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Can photovoltaic technologies help attain sustainable rural development in Bangladesh?
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Energy Policy 32 (2004) 1199–1207
Can photovoltaic technologies help attain sustainable rural development in Bangladesh? Wahidul K. Biswasa,*, Mark Diesendorfb, Paul Brycec b
a Environmental Science Discipline, Khulna University, Khulna 9208, Bangladesh Sustainability Centre and Murdoch University, PO Box 123, Epping, Sydney, NSW 1710, Australia c Faculty of Engineering, University of Technology, Sydney, NSW 2007, Australia
Abstract The paper explores a model of sustainable rural development and poverty alleviation in Bangladesh, based on the creation of village businesses that sell solar electricity generated from the photovoltaic (PV) technologies. The model shows that the solar electricity business model is in principle economically viable up to the maximum investment available from a micro-credit organisation. Furthermore, the transfer of the existing subsidy from the centralised power system to these businesses would create significant additional income for one-third of the total landless and marginal farmers (LMFs) to meet their income deficits for basic needs. It would also electrify all rural wealthier households. From this additional income, the LMF households employed by the scheme would be able to conserve their environmental resources of animals, land and trees that otherwise are being lost. Appropriate government policies are proposed to disseminate PV technologies. r 2003 Elsevier Science Ltd. All rights reserved. Keywords: Photovoltaic technologies; Rural electrification; Income generation; Rural poor; Bangladesh
1. Introduction The paper explores the possibility of attaining sustainable rural development in Bangladesh through fostering decentralised rural power companies based on photovoltaic (PV) technologies. Landless and marginal farmers (LMFs), representing about half the rural population, could be partly employed in such businesses. Currently, most LMFs have insufficient income to provide for their basic needs. LMFs live from hand to mouth as income from crop production is below subsistence level (Hossain, 1995). This situation is more severe in inundated areas where agricultural land remains under water about one-third of the year and multiple cropping is hampered (Biswas et al., 2001a). Under these circumstances LMFs have 3– 4 months to earn income from agricultural activities. They are often forced to undertake loans during the slack season, to be repaid in the agricultural season, with returns from share-cropping that barely meet repayments. These households suffer from deficits that are often met by selling animal and tree resources, thus *Corresponding author. E-mail address: wkb [email protected] (W.K. Biswas).
exacerbating the cycle of poverty. Ecological imbalance is thus an important consequence of the povertydirected spiral, as natural resources are transferred irreversibly into cash. According to UNDP (1995), poverty reduction, gender equity and sustainability are important objects of development. The most successful efforts in alleviating poverty have made efficient use of labour (Siddique, 1994). Accordingly, the technologies for income generation are best applied so as to empower rural poor, investing their indigenous skills and resources to meet their own and local needs. Waddell (1993) sees the key constituents of a sustainable economic development strategy as meeting basic needs, decentralisation and appropriate technology. Appropriate technology elements of a solution need to address energy supply and demand in the prevailing social and economic context. Thus, sustainable development has interconnected economic, social and ecological facets: ‘‘Sustainable development comprises types of economic and social development which protect and enhance the natural environment and social equity’’ (Diesendorf, 2001). Solar electricity could be a promising business and employment opportunity for LMFs, as it is not a seasonal business like agricultural activities.
0301-4215/03/$ - see front matter r 2003 Elsevier Science Ltd. All rights reserved. doi:10.1016/S0301-4215(03)00083-1
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We have studied in detail a village in Gopalganj district, Bangladesh, in order to test the feasibility of this model. The paper examines how PV technologies that are technically suitable could also be economically, environmentally and socially feasible.
2. Scope of PV technologies in Bangladesh The existing energy situation in Bangladesh is sketched as follows (Biswas, 2002): *
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The future of the centralised power generation system is uncertain because of the scarcity of natural gas, system losses, management problems in the power sector, and the need for huge capital investment for building additional power plants. Government funding for renewable energy technologies (RETs) is very low. The concept of RETs as a source of energy is not new in Bangladesh. The existing knowledge base can be built upon. Average national solar radiation (3.85 kWh/m2/day) is quite good for PV, but their application is still in an early stage. The installation and operation of a 62 kW PV power station, the country’s largest solar power plant involving a local NGO, consulting firm and foreign companies and consultants, indicates that Bangladesh has technical experts to carry out PV projects independently. However, operation of this plant is unsatisfactory due to its inadequate bill collection and maintenance systems. Customers have been found to dislike walking for long distances to pay bills and carry batteries. The sizes of the batteries are not designed according to customers’ demand. Incomplete charging, overuse and misuse of batteries can be avoided by providing technical knowledge to the users of the batteries. The loss in bill collection has been found to be 40% in the largest solar electricity project due to management difficulties. Even without the sponsorship of the government of Bangladesh, some NGOs in conjunction with private companies are trying to disseminate PV technologies. Some companies and NGOs were able to convince the government to withdraw any import tax on the solar components. Rural people like solar lighting system as the PV technology is not affected by load shedding, and they get more light than from the existing kerosene lighting. A tiny fraction of the rural population is able to afford PV technologies. The NGOs sell only to wealthier groups or to their own member projects, while government departments offer PV technologies to cyclone shelters, slums, and missions. Dissemina-
tion needs to involve the wider population. For example, Grameen Shakti is involved in commercialising RETs with loans to rural rich with collateral. Unlike its parent, the Grameen Bank Grameen Shakti does not follow the principle of micro-credit. This is because micro-credit, made available to individuals, involves loans that are too small for PV systems. Only 8.8% of the rural population are able to purchase this system at 15% down payment. Such a dissemination of PV technologies is very slow, because the rural rich account for a tiny proportion of the rural population. The progress of RETs in most cases has been stopped after pilot project level. While Bangladesh has resources, experts, suppliers, manufacturers, research organisations, NGOs and clients to help diffuse these technologies, the country is lacking in the ability to integrate these stakeholders through an appropriate institutional framework and financial mechanism.
3. The model applied to PVs The model is in essence an extension of the microcredit concept from individuals to businesses (Biswas et al., 2001b). The concept is as follows: 3.1. The model An implementing agency would help establish a renewable energy business, which may be run as a cooperative, for example, involving a number of LMFs voluntarily. The implementing agency facilitates linkages for renewable resource assessment, training, construction, operation, maintenance, and management of the renewable energy business with NGOs or companies, research organisations and government utilities. The implementing agency borrows the money on behalf of the renewable energy business, which purchases the technology, either a solar PV or biogas plant. The renewable energy business repays the instalments on the loan by selling energy to wealthier villagers. Because of the high cost of conventional sources of energy in the villages, the total revenue generated is sufficient to supplement LMFs’ income as well as to payback the loan to the micro-credit organisation. When the loan is paid off, ownership of the technology is formally transferred to the renewable energy business. This model is most applicable in countries where there is a large difference between rich and poor, thus allowing service to flow from poor to rich, while cash flows from rich to poor. The following three tasks were performed to test the actual practical applicability of the theoretical model.
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First, some of the most appropriate implementing agencies such as BRAC and Grameen Bank were contacted to know their interest to implement the model. Each of these agencies responded that they would be willing to implement, provided external funding is available. Second, wealthier households were surveyed as to whether they were interested in purchasing electricity from the LMFs. Out of 22 wealthier households in Polsair village, no one was found to oppose the rural electricity business run by LMFs. About 73% of the respondents said that they would appreciate anything that would improve the living conditions of the LMFs. Some said that they would be interested in electricity, irrespective of who was the supplier. Third, a meeting was held in Dhaka with energy experts from government, NGOs, academicia and consultancies. The meeting expressed broad support for the implementation of the proposed model. The following section incorporates field information into the model to investigate whether PV technologies would be economically, technically, socially and environmentally feasible to assist in a process of sustainable rural development.
4. PV technologies for sustainable rural development 4.1. Applying the base model to PVs The size of investment on the whole business, comprising the generation of electricity for both irrigation and domestic electricity supply, should be within a lending organisation’s lending limit for a microenterprise program (i.e., Tk. 200,0001 for BRAC). The number of PV modules required for irrigation was thus determined, with the same modules used to run irrigation pumps in the fields and to charge batteries for domestic electricity supply. So the number of customers who can be provided with domestic electricity depends on the size of the irrigation business. The number of households employed in this business would be based on the wage and person-days provided by the business. These two variables, wage rates and employment level (i.e., person-days), determine whether deficit households involved in this business would be able to meet their basic needs for food, clothes, and other items. As part of applying the model to solar electricity business, the technical considerations were first assessed to determine its appropriateness. The business creates employment for LMFs through using labour and appropriate technology to substitute for some expensive solar panels, solar trackers, etc., e.g. by using the same 1
US$1=Tk. 60.
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solar panels and pump for different plots under this irrigation scheme; following an irrigation schedule for high yielding varieties (HYV) of crops; delivering the charged batteries to wealthier households instead of providing them with their own solar panels; and replacing the commonly used centrifugal pump by an efficient reciprocating pump. Taking all these factors into account, we have tested the aforementioned model. In this base model, solar electricity cost is competitive with the existing and alternative technologies. Specifically, we will show in this section that solar-powered irrigation is cheaper than diesel-powered one and domestic lighting from batteries charged by solar energy is cheaper than kerosene lighting. As can be seen from Table 1, for the same supply of electricity, the solar electricity has been found to be about half the cost of the alternative diesel generation plant. This is because of the poor economy of small scale, where a diesel plant generates a very little electricity compared to its infrastructure costs (i.e., cables, generator). However, the substitution of kerosene lamps with straight tube fluorescent lamps (SFLs) has also been found to be a viable option. The net benefit is positive for all customers using 2–4 SFLs, indicating that the cost of electricity and electrical appliances is less than that of the existing kerosene lamps and kerosene. Interestingly, the cost of irrigation for solar pumping has been found cheaper than that by the existing diesel engine-run centrifugal pump. The optimum wage rate2 as given in Table 1 has been used to determine the additional income from the solar electricity business to meet income deficits of different deficit groups of LMF households. Three groups have been considered. Group 1 comprises the most vulnerable deficit households suffering from a deficit of expenditure on all basic items of food, clothes, education, health, etc. (see Table 2). About six households out of 19 interviewed LMF households fall into this group. Group 2 consists of all members from Group 1 plus two households with deficits in expenditure for clothes, education, and heath. Group 3 consists of all members from Group 2 plus two households not capable of paying for health and education only. An analysis has been carried out by involving each group separately participating in the same size of business. It was investigated as to how many people the business would be able to employ to meet their basic needs. The persondays distributed among the deficit households have been allocated on the basis of their deficits. Since the persondays required for a particular size of business is fixed, the number of person-days required to meet deficits of 2
The wage at which the business is competitive with the existing and alternative businesses providing the same services and the LMFs participating in the business are able to meet their basic needs.
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Table 1 Competitiveness of the solar electricity business at different wage rates at an investment of Tk. 200,000 (Source: Biswas, 2002) Wage rate (Tk./hr)
c
6.23 7.07d
Cost of electricity (Tk./kWh)
Cost of irrigation (Tk./m3)
Net benefit (NB) (Tk.)a
Solar electricity
Diesel electricity
Solar pumping
Diesel pumping
4 SFLsb
3 SFLs
2 SFLs
79.1 82.7
170.3 170.3
0.71 0.74
5.3 5.3
1,273 0
955 0
636 0
a
Net benefit is the benefit of solar electricity over the existing kerosene lighting system calculated over the lifetime of the straight fluorescent lamp (i.e. 7 years). The cost of solar electricity and the cost of purchasing fluorescent lamps and deep-cycle batteries have been compared to the cost of kerosene avoided and the costs of hurricane lamps. b Although the illumination of one straight tube fluorescent lamp is higher than that of one hurricane lamp, it was considered that one SFL is replaced by one hurricane lamp. This is because the people in the village use one hurricane at the point of use. Although it is possible for wealthier households to use one hurricane, they do not usually do that because they wish to avoid excess thermal radiation, excessive blackening ceiling, bad smell and chance of catching fire. c Existing wage rate. d Optimum wage rate.
Percentage of households meeting deficits
the business. Then, however, the investment may go beyond the NGO’s lending limit. Now the question is, where can the extra investment required, on top of the NGOs lending limit, be sourced?
6 households’ group
8 households’ group
9 households’ group
4.2. Potential improvements on the base model results
50 33
38 13
33 11
33
13
11
Table 2 Levels of deficits met by different groups consisting of different numbers of households (Source: Biswas, 2002) Level of deficits
Food Food and clothes All items
six households is more than that required to meet deficits of eight and ten households, respectively. The person-days required to run the irrigation application and domestic applications for eight and nine households of Groups 2 and 3 are fewer than those required to meet the deficits of six households at the given wage rate. Table 2 shows the deficits of LMF households for food, clothes, education, and health, and the additional income the households can generate by participating in different sizes of groups. It was found that all members of a group of six deficit households cannot totally meet their basic needs through selling electricity for both irrigation and domestic lighting purposes (see Table 2). In Group 1, 50% of households would be able to meet their deficit for food, 33% for food and clothes, and 33% for all basic items. In Group 2, only 38% of the households are able to meet their deficits for food and 13% for all basic items. Similarly, 11% of the members of Group 3 are able to meet all their basic items. It appears that the deficit households could also significantly alleviate their deficits for food, particularly in the case of the least fortunate group. However, to meet the deficits completely for all LMF households, the model would require an increase in plant size together with other forms of assistance. In addition to meeting deficits, extension of the plant capacity is required to serve more customers by the same number of LMFs in
Some economic variables are adjusted in order to increase wages, so that the LMFs participating in the business would be able to meet deficits for basic needs. Different investment sizes and rebate programs have been considered as economic variables to increase the wages and employment level (person-days) needed to meet all basic needs. 4.2.1. Government rebate strategy There is a basic constraint within the model that limits the possibility for reducing electricity unit costs, namely the lending limit for a micro-enterprise project. The economics of the base model can be significantly improved with a larger per capita outlay. In the village survey, at least, there was a demand for consuming a higher level of electricity. Thus, the model will benefit from capital rebates particularly available in Bangladesh. Although subsidies or rebates are discouraged in many cases as they restrict win–win opportunities (Foley, 1997; Byrne et al., 1999), the present approach is to investigate how the government’s rebate can facilitate transfer of PV technologies to the nonelectrified rural people competitively with its existing investment in rural electrification. 4.2.2. Source of rebate The rebate program can be financed from the additional revenue generated by decreasing the subsidy on the price of the national grid electricity. The price of electricity in Bangladesh is so subsidised that the total cost of generating, transmitting, and distributing a kWh of electricity (long-run marginal cost or LRMC) would
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still be higher than the income from the electricity if the existing subsidy on the electricity price were decreased by 50%. LRMCs are about 58–81% more than the price of electricity in different end-use sectors (BPDB, 1999). Such an electricity distribution system is not socially equitable as only 16% of the total population has access to electricity at this subsidised rate. In UK, the wind energy program supported by non-fossil fuel obligation (NFFO) showed a price drop of 64% due to the move to a 15-year subsidy, which gives operators much longer time to recover their investment costs (Biswas, 2002). This scheme was funded out of a 10% levy on domestic fuel bill. The Bangladesh government would obtain the funds for this rebate by decreasing the subsidy on gridconnected electricity. The amount by which the subsidy on the electricity pricing would need to be reduced, in order to extend this business throughout the country by a certain period of time (say 2015), depends on the size of the business and number of non-electrified households. The optimum reduction of the subsidy to electrify all wealthier households during 2015 has been determined in the following subsection. Reduction of the subsidy may be politically unacceptable. However, this analysis shows what would happen if some of the total subsidy enjoyed by a small proportion of the Bangladesh population were used to finance a business that would electrify a significant portion of the non-electrified rural population in Bangladesh. 4.2.3. Effect of rebate implementation program Power Cell, a policy planning section under the Ministry of Energy and Mineral Resources, had submitted such a proposal (following this work) for the government’s approval. The proposal involved setting up an organisation known as Renewable Energy Development Authority (REDA), which would evaluate projects offering rebates. For example, Indian Renew-
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able Energy Development Authority (IREDA) in India and Sustainable Energy Development Authority (SEDA) in New South Wales, Australia evaluate renewable energy projects to implement the rebate scheme (IREDA, 1998; SEDA, 2002). However, IREDA’s attempts to disseminate its line of credit have largely remained confined to urban areas, primarily because of its fear of poor rural repayment rates. Such a situation can be overcome in Bangladesh if a REDA regulates such a financial scheme in conjunction with the implementing agency such as BRAC or Grameen Bank by implementing the proposed model. In such a case, the NGO would get its project design, budget, and list of technologies approved by REDA. Upon REDA’s approval, the NGO would be under REDA’s 50% rebate scheme. Once the NGO installed the business, REDA would monitor whether the NGO followed their submitted design within the approved budget. Upon successful installation, the NGO would receive 25% rebate directly. After the first year, REDA would monitor the project, and if it was running successfully the NGO would receive the rest (i.e., a further 25% rebate). The following paragraph investigates the levels of investment that would be required to empower different sizes of the LMF population. It has been found that the NGO’s investment should increase from Tk. 200,000 to Tk. 337,500 (see Table 3). Therefore, the cost of generating electricity would decrease from Tk. 67.2 to Tk. 48.5 per kWh. As can be seen from Table 3, the unit cost of solar electricity is still competitive with diesel-generated electricity and existing kerosene lighting options. The number of customers is increased by 50% from 17 at an investment of Tk. 200,000. Even though, the hourly wage has decreased from Tk.15.25 to Tk. 11.25 for an increase of the total investment from Tk. 400,000 to Tk. 675,000, six LMFs within which highest income deficit is Tk. 1,430 are able to meet their deficits for basic needs. This
Table 3 Competitiveness of the services provided by the solar electricity business where the micro-credit organization pays 50% of the total investment (Source: Biswas, 2002). Wage rate (Tk./h)
Cost of solar electricity Irrigation (Tk./m3)
a
10.25 11.25b 15.25c a
0.42 0.44 0.60
At an investment of Tk. 400,000. At an investment of Tk. 337,500. c At an investment of Tk. 200,000. b
Domestic purpose (Tk./kWh) 46.0 48.4 67.2
Decentralized diesel option
Existing end-uses
Cost of electricity from diesel (Tk./kWh)
Diesel engine irrigation (Tk./m3)
42.7 48.5 80.8
4.56 4.56 4.56
Net benefit (Tk.)
4 amps
3 amps
2 amps
16,311 15,431 8,783
12,233 11,573 6,557
8,155 7,715 4,372
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is because person-hours increase with the size of investment and the additional income from the solar electricity business to meet the deficits is the product of the number of person days and wage rate. If the additional revenue of Tk. 2,550 million from electricity supplied from the national grid is spent offering 50% rebate for such a project, about 7285 similar projects could be implemented annually. Table 3 shows that the cost of pumping 1 m3 of water for irrigation from a head of 4 m by solar pump is Tk. 0.44, while it is Tk. 4.56 when using the existing dieselengine-driven irrigation pump. The existing irrigation situation of the village involves a fixed charge for irrigating a piece of land, at Tk. 1000 for 1 bigha3 and Tk. 60 for an hour for running a diesel engine pump. Here the unit cost is Tk. 1.37 per m3. The incremental cost of replacing centrifugal pump by an efficient reciprocating pump is 4–6 times less than the cost of panels avoided for a system irrigating 4.55–6.25 ha of land. It was observed during the field survey that the irrigation contractors do not deliver the required amount of water. The diesel engines operate 2–4 h per month to irrigate 0.1–0.3 ha of land in the village. Such a diesel-driven pump delivering 44 m3/h could deliver 88 and 176 m3 of water per month for 0.1 and 0.3 ha of land, respectively, although 110 and 330 m3 of water is actually required (Dutta and Mandal, 1985). 4.2.4. Consumer’s perspective Households replacing 2,3 and 4 kerosene lamps with solar-powered SFLs would be able to save Tk. 1102, Tk. 1653 and Tk. 2204 per year, respectively. The net benefit from using straight fluorescent lamps may be directed to other activities such as crop production. In this study, for the purchase of four 8 W lamps, the customer pays Tk. 301 per month for 2 years at 20% interest with no down payment. Grameen Shakti, for the same payback period of 2 years, requires a 25% down payment with 24 instalments (i.e., 8% per instalment per month). The monthly repayments are Tk. 1369 and Tk. 617 for 75 and 35 W panel systems, respectively. 4.2.5. Involving local industries It has already been noted that several of the components of the solar PV systems could be manufactured in Bangladesh. In addition, Dartnall (2000), the inventor of the proposed reciprocating pump, has suggested that the components of the pump (i.e., cylinder, piston, inlet and delivery valves, but not seals) could be manufactured under licence in Bangladesh. The involvement of local industries would therefore benefit the economy of Bangladesh. 3 Bigha is the local land unit of the village and is equivalent to 0.2 hectare of land
4.2.6. Climbing the energy ladder Once the 2-year payback period is over, the money that LMFs had previously spent on repaying the loan could be used for buying their office, paying rent, expanding the business within their own village and to neighbouring villages, or increasing wages (or dividends, if the business is a cooperative). With higher wages, the staff could also afford to purchase solar electricity for their own use. The annual surplus has been estimated as Tk. 66,521 for this LMF group. If the balance of the annual surplus is used, it is estimated that these households would be able to purchase modules and lighting appliances early in the third year, a fan and modules required to operate fans in the fourth year, and TV and modules early in the fifth year. 4.2.7. Price of solar electricity According to preceding section, the unit cost of Tk. 48.5 per kWh at an optimum investment of Tk. 675,000 would be considered as solar electricity price. At this investment, the unit cost is competitive with the existing and alternative technologies, the business is able to provide additional income to meet basic needs of the participating LMFs and offer adequate surplus for capacity extension after 2-year payback period. 4.2.8. NGO’s perspective The rebate scheme noted earlier offers incentives to NGOs for successful outcomes, as well as enhancing the scheme’s viability for LMF groups. In this case, over a 2-year payback period the NGO earns Tk. 67,500 as interest (20%) on its investment of Tk. 337,500 plus a Tk. 37,500 (10%) bonus after handing over the project to the LMF group. In total, the NGO would earn 30% return on its investment in 2 years of payback time. 4.2.9. Government’s perspective The government could benefit through the rebate program in three ways. Firstly, the rebate program would help lessen the per capita investment on electricity. In this model, the per capita investment of Tk. 11,719 is about 6% of the cost of the centralised distribution system. Secondly, given that the rebate system proposed is financed from 10% of the annual electricity revenue, the government would be less dependent on international donors. Thirdly, the payback period is 15 times shorter than that of the Rural Electrification Board. Such a low payback period offered by the solar electricity business avoids the risk associated with the security of the fuel supply and non-technical losses arising from sociopolitical issues.
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4.2.10. National perspective Although solar electricity is cheaper than the existing kerosene lighting system, the solar electricity price is about 15 times more than that of the centralised power generation system in areas where the grid exists. This situation is exacerbated by subsidies for power generation that are equal to expenditure on the health budget (more than US$100 million p.a.), of which beneficiaries are only 16% of the affluent households (Lovei and Mckechnie, 2000). If a similar type of business is to continue in the rest of the nonelectrified villages to electrify the rural wealthier households for lighting, it has been estimated that an investment equal to the revenue gained through increasing the electricity price by 39% would be required. Non-technical losses due to the centralised power generation system can be avoided, and some of the human resources strain of a centralised structure may be alleviated for other priorities in sustainable development.
4.2.11. Non-technical factors Some additional non-technical risks can be overcome with the use of solar pumps. For example, irrigation contractors collect fees in advance of purchasing fuel, and often need the money for personal reasons, which precludes adequate supply of diesel. As a result, they cannot irrigate the land satisfactorily. This risk can be avoided with a PV irrigation system, where fuel is not an issue. Expected revenue from the electricity service may drop because of flooding, a bad agricultural season, or customers’ tendency to drop out from the list of buyers. Considering these factors, the payback period has been increased to allow different rates of bill collection. Suppose LMFs are not able to collect 100% of the bill of 2798 kWh of electricity sold, with a reduction of bill collection by 10%. As a result, the electricity price increases from Tk. 48.5 to Tk. 55.2 per kWh, which is about 9% higher than the cost of electricity generated by the decentralised electrification plant. The payback period can be increased from 2–4 years to decrease the solar electricity price to 100% bill collection level, again competitive with other alternative diesel electricity system and existing kerosene lighting system. However, with an increase of the payback period to 4 years, the annual surplus decreases from Tk. 66,521 to Tk. 36,976. Such a lower annual surplus would delay LMFs owning electricity of their own until after 6 years of the commencement of the business. If the bill collection is 80% and the payback period is 10 years, the annual surplus is insufficient to allow the LMFs to extend the project to meet their own electricity needs.
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4.3. Local impact of solar electricity business 4.3.1. Overlapping effects Extra days4 required for the solar electricity business have been overlapped with the person-days allocated for other existing activities. The overlapping effects are as follows: It appears that deficit households need to consider overlapping time during the months of the paddy harvesting season ( mid-October to mid-December), in order to be fully involved in the solar electricity business. The income would be less from paddy harvesting than from solar electricity. It has been found from the field survey that an LMF gets on average 10 kg paddy per day, which is equivalent to 7 kg rice and 3 kg husk and bran. The market price of 7 kg rice is Tk. 84 (at Tk. 12 per kg) and that of 3 kg rice bran and husk is Tk. 7.5 (at Tk. 2.5 per kg). The daily wage from the solar electricity business is Tk. 90 (Tk. 11.25 per hour 8 h), which is more than enough to overcome any substitution of harvesting activity by the solar electricity business. Since the vulnerable LMFs participating in the business depend on farm activities, their person-days allocated for a solar electricity business will overlap more with agricultural activities. Migration of workers from the existing poorly paid activities, such as weeding, to the solar electricity business could increase the wage rate for weeding. Such an overlap has not been found to affect the overall income and benefits which they could have obtained from overlapping activities. Furthermore, it would increase demand in the agricultural labour market and help strengthen bargaining power.
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4.3.2. Land fragmentation Twenty-five per cent of the total land is sold in order to meet expenditure on food. As discussed earlier, the group of six households participating in this business would be able to meet these deficits. The business could help these households to combat selling their land completely. 4.3.3. Tree resources Because of financial insolvency, LMF households are found to keep endangered natural resources like trees as social security. About 45% of the rain trees and 30% of the Chambol trees were planted by these LMF households with an objective that they would sell the trees to pay for their daughter’s marriage. According to them, 4
The extra days required may, given local survey preferences, be taken from the days allocated firstly to physical labour, then to fishing during the rainy season. The extra days would only be taken out from land processing work in cases when there is no involvement in physical labour and fishing.
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each of these wood trees can be sold for Tk. 5000– 10,000. It costs at least Tk. 30,000 for the daughter’s marriage, including dowry. It would take at least 5–6 years for these trees to reach saleable size. By this time, accumulation of additional wages from the solar electricity business would help them to be less dependent on the tree resources, and allow such resources to remain as longer-term security.
5.2. LMFs For a sustainable result, LMFs will progressively own and manage all aspects of the project. In the initial stages, it is likely that LMFs will be involved in choosing their own clients from the wealthier group and submitting customers’ names and lists of appliances. They will *
5. Stakeholder roles Disseminating PV technology through a business mechanism for a Bangladeshi rural village application may involve an NGO, training institutes, government, REDA, LMFs, and a wealthier buyer group.
*
* *
5.1. NGOs In our model, we have considered that NGO would be the implementing agency. It would work directly with LMFs and REDA in this project. For implementing this project, it was suggested that the NGO develops a project according to the guidelines of REDA. According to the guidelines, the NGO will carry out the following tasks: *
*
*
*
assess LMFs level of household deficits for basic needs and employment needs from a social survey; determine the expected electricity demand of the wealthier group of the village; design a project plan to involve LMFs in the solar electricity business to meet their deficits; and prepare a budget and list of technologies.
*
5.3. Wealthier group (consumer) A sustainable business involves consumers in obligations as well as benefits. The wealthier group would get electricity under the following conditions: *
The NGO will facilitate the expressed interests of LMFs through some or all of the following activities, as appropriate to social context: *
*
* *
*
develop awareness and understanding of the risks and benefits of the general business model among a rural target group; ascertain those LMFs with an interest in involvement in the business; facilitate formation of LMF groupings; assist in allocating and negotiating person-hours with regard to the level of household deficits, and the nature of employment obligations with existing activities; and strengthen local capacity in technical and microfinance and other project management areas.
After the payback period, when the NGO hands over the business to the LMFs, the NGO will readjust the wage rate of the LMFs so that the surplus and additional income from the business will meet LMFs’ deficits.
choose irrigation clients until the land to be irrigated reach the maximum limit the solar irrigation pump can irrigate; be involved in the design and installation process, for example, assembling and handling the modules, maintenance of motors and pumps, etc.; target and collect payment of the electricity bill; undertake regular planning and progress meetings on bill collection, technical difficulties, and the financial situation, for example, in every meeting they will discuss money spent on different purposes, adequate balance of the accounts, and technical problems; and develop a team approach to collective sustainability through the adequate collection of revenue, time management, and other maintenance and book keeping aspects.
*
*
*
*
*
they will give details of the type of end-use technologies and expected operating hours; they will participate in estimating the load of their desired end-use applications; they will be informed as to the amount of electricity they require; they will buy a battery of a certain size required to store the electricity of their desired load; they will understand the problem of overusing the battery; and they will pay 2 months in advance.
Once they are satisfied with the above conditions, the system will be designed on the basis of their demand. 5.4. REDA Suppose that an REDA is formed by the Government of Bangladesh as a government financial authority charged with encouraging rural energy supply. Then REDA is likely to offer highest rebate (i.e., 50%) to an organisation involving LMFs in business ownership,
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since this serves three national purposes: * *
*
employing the LMFs; electrifying, initially, the wealthy group of villagers; and electrifying the LMF group in the longer term.
REDA is also likely to provide priority support for an NGO having a specific program for RETs. It will evaluate the project proposal submitted by the NGO according to its guidelines. Once the approved project under the rebate scheme is installed, REDA will inspect the project, addressing the following aspects: * * *
*
*
*
Have high-quality technologies been purchased? Will the capacity of the system meet the demand? Are the LMFs interested in participating in the business? How many wealthier households are committed to receiving the electricity supply? Have the consumer households already committed to purchasing a battery? What is the assessment of the Village Business’s planning and work distribution schedule, and financial analysis?
If these conditions are satisfied, REDA will provide a 25% rebate promptly. One year after the commissioning period, REDA will monitor if the cash flow in the business is going well and consumers are satisfied with the service. Upon successful operation of the project for 1 year, REDA will provide the NGO with the remaining 25% rebate.
6. Conclusions Photovoltaic technologies, used appropriately, may improve the quality of life of rural people and provide income-generating opportunities. Sustainable development through new technologies requires a model that specifically addresses social, economic, and environmental issues. This solar-based project describes how an appropriate framework may provide these elements, creating income-generating activities while alleviating poverty and conserving natural resources. The essence of the proposed model is to extend the successful models of the Grameen Bank and BRAC, which currently provide micro-credit to rural poor individuals, to the provision of larger loans to village businesses for RETs. Solar electricity businesses—within the constraint of an investment of Tk. 200,000, current energy resources, and energy demand—would be able to provide employment to two-fifths of LMFs in the study villages. However, a solar electricity business would require a rebate to increase the size of the business to allow LMFs
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to meet their deficits completely. Even then, the amount of rebate in this business to electrify a household would be 6 times less than what the government currently spends per household on the centralised electricity system. The payback period is 8 times shorter than that of the Rural Electrification Board, and avoids risks associated with the security of the fuel supply and nontechnical losses arising from socio-political issues. These businesses may also enable the participating LMFs to meet their own electricity needs.
References Biswas, W.K., 2002. Empowering rural poor through renewable energy technologies in Bangladesh, Unpublished Ph.D. thesis, University of Technology, Sydney. Biswas, W.K., Bryce, P., Diesendorf, M., 2001a. Photovoltaic Technologies for Poverty Alleviation in Bangladesh: A Specific Strategy. Community Technology 2001. Murdoch University, Western Australia. Biswas, W.K., Bryce, P., Diesendorf, M., 2001b. Model for empowering rural poor through renewable energy technologies in Bangladesh. Environmental Science and Policy 4 (6), 333–334. BPDB (Bangladesh Power Development Board), 1999. Commercial Operation Statistics. Bangladesh Power Development Board, Dhaka. Byrne, J., Shen, B., Wallace, W., 1998. The economics of sustainable energy for rural development: a study of renewable energy in rural China. Energy Policy 26 (1), 45–54. Dartnall, J, 2000. Personal communication, Department of Mechanical Engineering, University of Technology, Sydney. Diesendorf, M., 2001. Models of sustainability and sustainable development. International Journal of Agricultural Resources, Governance and Ecology 1 (2), 109–123. Dutta, S.C., Mandal, M.A.S., 1985. Technical and Management Aspects of Three Selected Proshika Landless Irrigation Schemes. Proshika, Dhaka. Foley, G., 1997. Step Towards Sustainable Commercialisation of PV Solar Home System. ASEAN Renewable Energy Congress, Phuket, Thailand. Hossain, M., 1995. In: Rahman, H.Z., Hossain, M. (Eds.), Socioeconomic Characteristics of the Poor in the Rethinking Rural Poverty: Bangladesh as a Case Study, University Press Limited, Dhaka. IREDA (Indian Renewable Development Agency), 1998. Renewable Energy Financing Guidelines, Indian Renewable Development Agency Limited, A Government of India Enterprise, India Habitat Centre Complex, East Court, New Delhi. Lovei, L., Mckechnie, A., 2000. In: P.J. Brook (Ed.), The Costs of ‘Corruption for the Poor’ in the Energy and Development Report 2000. World Bank Infrastructure Group, The World Bank, Washington, DC, USA. SEDA (Sustainable Energy Development Authority), 2002. Renewable energy and co-generation. http://www.seda.nsw.gov.au/ren photo.5pt}photovoltaics:asp: Siddique, M.A.B., 1994. The Government Poverty Alleviation: Selected Micro-economic and Selected Issues. Department of Economics, The University of Western Australia, Perth. Waddell, R., 1993. Replanting Banana the Trees. APACE Publications, The University of Technology, Sydney.
Energy Policy 32 (2004) 1199–1207
Can photovoltaic technologies help attain sustainable rural development in Bangladesh? Wahidul K. Biswasa,*, Mark Diesendorfb, Paul Brycec b
a Environmental Science Discipline, Khulna University, Khulna 9208, Bangladesh Sustainability Centre and Murdoch University, PO Box 123, Epping, Sydney, NSW 1710, Australia c Faculty of Engineering, University of Technology, Sydney, NSW 2007, Australia
Abstract The paper explores a model of sustainable rural development and poverty alleviation in Bangladesh, based on the creation of village businesses that sell solar electricity generated from the photovoltaic (PV) technologies. The model shows that the solar electricity business model is in principle economically viable up to the maximum investment available from a micro-credit organisation. Furthermore, the transfer of the existing subsidy from the centralised power system to these businesses would create significant additional income for one-third of the total landless and marginal farmers (LMFs) to meet their income deficits for basic needs. It would also electrify all rural wealthier households. From this additional income, the LMF households employed by the scheme would be able to conserve their environmental resources of animals, land and trees that otherwise are being lost. Appropriate government policies are proposed to disseminate PV technologies. r 2003 Elsevier Science Ltd. All rights reserved. Keywords: Photovoltaic technologies; Rural electrification; Income generation; Rural poor; Bangladesh
1. Introduction The paper explores the possibility of attaining sustainable rural development in Bangladesh through fostering decentralised rural power companies based on photovoltaic (PV) technologies. Landless and marginal farmers (LMFs), representing about half the rural population, could be partly employed in such businesses. Currently, most LMFs have insufficient income to provide for their basic needs. LMFs live from hand to mouth as income from crop production is below subsistence level (Hossain, 1995). This situation is more severe in inundated areas where agricultural land remains under water about one-third of the year and multiple cropping is hampered (Biswas et al., 2001a). Under these circumstances LMFs have 3– 4 months to earn income from agricultural activities. They are often forced to undertake loans during the slack season, to be repaid in the agricultural season, with returns from share-cropping that barely meet repayments. These households suffer from deficits that are often met by selling animal and tree resources, thus *Corresponding author. E-mail address: wkb [email protected] (W.K. Biswas).
exacerbating the cycle of poverty. Ecological imbalance is thus an important consequence of the povertydirected spiral, as natural resources are transferred irreversibly into cash. According to UNDP (1995), poverty reduction, gender equity and sustainability are important objects of development. The most successful efforts in alleviating poverty have made efficient use of labour (Siddique, 1994). Accordingly, the technologies for income generation are best applied so as to empower rural poor, investing their indigenous skills and resources to meet their own and local needs. Waddell (1993) sees the key constituents of a sustainable economic development strategy as meeting basic needs, decentralisation and appropriate technology. Appropriate technology elements of a solution need to address energy supply and demand in the prevailing social and economic context. Thus, sustainable development has interconnected economic, social and ecological facets: ‘‘Sustainable development comprises types of economic and social development which protect and enhance the natural environment and social equity’’ (Diesendorf, 2001). Solar electricity could be a promising business and employment opportunity for LMFs, as it is not a seasonal business like agricultural activities.
0301-4215/03/$ - see front matter r 2003 Elsevier Science Ltd. All rights reserved. doi:10.1016/S0301-4215(03)00083-1
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We have studied in detail a village in Gopalganj district, Bangladesh, in order to test the feasibility of this model. The paper examines how PV technologies that are technically suitable could also be economically, environmentally and socially feasible.
2. Scope of PV technologies in Bangladesh The existing energy situation in Bangladesh is sketched as follows (Biswas, 2002): *
*
*
*
*
*
*
*
*
The future of the centralised power generation system is uncertain because of the scarcity of natural gas, system losses, management problems in the power sector, and the need for huge capital investment for building additional power plants. Government funding for renewable energy technologies (RETs) is very low. The concept of RETs as a source of energy is not new in Bangladesh. The existing knowledge base can be built upon. Average national solar radiation (3.85 kWh/m2/day) is quite good for PV, but their application is still in an early stage. The installation and operation of a 62 kW PV power station, the country’s largest solar power plant involving a local NGO, consulting firm and foreign companies and consultants, indicates that Bangladesh has technical experts to carry out PV projects independently. However, operation of this plant is unsatisfactory due to its inadequate bill collection and maintenance systems. Customers have been found to dislike walking for long distances to pay bills and carry batteries. The sizes of the batteries are not designed according to customers’ demand. Incomplete charging, overuse and misuse of batteries can be avoided by providing technical knowledge to the users of the batteries. The loss in bill collection has been found to be 40% in the largest solar electricity project due to management difficulties. Even without the sponsorship of the government of Bangladesh, some NGOs in conjunction with private companies are trying to disseminate PV technologies. Some companies and NGOs were able to convince the government to withdraw any import tax on the solar components. Rural people like solar lighting system as the PV technology is not affected by load shedding, and they get more light than from the existing kerosene lighting. A tiny fraction of the rural population is able to afford PV technologies. The NGOs sell only to wealthier groups or to their own member projects, while government departments offer PV technologies to cyclone shelters, slums, and missions. Dissemina-
tion needs to involve the wider population. For example, Grameen Shakti is involved in commercialising RETs with loans to rural rich with collateral. Unlike its parent, the Grameen Bank Grameen Shakti does not follow the principle of micro-credit. This is because micro-credit, made available to individuals, involves loans that are too small for PV systems. Only 8.8% of the rural population are able to purchase this system at 15% down payment. Such a dissemination of PV technologies is very slow, because the rural rich account for a tiny proportion of the rural population. The progress of RETs in most cases has been stopped after pilot project level. While Bangladesh has resources, experts, suppliers, manufacturers, research organisations, NGOs and clients to help diffuse these technologies, the country is lacking in the ability to integrate these stakeholders through an appropriate institutional framework and financial mechanism.
3. The model applied to PVs The model is in essence an extension of the microcredit concept from individuals to businesses (Biswas et al., 2001b). The concept is as follows: 3.1. The model An implementing agency would help establish a renewable energy business, which may be run as a cooperative, for example, involving a number of LMFs voluntarily. The implementing agency facilitates linkages for renewable resource assessment, training, construction, operation, maintenance, and management of the renewable energy business with NGOs or companies, research organisations and government utilities. The implementing agency borrows the money on behalf of the renewable energy business, which purchases the technology, either a solar PV or biogas plant. The renewable energy business repays the instalments on the loan by selling energy to wealthier villagers. Because of the high cost of conventional sources of energy in the villages, the total revenue generated is sufficient to supplement LMFs’ income as well as to payback the loan to the micro-credit organisation. When the loan is paid off, ownership of the technology is formally transferred to the renewable energy business. This model is most applicable in countries where there is a large difference between rich and poor, thus allowing service to flow from poor to rich, while cash flows from rich to poor. The following three tasks were performed to test the actual practical applicability of the theoretical model.
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First, some of the most appropriate implementing agencies such as BRAC and Grameen Bank were contacted to know their interest to implement the model. Each of these agencies responded that they would be willing to implement, provided external funding is available. Second, wealthier households were surveyed as to whether they were interested in purchasing electricity from the LMFs. Out of 22 wealthier households in Polsair village, no one was found to oppose the rural electricity business run by LMFs. About 73% of the respondents said that they would appreciate anything that would improve the living conditions of the LMFs. Some said that they would be interested in electricity, irrespective of who was the supplier. Third, a meeting was held in Dhaka with energy experts from government, NGOs, academicia and consultancies. The meeting expressed broad support for the implementation of the proposed model. The following section incorporates field information into the model to investigate whether PV technologies would be economically, technically, socially and environmentally feasible to assist in a process of sustainable rural development.
4. PV technologies for sustainable rural development 4.1. Applying the base model to PVs The size of investment on the whole business, comprising the generation of electricity for both irrigation and domestic electricity supply, should be within a lending organisation’s lending limit for a microenterprise program (i.e., Tk. 200,0001 for BRAC). The number of PV modules required for irrigation was thus determined, with the same modules used to run irrigation pumps in the fields and to charge batteries for domestic electricity supply. So the number of customers who can be provided with domestic electricity depends on the size of the irrigation business. The number of households employed in this business would be based on the wage and person-days provided by the business. These two variables, wage rates and employment level (i.e., person-days), determine whether deficit households involved in this business would be able to meet their basic needs for food, clothes, and other items. As part of applying the model to solar electricity business, the technical considerations were first assessed to determine its appropriateness. The business creates employment for LMFs through using labour and appropriate technology to substitute for some expensive solar panels, solar trackers, etc., e.g. by using the same 1
US$1=Tk. 60.
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solar panels and pump for different plots under this irrigation scheme; following an irrigation schedule for high yielding varieties (HYV) of crops; delivering the charged batteries to wealthier households instead of providing them with their own solar panels; and replacing the commonly used centrifugal pump by an efficient reciprocating pump. Taking all these factors into account, we have tested the aforementioned model. In this base model, solar electricity cost is competitive with the existing and alternative technologies. Specifically, we will show in this section that solar-powered irrigation is cheaper than diesel-powered one and domestic lighting from batteries charged by solar energy is cheaper than kerosene lighting. As can be seen from Table 1, for the same supply of electricity, the solar electricity has been found to be about half the cost of the alternative diesel generation plant. This is because of the poor economy of small scale, where a diesel plant generates a very little electricity compared to its infrastructure costs (i.e., cables, generator). However, the substitution of kerosene lamps with straight tube fluorescent lamps (SFLs) has also been found to be a viable option. The net benefit is positive for all customers using 2–4 SFLs, indicating that the cost of electricity and electrical appliances is less than that of the existing kerosene lamps and kerosene. Interestingly, the cost of irrigation for solar pumping has been found cheaper than that by the existing diesel engine-run centrifugal pump. The optimum wage rate2 as given in Table 1 has been used to determine the additional income from the solar electricity business to meet income deficits of different deficit groups of LMF households. Three groups have been considered. Group 1 comprises the most vulnerable deficit households suffering from a deficit of expenditure on all basic items of food, clothes, education, health, etc. (see Table 2). About six households out of 19 interviewed LMF households fall into this group. Group 2 consists of all members from Group 1 plus two households with deficits in expenditure for clothes, education, and heath. Group 3 consists of all members from Group 2 plus two households not capable of paying for health and education only. An analysis has been carried out by involving each group separately participating in the same size of business. It was investigated as to how many people the business would be able to employ to meet their basic needs. The persondays distributed among the deficit households have been allocated on the basis of their deficits. Since the persondays required for a particular size of business is fixed, the number of person-days required to meet deficits of 2
The wage at which the business is competitive with the existing and alternative businesses providing the same services and the LMFs participating in the business are able to meet their basic needs.
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Table 1 Competitiveness of the solar electricity business at different wage rates at an investment of Tk. 200,000 (Source: Biswas, 2002) Wage rate (Tk./hr)
c
6.23 7.07d
Cost of electricity (Tk./kWh)
Cost of irrigation (Tk./m3)
Net benefit (NB) (Tk.)a
Solar electricity
Diesel electricity
Solar pumping
Diesel pumping
4 SFLsb
3 SFLs
2 SFLs
79.1 82.7
170.3 170.3
0.71 0.74
5.3 5.3
1,273 0
955 0
636 0
a
Net benefit is the benefit of solar electricity over the existing kerosene lighting system calculated over the lifetime of the straight fluorescent lamp (i.e. 7 years). The cost of solar electricity and the cost of purchasing fluorescent lamps and deep-cycle batteries have been compared to the cost of kerosene avoided and the costs of hurricane lamps. b Although the illumination of one straight tube fluorescent lamp is higher than that of one hurricane lamp, it was considered that one SFL is replaced by one hurricane lamp. This is because the people in the village use one hurricane at the point of use. Although it is possible for wealthier households to use one hurricane, they do not usually do that because they wish to avoid excess thermal radiation, excessive blackening ceiling, bad smell and chance of catching fire. c Existing wage rate. d Optimum wage rate.
Percentage of households meeting deficits
the business. Then, however, the investment may go beyond the NGO’s lending limit. Now the question is, where can the extra investment required, on top of the NGOs lending limit, be sourced?
6 households’ group
8 households’ group
9 households’ group
4.2. Potential improvements on the base model results
50 33
38 13
33 11
33
13
11
Table 2 Levels of deficits met by different groups consisting of different numbers of households (Source: Biswas, 2002) Level of deficits
Food Food and clothes All items
six households is more than that required to meet deficits of eight and ten households, respectively. The person-days required to run the irrigation application and domestic applications for eight and nine households of Groups 2 and 3 are fewer than those required to meet the deficits of six households at the given wage rate. Table 2 shows the deficits of LMF households for food, clothes, education, and health, and the additional income the households can generate by participating in different sizes of groups. It was found that all members of a group of six deficit households cannot totally meet their basic needs through selling electricity for both irrigation and domestic lighting purposes (see Table 2). In Group 1, 50% of households would be able to meet their deficit for food, 33% for food and clothes, and 33% for all basic items. In Group 2, only 38% of the households are able to meet their deficits for food and 13% for all basic items. Similarly, 11% of the members of Group 3 are able to meet all their basic items. It appears that the deficit households could also significantly alleviate their deficits for food, particularly in the case of the least fortunate group. However, to meet the deficits completely for all LMF households, the model would require an increase in plant size together with other forms of assistance. In addition to meeting deficits, extension of the plant capacity is required to serve more customers by the same number of LMFs in
Some economic variables are adjusted in order to increase wages, so that the LMFs participating in the business would be able to meet deficits for basic needs. Different investment sizes and rebate programs have been considered as economic variables to increase the wages and employment level (person-days) needed to meet all basic needs. 4.2.1. Government rebate strategy There is a basic constraint within the model that limits the possibility for reducing electricity unit costs, namely the lending limit for a micro-enterprise project. The economics of the base model can be significantly improved with a larger per capita outlay. In the village survey, at least, there was a demand for consuming a higher level of electricity. Thus, the model will benefit from capital rebates particularly available in Bangladesh. Although subsidies or rebates are discouraged in many cases as they restrict win–win opportunities (Foley, 1997; Byrne et al., 1999), the present approach is to investigate how the government’s rebate can facilitate transfer of PV technologies to the nonelectrified rural people competitively with its existing investment in rural electrification. 4.2.2. Source of rebate The rebate program can be financed from the additional revenue generated by decreasing the subsidy on the price of the national grid electricity. The price of electricity in Bangladesh is so subsidised that the total cost of generating, transmitting, and distributing a kWh of electricity (long-run marginal cost or LRMC) would
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still be higher than the income from the electricity if the existing subsidy on the electricity price were decreased by 50%. LRMCs are about 58–81% more than the price of electricity in different end-use sectors (BPDB, 1999). Such an electricity distribution system is not socially equitable as only 16% of the total population has access to electricity at this subsidised rate. In UK, the wind energy program supported by non-fossil fuel obligation (NFFO) showed a price drop of 64% due to the move to a 15-year subsidy, which gives operators much longer time to recover their investment costs (Biswas, 2002). This scheme was funded out of a 10% levy on domestic fuel bill. The Bangladesh government would obtain the funds for this rebate by decreasing the subsidy on gridconnected electricity. The amount by which the subsidy on the electricity pricing would need to be reduced, in order to extend this business throughout the country by a certain period of time (say 2015), depends on the size of the business and number of non-electrified households. The optimum reduction of the subsidy to electrify all wealthier households during 2015 has been determined in the following subsection. Reduction of the subsidy may be politically unacceptable. However, this analysis shows what would happen if some of the total subsidy enjoyed by a small proportion of the Bangladesh population were used to finance a business that would electrify a significant portion of the non-electrified rural population in Bangladesh. 4.2.3. Effect of rebate implementation program Power Cell, a policy planning section under the Ministry of Energy and Mineral Resources, had submitted such a proposal (following this work) for the government’s approval. The proposal involved setting up an organisation known as Renewable Energy Development Authority (REDA), which would evaluate projects offering rebates. For example, Indian Renew-
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able Energy Development Authority (IREDA) in India and Sustainable Energy Development Authority (SEDA) in New South Wales, Australia evaluate renewable energy projects to implement the rebate scheme (IREDA, 1998; SEDA, 2002). However, IREDA’s attempts to disseminate its line of credit have largely remained confined to urban areas, primarily because of its fear of poor rural repayment rates. Such a situation can be overcome in Bangladesh if a REDA regulates such a financial scheme in conjunction with the implementing agency such as BRAC or Grameen Bank by implementing the proposed model. In such a case, the NGO would get its project design, budget, and list of technologies approved by REDA. Upon REDA’s approval, the NGO would be under REDA’s 50% rebate scheme. Once the NGO installed the business, REDA would monitor whether the NGO followed their submitted design within the approved budget. Upon successful installation, the NGO would receive 25% rebate directly. After the first year, REDA would monitor the project, and if it was running successfully the NGO would receive the rest (i.e., a further 25% rebate). The following paragraph investigates the levels of investment that would be required to empower different sizes of the LMF population. It has been found that the NGO’s investment should increase from Tk. 200,000 to Tk. 337,500 (see Table 3). Therefore, the cost of generating electricity would decrease from Tk. 67.2 to Tk. 48.5 per kWh. As can be seen from Table 3, the unit cost of solar electricity is still competitive with diesel-generated electricity and existing kerosene lighting options. The number of customers is increased by 50% from 17 at an investment of Tk. 200,000. Even though, the hourly wage has decreased from Tk.15.25 to Tk. 11.25 for an increase of the total investment from Tk. 400,000 to Tk. 675,000, six LMFs within which highest income deficit is Tk. 1,430 are able to meet their deficits for basic needs. This
Table 3 Competitiveness of the services provided by the solar electricity business where the micro-credit organization pays 50% of the total investment (Source: Biswas, 2002). Wage rate (Tk./h)
Cost of solar electricity Irrigation (Tk./m3)
a
10.25 11.25b 15.25c a
0.42 0.44 0.60
At an investment of Tk. 400,000. At an investment of Tk. 337,500. c At an investment of Tk. 200,000. b
Domestic purpose (Tk./kWh) 46.0 48.4 67.2
Decentralized diesel option
Existing end-uses
Cost of electricity from diesel (Tk./kWh)
Diesel engine irrigation (Tk./m3)
42.7 48.5 80.8
4.56 4.56 4.56
Net benefit (Tk.)
4 amps
3 amps
2 amps
16,311 15,431 8,783
12,233 11,573 6,557
8,155 7,715 4,372
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is because person-hours increase with the size of investment and the additional income from the solar electricity business to meet the deficits is the product of the number of person days and wage rate. If the additional revenue of Tk. 2,550 million from electricity supplied from the national grid is spent offering 50% rebate for such a project, about 7285 similar projects could be implemented annually. Table 3 shows that the cost of pumping 1 m3 of water for irrigation from a head of 4 m by solar pump is Tk. 0.44, while it is Tk. 4.56 when using the existing dieselengine-driven irrigation pump. The existing irrigation situation of the village involves a fixed charge for irrigating a piece of land, at Tk. 1000 for 1 bigha3 and Tk. 60 for an hour for running a diesel engine pump. Here the unit cost is Tk. 1.37 per m3. The incremental cost of replacing centrifugal pump by an efficient reciprocating pump is 4–6 times less than the cost of panels avoided for a system irrigating 4.55–6.25 ha of land. It was observed during the field survey that the irrigation contractors do not deliver the required amount of water. The diesel engines operate 2–4 h per month to irrigate 0.1–0.3 ha of land in the village. Such a diesel-driven pump delivering 44 m3/h could deliver 88 and 176 m3 of water per month for 0.1 and 0.3 ha of land, respectively, although 110 and 330 m3 of water is actually required (Dutta and Mandal, 1985). 4.2.4. Consumer’s perspective Households replacing 2,3 and 4 kerosene lamps with solar-powered SFLs would be able to save Tk. 1102, Tk. 1653 and Tk. 2204 per year, respectively. The net benefit from using straight fluorescent lamps may be directed to other activities such as crop production. In this study, for the purchase of four 8 W lamps, the customer pays Tk. 301 per month for 2 years at 20% interest with no down payment. Grameen Shakti, for the same payback period of 2 years, requires a 25% down payment with 24 instalments (i.e., 8% per instalment per month). The monthly repayments are Tk. 1369 and Tk. 617 for 75 and 35 W panel systems, respectively. 4.2.5. Involving local industries It has already been noted that several of the components of the solar PV systems could be manufactured in Bangladesh. In addition, Dartnall (2000), the inventor of the proposed reciprocating pump, has suggested that the components of the pump (i.e., cylinder, piston, inlet and delivery valves, but not seals) could be manufactured under licence in Bangladesh. The involvement of local industries would therefore benefit the economy of Bangladesh. 3 Bigha is the local land unit of the village and is equivalent to 0.2 hectare of land
4.2.6. Climbing the energy ladder Once the 2-year payback period is over, the money that LMFs had previously spent on repaying the loan could be used for buying their office, paying rent, expanding the business within their own village and to neighbouring villages, or increasing wages (or dividends, if the business is a cooperative). With higher wages, the staff could also afford to purchase solar electricity for their own use. The annual surplus has been estimated as Tk. 66,521 for this LMF group. If the balance of the annual surplus is used, it is estimated that these households would be able to purchase modules and lighting appliances early in the third year, a fan and modules required to operate fans in the fourth year, and TV and modules early in the fifth year. 4.2.7. Price of solar electricity According to preceding section, the unit cost of Tk. 48.5 per kWh at an optimum investment of Tk. 675,000 would be considered as solar electricity price. At this investment, the unit cost is competitive with the existing and alternative technologies, the business is able to provide additional income to meet basic needs of the participating LMFs and offer adequate surplus for capacity extension after 2-year payback period. 4.2.8. NGO’s perspective The rebate scheme noted earlier offers incentives to NGOs for successful outcomes, as well as enhancing the scheme’s viability for LMF groups. In this case, over a 2-year payback period the NGO earns Tk. 67,500 as interest (20%) on its investment of Tk. 337,500 plus a Tk. 37,500 (10%) bonus after handing over the project to the LMF group. In total, the NGO would earn 30% return on its investment in 2 years of payback time. 4.2.9. Government’s perspective The government could benefit through the rebate program in three ways. Firstly, the rebate program would help lessen the per capita investment on electricity. In this model, the per capita investment of Tk. 11,719 is about 6% of the cost of the centralised distribution system. Secondly, given that the rebate system proposed is financed from 10% of the annual electricity revenue, the government would be less dependent on international donors. Thirdly, the payback period is 15 times shorter than that of the Rural Electrification Board. Such a low payback period offered by the solar electricity business avoids the risk associated with the security of the fuel supply and non-technical losses arising from sociopolitical issues.
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4.2.10. National perspective Although solar electricity is cheaper than the existing kerosene lighting system, the solar electricity price is about 15 times more than that of the centralised power generation system in areas where the grid exists. This situation is exacerbated by subsidies for power generation that are equal to expenditure on the health budget (more than US$100 million p.a.), of which beneficiaries are only 16% of the affluent households (Lovei and Mckechnie, 2000). If a similar type of business is to continue in the rest of the nonelectrified villages to electrify the rural wealthier households for lighting, it has been estimated that an investment equal to the revenue gained through increasing the electricity price by 39% would be required. Non-technical losses due to the centralised power generation system can be avoided, and some of the human resources strain of a centralised structure may be alleviated for other priorities in sustainable development.
4.2.11. Non-technical factors Some additional non-technical risks can be overcome with the use of solar pumps. For example, irrigation contractors collect fees in advance of purchasing fuel, and often need the money for personal reasons, which precludes adequate supply of diesel. As a result, they cannot irrigate the land satisfactorily. This risk can be avoided with a PV irrigation system, where fuel is not an issue. Expected revenue from the electricity service may drop because of flooding, a bad agricultural season, or customers’ tendency to drop out from the list of buyers. Considering these factors, the payback period has been increased to allow different rates of bill collection. Suppose LMFs are not able to collect 100% of the bill of 2798 kWh of electricity sold, with a reduction of bill collection by 10%. As a result, the electricity price increases from Tk. 48.5 to Tk. 55.2 per kWh, which is about 9% higher than the cost of electricity generated by the decentralised electrification plant. The payback period can be increased from 2–4 years to decrease the solar electricity price to 100% bill collection level, again competitive with other alternative diesel electricity system and existing kerosene lighting system. However, with an increase of the payback period to 4 years, the annual surplus decreases from Tk. 66,521 to Tk. 36,976. Such a lower annual surplus would delay LMFs owning electricity of their own until after 6 years of the commencement of the business. If the bill collection is 80% and the payback period is 10 years, the annual surplus is insufficient to allow the LMFs to extend the project to meet their own electricity needs.
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4.3. Local impact of solar electricity business 4.3.1. Overlapping effects Extra days4 required for the solar electricity business have been overlapped with the person-days allocated for other existing activities. The overlapping effects are as follows: It appears that deficit households need to consider overlapping time during the months of the paddy harvesting season ( mid-October to mid-December), in order to be fully involved in the solar electricity business. The income would be less from paddy harvesting than from solar electricity. It has been found from the field survey that an LMF gets on average 10 kg paddy per day, which is equivalent to 7 kg rice and 3 kg husk and bran. The market price of 7 kg rice is Tk. 84 (at Tk. 12 per kg) and that of 3 kg rice bran and husk is Tk. 7.5 (at Tk. 2.5 per kg). The daily wage from the solar electricity business is Tk. 90 (Tk. 11.25 per hour 8 h), which is more than enough to overcome any substitution of harvesting activity by the solar electricity business. Since the vulnerable LMFs participating in the business depend on farm activities, their person-days allocated for a solar electricity business will overlap more with agricultural activities. Migration of workers from the existing poorly paid activities, such as weeding, to the solar electricity business could increase the wage rate for weeding. Such an overlap has not been found to affect the overall income and benefits which they could have obtained from overlapping activities. Furthermore, it would increase demand in the agricultural labour market and help strengthen bargaining power.
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4.3.2. Land fragmentation Twenty-five per cent of the total land is sold in order to meet expenditure on food. As discussed earlier, the group of six households participating in this business would be able to meet these deficits. The business could help these households to combat selling their land completely. 4.3.3. Tree resources Because of financial insolvency, LMF households are found to keep endangered natural resources like trees as social security. About 45% of the rain trees and 30% of the Chambol trees were planted by these LMF households with an objective that they would sell the trees to pay for their daughter’s marriage. According to them, 4
The extra days required may, given local survey preferences, be taken from the days allocated firstly to physical labour, then to fishing during the rainy season. The extra days would only be taken out from land processing work in cases when there is no involvement in physical labour and fishing.
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each of these wood trees can be sold for Tk. 5000– 10,000. It costs at least Tk. 30,000 for the daughter’s marriage, including dowry. It would take at least 5–6 years for these trees to reach saleable size. By this time, accumulation of additional wages from the solar electricity business would help them to be less dependent on the tree resources, and allow such resources to remain as longer-term security.
5.2. LMFs For a sustainable result, LMFs will progressively own and manage all aspects of the project. In the initial stages, it is likely that LMFs will be involved in choosing their own clients from the wealthier group and submitting customers’ names and lists of appliances. They will *
5. Stakeholder roles Disseminating PV technology through a business mechanism for a Bangladeshi rural village application may involve an NGO, training institutes, government, REDA, LMFs, and a wealthier buyer group.
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5.1. NGOs In our model, we have considered that NGO would be the implementing agency. It would work directly with LMFs and REDA in this project. For implementing this project, it was suggested that the NGO develops a project according to the guidelines of REDA. According to the guidelines, the NGO will carry out the following tasks: *
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assess LMFs level of household deficits for basic needs and employment needs from a social survey; determine the expected electricity demand of the wealthier group of the village; design a project plan to involve LMFs in the solar electricity business to meet their deficits; and prepare a budget and list of technologies.
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5.3. Wealthier group (consumer) A sustainable business involves consumers in obligations as well as benefits. The wealthier group would get electricity under the following conditions: *
The NGO will facilitate the expressed interests of LMFs through some or all of the following activities, as appropriate to social context: *
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develop awareness and understanding of the risks and benefits of the general business model among a rural target group; ascertain those LMFs with an interest in involvement in the business; facilitate formation of LMF groupings; assist in allocating and negotiating person-hours with regard to the level of household deficits, and the nature of employment obligations with existing activities; and strengthen local capacity in technical and microfinance and other project management areas.
After the payback period, when the NGO hands over the business to the LMFs, the NGO will readjust the wage rate of the LMFs so that the surplus and additional income from the business will meet LMFs’ deficits.
choose irrigation clients until the land to be irrigated reach the maximum limit the solar irrigation pump can irrigate; be involved in the design and installation process, for example, assembling and handling the modules, maintenance of motors and pumps, etc.; target and collect payment of the electricity bill; undertake regular planning and progress meetings on bill collection, technical difficulties, and the financial situation, for example, in every meeting they will discuss money spent on different purposes, adequate balance of the accounts, and technical problems; and develop a team approach to collective sustainability through the adequate collection of revenue, time management, and other maintenance and book keeping aspects.
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they will give details of the type of end-use technologies and expected operating hours; they will participate in estimating the load of their desired end-use applications; they will be informed as to the amount of electricity they require; they will buy a battery of a certain size required to store the electricity of their desired load; they will understand the problem of overusing the battery; and they will pay 2 months in advance.
Once they are satisfied with the above conditions, the system will be designed on the basis of their demand. 5.4. REDA Suppose that an REDA is formed by the Government of Bangladesh as a government financial authority charged with encouraging rural energy supply. Then REDA is likely to offer highest rebate (i.e., 50%) to an organisation involving LMFs in business ownership,
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since this serves three national purposes: * *
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employing the LMFs; electrifying, initially, the wealthy group of villagers; and electrifying the LMF group in the longer term.
REDA is also likely to provide priority support for an NGO having a specific program for RETs. It will evaluate the project proposal submitted by the NGO according to its guidelines. Once the approved project under the rebate scheme is installed, REDA will inspect the project, addressing the following aspects: * * *
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Have high-quality technologies been purchased? Will the capacity of the system meet the demand? Are the LMFs interested in participating in the business? How many wealthier households are committed to receiving the electricity supply? Have the consumer households already committed to purchasing a battery? What is the assessment of the Village Business’s planning and work distribution schedule, and financial analysis?
If these conditions are satisfied, REDA will provide a 25% rebate promptly. One year after the commissioning period, REDA will monitor if the cash flow in the business is going well and consumers are satisfied with the service. Upon successful operation of the project for 1 year, REDA will provide the NGO with the remaining 25% rebate.
6. Conclusions Photovoltaic technologies, used appropriately, may improve the quality of life of rural people and provide income-generating opportunities. Sustainable development through new technologies requires a model that specifically addresses social, economic, and environmental issues. This solar-based project describes how an appropriate framework may provide these elements, creating income-generating activities while alleviating poverty and conserving natural resources. The essence of the proposed model is to extend the successful models of the Grameen Bank and BRAC, which currently provide micro-credit to rural poor individuals, to the provision of larger loans to village businesses for RETs. Solar electricity businesses—within the constraint of an investment of Tk. 200,000, current energy resources, and energy demand—would be able to provide employment to two-fifths of LMFs in the study villages. However, a solar electricity business would require a rebate to increase the size of the business to allow LMFs
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to meet their deficits completely. Even then, the amount of rebate in this business to electrify a household would be 6 times less than what the government currently spends per household on the centralised electricity system. The payback period is 8 times shorter than that of the Rural Electrification Board, and avoids risks associated with the security of the fuel supply and nontechnical losses arising from socio-political issues. These businesses may also enable the participating LMFs to meet their own electricity needs.
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