February 8, 2020, Afghanistan, Kabul – Afghanistan Integrity Watch launched a new research report on Afghanistan’s energy sector in a press conference held today. The report shows that only 35% of Afghans are connected to government owned electricity grid due to lack of an effective institutional arrangement in the country’s energy sector governance. Severe shortage of electricity in urban and rural areas, according to the report, has led to sluggish economic growth, air pollution in cities, and removal of forests in rural areas.
“Afghan government has not developed a clear and evidence-based vision for governance in Afghanistan’s energy sector. This, in turn, has caused sluggishness in the country’s economic growth, energy sector, and paved grounds for corruption,” Executive Director of Integrity Watch Afghanistan, Sayed Ikram Afzali, said in the press conference. The study has found that clear distinctions has not been made between policy powers (making, approving, and overseeing the policy) regulatory powers (preparation, and monitoring implementation of the relevant legislation) executive powers (conducting surveys, feasibility studies, procurement, monitoring implementation of energy related contracts) service delivery (distribution and maintenance of the electricity grids).
According to the study, the Ministry of Energy and Water is still reluctant to transfer Water and Engineering Power Company of Afghanistan, an executive firm, to the related institutions such as Da Afghanistan Breshna Shirkat or to Afghanistan Urban Water Supply and Sewerage Corporation in accordance with the country’s Electricity Law. While lacking any expertise in energy sector, the Ministry of Finance make decision to fund energy projects. The Electricity Regulatory Authority has not been established yet despite the fact that Electricity Law was passed in 2015. In spite of the fact that National Procurement Authority does not have the required expertise to evaluate the energy sector projects, the authority is tasked to do it based on a presidential decree. Lastly, Afghanistan Oil and Gas Regulatory Authority has yet to become fully operational while it was established in 2016 in line with the country’s Hydrocarbons Law. Mr. Naser Timory, Head of Advocacy and Communications of Integrity Watch Afghanistan, said, “The reluctance to create the Electricity Regulatory Authority and failure to support operation of Afghanistan Oil and Gas Regulatory Authority has undermined the growth of energy sector.”
“Three factors have led to failure in setting the institutional arrangements of the energy sector based on the relevant mandate’s separation – policy, regulatory, executive, and service delivery. These factors are: lack of a unified and clearly defined vision for the sector, lack of a sustained support of the government’s leadership to define and implement such vision, and lack of interests and preventions by institutions, particularly by Ministry of Energy and Water, Ministry of Mines and Petroleum, Ministry of Industry and Commerce, and Ministry of Finance to implement good governance in the energy sector,” Mr. Afzali said.
Afghan government runs nine separate electricity networks that are not connected to one another. One example of off-grid small electricity generating resources are those projects which are built by the Ministry of Rural Rehabilitation and Development. This ministry, through its rural development programs, implemented 4,549 off-grid renewable energy projects in Afghanistan from 2002 to 2016. Of these 2,186 are mini-hydropower, 2,358 are solar, and five are wind energy projects. These small-scale, off-grid projects added 55 MW to Afghanistan’s rural areas. Although 35% of the people are connected to the national electricity grid, those who have reported access to electricity in one way or another (from government, private, or home developed power system) touches 99% which highlights the vital role of private sector and public initiatives in the power sector.
On the other hand, the huge investments made on electricity production infrastructures are not used with the minimum extent due to poor coordination between the United States and government of Afghanistan and for lack of a good governance vision in energy sector. The United States Agency for International Development budgeted $95 million for the Tarakhil Power Plant but spent $335 million. According to the US government reports, Tarakhil power plant was designed to be a base load plant that would operate 24 hours, 7 days a week, but later it operated to support peak load only because the Afghan government has been unable to provide finance for it. The Afghan and American governments could build a new electricity dam with the same cost.
“Weak institutional and human capacity, overlap and contradictions in policies and mandates, ambiguity in the role of government ministries and international development partners, and the divergence and lack of integration between development partners’ agendas and the Afghan government’s needs are among the existing challenges of the energy sector,” Afzali said about the factors that have undermined the progress of Afghanistan energy sector.
“This research suggests that there are very few literatures in Afghanistan energy sector from good governance perspective. Many studies on institutional arrangements are needed to establish institutions for energy sector and for the rights of electricity consumers”, said Ezatullah Adib, Head of Research at Integrity Watch Afghanistan. He concluded that, “Universities, research centers, and civil society organizations should fill in this vacuum.”
Clarify the roles and scope of work of government agencies and the national power utility in the Afghan energy sector. For the sector to operate effectively, the existing overlap, confusion, and contradiction of mandates of actors need to be addressed. A clearly defined scope of work and mandate for each organization will prevent them from escaping accountability. The sector needs a clear mandate, to provide reliable and affordable electricity, and a framework of accountability for policy makers, executives, and sector leaders. Coordination among ministries in policy, planning, and project implementation cannot be omitted entirely. Thus, mechanisms for coordination among relevant actors should be defined in all laws, policies, and regulations pertaining to the energy sector. Ambiguous coordination mechanisms in the sector will lead to overlap, less accountability, and delay in achieving sector goals.
Redefine and reorganize the Ministry of Energy and Water (MEW). The current structure of MEW, which has departments for project implementation and Water and Engineering Power Company of Afghanistan (WAPECA), does not help advance toward the sector goal. MEW needs to act as a policy maker, not a project implementer or sector regulator. MEW must take ownership of the National Energy Policy and the Power Sector Master Plan (PSMP) and provide the overall policy and planning directions to the sector. The existing Electricity Law stipulates that the Electricity Regulatory Authority (ERA) will work under MEW. In order to attract private investment and ensure fairness between producers and consumers, it is recommended that the ERA function independently. The separation of policy and planning from regulation is essential for the long-term sustainability of the sector, especially when access to capital and private investments is important. Nonetheless, the establishment of the ERA should be the number one priority for the sector.
Commence to unbundle the national power utility (DABS). There are various models for unbundling a monopoly national grid company like DABS. It is recommended that DABS should act as the power system operator and retain the transmission network, but that IPPs should be allowed to generate power in future power plants. However, a study is required to make an informed decision about existing power plants.
Address the nonexistence of a unified, agreed-upon development plan and agenda for the sector. Most of the time, bilateral agreements of development partners with the Ministry of Finance (MoF) overlooked the national plans, as happened with the Afghanistan National Development Strategy (ANDS). It would be for the betterment of the sector for all development partners and relevant government ministries to agree on a single national development plan for the energy sector. This would reduce time for budget allocation, prioritization, and project preparation and also omit overlap and confusion in the coordination of plans. The Self-Reliance through Mutual Accountability Framework and Afghanistan’s National Peace and Development Policy Framework provide common ground on which the Afghan government and the international community can act.
Create an enabling environment for the private sector and offer incentives for investment in the energy sector. An enabling environment for the private sector requires, first and foremost, the establishment of an independent regulatory authority, the ERA, which will ensure transparency and fairness in licensing, return on investments, and tariffs. Other major concerns to the private sector that must be addressed include land acquisition and fair, efficient processes to obtain approvals from government departments. The private sector expects to see some relaxation in taxes and duties on renewable energy equipment and energy efficient appliances and subsidies in land acquisition. More importantly, the Afghan government should pay attention to assuring the security of the private sector’s staff, field workers, equipment, and plants.
More studies should be conducted in energy sector for good governance. This research has suggested that there are very few scientific products in Afghanistan energy sector from good governance perspective. Various studies are needed to be conducted on arrangements to establish institutions for energy sector and for the rights of electricity consumers. Universities, research centers, and civil society organizations should fill in this vacuum
Contacts for more information:
Ibrahim Khan: 0702028692 or Mohammad Naser Timory: 0794610003