Poverty alleviation strategy with solar energy
M S Siddiqui writes for DOT
Bangladesh is starving for energy for last few decades due to rapid industrialization and steady economic development. On the other hand, Bangladesh the fastest growing Solar Home System program in the world with over 50,000 SHS unit installations per month in the recent past. As of 2017, Bangladesh has the world’s largest SHS program with about 5 million household installations of SHS. Over 30 million people are benefitting directly from solar energy and over 100,000 new employments have already been created.
SHSs were considered economically beneﬁcial by 71% of the householders.SHS became popular among the rural people of Bangladesh for its affordable monthly installment-based financial model at the price of kerosene. Even then, solar energy has very small share in the present energy mix in Bangladesh.
SHS also saves its users time, money, and energy for purchasing and transporting kerosene from markets. Moreover, due to efﬁcient lighting, householders were able to pursue commercial activities for small household businesses. Owners of tea stalls and local shops reported longer evening business hours and increased proﬁts since the installation of an SHS. This proﬁt money could be further invested for business expansion. Grocery shop owners who were using kerosene lamps for their business extended their working activities by around 2 hours as a result of introduction of the SHS.
Fortunately, Bangladesh is blessed with year round sunshine (over 300 days per year) and has an enormous potential for solar energy. It is located between 20.30 – 26.38 degrees north latitude and 88.04 – 92.44 degrees east which is an ideal location for solar energy utilization. Herereportdely, the daily average solar radiation varies between 4 to 6.5 kWh per square meter. Maximum amount of radiation is available on the month of March-April and minimum on December-January.
Some NGOs are working closely with Infrastructure Development Company Limited (IDCOL), Grameen Shakti (GS), Bangladesh Rural Advancement Committee (BRAC), Rural Electrification Board (REB), Bangladesh Power Development Board (BPDB), Centre for Mass Education in Science (CMES), Local Government and Engineering Department (LGED). Grameen Shakti (GS), a non-profit village renewable energy scheme, linked to the micro-credit lender Grameen Bank, has pioneered in promoting ‘green energy’, since 1996 they were only NGO engaged in promotion of SHS.
Some other countries also have experience and set good example for us. Chinese State Energy Board and the State Council Poverty Alleviation Office issued a “Photovoltaic (PV) poverty alleviation work program” on October 11, 2014. The duration of this poverty alleviation program proposed to carry out for 6 years. Bangladesh may learn from China about management and finance of SHS.This initiative aims to add over 10 GW capacity and benefit more than 2 million households from around 35,000 villages across the country by 2020. A high degree of rural electrification; and the growing income gap between rural and urban populations are the three major factors driving the initiative since 2014.The policy aims to generate additional annual income of over 3,000 RMB for each household, mainly through rooftop and small-scale solar systems.
The development of photovoltaic poverty-relief power stations provides a new way for China’s precision poverty alleviation. PV poverty alleviation has a “hematopoietic function”, and is a clean energy which can play a positive role in the protection of the environment. PV power plant not only broadens the new channels for farmers to increase income, but also for the collective to provide economic income, and for the healthy operation of the energy economy to provide a good platform.
The successful PV alleviation program has been financed by three models: government funds, Loan to farmers, and Enterprise donation type.In some provinces like Guangdong and Hefei, the fund has been given by government and local governments for such projects. All the poverty alleviation funds in the region are paid by the government, and the proceeds are all owned by the poverty alleviation target. Hefei PV eradication project build a total of 100 3KW family of distributed power stations which cost 3 million yuan. Municipal finance need to pay 2 million yuan while the county-level financial need to pay 1 million yuan. Hefei power Supply Company pay the full amount of poor farmers on the Internet charges in accordance with the settlement cycle.
Those solar power station have the priority to enjoy the national electricity price subsidies, and income all owned by poor farmers. In addition, it is essential to select qualified conditions and social responsibility of solar photovoltaic enterprises through open tender. Routine maintenance is carried out by specialized companies. The costs incurred by specialized companies are incorporated into the local government budget. System suppliers provide maintenance and the establishment of after-sales service network.
Government-finance model is currently the most viable and most extensive model. Government financial support make it easy to fully mobilize the funds needed for the construction of photovoltaic power plants. However, this is due to the government’s focus and policy support efforts.
In the early stages of PV Poverty Alleviation, the Government should play a guiding role. However, once the PV poverty has become mature, the government propose to withdraw from it.
Farmers’ loans have also become a more feasible model of PV poverty alleviation. When the government is not enough attention, or the local government financial strength is lacking, the farmer loan-type financing model has become a better choice. The funding model the funding came from Banks, local government and corporates for these categories of project.
Some of the successful models are GuizhouLuodian Mu cited town and Jiangsu Xuyi West Lake Village PV poverty alleviation project. Unlike in the case of government funding, in this case, neither government nor is it funded by the firm or by the farmer to the bank. In the GuizhouLuodian Mu cited the town of PV poverty alleviation project, a total of 38 villagers install household PV power generation system. In this financing model, the local government invested 80%, photovoltaic enterprises advance 20%. After the income is generated, the farmer repays the enterprise with the power generation income instalment, and the rest is personal income. In the
The second successful program is the Xuyu West Lake Village, Jiangsu photovoltaic poverty alleviation project. The total investment of the project is 2.61 million yuan, of which the government invested only 90,000 yuan, accounting for 3.4% of the total investment funds; the rest by the third party guarantee company guarantees, farmers from the local agricultural firms loan more than 95%. According to estimates, if farmers pay 2000 yuan per month to the bank in the loan period of 15 years, the net income of farmers is 1,000 yuan. After 15 years, farmers earn an annual income of 3,000 yuan.Under conditions permitting that kind of financing model will increase the economic pressure of farmers. But in the long run, the model will also benefit farmers.
The last model is financed by charitable organizations, social individuals and other forces which will together help PV poverty alleviation. The best example of such financed model is the Jinzhai County PV poverty alleviation project. The source of funds is more diversified, but also contains the enterprise’s free donation with individual bank loans. The project installs 3kW of PV system for each household in the locality. Each household needs to invest 24,000 yuan. The local government invested 8,000 yuan, the company Xinyiphotovoltaic’s investment 8,000 yuan. The poor households who are unable to raise their own fundsfor balance amount, got loan from banks and pay back in instalments.
Rapid urbanization fuelled by stable economic growth, has created a huge energy demand in Bangladesh. It is well known that energy plays a vital role in poverty eradication, economic growth, sustainable infrastructure development, and ensuring security of a country. Bangladesh has a population of 170 million, nearly 75% of the population lives in rural areas and only about 30% of the rural households in Bangladesh have access to grid electricity.
Bangladesh government and NGOs may take the experience China and involve local government, bid business groups and Banks to finance similar SHS to promote use of electricity in small houses for small businesses. This is a successful poverty elevation model of China.
The writer is a Legal Economist