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PROPOSAL FOR PDF B
COVER PAGE INFORMATION
1. Country:
Lesotho
2. Focal Area:
Climate Change
3. Operational Programme:
OP #6: “Promoting the Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs
4. Project Title:
Lesotho: Promoting Solar Energy Technologies by Capacity Building and Market Creation
5. Total Cost:
GEF
US$ 220,000
Government of Lesotho (in-kind) US$ 17,000
UNDP
US$ 10,000
TOTAL
US$ 247,000
6. PDF Request:
US$ 220,000
7. In-kind contributions:
8. Requesting Agency:
United Nations Development Programme (UNDP)
9. Executing Agency:
Ministry of Natural Resources, Department of Energy (DoE)
Block: PDF Block B
10. Duration:
9 months
PROJECT STRUCTURE
11. Project objective:
The global objective of the project is to reduce greenhouse gas (GHG) emissions and to abate their future growth in
Lesotho, especially in the residential sector and small to medium-scale institutions, manufacturing and service industries.
This will be achieved by removing barriers to large-scale use of two solar energy technologies – photovoltaics (PV) and
solar water heaters (SWH) – whenever they provide the least-cost solution for supplying the needed energy services.
The development objective of the project is to reduce Lesotho’s dependence on imported fuels and to take full advantage of
its natural solar energy resources to promote sustainable development of the country.
The principal barriers that presently impede the efficient deployment of solar technologies in Lesotho, as identified by
various studies, include:
 High initial cost of solar energy systems and lack of suitable financing mechanisms;
 Poor institutional framework;
 Insufficient information and public awareness;
 Inadequate human resources and capacity;
 Theft of solar panels; and
 Lack of standards for solar energy systems
During the PDF B phase, the project will design specific activities to overcome these barriers and subsequently implement
them during the full project. It is estimated that currently 1.3% of rural households own solar PV system and without specific
actions taken, the percentage will not grow significantly in the near future. However, according to an analysis carried out by
the Department of Energy, some 30% of the rural households could afford a PV system if a suitable financial mechanism
was in place. The outputs of the project will thus be the necessary mechanisms to overcome the barriers and the main
outcome a significant increase in the number of solar energy users in Lesotho. The specific indicators related to the
achievement of the project outputs, outcomes and objectives will be developed during the PDF B phase.
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12. Global significance:
The outcome of this PDF is a full GEF project which will build upon the lessons learned by the review of GEF support to
photovoltaic projects. Particular attention will be paid to the emerging lessons learned from this review such as the need
for a: (1) viable business model to sustain market development, (2) delivery /business model development, (3) appropriate
and effective institutional arrangement, (4) microfinance organization at the local communities, (5) recognition of high
transaction costs associated with marketing, service, and credit collections in rural areas, (6) establishment of reasonable
equipment standards and certification procedures ;etc…
Lesotho is a relatively small country and it does not contribute significantly to the global emissions of the greenhouse
gases. The GHG emissions from the residential sector fuel use in 1994 were about 2.8 million tons of CO2 equivalent. This
includes also the biomass energy use, which accounted some 85% of the total. The CO2 emissions from the fossil fuel use
in the residential sector (paraffin, LPG, coal) were approximately 380,000 tons. These emissions, which in the absence of
the project are expected to rapidly increase in the future, can partly be abated by the proposed project.
The global environmental benefits from the project are primarily indirect, as is usually the case of solar home systems.
Firstly, the project – as part of the large GEF portfolio on solar PV – will lower the global PV production costs over time.
Secondly, the lessons learned from the project can be replicated in other countries, especially in the SADC region, with
high solar energy potential. One particular example could be the problem related to theft of the PV panels. As this
equipment are relatively easy to smuggle from one country to another, common solutions will be needed in order to resolve
this problem.
13. Background:
The Kingdom of Lesotho is a landlocked country in Southern Africa, entirely surrounded by the Republic of South Africa.
The estimated population in 1999 was 2,128,000. The land area is 30,350 km2. An estimated two-thirds of the country is
mountainous, with steep-sided valleys and an annual precipitation exceeding 1000 mm in several areas. The mountain
areas experience sub-zero temperatures during the winter season.
Lesotho is economically dependent on its single neighbour, South Africa, which serves as a safety value for employment
and income generation. Most of the country’s exports go to South Africa. All but ten per cent of its imports originate from
South Africa. Lesotho’s GDP per capita in 1997 was US$ 1,860 (adjusted for purchase power parity) and the UNDP Human
Development Index 0.582. Civil disorder in September 1998 destroyed 80% of the commercial infrastructure in the capital
Maseru and two other major towns. Most firms were not covered by insurance, and the rebuilding of small and medium
business will be a significant challenge in terms of both economic growth and employment levels.
The consumption of petroleum products – all imported from South Africa – was 434,350 barrels in 1997. Residential energy
use accounts for 86% of the energy consumption in Lesotho. While most of this is due to traditional use of biomass for
cooking, use of paraffin (kerosene) for lighting and heating is significant (54,332 m3 in 1994).
Lesotho forms part of the Southern African Power Pool (SAPP), which aims to link SADC members into a single electricity
grid. The electricity imports from South Africa were 318 GWh in 1997. However, as part of the Lesotho Highlands Water
Project, the first phase of the 80 MW Muela hydro facility came online in 1999 making Lesotho practically self-sufficient in
electricity. If the second phase of the project will be carried out, the installed capacity will reach 110 MW and Lesotho will
be a net exporter of electricity to South Africa. Despite of the significant hydroenergic resources, only 2% of Basotho
households have access to electricity. Because of the difficult rugged geography and low levels of consumption, it is not
economically viable to extend the grid in most of the rural areas. The rural population will thus necessary depend on
decentralised energy solutions, such as diesel generators or solar energy.
The Lesotho Energy Master Plan (1998) estimated solar energy at annual average of 7,520 MJ/m2 per day on horizontal
surface. As part of the national sustainable development policy, one of the main objectives of the government in the energy
sector is to promote the adoption of solar energy technologies. The draft paper on renewable energy policy enlists solar PV
applications (solar home systems, PV for clinics, PV for water pumping and PV for telecommunication) and solar thermal
technologies (solar water heaters, passive solar design of buildings, solar cookers and solar dryers) as the most prominent
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renewable energy technologies in Lesotho.
The UNDP FINESSE Programme (Financing Energy Services for Small Energy Users) in SADC countries concluded the
Lesotho Country Study in 1997. In the Programme, bankable renewable and energy efficiency projects were identified and
the respective business plans developed. Two of the three business plans elaborated for Lesotho address the use of solar
energy: PV Solar Home Systems and Solar Water Heaters.
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14. Project description: including implementation arrangements
Current situation
Despite the abundance of solar energy in Lesotho and its relative social acceptability, widespread adoption of solar
technologies has not been achieved. Lesotho Energy Masterplan estimated in a recent study that about 4,000 rural
households own a PV system. SWH systems are mostly used in clinics and rural hospitals – their penetration to
households has been limited. Without the GEF intervention, the business as usual is expected to continue, with only limited
number of solar energy systems installed annually.
Business plans for both PV and SWH have been developed within the UNPD SADC-FINESSE project. The potential market
size over a 10-year-period was estimated to be 33,000 PV systems and 4,680 SWHs with an investment requirement of
over US$ 13 million. This would imply reducing the CO2 emissions by about 64,000 tons over the 15-year lifetime of the
equipment. The proposed project intends to tap this potential by removing the barriers to the use of photovoltaic (PV) and
solar water heating (SWH) technologies in Lesotho and by reducing their high implementation costs resulting from the low
volume markets and lack of practical experience. It is consistent with the GEF Operational Program No. 6 “Promoting the
Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs”.
Main Barriers and the Planned Activities for their Removal
High initial costs and lack of suitable financing mechanisms
The lack of suitable financing mechanisms has been identified as one of the main barriers to promoting solar energy in
Lesotho. The first intent to overcome this problem was suggested in the Government of Lesotho – GTZ project called
“Advisory Project for Household and Building Energy Issues” (APHABEI). The funds were to be channelled through Lesotho
Agricultural Development Bank (LADB). Because of internal problems of LADB, however, this scheme was never put into
practice. Afterwards the FINESSE country study suggested that a new special facility called “Lesotho Renewable Energy
Finance Agency” (LeREFA) be established as a commercial entity within the Bank of Lesotho. Due to problems in the Bank
of Lesotho, this scheme also resulted nonviable until the very recent restructuring of the Bank of Lesotho.
Thanks to the restructuring, there exists now a possibility to develop financing mechanisms together with the banks of
Lesotho. A memorandum of understanding will be signed with one or several Basotho banks and during the PDF phase a
specific financing mechanism for solar energy will be designed together with the interested bank(s), the Ministry of Finance
and the Department of Energy. The mechanism will be based on the outcomes of the APHABEI and FINESSE projects
taking into account the recent developments in Lesotho. Apart from the banks and the government agencies, other
participants such as credit unions, NGOs and possible donors will be invited to participate in the design of the financing
mechanism.
Poor institutional framework
The existing institutional framework is one of the inhibitive factors for wide application of solar technologies. The national
utility, Lesotho Electricity Corporation (LEC), does not view renewable energy as a viable option to supplement its services
where the grid is non-existent. Poor co-ordination between the government, NGOs and private enterprise has rendered it
very difficult to harmonise utilisation of solar technologies in the country.
The project will assist the Government in providing linkage and synergy between the key stakeholders related to solar
energy so as to enhance smooth working relations and channels of communication among them. The Department of
Energy envisages to establish working committees on issues related to renewable energy – such as household, health,
telecommunication, productive services and investment opportunities – in order to bring together views of different
stakeholders. During the PDF phase, the project will provide support to establish these committees, assess the needs for
institutional strengthening and design mechanisms to guarantee efficient co-operation and communication in a sustainable
way during and beyond the project execution.
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Insufficient information and public awareness
The socio-economic study of 1993 identified the lack of information and awareness as an important barrier to solar
technology adoption. The problem still persists at present. During the PDF phase, the project will help the government to
evaluate current dissemination efforts and design new and innovative information dissemination campaigns on renewable
energy in general and solar technologies in particular.
Inadequate human resources and capacity
Essential measures to promote solar energy technologies in Lesotho include ensuring adequate capacity building in the
form of know-how within the training institutions, i.e. the technical schools, for the training of trainers and instructors, as well
as the development of suitable curricula in the country’s technical and vocational schools. The curricula would be geared
towards installation and maintenance of solar energy appliances for rural and peri-urban electrification and water heating
for residential and small to medium-scale institutions and manufacturing/service industries.
Three technical schools already offer courses in electrical installation and the PV modules can fit well into their programme,
while the module for SWHs is more suitable for the plumbing programme.
Theft of solar panels
The theft of panels for both individually and community owned systems has been a worrying phenomenon in the application
of solar PV. This has severely affected the penetration of the technology, as people are concerned about safety of the
system. If this phenomenon continues unabated, it will tarnish the name of the technology. The Department of Rural Water
Supply and Lesotho Telecommunication Corporation have suffered the worst blow as a result of this problem.
The Basotho Government in collaboration with relevant security authorities, private ector and regional and international
bodies will develop strategies to curb the theft problem. It is envisaged that the Department of Energy will work with the
manufacturers of the panels to develop coding on panels. This information will in turn be passed to the police. DoE will also
hold regular meetings with regional bodies to develop strategies for minimising cross-border theft. Another strategy to cope
with the problem is to develop insurance coverage for PV panels and other components which are at risk of being stolen.
This work will be carried out together with the private sector insurance companies.
During the PDF phase, a national and regional meeting will be organised to discuss the problem. Based on the result of the
workshops, concrete activities will be designed along the lines described above.
Lack of standards for solar energy systems
Lack of standards has promoted poor workmanship in installation of solar energy systems. Many PV systems have failed to
deliver the service expected of them, which consequently has resulted in loss of interest by potential users. The project will
assist the government in developing minimum standards and foster the implementation of existing ones to ensure high
quality service of solar technologies. The Department of Energy will work together with other institutions doing research on
renewable energy to improve the standards of the technologies by adapting existing standards from elsewhere to local
conditions. The quality of products entering the country will be assessed together with the Bureau of Standards.
Furthermore, code of practice for installation of solar energy systems will be developed together with the private sector,
government, and NGOs.
Implementation Arrangements
A steering committee will be established to provide the executing agency with guidance, to facilitate the co-ordination of the
project with relevant activities carried out simultaneously by other institutions and to ensure that the project is in line with
pertinent development policies. The participants of the steering committee will include at least the executing agency, the
GEF operational focal point and UNDP. The detailed terms of reference of the steering committee as well as its final
constitution will be designed during the PDF phase.
Department of Energy (DoE) of The Ministry of Natural Resources will be the executing agency of the proposed project.
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DoE is the national body responsible for the formulation and implementation of energy policy, legislation and activities in the
energy sector at national, regional and local levels in consultation with relevant stakeholders. Within DoE, the Division of
Renewable Energy is the main government body involved in renewables in Lesotho. The Appropriate Technology Section
(ATS) of the Ministry of Home Affairs is also involved in renewable energy to some extent and proper co-ordination
between the project and the activities developed by ATS need to be guaranteed.
The Ministry of Environment, Gender and Youth Affairs through its National Environment Secretary (NES) participates in
the project in its role as the GEF operational focal point to guarantee co-operation with other GEF initiatives. Most
importantly, the findings of the climate change enabling activities project of GEF/UNEP executed by Lesotho Meteorological
Services needs to be taken into account.
The three technical and vocational schools are the key players in the training related components of the project. The coordination between them is facilitated by the Technical Vocational Department (TVD) of the Ministry of Education.
Financing has been identified as an important obstacle in development of the renewable energy market and therefore the
participation of the financial institutions is important for the success of the project. There are three commercial banks in
Lesotho: Standard Bank, Lesotho Bank (now partly owned by the Standard Bank) and Nedbank. On-lending to end-users
could be arranged through credit unions or through suppliers, such as furniture stores, which traditionally use hire purchase
agreements. Another interesting model for financing is that of the NGO Credit Centre, which on-lends through three NGOs
(Women in Business, Lesotho Chamber of Commerce and Industry, Lesotho Council of NGOs) funds received from
Lesotho Bank and the African Development Foundation.
There are currently a few companies which provide integrated services by supplying, installing and maintaining solar
systems (INGO’s TV Centre, Solar Lesotho, Solar Matla, M&M Solar, Solar Lights, Maseru Pumps and Plastics). They will
be involved in the project from the very outset.
Final beneficiaries of the project are the end-users who will benefit from the solar systems.
15. Description of proposed PDF activities
Project Oversight and Management
The general activities of project oversight and management will be carried out by a small Project Management Unit (PMU)
to be established within the Department of Energy. The PMU consists of the National Director of the project (a designated
officer of the executing agency), Chief Technical Adviser to be contracted, and the DoE personnel dedicated to the project.
The activities of project oversight and management also relate to the poor institutional framework barrier. The activities of
the PMU during the PDF consist of:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Functioning as a Technical Secretariat for the Steering Committee;
Co-ordination of the various project activities;
Drafting of the terms of reference for the different consultancies;
Compiling the information of the different studies into executive summaries to be annexed to the Project Brief;
Assessment of the institutional strengths and weaknesses;
Establishing necessary working committees;
Organising meetings and workshops;
Drafting the logical framework of the project based on the outcomes of the components;
Designing of the monitoring and evaluation framework for the project;
Assessing the incremental costs of the project; and
Drafting the full-sized Project Brief and the UNDP Project Document;
Financial Mechanism
This component will design in a participatory manner the necessary financing mechanisms for solar energy in Lesotho. It is
envisaged that the mechanism will be hosted in a commercial bank and be accessible through NGO’s, credit unions or
other intermediaries. The hosting bank/banks who actually contribute the resources for the investments plays a key role in
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designing the component. GEF funding will be eventually requested for setting up the mechanism, for non-grant financing
instruments such as guarantees etc. The PDF activities include:
1.
2.
3.
4.
Signing of a MoU with one or several banks;
Assessment of the financing needs for solar energy;
Participatory workshop on solar energy finance; and
Design of the dedicated financing mechanism for solar energy
Information and Public Awareness
This PDF component will develop the necessary framework to overcome the barriers related to lack of information and
public awareness. The principal activities are:
1. Evaluation of the current dissemination efforts of the government and other players;
2. Identification of the needs for information and public awareness raising; and
3. Design of an information dissemination and awareness-raising programme considering different focus groups
Training
During the PDF phase, the following activities will be carried out:
1. Assessment of the current training activities and needs;
2. Design of the solar energy training programme; and
3. Development of the relevant curricula for the technical schools
International Co-operation, Standards, Theft Prevention
The development of standards and preventing thefts both need transboundary action. During the PDF phase the following
activities will be undertaken:
1.
2.
3.
4.
5.
Assessment of theft problem and international solutions/approaches towards it;
Assessment of the international standards on solar energy systems and installations;
Regional workshop on standards and theft prevention;
Design and/or adoption of a solar energy quality programme; and
Design and/or adoption of a theft prevention programme
16. PDF Block B Outputs:
The project is expected to produce the following outputs:
1. Full-sized GEF Project Brief and UNDP Project Document;
2. Design and implementation plan for a dedicated solar energy financing mechanism to be set up within an existing
bank;
3. Solar energy information dissemination and awareness building programme;
4. Solar energy training programme and the related curricula for the technical and vocational schools
5. Solar energy quality programme (standards, code of practise, certification, enforcement); and
6. Regional theft prevention programme
17. Eligibility
Lesotho ratified the UNFCCC on 7 February 1995 and is eligible to receive GEF assistance through the financial
mechanism of the Convention.
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18. National level support
The project has been endorsed by the national GEF focal point, Ministry of Environment, Gender and Youth Affairs
(endorsement letter attached). There is a high level of interest and stakeholder involvement in this project. It has been
designed in consultation with various key stake-holders in Lesotho including private firms, government institutions, technical
schools etc. It is largely based on the outcomes of the FINESSE-country study, which was developed in close co-ordination
with numerous people from a range of government, private and parastatal organisations.
19. Justification
The project is consistent with the GEF Operational Programme number 6. The full-sized project is expected to eliminate the
existing barriers to full utilisation of the important solar energy potential in Lesotho. It will reduce fossil fuel use in Lesotho
and has a potential to provide important lessons-learned for other countries especially within the SADC region.
Even though the principal barriers to solar energy use in Lesotho have been identified through various studies like
APHABEI and FINESSE, PDF B funding is necessary to design the specific components to overcome these barriers.
Especially important during the PDF B phase is to work together with the financial institutions and other key stakeholders to
design the financial mechanism for solar energy. The PDF outputs will provide the necessary elements to successfully
implement the full-sized project.
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20. Timetable
Execution period:
Management
Financing mechanism
Info/awareness
Training
Standards & Theft
9 months (October 2000 – June 2001)
1 month
ToR
2 month
SCM
MoU
3 month
4 month
5 month 6 month 7 month 8 month
SCM
PB, PD
WS
Needs Assessment
Final Design
Evaluation
Design
Curricul.
Evaluation
Design
RWS
Assessment
Design
Brief Preparation
ToR
SCM
PB, PD
MoU
WS
RWS
TOR
Drafting of terms of reference
Steering Committee meeting
Drafting the Project Brief and Project Document
Signing of the Memorandum of Understanding
Workshop
Regional Workshop
Budget:
Management
Financing
Info/Awareness
Training
Standards, Theft
Draft Project Brief & Prodoc
Stakeholders workshop
TOTAL
9 month
SCM
GEF
45,000
40,000
30,000
30,000
40,000
15,000
20,000
220,000
UNDP
0
0
0
0
10,000
0
0
GOV
9,000
2,000
2,000
2,000
2,000
0
0
10,000
17,000
TOTAL
54,000
42,000
32,000
32,000
52,000
15,000
20,000
0
247,000