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Rural Electricity : Barriers to and Incentives for Promoting Renewables Isolated Systems: Solar Energy Program in Bangladesh

Nazmul Haque
Director & Head of Investment Infrastructure Development Company Limited (IDCOL)

3rd Annual Asia‐Pacific Dialogue on Clean Energy, Governance, Policy, Law and Regulation June 4~5, 2012

IDCOL Solar Home System Program

IDCOL is a state-owned financial institution dedicated to promote private sector financing in infrastructure and renewable energy sector. IDCOL Solar Home System (SHS) Program:


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Program at a glance Program Structure Fund Flow and Role of Partners System Design and Up gradation Financing Structure Quality Control Mechanisms Challenges & Mitigations Prerequisites to Develop Similar Program

IDCOL SHS Program – at a Glance
 Program Target  Program Achievement  Number of beneficiaries  Electricity generation  Fossil Fuel saving  Job creation

: 2.5 million SHS by 2014 : 1.4 million as of Apr 2012 : 7 million : 70 MW : About 140,000 ton/year : 70,000

Program Structure
Suppliers
Supply Equipment Pay for Equipment Provide grant & loan Provides approval Seeks approval

Technical Standards Committee

PO Selection Committee

Applies
Select POs

NGO/PO

Seeks grant & loan

IDCOL

Sells SHS & provide service

Pay downpayment & installment

Grant & soft term credit

Operations Committee

Household

Donors

Fund Flow and Role of Partners

Donor
• Provides grant and soft loans • Provides technical assistance needed

GoB
• Provides grant and soft loan to IDCOL • Provides policy support

IDCOL • Provides grants to reduce SHS cost and for capacity building • Provides soft loans • Provides training, promo support • Monitors implementation

PO
• Identify potential customers • Installs SHS • Extends micro-credit • Provides after sales services

Household
• Maintain system • Repay loan in monthly installments

Debt Service

Debt Service

Debt Service

Debt Service

System Design and Up gradation
Capacity 20Wp 50Wp Appliances Operating Hour 4-5 hours 4-5 hours

Lamp: 2 Mobile Charger: 1
Lamp: 4 B & W TV: 1 Mobile Charger: 1 Lamp: 9 B & W TV: 1 Mobile Charger: 1

85Wp

4-5 hours

Technology Up gradation
• • • • CFL Bulb LED Light Gel Battery DC-DC Converter to run color television, fan, refrigerator etc.

Financing Structure
(a) Market Price of 50 Wp SHS USD 400 USD 25 USD 375

(b) Buy-down Grant (Grant A) (c) System Price for Household [(b)-(a)]
(d) Down Payment from Household to PO [15% of (c)]

USD 56
USD 319
3 years 12% p.a. USD 8.5

(e) Loan Payable from Household to PO [(c)-(d)]
Loan Tenor Interest Rate Monthly Installment Amount

(f) IDCOL Refinance [80% of (e)] (g) PO Contribution [20% of (e)]

USD 255 USD 64

Financing Structure (contd.)
 Capital buy down grant  Institutional grant  Refinance amount  Loan tenor

 Grace period
 Interest rate

: USD 25 per system : USD 0~12 per system : 70%~80% of POs’ loan to household : 5~7 years : 6~12 months : 6%~9%

Quality Control Mechanisms
SHS Inspection
• • • • • • • • Technical inspection by technical inspectors Verification of collection efficiency by collection efficiency inspectors Random re-inspection by IDCOL officials Independent technical and financial audit Training for trainers PO Staff Training Supplier consultation Customer Training

Training Programs

IDCOL Call Centre

Lodges complain

IDCOL

Informs PO

Household

Takes remedial measure

PO

Challenges & Mitigations
Challenges Lack of awareness Mitigation − Countrywide promotional campaign − Extensive network of the POs

− Customer training program
Untested business model − Social enterprise model with an ultimate goal of commercialization − Presence of multiple POs ensures healthy competition − Phased reduction nature of grant − Institutional development grant − Long-term concessionary credit facility − Staff training program

Lack of institutional capacity

High cost of SHS equipment

− Capital buy-down grant
− Concessionary credit facility − Local support industry development − Technical standard committee

Lack of quality assurance
Lack of fiscal support

− After sales services provided by the POs
− Quality control mechanisms by IDCOL − Tax holiday − Duty free import

Prerequisites to Develop Similar Programs
 Root level access of private sector agencies i.e. MFI, NGOs  Micro-credit outreach experience of the private sector agencies  Adequate financial support from the donor agencies  Availability of concessionary credit facility to the executing agencies

 An agency to monitor quality of products and services
 Development of local support industry  Active support from the government

Thank You

Q&A
Infrastructure Development Company Limited (IDCOL) UTC Building (16th Floor), 8 Panthapath, Dhaka 1215 Phone: +880-2-9102171~8 Fax: +880-2-8116663 E-mail: nhaque@idcol.org www.idcol.org