IDCOL Solar Home System Program Nazmul Haque Director

IDCOL Solar Home System Program Nazmul Haque Director (Investment) & Head of Advisory Infrastructure Development Company Limited (IDCOL), Bangladesh Off-grid Electrification Workshop Naypyidaw, Myanmar 28~29 January 2015

Bangladesh: Key Energy Outlook While significant progress is being made every year, still more than 40% of the country’s nearly 160 million people do not have access to grid electricity. 15 million rural households do not have access to electricity and still use kerosene lamps for lighting their homes after dark. The Government has a vision to ensure access to electricity for all by 2021. Government also has a target to generate 5% of total electricity using RE by 2015 and 10% by 2030. While the country’s renewable energy (especially solar) potential appears to be bright, ensuring affordable electricity for the poor (About 32% of the country’s population are below the poverty line and about 18% are ultra poor) using capital intensive renewable energy technologies remains a big challenge.

IDCOL Solar Home System (SHS) Program IDCOL is a state-owned development financial institution dedicated to promote/finance infrastructure and renewable energy projects in Bangladesh. IDCOL SHS Program: ◦ Started in 2003 with funding support from the World Bank and GEF ◦ Initial Target: 50, 000 SHSs by June 2008 ◦ Revised Target: 1 million SHSs by 2012 ◦ New Target: 6 million SHSs by 2017

Key SHS Statistics Program Achievement Number of Beneficiaries Power Generation Fossil Fuel Saving CO 2 reduction Job Creation IDCOL Investment : 3. 45 million till Dec’ 14 : 15. 5 million people (9% of total population) : About 141 MW : 207, 000 ton/year : 488, 913 ton/year : 75, 000 people : USD 600 million

Program Structure Suppliers Provides approval Seeks approval Supply Equipment PO Selection Committee Technical Standards Committee Pay for Equipment Provide grant & loan Applies Select POs Sells SHS & provide service NGO/PO Pay downpayment & installment Seeks grant & loan Operations Committee IDCOL Government Household Development Partners

Mode of Financing: an Example (a) Market Price of a 20 Wp SHS USD 193 (b) Buy-down grant USD 20 (c) System Price for Household [(a)-(b)] USD 173 (d) Down payment from household to PO [10% of (c)] USD 17 (e) PO loan to household [(c)-(d)] USD 156 Loan Tenor 3 years Interest Rate 16% p. a. Monthly Installment Amount (f) IDCOL Refinance [70%~80% of (e)] USD 5. 40 USD 109 ~ 125 Loan Tenor 5~7 years Interest Rate 6~9% p. a.

Key Program Features Output based Subsidy and Credit Support: POs install SHSs as per IDCOL Specification, collect downpayment and extend microcredit POs seek subsidy and refinancing for installed SHSs and upload household information in database IDCOL checks subsidy and refinancing eligibility & conducts random physical verification IDCOL disburses subsidy and refinancing within 21 business days

Key Program Features Targeted Subsidy with More for the Poor: As grid electricity is already subsidized, the SHS Program focuses only the off-grid areas to avoid duplication of subsidy schemes; Initial range of SHSs supported was 30~130 wp, however, later 10~20 wp was also introduced to serve the lower income segment. Fixed subsidy for all system sizes, meaning a larger percentage of subsidy for smaller systems usually availed by the poorer segment of the society.

Key Program Features Superior Quality Control and After Sales Services: Only TSC approved equipment and suppliers are eligible to supply. All suppliers are required to provide 20 -year warranty for the panel, 5 -year warranty for battery and 3 -year for the charge controller. POs provide minimum 3 -year free after sales service and enter into yearly maintenance agreements with households afterwards. 150 quality inspectors of IDCOL monitor the quality of SHS components and after sales service of POs from 12 regional offices of IDCOL officials and independent technical auditors conduct random re-verification of systems. A dedicated call centre at IDCOL Head Office lodges customer complains and mitigate the same.

Key Program Features Price Determination by the Market: Multiple suppliers for each SHS component allow POs to procure SHSs at competitive prices. Presence of multiple POs ensures healthy competition and customers are free to purchase from their chosen PO based on price and quality of service. Development of Domestic Support Industries: Fiscal support by the government as well as the semi-concessional credit facilities offered by IDCOL to local support industries encourages new domestic manufacturers, ensuring smooth supply at one of the lowest prices in the world

A Sustainable Financing Structure Phased-out Subsidy : 2003 2004~5 2006~7 2008~9 2010~11 Capital Buy down Grant $70 $55 $40 Institutional Development Grant $20 $15 $10 $5 2012 2013~14 $25 $20* $3 - - *for small SHS (up to 30 wp) only Concessionary to Semi-Commercial Credit: Loan Tenor Interest Rate % of Loan Refinanced 2003~8 2009 2010 2011 2012~15 10 yrs 6 -8 yrs 5 -7 yrs 6% 6%-8% 6%-9% 80% 80% 70%-80%

Key Success Factors Innovative financing structure Cost-efficient standardized technical design Development of local support industries Financial contribution of all parties Price determination by the market Bangladesh’s micro -finance experience Sustainable business model Superior quality control & after sales service Support from Go. B and development partners

Major Challenges Low collection efficiency in some areas due to political instability and inefficiency of partner organizations Prevalence of low cost and low quality SHS outside the program market Lack of the accountability of the suppliers Expansion of grid area

Can IDCOL SHS Program be Replicated in Myanmar? Common Market Features Large off-grid area Dispersed nature of rural population Expensive grid expansion due to difficult topography Unjustified grid expansion due to low rural demand Adequate solar irradiation Presence of NGOs and MFIs Stable GDP growth outlook What to do? Feasibility study and awareness campaigns Sustainable financial model including smart subsidy planning Cost efficient technical design Development of local support industries Proper quality control and after sales service arrangements Establishment of a dedicated company

Advisory Services from IDCOL Knowledge support provided to a number of African countries for successful program replication

Thank You Q&A Infrastructure Development Company Limited (IDCOL) UTC Building (16 th Floor), 8 Panthapath, Dhaka 1215 Phone: +880 -2 -9103883, +880 -1711828373 E-mail: nhaque@idcol. org www. idcol. org