create with that certain customer demand. In some regions there was also a participation in technology development of for example solar cookers and water heaters.
Social and environmental risks of the program were in general low. There was certain integration of communities in the management of those risks, especially where they were higher like in the case of the use of mini-grids.
The project has an important social impact as it provides basic electricity service. Better lighting and access to communication mediums (TV, radio) improved life quality significant of beneficiary families. The hours available per day for work, study and other activities were extended.
Great positive impacts of the project were noticed for education. The hours for studying and class preparation were extended, as well as the usage of other teaching methods by televisions, computers, etc. are possible.
There were a range number of different benefits for communities and environment. The substitution of wood like the main resource for energy helped to stop the expending deforestation in many regions. The substitution also facilitated the access to energy for many families, because they had to make long distance before to collect the necessary wood for cooking and other activities.
To allow low-income populations in rural areas the access to electricity, user tariffs are heavily subsidized. The final user tariffs are determined by provincial governments in negotiation with the concessionaires and depend on local conditions and the level of power required. There is a great variation between regions. In Jujuy for example 90 per cent of the user tariff is subsidized, while in Chaco users pay almost the whole tariff. In 2010 on average 76 per cent of user tariffs were subsidies and users paid an average of US$4 per month.
A maximum subsidized level of power is 90 kWh/month for collective service users. Like the project was designed for basic needs the provided energy doesn't allow the development of new economic activities or further domestic use.
The geographical conditions in the target areas make grid extensions uneconomical and renewable energy systems or mini-grids seem mostly the best technical solution. To counteract the high investment costs of renewable energies at the beginning and make involvement attractive for concessionaires, the investment costs were financed completely from the project resources since 2007.
The results are costs for consumers that are equal or less than the costs of previously used candles or kerosene lamps, with all positive effects of electricity access.
The success of the project could be achieved through political efforts at different levels and companies that were willing to invest and operate in rural areas. One of the most important private actors in the project is the Jujuy Company for Dispersed Energy Systems EJSEDSA. Jujuy is one of the first provinces that established the project and with one of the best results. The company takes on a key role in rural electrification. Today the company provides electricity to 6,926 rural customers through thermal, hybrid and photovoltaic isolated systems.
The M&E of the program was specified by the World Bank, like the most important backer and the Argentinian government. Monitoring is concentrated on technical indicators, for example number of installations and reduction of CO2 emissions. Every three months PERMER sent a report to the World Bank about the development of outputs and indicators.
In 2005/2006 the program was evaluated in detail. The evaluation included interviews of users in provinces where the implementation process was advanced. Since then no other evaluation has taken place.
The project started in 1999 with the participation of two provinces, Jujuy and Salta. During its maturity the project was extended and has now a national character. Gained experience from the applied innovative delivery mechanism for renewable energies can be interesting for donors and governments for other energy access extension projects. Especially the experience with solar home systems (SHS) at a large scale and the wind home system (WHS) pilot project ease replication in other parts of the world. It has been shown that service contracts are a well working instrument to guarantee long term operation and sustainability. Centralization of activities had positive efficiency effects. However PERMER counts with limitations, especially to productive use and social development. The project implementation is very expensive and depends on a high level of subsidies. Thus, its replication depends on the availability of financial resources, as well as capacitated stuff and existence of possible concessionaires.
Fundación Bariloche en Buenos Aires
(1) Sarah Best, Sustainable Development Advisors for the International Institute for Environment and Development (2011): Remote access; expanding energy provision in rural Argentina through public-private partnerships and renewable energy; A case study of the PERMER programme, UK. link
(2) World Resource Institute (2002): Power politics; equity and environment in electricity reform, Cap. 3 Argentina, Washington D.C. link
(3) World Bank (1999): Project Appraisal Document for Renewable Energy in Rural Market Project. link
(4) World Bank (2008): Project Information Document for AR PERMER Renewable Energy Additional Financing. link
(5) World Bank (2002): Second Amendment to Loan Agreement an GEF Trust Fund agreement. link
(8) Fundación Bariloche, GNESD (2011): Regional Analysis and Case Studies Report, RE based expansion of access to electricity in developing countries, the Argentinean Case Study, Argentina.
(9) REToolKit Case Study: The Argentine Off-grid Electrification Concessionaire EJSEDSA. link
(11) Alberto Pascó-Font, Máximo Torero (2002): Infrastructure Projects in Telecommunications, Roads and Electricity in rural areas, Best Practices, Lima. link
Name:Argentina: Project for Renewable Energy in Rural Markets (PERMER)
The PERMER project was launched by the Argentine government and is executed by concessionaires from the private or public sector. Local implementation and regulation is responsibility of the provinces.
Fundación Bariloche en Buenos Aires
Technology:Multi Functional Platform
- Micro Hydro (5-100 kW)
Project status:Operational project
Implementing approach:Public private partnership