IDCOL Solar Home Systems Model

An off grid lighting solution in Bangladesh

Islam Sharif
Chief Executive Officer
Infrastructure Development Company Limited (IDCOL)

Promoting Rural Entrepreneurship for Enhancing Access To Clean Lighting

Delhi International Renewable Energy Conference 2010, Delhi

28 October 2010
 BANGLADESH: KEY ENERGY OUTLOOK

• Only 45% of the population has access to grid electricity and consumption per capita is
one of the lowest (145kWh per annum) – about 1/18th of world average;
• 70% of Bangladesh's total commercial energy is provided by natural gas and the
remainder almost entirely provided by imported oil, hydropower and coal;
• 46% of primary energy consumed comes from biomass and used mostly for cooking in
rural areas;
• Load shedding is currently 1200 MW per day and expected to be 1,750 MW by 2014 and
may increase to 3,000 MW with increased gas supply uncertainty;
• Current share of renewable energy (RE) in electricity production is very low with solar
and conventional hydro producing about 0.1% and 4% of electricity, respectively;
• Government has a vision to make electricity available for all by 2020.
 NEED FOR RENEWABLE ENERGY

• To ensure energy security

– Present proven reserves of indigenous gas and coal will be exhausted by 2030.

• To reduce negative environmental consequences

– Climatic change will eventually raise the sea level . One meter sea level elevation
will inundate more than 15% of Bangladesh, displacing more than 13 million people.

• To expedite electricity coverage

– The country requires US$ 10 billion worth of investment by 2020 for grid expansion.
– Given the current coverage rate, another 30-40 years will be required to ensure
complete coverage.
– Many areas are uneconomical for grid expansion due to low consumption.
– Numerous rivers and water courses that crisscross the country make grid
electrification difficult and expensive.

• To supplement Government’s vision

– Electricity for all by 2020.
– Government has set a target to meet 5% of total power demand by 2015 and 10%
of total power demand by 2020 from RE sources.
 WHY SOLAR ENERGY?

• Being located near the Equator, Bangladesh is recipient of sufficient sunshine round the
year with daily average solar radiation ranging between 4~6.5 kWh / m2;
• Solar energy applications i.e. solar home system (SHS), solar powered irrigation pump,
solar mini grid can be easily installed and maintained with little customer training;
• Although initial investment cost is high, the operating costs is lower than most other RE
options and hence, a cost effective option;
• Solar energy is comparatively cleaner because unlike biogas and windmills, it does not
produce smell or create sound pollution.
• Solar energy based applications constitute more than 13% of current RE portfolio of
Bangladesh.
 EXISTING GOVERNMENT INITIATIVES

• Import of solar modules, solar cells and equipment and machineries of solar module
manufacturing /assembling lines has been made duty free;
• Fiscal incentives i.e. tax holiday would be applicable for solar PV plants for at least 5
years;
• Tenders for three grid connected solar power plants will be floated soon by Bangladesh
Power Development Board (BPDB);
• A feed-in-tariff policy is being formulated by the Government;
• Solar panels have been installed in important government offices including the Prime
Minister’s Office, Central Bank etc;
• The government also expressed its willingness to electrify community clinics, schools,
rural information centers etc. with solar power;
• Bangladesh Bank, the Central Bank has created a BDT 2000 million refinancing facility
for the commercial banks and financial institutions to on-lend to RE projects at a
concessional rate.
 MAJOR SECTOR FINANCIERS

• Infrastructure Development Company Limited

– Provides subsidy and concessional credit facility to RE projects / programs with economic viability;
– Already financed installation of more than 650,000 SHSs, 15000 domestic biogas plants and few
solar irrigation pumps, solar-diesel hybrid solutions for off-grid solar BTSs, solar mini grids and
biomass / biogas based electricity plants.
• Bangladesh Bank
– Refinancing facility to the banks and financial institutions for on-lending to RE projects.

Type of Capacity Limits in Debt to equity

Category Description Interest rate Tenor
consumers (Wp) BDT ratio
Solar Rural area Household 10-130 10,000- Based on Retail: Bank rate Up to 3 years
Panels 70,000 relationship (5%)+Margin (4%);
between customer Wholesale: Bank rate
and the bank (5%)+Margin (4%)
Commercial 520 175,000
Urban area 170-560 60,000- Based on Retail: Bank rate Up to 3 years
175,000 relationship (5%)+Margin (4%);
between customer Wholesale: Bank rate
and the bank (5%)+Margin (4%)
Solar PV Based on Bank rate (5%)+Margin Up to 5 years
assembling capacity (3%) including 6 months
plant grace period
 OVERVIEW OF IDCOL

• IDCOL is a Government-owned financial institution mandated to promote private sector

financing in infrastructure and renewable energy;
• It provides long-term financing in both foreign and local currencies to private sector
infrastructure and renewable energy projects;
• Supported and funded by multilateral agencies i.e. the World Bank, ADB, KfW, GTZ, SNV,
IDB and others;
• Largest financial institution engaged in the promotion of renewable energy in
Bangladesh;
• The total investment portfolio of IDCOL is about USD 300 million of which renewable
energy share is 44%;
• Current approved lines of credit with the World Bank, ADB, IDB: USD 200 million;
• Renewable energy portfolio of IDCOL includes Solar Home Systems (SHS), biogas
plants, biomass gasification based and biogas based power plants, solar PV powered
irrigation pump, solar mini grid, etc;
• IDCOL SHS program currently accounts for more than 99 percent solar PV installations in
Bangladesh.
 SCENARIO OF SOLAR PV INDUSTRY IN BANGLADESH

• Bangladesh imports its entire demand of solar PV mostly from Japan, India and China.
• PV installations almost entirely entails off-grid connectivity and Solar Home Systems
(SHSs) used in the rural households is the dominant solar PV application in Bangladesh.
• IDCOL SHS Program accounts for almost 99% of the solar PV installations in Bangladesh.
• Under the program, 34 MW equivalent SHSs have been installed till September.
• Recent application of solar PV in Bangladesh –
• Solar Mini Grids
• Powering of water pumps for farming
• Electrification for off-grid BTSs of telecom companies
 A TYPICAL SOLAR HOME SYSTEM

Major Components

• Solar PV module
• Battery
• Charge controller
• Lamp
 IDCOL SHS PROGRAM- BACKGROUND

With the help of International Development Association (IDA) and Global Environmental
Facility (GEF), the Solar Program in Bangladesh started in 2003 as a key component of
the Rural Electrification and Renewable Energy Development Project (REREDP) of The
World Bank;
The Government of Bangladesh targeted Palli Biddut Samity (PBSs) and non-
government organizations (NGOs) and micro-finance institutions (MFIs) as the
implementing agencies;
Rural Electrification Board (REB) and IDCOL was selected as the coordinating agencies
for the execution of the program;
While introducing the program as an off-grid electrification solution, the focus has been
to create a sustainable business model for the program.
 IDCOL SHS PROGRAM- AN OVERVIEW

The initial installation target under IDCOL SHS program was to install 50,000 SHSs (equivalent
to 2.44 MW) within June 2008;
Initially, IDCOL selected 5 partner organizations (POs) to start the program;
The initial target was achieved through 15 POs in August 2005, 3 years ahead of completion
date and USD 2 million below the estimated cost;
Subsequently, the successful growth of the program attracted other multilateral agencies i. e.
GTZ, KfW, ADB, IDB to come forward to bridge the financial gaps;
About 680,000 SHSs (about 34 MW) have been installed under the program up to September
2010, lighting the lives of about 3.4 million people;
An average of 30,000 SHSs are installed per month, lighting the lives of about 150,000 people;
IDCOL has revised its target to 2.5 million SHS by 2014;
Total number of POs has been increased to 21;
It is the fastest growing renewable energy program in the world ??
 SHS INSTALLATIONS IN BANGLADESH

800,000

700,000
Number of SHS

600,000

500,000

400,000

300,000 IDCOL SHS Program

200,000

100,000

2007
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2008

2009

2010
Year
 PARTICIPANTS AND THEIR ROLE

Government:
 Sources necessary fund for the program
 Creates incentives (waiver of duties, tax benefit etc.)
IDCOL:
 Provides grants to POs to reduce SHS cost and capacity building
 Soft loan to POs
 Technical assistance (training, logistics and promotional supports)
 Monitors implementation of the program
Multilateral Agencies:
 Provide grant and soft loans through IDCOL
 Technical assistance to the program
POs:
 Select areas and customers and install SHS
 Extend micro-credit to customers
 Provide after sales services
Manufacturers/suppliers: Sell SHS or its components to POs
Professionals: Technical specification and impact assessment
 COMMITTEES AND THEIR RESPONSIBILITIES

PO Selection Committee

 Consists of representatives from IDCOL, ministries and relevant government

organizations;
 Selects PO to implement the program on the basis of micro-finance experience and
financial strength;

Technical Standards Committee

 Consists of technical experts from university, engineering departments of govt. and

IDCOL;
 determines technical standards, review product credentials of dealers, and approve the
eligible equipment;
Operations Committee
 Consists of program heads from all POs and representatives from IDCOL;
 Monitor and manage operational aspects of the program.
 SNAPSHOT OF OPERATION

Provides approval Technical

Suppliers Standards
s Seeks approval Committee

Supply Pay for

Equipment Equipment

Applies Provide grant & loan

PO Selection NGO/PO IDCOL
Committee Select POs Seeks grant & loan

Grant &
Sells SHS Pay down- soft term
& provide payment & credit
service installment

Operations Household Donors

Committee
SAMPLE SHS PACKAGES UNDER IDCOL SHS PROGRAM

Capacity Total Load Operating Hour Cost

(in USD)
20Wp Lamp: 2 (5W each) 4-5 hours 170
Mobile Charger: 1

50Wp Lamp: 4 (7W each) 4-5 hours 380

Black & White TV: 1
Mobile Charger: 1

85Wp Lamp: 9 (7W each) 4-5 hours 580

Black & White TV: 1
Mobile Charger: 1

130Wp Lamp: 11 (7W each ) 4-5 hours 940

Black & White TV: 1
Mobile Charger: 1
 FINANCIAL SUPPORT FROM IDCOL

• Grant Facility: Two kinds of grants are provided under this program:
• Capital Buy-down Grant
• Provided to household to reduce initial cost of the system
• Institutional Development Grant
• Given to POs for extending credit to the households
• Since the objective of the project is to commercialize the project, it has adopted a policy of
reducing grant with the progress of the project.

• Refinancing:
• 80% of the credit sale granted to the household e.g. approx. USD 232.29 of USD 290.36 (most
common scenario)
• 7-10 years loan including 1-2 years grace period
• 6% to 8% tiered interest rate based on outstanding loan
 PHASED REDUCTION OF GRANTS

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
Next 72,000 SHS* €22 €20 €2
*Current
 FINANCING OF A SHS: INITIAL PATTERN

Cash Sale
Only Grant A (buy-down grant) is provided to the PO
Credit Sale

Financing Method ( Sample of a 50 Wp Financing terms of loans from

System) PO to household
SHS cost USD 380
Loan (Tk) USD 290.36
System buy-down Grant A:€30 USD 38.40
Loan duration 3 years
Remaining Cost USD 341.6
Total Interest USD 104.53
Household Down payment (15%) USD 51.24
charge (12% p.a.
Credit to customer (Tk) USD 290.36 flat)

IDCOL refinance (80%) USD 232.29 Total household USD 394.89

payment
PO Contribution (20% of loan USD 58.07
amount)
Monthly household USD 10.97
Institutional Development Grant B USD 10.24 installment
:€8
 FINANCING OF A SHS: CURRENT PATTERN

Cash Sale
Only Grant A (buy-down grant) is provided to the PO
Credit Sale

Financing Method ( Sample of a 50 Wp Financing terms of loans from

System) PO to household
SHS cost USD 380
Loan (Tk) USD 301.15
System buy-down Grant A:€20 USD 25.71
Loan duration 3 years
Remaining Cost 354.29
Household Down payment (15%) USD 53.14 Total Interest USD 108.41
charge (12% p.a.
Credit to customer (Tk) USD 301.15
flat)
IDCOL refinance (80%) USD 240.92
Total household USD 409.56
PO Contribution (20% of loan USD 60.23 payment
amount)
Monthly household USD 11.38
Institutional Development Grant B USD 2.57
installment
:€2
 PROJECTIONS OF SHS INSTALLATIONS in millions

Projection of SHS Installations

4.31
4.50

4.00

3.50 3.10
Figures in million

3.00

2.50 2.12

2.00
1.36
1.21
1.50
0.98
0.76
1.00 0.60

0.50

-
2011 2012 2013 2014

Year-to-year projection of SHS installation Cumulative installations

 BUSINESS OPPORTUNITIES IN SOLAR INDUSTRY IN
BANGLADESH

• Solar PV module:
• Assembling
• Manufacturing
• Export

• Solar Accessories i.e. Battery, Charge controller and Lamp

• Manufacturing

• Providing solar power solutions:

• SHS under IDCOL SHS program (only in off-grid area)
• Solar mini-grid (both off-grid/grid areas)
• Water pumps for farming
• Base Transceiver Stations (BTSs) of telecom companies (both off-grid/semi grid areas)
 EXISTING PLAYERS IN SOLAR PV INDUSTRY IN BANGLADESH

EXISTING MARKET PLAYERS IN SOLAR PV IN BANGLADESH

• Existing market players:
• Bangladesh currently imports its
entire demand of solar PV
modules mostly from Japan, India
and China;

• Upcoming market players:

Tata BP Kyocera Solar World Suntech Others
• IDCOL has recently approved
financing to three solar PV Module Annual capacity Current status
Manufacturer
per shift (MW)
assembling projects,
• Rahimafrooz started construction Electro Solar 5 Started commercial
operation
in April 2010,expected commercial
operation within next month. Rahimafrooz 5 is in construction
phase
Maxtech 5

Radiant Solar 5
 PRICING STRUCTURE OF SOLAR PV MODULE

Pricing structure of existing players:

Module Manufacturer Country of Origin Landed Price ($/Wp)

(including insurance, freight & banking charges)
Tata BP India 2.30

Kyocera Japan 2.40

Solarworld Korea 2.40

Suntech China 2.00

Proposed pricing of upcoming assemblers:

Module Manufacturer Country of origin of Proposed selling Price

equipment and raw ($/Wp)
material

Electro Solar China 2.00

Rahimafrooz Japan 2.35

Maxtech Germany 2.39

Radiant Solar China and India 1.82

 BATTERY MAUFACTURING INDUSTRY IN BANGLADESH

• Two types of industrial batteries are produced in Bangladesh: tubular plate batteries, and flat type
batteries;
• Because of the higher durability, consumption of tubular plate battery is higher than the flat type;
• Most of the tubular plate battery is now locally manufactured with a total capacity of 201,000 per year;
• IDCOL SHS program constitutes 90% of total consumption of tubular battery and IPS industry holds the
rest 10%;
• Although existing production capacity seems sufficient, IDCOL POs frequently complains about short
supply of batteries;
• Major manufacturers include Rahimafrooz, Rimso, Hamko, Navana, Panna and few others;
• Batteries used under IDCOL SHS program need to obtain certification from a testing laboratory of one
the public engineering universities i.e. BUET, KUET and provide minimum 5 year warranty;
• In terms of cost, 70% of the raw materials are imported. Major raw materials include lead, separators,
casing etc;
• Duty for imported finished battery is about 25% (custom duty 25%). Duty on raw lead is 7.5% and on
other raw materials i.e. separators, casing 12%.
 MAJOR PLAYERS: TUBULAR BATTERY

Production per year

Major Players in the Battery (Figures in ‘000 pcs)
Manufacturing Industry in Bangladesh
Existing players Solar IPS Total
9%
10% Rahimafrooz 80 9 89
44%
10% Rimso 27 3 30

12% Hamko 22 2 24
15% Navana 18 2 20
Panna 18 2 20
Others
Rahimafrooz Rimso (J.Co, Z/A Corp., etc.) 16 2 18
Hamko Navana
Total 181 20 201
Panna Others (J.Co, Z/A Corporation, etc)
Upcoming players

*Electro Battery Co. Ltd. has already obtained Electro Battery Co. Ltd.* 36

approval for selling battery under IDCOL SHS Srizony Battery (proposed) 60

program. Total 96
 PRICING AND INVESTMENT REQUIREMENTS

• Pricing:

Sl. No Battery Size(Ah) Amount in USD

1 30Ah 57

2 60Ah 86

3 80Ah 114

4 100Ah 143

5 130Ah 179

• Battery Manufacturing Plant Cost:

Technology Plant type Annual Capacity Cost

Tubular plate battery Manufacturing 30,000-50,000 pcs BDT 100 million

• Financing availability:

• Battery manufacturers usually avail financing at the prevailing commercial terms for setting up
of battery manufacturing plant.
 OTHER SOLAR ACCESSORIES INDUSTRY IN BANGLADESH

• Charge Controller:
• Most of the charge controllers currently used under IDCOL solar program are locally assembled
• Major assemblers are Innovative Technologies, Grameen Shakti, Easy Electronics, MSi
Technology, Technosol, CMES, Energypac etc.
• Charge controllers used under IDCOL solar program need to obtain certification from a testing
laboratory of one the public engineering universities i.e. BUET, KUET and provide minimum 3
year warranty
• In terms of cost, 85% of the raw materials are Imported.
• On an average, 40% on the import value of charge controller components need to be paid as
custom duty, supplementary duty, AIT and ATV.

• Lamp:
• Most of the lamps used under IDCOL solar program are fluorescent lamps (FL), though CFLs are
becoming increasingly popular.
• Though Inverter circuits and casing for FLs are locally assembled / manufactured, fluorescent
tubes are still 100% imported. Major assemblers are Innovative Technologies, Grameen Shakti,
Easy Electronics, MSi Technology, Technosol, PSL etc.
• Energypac is the only local assembler for DC CFLs. Existing assembling capacity is 100,000 per
month.
• In terms of cost, almost 100% of the raw materials are imported. On an average, 26% on the
import value of the CFL components need to be paid as custom duty, AIT, ATV.
Thank you
E-mail: islamsharif@idcol.org
 SHS INSTALLATIONS IN BANGLADESH

800,000

700,000
Number of SHS

600,000

500,000

400,000

300,000 IDCOL SHS Program

200,000

100,000

2007
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2008

2009

2010
Year