IDCOL Local Solar Home System Program

Nazmul HaqueDirector (Investment) & Head of Advisory

Infrastructure Development Company Limited (IDCOL), Bangladesh

Workshop on ‘Financing Sustainable Energy for All’London, United Kingdom

17 November 2014

While significant progress is being made every year, still about 32% of the country’s nearly 160 million people are below the poverty line and about 18% are ultra poor.

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 using capital intensive renewable energy technologies remains a big challenge.

Bangladesh: Key Energy Outlook

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 WB & 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 : 3.3 million till Sep’14

Number of Beneficiaries : 15 million people

Power Generation : About 145 MW

Fossil Fuel Saving : 312,000 ton/year

CO2 reduction : 700,000 ton/yr

Job Creation : 70,000 people

IDCOL Investment : About USD 550m

Program Structure

Supply Equipment

Pay for Equipment

Seeks grant & loan

Provide grant & loan

IDCOL

Technical Standards Committee

Suppliers Seeks approval

Provides approval

Household

Sells SHS & provide

service

Pay down-payment & installment

NGO/POPO Selection Committee Select POs

Applies

Government

Development Partners

Mode of Financing: an Example

Key Program Features

Output based Subsidy and Credit Support:

POs install SHSs as per

IDCOL Specificatio

n, collect down-

payment 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 30~130wp, however, later 10~20wp 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.

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 :

Concessionary to Semi-Commercial Credit:

*for small SHS (up to 30 wp) only

2003 2004~5 2006~7 2008~9 2010~11 2012 2013~14

Capital Buy down Grant

$70 $55 $40 $40 $25 $25 $20*

Institutional Development Grant

$20 $15 $10 $5 $3 - -

2003~8 2009 2010 2011 2012~15

Loan Tenor 10 yrs 6-10 yrs 6-8 yrs 6-8 yrs 5-7 yrs

Interest Rate 6% 6%-8% 6%-8% 6%-8% 6%-9%

% of Loan Refinanced 80% 80% 80% 80% 70%-80%

Key Success Factors

Advisory Services for Successful Replication

Knowledge support provided

to a number of African countries

for successful program

replication

Thank You

Q & A

Infrastructure Development Company Limited (IDCOL)UTC Building (16th Floor), 8 Panthapath, Dhaka 1215

Phone: +880-2-9103883, +880-1711828373 E-mail: nhaque@idcol.org

www.idcol.org