Financing Renewable Energy in Bangladesh

12 June 2014

Md. Enamul Karim PavelHead of Renewable Energy

Infrastructure Development Company Limited

Only 62% of the population has access to grid electricity and generation per

capita is one of the lowest (321 kWh per annum);

62% of primary energy consumed comes from biomass and used mostly for

cooking in rural areas;

70% of commercial energy is produced from natural gas and the rest mostly

from imported oil;

Current share of RE in electricity generation is 1.4% only;

Government has a vision to make electricity available for all by 2021

Government also intends to ensure 5% electricity generation from RE by 2015

and 10% by 2030.

Bangladesh: Key Energy Outlook

Overview of IDCOL

A fully Government owned public­private­partnership financial institution

Started operation in 1997

Mission: to catalyze private sector participation in infrastructure,

renewable energy, and energy efficient projects in a sustainable manner

Largest financier in private sector infrastructure projects

Market leader in renewable energy sector

Funded by the Government and multiple agencies i.e. the World Bank, ADB,

IDB, DFID, JICA, KfW, GIZ, GEF, USAID, GPOBA

Product & Services

Infrastructure

Sector

Long­term local and foreign currency loans

Debt and equity arrangement

Concessionary financing and grant supports

Technical assistance and quality assurance

Capacity development of stakeholders

Arranger of Carbon Credits

Project Finance

Financial Modeling

Renewable Energy

*Trained about 2,000 professionals & arranged 7 experience

sharing programs for delegates from African countries.

Renewable Energy &

Energy Efficiency

Initiatives

Corporate

Advisory

Snapshot of IDCOL RE Initiatives

Project/Program TargetAchievements as

of May 2014

SHS Program 6 ml by 2017 3.1 ml

Domestic Biogas Program 100,000 by 2017 33,207

Solar Irrigation Program 1,550 by 2017 149

Solar Mini­grid 50 by 2017 6

Solar powered Telecom BTSs As per demand 138

Biogas Based Electricity Project 130 by 2017 8

Improved Cook stove Program 1 ml by 2017Recently

Launched

Solar Home System (SHS) Program -An Overview

A successful business model well accepted

by all stakeholders.

Program started in Jan 2003 with support

from the World Bank and GEF.

47 POs (NGO, MFI and Private Entities) are

implementing the program.

3.1 million SHS have been installed with an

weighted average capacity of 45 Wp.

Program target: 6 million SHS by 2017

Investment : USD 556 million (up to May’14)

Largest & fastest growing off­grid rural

electrification program in the world

Why Solar Energy?

Being located near the Equator, we receive sufficient sunshine round

the year (average insolation 4~6.5 kWh / m2);

Solar energy applications i.e. SHS, irrigation pump, mini­grid etc. 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;

Cleaner energy compared to other applications, does not produce

odor or create sound pollution;

As a result, solar energy based applications constitute 90% of current

RE portfolio of Bangladesh.

Solar Home System (SHS)

Capacity Appliances Operation

20Wp 3 W LED Lamp: 3Mobile Charger: 1

4-5 hours

50Wp3 W LED Lamp: 5LED Color TV: 1

Mobile Charger: 14-5 hours

85Wp

3 W LED Lamp: 7LED Color TV: 1

Mobile Charger: 112 W DC Table Fan: 1

4-5 hours

• Lead – Acid Battery• DC-DC Converter to run color

television, fan, refrigerator etc.

Solar Maphttp://www.idcol.org/bd-map/bangladesh_map/

Year-wise SHS Installation Status

Total installation: 3.1 ml Monthly average installation : 68,000

Program Structure

Supply Equipment

Pay for Equipment

Seeks grant & loan

Provide grant & loan

IDCOL

Technical Standards Committee

SuppliersSeeks approval

Provides approval

Household

Sells SHS & provide

service

Pay down-payment & installment

Operations Committee

Seek operation

related solutions

Provides Solutions

NGO/POPO Selection Committee Select POs

Applies

Donors

Grant & soft term

credit

Mode of Financing: an Example

A Sustainable Financing Structure

Phased-out Subsidy :

Concessionary to Semi-Commercial Credit:

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 6­10 yrs 6­8 yrs 6­8 yrs 5­7 yrs

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

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

*for small SHS (up to 30 wp) only

Quality Control Mechanisms

Informs POLodges complain

Takes remedial measure

Program Benefits

Program Achievement : 3.1 million SHS

Number of Beneficiaries : 14 million people

Power Generation : 140 MW (approx.)

Fossil Fuel Saving : 185,000 ton/yr

CO2 reduction : 538,000 ton/yr

Job Creation : 70,000 people

Challenges & Mitigations

Key Success Factors� Innovative financing structure

o Ownership model

� Financial contribution of all partieso Facilitated timely installment collection and after sales service

� Sustainable business modelo Commercialization objective and focus on institutional development

� Cost­efficient standardized technical designo Extended warranty and suppliers’ accountability

� Price determination by the marketo Healthy competition

� Superior quality control and after sales serviceo Multi­level inspection mechanism and dedicated call center

� Development of local support industrieso Timely supply of necessary SHS components at lower price

� Bangladesh’s micro­finance experienceo Facilitated credit based sale

� Support from GoB and develop partners

IDCOL Biogas

Program

33,207plants installed up to May’14

Beneficiaries:

150,000 beneficiaries

Yearly Savings:

60,000 tons of firewood worth USD 1.6

million

25,000 tons of chemical fertilizer worth

USD 17 million

Job creation:

2,000 direct and 5,000 indirect jobs.

Reduced:

13% workload for women beneficiaries

Challenges & MitigationsChallenges Mitigation

Financial barriers Revised financial model and subsidy

has been increased

Absence of better technology

for lean period (rainy season)

Selection of pre­fabricated bio­gas

digesters is under process

Lack of awareness of Biogas

technology

Awareness campaign through print

and electronic media has been

undertaken

Bio­slurry Utilization and

Management

Working to establish supply chain to

ensure proper collection of bio­slurry

for commercial use

Solar Irrigation

Program

Sector Outlook:

� Bangladesh has more than 1.4 million diesel pumps

that may be replaced with solar irrigation pumps.

� The existing pumps consume more than 800,000 ton

diesel, requiring USD 120 million subsidy every year.

Implementation Challenges and Mitigation:

� High initial capital cost: Significant amount of subsidy

(40%) has to be offered to lower the cost.

� Water supply rate: Should be kept same or lower

than prevailing cost with high subsidy and

concessional loan

� Area selection: Areas with multiple crops cultivation,

and low pump head.

� Lack of awareness: Promotional campaign and

community mobilization

Institutional Arrangements

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Implemented by – NGOs/MFIs/Private entities (PO)

Responsibility of POs

� Selection of areas and target customers

� Installation of pumps

� Operation and supply water to a group of farmers at an affordable rate

� Collection of payments

IDCOL’s role

� Technical support including collection of irrigation data

� Promotion of the technology

� Financial support to the POs

� Monitoring of pump performance and quality assurance

Implementation Projection

Target : Installation of 1,550 solar irrigation pumps

Average capacity : 8 kWp

Dynamic head : 10­18 meters

Average water flow : 500,000 – 600,000 liters/day

Installed capacity : 12.4 MW

Grant Support : BCCRF, GPOBA, KfW and ADB

Credit Support : The World Bank and JICA

2012-13 2013-14 2014-15 2015-16 2016-17 Total

Number of pumps 17 150 300 450 633 1550

Solar Mini-grid Program

Sector Outlook:

� 38% population does not have access to electricity.

� Grid expansion is not economically feasible or

physically possible in many areas i.e. offshore islands.

� Diesel based micro­grids supply electricity at high prices

and for limited hours in some areas.

Implementation Challenges and Mitigation:

� High initial capital cost: Significant amount of subsidy

(50%) has to be offered to lower the cost.

� Energy tariff: Should be made affordable with high

subsidy and concessional loan

� Areas selection: Isolated densely populated areas

should be targeted. Customers need to be solvent.

Target:

� 50 mini­grid (average 100 kW) by 2017

Biogas Based Power Plant

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Sector Outlook:

Bangladesh has about 1.5 lac poultry farms

These farms can generate about 800 MW electricity

Target Customers

Poultry or dairy firms

May be within grid/off­grid areas

May only be used for captive consumption

Target

130 (average 50­kW) plants by 2017

Improved Cook Stoves (ICS) Program

Sector Outlook:

Bangladesh has a potential for about 25 million ICS

So far, roughly 1 million ICS have been installed in the

country

Program Objective:

To promote the technology

Develop the local support industry

Install 1 million ICS by 2016

Thank

You