On 17 November 2014, IIED, the Overseas Development Institute and Institute of Development Studies co-hosted a one-day workshop titled ‘Financing sustainable energy for all’. The event took place at IIED’s offices in London, and was aimed at allowing researchers to engage more actively with investors, donors and practitioners and use this engagement to inform a future research agenda. Thirty-three participants attended the workshop, ranging from practitioners (working in Haiti, Bangladesh, Peru and Kenya), to investors, to researchers and advocacy NGOs. This presentation by Nazmul Haque, of Infrastructure Development Company Limited, Bangladesh, discusses reaching the poorest. More details: http://www.iied.org/how-can-we-finance-sustainable-energy-for-all.

1. IDCOL Local Solar Home System Program
Nazmul Haque
Director (Investment) & Head of Advisory
Infrastructure Development Company Limited (IDCOL), Bangladesh
Workshop on ‘Financing Sustainable Energy for All’
London, United Kingdom
17 November 2014

2.  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

3. 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

4. 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

5. Program Structure
Supply
Equipment
Pay for
Equipment
Seeks grant & loan
Provide grant & loan
IDCOL
Technical
Standards
Committee
Supplier
s Seeks approval
Provides approval
Household
Sells SHS
& provide
service
Pay down-
payment &
installment
NGO/POPO Selection
Committee Select POs
Applies
Government
Development
Partners

6. Mode of Financing: an Example

7. 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

8. 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.

9. 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.

10. 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.

11. 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%

12. Key Success Factors

13. Advisory Services for Successful Replication
Knowledge
support provided
to a number of
African countries
for successful
program
replication

14. 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