The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) Integrated Safeguards Data Sheet Appraisal Stage Appraisal Stage | Date ISDS Prepared/Updated: 20-Jun-2018| Report No: ISDSA25093 Regional Vice President: Victoria Kwakwa Country Director: Ellen A. Goldstein Senior Global Practice Director: Riccardo Puliti Practice Manager/Manager: Julia M. Fraser Task Team Leader: Sunil Kumar Khosla The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) . I. BASIC INFORMATION 1. BASIC PROJECT DATA Project ID Project Name P166413 Myanmar RBF for Off-grid Solar Task Team Leader(s) Country Sunil Kumar Khosla Myanmar Approval Date Environmental Category 10-Aug-2018 B-Partial Assessment Managing Unit Is this a Repeater project? GEE02 No PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 3.45 Total Financing 3.45 Financing Gap 0.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Trust Funds 3.45 Energy Sector Management Assistance Program 0.45 Global Partnership on Output-based Aid 3.00 2. PROJECT DEVELOPMENT OBJECTIVE Project Development Objective . The objective of the RBF for Off-grid Solar is to help increase access to electricity in Myanmar. The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) 3. PROJECT DESCRIPTION Component 1: Results-based subsidies to eligible companies/NGOs in order to support sales of solar products ranging from 1.5 watt peak (Wp) solar lamps up to 50 Wp SHS. There are about 150 Lighting Global certified products in this range. These products cater for basic needs such as lighting and phone charging (Sustainable Energy for All - SE4All Tier1 access1) up to the operation of direct current (DC) appliances such as televisions and fans (SE4All Tier 2 access). The activity will promote more sustainable, private sector driven off-grid solar market development. It will address high initial market development costs faced by the private sector in Myanmar, contributing to supply chain development and provision of quality sales and services. As RBF/output-based aid (OBA) solar energy programs have demonstrated, potential customers would benefit from increasing market competition, which is expected to result in a larger offer of quality products at competitive price. Product quality assurance: The RBF grant will promote Lighting Global certified products that are delivered with 1-3 year warranty requirements depending on the product and after sales service. The Lighting Global testing procedure for small solar systems up to 10 Wp has become an international standard IEC-TS 62257-9-5, while the testing procedure for SHS kits up to 350 Wp is planned to be formalized as IEC standard in 20182. Companies can either select one of currently certified products or submit their untested products for certification. IFC Lighting Myanmar supports local companies that seek Lighting Global certification for their products. RBF Subsidy payment. The RBF subsidy will be 100% reimbursed to solar companies/NGOs based on the verification of sales by an independent verification agent on a sample basis. The verification process will combine review of import documentation submitted by the supplier to DRD with calls and field visits of customers. In addition to the verification of sales, information on the beneficiary household (size, gender, ethnicity), consumer satisfaction (product and service received), after sales service (spare parts and warranty implementation), and use (appliances) will be collected. The information will inform the output monitoring as well as the annual review of the RBF incentive mechanism. Funding Structure and Subsidy Levels. Companies entering the rural solar market in Myanmar with quality products and services are facing the challenge of high market risks and market entry costs. Risks include uncertainty of market uptake caused by low household willingness to pay due to the competition of cheap low-quality products that have largely penetrated the market and expansion of various rural electrification programs. Market entry costs include marketing, employment and training of staff, rent for office and warehouse space, import and transport logistics, and facilitation of consumer financing and post-sale service. Company’s income consists of sales revenues which are usually low and difficult to predict in the pilot phase. High initial investment is required until increased sales eventually pay off. Depending on confidence in the market potential, equity investors will accept higher risks to quickly scale-up the market or require a slower approach, expecting first results before decisions on further market expansion are taken. The RBF incentive aims to accelerate market uptake by partially compensating companies for risk taking and high marginal retail costs incurred by entering new markets. Competition and economies of scale are expected to result in more affordable price for end users. Products that are eligible for RBF incentives cover a wide range of service and cost level. Larger systems (within the supported range under the RBF pilot) are offered with consumer financing - either in cooperation with MFIs or as a credit extended by solar companies themselves, as PAYG, making these systems and better service affordable to more customers. Lowest-income 1 ESMAP Multi-tier Framework for Measuring Energy Access. https://www.esmap.org/node/55526 2 Product testing can be conducted in one of the six registered laboratories in US, China, India, Hong Kong, Kenya, and Germany and requires about 3-5 month time at cost of USD 5,000 to 7,000. The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) households will have the choice of entry level quality solar products starting at US$25 up to larger systems paid on monthly rates of US$3 to US$13.33 over one to two years. The RBF incentive is designed as cash payment to reward risk taking and reduce market entry costs for first mover companies. The subsidy calculation is based on lumen-hours per day provided by the system. Similar subsidy calculation methodology was adopted by GiZ Energizing Development/EnDev in other countries. The methodology has several benefits: (a) It provides good proxy for the amount of energy service provided by the system (even considering that some energy will go to non-lighting services like mobile phone charging). (b) It provides a transparent metric that can be easily compared across systems of different sizes. (c) It is readily available on the Lighting Global testing specification sheet for tested products, and therefore would not require any additional system testing. All Lighting Global products have published specification sheets, meaning that any new product that gets tested can be easily added to the RBF incentive list. The subsidy calculation methodology will be presented in the Operational Manual and will be subject to annual review. The annual review of the RBF subsidy level will be conducted by DRD considering market uptake in Myanmar, newly Lighting Global certified products, and changes in FOB prices. The Lighting Global products are clustered in three service level categories based on their key performance characteristics: (i) one light point with phone charging, (ii) multiple light points with phone charging, and (iii) 4 and more light points with phone charging and optional operation of a TV. Component 2: Implementation support to DRD. Key activities include overall management and promotion of the RBF Off- grid Solar, compliance with RBF procedures, monitoring and verification of results, fiduciary and safeguards aspects of the grant. Customer awareness campaign is supported by IFC as part of Lighting Myanmar initiative. IFC procured a marketing firm that promotes the benefits of quality-verified solar products and in particular Lighting Global certified products available in Myanmar. The marketing firm will also disseminate information on the RBF pilot. . 4. PROJECT LOCATION AND SALIENT PHYSICAL CHARACTERISTICS RELEVANT TO THE SAFEGUARD ANALYSIS (IF KNOWN) Based on the nature of the technology, the Lighting Global certified products supported under the proposed grant have very small footprint and are widely dispersed. The proposed RBF proposed grant will initially support the ongoing IFC-led Lighting Myanmar activities in central Myanmar as envisaged at NEP project design. In the longer term, the scope of the project remains national, demand driven, where households are willing to buy Lighting Global certified solar products. The proposed RBF will be implemented alongside and by the same implementation agency as the ongoing National Electrification Project (NEP), which has an ESMF approved by the Bank. However, NEP has revised its ESMF to ensure that it is more relevant and tailored to NEP broadly as well as to the RBF grant activities. The revised ESMF will be applicable to the RBF grant activities. The revised ESMF includes RBF activities in the typology of sub-projects covered, with corresponding brief ESMPs/ECOPs added (e.g. encouraging appropriate disposal). An Action Plan to address NEP safeguards policies issues has been articulated as a part of the NEP mid-term review. The key elements include (i) revision of ESMF by the client with support provided by GIZ, (ii) upstream E&S support by GIZ, (iii) The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) recruitment of the minimum number of local safeguards consultants with a view to add additional consultants as capacity deficit becomes clearer; (iv) continued training of implementing agencies staff. 5. ENVIRONMENTAL AND SOCIAL SAFEGUARDS SPECIALISTS ON THE TEAM Martin Fodor, Environmental Safeguards Specialist Zeynep Durnev Darendeliler, Social Safeguards Specialist SAFEGUARD_TABLE 6. SAFEGUARD POLICIES TRIGGERED Safeguard Policies Triggered Explanation The RBF grant supports the supply of small solar products of up to 50Wp capacity, with minimal environmental impact. Considering this activity as part of NEP broader suite of interventions and the country-specific social risks associated with social inclusion, the proposed project is treated as EA category B as overall NEP project. The NEP's revised Environmental and Social Management Framework (ESMF) will be applied. The revised ESMF has been revised by the client with support provided by GiZ Environmental Assessment OP/BP 4.01 Yes and disclosed on July 17, 2018. The document is subject to ongoing public consultations. As a part of the revised ESMF, the proposed RBF grant for Off-grid Solar is included in the typology of sub-projects with its own brief ECOPs added. Battery based products, disposal / recycling will be considered as a part of NEP’s solar program sustainability plan agreed during the Mid-term Review (April 24- May 25, 2018). Natural Habitats OP/BP 4.04 No Impacts on natural habitats are not expected. The grant will not affect any forestry activities nor Forests OP/BP 4.36 No require triggering of OP4.36. The pest management policy is not triggered under Pest Management OP 4.09 No the proposed RBF off-grid solar grant. Given the scope of the proposed grant, OP/BP 4.11 Physical Cultural Resources OP/BP 4.11 No is not triggered. The project triggers OP 4.10 because ethnic Indigenous Peoples OP/BP 4.10 Yes minorities that fit the criteria of indigenous people are present in project areas. As part The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) of the ESMF, the Indigenous People Planning Framework is also revised to ensure that the project obtains and documents broad community support in areas with ethnic minorities, following free, prior and informed consultation. To date, systematic application and documentation of the policy has been weak, but the revised ESMF and increased safeguards staffing should improve application. The RBF will not specifically target areas with ethnic minorities. Originally, NEP was designed to serve more peripheral and ethnic areas in Myanmar with high-subsidy solar systems, while the RBF grant would provide lower-subsidy solar systems in central Myanmar to jump-start the private market in these more accessible areas. During NEP implementation so far however, DRD has also included the central Myanmar areas for solar home systems, with higher subsidy support than planned. However, the next round of high subsidy support for solar home systems will be concentrated in ethnic areas. As higher-subsidy support shifts to peripheral ethnic areas, the lower subsidy RBF support will target central Myanmar to stimulate the private sector in these areas. The grant does not trigger OP 4.12 on Involuntary Involuntary Resettlement OP/BP 4.12 No Resettlement since it supports small solar systems of up to 50 Wp that will not have physical footprint. The project intervention is not expected to require the construction of dams or impoundment Safety of Dams OP/BP 4.37 No structures, nor is it expected that it could cause impacts to existing structures as governed by this policy. The project intervention is in nature and scale not expected to cause any drainage or discharges to Projects on International Waterways surface waters, nor entail any No OP/BP 7.50 significant usage of surface water for cooling or other purposes, that would affect international waterways. The project intervention is not in disputed areas Projects in Disputed Areas OP/BP 7.60 No and will be wholly within the borders of Myanmar. KEY_POLICY_TABLE II. KEY SAFEGUARD POLICY ISSUES AND THEIR MANAGEMENT The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) A. SUMMARY OF KEY SAFEGUARD ISSUES 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts. The RBF grant supports the supply of small solar products of up to 50Wp capacity, with minimal environmental impact. Considering this activity as part of NEP broader suite of interventions and the country-specific social risks associated with social inclusion, the proposed project is treated as EA category B as overall NEP project. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area. No long term or indirect impacts are foreseen. 3. Describe any potential alternatives (if relevant) considered to help avoid or minimize adverse impacts. Site selection in the project is flexible and ESMF provides guidance on choosing alternative sites if the initial siting is in an environmentally sensitive area or requires land acquisition. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. Department for Rural Development (DRD) is responsible for monitoring the safeguards’ compliance for the proposed grant, alongside the NEP safeguards implementation. DRD hired one national environmental and social safeguards specialist in March 2018. In terms of staff, four DRD staff work part time on safeguards as well as the technical reviews for mini-grids, and two staff work on communications and grievance redress. Moreover, GiZ has engaged an international consultant to support the client with the ESMF's revision. DRD has consultants with environmental and social safeguards experience in place for the first time, and the Bank thinks that environmental and social safeguards performance can improve to a satisfactory level once the revised ESMF is implemented, and recently prepared safeguards workplan starts to be implemented in the next six months. The World Bank has provided training and capacity building activities to DRD, including: in-mission training sessions to assigned staff on screening using the ESMF screening form (May 2017), two day training on environmental and social safeguards to NEP staff (June 2017), two day training on grievance redress and village electrification guidelines to NEP Union level staff (September 2017), two day training on grievance redress and village electrification guidelines to NEP township engineers (November 2017), two day training on environmental and social safeguards to NEP staff (April 2018). 5. Identify the key stakeholders and describe the mechanism for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The revised NEP ESMF was disclosed and the document is subject to ongoing consultations for a month. For RBF grant, the stakeholders include households that are willing to purchase Lighting Global Certified products and local companies and NGOs that provide such products.Since the RBF grant activities will complement IFC-led Lighting Myanmar activities, IFC's stakeholder engagement mechanisms will also be used throughout project implementation. The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) A customer awareness campaign is supported by IFC as part of Lighting Myanmar initiative. A firm has been hired by IFC to promote the benefits of quality-verified solar products and in particular Lighting Global certified products available in Myanmar. The marketing firm will also disseminate information on the RBF activities. DISCLOSURE_TABLE B. DISCLOSURE REQUIREMENTS ENV_TABLE Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank Date of submission for disclosure 02-Jul-2018 17-Jul-2018 For Category ‘A’ projects, date of distributing the Executive Summary of the EA to the Executive Directors “In country� Disclosure Country Date of Disclosure Myanmar 17-Jul-2018 Comments INDIG ENOUS_TA BLE Indigenous Peoples Development Plan/Framework Date of receipt by the Bank Date of submission for disclosure 02-Jul-2018 17-Jul-2018 “In country� Disclosure Country Date of Disclosure Myanmar 17-Jul-2018 Comments COMPLIANCE_TABLE C. COMPLIANCE MONITORING INDICATORS AT THE CORPORATE LEVEL The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) EA_TABLE OP/BP/GP 4.01 - Environment Assessment Does the project require a stand-alone EA (including EMP) report? Yes If yes, then did the Regional Environment Unit or Practice Manager (PM) review Yes and approve the EA report? Are the cost and the accountabilities for the EMP incorporated in the credit/loan? NA IP_TABLE OP/BP 4.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework (as appropriate) Yes been prepared in consultation with affected Indigenous Peoples? If yes, then did the Regional unit responsible for safeguards or Practice Manager Yes review the plan? If the whole project is designed to benefit IP, has the design been reviewed and NA approved by the Regional Social Development Unit or Practice Manager? PDI_TABLE The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank for No disclosure? Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups No and local NGOs? ALL_TABLE All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been Yes prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project Yes cost? Does the Monitoring and Evaluation system of the project include the monitoring Yes of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower Yes and the same been adequately reflected in the project legal documents? The World Bank Appraisal ISDS Myanmar RBF Off-grid Solar (P166413) III. APPROVALS Sunil Kumar Khosla Task Team Leader(s) Raluca Georgiana Golumbeanu William Onahan Gallery Approved By Safeguards Advisor Practice Manager/Manager Julia M. Fraser 06-Aug-2018 .