Defining an adequate level of subsidy Sample Clauses

Defining an adequate level of subsidy. What is the appropriate rate of subsidy? No single solution can be given to the question of the adequate level of subsidy. Successful programs around the world have applied very different rates of subsidy to support solar energy development, as demonstrated in the table below. Program Subsidy Bangladesh IDCOL 20% (on average) Bolivia ANED 45% Sri Lanka SEED 66% Table 5: Subsidy level in solar energy programs The adequate level of subsidy has to be defined in the specific context of Indonesia, according to the following considerations: ▪ the costs of operation for renewable energy providers: the subsidy can be used to encourage solar energy suppliers to undertake promotion campaigns and provide maintenance services in areas where they would not have gone because of high operating costs. ▪ the willingness to pay of end-users: the subsidy level should be defined so that the remaining cost to be paid meets the ability to pay of the end-user. This implies having (updated) estimations on the willingness to pay of rural populations. ▪ the budget available for subsidy (from the government and/or from donors): there is a clear trade-off between level of subsidy and outreach. Within a limited budget, the higher the subsidy, the lower the number of households which will benefit from it. The choice of the subsidy rate should thus be defined according to the outreach objectives set up for the program too. Adapting the level of subsidy to target areas’ characteristics When dividing villages in 3 segments for its past solar energy program, the GoI had already in mind that populations have different ability to pay for renewable technologies and that government support should be dedicated to the ones that need it most. Following this idea, RENDEV also recommends that the level of subsidy vary according to target areas’ characteristics. An essential condition of success is that rules be the same for all players in a particular area. In this aim, the first necessity is to define clear and simple criteria to be eligible to a certain level of subsidy. Criteria for determining the level of subsidy could be chosen among the following: ▪ Poverty rate ▪ Average income ▪ Remoteness from urban centres ▪ Electrification rate ▪ Population density ▪ Etc. By crossing the data, decision makers will be able to shape a subsidy matrix as showed in the table below. According to the capacity to pay of the end-user (poverty rate) and the cost of operations for the REN service provider (remoten...