Understanding CESP
Experiences of development projects in Nepal have shown that delivery of services by community based business entity is a key to ensuring smooth service to the local end users. Embracing the same concept, the European Union and the GoN launched Renewable Energy Project to provide solar energy services to the rural areas through the Community Organizations (CO) which are considered as the driving force for the energy service provision and creation of the energy infrastructure in rural areas. CESP, an energy cooperative, is a public–private partnership initiative which provides off-grid energy services from stand-alone solar PV systems for a fee through energy service agreement. The CESP is owned and managed by the local CO with proven operating experiences and is engaged in both "not-for-profit" and "for-profit" energy sales.

As an independent legal entity, the CESP will have its own set of rules for the operation of activities and autonomy in their execution. The main business area of the CESPs is Energy supply. REP support will focus on energy services to social institutions (schools, clinics), for water pumping system to water user groups and for individual productive appliances (milk chilling & grinding, audio-video entertainment, computer use, internet and email). However, the CESPs may in the future expand their business to other clients.

 CESP Concept

 
CESP are setting financially viable and economically affordable tariffs that cover CESP's full costs for providing the energy services: costs of operation, maintenance and rehabilitation as well as the costs of management and administration. The basic tariff principles of CESP are: "not-for-profit" tariff for energy service to public institutions and water pumping which will cover the basic cost of operation; and Commercial tariff (which also includes certain percentage of profit margin) for energy service to business and income generating activities. The average combined tariff of all activities must, as a minimum, cover all operating cost of the CESP.

AEPC and the local government institutions (DDC/VDC) are the major regulatory organizations that will monitor and supervise the performance of CESPs and control over the use of CESP property. 

CESP set-up
The process of CESP set-up started with the identification of community based organization, operating in the REP eligible VDCs. The dissemination of the information on REP implementation modality focusing on CESP concept was carried out through the extensive social mobilization. REP organized a two-day workshop in each selected district. COs, operating in the district, such as co-operatives, functional groups, COs set-up through other donor programs, were invited and provided with the information. During the same event, the participating community organizations expressed their interest to become CESP in a format prescribed by REP.

 CO selection flow chart

The letters of interest submitted by the COs were verified at various levels. To this effect, REP designed a set of quantifiable criteria including the track record of past operations, existing demand for energy, etc. Based on these pre-defined criteria, the COs was rated, and up to 20 CO/district were selected for field verification. 

CO selection criteria

Present status of Selected Community Organization
As REP selected existing COs, there is a significant variation in the objective and working modalities among the promoter organizations and consequently organizational status of the selected COs. The selected COs can be grouped into three categories:

• Cooperatives
• Forest User Groups
• Other (mother group, set-up by other development program, etc.)

Transformation of COs into CESP 
 In order to transform the finally selected COs in to CESP, REP provides them extensive training and technical assistance

REP capacity building efforts are centered around the following topics:

• Operation and maintenance of PV systems
• Financial management
• Tariff setting 
• Business development
• Management & administration of user group
  
  

Transformation process of COs into CESP

To this end, the existing capacity will enhanced through two ways:

• Training and awareness raising by REP staff
• Formal training by external experts in the area of Technical, managerial, financial, business

Furthermore, technical assistance is provided for the preparation of required documents,  such as:

• CESP founding documents, charter, business plan etc.
• Tariff setting
• Energy service contracts
• CESP operational guidelines
• ToR for CESP staff
• Ownership transfer form
• Agreement with DDC or AEPC

Sustainability of CESPs
Sustainability of CESPs depends on a number of factors (see table below). The mitigation actions have been identified for each recognized risk, and REP is working in their implementation in order to making sustainability of the CESPs and PV systems.