Lessons and Experience Rural Electrification in Bangladesh Laos

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Lessons and Experience Rural Electrification in Bangladesh, Laos and Cambodia Jie Tang Lead Energy

Lessons and Experience Rural Electrification in Bangladesh, Laos and Cambodia Jie Tang Lead Energy Specialist South Asia Region, The World Bank May 31 – June 1, 2013 1

Rural Electrification • Bangladesh – Solar Home System (SHS) Program for lighting • Laos

Rural Electrification • Bangladesh – Solar Home System (SHS) Program for lighting • Laos and Cambodia – Grid-extension for Rural Electrification 2

Bangladesh - SHS Installation Rate Celebrated installation of 2 million SHS in early 2013

Bangladesh - SHS Installation Rate Celebrated installation of 2 million SHS in early 2013 3

Bangladesh SHS Program A viable business model for providing SHS for access to electricity

Bangladesh SHS Program A viable business model for providing SHS for access to electricity for meeting basic lighting needs • Implemented by the Infrastructure Development Company Limited (IDCOL) – Government owned Company • Started in January 2003 with IDA and GEF funds. Target was 50, 000 systems by 2008, but achieved by August 2005 • Later on jointed by other donors: including ADB, kf. W, Gi. Z, IDB, GPOBA, and JICA just started • Installation rate now is over 50, 000 SHS/month • Next Target - another 2 million by 2015 4

The Ownership Model Partner Organizations (POs), mostly NGOs install the SHSs under a micro-credit

The Ownership Model Partner Organizations (POs), mostly NGOs install the SHSs under a micro-credit program – Households pay down payment (10 -15%) of the system cost net of grant. The rest is paid under micro-finance (2 -3 years repayment at interest rate of 12 -16% per year) – The micro-finance extended by the POs are refinanced by IDCOL (5 -7 years at 6 -9% interest rates) allowing POs to install more systems 5

The Ownership Model s Technical Standards Committee Provides approval Suppliers Supply Equipment PO Selection

The Ownership Model s Technical Standards Committee Provides approval Suppliers Supply Equipment PO Selection Committee Applies PO Seeks approval Pay for Equipment Provide grant & loan IDCOL Funds Seeks grant & loan Select POs ion ns Grant & t a tio r s soft term pe olu on Sells SHS i o t Pay downs lu ek ed credit o & provide e S payment & S lat s e service installment d re i v o Pr Operations IDA and Household Committee others

Financing Scheme Figures in US$ for a 50 Wp system (a) Solar Home System

Financing Scheme Figures in US$ for a 50 Wp system (a) Solar Home System Cost 400 (b) Buy-down Grant from IDCOL (for all size) 25 (c) Cost net of Grant (b-a) 375 (d) Household Down payment [15% of (c)] 56 (e) Credit to customers (c-d) 319 Loan Tenor 2 -3 years Interest Payment 12 -16% Monthly Installment Payment 8. 5 (f) Refinancing from IDCOL to PO [80% of (e)] 255 • System size ranges from 10 Wp to 120 Wp with shifting preference for smaller systems (30 Wp or less) • System prices are in the $8 -10/Wp range 7

Role of IDCOL PO Selection Committee of IDCOL selects the POs as per eligibility

Role of IDCOL PO Selection Committee of IDCOL selects the POs as per eligibility criteria Technical standards committee of IDCOL develops technical standards for the equipment (panels, batteries, charge controllers) Inspections by IDCOL inspectors before release of funds to POs Hotline service for customers. IDCOL does not release payment until customer complaints are addressed by the PO 8

Phased Reduction of Grant Amount of Grant Available per SHS Item Total Buy-down grant

Phased Reduction of Grant Amount of Grant Available per SHS Item Total Buy-down grant Institutional Development Grant First 20, 000 SHS $90 $70 $20 Next 20, 000 SHS $70 $55 $15 Next 35, 000 SHS $50 $40 $10 Next 88, 160 SHS € 38 € 30 € 8 Next 35, 000 SHS € 36 € 30 € 6 Next 235, 000 SHS € 34 € 30 € 4 Next 100, 000 SHS € 28 € 25 € 3 Currently $25 $22 $3 9

Transition to “Commercial” Financing • IDCOL refinancing % is being reduced from 80% to

Transition to “Commercial” Financing • IDCOL refinancing % is being reduced from 80% to 60% • Repayment terms from POs to IDCOL are becoming more “commercial” – For large POs- 9% interest rate, 5 year repayment and a 6 month grace period – For smaller POs- 6% interest rate, 7 year repayment, 1 year grace period 10

Critical Success Factors • Geographic concentration of rural population – Economies of Scale •

Critical Success Factors • Geographic concentration of rural population – Economies of Scale • A viable business model for providing SHS • Existing network of NGOs – Public acceptance of NGO services • Supervision and Monitoring by IDCOL 11

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Thanks! 12

Laos – Grid-extension for Rural Electrification 80% Access to Electricity 2013 70% Population: 6.

Laos – Grid-extension for Rural Electrification 80% Access to Electricity 2013 70% Population: 6. 5 million, about 1. 2 million households 84% 60% 50% 40% 30% 20% 15% 1995 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 13

Laos – Grid-extension for Rural Electrification A model of public utility-driven grid extension to

Laos – Grid-extension for Rural Electrification A model of public utility-driven grid extension to expand access to electricity • Strong Government commitment and targets for rural electrification – 70% by 2010; 80% by 2015 and 90% by 2020 (set in 2002) • Electricity du Laos (Ed. L) established strong capacity in implementation of rural electrification – Capacity building since mid 1990 s when the Bank started the first rural electrification project – Efficiency in system planning, procurement, installation and commissioning • Comprehensive system loss reduction program to reduce distribution system losses thus cost of services – From about 20% in 2005 to 10% in 2010, along with the fast expansion of the distribution system into rural areas 14

Laos – Grid-extension for Rural Electrification • Programmatic approach in tariff reform to ensure

Laos – Grid-extension for Rural Electrification • Programmatic approach in tariff reform to ensure cost recovery and a profit margin for Ed. L – Cross-subsidies among consumer categories to ensure (i) affordability of rural housheolds; and (ii) weighted average tariff cover the weighted cost of services • Strong Government support to Electricity du Laos (Ed. L), a public utility company, to expand access to electricity services – Financial support to Ed. L when tariff did not cover the cost – Provided strong support of tariff reform toward cost recovery and a profit margin – Concessional terms of loans to Ed. L for rural electrification projects • Special program for connecting the poor – Power to the Poor: about 20 -40% of households in the villages electrified were not connected to the grid since they could not afford the upfront-connection cost (about $80) 15

Power to the Poor (P 2 P) – Revolving Fund Targeting the poor 1.

Power to the Poor (P 2 P) – Revolving Fund Targeting the poor 1. 2. 3. interest-free credit households in village already electrified household monthly budget neutral Ed. L Operational Account $2. 5 /month Ed. L, IDA, GEF Grants $80 Ed. L P 2 P Revolving Fund $1. 5/m + $2. 5/m Monthly bill Electricity payment P 2 P Repayment Poor Households $80 Wiring Service Contractor for in-house wiring

Power to the Poor (P 2 P) Pilot Example: Phosaad Village Grid to village

Power to the Poor (P 2 P) Pilot Example: Phosaad Village Grid to village in 2002 270 households in 2008 72 not connected over the past 6 years were all connected to the grid in about one month (Feb. Mar 2009) through the P 2 P Youtube Video: Lao PDR: Electricity for All – A Gender Lens http: //www. youtube. com/watch? v=h. DY 3 T_1 RPI&feature=player_embedded

Results of P 2 P Significant result of the P 2 P Program –

Results of P 2 P Significant result of the P 2 P Program – About 25, 000 poor households (2% of the population) gained access to grid electricity through the P 2 P – Increased the overall connection rate in P 2 P villages from 79% to 96% P 2 P Program in a gender sensitive approach – About 1, 300 female-headed households gained access to grid electricity – Connection rate increased in female-headed households from 67% to 95% 18

Cambodia – Grid-extension for Rural Electrification A model of expanding access to electricity led

Cambodia – Grid-extension for Rural Electrification A model of expanding access to electricity led by private sector – about the same access rate as Laos in mid 1990 s, but now still less than 30% • Private Rural Electrification Enterprises (REEs) have exclusive right in electricity service provision in licensed areas – There about 180 REEs licensed for rural electrification – About 54% of the population are in REEs’ areas – Very weak technical and financial capacity of REEs, resulting in insufficient investments in generation and distribution, very low efficiency, and very high cost of electricity services – very high tariff, about $0. 5 -1. 0/k. Wh – very low connection rate, about 3 -5% in the REEs’ areas 19

Cambodia – Grid-extension for Rural Electrification • Independent regulator – Managing the licensing of

Cambodia – Grid-extension for Rural Electrification • Independent regulator – Managing the licensing of REEs – Regulating REEs’ retail tariff in the principle of “cost plus” – Different tariffs for different REEs • Public power utility company – Generation, transmission , plus distribution services in urban areas – Now is expanding MV network to REEs’ areas for bulk sales – can reduce cost of generation – Not proactive in expanding distribution networks to expand grid coverage • Governance risks – Risks in tariff setting ? – Risks of corruption – REEs are running profitable business 20

Critical Factors of Success vs no Success • Strong government commitment and support •

Critical Factors of Success vs no Success • Strong government commitment and support • An efficient model with public utility-driven grid extension • High efficiency in implementation of rural electrification projects due to strong commitment and capacity of Ed. L • Combination of lowering cost of services and increasing tariff to ensure financial sustainability of electricity services 21

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Thanks! 22