Output-Based Aid in Bolivia: Balanced Tender Design for Sustainable Energy Access in Difficult Markets

Bolivia is implementing an innovative public-private approach to increase rural electricity access to extremely remote areas via Solar Home Systems (SHS). Novel Medium-term Service Contracts (MSCs) balance the Government’s wish for sustainable service and maximum control with providers’ aim for minimal risk exposure. In 2005, 14 MSCs were successfully bid out to private service providers to minimize the subsidies paid against an ambitious set of provider obligations. The tender resulted in a 25-percent gain in number of new users. Although private participation in Bolivian infrastructure declined sharply in 2006, the SHS service model enjoys continued support by government and private providers alike.