SME CONTRIBUTION IN SOLAR PANEL BUSINESS IN BANGLADESH

Rakib Hasan Shovan

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Serial number

Contents Pagenumber

1 INTRODUCTION TO SOLAR ENERGY 02

2 PRESENT CONDITION OF ELECTRICITY IN BANGLADESH

03

3 REGULAR DEMAND OF ELECTRCITY IN BANGLADESH

04

4 CAUSES OF POWER CRISIS 05

5 SOURCES OF POWER ENERGY IN BANGLADESH

9

6 INTRODUCTION TO SME 10

7 PRIMARY GREEN OPTION-SOLAR 11

8 SOLAR PV IN BANGLADESH 11

9 SOLAR PV COST STRUCTURE 12

10 SOLAR PV APPLICATION 13

11 ADVANTAGE OF SOLAR ENERGY 13

12 SCENARIO SOLAR ENERGY IN BANGLAADESH

14

13 SCOPE OF SOLAR ENERGY BUSINESS IN BANGLADESH

16

14 GOVERNMENT POLICIES IN REGARD TO SOLAR ENERGY

17

15 RECOMMENDATION 19

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1. INTRODUCTION TO SOLAR ENERGY

The Sun, our nearest and the biggest star, is the biggest source of energy to us. Sun

energy or the solar energy has been in use since the time human existed on the earth.

Solar energy is our essential need and we need it naturally to make our life work

properly. Sun has a lot of stories and histories attached to it, for most of the humans of

the world, Sun is God, it is a Holy part of religion to many tribes like the American

Native Tribe, it is also worshipped by the Greek people, where as many other religions

like Hinduism, Buddhism, Zoroastrianism and Druids of England take Sun as the priority

of their religion. Today we know that solar energy is highly important for us and without

it we would not be able to live our lives. We need solar energy to get our work done from

inside home to outside there in the factories and industries. The old fossil fuel is also one

form that has a lot of sunlight energy trapped in it. In short the Sun and also other stars

are responsible in providing us energy. We can use solar energy in different methods to

get our work done in proper way.

According to market economy, the increasing worldwide demand for energy, forces a

continuous rise on the price of fossil combustibles. In fact, it is expected in the near

future, that the demand for energy will grow faster than the finding out of new available

fossil resources. This market behavior brings a positive challenge to the scientific

community as more funds are allocated for the research and development of new

alternatives to the usual main energetic sources (fossil combustibles). In this context in

the last decades, concentrated focuses have been assisted on renewable energy research.

Among these renewable energetic sources, the international scientific community has

devoted intense efforts to wind, solar photovoltaic and biomass. Some investigations and

hardware developments on wave energy have been led by Great Britain and Portugal .

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In this paper an intelligent sun-tracking system for efficiency maximization referring

solar energy production is developed. Nowadays solar energy has a low efficiency ratio

concerning the complete distribution chain from production to consumption (ca. 12%). In

optimized environments (materials, electric inverters, tracking systems, etc) an input of

1000W of solar incident energy production and it avoids systematic failures coming from

changes on the assumed values (position, initial infrastructure orientation, cleanness of

the photovoltaic cells, etc.).

2. PRESENT CONDITION OF ELECTRICITY IN BANGLADESH

The urban Bangladesh now faces almost 10-12 hours load shedding every day while the situation in the rural areas are even worst, where in most cases, the length of load-shedding range between 18-20 hours. Though the current government led by Bangladesh Awami League made specific pledges to the nation of greatly resolving the power shortage maximum by 2012, in reality the situation is getting worst from bad. Power crisis has already affected country’s production sector, while severe environmental pollution is continuing due to use of generators at domestic, commercial and industrial establishments. Diesel-run generators not only create unbearable noise, it also releases hazardous smokes or gas, which is extremely vulnerable to human health.

Power Development Board (PDB) said, the rental, quick rental and peaking plants were undertaken on a fast-track basis to address the nagging power crisis. The QRPP projects were supposed to add about 1,000 MW of electricity to the national grid. These QRPP projects are Meghnaghat 100 MW, Khulna 115 MW, Meghnaghat 100 MW, Ghorasal 78.5 MW, Ashuganj 80 MW (gas-generated), Keraniganj 100 MW, Ashuganj 53 MW, Noapara 40 MW, Amnura 50 MW (Chapainawabganj district), Juldha 100 MW, Siddhirganj 100 MW and Katakhali 50 MW.

Bangladesh’s energy infrastructure is quite small, insufficient and poorly managed. The per capita energy consumption in Bangladesh is one of the lowest (136 kWH) in the world. Non-commercial energy sources, such as wood, animal wastes, and crop residues, are estimated to account for over half of the country’s energy consumption. Bangladesh has small reserves of oil and coal, but very large natural gas resources. Commercial energy consumption is mostly natural gas (around 66 percent), followed by oil, hydropower and coal.

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Electricity is the major source of power for country’s most of the economic activities. Bangladesh’s installed electric generation capacity was 4.7 GW in 2009; only three-fourth of which is considered to be ‘available’. Only 40 percent of the population has access to electricity with a per capita availability of 136 kWh per annum. Problems in the Bangladesh’s electric power sector include corruption in administration, high system losses, and delays in completion of new plants, low plant efficiencies, erratic power supply, electricity theft, blackouts, and shortages of funds for power plant maintenance. Overall, the country’s generation plants have been unable to meet system demand over the past decade.

3. REGULAR DEMAND OF ELECTRCITY

IN BANGLADESH

Peak demand is catered by:

Demand from:

Natural gas 85% DESA,DESCO 1800MW

Liquid fuel 6.76% REB 2200MW

Coal 5.41% PDB itself 1500MW

Hydropower 2.45%

1 TCF Coal (37MT) can produce 14000-94000 MW

1 TCF Gas can produce 3.5 barrels of oil = 17000 cubic feet gas = 1780

pound coal (in terms of energy production) 4. CAUSES OF POWER CRISIS

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Bangladesh electricity supply industry is controlled by the centralized bureaucratic system of the Ministry ofPower, Energy, and Mineral Resources (MPEMR) and its subordinate organizations Power Division and BPDB. It is believed that the organizational inefficiency along with other factors is responsible for the current electricity crisis.

(A) Organizational structure and Reform PolicyKerr and Savelsberg (2001) argue that reformation is done by the state for welfare of the people. The locus of responsibility for welfare is refocused in what we see as part of a broader new social agenda which encompasses changed roles, expectations, rights and responsibilities for individuals, organizations, and governments (Kerr and Savelsberg, 2001). Alam et al. (2004) argues that, the Bangladesh government has kept the electricity business in its jurisdiction with a view to serve the mass people either in the name of corporate body or of company as this industry has an immense social, political and economic importance. As a result Bangladesh electricity supply industry is highly centralized within the bureaucratic system, although private participation is there (Alam et al.,2004). Tayeb (1994) discusses that, high degree of centralization means all the decisions are taken at the top of the organizational hierarchy. It this situation the employees cannot express their opinions and it does not reflect the consultations and information exchange (Tayeb, 1994). In Bangladesh all the decisions are taken bythe cabinet and the ministry without consulting with the stakeholders (“PM approves emergency power plant……”, 2010).

(B) Privatization and Public-Private-partnership

Williamson (2002) discusses that, the main rationale for privatization is the belief that private industry is managed more efficiently than state enterprises, because of the more direct incentives faced by an organizational manager who either has a direct personal stake in the profits of an enterprise or else is accountable to those who do. But, in Bangladesh public-private-partnership or privatization take place in the case of urgency and emergency rather than increase efficiency of the electricity supply industry (Gratwick and Eberhard, 2008). Independent Power Producers (IPPs) take part in electricity generation under privatization and private-public partnership policy of Bangladesh government at the moment when government funds are not available and crisis in electricity supply becomes acute (World Bank, 2003; TIB, 2007). Although Bangladesh adopted electricity supply industry reformation policy and the private sector power generation policy in 1996 to encourage private investment in this industry (BOI, 2010; World Bank, 2003), it

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takes a long process for approval of these IPPs projects due to political influence, corruption and inefficiency (“Lengthy process sets back power projects…”,2010).

(C) Electricity crisis due to organizational weaknesses

Electric supply industry of Bangladesh subsidizes its residential customers as well as its commercial and industrial customers, although the industry is not able to meet their operational costs (Khan, 2003). Khan (2003) suggests that, the Government of Bangladesh (GoB) funds to Rural Electrification Board (REB) to meet the revenue deficit and the operational losses. REB and DESA in Bangladesh also receive power from BPDB at subsidized rates. Temple (2002) estimates that, in the year 2002, the average cost of electricity supply was taka 3.08 per kWh whereas, the average selling price of BPDB was below its cost of supply, providing a total subsidy of 12170 million taka to its customers in the year 2002. The losses of BPDB have been attributed to mainly three factors: Low Average tariff, high system losses of (including pilferage, non-billing, non-payment of bills, etc) and low rate of bill recovery (ADB, 1997; Rahmatullah, 2001).

(D) Inefficient organizational managementIn view of the fact that BPDB has been in losses, unable to recover its operation cost through sales revenue, the subsidy to REB come from public funds rather than cross-subsidization from BPDB’s other customers (Alam et al., 2004). Alam et al. (2004) argues that, these losses implied that allocation to BPDB by the government could not be fully utilized for capital investment in expanding electricity infrastructure. Also it is likely that this affected the available resources with the government for allocation to the rural electrification program (TIB, 2007).

(E) Corruption

Klitgaard (1988) defines corruption as “the abuse of office for personal gain”. In Bangladesh electricity supply industry corruption takes many forms, ranging from grand corruption – the capture of high office of government by elites and the uses of these offices for private gain – to “petty” corruption – the use of bribes or other“facilitating payments” to provide services, bend or break laws (TIB, 2007; Azfar, 2002; Johnston, 1996) . TIB (2007), World Bank(2003), Newbery(2006) & Smith(2004) think Bangladesh electricity supply industry suffers from all sort of malpractices and inefficiencies, particularly ‘corruption‘. Ahmad (2007) argues that, corruption takes place because of inadequacies in existing public management systems as well as in social and cultural role of communal bonds and kinship ties

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within social framework‘. On the other hand Mauro (1993), opines that, ‘speed money‘or ‘bribe’ helps to conquer the ‘bureaucratic red tape‘ works as motivation for the industrious government employees. Due to the alleged corruption in the electricity supply industry the present Prime Minster and ex-Prime Minister along with their political and bureaucratic colleagues were arrested and they are stillfacing the court (Bangladesh Awami League, 2010).

(F) Weak governance: Theft and lack of accountability

Accountability covers the issues such as, making the elected representatives to answer for their policies to the voters, making the public servants answerable for their mistakes and seeking redress from government agencies and officials by the member of public (Mulgan, 2000). Mulgan (2000) suggests that there should be a relation between accountability and efficiency and accountability leads to responsibility for political and managerial aspects. Laking (2001) and Khan (2003) argue that, the main form of corruption in Bangladesh Power Development Board (BPDB) and Dhaka Electric Supply Authority (DESA) is system loss and the employees of these organizations are responsible for that loss. System loss occurs mostly due to the theft of electricity by unauthorized connections and unpaid bills and the employees of these organizations assist these activities (Smith, 2004; Khan, 2003; Laking, 2001). Engineers of the electricity supply industry oppose the reformation process as their professional body named, ‘Institution of Engineers in Bangladesh (IEB)’ that is controlled by the political leaders, is partly against the reformation process in this sector (Bhattacharyya, 2003; IEB, 2000). Hill and Lynn(2004) demonstrate that, political actors who pursue their interests through the hierarchical structures of national political institutions control over the officers and organizations having the administrative authority and thus the staffs are not formally accountable to anyone.

(G) Other weaknesses

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Apart from the organizational inefficiencies there are some other factors those are considered as equal responsible for the current electricity crisis

1.1 Wrong policy

Governance framework has the power to make policy and its implementation quite different from reformers’ intentions (Boyne et al. 2003). Forbes et al. (2004) suggests that different levels of governance influence one another, that is, that the organization of governance impacts what, how, and for whom public services areprovided. Public managers control formal structures and authority below the level of national policy making, other discretionary choices by public managers, and the characteristics of service provision (Forbes et al., 2004). TIB (2007) finds that due to the indecision of the Power Division of Bangladesh in policy formulation process some proposed power plants both in the public and private sectors could not start its operations on time and thus the crisis has been deepen in these days. On the other hand wrong site selection and wrong policies to build newpower plants are also responsible for the delay (TIB, 2007).

1.2 Insufficient Government funding

USAID-SARI/Energy (2007) finds that Bangladesh Government had insufficient fund for electricity supply industry since its emergence as electricity generation, transmission and distribution require large financial investment. Bangladesh‘s electricity generation plants have been constantly incapable to meet system demand since 1990s (Newbery, 2005). Newbery (2005) argues that, shortages of government funds for electricity generation plant maintenance and for installation of new plants have created this acute problem in Bangladesh.

1.3 Inadequate public-private investment

Bangladesh started ‘privatization’ and ‘public-private-partnership‘in 1994, consulting with the World Bank and Asia Development Bank (ADB, 2001). MacEwan (2002) argues that, as the private company earns enormous profits for its owners, ‘privatization’ is not always suitable and it is particularly tricky when it swaps an inefficient government monopoly. (Newbery, 2006) thinks that, Bangladesh have been more successful than India in continuing to attract foreign private investment, although it was the most corrupt country in the world till2005.On the other hand Bhuyan (2009) argues that, although Bangladesh adopted ‘private sector generation policy' in 1996 and declared its vision in 2000, it has not

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received significant amount of investments in this sector ever after a decade. Experts, businesspersons, donors think there are still scope to invest in Bangladeshelectricity supply industry (“Enough scope to invest in power sector……”, 2010).

1.4 Long term absence of government oversight

Womukonya (2003) , TIB (2007) and (Bhattacharyya, 2007) identify many causes of the crisis those are not properly over-sighted by the government over the years, although those are creating current electricity crisis: 1)

5. SOURCES OF POWER ENERGY IN

BANGLADESH

Natural Gas

Diesel

Petroleum

Coal

Solar Energy

Wind Energy

Water Energy

6. INTRODUCTION TO SME

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SMEs all over the world have played a fundamental role in promoting economic and industrial production. In particular, SMEs especially the „micro-enterprises‟ provide the necessary foundations for sustained growth and rising incomes in the less developed and transitional economies. However, in the current state of changing times, SMEs need to adapt themselves to new realities and challenges and to stay competitive. Not only they must add new features to their products, improve performance and reduce prices to remain competitive, but must also innovate to create new products and markets. Clean and renewable energy technology or CRETs need to be effectively tapped by SMEs to enhance their competitiveness. The deployment of CRETs need to be seen as a process which compliments and is customized to the local requirements of the users such as micro and SMEs, with a view to enhance their competitiveness aspect especially those related to quality, convenience, flexibility, delivery and cost of the product being manufactured. The technology innovation in the context of SMEs has to be deployed in a way that enables its business activity to operate efficiently and profitably, while providing equitable opportunities for jobs, and due consideration to gender issues such as inclusive role of women. The technology transfer of CRETs to SMEs in modernizing their production system and making them more efficient in utilizing locally available fuel can significantly reduce the energy inputs required for their operations, making them more profitable and economically competitive. Technology transfer takes place in various different modes. Most commonly it occurs through the consumption of products or services that incorporate the technology, through licensing the production, or by a joint venture arrangement or foreign direct investment. Technology transfer also may result from technical assistance programmes from either multilateral or bilateral donors. These might include training and capacity building in technical skills, policy formulation, project management, development and monitoring, and application and commercialization. Whichever mode is used, the transfer of hardware, knowledge and expertise to operate that hardware must be complemented by the development of local knowledge and expertise to modify and adapt that hardware as necessary.

7. PRIMARY GREEN OPTION-SOLAR

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• Abundant solar radiation

– Annually ≥330 days are solar proactive

• Easy to use

– Relatively low tech

• Environmentally friendly

– No carbon emission

• Relatively inexpensive

– BDT 16 per kWh vs. PDB cost BDT 14 per kWh

8. SOLAR PV IN BANGLADESH

Installation Base

• Current PV installation

–15 MW in 2010

• Projected installation

– Ten-fold increase in 5

years

• Aggressive projection

by a Bangladeshi

publication

– 300 MW in few years

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9. SOLAR PV COST STRUCTURE

Module vs. electricity

• PV module lowest available cost

– Mono-crystalline silicon

• $2.07 /Wp

– Poly-crystalline silicon

• $1.74 /Wp

– Thin film

• $1.50 /Wp

• Solar firm installation cost

– $4.23 /Wp (US)

– $4.11 /Wp (EU)

• PV electricity cost

– 19.27 cents /kWh (US

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10. SOLAR PV APPLICATION

• Solar power systems

• Solar irrigation

• Solar heating

• Solar cooling

• Solar street lighting

• Commercial

• Industrial

• Househol

11. ADVANTAGE OF SOLAR ENERGY

One of the most important problems facing the world today is the energy problem. This

problem is resulted from the increase of demand for electrical energy and high cost of

fuel. The solution was in finding another renewable energy sources such as solar energy,

wind energy, potential energy...etc. Nowadays, solar energy has been widely used in our

life, and it's expected to grow up in the next years.

Solar energy has many advantages:

Need no fuel

Has no moving parts to wear out

Non-polluting & quick responding

Adaptable for on-site installation

Easy maintenance

Can be integrated with other renewable energy sources

Simple & efficient

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12. SCENARIO SOLAR ENERGY IN

BANGLAADESH

Energy issue has become a global concern. Like other countries, Bangladesh also may

not find immediate and easy solution to the energy problem. Moreover, with the passage

of time the demand for energy in Bangladesh will increase further. From the past

experience it appears that there is prevalence of huge gap between demand and supply.

Striving to remove this demand and supply gap, Bangladesh has made significant

progress in the renewable energy sector by introducing solar energy systems.

Infrastructure Development Company Limited (IDCOL), Grameen Bank, BRAC and few

other NGOs have taken remarkable steps forward in this regard. Grameen Shakti that has

installed about 125,000 Solar Home Systems at rural level has opened our eyes. This

energy technology might change the life style of the poor people.

Solar Home Systems have mainly targeted the rural areas of Bangladesh so the range of

products is limited. These can however be expanded to include the solar lantern, solar

torch light, solar thermal heater, and solar mobile charger. Small shop owners at rural

growth centers, mini poultry farm owners, country boat operators, and police and ansar-

VDP forces, Union Parishad Chowkidars could be potential users of solar systems. In

urban areas slum people may use these solar products to improve their living condition.

Rickshaw puller may have the opportunity to use products like solar lantern in their

rickshaws and other products for their households.

In Bangladesh, building and houses located in all metropolitan areas could at least use

some of the solar products in lightning their garden, boundary wall, gates and furnish

security lights and water heating systems. RAJUK, CDA, KDA, RUK, city corporations,

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which have a role in approving architectural and structural plans may have a good

opportunity to recommend solar energy systems.

There are about 3000 growth centers in the country. If growth centers are lighted with

solar applications by LGED it will have a tremendous effect in our agriculture, trade and

commerce and thus economic growth. The government can also bring thousands of flood

shelters cum schools, 465 Upazilla Chairman's houses, 490 Upazilla Teachers' Resource

Centres, 5000 Union Parishad Buildings, 54 Primary Training Institutes (PTI) 3150

colleges, 18700 high schools and 9300 madrashahs under the solar power system.

Moreover, 80,000 primary schools, 2.00 lakh mosques and few thousands rural health

centres may have the opportunity to use this energy. Maintenance of solar system could

be another opportunity of employment. Customised Technical education courses will

build local capacity and help generate rural employment.

There are many islands in coastal areas and remote char areas in Bangladesh. At present,

a few islands are using Solar Home Systems in households. The life of the people of Char

areas may change dramatically change through solar power. Coastal areas will have

similar opportunity.

Solar energy however will not be very competitive, in the economic sense, in a market

dominated by fossil fuels. Despite market factors, solar industry needs government

patronage and help to create the right momentum in solar market, and government grants

are needed for research in solar technology. Many countries in the world have provided

incentives to encourage people to use solar power.

Unlike others, there are, of course, limitations in expanding these solar programmes in

Bangladesh. Research & development is not very significant. Initial investment in solar

systems is quite high. Moreover there is no complete manufacturing plant yet of solar

systems in Bangladesh. These are expensive and susceptible to frequent change of

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technology. The private sector in Bangladesh may not be attracted enough to establish

solar manufacturing plants. Public Private Partnership might provide a solution. We may

also think about accessing funds from carbon trading etc. Despite the limitations, the

objective conditions are favorable and ready for expansion of solar energy in Bangladesh.

All we need are appropriate policy, planning and initiatives, together with Public Private

Leadership.

13. SCOPE OF SOLAR ENERGY BUSINESS IN BANGLADESH

Cost details of acquiring solar panel:

To procure a solar panel one has to pay 15% down payment, the rest is covered by installments, total costs stand at Taka 68000.

Direct purchase costs 2 thousand 720 less.

The maintenance cost for the panel is very low.

The companies also give 20-25 years of warranty.

Investment in this sector:

The amount of investment in this energy sector in rural area per year is more than 2500 crore.

60% of this invested in solar panel, total of which requires to be imported from outside. 25% is invested in battery and the rest 15% in small mechanical parts.

Batteries and accessories are all produced in the country. In near future, the solar panel will also be produced locally.

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14. GOVERNMENT POLICIES IN REGARD TO SOLAR ENERGY

The cabinet of Bangladesh government and the ministry have taken some immediate strategies as well as long term strategies to overcome the electricity crisis.

Immediate strategiesThe Bangladesh government and the Prime Minister have taken some instant measures to reduce social unrest and dissatisfaction: Prime Minster and her cabinet rapidly approved some huge projects that are also have allegation of corruption, without following the rules and laws (“PM approves emergency power plant……”,2010). Power Division, BPDB carried out decisions of shutting down some fertilizer factories and diverting gas for power generation, rationing the use of air conditioners in private homes/offices, 1 hr electricity outage every alternate hour (“PM Orders 1 hr Outage ………”, 2010). All these were contingency approach of the Ministry, Power division and BPDB though no measures have been taken to enhance organizational efficiency and to stop political interference.

6.2 Long-term strategiesThe Cabinet of Bangladesh government and the power division of the ministry have taken some immediate but long term strategies to mitigate current electricity crisis. Some of the mentionable strategies are: project to build ten "peaking power plants" and project to modify and renovate the old generation units which will produce electricity in 2011 (“Cabinet body approves 3 rentals ………”, 2010). Bangladesh is going to install a nuclear power station with the help of Russia and going to import electricity from India, Nepal, Bhutan and Myanmar(“Dhaka and Moscow sign nuclear….”, 2010).

The objectives of solar energy policy are to:

Harness the potential of solar energy resources and dissemination of solar energy technologies in rural, peri-urban and urban areas

Enable, encourage and facilitate both public and private sector investment in solar energy projects.

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Develop sustainable energy supplies to substitute indigenous non-solar energy supplies.

Scale up contributions of solar energy to electricity production.

Scale up contributions of solar energy both to electricity and to heat energy.

Promote appropriate, efficient and environment friendly use of solar energy.

INVESTMENT & FISCAL INCENTIVES BY GOVERNMENT

A renewable energy financing facility shall be established ; Private sector participation including joint venture initiatives in renewable energy development will be encouraged and promoted.

Renewable energy project investors both in public and private sectors shall be exempted from corporate income tax for a period of 15 years.

Accelerated depreciation up to 80% may be allowed in the first year.

An incentive tariff may be considered for electricity generated from renewable energy sources which may be 1.25 times the highest purchase price of electricity by the utility from private generators.

To promote solar water heaters, rates of both electricity and gas may be refixed to discourage electricity and gas use for water heating.

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15. RECOMMENDATION

Solar PV is primary choice of green technology for

sustainable industrial development in SME sector

Solar power systems be installed for SMEs as a backup if not primary power supply

GOB and UNIDO incentivize solar installations for SMEs

Offer low interest loans/grants for global joint ventures.