Once the long-list of energy market systems has been developed, a set of manageable selection criteria against which to judge them against each other, should be developed and used. The criteria should cover several important factors, including the long-term economic opportunities each energy market provides and the potential of each energy market to impact poverty and gender equality. The balance between these two factors enables the selection of an energy market system that has the potential to grow in an inclusive and equitable manner.
A template has been developed, in Annex 1, to help the facilitation team discuss and agree on the most important selection criteria that will then be used to assess and rank the long list of energy market systems being considered. The template provides space for the explanation of each criteria choice to ensure a clearly argued and transparent decision is made. Under each criterion, a small number of questions (3-5) should be agreed on to help steer the data collection and discussion process. The criteria should be kept to a manageable number, such as 3-4, although should always include Economic opportunity and Potential impact on poverty, summarised in the following sections.
Criteria 1: Economic Opportunity
This concerns the economic performance of an energy market system and how it is expected to evolve in the future, including the following issues:
- Energy Demand: Is there a significant partially or fully unmet demand for the energy technology or services that is it likely to grow in the next 10 years if the market system is supported?
- Potential Income and Wealth Increase: Are there significant opportunities to create wealth and increase incomes and profit across the energy market system if it develops?
- Competitiveness: How competitive is the energy market system compared to other regional, national and international markets?
- Potential for Improvement: Are the energy market actors likely to be able to meet an increase in demand, by increasing their production, and, or, efficiency? Can other actors easily move into the market, creating new, higher value products?
- New Market Opportunities: Can new markets be created or reached through an improvement in this energy market system?
Criteria 2: Potential Poverty Impact
This criterion is concerned with the inclusiveness and equitability of the market system, and whether its growth and development is likely to lead to poverty reduction and gender equality, including the following issues:
- Involvement of the Poor: What are the estimated current numbers of poor people deriving incomes from the energy market system, and what are their levels of return from their efforts and investments?
- Income Gains: What is the realistically possible increase in incomes of the poor through the development of the energy market system?
- Competitiveness of Poor and Small-Scale Actors: Are small-scale and poor energy producers able to compete with other larger actors in the energy market system? If so are they likely to be to maintain or increase their competitiveness if the market system improves?
- Market Value Share: How is the value distributed across the market system? Are there realistic opportunities for poor actors to increase the value they receive by increasing their productivity, enabling new markets or negotiating new terms with other market actors?
- New Opportunity Creation: If the market system improves, is it likely that it will create new opportunities for the poor through employment by existing market actors, or establishing new small businesses?
Criteria 3: Gender and Social Inclusion
To take into account the economic equity and inclusion of both women and specific socially marginalised groups in the potential energy market systems, it is possible to disaggregate some of the questions in Criteria 1 and 2 to assess the extent to which improvements in an energy market system positively impact these different social groups and promote economic inclusion.
Criteria 4: Other Important Criteria
Other cross-cutting and context specific issues such as social transformation and environmental sustainability, including greenhouse gas emissions, are also very important depending on the values and priorities of your organisation and partners, and government agencies and main donors, such as the following:
Social Transformation: Will the development of the energy market system lead to positive changes in the attitudes and relationships of certain social groups towards socially excluded groups and promote political, social and cultural equity and empowerment?
Environmental Sustainability: Will the development of the energy market system lead to significant environmental benefits, such as through reduction in deforestation, scarce resources or greenhouse gas emissions?
As selecting an energy market system never occurs in isolation, in particular the pressure of fundraising and maintaining relationships with donors, the facilitation team may choose to add a criterion to reflect the strategic importance of each energy system.