Ownership and Management Issues

Ownership is usually determined by the source of investment in a project.  However, when projects rely on government investment or grants from outside donor agencies, unless ownership rights, responsibilities and risks are clearly established and transferred to local parties, the projects are unlikely to maintain sustainable operation over an extended period of time.

It is likely that government investment and grant funding will continue to be used to promote wider acceptance of renewable energy mini-grid systems through pilot demonstration projects. However, for some donor-funded projects, local ownership issues are not clarified from the outset. In general, this should be avoided.   Where a specific situation requires the long term ownership arrangement to be left open (e.g., to allow for an initial period of system operation and evaluation), it is critical that short term management arrangements be clearly assigned.  

The following four types of management and operation options have been applied to renewable energy mini-grid community power systems in China.  These have all been implemented successfully in China and would require adequate regulations.

• Authorization arrangement:   The power system is managed by the local government (a leader or committee) that appoints one or more individuals to manage and operate the system.   Under this option, the local government generally determines the price for electricity, the salary of the operators, the distribution of revenues and the families that get connected to the system if the capacity is insufficient to meet all household demands.
  
• Contracted operation:   The system owner(s) contract the operation of the system to an individual or enterprise that takes full responsibility for system operation and maintenance, and may even collect revenues and pay for fuel and other consumables. The key to this arrangement is the clarity and completeness of the contract that must define the rights and responsibilities of both the owner and contactor.   
  
• Leasing:   The tangible assets of the system are leased to the system operator, who can be an individual or enterprise.   The system operator (leasor) takes on a greater degree of responsibility for medium-term system maintenance.  The lease arrangement will usually set some basic guidelines for revenue collection and disbursement, including amounts that must be set-aside for long-term maintenance.
  
• Ownership transfer:   Instead of the owner(s) making some arrangement for the system operation (as in the above three cases), the owner or system developer transfers ownership to a specialized enterprise for a fee.    A detailed transfer agreement is needed and will usually specify the minimum levels of service to be provided, an upper limit to the tariffs that can be charged, and payment terms for the transfer fee.