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<%-- Volume Number --%> Vol 1 Num 141 <%-- End Volume Number --%>

February 13 , 2004

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Harnessing Power from the Sun


Only two hours away from Dhaka, life is surprisingly different in Dakatia , a small village under Munshiganj district. As night falls darkness descends in the neighbourhoods. The weak slim flame from the kerosene-burning kupi and hurricane is no match for the deep darkness of the village nights. Here sunset means more than just the end of a day, it means the end of all forms of activity. The only thing one has to do then is retire to bed.

Dakatia is certainly not the only village where life halts at sunset. There are thousands of villages across the country where people do not have access to simple household conveniences basic to modern living like light, fan, television, fridge and many more household appliances, because they don't have electricity. Access to electricity is still a privilege only a few urbanites can enjoy while the majority of village folk have to depend on lanterns.

Electricity would not only allow this large village populace a few extended hours of work but also open up opportunities to involve themselves in many new income-generating activities. Grid-based electricity is extremely expensive and the best option would be to opt for renewable energy, which can be reached far more easily and quickly to these power-starved areas. Infrastructure Development Company Limited (IDCOL), a government financial institute, through its renewable energy programme has shown the great potential of solar power in bringing about a positive change in our social and economical life. SWM ventures to find out how.

WE are a power-starved nation. Access to electricity in Bangladesh is one of the lowest in the world -- around 70% of the total population do not have electricity. To put it in another way, among some 30 million families about 23 million families are now deprived of power, most of who live in the rural areas. Neither is there any realistic chance that these rural people will get electricity any time soon. Rural Electrification Board or REB, the institution created to facilitate electricity in rural areas, is currently providing 5 lakh new connections a year. At the present pace of installing new connections, it will take at least 50 years to reach our target of electricity for all. On an average each connection costs Tk 6,000, so approximately 25 thousand crore Tk will be required for transmission and distribution purposes. An estimated 50 thousand crore Taka more is needed to generate the additional 15,000 megawatts to supplement the existing about 4,000 megawatt power to provide electricity throughout the entire country.

The question is where do we get this huge amount of money and how long do we have to wait? Along with speeding up of the on-going electrification process we will have to think of alternative means of power generation using renewable energy, such as solar, mini-hydro, wind and biomass energy etc. In fact, some works have already been done in the last 6 or 7 years, but in too small a scale to be noticeable. Local Governemnt Engineering Department (LGED), Grameen Shakti, Bangladesh Rural Advancement Committee (BRAC), Centre for Mass Education and Science (CMES) and a few other organisations have been trying to use solar energy since 1996. In the last one year, that is 2003, this venture of installing solar power system acquired a momentum with IDCOL (Infrastructure Development Company Limited) getting into the act.

IDCOL was created by the Government of Bangladesh (GoB) and financed by the International Development Agency IDA. IDCOL, in addition to financing infrastructure project is also financing renewable energy to help Bangladesh accelerate its electricity access rate promoting mainly Solar Home System (SHS) and a few wind, mini-hydro and biomass energy projects in rural areas. The initial project period was five and half years and IDCOL was given a target of financing 50,000 SHS by the stipulated time. By installing 12,000 SHS within a year, against a tar get of 6,000 in the first year, IDCOL has set a new target for itself : " We hope to achieve our target of 50,000 SHS in three years time," says Dr Fouzul Kabir Khan, Executive Director and CEO, IDCOL. IDCOL's success of reaching double its annual target proves one thing beyond any doubt--the huge potential of renewable energy in terms of popular acceptance in Bangladesh. If the momentum occasioned by IDCOL can be sustained, the piteously low rate of access to power can be raised to a respectable position in the near future.

Khan illustrates various aspects of SHS that make it preferable to other alternative means of power generation. It is easy to install, doesn't require any specialised training to install and takes less than two hours to set up. It is also easy to operate. With no electricity bill to pay in this system there is no scope of corruption. Solar energy, moreover, is environment friendly, because it is clean and doesn't produce residue and unpleasant odour. Another advantage of solar power is that it can be installed anywhere and requires no extra space. Especially in places where habitation is sparse as in the hilly areas or an area surrounded by jungles or water bodies, solar power is certainly the best option. There are many places where setting up the conventional electrification system is not economically viable. If there are a few households in a char, far away from the mainland, providing power in the conventional means is not feasible there. Unlike the conventional electrification system which requires high poles, transmitters and long electric wires, a Solar Home System is self-sufficient and therefore affordable and preferable in difficult areas.

IDCOL's renewable energy programme has not only provided electricity to remote rural areas but in the process has created new job opportunities. The eight participating organisations, which are providing SHS for IDCOL, have recruited some 500 young men, both skilled and unskilled, for this programme. Besides a good number of Diploma Engineers, around 188, technicians, around 356, accountants, around 11, have been recruited in the last one year.

Local manufacturing companies have also been benefited from IDCOL's programme. Except for the PV module all the components required for an SHS system such as battery, charge controller, solar lamp and switch are produced locally, so a rise in the sale of SHS means more business for the local industries. Besides, charge controller and solar lamp workshops provide poor women with a job opportunity. Rahimafroz, a supplier of batteries, for example, has doubled its capacity after the successful commencement of the project. "So, job opportunities were created even there and, provided we can keep up our good work, there will be many more new jobs," Khan hopes.

Launching the 10,000th SHS
On 25 December 2003, M Saifur Rahman, Minister for Finance and Planning inaugurated the 10,000th SHS under IDCOL financing at the residence of a grocer Ankar Mia at Rajnagar, Maulavibazar. While inaugurating the system he lauded IDCOL's initiative and congratulated both IDCOL and its POs for their work. He also suggested that the government will consider providing additional subsidies to popularise SHS.

Access to power can make a world of difference. The 12,000 households in the remote rural areas have been changed forever. The nights are no more dark and full of silence and inactivity, but bright with lights and full of life. Students no more have to strain their eyes in the weak light coming from kerosine lamps and hurricanes. The dull evenings that were spent waiting for sleep is now full of fun and entertainment, thanks to television. Entertainment aside, television has also provided them with access to information and they are certainly more conscious about things that never crossed their minds before.

Different types of economic activities in the rural areas have also been boosted. Working hours that formerly ended with the sunset have now extended late into the night allowing small businessmen, weavers, tailors, hair dressers, and handicrafts makers extra hours and, of course, extra income. Another crucial contribution electricity has brought about is women in the rural areas no more suffer from the insecurity of walking in the dark.

If solar power can be used to its fullest potential it will bring a sea change in rural lifestyle.

So what is a Solar Home System or SHS?
The SHS is a means of supplying power using the energy from sunlight. A typical SHS operates at a rated voltage of 12 Vdc (?) and provides power for small electrical loads such as fluorescent luminaries, radio, cassette players, small black and white television or similar low-power appliance for about four hours a day. An SHS consists of PV (Photovoltaic) module, charge controller, battery, DC lights and cables, fuses and light switches. The Photovoltaic solar module converts the solar energy to electrical energy and this output power from the solar module charges the battery. The charge controller, positioned between the solar module and the battery, is meant to protect the battery from overcharging and discharging below their cut-off voltage, which may cause permanent damage to the battery. An SHS generally comprises 2 to 8 DC lights in range in wattage from 6W to 20W depending on the capacity of the module.

SHS however, is by no means is cheap. A 50Wp system that can provide power for 4 DC bulbs and one black and white television costs Tk 22,750. However, since the target group of buyers is generally lower income group people, under IDCOL programme the Participating Organisations (POs) provide an installment facility to make it affordable. For example, one has to pay an initial down payment of Tk 3,375 and a monthly installment fee of Tk 627 for three years, and then he/she becomes an owner of the SHS. Khan concedes that it is a little expensive, but it's a good investment for the long run, he claims: "The photovoltaic panel is warranted for 20 years and battery for 5 years. So after paying off one becomes the owner of the system within 3 years, which he/she will be able to run for at least 17 years more. It requires little maintenance costs and the only major part he needs to buy during this 17 years period is battery. When you take all these factors into account it isn't all that expensive."

How does it work?
IDCOL doesn't work all by itself. It acts through the Participating Organisations that include NGOs, Microfinance Institutions and other entities by channeling IDA fund and GEF (Global Environment Facility) grant. At present IDCOL is working in collaboration with 8 POs namely Grammen Shakti, BRAC Foundation, Coastal Association for Social Transformation (COAST) Trust, Thengamara Mohila Shabu Shangha (TMSS), SRIZONY Bangladesh, Centre for Mass Education in Science (CMES), Shubashati and Integrated Development Foundation (IDF).

After the POs are selected they enter into an agreement with IDCOL that categorically spells out how they select the project area and target potential customers, and how they will extend loans, install the system and provide maintenance support. IDCOL on its part provides grants and refinance, sets technical specification for solar equipment, develops publicity materials, and provides training and monitors the PO's performance. Khan believes that the Participating Organisations deserve as much credit as does IDCOL for making the renewable energy project a success. "Without the great network of these organisations spread out all over the country as well as commitment and hard work of their staff we could never materialise this project," Khan remarks.

The Secret to IDCOL's Success

The success of IDCOL's was possible due to the visionary and dynamic leadership of IDCOL's Executive Director and CEO Dr Fouzul Kabir Khan(FKK). He shares his experiences and future plans with SWM.

SWM: What is the secret behind your success, especially when most other foreign funded projects have miserably failed to produce any results? And what have been the main constraints you have had to overcome?

FKK: Actually, our experience is rather mixed in managing two World Bank funded projects on behalf of the government. In the renewable energy development project, in the first year, we have financed nearly 12,000 solar home systems (SHSs) against the target of 6,000. However, our achievement is more modest with respect to financing private sector infrastructure projects: we have invested $80 million in a 450 MW power plant.

The success of renewable energy development project is attributable to: (a) the project providing for a critical need of our energy-starved country; (b) our involvement in designing the project; and (c) existence of a decent renewable energy programme of Grameen Shakti, BRAC, LGED and others. Most importantly, we were able to combine the social responsibility of IDCOL as an government institution, international experience of the World Bank, grassroots experience of the NGOs, dynamism of private business, technical expertise of local academics and consulting houses in our programme. Our contribution relates more specifically to the acceleration of the existing programme. During 1996-2002, in six years, about 9,000 SHSs were installed in Bangladesh; whereas, we financed about 12,000 systems in 2003 alone. That's the key to development-- to do things in a year that took six years in the past; do things in a month that took a year.

The major challenge, however, was to design a programme that would work under local conditions. A programme working in one country may not work in another. Fortunately the World Bank helped us to develop a programme suitable for Bangladesh.

SWM: IDCOL is supposed to invest private sector for infrastructure developmentthen how come you have managed to invest only 80 million dollars when IDCOL has access to a fund worth 225 million dollars?

FKK: Private sector participation in infrastructure is a relatively new concept in Bangladesh. When the project was prepared, it targeted to finance several infrastructure projects through private sector participation. Some of those projects in IDCOL's pipeline, namely, SSAB Container Port in Chittagong, 300,000 Fixed Telephone Lines, Meghnaghat Phase-II, Baghabari Power Plant, etc. either did not materialise or were delayed, denying us the opportunity to make investments. Moreover, in recent years there has been a downturn in the private sector interest to invest in infrastructure projects in recent years. In addition, the project did not allow financing of captive infrastructure, making local currency loans and equity investments. All these limitations in project design also caused similar projects implemented in Sri Lanka and Pakistan to run into difficulties like ours.

Under the project, IDCOL could finance only those private sector infrastructure projects for which the relevant government agency has followed "International competitive bidding (ICB)" procedure to select the sponsors or the sponsors will have to follow ICB for its downstream procurement. While ICB works fine with public procurement, both government agencies and the private sector are reluctant to follow ICB procedure in public-private partnership projects. Notably, IFC, an affiliate of the World Bank and the Private Sector Group of Asian Development Bank do not require ICB, when making loans to private sector projects.

From the beginning, we have raised these issues with the World Bank. The Bank has recently agreed with the government to allow local currency loans. We are optimistic that, working with the World Bank, we will be able to restructure the project and achieve its objectives. In addition, we have been authorised by the government to invest re-flows from our power plant loan. We believe that we have now turned a corner and look forward to making local currency loans to local entrepreneurs soon.

SWM: There are various forms of renewable energy. Why has IDCOL opted for solar power instead of, say, windmill or mini-hydro?

FKK: Initially, we opted for solar energy because of its demonstrated potential. However, we have recently initiated feasibility study for 3 micro-hydro, 2 biomass and 2 wind projects.

SWM: What is your future plan with the solar power project? Is IDCOL contemplating to work on any other renewable energy?

FKK: In the next phase, we are getting private businesses involved in the programme. Given, its enormous potential, we need to commercialise renewable energy in future and involving private businesses is the right way to do so.

SWM: What can the government do to expedite this project so that a larger number of people get solar energy more quickly? And who else (for example media) can play a role here except the government?

FKK: IDCOL is a fully government owned institution. IDCOL, on behalf of the government, is already channelling Global Environment Facility (GEF) grants and providing concessional re-financing to the POs. The government has also exempted SHSs from import duties. To accelerate the programme further, we have to lower SHS prices and commercialise it. The solar panels, the single most expensive (about 60%) component of the SHSs, are now imported. As the market grows, plants for manufacturing solar panel may be set up by the private sector in the country. This would lower system costs and make it more affordable.

We cannot expect to achieve the goal of "electricity for all" by 2020 by relying solely on expansion of grid based electricity. We have to provide different kind of electricity based on realistic assessment of availability of resources for grid-expansion; and needs, ability to pay, and location of different type of consumers. Renewable energy, such as solar energy is not a substitute, but could become a useful complement to grid-based expansion. Media has an important role to play here in educating people that there are different energy solutions for different groups of people. But we must provide basic electricity to all.

SWM: IDCOL's success can be a good example for others who want to work for the development of the country. What can you do so that others know about this institution and its success story?

FKK: IDCOL was designed to have a finite life -i.e. to end with the project. But we felt that the country needed a development finance company and converted IDCOL into an institution that is financially independent of both GOB and donor agencies to meet its operational expenses. We also had a very successful knowledge transfer programme. Now Bangladeshis are doing most of the work previously done by foreign consultants. IDCOL is now fully equipped to work with the World Bank in other projects and multilateral agencies such as ADB, DFID, UNDP and similar agencies that may require our financial services. Most importantly, IDCOL will continue to work for the Government and the people of Bangladesh as their prime development finance institution.





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