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National Exhibition and Seminar (Title : Climate Change Mitigation : Role of Renewables) on Renewable Energy . Dhaka, Bangladesh,  24-25 March, 2008

 

Focus on Climate Change Mitigation: Role of Renewable

 

Achievement of IDCOL in Promoting RET in Bangladesh

 

S. M. Formanul Islam

 

Director, Legal and Company Secretary

Infrastructure Development Company Limited (IDCOL)

 

About IDCOL

R      IDCOL is a financial institution owned by the government.

R       IDCOL is mandated to provide long-term financing to private sector infrastructure projects 

R      Infrastructure sectors in the current priority list of IDCOL

    include: Power generation, Telecommunication, Information

    and Communication Technology, Ports, Gas and Gas 

    related infrastructure, Water Supply, Toll Roads and

    Bridges, Urban Environmental Services and Renewable

    Energy projects.

 

IDCOL’s Objectives

 

R      Catalyzing private sector participation in the infrastructure projects. 

R      Promoting renewable energy technology in Bangladesh

R      Promoting renewable energy businesses in Bangladesh on

     commercial basis

R       Promoting eco-friendly projects

 

IDCOL Current Renewable Energy Programmes

R      IDCOL Solar Home Systems Programme

R       National Domestic Biogas and Manure Programme

R       Biomass gasification-based Power Plant

 

Solar Home Systems Programme:  How it started

 

v       With the help of International Development Association (IDA) and Global   Environmental Facility (GEF), the Solar Program in Bangladesh started as a key component of the Rural Electrification and Renewable Energy Development Project (REREDP) of The World Bank.

 

v      The Government of Bangladesh targeted  Palli Biddut Samity (PBSs) 

    and non-government organizations (NGOs) and micro-finance

    institutions (MFIs) as the implementing agencies

 

v       Rural Electrification Board (REB) and IDCOL was selected as the

     coordinating agencies for the execution of the program.

Implementation method

 

v        Implemented through 15 Partner Organizations selected from NGOs, MFIs and Private Entities.

 

v      IDCOL provides grants (currently EUR 34) and refinance (up to 80% of POs loan but not to exceed EUR176 per system)

 

v      IDCOL sets technical standard for the equipment and ensures quality

 

v      It ensuring that grant benefit reaches the target people

 

v      It facilitates cooperation and coordination among the POs

 

v      Provides training, publicity materials and logistic supports to the POs

 

Current status

 

R       Started in January 2003, IDCOL initially targeted to finance 50,000 SHSs by

     the end of June 2008.

 

R       Target was achieved in September 2005, 3 years ahead of schedule and US$

     2.0 million below estimated project cost.

 

R       Revised target is to finance 228,000 SHSs by 2009 with additional support  from World Bank, KFW and GTZ.

 

R       Till February 2008 a total of 180,000 SHSs have been installed under the  

     programme.

 

R       IDCOL’s Solar Program is one of the fastest growing renewable energy

     programs in the world

 

Progress of the Project

 

 

 

 

 

 

Monthly average SHS installation : 6,500 SHSs/month in average

 

Grant Facility

R      Two kinds of grants are provided under this program:

–         Capital Buy-down Grant

•          Provided to household to purchase SHS so that the cost of the system is reduced and the down-payment and installment payment become affordable.

–         Institutional Development Grant

•          Given to POs for extending credit to the households

 

v      Since the objective of the project is to commercialize SHS, IDCOL has

            adopted a policy of reducing grant with progress of the project

 

Phased Reduction of Grants

 

Item

Amount of Grant Available per SHS

Total

Buy-down Grant

Institutional Development Grant

First 20,000 systems

$90

$70

$20

Next 20,000 systems

$70

$55

$15

Next 30,000 systems

$50

$40

$10

Next 28,000 systems

€ 38

€ 30

€ 8

Next 30,000 systems

€ 38

€ 30

€ 8

Next 35,000 systems

€ 36

€ 30

€ 6

Next 35,000 systems

€ 34

€ 30

€ 4

 

 

Project Snapshot

 

 

 

 

 

 

Lending Terms

IDCOL Refinancing: 80% of MFI loan to Household

Max. Refinancing per system: US$ 230 / EUR 176

Household Down payment: Minimum 10% of system cost

 

IDCOL Loan Terms to MFIs:

 

Tenor: 10 years

Grace: 2 years

Interest rate: 6% calculated on the outstanding balance

Repayment : Semi-annual (total 16 equal installment)

 

Financing Method ( Sample of a 40 Wp System)

 

IDCOL’s Loan to POs

 

Cash Sale

Only Grant A is provided to the PO

Credit Sale

System Capacity

40Wp

SHS cost (Tk)

Tk 22,600

Household Down payment (15%)

Tk 3,390

Loan (Tk)

Tk 19,210

IDCOL refinance (80%)

Tk. 15,368

Grant A EU 30

Tk. 2,550

Grant B EU 8

Tk. 680

PO Contribution 20% of loan amount

Tk. 3,842

 

PO’s Loan to Households

 

ü      Different POs extend credit on different terms and conditions.

 

ü      Loan tenor varies from 1 to 5   years.

 

ü      Interest rate varies:

 

ü      8% to 15% per annum   on declining balance method or 10%  to 15% per annum  on equal principal payment method

 

Biomass Power Plant    

R      The capacity of Biomass fuelled Power Plant is 250 kW

 

R       The plant uses locally available agricultural residues i.e. rice husk as fuel for

     power generation

 

R       Being located in an un-electrified area, the plant is supplying grid quality

    power to 300 households and commercial entities of the area of Kapasia,

    Gazipur

 

R       The Plant has been developed by a local private entity Dreams Power Ltd.

  

 

 

Total Project Cost : BDT 2.5 crore

Debt Equity ratio : 80%-20%

Grants :  BDT 1.5 crore provided by World Bank

Term Loan : BDT 50 lac provided by IDCOL

Tenor of term loan : 7 years

Grace period : 1 year

Interest Rate: 9.5%

Repayment : Quarterly

Fuel Cost : Rice Husk- 1.4 Tk/kWhr, Diesel- 3.3 tk/ kWhr ( Producer gas to diesel ratio : 70%-30%)

Tariff : 7.11 Tk/ kWhr

 

National Domestic Biogas and Manure Program (NDBMP)    

 

 

Overview

 

R       Being implemented with financial assistance from SNV Netherlands Development Organization and KfW

 

R        Under the project, a total of 60,000 domestic sized biogas plants will be 

      constructed by 2010

 

R        Beginning in June 2006, IDCOL has awarded construction approval to 4,823 plants up to February 2008 of which 3,200 have been completed

Domestic Biogas Plant

 

Method of Implementation

IDCOL is implementing this program through 20 partner organizations (PO)

There are 4 types of POs:

(a)   Construction Partner Organizations (CPOs),

(b)   Lending Partner Organizations (LPOs),

(c)   Lending and Construction partner Organizations (LCPOs) and

(d)   Manufacturing Partner Organization (MPOs)

Total Project Cost is estimated as EUR 23.61 million

Interest rate: 6% to LPOs and LCPOs to households

Loan tenure : 7 years

Grace Period : 1 year

Repayment Profile : Quarterly

Subsidy: 7,000 Tk/Plant provided by SNV to customer

Credit facility : IDCOL, KfW up to 80% of the LPOs and LCPOs loan to households

 

 

 

Financing Method

 

Cash Sale

   completion of the plant.

Credit Sale

 

The Way Forward…..

 

R      Installing more Biomass based Power Plant: 10 in 2008 and 20 in 2009

R       Establishing Solar Panel Assembling Plant with 1-2 MW capacity

R       Installing community based solar power system in urban/rural areas.

R       Promoting usage of solar water heater, solar pumping

R       Financing of solar energy powered BTSs of mobile operators

R       Undertaking other renewable energy programmes:

─        Biogas based Electricity Generation (up to 500 kW),

─        Large Biogas Plant  (10 m3 and above),

─        Electricity Generation from Urban Waste,

─        Production of Bio-diesel.