Haïti: Enjeux et Options dans le Secteur de l'Énergie

Public Disclosure Authorized Report No. 3672-HA Haiti: Issues and Options in the Energy Sector June 1982 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Repori of the Joint UNDP/Aorid Bank Energy Sector Assessment Program This document has a restricted distribution. Its contents may not be disdosed without authorization from the Government, the UNDP or the World Bank. t . t p- f 8 f iow; ABBREVIATIONS M thousand ST short ton B barrel B/D barrels per day Toe tons of oil equivalent kWh kilowatt hour US cents Ton metric tonne TABLE OF CONVERSION FACTORS Energy Form Unit 106 Btu/unit Primary Sources: Hydropower Gwh 10,195 Wood-Air dried Mm3 9,722 Bagasse (50% humidity) MST 8,100 Secondary Electricity Gwh 3,412 Charcoal MT 28,173 LPG B 3.7 Gasoline B 4.9 Kerosene/jet fuel B 5.4 Diesel Oil B 5.5 Fuel Oil B 5.8 Ton of oil equivalent toe 39.68 This report is based on the findings of an energy sector assessment mission comprising Ms. Ursula Weimper (Mission Leader) and Messrs. L. Sayn-Wittgenstein (Consultant - Forester), C. Robertson Lavalle (Consultant - Electric Power). Report No. 3672-HA HAITI ISSUES AND OPTIONS IN THE ENERGY SECTOR June 1982 This is one of a series of reports of the Joint UNDP/World Bank Energy Sector Assessment Program. Finance for this work has been provided, in part, by the UNDP Energy Account, a'nd the work has been carried out by the World Bank. This report has a restricted distribution. Its contents may not be disclosed without authorization from the Government, the UNDP or the World Bank. TABLE OF CONTENTS Page No. Preface I. ISSUES AND RECOMMENDATIONS ......................... . 1 II. PROSPECTS FOR DEVELOPING INDIGENOUS ENERGY RESOURCES 16 Resource Overview ................ 16 A. Forest Resources............. 16 1. Identification of the Problem ................. 16 1.1 Deforestation... .............. 16 1.2 Ivnoy...................... 17 1.3 Growth Rates ............................. 18 1.4 Projected Wood Balance to 1985 ........... 18 2. Reforestation Strategi........................ 19 2.1 Wood Plantations ......................... 19 2.2 Treatment and Protection of Existing Forests...................... . 21 2.3 Erosion Control......................... 21 3. Recommended Action ......................... . 22 B. Fossil Energy Resources....................... 23 1. Oil and Gas Prospects......................... 23 1.1 Status of Exploration.................... 24 1.2 Recommended Strategy for Exploration ..... 25 2. Lignite.*..*., ......................... 25 2.1 Resources - Maissade..................... 25 2.1.1 Camp Perrin.................... ... 27 2.2 Mining Project ........................... 28 2.2.1 Maissade .......................... 28 2.3 Use for Power Generation................. 29 2.4 Recommended Strategy for Exploration..... 31 C. Hydropotential and Power Expansion Program**...... 32 l.Invnoy*........................ 32 2. Sedimentation of Peligre...................... 33 3. Power Development Strategy.................... 34 3.1 Expansion 1980-1990 ....... ............. 34 3.2 Long Term Generation Alternatives........ 35 D. Alternative Energy Options........................ 36 1. Geothermal Potential...,......... ..... 36 2. Agricultural Waste Products.................. 36 3. Solar Energy ........ .......... 38 4. Wind Power .......... ....... *....*..*.* 39 5. Conclusions ............................. .... * 39 - ii - Page No. III. DEMAND MANAGEMENT STRATEGIES .......................... * 42 Aggregate Demand: Past trends and Projections.. ...... 42 Advantage of Demand Management................ ........ 43 A. Energy Pricing: Present Levels and Recommended Action.... .................... .0 . 43 1. Wood and Charcoal............................. 44 2. Petroleum Products. ............... .... . ..... . 45 3. Electric Tariff Structure.................... 47 3.1 EdH's Financial Situation .............. .. 48 B. Other Supply and Demand Management Actions........ 49 1. Energy Supply and Conversion .o.o............. 49 1.1 Wood Production . *....... 49 1.2 Conversion to Charcoal .................. 51 1.3 Electric Power Generation and Distribution ............ .............................. 52 1.4 Bagasseoo ...... .................. so* ..... *a .... &**.. 53 1.5 Petroleum Supply ... . .... . .... ... ... *.. . 54 2. Energy Efficiency in Final Consumption........ 55 2.1 Traditional Sector*...................... 56 2.1.1 Efficient Stoves ..... ....Q........f 56 2.2 Modern Sector ..... ... ..... . .... S... .. 57 2.2.1 Aggregate Demand for Oil and Electricity ... .................... 57 2.2.2 Sectoral Distribution of Consumption.. ...... ...... .... .. 58 a. Industrial Sector .............. 58 b. Transport .................... . 60 c. Residential and Commercial Sector ...................... 61 3. Projections ......................... .... . 0.... 61 4. Recommended Demand Management Actions ........ ... 62 IV. Institutional Issues.................................. 64 1. Present Institutional Organization.......*.... 64 a. Secretairerie d'Etat du Plan .........*.... 64 b. Department des Mines et des Ressources Energetiques ................ ............. . 64 c. Department of Agriculture, Natural Resources and Rural Development (DARNDR). 66 d. Office of Science and Technology .......... 66 e. Institut de Developpement Agricole et Industriel............................... 66 f. Electricite d'Haiti ......... .. .......... 66 g. Other Institutions ........... .......... . 67 2. Institutional Changes .... ............... .... 67 a. Advisory Commission....................... 67 b. Statistical Energy Unit ................... 67 c. Economic Evaluation Unit.................. 68 - iii - Page No. d. Forestry Service. . .... ......... . . . . . . . . 68 e. Division of Energy Resources.............. 68 3. Training,t ................................. 68 4. Operating Budget .............. e.. . .s. . . . . . ... .s . ... 68 5. Legal Aspects. ...................... ... .. .. ** 68 V. INVESTMENT REQUIREMENTS AND FOREIGN ASSISTANCE ........ 70 ANNEXES Annex 1 Statistical Data Table 1 1979 Energy Balance - Original Units ......... 72 Table 2 1979 Energy Balance - 10 Btu................ 73 Table 3 Primary Energy Consumption 1973-1979......... 74 Table 4 1979 Final Energy Utilization ............... 75 Table 5 Value of Petroleum Imports* ..... ooe...... .... 76 Table 6 Petroleum Consumption by Products 1973-80 .... 77 Table 7 Structure of Petroleum Consumption by Products ........... ............. 78 Table 8 Petroleum Consumption by Sector .............. 79 Table 9 Power Generating Facilities.................. 80 Table 10 Electric Power Sales 1971-1980................ 81 Table 11 Charcoal Prices ...... . ..... ........ o..... 82 Table 12 Oil Product Retail Prices 1974-1981...*...... 83 Table 13 Oil Product Price Structure 1980.............o 84 Table 14 Electric Tariffs 1978-1980................... 85 Table 15 Maissade Lignite - Preliminary Mining Cost ... 86 Table 16 Hydro Potential,,**.*..,,,,, ........... 87 Table 17 Oil Products Constant Retail Prices .......... 88 Table 18 Price Differential Between Gasoline and Diesel............................ so ......... 89 Table 19 Oil Demand Projection to 1985 under Conservation... ... . .............. . . ...... . 90 Table 20 Electric Sales Projections to 1986........... 91 Table 21 Average Monthly Radiation as Measured at Dain............................. o.40460 92 Table 22 Average Wind Velocities...................... 93 Annex 2 Individual Forestry Programs 1. Department ofAgriculture.......................... 94 2. HACHO .. ........... ... o .................... 94 3. Operation Double Harvest ............ o ...........o 96 4. USAID*oo. ...................... .o.o ..... o..... .o.......... 98 5. CIDA.o...... .....................................* 98 Annex 3 Terms of Service Contracts ................ oo ..... .. 100 MAP 1. IBRD 15722 I. ISSUES AND RECOMMENDATIONS 1.01 Haiti is a small, open economy, with a markedly dual structure: a large agricultural sector, characterized by low productivity and dense population, and a modern, urban sector of rapid growth during the 1970's, which has a high import content. Although there has been moderate growth of the economy during the decade of about 3.6% per year, income per capita in Haiti (US$260) remains the lowest in the Western Hemispnere and three-quarters of its population live in dire poverty, with incomes per capita below US$100. 1.02 Agricultural production has been stagnant and as a result its share in GDP has decreased from 49% in 1970 to about 39% in 1979. Future productivity of the sector is threatened by a severe soil erosion problem. The pressure on land and the indiscriminate felling of trees for energy has reduced the land's protective forest covers and in many areas the land has lost its ability to retain moisture and regulate water run-off. The result is progressive desertification and periodic agricultural crisis caused by floods and droughts. 1.03 The manufacturing and construction sectors are not large enough to compensate for the poor performance in agriculture or to provide pro ductive employment for migrants from rural areas. Most dynamic in recent years has been the assembly industry, which benefits from low-cost labor, but whose expansion depends on market conditions in the USA and Europe. The industrial sector generated 24% of GDP in 1979 and had an average growth rate in recent years of 5.6% per year; the share of the tertiary sector was 37% in GDP, and its growth-rate was 3.6% per annum. 1.04 The poor performance of agriculture, the high import content of the modern sector and the progressive deterioration of the terms of trade have caused a growing deficit in the trade balance, which is only com pensated in part by the inflow of foreign transfers in the form of public grants and private remittances from Haitians abroad. Medium term projec tions indicate that the deficit in the trade balance is likely to increase from US$ 128 million in 1980 to US$300 million by 1985. The Bank has already suggested a shift in economic policy toward agricultural and other raw material production to create the base for a backward link age of the industrial sector and continued foreign assistance to supple ment the low level of domestic savings. Energy Sector 1.05 Haiti has an adverse energy position. The main characteristics are: (i) the weak natural energy base of the country, aggravated by the rapid depletion of its forest resources; (ii) the growing energy inten siveness of the modern sector of the economy and the high dependence of this sector on imported petroleum; (iii) the subcritical size of its energy systems, which constrains the choice of least cost solutions; and (iv) the weakness of the country's institutional structure and the scar city of technical and economic capability to handle the problems. - 2 - 1.06 It is therefore essential that the country develop effective and carefully balanced programs in supply development, demand management, institutional building, sector organization and pricing, and this report assesses these aspects of the energy sector. Haiti will continue to need external support and although in recent years bilateral and multilateral agencies have done a great deal in clarifying crucial issues and in pro ject identification and formulation, there is a need for coordinated project implementation to enhance the effectiveness of these efforts and avoid duplication. Energy Balance 1.07 Primary energy requirements rose by about 5.6% per year during the past decade, or 1.6 times the rate of economic growth. Per capita consumption (about 270 kg of oil equivalent in 1979) puts Haiti among the least energy-intensive economies of the world. The demand structure reflects the relatively small size of the modern urban sector. Although the demand for commercial fuels has grown at high rates during the 1970's (10% per year for oil, 16% for electricity and 15% for charcoal), these fuels supplied less than 25% of the final consumer needs in 1979. (Table 1.1). This is so because a significant portion of the industrial, artisanal and commercial sectors use bagasse and wood as the main energy source and because commercial energy is too expensive a commodity for the rural population, which depends entirely on fuelwood for is energy needs and derives an income from the production and sale of charcoal. .Another indication of the market's segmentation is given by the fact that 93% of oil and electricity available for final consumption is used by industry and transport, although these sectors' share in total final energy demand is only 41%. -3 - Table 1.1 1979: Sectoral Final Energy Consumption Total Consumption Sources of Energy (%) Economic Sectors 1000 toe % Non- Charcoal Electricity Oil Total Commercial 1/ Residential 447 38.6 91.0 6.8 1.3 0.9 100.0 Industry 361 31.1 73.9 - 2.1 24.0 100.0 Transport 113 9.7 - - - 100.0 100.0 Others 239 20.6 84.9 12.7 0.7 1.7 100.0 TOTAL 1160 100.0 75.5 5.3 1.3 17.9 100.0 1/ Includes fuelwood and bagasse. Source: Statistical Annex - Table 2. 1.08 Domestic energy resources provide 83% of total energy primary requirements. (Table 1.2). Wood is by far the most important source, followed by bagasse and hydropower. The energy deficit of about 17% is met by imported petroleum products. Although still modest in volumetric terms (4.8 thousand barrels per day in 1979), the cost of these imports has become a severe burden to the economy. The oil import bill was US$32 million in 1979 and is estimated at US$61 million in 1980, equal to 23 and 29%, respectively, of the country's export earnings. If past trends continue, the energy deficit would increase to 22% of total supplies by 1985 and if the gap were to be supplied by imported petroleum, the volume of these imports would reach 9 thousand barrels per day and their cost, in constant 1980 prices, would absorb at least 45% of Haiti's projected export revenue. -4- Table 1.2 1979: Structure of Energy Supply (in thousand of tons of oil equivalent and ) Gross Supply Conversion Energy Sector Con- Available for sumption & losses Final Consumption Mtoe % Z of Gross Mtoe % of Gross Mtoe X - Supply Supply Domestic 1132.4 83.1 - 152.2 13.4 948.3 81.8 Wood 980.0 71.9 17.2 107.5 11.0 811.4 70.0 Charcoal - - - - - 61.1 5.3 Bagasse 104.5 7.7 100.0 40.3 - 64.2 5.5 Hydro 47.9 3.5 100.0 4.4 9.2 11.6 1.0 Imported Oil 229.8 16.9 9.1 12.6 5.5 207.5 17.9 Thermal Power - - - - - 3.9 0.3 TOTAL 1362.2 100.0 - 164.8 12.1 1159.7 100.0 Source: Statistical Annex - Table 2. 1.09 The efficiency with which energy is transformed and used in Haiti merits special scrutiny in view of the growing constraints on domestic energy supplies and the economic burden of foreign energy imports. The estimate in Table 1.2 indicates that about 12% of primary gross supply of energy is consumed and lost in conversion processes. The most important loss occurs in charcoal production, although only 1.7% of wood was converted into charcoal in 1979. With progressing urbanization and exploitation of farther removed forests, the share of conversion will increase and result in accelerated depletion of the resource base. To limit this trend, urgent measures are required to establish plantations near urban centers, thus reducing the incentive for producing charcoal and to adopt better conversion methods. With respect to bagasse, the table shows that alaost 40% of this fuel is lost because of inefficient handling and burning in sugarcane processing plants; similarly, it becomes evident that the losses in power transmission and distribution exceeded in 1979 the amount of electric power thermally generated. 1.10 On the other hand, fuelwood is used with very low efficiency by the final consumer. In this report, a 7% to 15% efficiency range was assumed, which is less than half of the estimated average efficiency with which fuels are used in Haiti. This indicates that considerable savings in fuelwood consumption could be achieved through the dissemination of more efficient stoves. -5- Development Projects 1.11 To realize a more sustainable energy position over the longer term, Haiti should follow a two-pronged approach. First, through appro priate demand management and stimulation of higher energy efficiency, increases in energy consumption should be curtailed in a manner which does not impair economic growth. Second, to the extent consistent with efficient resource allocation, indigenous energy resources should be developed. Since Haiti will not be able to support more than a limited number of projects during the next five years due to the shortage of trained people, it is important to distinguish between those which will have an immediate impact on the two crucial issues of Haiti's energy problem: depleting forest resources and increasing cost of oil imports, and those which are important for consideration in the longer-term. PROJECTS WITH IMMEDIATE IMPACT A. Indigenous Resource Development Forest Resources 1.12 There is a general acknowledgement that the rapid disappearance of Haiti's forest cover involves an environmental problem of the first order that threatens the long-term productive capacity of the nation. Athough statistical information is inadequate, several studies have provided conclusive evidence of the growing imbalance between the natural growth rate of wood in existing forest areas and the domestic consumption of wood. The estimate contained in this report indicates a relationship of 1:2. Current reforestation programs are insufficient to introduce a significant change in this situation. The depletion of this resource is further aggravated by the continuing and uncontrolled expansion of agriculture into forest areas. To overcome the problem and assure a continued supply of fuelwood and charcoal, Haiti must proceed with a determined reforestation policy, including protection of remaining forests and new plantations. However, there is a justified concern that energy plantations would compete with land required for agriculture. The issue must be resolved through the definition of a land use policy and through the formulation of a strong agricultural extension program to increase the productivity of land. As a first step, a national inventory and mapping program should be completed, showing current land cover and use. It is recommended that this survey be started on a priority basis on areas suitable for fuelwood plantation development and later be expanded to cover the entire country. Further, the following actions are recommended: (a) Identification and eventual establishment of forest plantations of fast growing species which will supply a significant portion of the nation's needs for charcoal and fuelwood. Fully implemented the program would cover between 100,000 and 300,000 ha and should be located near the major consuming centers. An immediate goal should be the establishment of a 10,000 ha - 6 - plantation near Port-au-Prince, with the objective of meeting about one-third of the capital's charcoal demand by 1990. (b) Immediate action to sharply reduce erosion and sedimentation at Peligre and thus to protect Haiti's hydroelectric resources. Requirements include the control of grazing and cultivation, the planting of grasses on steep slopes, and reforestation of the Artibonite headwaters, in conjunction with orderly agricultural development. (c) Identification of several blocks of partially forested land suitable for wood production which could be improved by imme diate institution of basic forest management practices including fire control and elimination of illegal felling and cattle graz ing. After a short period, stand improvement and planting could be initiated in these areas, with the double objective of energy production and industrial utilization of wood. The pine forest of La Selle should be considered for demonstration of these policies. The long-term objective should be to establish such forest management on approximately 100,000 ha. The Northwest Region should be included in the program. (d) Establishment of plantation programs to identify suitable tree species and to demonstrate results for wood production and erosion control. Provisional estimates of trial plantation sizes are: Location Hectare Central Plateau 200 North-West (dry sites) 100 North, or North-East (mountain sites) 100 North, or North-East (plain) 100 Cul-de-Sac 100 Southern Regions 200 Expansion of Power Generating Capacity 1.13 For planting-up purposes, electricity sales in the Port-au Prince market have been projected by the public utility to grow at 13.1% per year during the period 1980-1986, on the basis of assumed economic growth of 4%. This compares with an actual average rate during the past decade of 16.4% in electric sales and 3.6% in GDP. Even if GDP does not grow at 4 percent, because of some industrial projects not materializing, the projections appear reasonable because demand growth is determined more by the supply capacity of the utility than by the characteristics of the market, as no more than 34% of the population in Port-au-Prince has access to electricity. The projections imply that generation requirements will double during the period and that maximum demand will increase from 54 MW in 1980 to 106 MW in 1986. For the decade as a whole, increase in generating capacity is estimated at 140 MW. 1.14 The analysis of alternative primary energy sources available for power generation indicates that the development of the hydropotential is the least cost solution for expanding generation in the interconnected system. Table 1.3 further shows that generation based on domestic lignite may not be competitive with imported coal, even if sufficient reserves can be proved to justify the installation of a steam power plant. Table 1.3 Cost Estimate for Alternative Power Generation Size Investment Unit Cost Estimate Type of Plant Cost Fuel Capital Total MW (in 1981 US$/KW) (c/kWh) (C/kWh) (a/kWh) Hydro Plants 5-32 2,200 or less - 4.9 4.9 Diesel Units Bunker C fueled 7-14 800 6.2 1.9 8.1 Steam Plants Imported Coal-fired 30.0 1,500 3.0 3.5 6.5 Domestic Lignite-Fired Low Reserve Estimate 15.0 3,000 4.3 7.3 11.6 High Reserve Estimate 30.0 1,700 4.3 3.9 8.2 Source: Table 2.6 1.15 Haiti's undeveloped hydropotential is estimated at about 120 MW. The largest portion is located on the Artibonite river, downstream from the existing Peligre dam, and on an upstream tributary, the Guayamouc river. Some 100 MW, with an average aggregated generating potential of 600 GWh per year, could be developed and connected to the national grid. In addition, there are a number of mini and micro sites, some of which could be developed to supply isolated networks. 1.16 Electricite d'Haiti envisages the development of the hydropoten tial on the Artibonite and Guayamouc rivers during the 1980's. As a first step, its investment program for 1981-1986 establishes total expen ditures at about US$250 million, allocated to the following projects: (a) Feasibility studies for the proposed hydropower plants and construction of the largest of the four possible sites on the Artibonite (La Chapelle) and of one dam on the Guayamouc river, which not only is the least cost option for power generation but also will significantly reduce the inflow of erosion material into the Peligre Lake. -8- (b) A 35 MW increase in the thermal generating capacity to meet the incremental demand of the interconnected system until the hydro plants are commissioned. These plants will be diesel units, Bunker C fueled. (c) Renovation of the distribution system, and enforcement of measures against thefts to reduce losses in the system from 28% in 1979 to at least 19% in 1986. 1.17 In addition, the following actions are recommended: (a) Further investigation on the feasibility of developing the remaining potential on the Artibonite-Guayamouc basin, taking into account the cost of thermal capacity that has to be installed as back-up for the hydro system and com paring these costs with the coal alternative. (b) Continue the feasibility study for the construction of a dam on the Artibonite river, upstream from Peligre, to further reduce the siltation problem of this reservoir and generate electricity. EdH should also obtain additional information on the hydrology of other upstream river basins to determine whether dams could be built in this area in the future. (c) Initiate studies on the alternatives available for long term expansion of the generation capacity of the system. In the 1990's, the system is likely to require a yearly increment in capacity of 15-20 MW. This would allow the commissioning of commercial size steam power plants, fueled with imported coal or imported heavy oil. The cost of these alternatives will have to be assessed in the light of relative price evolution and transport costs of these fuels. (d) The subsidy to the isolated electric systems of the interior must be carefully monitored. A realistic cost benefit analysis should preceed any future expansion. The development of mini-hydroplants should be encouraged whenever possible, to reduce the consumption of diesel oil in these systems. (e) Rural electrification on a large scale should not be con sidered at this time, with the exception of the lower Artibonite valley, where pumping water for irrigation will achieve a significant increase in agricultural productivity. Hydrocarbon Exploration 1.18 Past exploration efforts have not been successful. Two companies are engaged at present in exploration, following a long list of previous contractors which in total have drilled 11 wells over a total - 9 - prospective area of 20,000 km2 Expert opinion is that prospects appear to exist at depths of more than 5,000 meters in the Artibonite and Cul de-Sac basins and in the Les Cayes area in the southern peninsula. To accelerate exploration, the Government should request technical and financial assistance from international agencies to identify exploration projects that can attract private interest. The preparatory work for the promotion of new exploration includes: (a) Synthesis of all geological information available from past and present exploratory activity, to better define the geological structure and help to identify drillable prospects. An exchange of information with the Dominican Republic would shed additional light on the deeper geolo gical structure of the island, as oil has been found in the Enriquillo Graben and deep drilling is progressing. (b) Review of the present hydrocarbon legislation and Service Contracts to bring them into line with modern petroleum operation. Model contracts and appropriate tax regimes should be adapted to local conditions. Further, the service contract with Crux International should be submitted to legal scrutiny as the company appears to have withdrawn from further activities in Haiti. B. Demand Management 1.19 In view of the very limited resource endowment, the most immediate options available to Haiti are pricing policies and other measures to increase the efficiency of energy use, and substitute imports of high cost petroleum products by imports of cheaper and heavier oils and coal. Pricing Policies 1.20 Pricing policies and fiscal incentives must be appropriated to the general objectives of supply development and demand management. Because of Haiti's highly skewed distribution of income, conflict between prices and purchasing power of the poor population can arise, which must be resolved. (i) Petroleum 1.21 All oil product prices are based on border values and there are no direct subsidies. In recent years, the Government has progressively reduced its taxes on all products but gasoline to shield domestic consumers from the increase in world market prices. The taxes on gasoline were retained for conservation reasons. However, this effect has been partially eroded by substituting diesel for gasoline vehicles. Although diesel vehicles are more efficient in terms of volumetric fuel consumption, their investment cost is higher. Under current international price relationships the diesel option is economic for - 10 - intensive uses - such as public transport and freight, - but it is an expensive means of providing for private transport needs. 1.22 To avoid further distortion of the market, the Haitian Government decided in late 1981 to progressively increase taxes on transport diesel to realign over the medium term domestic relative prices for gasoline and diesel to world market ratios. Control will have to be exercised to avoid the use of the lower priced industrial diesel oil or kerosene for transport purposes. - 1.23 Complementary measures to enhance conservation in the private transport sector should be envisaged, such as: (a) Discourage the import of vehicles for private use. (b) Eliminate all tax exemptions granted to official entities on import duties and excise tax for vehicles and fuels. (c) Increase the annual licensing fee on automobiles, imposing a higher levy on privately-owned diesel vehicles, until the gasoline/diesel price ratio has been fully realigned. (ii) Electricity 1.24 For appropriate electricity pricing, the tariff should reflect the incremental opportunity cost of expanding the service and generate adequate funds for financing the expansion of the system. In January 1977, the public utility adopted a new tariff structure based on the principle of marginal pricing. Some months later, it was modified to allow social pricing below a certain level of consumption for low income families and small industrial users. A fuel adjustment clause was implemented at the same time. EdH's average revenue rose from USQ 6.5 per kWh in 1978 to an estimated US, 11.2 in 1981, i.e. an increase of about 20% per annum. The adequacy of the tariff structure is to be reviewed in early 1986. It is recommended that in this process consideration be given to the level of cross subsidization among categories of consumers and between Port-au-Prince and the provinces, and that marginal costs be assessed in the light of the new investments. 1.25 The present financial situation of the electric utility is com fortable although the rates of return were only 4.4% and 5.5% in 1979 and 1980, lower than the respective 7% and 7.5% rates of return established as targets by the government and the electric corporation in consultation with IDA. Internal cash generation has provided 54% of the total construction expenditures of EdH in the last fiscal year. Financial forecasts show that for EdH to earn 8% on its revalued assets during 1981-1986, its average revenue per kWh need to be raised by about 10% per year. The corresponding revenues would enable EdH to contribute internally about 35% toward its investment program during that period. - 11 - (iii) Fuelwood 1.26 For consumers/harvesters wood appears to be a free good, but a zero price does not reflect the economic cost of depletion of the forest resources. The only tax in the production of charcoal is a levy of about US$1.65 per ton, imposed when cutting green trees. This is too low to finance effective forest management or to encourage the establishment of plantations. There is no doubt that the cost of wood plantations will result in a much higher price for wood. Therefore, the price of charcoal will have to be increased through higher taxation. Compensatory measures will have to be found to allow the poorest segments of the population in deforested areas to continue purchasing their required needs. Demand Management Projects 1.27 Reduction of losses and thefts in power distribution: In 1979, these losses exceeded the amount of electricity generated in thermal units. Thefts represent a high portion of the 28% of energy lost. Investment in the renovation of the distribution system of Port-au-Prince is therefore well justified and the law against illegal connections must be fully enforced. 1.28 Energy audits in large industrial establishments are required to assess immediately attainable energy savings, by increasing the efficiency of energy use in existing equipment; these audits should cover steam generation and distribution equipment, electricity use in machinery and lighting, etc. 1.29 Technology changes: The cement factory has proposed an expan sion of its productive capacity, conversion of its manufacturing process to the dry technology, and replacement of residual oil for imported coal as the main energy source. The dry technology reduces energy input per unit of output by almost 50% and the substitution for coal could lead to important foreign exchange savings. Given the significant impact of this project on Haiti's energy balance, the project should be evaluated as soon as possible. 1.30 There are a number of industrial groups that have a good growth potential. These should be evaluated to assess retrofitting possibili ties and installation of new efficient equipment. 1.31 Mass transport system: Major measures in this area would be to increase the number of buses in the Port-au-Prince area and introduce interurban services, implement traffic regulations to reduce congestion in flow and curtail the import of vehicles for private use. 1.32 Efficient Stoves: The introduction of an efficient stove design appropriate to local conditions could reduce the energy intake for cooking by as much as half of the required in the traditional 3-stone fireplace. A preliminary analysis indicates that even if the dissemination is fully subsidized and only a 5% increase in fuel efficiency is achieved, the program would have a positive return relative - 12 - to the cost of new wood plantations. A survey should also be carried out on the type of equipment most commonly used by the commercial and artisenal sectors, to assess the technical modifications required to improve their efficiency. C. Institutional Development 1.33 Haiti's energy situation will continue to deteriorate unless the Government recognizes the urgency of the issues and commits itself to decisive action on the above recommendations. It is felt that the implementation of the energy program is constrained more by shortcomings in the decision making/implementation process than by the availability of resources. In other words, there is a possibility for Haiti to obtain larger amounts of financial and technical foreign assistance, but, at the present, the country lacks the ability to effectively and productively utilize the additional resources that could be made available to it. To improve this situation, the Government must agree on and define its energy objectives. It should decide upon a strategy and on the programs to carry out that strategy. An implementation schedule should be set, and the agency responsible for each program should be designated. Finally, these agencies should be given the necessary legal authority and a minimum of financial support to execute their responsibilities. 1.34 To assist the Government in the planning and implementation process, the mission recommends the creation of an Advisory Committee, which would be made up of the heads of the agencies in charge of energy programs, of technical public and private experts, and representatives of interested international aid agencies. Furthermore, it is suggested that an Energy Statistical Unit be established to provide the quantitative framework for the decision-making process. 1.35 The technical and managerial capability of the individual agencies must be strengthened, particularly the Forestry Service and the Division of Energy Resources. At a first step, it is suggested that an Economic Evaluation Unit be set-up to help select those projects with the highest socio-economic returns and to advise the technical departments of the Ministries on organizational schemes for project development. Whenever possible, the private sector should be encouraged to participate in project execution and operation. Special attention should be given to the utilization of communal and cooperative organizations in rural areas. In addition, the individual services should contract a few high level outside experts and managers to allow immediate execution of priority projects and provide for on-the-job training of present staff. OTHER PROJECTS A. Indigenous Resource Development Agricultural Waste Products and Solar Water Heating 1.36 Haiti's large agricultural sector offers opportunities for con verting agro-industrial waste products into usable forms of energy. It - 13 - is suggested to direct efforts towards the identification of specific localized projects. This requires assessment of the volumes and geographic location of potential materials, such as those derived from coffee, cotton, sugar cane, vetiver, and solid urban waste; evaluation of energy end-uses, choice of most appropriate technology and economic and financial analysis. 1.37 Large consumers of hot water should be made aware of the economic advantages of solar water heating systems. They have proven to be competitive in many countries in applications that range from hot water for households, hotels and hospitals, to pre-heating of low-medium temperature process water in industries. These systems can be installed in new buildings or retrofitted into existing ones. They can be used alone or in combination with electric or fossil-fueled heaters. It is suggested that the Government should evaluate potential savings of commercial energy that can be achieved through the diffusion of this technology and provide the private sector with the required technical assistance. Lignite: Maissade and Camp Perrin 1.38 Lignite is found near the town of Maissade in the Central Plateau and in two locations in the Southwest peninsula. Maissade is by far the most important field, although the quality of its lignite (high ash and sulphur content) makes it suitable only for industrial use. Camp Perrin is a very small field, but its lignite has the right quality for use as cooking fuel. 1.39 The structure of Maissade has been determined by two geological surveys which indicate the existence of several small deposits in which lignite seams with a thickness of 1-2.5 meters are buried at depth of up to 20 meters. Only one of these deposits has been evaluated; proven reserves are 750 thousand tons and the ratio of lignite to overburden is 1:10.5. A preliminary cost estimate for capital intensive open cast mining of this deposit indicates that lignite could be recovered at about US$36/ton. Taking into account its calorific value (2,500 kcal/kg), Maissade lignite would only be competitive with coal should the landed price of this product exceed US$100/ton. 1/ (The current landed cost for imported coal is estimated at US$ 70/ton.) The intensive exploitation of the deposit for power generation can therefore not be justified under present economic conditions. 1.40 However, further exploration is necessary to determine the extension of the deposits, the depth of the seams, their thickness and 1/ Based on relative calorific values of coal and lignite. This figure does not include the capital cost differential between lignite fueled and coal fueled power plants. - 14 - the quality of the coal. 1/ This involves the following action: (a) topographic mapping of the area; (b) synthesis of the results from the previous exploratory campaigns; (c) intensive exploration of deposits already detected and further extensive exploration of the rest of the field. A detailed feasibility study of the mining project should be made once the new information has been compiled. It should include the evaluation of alternative industrial uses for the lignite. 1.41 The survey on Camp Perrin indicated that the deposit could con tain at best some 100,000 tons. The Ministry of Mines and Natural Resources intends to assess whether this lignite could be mined as a cottage industry to provide a fuel for household cooking. Despite the probable size of the deposit, it could provide for the household requirements of the cities of the region. Other Renewable Resources 1.42 Several public institutions in Haiti are engaged in research on renewable energy technologies. In view of the scarcity of technical and managerial resources, it is suggested that the range of programs be narrowed, by selecting those that might have the highest impact on the rural sector, reducing deforestation and increasing the productivity of agriculture, such as solar crop dryers and cookers, wind water-pumping, and mini-hydroplants. The strategy should include research and development to adapt these technologies to local conditions, build-up of domestic capability in repair, maintenance and construction of hardware, extension of their use and training. B. Demand Management 1.43 Higher efficiency in Bagasse use: Only one industrial plant cogenerates steam and electricity from bagasse to satisfy the energy requirements in its sugar cane processing facility. There are two other industrial plants in operation that use bagasse to generate heat, but which purchase diesel oil for power generation. It is therefore recom mended that the industry be studied to determine whether it is feasible to increase electric generation from bagasse and supply a surplus to the national grid. It would require investment in power generation equipment and in bagasse handling facilities. 1.44 Residential and Commercial Sectors: A national educational campaign informing the public on the energy problem and indicating saving opportunities would be helpful in obtaining the cooperation of the popu lation in the demand management program. 1/ The German aid agency has in principle agreed to finance the second phase exploration of Maissade. - 15 - 1.45 The prevailing method of producing charcoal in Haiti is in tra ditional earth mounds. There are no obvious gains to be expected from introducing modern charcoal making processes, because few areas have the wood concentrations to warrant substantial investment in new equipment. More efficient methods, including the recovery of pyrolytic oils, should be considered in future energy plantations, and in areas where forest management programs have been established. INVESTMENT REQUIREMENTS AND FOREIGN ASSISTANCE 1.46 The public energy investment requirements for the next five years were conservatively estimated at about US$300 million, 82% of which (US$248 million) correspond to the power development program; 11% (US$33.4 million) to forestry projects; 2.0% (US$6.2 million) to other resource assessment and development; and 5% (US$15.5 million) to demand management and institutional building. 1.47 Public finances already depend heavily on foreign resources and a significant portion of domestic resources are earmarked as counterpart funds. The increased investment effort involves important decisions in scarce resource allocation and, therefore, coordination of objectives between Government and foreign aid institutions becomes crucial. - 16 - II. PROSPECTS FOR DEVELOPING INDIGENOUS ENERGY RESOURCES Resource Overview 2.01 Haiti has a very limited resource base. At present, only wood and hydroelectricity are being produced. About one-third of the nation's hydropotential has already been developed; the rest consists of a number of small sites with an aggregate potential of 110 MW which is planned to be developed during the present decade for connection to the integrated system. Some isolated centers can be supplied with energy from a number of micro hydro sites. Although the country has not yet been fully eva luated, there are modest prospects for discovering significant accumu lations of oil and gas. Small lignite deposits have been found, but they are costly to exploit because of their size and the overburden of unpro ductive material that covers them. There appear to be no high tempe rature geothermal prospects. 2.02 As neither fossil fuels nor hydroelectric power can greatly increase their share in the long term supply of energy, there is no reason to expect a major change in the nation's heavy dependence on wood. But the potential supply of wood is rapidly being depleted. Large areas of Haiti have been deforested in recent decades and few timber reserves are left. The clearing of land for agricultural purpose and the felling of trees for fuelwood and charcoal are the main causes. 2.03 However, the necessity for re-establishing Haiti's forest cover goes far beyond energy reasons. Deforestation has caused soil erosion which is so serious that the long term productive capacity of the land is threatened. In many areas, the land has reduced its ability to retain moisture and regulate water run-off; the result is desertification and loss of agricultural productivity on which depends the livelihood of three quarters of the Haitian population. 2.04 The first section of this chapter describes the present disequi librium between wood growth and depletion and proposes a strategy to reverse the situation. The second part analyzes the prospects for fossil and hydropower energy development. The last section describes alter native energy technologies that have a potential to supply small scale energy needs. A. Forest Resources 1. Identification of the Problem 1.1 Deforestation 2.05 Statistics on the rate of deforestation are inadequate, and would, in any case, be difficult to collect because deforestation is not through systematic clearcutting but through a rapid degradation of the forest by partial cutting and the destruction of forest regeneration by agriculture and grazing. - 17 - 2.06 DARNDR 1/ has started preparing some maps which show the rapid rate of disappearance of pine forests. Another indication of the rate of deforestation is provided by statistics in the UNDP report on the Plateau Central, *j which show the change in forest area between 1956 and 1977. The authors include several qualifications with their tabulations, but all trends are consistent and negative. Total forest area was reduced by 59% during the period studied; in the case of dense pine stands the reduction was 99%. All sources agree that an environmental problem of the first order is involved. 1.2 Inventory 2.07 There is no systematic forest inventory for Haiti, but all official statistics confirm the general impression that there is little forest left. A recent report 3/, gives the total forest area of Haiti in 1978 as 243,000 ha, or 9% of total land area; the same source states that 926,500 ha or 35% of Haiti should properly be covered by forest, presumably a reference to the large areas of degraded forest, deforested woodland and land under cultivation, but unsuitable for this purpose. If we describe these areas as "open, degraded woodland" and assume that they cover 683,500 ha (926,500 ha minus 243,000 ha) then the basic forestry statistics of the following table result: Table 2.1 DISTRIBUTION OF FOREST AREA (1978) Forest Type Area (ha) Coniferous 73,000 Broad-leaved 150,000 Mangrove 20,000 Open degraded woodland 683,500 2.08 The figures in the above table are only rough estimates. They exclude the well-developed culture of fruit trees, such as mangoes, in the good agricultural areas, though this is unimportant in the context of an energy survey because, while these 'orchards" yield some wood, their primary purpose is food production. On balance, however, the table probably over-estimates the size of the forest area, because it is based on estimates for 1978, and deforestation continues at a rapid pace: land is being cleared for agriculture, mangrove stands are being removed for shoreline development, and charcoal makers are moving from one region to another, following the disappearing forest. (For example, many charcoal 1/ Ministry of Agriculture and Rural Development. Ti Report "Projet de Mise en Valeur du Plateau Central, "UNDP", September 1980. 3/ DARNDR, 1980. - 18 - producers currently in the Northwest have arrived in recent years from the Gonaive area). 2.09 In this report, it is assumed that the forest area is shrinking at an annual rate of 5%. This could well be an underestimate; in 1976, FAO estimated that Haiti's forests would disappear in ten years and UNDP indicated in its study a 59% reduction between 1956 and 1977, which is equivalent to an annual decline of slightly less than 7%. This rate of deforestation is extremely high and can be compared with the current decline in forest area in Nepal and in several provinces of Thailand. 1.3 Growth Rates 2.10 National forest inventory figures giving standing volume per acre are unavailable but a growth rate of 1 m3/ha/yr is assumed for degraded, open woodland; this value has some basis in estimates for open woodland in the southern Sudan. A growth rate of 5 m3/ha/yr is assigned to the closed, natural forest, and 10 m3/ha/yr is accepted for plantations. The last figure does not imply that growth rates as high as 30 or 35 m3 /ha/yr could not be a