Solar Energy Can Become A Lifeline For Low-income Households In Rural Bangladesh But Is Enough Being Done To Make A Significant Change In Their Lives?
Photographs by Din M Shibly
Nights in Dhaka are usually defined by glowing streets, illuminated by the superfluity of stores and restaurants. The relentless horns blaring from an endless torrent of cars and rickshaws further punctuates this spectacle.
Outside the capital (or any of the other major cities), the reality is quite different. Sunset in the rural vastness of Bangladesh brings most activities to a halt as the majority of the people do not have access to the main electrical grid. During these hours, battery-powered torches and kerosene lamps are usually the only light sources used for household chores or school homework.
However, times are changing, the economy is advancing, which means rural off-grid households are finally being brought under the electricity net through various renewable energy projects. Furthermore, government officials have stated that it has targeted the generation of 2000 MW from renewable sources by 2020 and with different companies in the process of setting up power stations in various regions of the country, the future is already looking a lot sunnier.
Southern Solar Power Ltd, a subsidiary of US-based SunEdison in Bangladesh, is planning to set up a 200MW solar power plant at Teknaf in Cox’s Bazar with an estimated investment of $300 million. Additionally, four other solar power plants in different areas across the country will also be set up to generate a total of 258 MW electricity.
These projects may paint a brighter picture for the future, but how are the already established solar power stations faring in our country? ICE Business Times recently traveled to two different solar projects in two separate regions in the country to take a look at how inhabitants have been living their lives with the limited amount of electricity they purchase.
The mini-grid project can generate up to 148.5 KW of power per day which covers around 10 km of the area in the Char. This limited coverage means only around a thousand out of its population of five thousand receive its facilities.
The total investment in the project is around Tk 7 crore, 20% of which comes from AVA Development’s equity and 50% of which arrives in the form of grants from organizations like Department of International Development (DFID) through the government. Infrastructure Development Company Limited (IDCOL) loans out the remaining 30% to AVA with a 6% interest charge.
Life on the char means a lot of people don’t have access to various necessities which is why must make frequent visits across the river to buy food and vegetables from the nearest village market. Children also have to travel to the other side to attend school.
Living on the char is difficult, as it is, but it is a real testament to the incredible character of these people who have lived without electricity for so long especially considering the intensity of the heat waves. These solar power initiatives have brought another level comfort to these families as they can now use fans in their households after laboring through the day in the scorching heat of the chars. The electricity can also be used by students at night time to study. In other parts of the area, its facilitating small-scale commercial purposes through welding shops, mustard or rice mills and so on. A project like this creates avenues for these small industries to thrive and create employment opportunities for the char dwellers.
However, AVA Development is planning on widening their net in the coming years. With only half the people receiving coverage, the other half also have demands for electrical facilities, so the company is planning on setting up a second solar power plant on the char to expand their reach.
The twenty-year project had an investment of around Tk 6.83 crore. With a 20% equity, 50% grant and 30% loan (at 6%) financing structure, Solar Electro come under same financing system as AVA. The plant generates around 234 KW per day for around four hundred and seventy households within a 15km range.
Similarly, until the establishment of this facility, the occupants in this region were also devoid of the wonders of electricity. Within its 15km range, it supports households as well as commercial entities by enabling saw mills, thirteen auto rickshaw recharging stations, welding stores, and other mechanical workshops.
Moving more towards the center of Bangladesh, Solar Electro Bangladesh Limited have plans on establishing two more projects in the Shariatpur District which would generate 5 MW of solar power for around two thousand households along with commercial enterprises and agricultural facilities used for irrigation and/or rice mills.
THE COST OF COVERAGE
Both projects have the right idea in mind, but when it comes to the cost of running the projects, the picture turns a little bleaker. The per unit cost of the producing solar electricity comes around to Tk 60 for both companies; however, they end up charging Tk 30 to their customers with government subsidies covering the remaining portion of the cost.
Even with a Tk 30 subsidy from the state, the price per unit charged to rural electricity users is still too high. The end users are usually in the dark (pun intended) when it comes to the technicalities of the cost breakdown. Therefore, when they compare it to what people are being charged through regular grid connectivity, they obviously make the assumption that they are being extorted or overcharged. This drives down the demand for household consumption meaning the organizations have a hard time pulling in substantial returns for the significant amount of investment they have made. AVA Development has monthly operational costs amounting to around Tk 4.3 lac, and similarly, Solar Electro Bangladesh incurs around Tk 4.44 every month. Due to these exorbitant expenses, which include maintenance fees, staff salaries, interest payments, etc. the companies cannot break even when the regional consumption levels cannot be increased. There are no concrete plans in place to meet these shortfalls either. Reported monthly earnings come around to Tk 1.5 at most, while, during the cooler times of the year, electricity usage drops dramatically, yielding revenues as low as Tk 50,000.
The situation for all solar energy ventures will be further exacerbated by the government’s proposed import duty on solar panels in its FY 2017-18 budget. Imports of solar panel will be subject to 10% customs duty, VAT and other taxes, totaling an additional cost of 37.5% in the next fiscal year.
BRINGING THE SUNNY SIDE UP
The government along with the relevant bodies such as IDCOL need to take up a definitive stance in this regard. A holistic plan is required for these companies to be sustainable over the long run which includes proper expenditure and revenue mapping.
Addressing the consumption and cost issues is of paramount importance. A significant portion of the occupants of these regions are deterred from buying solar powered electricity due to a number of reasons but certain measures can be taken to amend the situation:
• Changing Habits and Perceptions – Most of these people had not experienced electricity and its uses for most of their lives. It is a phenomenon which has been made available to them only during the last few years. As they say, old habits die hard, so a large portion of the targeted market opts to live without electricity since they are already accustomed to being without it. It is imperative that strategies are implemented which can increase their reliance on electricity in the areas.
• Introduce Energy Efficient Household Products – An alternate solution for the cost problem can be the introduction of low-cost energy-efficient household electronics in these areas. Lights, fans, etc. which would be cost-efficient would mean more people would buy them for their homes, leading to greater demand for electricity. People would slowly become more habituated towards electricity use in their daily activities, thereby, increasing the consumptions levels over the long run.
• Reduce Prices – A Tk 30 per unit charge for the low-income families in these regions is exceptionally high. So the obvious option for the government would be to allocate more funds towards covering the Tk 60 per unit cost incurred by these solar ventures. In this regard, taking a leaf out of our neighbor’s book might also be helpful as this year we’ve seen India drastically reduce solar power charges to as low as 2.62 rupees per kilowatt-hour of electricity generated from solar panels.
• Increase Industrial Impact – Larger industries beyond just agricultural entities or mechanical workshops need to be established in those areas so the overall regional income levels rise which can make electricity more affordable. The spillover effect will not only generate employment but also increase revenues for solar power projects in the areas.
Sources: i. Dhaka Tribune, ii. The Daily Star, iii. The New York Times, iv. The Guardian