Social impact calculator and simulator

Every year the Colombian State approves the general budget of the nation. But, what amount will truly make a difference on the Colombian lifestyle?

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Inspiration

I worked as advisor during the Colombian congress. Working there, I saw that most of the times, there is no way to make decisions based on analytical tools. My project was born from a need identified by the National Planning Department (DNP), of not having a sectoral methodology for the economic evaluation of rural electrification projects. I decided to donate my Master's research work to try to solve this problem of prioritization of investment projects in the most forgotten areas of Colombia.

According to the Mining-Energy Planning Unit (UPME), there are 495,799 homes without electricity service in Colombia, which is equivalent to an investment of 7.4 trillion pesos. From there the question arises, should the Government invest to expand the interconnection networks, build isolated micro-grids or individual solutions? It is necessary to evaluate the socioeconomic convenience of the project.

Colombia does not have Cost-Benefit Analysis (CBA) methodologies for the presentation and evaluation of rural electrification projects. This fact causes that many of the investment prioritizations in the sector do not seek a social well-being but a merely individual one, since only the financial benefit of the project or of whoever formulates and executes it would be considered.

What it does

Cost Benefit Analysis (CBA) tool serves as an analytical and technological tool for prioritizing investment projects in a budget. According to the European Commission, "the purpose of CBA is to facilitate a more efficient allocation of resources, demonstrating the convenience for society of a particular intervention instead of possible alternatives". For example, "a project could be attractive to the executing entity and, at the same time, be unattractive to other individuals, in the case of those who live in the area where the project is to be carried out" (Castro & Mokate, 2003).

When investigating this tool in rural electrification projects, it was found that Colombia does not have CBA methodologies for the presentation and evaluation of rural electrification projects. According to the National Public Investment Systems Network (SNIP), countries in the region (Latin America and the Caribbean) such as Bolivia, Chile, Mexico and Peru already have these methodologies, while Colombia and other Latin American countries are lagging behind.

How we built it

For the construction of the methodology and the tool, international referencing was carried out guided by the public investment systems of Economic Commission for Latin America and the Caribbean (ECLAC). Specifically, for the rural electrification sector, the following methodologies were studied:

  1. Mexico: Methodological Guide for the Evaluation of Luminaire Change Projects
  2. Peru: Rural electrification, guide for the formulation of successful investment projects
  3. Chile: Methodology for the Formulation and Evaluation of Rural Electrification Projects
  4. Bolivia: Manual for the Development and Evaluation of Rural Electrification Projects

These experiences in the region were reviewed and studied. We found different ways of economic and social evaluation methods. With this knowledge in mind, I created the first benefit assessment methodology for rural electrification projects in Colombia, according to our needs.

A constant that is evident in the region is the non-application of technology. For this reason, I created the first social impact calculator and simulator for rural electrification projects, through which it aims to prioritize the most beneficial projects for society.

Challenges we ran into

Once the methodology for Colombia was created, the first challenge I faced was the possibility of validating it. For this challenge, I made approaches with the officials of the Institute for Planning and Promotion of Energy Solutions for Non-Interconnected Zones (IPSE) (government entity that is in charge of preparing, jointly with the Ministry of Mines and Energy and the territorial entities, the plans, programs and energy infrastructure projects for non-interconnected areas), and thanks to their support, the initiative was tested through a case study in the community of Belén de Taparral, municipality of Bajo Baudó, Chocó in Colombia

Accomplishments that we're proud of

The credibility of the project has been gaining more and more strength and it is one of my biggest accomplishments. The first aspect in this regard was winning an award as one of the best posters at the first Congress on Energy and Energy Transition this year, led by the University of the Andes and Uniandinos. Additionally, the idea was also selected by the Society for Cost Benefit Analysis to be presented this year in Milan at the Fourth European Conference of the Society for Cost Benefit Analysis and the offer to chair the energy panel. This will undoubtedly be one of the greatest evaluators of this initiative and of the greatest contributions to knowledge as they will be experts on the subject feeding back the idea with international experiences from other countries, not only from Latin America but from all over the world.

What we learned

The government is an ally in this project. Since the proposal was created with the cooperation of officials from DNP and IPSE, who provided us with the necessary information on the different methodologies, cases, and annexed documents they have to date and the products they are working on.

The idea can be extended to more sectors related to energy supply and climate change. And finally, we also learned the triple impact that the project brings: institutional, technological and climate change.

What's next for Social impact calculator and simulator

The scalability potential of the initiative is enormous. The first has to do with the fact that the CBA tool focus on the rural electrification sector as a preliminary initiative. Based on this fact, its implementation can cover not only Colombia, but other countries in Latin America that are lagging behind in the subject.

There is an acceleration plan through three implementation axes. The first is directly with the Government through its applicability to the Type projects that the DNP has for the presentation of rural electrification projects in Colombia. In the hypothetical case that it was a national requirement, it would create the need for all project formulators to use this technical service at the national level, or at least for those Non-Interconnected Zones.

As a second phase of implementation, there are plans to improve or complement the Investment Map tool that the Inter-american Development Plan (IDP) has been working on. For this purpose, it is considered to establish an extension to measure social welfare impacts. And as a final phase, a possible project audit phase is contemplated, once the tool and the model are more robust.

Available information

For this very important element and following the previously described scaling phases, the following is obtained: Phase 1, Directly with the State: the information of the projects come directly from the planning or evaluating entities of the projects. For example, in the case of rural electrification, it came from IPSE and DNP in Colombia. Phase 2, investment map: taking advantage of the advanced work of the IDB's investment map platform, the intention is to use this available data to complement or extend the platform. Phase 3, Audit: once the information from phases 1 and 2 has been obtained, the idea is to refine the model and the technological tool.

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