The first solar mini-grid service in Bangladesh

by Hasna J Khan and Asma Huque

back 1Despite its large population, Bangladesh has achieved substantial economic growth over the last 15 years. Deficient infrastructure prevents the country from achieving its full growth potential. This situation is particularly evident in the economically disadvantaged remote and rural areas.
Whereas access to energy is a priority in the development framework, much work needs to be done on basic infrastructure for rural electrification. Remote and dispersed areas are currently adopting off-grid electrification as a viable alternative to the national grid service.
Solar Home Systems (SHS), established as a complementary solution to grid electrification, has proven it to be the most viable off-grid electrification today. Prokaushali Sangsad Limited (PSL) was engaged in providing the original concept leading up to the final SHS program design.
Currently Bangladesh deploys over 70,000 SHS per month, with over 2.7 million in total, under the national solar home program executed by Infrastructure Development Company Limited (IDCOL). This is one of the most successful off-grid SHS programs, with the highest installation rate in the world today.
Similar to SHS, solar mini-grid can also offer reliable service for rural off-grid areas in Bangladesh. With the initiative and technical support of PSL, private utility company Purobi Green Energy Limited (PGEL) has invested in the nation’s first commercial solar mini-grid in the coastal island of Sandwip in Bangladesh, with financing from IDCOL.
back 2Germany based Asantys Systems, with local partner Energy Systems, installed the world-class solar mini-grid technology in un-electrified Enam Nahar market in Sandwip. Various productive outcomes have confirmed the potential economic benefits from clean solar power, compared to the previous micro-diesel generators. Commercial enterprises switched from diesel service to solar.
Similar application of solar mini-grids for the vast number of rural markets in off-grid locations can offer significant improvement in socio-economic conditions of such underserved population. Although rural markets show the most potential for solar mini-grid application, clustered households adjacent to markets are also additional beneficiaries. The experience of PGEL shows that a suitable mix of consumers is important for the success of a sustainable business, while also ensuring social and environmental benefits.
Additionally, policy-wise, subsidised financing with attractive incentives for the private service providers is essential at this early stage of mini-grid deployment.
This article outlines the technical and business viability of operating solar mini-grid in remote, off grid locations of Bangladesh. Having the first installation of its kind, PGEL is currently the only utility company in the country which operates as a solar mini-grid service provider, receiving technical support from PSL.
This pioneering experience has become a learning platform for other investors, financing and developing agencies, in addition to policy makers. Some of the national clean energy policy decisions for off-grid rural electrification business models are being made using the experience gained from Enam Nahar Market.
A survey was carried out in 2009 to collect information on the present demand for power in the project area. The initial survey showed that Sandwip Island had a dynamic population with several diesel electrification service providers supporting the general public. It was noteworthy that several educational institutions, health service centers and hospitals, major markets, computer service centers etc. were available in the market.
Although major businesses operated on captive power, general shops in the markets received electricity from diesel micro-grid service providers. Such services operated on an ad-hoc basis for about five hours a day. Households were found to be un-electrified in general, unless using individual solar home systems. A government-owned and operated diesel generator occasionally operates in Sandwip Island for three to four hours a day for the local government offices, situated about 5km from Enam Nahar Market.
Power lines used by the private service providers were of poor quality since they were not designed taking into consideration efficiency and line loss. Service providers also did not account for their own time spent, therefore the power production cost calculation was arbitrary.
The project envisioned a solar mini grid that could serve the basic needs of commercial enterprises within Enam Nahar Market and some adjacent households, in addition to local schools and health centers. PGEL was hence formed with an objective of serving this remote location with state of the art mini-grid technology. The level of services offered were to be based upon the needs of its clients, and quality of service would follow the standards of the national distribution grid.
Total cost of the project was Taka 56.78 crore, including hardware, site development, civil work for office building and solar installation, distribution lines, technical assistance, installation and commissioning etc. The financial plan and business forecast showed the service to be financially viable under the special financing scheme offered by IDCOL. Hence, with equity of 20 per cent, PGEL obtained a soft loan for 30 per cent and a grant of 50 per cent of the total project cost from IDCOL, for a solar plant of 100 kW and 40kW diesel backup. Keeping an affordable tariff with service hours of 9 am to 11 pm year-round, while retaining adequate revenue, was key to the financial viability.
People residing in remote locations of Bangladesh pay one of the highest rates for electricity from diesel-powered micro-grids. Surveys showed that most of the commercial enterprises of Enam Nahar Market were using diesel micro-grid services. Depending upon the type of appliance being used, daily rates being converted to tariff ranged from Tk 46/kWh to Tk 76 /kWh. Such high rates from diesel generated power were tolerated due to the high demand for electricity for commercial activities in the market. Consumers paid charges on a daily basis without any contractual commitment, and the quality of service could not be taken to account.
Preliminary surveys suggested that the potential consumers of a solar mini grid in Enam Nahar Market were eager to pay an equivalent amount to cover their cost of service, considering its reliability and scope of modernisation with alternative energy. Based upon tariff prior to solar electrification, financial analysis and project financing criteria of IDCOL, PGEL set the tariff at Tk 32/kWh.
In September 2010, the 220V AC mini-grid of 100 kW solar PV coupled to a 40kW Diesel backup system was commissioned to meet partial demand of electricity for the people of Enam Nahar Market of Sandwip Island.
About 60 kW of the PV modules are connected to six grid tied inverters, supplying directly to the 220V mini-grid distribution line. The unused portion of the generated power is stored in the batteries through 12 bidirectional inverters called Sunny Islands, distributed in four clusters. Additional 40kW of PV are generated and stored directly into the same battery bank through DC battery chargers.
The power plant has a total of 96 batteries in four battery banks with total 12000 Ah (@48V). The battery bank is sufficient to cover the evening load of the market with average insolation. During bad seasons of solar irradiation and low charge of the batteries, backup power is provided by a 40kW diesel generator, which also provides the equalization charge to the battery bank.
A three phase distribution line with 220V AC bus line is connected to the bi-directional inverter-battery assembly through a multi-cluster interface for mini-grid. The power station being located in the central part of Enam Nahar Market, three separate phases extend in different directions, with a balanced load from the consumer end.
The total land used by PGEL for the solar power plant is 0.61 acres. Area requirement for 100 kW solar PV was about 1500 square meters, which includes the ground mounted solar park along with the roof of the office building.  Beyond solar plant design, site development, various licensing, civil and fieldwork supervision were done by PSL. PGEL procured its own five km distribution lines for the solar plant.
Much attention was given to Demand Side Management (DSM) of the service. In order to minimise evening load, the consumers were encouraged to use only energy saving compressed florescent lamps (CFL), and appliances with standard specifications. A major campaign is currently going on to introduce efficient LED lamps to replace all other types of lighting devices, in addition to energy efficient fans and motors. Distribution line, circuit breakers, service drop lines, and household meters follow the specification standards of the Rural Electrification Board (REB) of Bangladesh. Each consumer is billed on a monthly basis based on individual electric meter readings.
Since October 2010, the solar mini-grid of PGEL has been serving the Enam Nahar Market and its surrounding areas by providing electricity for basic lighting, fans, computers, printers and various appliances used on a daily basis. To date, the plant has generated more than 320MWh with a specific yield of 80.52 kWh/kWp, displacing 222,230 kg of Co2.
The major focus was to serve enterprises that can benefit from profitable income generation through the use of reliable electricity. It took about one year for general consumers to build confidence in the services of PGEL before they collectively decided to disconnect from the earlier diesel services. The number of connections has gradually increased and a total of 257 consumers have taken connection from the mini grid in the three years up to March 2014.
The consumers of PGEL can be categorised into four diverse groups, where SMEs form the major 58 per cent, followed by institutions, households and small industry.
Based upon average consumption pattern, the consumers are classified into three classes – large, medium, small. It is noteworthy that each class nearly equally shares the total energy produced by PGEL.
Many potential risks remain with the first time investors and project implementers. Overcoming regulatory inertia, including undefined policies, has been a major drawback. Given that solar mini grid is a new technology, it is experiencing special scrutiny from development organisations, financing institutions, and others, to gauge its true merit as a remote area power provider. Obtaining an environmental clearance certificate for renewable energy based power plant needs to be simplified and streamlined. Policy for allocating concessionary market for private sector needs to be in place to avoid future threat from highly subsidised public services to enter in the same area. Duty structure for import of important high quality components need to be rationalised. And finally, financing agreements between project implementer and investors need to be standardised. A recently declared document ‘Guideline for the Implementation of Solar Power Development Program’ has looked into some of the issues that can be implemented in the field.
The total cost of the project undertaken in 2009-10 was Tk. 56.78 crore, where 89 per cent of the capital cost was for hardware. The high level of investment on hardware is typical for renewable energy projects, especially for solar, where the first cost is high and operating cost is minimal. Due to the nature of load distribution, the peak evening load of PGEL is supported with batteries. The energy storage system through flooded lead acid batteries was 26 per cent of total hardware cost.  Replacement of the battery bank at the end of its useful life (about 10 years) will be a challenge to PGEL, which will also increase the life-cycle cost of the system. Use of diesel generator, as a backup source for winter evenings and overcast periods of the monsoon, is also a variable cost. Recurring fuel cost must be managed over time by spreading the peak power load, especially the energy intensive loads in the market. However, recent reduction of price of solar modules will lower costs for future investors.
There must be reasonable certainty for new investors in renewable energy based mini-grids, that the public grid will not extend its services to the area in the near to medium term. In case it arrives, the sponsors would demand compensation for their assets in favorable terms, or other arrangements, since their customers might opt for the drastically reduced subsidised tariff, even if reliability is low. PGEL’s mini-grid being first of a kind power project, is used as a demonstration that feeds into subsidy policymaking, which, however, in this case, is a risk to its private investors.
The data presented in this study undertaken by PSL provides a reference for future solar mini grid configurations for remote rural markets in off-grid areas of Bangladesh. It provides an overview of commercial viability of solar mini grid service with special financing, keeping reliability of service as the priority. In the long run it may be worthwhile for the REB/PBSs to consider solar mini grid service in the remote un-electrified locations. Economic viability of such services is open for discussion on public-private partnership.

The authors are associated with the Prokaushali Sangsad Limited (PSL)

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