Challenge
Only about 30 percent of the rural households in Bangladesh have access to grid electricity. For the rest of the areas not connected to the grid, life almost comes to a standstill after sunset. Even for those connected to the grid, power generation capacity constraints result in frequent power-cuts. Reliance on grid electricity alone will not allow the Government of Bangladesh to realize its vision of universal access to electricity by the year 2020. Furthermore, the dispersed nature of rural settlements and the numerous rivers that crisscross the country make grid electrification in many areas difficult and expensive. In this context, off-grid electrification, based on renewable energy is a viable long-term option available for cost-effective electricity access for millions of people in remote areas. Now, many villages especially in isolated areas are starting to enjoy electricity generated by solar panels, thanks to the SHS scheme.
The country has severe power generation shortages. Against a peak demand of 6,500 megawatt (MW), current supply is only about 4,500 MW. Frequent power cuts, especially during the hot summer days are a common phenomenon. Rural areas are hardest hit since they get the major share of power cuts. Additional financing for the project in 2009 added a demand-side management component for large-scale deployment of energy efficient CFLs in exchange for incandescent lamps.
Approach
The Rural Electrification and Renewable Energy Development Project supports Bangladesh's efforts to raise levels of social development and economic growth by increasing access to electricity in rural areas. It aims to increase access to electricity in rural areas through both grid and off-grid options. The project also promotes renewable energy sources to provide electricity to remote, hard-to-reach villages where grid electricity is not feasible.
Specifically, the project makes SHS available to households through a network of nongovernmental organizations (NGOs) under a microcredit scheme. Under the program, Partner Organizations (POs) (mostly NGOs) procure and install the systems in rural households as per the Infrastructure Development Company Limited (IDCOL) technical standards. Households pay a 10 percent down payment while 90 percent is repaid during a 3-5 year credit period at market interest rates. After the systems are installed, the POs apply for refinancing from IDCOL (at a lower interest rate and for a longer repayment period). After technical and other verifications, IDCOL releases the credit and a fixed subsidy (currently $28 per system) to the POs. This refinancing provides the POs with funds to install more systems. In addition to providing IDA financing for the refinancing scheme, the World Bank has also made available subsidy amounts, initially from the Global Environment Facility (GEF), and more recently from the Global Partnership on Output-Based Aid (GPOBA). The project is also piloting renewable energy based mini-grids in remote rural areas.
The project is supporting deployment of energy efficient CFLs in exchange for incandescent lamps as part of an electricity demand-side management program to help address the severe energy shortages in Bangladesh that particularly affect the rural areas. At a time when the country’s power generation capacity is much below the energy demand, the introduction of CFLs is helping to reduce peak electricity demand. Approximately 10 million CFLs are already distributed and another 17 million are being procured for deployment.
Results
- 630,000 new consumers were connected to the grid
- More than 750,000 remote households and rural shops were provided with Solar Home Systems.
- Every month, 30,000 Solar Home Systems are being installed.
- Access to electricity is changing people’s lives and transforming villages into thriving centers.
- Ten million energy efficient CFLs were distributed free of cost to households in exchange for incandescent lamps (regular bulbs). Another 17 million CFLs are being procured for distribution.
- The project contributed to increasing access to electricity in Bangladesh by 3.5 percent. .
Voices
Now I can keep my small restaurant open even during the evenings and till late at night. My business is booming and my family lives much more comfortably with our increased income. My children are also doing much better at school.
Map
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Bank Contributions
IDA financing for the Rural Electrification and Renewable Energy Development Project (RERED) was approved on June 25, 2002 and became effective on December 31, 2002. Approximately US$321 million was disbursed by 2009. Additional financing of US$130 million was approved in August 2009 to support an additional 300,000 SHS and deployment of 10 million CFLs.
Partners
Given the successful implementation of the renewable energy component, several development partners joined the program. The World Bank provided funds through the GEF and GPOBA to provide training, an awareness and communication campaign, and to subsidize initial SHS costs to consumers.
Following the same project design, other development partners are now contributing to the project by providing grant funds for the technical assistance part of the project and the subsidy amount for the systems. Recently, the Asian Development Bank approved a credit of US$33 million to install 100,000 SHS.
The Bank signed an Emission Reduction Purchase Agreement with the implementing agency for receiving carbon revenues for the SHS and CFL projects. Both projects are in the process of validation.
Toward the Future
IDA has been approached to further scale up its support for the program with a second round of additional financing worth US$100 million to support 300,000 additional systems. In fiscal year 2012, a new project is expected to support an additional 400,000 systems. The target is to install 2,500,000 SHS by the year 2015 and the Government of Bangladesh has requested assistance from IDA to scale up its support to the program.
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