Solar Home Systems in Bangladesh

Overview

This case study examines a program of rural electrification in Bangladesh by means of solar home systems (SHS). Bangladesh ranks among the lowest in the world for population with access to electricity. In 2003, the Infrastructure Development Company Limited (IDCOL) launched the SHS program to provide cost-effective electricity to the rural population of Bangladesh. Using an ownership model, customers financed the purchase of SHS from partner organizations (POs). The POs install and maintain the systems, collect the loan payments, and recycle used batteries. The quality and installation of the SHS were monitored, as was the financial performance of the POs. The program has increased the rate of rural electrification to 40 percent. Issues remain for quality and proper installation of SHS systems and unauthorized recycling of used batteries.

Key contextual conditions: Access to electricity in Bangladesh ranks among the lowest in the world. The government’s energy policy had previously focused on extension of the energy grid, but in remote rural areas with low population density, electrification through grid extension is not a financially viable option. Expanding access to electricity through solar power needed financing and technical expertise.

Key stakeholders: Government of Bangladesh, the Infrastructure Development Company Limited, partner organizations, international donors, citizens of rural Bangladesh.

Lessons Learned

  • Combining the installation, maintenance, and financing and collection of loans through local POs, which maintained a continuing relationship with customers, enabled IDCOL to coordinate all aspects of the SHS program.
  • High-quality equipment and installation and maintenance by qualified technicians are necessary for the successful implementation of SHS.
  • Users must be trained in the use of the SHS.
  • The ownership model is more successful than the fee-for-service model. Ownership creates a feeling of responsibility that leads to improved caretaking of the systems.
  • Installation of SHS must be coordinated with plans for grid extension. Installing SHS in areas that will shortly be connected to the electrical grid is a poor use of resources.
  • Battery recycling must be addressed when the program is launched. Incentives for proper recycling of batteries can reduce the number of batteries that are recycled improperly, causing harm to the environment and public health.
  • A strong market for SHS can reduce the need for subsidies, but may also lead to the sale of unregulated systems that can be manufactured more cheaply but are of lesser quality.

Development Challenges

  • Generating income and improving access to education and health services are difficult without electricity.
  • Access to electricity in Bangladesh ranks among the lowest in the world.
  • An increase in electrification was urgently needed to contribute to economic development and combat poverty, especially in rural areas, which rely on traditional subsistence farming.

Delivery Challenges

  • Lack of financing. Funds were needed for the initial purchase and installation of SHS, and credit financing would have to be arranged to make loans to customers to purchase the systems.
  • Limited technical knowledge. Specifications for SHS would have to be written and sources of supply found. Companies and their employees would have to be trained in the installation and maintenance of SHS.
  • Institutional limitations.
  • Existing energy policy. Bangladesh’s energy policy (together with the financial and technical support of donor institutions) was focused primarily on grid extension. However, the very rural population living far from the national grid cannot be electrified through grid extension at a reasonable cost. Under existing policy, they would be left out. Therefore, a program for off-grid electrification was required.