Power from the Sun: An Evaluation of Institutional Effectiveness and Impact of Solar Home Systems in Bangladesh
M. Asaduzzaman, Mohammad Yunus, A. K. Enamul Haque, AKM Abdul Malek Azad, Sharmind Neelormi, and Md. Amir Hossain
Given that a substantial number of SHSs have been installed and that the generation and distribution of electricity in the normal process is hampered, one must know how effective the technology had been so far in its reach, to whom and how effectively in terms of serving the needs of the people, and cost, management, technical support and quality of providing the service and how far the present system of financing, management as well as the observed impacts allow its expansion for reaching more people in the off-grid areas.
The specific objectives of the present study are to find out the following based on intensive empirical investigation and consultation with concerned people:
- characterization of the SHS adopters and non-adopters;
- various impacts, direct and indirect, on the households and its members including those on women;
- the nature of the technology and its technical and management limitations on the ground;
- the nature and quality of program delivery system and its differentiation by the supplier (POs);
- market characteristics, present size, present limitations and future potentials in terms of size given various factors influencing the market;
- the role of financing mechanism including subsidy in diffusion of SHS, willingness to pay and subsequent welfare implications for the client.
Based on various analyses the findings of the study may be grouped as follows:
Present status of SHS diffusion: By December 2012, more than 1.7 million SHSs have been put in place by IDCOL and its POs. The information indicates that just one PO, the Grameen Shakti, accounted for 58% of the SHS that have been installed. Three more POs viz. RSF, BRAC, and Srizony Bangladesh had installed respectively 15%, 6% and 4% of the SHS.
Present financing system: The IDCOL gets the funds from various development partners and then disburses it to the POs based on their expansion schemes. The POs get refinancing from IDCOL only after SHSs are installed by them at the households. POs also make a contribution of their own in providing credit while they receive an institutional development grant. Households make down payments as well as installments. POs receive the credit from IDCOL at 6% rate and pay back in 6-8 years. Households pay 12% interest and pay back in 3 years. On the other hand, the grants POs receive are provided on a declining basis. As the number of installations rise, the rate of grant falls per unit.
Diffusion of SHS among sample households: The diffusion level of SHS is nearly a quarter or one-third. Barisal rates high on the weighted scale at 48% adoption rate with Sylhet following at 34%, the lowest being in Khulna (neighboring division of Barisal) at 11%.
Characteristics of households: The adopter households have been found to be systematically different from non-adopter households both in the treatment and control villages. Female headed households are more prominent among adopters compared to non-adopters while age of household head has little overall influence. Household size and age, however, are of not much importance. Non-agricultural occupation is predominant among adopter household heads. On the other hand, the land holding is also much higher among such households. Self assessed food security is much higher among adopter households, around 40% of whom consider themselves to be in surplus category while the percentage for non-adopters are only half as much. The adopters’ possible future income may also be higher as they spend 50-80% more for children’s education than non-adopters. On the whole the adopters are better endowed with assets and income as well as education. Econometric analyses indicate that variables such as total annual income, education of head of the household, non-agricultural occupation, women’s education and whether the household has a woman as its head do positively and statistically significantly influence the choice of installation of a SHS.
System capacity: The SHSs are differentiated, among others, by their capacity to produce electricity and are calibrated in terms of watt-peak (Wp). The POs offer various capacities of SHSs. Of those supplied by them, only three categories of capacity predominate, 20 Wp (24%), 40/45 Wp (21%) and 50/55 Wp (31%). Among these, the 50/55 Wp appeared to be most dominant historically followed by the other two categories. Over the last one year, however, it appears that the 20 Wp category is gaining popularity.
Factors behind choice of capacity: Four economic indicators have been used to find out the relationship regarding choice of capacity of SHS. These are total land holding, agricultural land holding, total value of assets (including financial assets) and total household income per year. The indicators clearly show that the demand for and use of higher capacity SHS is positively related to all of them. The pattern gets stronger beyond the basic low capacity SHS, namely 20 Wp and 40 Wp.
Energy consumption: The households irrespective of the SHS status are dependent on kerosene and biomass for their energy requirement. About 80% of the households use fuel wood or non-fuel wood biomass for cooking and related activities. While 62% of the SHS households reported to use kerosene, the incidence is significantly higher at 99% among the non-SHS households. As the overall consumption of energy does not differ significantly, one can surmise that the use of SHS changes in the composition of energy consumption.
The actual difference on kerosene use on average between an SHS user and non-user is 3.67 liters per month per household and translates into more than 88 million liters per year at the present level of diffusion of SHS. The consequent direct reduction of carbon dioxide emission is more than 240 thousand metric tons.
Gender dimensions of apparent impacts: Two types of issues are important in terms of gender dimensions. First, how SHS installation is affected by gender related variables and second how SHS installations in turn affect women as opposed to men. It has been found that female-headed households are comparatively more likely than male-headed ones to adopt/buy an SHS. On the other hand, presence of educated women in the family, even if it is up to primary level does positively, independently and statistically significantly influence SHS adoption as well as choice of higher capacity SHS.
In terms of the processes and impact, kitchen lighting is more prevalent among female-headed households (50% compared to 40% in male-headed households) while the sense of security is also much higher among women in SHS households.
Socioeconomic impact of SHS: The identification of the causal effect of SHS requires an econometric application of a method that helps identify what would happened to the differential socio-economic outcomes between SHS adopters and non-adopters if adopters did not adopted SHS. The application of a propensity score matching (PSM) that matches the adopters with the non-adopters based on the observed characteristics shows that SHS is found to improve household welfare in a variety of ways. Children’s study time increases with SHS adoption, more so for girls than for boys. Girls’ study times in the evening increased by 12.1 minutes per day on average compared to 8.5 minutes for boys. Although there is no significant positive effect of SHS on contraceptive prevalence rate, adoption of SHS is found to have a negative effect on recent fertility. Also SHS is found to influence positively women’s mobility, general and economic decision-making including purchase of household goods. Women are found to use more time for tutoring children, watching TV, socializing, visiting friends and neighbors with the adoption of SHS that also allows them to run a black and white TV. The disease prevalence has significantly reduced among SHS households. Greater awareness through greater connectivity to TV coupled with better indoor environment (replacing kerosene lamps) may have contributed to lowering the prevalence of diseases.
Operations on the ground: The impacts discussed above are based on what has happened so far and institutional set ups on the ground had a lot to do with it. But will this remain so in future? The overall impression one gets by analyzing the first hand information is that there is an almost standardized system of operation on the ground. Many of the rules and procedures are rather similar across POs. So far it has worked fairly well. But now that POs are all operating in areas where others are also operating, the competition is getting tough. Instead of providing quality service, the tendency overall appears to be to compromise with it. This is evident from the performance indicators in more recently set up branches. The problems are beginning to pile up. PO branch officials themselves complain of poorer quality of SHS and its components while consumers also are blamed for some of the problems as roughly a quarter do not properly understand the operation of SHS. As a result, there had been voluntary return and also delinquency due to financial constraints and these are now beginning to accumulate. As Bangladesh has a very high potential for further expansion of the system, it is high time that before scaling up, the problems should be managed well and not allowed to fester, If it does, again a very good Bangladesh initiative will falter as did several other institutional good experiments earlier such as the Comilla model or the early LGED initiatives.
Nature of demand, role of incentives and size of market: Several interrelated issues have been investigated to find out how the market for SHS behaves and what that means in terms of market operation and market size of SHS. First, it has been found that while on average the demand for SHS is price inelastic (elasticity is -0.85), the elasticity is different at different prices. Up to Tk. 21,500 it is inelastic but becomes elastic beyond that. For example at Tk. 33,000, the elasticity is – 1.53.
Technical quality of service: Many POs reported major problems in operation of SHS but more than one half (55%) were allegedly due to mishandling by households. On the other hand, practically all POs reported problems of quality with major components of the SHS such as lights/bulbs (74%), charge controller (96%) and battery (69%). On the other hand, just about half of the clients never return damaged or inoperative batteries to the POs.
Of the SHS users in the sample, very few have reported problem regarding the PV panels that required replacement, or needed major or minor repair works. Comparatively more required replacement of their batteries (11%) while a similar percentage of clients reported need for minor repair works. For the charge controllers, 14.0% of the clients have had their charge controllers replaced due to damage/breakdowns whereas, very few needed any repair works.
Given these issues, there are a lot that the POs will have to do and the IDCOL as the overseer will have to ensure such behavior by the POs The following recommendations may be of use for further upscaling and providing better services:
a) POs should be encouraged to serve hitherto unserved areas within the off-grid zones and the POs while applying for license from the IDCOL should indicate it. Alternatively, the IDCOL should check from its own database of PO operations whether other POs are already operating in the area. Probably no more than 3 POs should be allowed to operate in the same area to maintain competition as well as quality of service or promise to go by the IDCOL guidelines regarding quality of service. In this regard the present guidance of the IDCOL for battery disposal may be strictly enforced.
b) POs and the IDCOL should decide together how female-headed households and women in general may be provided more access to SHS and its services. Trainees may be chosen as Grameen Shakti does from among women for servicing SHS and thus be a source of income and empowerment for them. An on-going evaluation of women integration into the Grameen Shakti should be able to provide more precise recommendations on this issue.
c) The IDCOL should be continuously on the lookout for better and tested technology which minimizes maintenance problems while may provide cheaper alternatives to present models for at least the same energy services compared to previous larger capacity models. The Wp choice based on price, technology and demand from buyers should coalesce together to this end. The IDCOL may review these issues periodically.
d) How far subsidy may be changed or withdrawn should be based on assuring POs a healthy return on their investment without burdening the consumers with high rates of interest.
e) An exercise should be carried out to find out the real cost-effectiveness of SHS given the state of technology and the energy services that it may provide compared to alternatives such as rural electrification as well as grid electricity based on other primary fuels such as coal, natural gas and oil. This will allow a longer term optimal electricity supply mix.