Solar Energy Programme

Rural Electrification And Renewable Energy Development Project (REREDP) By Infrastructure Development Company Limited (IDCOL)

IDCOL Solar Energy Program

IDCOL started its solar energy program in January 2003 with the support from IDA and GEF. Initial installation target was 50,000 solar home systems (SHS) in off-grid areas within five and half years. Target was achieved in August 2005, 3 years ahead of completion date and US$ 2 m below estimated cost. Following this success, World Bank, GTZ and KfW have extended support. Asian Development Bank is expected to support the program. IDCOL has revised its target to 1 million SHS by 2012. Installation of SHS up to 26 October 2009 is 400,000 (11+ MW) i.e. more than 1 million users are getting electricity.

SHS Installation Status in Bangladesh

Carbon Credit

IDCOL signed Emission Reduction Purchase Agreement (ERPA) with IBRD on December 19, 2007, to avail Community Development Carbon Fund. IDCOL is acting as bundling agency for the fund. IDCOL will sell CERs for SHS installed during 2007 to 2012 at 9 EURO per CER. Exploring the VER market for IDCOL’s biogas program This fund will be passed to the POs for further development of the program.

A Collaborative Effort

A collaborative effort of five partners:

IDCOL: A Government of Bangladesh, owned financial institution having project finance and project management expertise. Works only for Private Sector development.
Multilateral Agencies: Multilateral Agencies Global experience in renewable energy projects, and financial resources
NGOs/Micro-finance institutions: Operate at grass-root level and have expertise in micro finance activities
Manufacturer/supplier: Dynamism in operation
Professionals: Expertise in technology and rural development

Role of the Partners

1) IDCOL

soft loans/refinance to POs on project finance basis
grants to POs to reduce SHS cost and capacity building
capacity building & technical assistance (training of PO staff and customer, logistic and promotional support)
implementation agency and management of the program
funds manager of bi-lateral agreements

2) Multi-lateral Agencies:

· provide grant and soft loans to IDCOL, directly or under bi-lateral agreements

3) NGOs/MFIs(Partner Organizations/PO’s)(Partner Organizations/PO’s):

· identify areas/zones, select customers and install SHS

· extend micro-credit to customers

· provide after sales service

4) Manufacturers/suppliers: sell SHS or its components to POs

Professionals: Professionals: participate in technical specification and social impact assessment of the program

Committees and Responsibilities

a) PO Selection Committee:

–Consists of the representatives from IDCOL, ministry and relevant government organizations.

–Selects PO to implement the program on the basis of intent, micro-finance experience and financial ability

b) Technical Standards Committee:

–Consists of technical experts from universities, engineering departments of govt. and IDCOL

–determine technical standards, review product credentials of dealers, and approve eligible equipment

c) Operations Committee:

–Consists of program heads of POs and representatives from IDCOL

–look after the operational and business aspects of the program

Sample Calculation for a 50 WpSHS

Amount in US Dollar

(a) Solar Home System Cost	440
(b) Buy-down Grant from IDCOL	40
(c)RemainingCost (b-a)	400
(d) Household Down payment [15% of (c)]	60
(e) Remaining Cost (c-d)	340
(f) Loan from IDCOL to PO [80% of (e)]	272
(g) Contribution of PO as loan to customer (e-f)	68

Battery Recycling

· Battery recycling under IDCOL’s SHS program has been made compulsory

· Salvage value will be paid as per the contract signed between PO and battery manufacturer within 45 days of battery collection in the collection point.

· POs will not sell any new battery to the POs without collecting the old one.

Development Impact

· Improves quality of life of rural households through access to electricity

· Provides clean lighting/energy

· Improves health of children, females and other household members

· No energy bills (recurring costs) for rural and less fortunate households

· Provides opportunities for developing local entrepreneurship, income generating activities through micro/small business as well as extended hours of business activities

· Establishes link with the outside world –entertainment, news through use of television

· Promotes domestic industry and technology: Batteries, Solar lamps, charge controllers, wires etc.

· Creates jobs opportunities and skilled resources in rural and urban areas at three levels –technical, staff employed by PO’s, self employed and employment by manufacturers’ of components

· Benefits students through extended hours of studies

· Reduces carbon emission (200,000 SHS will reduce 85,000 tCO2e per annum)

Success Factors

· Sustainable partnership model. Apex entity managing finance, administration business of the program with various partners andother stakeholders.

· Collaborative effort harnessing strengths of all other partners

· Participation of customers, PO’s and IDCOL in procuring SHS

· Using expertise of the POs in expanding the use of SHS by using the micro-finance tool

· Customers become owner between 12 to 24 months after full payment of micro loans

· Technical and promotional support from IDCOL

· Necessary support from donor agencies

· Independent technical committees for approval of components

· Physical inspection by IDCOL, of systems installed by POs

· Ensuring after sales service to end users by POs

· Prompt resolution of operational problems

· Building a healthy competitive atmosphere among the POs

· Facilitating continuous availability of SHS components by suppliers

· Private sector participation

· Transparency in dealing with stakeholders

VISION

ONE MILLION SOLAR HOME SYSTEMS ACROSS RURAL BANGLADESH BY 2012

Project overview

IDCOL has revised the target of Solar Home System Installation Programme to 400,000 (26 October 2009 , 2009) worth of 7.4 megawatt-peaks, which it plans to achieve over an approximate period of four years [September 2005- December 2009].

In addition to refinancing, IDCOL also provide grants to lower costs of SHS and build institutional capacity of the Partner Organizations (POs’). IDCOL’s principal objective is the commercialization of SHS. Therefore, IDCOL has adopted a policy of reducing grant with the progress of the project.

Table: Phased reduction of the grants

Item	Amount of Grant Available per SHS/household
Item	Total	Buy-down grant	Institutional Development Grant
The World Bank funds
First 20,000 systems	$90	$70	$20
Next 20,000 systems	$70	$55	$15
Next 30,000 systems	$50	$40	$10
GTZ funds
33,660 systems	€38	€30	€8
KfW funds
First 30,000 systems	€38	€30	€8
Next 35,000 systems	€36	€30	€6
Next 35,000 systems	€34	€30	€4

So far sixteen POs namely: Grameen Shakti, BRAC Foundation, COAST Trust, TMSS, SRIZONY Bangladesh, CMES, IDF, Shubashati, UBOMUS, DORP, BRIDGE, PMUK, Hilful Fuzul, RSF, PDBF and Mukti have signed Participation Agreements (PA) with IDCOL to participate in the solar program.

Method of Implementation

The program is being implemented through the POs. The role of the PO is to select the project areas and potential customers, extend loans, install the systems and provide maintenance support. IDCOL provides grants and refinance, sets technical specification for solar equipment, develops publicity materials, provides training, and monitors PO’s performance.

IDCOL offers soft loans of 10-year maturity with 2-year grace period at 6% per annum interest to its partner organizations. Usually, IDCOL does not require any collateral or security for the loan, except for a lien created on the project accounts. Unless and until there is an event of default, POs are authorized to operate the project accounts of their own.

Under the PA, the households are required to pay minimum ten percent of the system cost as down-payment. On receipt of the down-payment, the POs enter into a sale/lease agreement (provisions of which are approved by IDCOL), install the system (mostly on credit) and makes electronic disbursement request to IDCOL for refinance and grants, as applicable. After in-house checking IDCOL conducts physical verification of the SHSs installed. IDCOL releases grants and refinance amount only if the inspection result is satisfactory. The refinance amount does not exceed US$230 equivalent in Taka per system. IDCOL makes the disbursement within 21 days from the receipt of disbursement request.

The households can buy SHS either in cash or on credit. POs extend loan to the households for purchase of SHSs. Different POs extend credit on different terms and conditions. The loan tenor varies from 1 to 5 years, and interest rate varies from 8% to 15% per annum on declining balance method and 10% to 15% per annum on equal principal payment method. But in all the instances, the repayment frequency is monthly.

Programme Target

The year wise target of installation of SHS under the program is shown in the table below.

Period	2006	2007	2008	2009	Total
No. of Systems to be financed	24,000	36,000	42,000	48,000	150,000
Cumulative	74,000	110,000	152,000	200,000	200,000
Equivalent kWs to be financed over the Project Life (kW)	1173	1759	2052	2345	7329

Implementation Status of the Programme

IDCOL achieved its first target of solar home system installation of 50,000 in August 2005, three years ahead of the project completion period and US$ 2 million below the estimated costs. Following the success of IDCOL’s solar program, the World Bank extended its support to this project and KfW signed a Finance & Program Agreement to provide EUR 16.5 million as grant to government to be used for further expansion of the program. GTZ has also been providing grant portion for 28,000 SHSs. However, the revised target has been set at 200,000 expected to be achieved by December 2009. Up to March 2007, a total of 109,456 solar home systems have been installed in remote rural areas under IDCOL solar program.

The following figure shows the expansion of usage of solar home system in Bangladesh:

WHAT WE ARE

Only local Public-Private financial institution working in private sector infrastructure development in Bangladesh;

Largest financial institution working for the promotion of renewable energy in Bangladesh;

Supported and funded by multiple donor agencies i.e. World Bank, KfW, GTZ, SNV, ADB and others;

Increase in capital, on-balance sheet financing and net profit;

       From Tk. 0.1 million share capital in 1997 to Tk. 400 million in 2007

       From net profit 0.95 million in 1997 to Tk. 75 million in 2007

       From fee income 2.35 million in 1997 to Tk. 77.17 million in 2007

Long term local and foreign currency loans in various infrastructure projects like power generation, telecommunications, ICT, PSTN, port, gas related infrastructure.

Financing, credit, grant and technical support for the promotion of renewable energy across rural Bangladesh:

  Installation of 210,263 Solar Home Systems.

  Construction of 4,328 biogas plants.

  Construction of the first ever biomass gasification based power plant.

Training and capacity building

Capacity building of partner organizations’.

Trained about five hundred professionals on project finance and financial modeling.

IDCOL’S RENEWABLE ENERGY PROGRAMMES

IDCOL Solar Energy Program

National Domestic Biogas and Manure Program

Biomass gasification-based Power projects

IDCOL SOLAR ENERGY PROGRAMME

IDCOL started its solar energy program in January 2003 with support from IDA and GEF.

Under the program, solar home systems (SHS) is being installed in off-grid areas through 15 private organizations.

Initial installation target was 50,000 SHS within five and half years i.e. by June 2008.

Target was achieved in August 2005, almost 3 years ahead of completion date and US$ 2 m below the estimated cost.

Following the success, World Bank, GTZ and KfW have extended support. ADB is also expected to join.

IDCOL has revised its target to 1 million SHS by 2012.

Installation of SHS up to 26 October 2009 2009 is 400,000 (11 + MW) i.e. more than 1 million customers are getting electricity.

OUR PARTNERS

Grameen Shakti

BRAC Foundation

Rural Services Foundation

SRIZONY

UBOMUS

BRIDGE

HFSKS

COAST

IDF

CMES

Shubashati

TMSS

PDBF

Mukti

PMUK

SHS INSTALLATIONS BY PARTNERS

Grameen	130,189	IDF	2,003
BRAC	37,659	CMES	1,826
RSF	15,103	Shubashati	1,818
SRIZONY	5,584	TMSS	1,258
UBOMUS	4,447	PDBF	1,135
BRIDGE	3,735	Mukti	311
HFSKS	2,746	PMUK	319
COAST	2,053	Others	77
Total		210,263

SHS INSTALLATION STATUS IN BANGLADESH

Monthly average installation of SHS : 8,500 SHSs

It is one of the fastest growing Renewable Energy Programmes in the world.

OUR PARTNERS

Grameen Shakti

SOUL

Kamrul Biogas

Rahman Biogas

Hosain Biogas

RSF

SRIZONY

Sangram

Change Maker

BRIDGE

Palli Shakti

SUF

Shubashati

SAPNO

Practical Action

BASA

DESHA

Nirapad

Nurunnabai Biogas

Jahanara Biogas

Barishal Biogas

BIOGAS CONSTRUCTION BY PARTNERS

Grameen	1,769	Shubashati	91
Soul	807	SAPNO	39
Kamrul biogas	478	Practical Action	18
Rahman Biogas	336	BASA	16
Hosain Biogas	268	DESHA	13
RSF	173	Nirapad	30
SRIZONY	205	Nurunnabai Biogas	11
Sangram	20	Jahanara Biogas	1
Change Maker	3	Palli Shakti	2
BRIDGE	23	SUF	25

BIOMASS POWER PLANT

A 250-kW biomass gasification based power plant has been constructed in Kapasia, Gazipur under World Bank project.

IDCOL provided financial and technical assistance for implementation of the project.

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

The plant uses rice husk as fuel for power generation.

Being located in off-grid area it is supplying grid quality electricity to 400 households and commercial entities.

OUR ACHIEVEMENT

Electrified 285,000 rural homes with Solar Home Systems.

Financed 7000 domestic size biogas plants.

Implemented the first rice husk based power plant in Bangladesh.

Provided BDT 70 crore as grants and BDT 285 crore as concessionary loans under Renewable energy Programmes.

Created around 5,000 employment opportunities around the country.

Improved the quality of life of about 10 lacs people around the country.

OUR MISSION BY 2012

Electrify 1 million homes with Solar Home Systems.

Install 60,000 domestic size biogas plants.

Finance 20-30 plants of about 10-20 MW generation capacity using rice husk and other biomass.

Introduce innovative Renewable Energy projects like biogas-based electricity generation plants, improved cooking stoves, etc.

Undertake energy efficiency projects for industries and households.

Special features of the Programme

IDCOL solar programme has some special features which are discussed below:

1. Committees:

Two committees: (i) Operations Committee and (ii) Technical Standards Committee have been formed to coordinate the various aspects of implementation of the programme. Operations Committee (OC), chaired by the CEO, IDCOL and consisting of program-in-charges from all POs and representatives from IDCOL, regularly meets to look after the operational aspects of the solar program. Technical Standards Committee (TSC) comprises members from BUET, REB, LGED and IDCOL. The role of TSC is to (a) establish and update equipment and service standards, (b) design a quality assurance program, (c) determine technical standards for equipment to be financed, (d) review the product credentials submitted by dealers, and approve the eligible equipment, and (e) evaluate the feedback from dealers and POs to develop the industry standards for the PV equipment. Equipment that is not approved by TSC is ineligible for IDCOL grants and refinance.

2. Audit:

IDCOL appoints independent organizations to conduct two types of audit: (i) Commercial audit and (ii) Technical audit. The objective of the commercial audit is to ensure that the households’ down payments are accounted for properly and POs are utilizing the grants and refinancing for their intended purposes only. A technical audit is conducted to ensure that only TSC approved equipment with their committed quality are used under the programme. Representatives of the suppliers accompany the technical audit team.

3. Training programmes:

IDCOL also conducts training programme to build awareness among the staff of the POs’ and the consumers. Training is provided to the staff of the POs on SHS configuration, positioning of SHS, installation procedure and guidelines with measurements, maintenance and troubleshooting of SHS, guidelines for monitoring and inspection of SHS, market development, micro-credit methods for marketing, and maintenance of battery used in SHS. 80% of the total expense is sponsored by IDCOL and the rest is shared by the POs.

Since SHS is entirely new to the households, consumer trainings are conducted regularly to educate them. They are trained on how to use the SHS and fix petty problems without waiting for the technician.

4. Others: In addition the following supports are extended to POs:

i) Logistic support: Each PO is given a computer for efficient documentation related to SHS installation. They are provided with tool boxes, motorcycle, demonstration kit, hydrometers and battery chargers according to their requisition for rendering better service to customers. Major share of the costs is sponsored by IDCOL. Further logistic support will be provided to the POs as and when necessary.

ii) Promotional support: IDCOL has developed and distributed publicity materials to raise awareness and popularize the use of SHS in different parts of the country. Posters, leaflets, T-shirts, and billboards have been distributed and more will be provided to the POs for wider publicity of solar energy. TV and radio spots have also been developed and aired.

iii) Exposure visit: To gain hands-on experience and diversified uses of the PV module and other renewable energy technology, exposure visits to Srilanka and India were organized for the representatives of the POs and IDCOL staff.

Development impact of the Programme

SHS is a convenient mode of supplying power for small electrical loads such as lights, radio/cassette players and black and white TV. Although available for limited number of hours in a day the supply is reliable and the system can be managed with a little training. The programme has also brought in positive changes in the economy of the rural people. Now they are using SHS in the advantage of their income generating activities e.g. working hours have been increased for small businessmen, weavers, tailors, hair dressers, and handicraft makers. Students are also getting benefits through extended hour of studies at night. In addition, the use of TV and radio has enhanced rural people’s access to the outer world. Many women opined that they were feeling more secured at night after installation of SHS.

Job creation in POs project areas

A good number of job opportunities, both for skilled and unskilled manpower, have been created. Specially, each unit office hires a local youth who has good knowledge about the area. It has paved the way for creating job opportunity locally. In addition, a good number of diploma engineers have been employed by POs to look after the technical aspects of SHS. Till December 2006, some 1500 new jobs have been created by the program.

Promotion of indigenous technology

A SHS system includes PV module, battery, charge controller, solar lamp and switch. Except for the PV module, other components are produced locally. For example, Rahimafrooz, a supplier of batteries, has doubled its capacity to meet the demand of the project. Charge controller and solar lamp manufacturers provide poor women with a job opportunity. IDCOL is also trying to establish a 1-2 MW solar panel assembling plant in Bangladesh through private sector participation to reduce the cost of purchasing PV module.

Conclusion

The solar energy project of IDCOL is a collaborative effort where strengths of each participating institution have been harnessed to the fullest extent. IDA, GEF, KfW and GTZ through their global experience, IDCOL through discharging social responsibility of the government, POs through their access to grass root levels, private suppliers through their dynamism and academicians through their professionalism have contributed in designing a system which has so far been very well accepted by the target group. A mass awareness building programme and promotional campaigns are also in place to give the project a further impetus.

Rural Electrification and Renewable Energy Development Project (REREDP)

Under REREDP Solar Home System (SHS)

400,000 Home System installed by IDCOL

Progress with SHS's installation up to 26 October 2009

PO wise installation of SHSs

Partner Organization	Number of SHSs Installed
Grameen Shakti	269,010
BRAC Foundation	53,103
RSF	45,864
Srizony Bangladesh	11,933
UBOMUS	8,447
BRIDGE	6,210
COAST Trust	3,483
Integrated Development Foundaton	4,305
Centre for Mass Education and Science	3,237
Shubashati	2,743
Hilful Fuzul Samaj Kallyan Sangstha	7,155
TMSS	2,240
PDBF	2,305
PMUK	770
Other	388
Total	421,193

Progress with SHS's installation up to 26 October 2009 (IDCOL promotes Solar Home Systems SHS, under REREDP )

Status of Partner Organizations (PO's working with IDCOL) wise installation of SHSs

Division wise installation of SHSs (26 October 2009 )

Division wise installation of SHSs

Division	Number of SHSs Installed
Barisal	64,734
Chittagong	86,195
Dhaka	99,655
Khulna	46,664
Rajshahi	59,280
Sylhet	53,222

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