RFI__USAID-ES-18-01.pdf

Document Type: Request for Information (RFI)

Number: USAID-ES-18-01

Issuance Date: June 21, 2018

Closing Date: July 20, 2018

Closing Time: 5pm Local El Salvador Time

Activity Title: El Salvador Power Efficiency and Reliability Improvement

This USAID/El Salvador Request for Information (RFI) is issued for the purpose of providing industry and stakeholders an opportunity to review, comment, suggest, and enhance areas in the attached Concept Note (CN) for the USAID/El Salvador activity titled: El Salvador Power Efficiency and Reliability

Improvement. As appropriate, USAID/El Salvador will incorporate responses to the RFI into the development of the Statement of Work (SOW) or Program Description (PD) that may lead to a formal solicitation. The duration of a potential award will be up to five (5) years with an estimated USAID contribution between $4,000,000 and $5,000,000.

The attached CN presents the current draft objectives and key elements of the activity. USAID/El Salvador may significantly revise this proposed activity and planned solicitation based upon the comments received and further internal discussions.

This RFI is issued solely for information and planning purposes and does not constitute a Request for Proposals (RFP) or Notice fo Funding Opportunity (NFO). Responses to this RFI shall not be portrayed as proposals or applications and will not be accepted by the U.S. Government (USG) to form a binding agreement. This RFI is not to be construed as a commitment by the USG to issue any solicitation or ultimately an award on the basis of this RFI, or to pay for any information submitted as a result of this request. Responders are solely responsible for all expenses associated with responding to this RFI.

If the requirement is released in the form of an RFP or NFO, it may be synopsized in, but not limited to, the USG procurement information site FedBizOpps (Federal Business Opportunities: www.fbo.gov), or grants.gov and USAID websites. It is the potential responder’s responsibility to monitor these forums and the USAID Business Forecast for the release of any further information.

It should be noted that responding to or providing comment on this RFI will not give any advantage to any organization in any subsequent competitive process. USAID/El Salvador will not provide answers to any question submitted in response to this request.

By issuing the request for information USAID/El Salvador aims to consult with the broad community of actors involved with energy management systems and energy efficiency in El Salvador. Your comments are requested to help refine a potential intervention and to ensure maximum development impact, resolve a clear development challenge or need as expressed by the private sector, facilitate sound coordination with existing activities, and alignment with the Government of El Salvador’s priorities. Please ensure your comments are concise and specific to information included within the CN. While there are no limits on the length of submissions accepted, we value concise, issue-specific responses with reference to page and section numbers in the draft program description.

Areas of particular interest include, but are not limited to:

1. The intent is to develop a focused private sector energy management activity with a targeted outcome: to reduce electricity costs for Salvadoran businesses through better energy management.

Does the logic behind the development hypothesis, general approach, and results framework make sense? Do you have any suggestions on how the proposed activity could be improved?

2. What do you envision are the overall costs of developing the capacity of an energy services firm?

Are there enough energy service providers (defined as organizations that provide quality energy audits for businesses to compete with recommendations to reduce electricity costs) in El Salvador to allow for competition? What are the best approaches to ensure that the regulations are evenly applied to allow sale of surplus energy into the grid?

3. This activity will require indicators and establish targets to measure progress and results (e.g.

electricity costs reduced by xx% or number of quality energy audits completed). Which indicators would you recommend for tracking the high level results and outcomes? Given potential resistance disclosing business-sensitive data, how could we best measure cost-savings at the firm level?

4. The activity includes various linkages with other USAID projects to ensure future sustainability.

Do you think that this is the right approach for achieving and sustaining capacity building targets for energy service providers? Is there work being done by other donors that this activity could better leverage?

Please address your information and comments to Marielos Arce at email mquinonez@usaid.gov with a copy to Ross Hicks at email rhicks@usaid.gov no later than the closing date shown above.

The following documents are attached for reference:

Attachment 1 Concept Note for the El Salvador Power Efficiency and Reliability Improvement

Activity

Attachment 2 Preliminary Results Framework or Logical Framework

Attachment 3 USAID Regional Clean Energy Initiative- Final Report

Attachment 4 Lighting the Way to Better Lives- Report by USAID Regional Clean Energy

Initiative mailto:mquinonez@usaid.gov

Attachment 1. Concept Note for the El Salvador Power Efficiency and Reliability Improvement

Activity

Goal: Contribute to El Salvador’s broad-based economic growth by enhancing the private sector's competitiveness through energy efficiency measures and renewable energy technologies.

1. Background:

Commercial and industrial electricity prices in El Salvador are 80 percent higher than the U.S. average.

The relatively high cost of electricity is a key barrier to investment and constraint to economic growth in the country. Companies consistently point to the high cost of electricity and inconsistent quality (causing brief surges or shortfalls of electricity that can shut down equipment) as hindrances to doing business.

Although official electricity prices in El Salvador are relatively competitive in Central America, anecdotal evidence suggests other countries in the region offer rates below official prices to lure companies, which impedes El Salvador’s attractiveness to potential investors.

Regional electricity integration, energy auctions, energy diversification, and energy efficiency are all ways to reduce electricity prices in El Salvador. This new bilateral activity will focus on energy diversification and energy efficiency to lower the cost of electricity for Salvadoran businesses. This decision was made because the Government of El Salvador (GOES), thanks in part to past USAID assistance, is already adopting energy auctions to reduce prices, and addressing regional integration is outside of the manageable interest of the Economic Growth Office. The principal issues preventing regional integration are not technical improvements, as these can be resolved if all Central American countries committed to doing so. The major barriers that prevent regional integration concern vested political and financial interests that keep prices high because reduced prices could also reduce profits for energy generators and distributors. , The new energy activity will be most effective if it focuses on energy diversification (mainly in solar) and energy efficiency on the part of Salvadoran businesses to reduce electricity costs. However, the new activity complements regional integration efforts as it lays the foundation for Salvadoran businesses using renewable sources to sell surplus electricity back into the regional grid. The planned activity will support reforms to allow the sale of electricity into the grid and will foster demand for such reforms as businesses produce excess electricity from renewable sources.

El Salvador has historically relied on heavy fuel oil and hydroelectric generation for the country’s power needs, and the dependence on these two sources has made El Salvador vulnerable to oil price fluctuations and drought, leading to high energy prices and damaging the competitiveness of businesses and especially export industries. Beginning in 2013, with the support of USAID, GOES launched several renewable energy tenders to help diversify its energy matrix, decrease dependence on foreign energy sources and attract much needed foreign investment. USAID also supported the Consejo Nacional de Energia (CNE) in the development of energy efficiency standards and public lighting guidelines. The new energy activity will build upon past success, but focus more on private-sector engagement and empowerment.

Specifically, the activity will foster a market-led approach to provide Salvadoran businesses with more efficient energy consumption and off-grid energy solutions to reduce on-grid dependency. With improved energy efficiency and more sources of energy (outside the grid) businesses will reduce electricity costs and have more-reliable energy to ensure a continuity of operations.

Calculations based on available data from the Consejo Nacional de Energia (CNE) and the U.S. Energy Information Administration from 2014-

2017.

2. Development Challenge, Development Hypothesis & Alignment to CDCS, PAD/CEN Strategy:

High electricity costs are a key barrier to investment in northern triangle countries, thereby constraining economic growth, business competitiveness and eventually leading to job losses that contribute to migration. The U.S. Strategy for Engagement in Central America (CEN) seeks to bring down the region’s high electricity costs (specifically under Prosperity/Promoting More Efficient and Sustainable Energy), which are a drag on businesses and economic growth in general. In addition to this, CEN is committed to support El Salvador’s actions under the Alliance for Prosperity (A4P) initiative which includes energy as one of the strategic line of action. Specifically, the new activity will support energy “reliability through diversification and strengthening service providers,” lines 2.14 and 2.15 of A4P.

Furthermore, the activity will support recently-launched Joint Regional Strategy Framework that calls to advance the President’s trade agenda and foster economic growth in the United States by ensuring fair and reciprocal trade conditions for U.S. firms and exports including energy as a Strategic Objective: SO 2.3: Promote energy security, regional energy integration, and infrastructure development.

Under the Development Objective 2 of USAID/El Salvador’s Country Development Cooperation Strategy, Economic Growth Opportunities in Tradables Expanded, the new energy activity will support Salvadoran businesses in reducing costs to increase production. Specifically, the activity will contribute to Intermediate Result 2.2, Productivity of Targeted Businesses Increased through business development services for Small and Medium Enterprises (SMEs), and expanding sales of natural resource-based industries. As a result, the new activity is fully in line with the Increasing Business Productivity Project (PAD No. 519-0470).

In El Salvador, Micro, small, and medium (MSME) business development is key as they represent 99.6% of the businesses in El Salvador and employ 65% of workers

. For MSMEs, high energy costs hinder business competitiveness potentially leading to layoffs and business closures. The new energy activity will support Salvadoran organizations that provide energy-efficiency services and off-grid solutions for Salvadoran businesses. This approach will improve productivity of MSMEs through reduced energy costs in a sustainable manner since it will work through local organizations to fulfill the existing demand for off-grid energy and improved efficiency.

Development Challenge: High energy costs and poor reliability hinder business competitiveness, negatively impacting business growth, contributing to loss of jobs, and potentially exacerbating migration flows to the U.S.

Development Hypothesis: If businesses improve energy management through innovation and implementation of cutting-edge technology, the government improves regulatory frameworks and streamlines procedures for on-site power generation, and the public and private sectors work together to achieve mutual energy objectives, then competitiveness and productivity will improve, contributing to long-term, broad-based economic growth and employment generation.

3. Results to be Achieved: Describe the principal results expected over the life of the activity.

Private sector organizations strengthened and ready to expand lower-cost energy activities in El Salvador.

Ministry of Economy Census 2005.

Current legal framework that regulates excess electricity sales generated at enterprises and/or homes improved.

Eight of the energy efficiency standards approved (out of eight total) through USAID’s Regional Clean Energy Initiative for El Salvador fully implemented.

Program to certify energy auditors designed and implemented with the support of other USAID activities (e.g. Higher Ed and Puentes).

At least three energy-services companies or organizations that design, construct, operate and finance energy efficiency projects strengthened.

4. Illustrative Interventions:

The new activity could provide financial support (or facilitate access to finance) and technical support to Salvadoran organizations during the life of the activity (up to five years), and expect these organizations to be fully self-sufficient thereafter to continue providing energy-related services, such as energy efficiency audits for a fee. Business plans will have to identify the necessary income streams to ensure sustainability is accomplished in the medium-to-long term. Some of the interventions to be explored under the Activity include:

● Promote knowledge sharing through exchanges, forums, seminars or roundtables on energy management systems

● Design a sustainable mechanism to promote the formation and certification of energy efficiency auditors that can fulfill the need of this type of professionals in the country

● Support the development of high-impact energy efficiency and renewable energy pilot projects in selected sectors (e.g., tourism, plastics, textile, etc.) to reduce grid consumption.

● Scale up support for the adoption, implementation and/or enforcement of energy efficiency appliance and equipment standards.

● Provide technical assistance and support to national institutions and private sector to develop, design and implement energy efficiency programs, regulations and policies

● Promote the utilization of USAID’s DCA’s and facilitate access to lending partners under the Economic Competitiveness project’s MOUs with 10 banks.

5. Analyses: Identify existing analyses, results from prior or ongoing USAID and other donor interventions and customer feedback that support or inform USAID' s understanding of the problem and possible interventions. Identify additional analyses needed.

USAID’s recent interventions and studies in Central America, including the Regional Clean Energy Initiative (RCEI, 2012-2017), the Climate Economic Analysis for Development, Investment, and Resilience (CEADIR, 2015-2017), the Energy Efficiency Opportunity Study - El Salvador under the Energy Efficiency for Clean Development Program (EECDP, 2015) and the Development Credit Authority (DCA) Loan Portfolio Guarantee in clean energy have all informed the new activity concept.

Under the RCEI, technical assistance was provided directly to government institutions or regional entities (SICA, CRIE, EOR and CDMER) that oversee regional energy integration. In most of these interventions, the private sector has not been directly involved but in the case of the DCA agreement, where financial

Norma para Usuarios Finales Productores de Energía Eléctrica con Recursos Renovables was approved by SIGET in October

2017.

institutions are providing loans to SMEs for renewable energy purposes. The new activity will be more of a market-led approach to provide businesses with improved energy efficiency and off-grid technology that will eventually become economically self-sufficient.

To maximize USAID’s resources, future interventions will leverage capacity building efforts under USAID’s Bridges to Employment activity and will explore synergies with Economic Competitiveness and Higher Education activities in the energy sector. In addition, the new activity could benefit SMEs considering DCA loan guarantees.

Attachment 2: Preliminary Results Framework or Logical Framework.

Development Hypothesis: If businesses improve energy management through innovation and implementation of cutting-edge technology, the government improves regulatory frameworks and streamlines procedures for on -site power generation, and the public and private sectors work together to achieve mutual energy objectives, then competitiveness and productivity will improve, contributing to long-term, broad-based economic growth and employment generation.