3. A look at current events

In spite of an incremental shift in favour of markets, entrepreneurs and innovation the current phase of the innovation-regulation cycle still finds the engineers and entrepreneurs on the defensive. In developing countries they do not yet have a firm enterprise base nor strong technical capacity. The early electricity engineering firms and enterprises had established a foothold; had tested modified and refined technologies; and had found and responded to market niches, before they faced the challenges of bureaucracy. Their struggle was to keep the market viable. Today's entrepreneurs are struggling just to be allowed to test the markets' viability. The challenge 100 years ago was to prevent barriers being erected. The challenge today is to bring them down and to replace them with structures meant to incorporate not constrain market forces. Small victories are much celebrated. The current energy development literature awards accolades for the most modest progress:

'In Nepal ... improved mills are being used to generate electricity ... at 27 percent per installed kilowatt of the capital cost of government-run larger hydro plants. The government has greatly assisted the spread of mill innovation by licensing the private sale of electricity ... '.

Ganesh Ram Shrestha and Kiran Man Singh, 'Improved Ghattas in Nepal', Appropriate Technology, December, 1989

Licensing- which is to say allowing, permitting. Permitting, under still restrictive conditions, a practice forbidden in law and fact prior to this celebrated 'new' approach to energy planning. In a country with a GNP of perhaps $150.00, where the national grid reaches perhaps 5% of the rural population, and with one of lowest life expectancies in the world it is thought to be significant progress that national planning authorities now present only a considerable bureaucratic barrier-to-entry (with all the attendance costs, informal and formal that this implies in south Asia) rather than an outright ban. This, to emphasize the obvious, is a barrier-to-entry restraining private initiative from attempting to bring to some of the worlds' remotest, poorest, most environmentally stressed and disease burdened areas a renewable energy resource that might:

'Save the cost of traditional sources of heating and light, such as firewood, dung and kerosene help the development of local industry ... revolutionalize social life in the evenings, and has even been invoked as a means of population control ... its effects on education are potentially very strong. Certainly the advantages of electrification are easily seen by comparing those villages with, and those without, power,'

G. A. Bridger and J. T. Winpenny, Planning Development Projects, p. 79, ODA, 1983

Progress to date notwithstanding the pendulum still has far to swing in favour of innovation and enterprise if the market is to offer even a small portion of its potential contribution. Progress is evident; in entrepreneurial innovation and evolution as well as in bureaucratic barrier reduction. Shresta and Singh go on to note that the government of Nepal offered private licensees 'subsidies and credit'. And in the years since, that approach, though not without its criticisms, is thought to have worked. Surprisingly, the criticisms do little to question the wisdom of a poverty stricken nation erecting expensive barriers to entry and then, again expensively, subsidizing those who manage to penetrate them. Notwithstanding this oddity, there are success stories. In Nepal there are now at least ten schemes that supply electricity full time and dozens of schemes producing electricity in the evenings. Privatization seems to be working; the government increased its level of subsidy fourfold in 1991 to acknowledge this, and there is talk of expanding private licensing as part of a massive planned project to achieve national village electrification. There are now nine independent Nepali companies specializing in building and installing micro-hydro plants. Local technological capacity has been enhanced to the point where it can respond to current levels of local demand. There is evidence of development in that much of the local demand for rural electricity is being supplied by local enterprise, itself underpinned by local technological capacity. The market, though much manipulated, is at least keeping up with innovation in rural electrification technology. The signs of sustainability are encouraging.

At least they were until recently. Planning enthusiasm is threatening to arrest the swing of the pendulum. All too predictably there is a proposal being considered to expand 'privatized' electricity on a massive scale. The means proposed for this are donor funded subsidies and externally supplied development projects - a comprehensively planned 'private sector' electrification project. There is more than a little concern about the effect this will have on rural energy development and local energy entrepreneurs:

'Instead of being a business opportunity to the nine Nepali companies ... this project threatens to destroy them ... by importing equipment offered as "aid". This poisoned pill may ... Iead to disaster. Being unable to compete with "free" foreign machines the Nepali micro-hydro industry will wither away taking with it the expertise needed to maintain and repair the equipment. Only If NGOs and donor governments act responsibility will Nepal's micro-hydro industry grow, build up a skilled work force, and offer a sustainable solution to the energy shortage (emphasis added)'.

Mark Waltham, 'Micro-hydro for Rural Energy in Nepal', Intermediate Technology, December, 1991

A planning success that for all its defects can be credited with creating a 'local technological capacity' in rural electrification is now feared, within a very short cycle of two years, to become the instrument of that technological capacity's extinction.

The mistake in not so much the planning process itself, but in the almost inevitable tendency of such processes to constrain rather than encourage markets and entrepreneurs. In Nepal, as in many other places, the planning approach is demonstrating sadly little comprehension of the workings of the market mechanisms they so fervently pledge to support.

In an era of increasing concern for sustainable development the inevitability of 'plans' must be accepted. Yet, it does not follow from this that plans must inevitably fail to stimulate and encourage the local technological capacity and local entrepreneurs that offer the best hope for rural energy sustainability. A good plan can and should provide a development framework that co-opts market efficiencies and allocates resources to enhancing market based local capacity. This can extend to allowing the market to function largely unfettered - to remove barriers to entry and direct scarce administrative resources to more productive tasks. Successful examples abound; one need look no further than Alaska, the largest and one of the richest of the 50 American States, to find rural electricity being supplied commercially by small local entrepreneurs. The capacity to create, virtually cost free, such possibilities is an opportunity developing countries have largely declined to exploit.

The history of electrification, from early European events to current Asian, African and even Alaskan anecdotes, offers many lessons that can be applied to planning for sustainable village electrification.