Installation of grid-connected solar power projects are not gaining momentum due to land scarcity. However, lower generation cost of rooftop solar compared to grid power for industrial use is making it more attractive for investment. It would be possible soon to increase industrial rooftop solar power to 1,000 MW. Third party investment here would also make it more attractive.
Mahmood Malik, Executive Director and CEO, Infrastructure Development Company Limited (IDCOL), said this in an exclusive interview with EP Editor Mollah Amzad Hossain.
IDCOL had launched its business with a pledge to finance the infrastructure projects. It started working on renewable energy a bit later. How did you start working on renewable energy and energy efficiency?
The financing of IDCOL started with the 450 MW Meghnaghat power plant, the second Independent Power Project (IPP) of Bangladesh. But the works on renewable energy started a bit later in 2003 when the grid power coverage in the country was below 40%. IDCOL started working on renewable power mainly with the vision to supply power for the rural population outside power grid through Solar Home System (SHS). Works on efficient use of energy started later. We are working on energy efficiency for the last 2-3 years.
SHS is a flagship project of IDCOL and Bangladesh. Starting in 2003, you have so far installed 4.13 million SHS. You are doing this through NGOs and business organizations with the financial assistance of donor agencies. How would you evaluate the overall success or failure?
It is a milestone achievement and a major success in the power supply to domestic sector of rural Bangladesh. Till 2017, it was possible to set up 4.13 million SHS. Around 18 million people have been provided with the benefit of electricity use. This is about 12% of the total population. A ‘silent revolution’ has happened in rural Bangladesh due to energy access through IDCOL SHS Program which many people in the urban areas are unaware of. The program cannot be measured mere by the numbers rather by overall socio-economic impact created in the rural areas. IDCOL has done this through partner organizations (POs) utilizing the financial assistance of the Government and development partners. Initially, a little subsidy was given but later it has been implemented with concessional loans only without providing any subsidy. Our primary target was setting up 50,000 SHS in five years till 2008. But we could attain the target within 4 years. The project got momentum as cheaper technology for solar power generation evolved in the world. During a period of 2011-2014, around 50,000 SHS could be installed every month. Inspired by the business acumen of IDCOL, development partners are replicating this model in different countries, especially in Africa.
Few elements worked for the rapid success of the initiative. First of these was that the generation capacity being far less than demand, the pace of extension of power grid coverage was considerably slow. People were eager to get electricity supply for getting the feel of better lifestyle. NGOs, which were working on SHS in smaller scale, got interested for working as POs utilizing small loans of IDCOL. On the other hand, cost of solar power started depleting in global market progressively with the launching of the initiative. Shelf lives of the batteries are usually for three years in the world, while guarantees were provided for 5 years in Bangladesh. But in real practice, these worked smoothly for 7-8 years. For all these, SHSs were very much affordable for the rural masses.
During 2017-2020, the power grid expansion continues across the country under the power to all program. Consequently, those who were relying on SHS also started accessing the grid power. Under another policy decision of the government, under TR and Food/Money for Work (Kabikha/Kabita) program, free of cost installation of SHS. It created impediments for recovering the loan installments for the POs. IDCOL invested a total of Tk 4,500 crore for this. About Tk 3,600 crore could be realized from the customers which is 80% of the investments. But it has become an issue recovering the remaining loan amount. For continuing recovery of the installments, the registered POs are still setting up SHS under TR and Kabikha since FY 2016-17 as per decision of the government. This has paved the way for the POs to recover the loans and mitigate the losses. With 15 years of experience in solar energy, IDCOL POs are helping the government to successfully implement the program. Also, the government has provided support to IDCOL by waiving interest of the loan to IDCOL for SHS Program since July 2018 which has been passed on to POs.
Many countries are now replicating the commercially successful SHS business model. How you are helping them?
The World Bank (WB), Asian Development Bank (ADB), KFW, JICA, DFID, USAID and GIZ like development partners financed the IDCOL initiatives. Right from the very outset, they intensively monitored the project implementation, recovery of loan, customer services activities at every stage. These development partners are now using our successful model in more than 15 countries of Africa and Asia. Upon request by the development partners, IDCOL provided all out support, including project visit and training, to those countries.
Excluding 1,059 villages, the entire country would come under the grid power coverage by end of 2020. The success of SHS has been stalled for expansion of the grid. This has also made it difficult to recover the loans you provided. What is the present situation?
I have already mentioned about issues related to investment and recovery of loans. It has been possible for recovering 80% of the loans so far. We are still monitoring the consumers. You know that the lifecycle of a panel is 20 years. Batteries usually provide service for 7-8 years and in some cases for 9 years. Some consumers have replaced their batteries and are using solar power alongside the grid power. Our study evidences that most of the SHSs are still active.
Works on biogas and fertilizer started soon after independence of Bangladesh. But notable success could not be achieved yet. IDCOL started it afresh since 2006. What are your plans? What success you have achieved so far?
We could set up 54,000 plants under biogas program so far. But this work has much greater challenges than SHS. At least 4-5 cows are required for this. Land is also essential for this. Many people are developing dairy farms after suspension of import of cattle from India. There is scope for setting up biogas plants there. The costs of solar power projects are progressively getting reduced for lowering costs of components but, on the contrary, the cost of biogas plant is increasing for increased costs of components. We are now able to set up 4,000-5,000 biogas plants every year. Some 95% of these plants are functioning well and 4% are working at reduced capacity. We planned for setting up 60,000 plants. We have almost achieved our target. Donors are regularly monitoring operation of these plants. Subject to getting new funds, we will take up new schemes.
We like to mention here that about half of the fertilizer produced from such plants cannot be used properly yet. IDCOL is working to find ways how these can be properly utilized. Solar plants do not need any subsidy but the biogas plants need 20-25% subsidy. Even then, there are opportunities for expanding the biogas plants program in future.
Mini solar grid is another initiative of IDCOL. We have learnt that such projects are in operation now. What is future here? What are your plans?
Some 26 mini solar grids are in operation now in the islands and isolated char areas of Bangladesh. The combined capacity is about 5 MW. Submarine cables are creating grid connectivity in these areas. IDCOL proposed relevant utilities for power purchase from these mini solar grids. Power Division has agreed and the approval by the Prime Minister has also been accorded. Such mini solar grids are now in operation in the franchise areas of BPDB, REB, WZPDCL and NESCO. We are optimistic that tariff for this can be agreed within 2020 through discussions among all stakeholders and power purchase agreements can be concluded for the lifetime of these mini grids between operators and respective utilities.
Under the government plan, up to 300MW capacity rooftop solar power would be installed by 2022. The government has already finalized net-metering policy to support this. Encouraging responses have been received from the entrepreneurs. What is IDCOL doing about this?
This is now the most attractive project through which solar power in Bangladesh can achieve major landmark. We think through long-term plan, even 4,000 MW to 5,000 MW of rooftop solar power generation is possible. Please note that if rooftop solar scheme is successful, industries can save at least Tk 1-1.50 per unit from what they are now paying for the grid power. Moreover, under net-metering system, they can sale surplus power to the grid. These are making the scheme commercially attractive gradually. The present increased trend of power tariff will make rooftop solar more attractive.
The entrepreneurs will have to account for 20% equity for getting IDCOL loans for this project. We are providing 80% of the project cost as loan for 10 years at 6% interest rate. We have already approved 25 such projects of 30MW capacity. Approval for another group of proposals totaling 50MW capacity are in the pipeline. The present crisis over coronavirus outbreak is making some delays. Those 25 entrepreneurs who have already received approvals have potential for installing rooftop solar plants in other industries. These can generate another 100MW.
Of course, many industries where there exist opportunities for rooftop solar power generation are not willing to invest for it. There is scope for third parties investment there under an OPEX model. Three of 25 approved projects of IDCOL are like those.
The land availability in Bangladesh for large grid-connected plant is a huge constraint. This will facilitate industrial rooftop to become solar power leader in near future.
The government has adopted a highly ambitious project to replace diesel-run irrigation pumps with solar ones. High level policy makers are heard saying that about 1.0 million solar pumps would replace diesel pumps in phases. How optimistic you are about the success of this program? What is IDCOL planning about it?
I would not term it highly ambitious because installation of only 100,000 solar pumps will replace 1.0 million diesel pumps. IDCOL is now working for 10,000 solar irrigation pumps by 2025 which will replace 100,000 diesel pumps. Around 1,500 such pumps have been already installed. The combined generation capacity is 40 MW. But for this, we need sizeable investment. IDCOL is providing 50% subsidy to make this program successful.
We have got proposals for another 800 solar pumps now. We will approve these subject to availability of financing from the government and development partners. In present circumstances solar pumps remain in operation up to 150-160 days every year of 365 days. An enabling business model can be prepared if these pumps can be operated round the year. It is possible if the generated power can be evacuated to power grid outside the irrigation period. Sustainable and Renewable Energy Development Authority (SREDA) working on this has submitted a proposal to the Power Division. When approved, this will create a new dimension for investment in solar irrigation pumps.
IDCOL has submitted a concept paper for getting fund for solar irrigation pumps from Green Climate Fund (GCF).
IDCOL is working with different organizations and agencies on research and development (R&D) based projects for renewable energy and energy efficiency. What is the status of these? What do you want to actually achieve from here?
We are not really working on inventing new technology for renewable energy. Our R&D is basically targeted to making available technologies more sustainable for Bangladesh. Under the purview of this, we are considering small scale solar cold storage. Notably, we funded 13 R&D projects of which 3 were on solar cold storages. IDCOL, using its partner organizations, is planning to start implementation of this soon.
Significant works have been done over the past decade on efficient use of energyat different level of Bangladesh. There are many success stories as well. SREDA is working on implementation of Energy Efficiency Roadmap. What are the plans of IDCOL on efficient use of energy?
IDCOL is working in two stages. First, following the footprint of SREDA, we are implementing Improved Cook Stove (ICS) program. With a target for 5.0 million ICSs by 2023, we have already installed 2.2 million. We are doing this utilizing USD 40 million grant support, US$ 20 million grant from GCF channeled through WB and additional US$ 20 million financing from WB. We started the program with Tier 1 (thermal efficiency >15%) cookstoves, but through local R&D thermal efficiency level has been improved to Tier 3 (>35%). We are now promoting Tier 3 stoves and above stoves only.
IDCOL is working on Industrial Energy Efficiency over the past few years. The aim is to provide soft-term, low-interest loans to industries endeavoring for fuel efficiency. Work started with utilization of JICA provided US$50 million fund. It is complete now. Discussion is going on with JICA, AFD and KFW for fresh loans. AFD will provide 100 million Euro. Besides these, IDCOL has submitted a proposal seeking US$ 100 million from GCF for the textile sector. We are preparing proposal for another US$150 million for the RMG sector which will be channeled through four local financial institutions -Southeast Bank, BRAC Bank, The City Bank and IDLC.
IDCOL is providing advisory services at home and abroad on renewable energy and energy efficiency. What actually you are doing?
We have already provided support to more than 15 African and Asian countries for capacity enhancement in renewable energy. In joint venture with Deloitte, IDCOL is going to implement a TA project in Tanzania. We have plans for expanding such activities at home and abroad either on standalone basis or in joint venture with other companies in future.
IDCOL is acting as focal point of GCF. How many projects you have so far submitted to GCF? What level of commitments for financing you have already received till now?
For Bangladesh, IDCOL is the first Direct Access Entity for GCF. IDCOL can submit project proposals to GVF for up to US$ 250 million. PKSF is another Direct Access Entity from Bangladesh. Till now Bangladesh has received US$85 million grant from GCF. IDCOL has directly submitted its first project for textile sector with a funding request of US$ 100 million. We are expecting positive response soon. We are currently working on 4 additional projects which will be submitted shortly. Also, IDCOL has a strong pipeline of projects for GCF funding.
