Access to reliable, efficient and modern sources of energy is a key enabler of basic economic and societal development, by unlocking significant improvements in education, health and medical services, and increasing economic opportunity and supporting gender equality. Energy is a central issue in development, and considered one of the main challenges globally in meeting the United Nations’ set of eight Millennium Development Goals (MDGs).
The importance of energy, and electricity in particular, is underscored by the “Greatest Engineering Achievements of the 20th Century” list compiled by the U.S. National Academy of Engineering, which named the electrification of national power grids globally as the single most important engineering achievement of the 20th century.
This is achievement and its many benefits have not reached all the world’s people, however. Globally, 1.2 billion people do not have access to any electricity, while another 1 billion only have access to an unreliable supply of power (United Nations Foundation). Without consistent energy and the infrastructure to adequately distribute it, these 2.2 billion and the nations that they inhabit are hampered by a number of limitations.
Insufficient lighting at night inhibits education and learning, a lack of refrigeration prevents modern medical practices like blood transfusion and vaccination, and indoor air pollution from kerosene lamps and stoves burning wood or dung causes serious eye and respiratory illnesses.
Energy poverty is experienced most acutely in rural areas, due to the cost, time, and difficulty of connecting the national electricity grid to these distant, often hard to access areas. Without electricity, employment and upward mobility through education are limited in rural areas, which is probably a significant contributor to the global sea change in rural to urban migration, as migrants from the countryside to cities are primarily seeking better economic opportunity in urban areas.
This trend has resulted in rapid urbanization in many regions of the global south, which has filled many cities far beyond their capacity to provide sufficient infrastructure and services, resulting in sprawling, destitute informal settlements.
Achieving energy equity, whereby all people have access to energy for the most important functions, is a vital part of improving lives in a number of intersecting and related ways. For example, energy access enables education and modern medicine, leading to longer lives, empowered women who can make wise family planning choices, better opportunities for young people and greater awareness of national and global issues.
It is equally important that this energy come from sources that are as clean and renewable as possible, to minimize air and water pollution and the dangerous overheating of our planet, whose adverse effects, if unchecked, will over the long term ruin efforts to reduce poverty and improve lives.
Reaching energy equity with mostly clean sources poses quite a challenge, as our global population increases to eight or nine billion people by 2050, and pressure to rapidly modernize often turns developing nations to coal, the cheapest, largest bulk sources of power. Perhaps the best place to start examining how to solve this challenge is in Bangladesh, from whom we can take inspiration and a few lessons on providing clean power to all people.
Bangladesh, known as East Pakistan before its war for independence in 1971, is slightly smaller than Iowa, yet home to an estimated 168 million people, making the country one of the densest in the world. Bangladesh faces a number of problems and challenges, including: decades of fractious politics since becoming a democracy in 1991, per capita gross domestic product (GDP) amongst the bottom quarter of nations globally, flooding and devastating cyclones, high vulnerability to sea level rise from climate change, prevalence of water-borne diseases, and relevant to this discussion, an insufficient, unreliable and in many paces nonexistent power grid.
Supplying electricity reliably to its citizens has been a persistent drag on progress for Bangladesh. The power grid is small, very inefficient and not managed well, with sudden losses in power and occasional blackouts that together are estimated to shave off 0.5% of the country’s entire GDP each year, and cause one-third of all electricity that is generated to be lost.
Efforts to expand and improve the grid have been slow and have often stalled, particularly in rural areas, due in part to the challenges and the high costs of expanding the national grid in Bangladesh’s low-lying landscape, which features some 700 river and is consistently flooded during the five month monsoon and hit with cyclones and tidal bores on occasion. As a result, 58% of rural Bangladeshis lack any electricity access, and the country as a whole has one of the lowest per capita energy consumption in the world (IDCOL Solar Home System study).
It was this disparity in energy access that led Bangladesh’s government and a number of groups to create programs designed to supply off-grid residents with power using photovoltaic solar panels. The first pilot project was conducted in 1995 by Grameen Bank, the micro-finance organization created by Nobel Peace Prize winner Muhammad Yunus. The project was scaled up twice and led to the creation in 1996 of an offshoot of Grameen Bank called Grameen Shakti, whose mission was to “promote, develop and popularize renewable energy technologies in remote, rural areas of Bangladesh.”
Where Grameen Bank was (and is still) known for its work in funding the small enterprises of poor Bangladeshis with micro-loans, Grameen Shakti carried out its mission by offering soft credit, low interest loans and grants to bring small solar power systems within the reach of villagers with little disposable income. Essentially, this would become the model used by all groups, once the various nonprofits and Bangladesh’s government began to collaborate under one program.
The various initiatives by the government, Grameen Shakti and other non-profit groups offered valuable lessons and showed that off-grid, small solar could work in remote villages. However, the spread of micro solar power via micro-finance truly took off once a more unified and streamlined approach was taken in 2003, when state-owned Infrastructure Development Company Limited (IDCOL) created the Solar Home System (SHS) program.
From just over 11,000 solar home systems in 2003, SHS installations grew to 270,000 by 2008, and jumped to 3.5 million systems by the end of 2014. All told, SHS provide power to 16 million Bangladeshis, equivalent to about 10% of the entire population of the country (Asian Development Bank).
Solar Home System Program
A solar home system consists of a photovoltaic (PV) panel, battery, charge controller and several conduits to plugin small appliances like lights, television, radios, room fans and mobile phone chargers. Sunlight is captured by the PV panels, converted into DC electricity and stored in the battery, which can supply about 4 hours of continuous use when fully charged.
Different SHS packages are offered according to a household’s needs and budget, ranging between $80 and $590 in cost, and 20 to 130 watt-peak capacity. A 20 watt system can power two LED lamps and one mobile phone charger, while the most popular 50 watt system powers five lamps, one phone charger and one color television (The ‘Everyday’ Political Economy of Social Enterprise).
For a typical household, a 50 watt SHS will end up costing about $400. A down payment of 15-25% secures financing for the remainder of the system cost, which is paid over a period of three years at 12% interest per year and about $11 in monthly installments.
This may seem like a high interest rate, however the actual amount paid by the customer ends up only being slightly higher than the upfront cost of the system, due to grants and refinancing at various stages in the payment process.
In terms of its operations, financing and administration, the Solar Home System program is a significantly scaled-up and professional version of the earlier programs. There are a few key features that have made this scaling-up both possible and effective.
First, funds for the program come from international donors, like the World Bank, the Asian Development Bank, Germany’s GIZ aid organization and others. This provides a larger pool of money than Bangladesh’s government or the organizations within the SHS could come up with, and allows for generous interest rates and grants to make small solar systems feasible for the poor.
Second, the program divides up roles and responsibilities to effectively utilize both top-down and bottom-up approaches, which allow IDCOL and the non-profit organizations to complement one another’s strengths and bypass areas where each is less capable.
IDCOL taps its professionalism, expertise and connection as a publicly-owned company of the Bangladesh government to act regulator, financier and supporter of the non-profit and micro-finance groups (collectively called the Participating Organizations) within the SHS program.
The Participating Organizations (POs), on the other hand, leverage their extensive grassroots networks and established relationships within rural communities to inform and engage villagers about solar home systems, and then to sell, maintain and provide after-sales support for each system sold.
In this way, IDCOL secures large funds from donors, provides professional training and marketing support for the POs, ensures quality standards in the technology components of each SHS and disperses grants and loans to the POs, while benefiting from the established networks, credibility and experience of the POs working within Bangladesh’s remote communities. Likewise, the POs can focus on their strengths, without having to find funding, quality suppliers or training support.
This mix of approaches is demonstrated in how the SHS has been marketed and publicized: IDCOL has run ads in newspapers and on billboards, and distributed posters, leaflets and t-shirts touting the program, while the POs have worked within their networks and with members of other micro-finance endeavors to spread the word about village solar via word-of-mouth referrals.
As a result, the Solar Home System program has reached every rural corner of the country, an estimated 65,000 SHS are installed every month, and IDCOL projects it will finance 6 million systems by 2017. Cumulatively, off-grid residents with SHS have saved hundreds of millions of dollars by no longer relying on kerosene for light, while also avoiding the emissions from about 200,000 tons of fossil fuels each year. There have been zero defaults amongst more than 50 Partner Organizations, and loan collection rates from households averages 96%.
Bangladesh Solar Home Systems Program in Summary
For most customers, a SHS provides the first supply of electricity they have ever had inside their own homes, and yields a number of benefits and improvements in their lives.
Previously, off-grid households had to rely upon the dim, noxious glow of kerosene lamps and wax candles to see after sunset. These deficient forms of lighting incur a significant cost on rural residents as a proportion of their income, while limiting activities after dark, causing serious respiratory and eye problems from indoor air pollution, and posing a fire risk due to their high flammability.
The availability of electrical lighting provides much better light to read and work by, opens up hours in the evening to grant flexibility in lifestyle, removes harmful indoor air pollution and fire risk, and carries no fuel cost, as sunlight is free and abundant. Children have more time to learn and study, shopkeepers can stay open later, home craft businesses crafting clothes or other items are enhanced.
Women specifically benefit from lighting in a number of ways. Since women in traditional Bangladesh spend more time inside, cooking, cleaning and taking care of the children, they are more at risk of health problems from indoor air pollution, and so benefit more from solar-powered lighting. Increased lighting also makes any place safer and less subject to crime, which again benefits women more so than men.
Additionally, women are no longer limited to taking care of their tasks during the day when they can see best, which provides flexibility for household tasks and allows the opportunity to learn new skills or devote time to their own home-based trade or craft. This means that if a husband leaves his wife and family, she can still support her children without him.
Besides lighting, the availability of television and radios can be important in providing Bangladeshis with information about current events and weather, especially cyclones or flooding that the country is vulnerable to, which villagers may otherwise been in the dark about. SHS also save time and money by allowing mobile phones to be charged at home rather than at charging stations, which may be far away and cost money to use.
Beyond the benefits offered directly by the SHS, the program has contributed to the well-being of a wider swath of Bangladesh’s population by providing a path to good jobs and supporting local industries.
The country has 114,000 jobs in green energy, the same amount as Spain and #6 in the world, and is still growing rapidly. Within the SHS alone there are 70,000 people involved in the program, according to IDCOL.
Besides the solar panels, all the components that make up each SHS are sourced by IDCOL from manufacturers located in Bangladesh.
Furthermore, the social mission to empower rural residents with clean energy has been furthered by the likes of Grameen Shakti, who trains and employs disadvantaged women to be solar technicians and to assemble component parts, and Rahimafrooz Batteries, who employ former street children in battery and solar PV production.
Thanks for reading, feel free to reach out if you have any questions or thoughts about Bangladesh’s solar micro-finance program. I drew primarily from these three sources:
Making Renewable Energy a Success in Bangladesh: Getting the Business Model Right, Asian Development Bank December 2015.
The ‘Everyday’ Political Economy of Social Enterprise: Lessons from Grameen Shakti in Bangladesh, Michelle Theresea Hackett July 2012.