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The Financial Express

Lessons from the Solar Home Programme


Lessons from the Solar Home Programme

Access to clean and fresh energy is essential for according people the opportunity to lead a healthy and dignified life. With over 800 million people worldwide still lacking access to electricity, deploying innovative means to reach electricity to remote rural communities affordably, quickly and sustainably has been a huge challenge.

Bangladesh Solar Home Systems (SHS) Programme was one such initiative, which was launched by the government of Bangladesh (GoB) and the World Bank (WB) in 2003 when only 27 per cent of the country's rural households had access to grid electricity. Led by Infrastructure Development Company Ltd. (IDCOL) and supported by development partners including the WB, the programme applied an off-grid business model that brought power to about 14 per cent of Bangladesh's population in 15 years.

The World Bank has recently published a report titled 'Living in the Light: The Bangladesh Solar Home Systems Story' on this programme with the hope that lessons from it would help countries implement economically smart and tailored approaches that suited their needs and supported technological, financial and policy innovations for the expansion of affordable electricity coverage. 

The SHS Programme (2003-2018) sold 4.1 million solar home systems by offering consumers a choice of quality systems made affordable through financing. About 20 million people obtained electricity services through this programme, thereby enabling one-fourth of the un-electrified rural population to get electricity - far sooner than would have been possible through grid-based electricity of Rural Electrification Board (REB).

These SHS were mainly used for lighting, mobile phone charging, and powering TVs and radios. Apart from individual households, about 200,000 rural businesses and religious establishments also used them. The credibility gained through the programme led to efficient SHS distribution to poorest households by other programmes as well as uptick in its commercial sales alongside IDCOL-financed ones.

The implementation model of the programme involved partner organisations (POs) selected by IDCOL, which were mainly NGOs and MFIs having rural networks. They marketed, sold, financed, installed, and serviced quality-certified SHS to rural customers. The government sourced SHS Programme funding from development partners, and IDCOL was allocated these funds in local currency to refinance a portion of the loans given by POs to SHS customers. The POs sold SHS to customers on credit with repayments spread over a three-year period. Small grants were also given for enhancing affordability and helping POs strengthen their institutional capacity. An independent Technology Standards Committee (TSC) was established to ensure quality standards of SHS and components, which were sourced by POs from domestic and international suppliers. There was also an Operations Committee (OC) that met with the POs every month to monitor progress, resolve problems, and share experience-cum-lessons. Besides, technical audits, field surveys, and consumer satisfaction surveys were conducted on a regular basis.

Benefits of the programme included faster access to electricity - gained far sooner than if the consumers had to wait for grid connections. Positive social impacts on rural families included allowing children to study for longer hours; households enjoying greater safety, comfort and convenience; easier and lower cost access to TV, radio, fan, and mobile phone charging. It benefited 200,000 enterprises and social institutions with better quality light, extended hours of operation, and power for small appliances. The value of kerosene saved by households in 15 years at retail price is estimated to be US$908 million.

The applied business model allowed SHS customers to benefit from technological improvements by transitioning to more efficient LED lighting and DC appliances. The programme also contributed to the flourishing of solar photovoltaic industry - encompassing retailers, service-providers, financiers and manufacturers.

The environment was benefitted through reduced kerosene combustion due to decrease in carbon dioxide and black carbon emissions. If the additional benefit to global community due to carbon emissions reduction is considered, then the economic internal rate of return (EIRR) of the programme stood at 25 per cent.

The WB review of the SHS Programme has yielded several conclusions. Firstly, rural households highly valued SHS and were willing to pay for its services. Secondly, the programme was both economically and financially viable, with an FIRR of 13 per cent if there had been no loan defaults and 17.7 per cent after considering defaults. The GoB, IDCOL and the POs reaped substantial financial benefits from the programme despite later-stage problems. The programme was upended from 2015 mainly due to sudden and rapid grid expansion by REB, which increased rural household connections by 280 per cent in five years. This led to rapid shrinkage of SHS market and defaults by some households in debt repayments. The damage was compounded by expansion of TR/KABITA off-grid programme that gave SHS to households at no cost. Better planning and coordination of electrification by GoB that ran three parallel efforts could have deterred these late-stage difficulties faced by SHS Programme.

However, IDCOL convinced the government by 2016-17 to let it manage TR/KABITA, and then used the SHS Programme infrastructure to run that programme, which helped the POs overcome sales decline under SHS Programme.

The experiences of the SHS Programme - one of the largest and most successful in the world - offer lessons that other countries can emulate while implementing off-grid programmes to complement grid-based electrification. The key lessons include proper planning, developing sustainable institutions, providing quality products and services, overcoming the first cost barrier, and harnessing government-cum-development partners' support.

The programme should be designed in relation to a clear goal like deepening accessibility or universal access. Coordinated planning should be ensured at the highest level with regard to on-grid and off-grid electrification, and the impacts on key stakeholders as well as economic returns should be evaluated for justifying the programme. The government ought to ensure that on-grid and off-grid electrification are promoted and coordinated for optimising access, and see to it that the private sector functions as a complementary force, not a competing or alternative one. The development partners should support transfer of technology and knowledge, and not merely act as sources of fund.

 

Dr Helal Uddin Ahmed is a retired Additional Secretary and former Editor of Bangladesh Quarterly.

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