Lessons and Experience Rural Electrification in Bangladesh, Laos and Cambodia

1. Lessons and ExperienceRural Electrification in Bangladesh, Laos and Cambodia Jie Tang Lead Energy Specialist South Asia Region, The World Bank May 31 – June 1, 2013

2. Rural Electrification • Bangladesh – Solar Home System (SHS) Program for lighting • Laos and Cambodia – Grid-extension for Rural Electrification

3. Bangladesh - SHS Installation Rate Celebrated installation of 2 million SHS in early 2013

4. Bangladesh SHS Program A viable business model for providing SHS for access to electricity for meeting basic lighting needs • Implemented by the Infrastructure Development Company Limited (IDCOL) – Government owned Company • Started in January 2003 with IDA and GEF funds. Target was 50,000 systems by 2008, but achieved by August 2005 • Later on jointed by other donors: including ADB, kfW, GiZ, IDB, GPOBA, and JICA just started • Installation rate now is over 50,000 SHS/month • Next Target - another 2 million by 2015

5. The Ownership Model Partner Organizations (POs), mostly NGOs install the SHSs under a micro-credit program • Households pay down payment (10-15%) of the system cost net of grant. The rest is paid under micro-finance (2-3 years repayment at interest rate of 12-16% per year) • The micro-finance extended by the POs are refinanced by IDCOL (5-7 years at 6-9% interest rates) allowing POs to install more systems

6. Provides approval Seeks approval Technical Standards Committee Suppliers Supply Equipment Pay for Equipment Provide grant & loan PO Selection Committee Seeks grant & loan Applies IDCOL Funds IDA and others Grant & soft term credit Select POs Seek operation related solutions PO Sells SHS & provide service Pay down-payment & installment Provides Solutions Operations Committee Household The Ownership Model s

7. Financing Scheme Figures in US$ for a 50 Wp system • System size ranges from 10 Wp to 120 Wp with shifting preference for smaller systems (30Wp or less) • System prices are in the $8-10/Wp range

8. Role of IDCOL • PO Selection Committee of IDCOL selects the POs as per eligibility criteria • Technical standards committee of IDCOL develops technical standards for the equipment (panels, batteries, charge controllers) • Inspections by IDCOL inspectors before release of funds to POs • Hotline service for customers. IDCOL does not release payment until customer complaints are addressed by the PO

9. Phased Reduction of Grant

10. Transition to “Commercial” Financing • IDCOL refinancing % is being reduced from 80% to 60% • Repayment terms from POs to IDCOL are becoming more “commercial” • For large POs- 9% interest rate, 5 year repayment and a 6-month grace period • For smaller POs- 6% interest rate, 7 year repayment, 1 year grace period

11. Critical Success Factors • Geographic concentration of rural population • Economies of Scale • A viable business model for providing SHS • Existing network of NGOs • Public acceptance of NGO services • Supervision and Monitoring by IDCOL

12. Thanks!

13. Laos – Grid-extension for Rural Electrification Access to Electricity 84% 2013 Population: 6.5 million, about 1.2 million households 15% 1995

14. Laos – Grid-extension for Rural Electrification A model of public utility-driven grid extension to expand access to electricity • Strong Government commitment and targets for rural electrification • 70% by 2010; 80% by 2015 and 90% by 2020 (set in 2002) • Electricity du Laos (EdL) established strong capacity in implementation of rural electrification • Capacity building since mid 1990s when the Bank started the first rural electrification project • Efficiency in system planning, procurement, installation and commissioning • Comprehensive system loss reduction program to reduce distribution system losses thus cost of services • From about 20% in 2005 to 10% in 2010, along with the fast expansion of the distribution system into rural areas

15. Laos – Grid-extension for Rural Electrification • Programmatic approach in tariff reform to ensure cost recovery and a profit margin for EdL • Cross-subsidies among consumer categories to ensure (i) affordability of rural housheolds; and (ii) weighted average tariff cover the weighted cost of services • Strong Government support to Electricity du Laos (EdL), a public utility company, to expand access to electricity services • Financial support to EdL when tariff did not cover the cost • Provided strong support of tariff reform toward cost recovery and a profit margin • Concessional terms of loans to EdL for rural electrification projects • Special program for connecting the poor • Power to the Poor: about 20-40% of households in the villages electrified were not connected to the grid since they could not afford the upfront-connection cost (about $80)

16. Power to the Poor (P2P) – Revolving Fund Targeting the poor1. interest-free credit2. households in village already electrified3. household monthly budget neutral EdL, IDA, GEF Grants $80 EdL Operational Account $2.5 /month EdL P2P Revolving Fund $1.5/m + $2.5/m Monthly bill Electricity payment P2P Repayment Service Contractor for in-house wiring $80 Wiring Poor Households

17. Power to the Poor (P2P) Pilot • Example: Phosaad Village • Grid to village in 2002 • 270 households in 2008 • 72 not connected over the past 6 years were all connected to the grid in about one month (Feb-Mar 2009) through the P2P • Youtube Video: • Lao PDR: Electricity for All – A Gender Lens • http://www.youtube.com/watch?v=h-DY3T_1RPI&feature=player_embedded

18. Results of P2P Significant result of the P2P Program • About 25,000 poor households (2% of the population) gained access to grid electricity through the P2P • Increased the overall connection rate in P2P villages from 79% to 96% P2P Program in a gender sensitive approach • About 1,300 female-headed households gained access to grid electricity • Connection rate increased in female-headed households from 67% to 95%

19. Cambodia – Grid-extension for Rural Electrification A model of expanding access to electricity led by private sector – about the same access rate as Laos in mid 1990s, but now still less than 30% • Private Rural Electrification Enterprises (REEs) have exclusive right in electricity service provision in licensed areas • There are about 180 REEs licensed for rural electrification • About 54% of the population are in REEs’ areas • Very weak technical and financial capacity of REEs, resulting in insufficient investments in generation and distribution, very low efficiency, and very high cost of electricity services • very high tariff, about $0.5-1.0/kWh • very low connection rate, about3-5% in the REEs’ areas

20. Cambodia – Grid-extension for Rural Electrification • Independent regulator • Managing the licensing of REEs • Regulating REEs’ retail tariff in the principle of “cost plus” • Different tariffs for different REEs • Public power utility company • Generation, transmission , plus distribution services in urban areas • Now is expanding MV network to REEs’ areas for bulk sales – can reduce cost of generation • Not proactive in expanding distribution networks to expand grid coverage • Governance risks • Risks in tariff setting ? • Risks of corruption – REEs are running profitable business

21. Critical Factors of Success vs no Success • Strong government commitment and support • An efficient model with public utility-driven grid extension • High efficiency in implementation of rural electrification projects due to strong commitment and capacity of EdL • Combination of lowering cost of services and increasing tariff to ensure financial sustainability of electricity services

22. Thanks!