Dissemination Of Solar Lantern (PicoPV) In Bangladesh Through EnDev’s Result Based Financing (RBF) Mechanism For Improving Access To Clean Energy: Achievements And Challenges

Abstract

Energy consumption in Bangladesh is characterized by a unsatifactory level of access to reliable grid connectivity. However, there is also disparity between urban and rural access to quality electricity. The consumers without access to electricity are still reliant on inefficient, expensive and polluting kerosene lamps which are environmentally damaging and dangerous. They need to go far away to get their cell phone charged. These underserved communities can be served with modern off-grid technologies at lower costs. One such technology is the solar lantern (PicoPV, <10Wp). They provide better light than kerosene hurricanes or kupis, eliminates health hazards such as noxious fumes and CO₂ emission, easily portable, less maintenance than Solar Home System, including cell phone charging facility. Each lantern can save 2.7 liters of kerosene/month and thus 2.41 kg of CO₂ saving per liter of kerosene. Multi donor funded Energising Development (EnDev) Programme of GIZ Bangladesh was implementing a project for disseminating Solar Lantern (PicoPV) to mainly rural off-grid people of Bangladesh. Objectives of the project were (1) to create conditions to encourage and enable families to shift from traditional to superior modern lighting systems and improve living standards (2) to create conditions necessary for SMEs and new entrepreneurs to take part in the PV value chain. EnDev Programme is using a  result-based financing (RBF) scheme that increased the affordability of PicoPVs for low-income families. This is a unique feature of the project. The financial contribution of maximum US$20 for upto 1200 lumen-hour/day is given for each lantern on a sliding scale. That means the cost of the PicoPV system to the household is reduced by the financial contribution that is provided by the Project. For the remaining cost, end-users either pay in cash or sign a PicoPV purchase contract under a micro-finance scheme to get the financial services from a microfinance institution ((MFI). The project was implemented by authorised distributors, SMEs,  community-based institutions, NGOs and small retail shops in rural areas. Delivery of PicoPVs involves established and trusted local business outlets such as small electrical shops and hardware stores in small towns along with a network of rural agents. These interventions were protecting a vulnerable sector of Bangladesh’s population from the vagaries of sub-standard products and remove doubts regarding the long term reliability of PicoPVs (quality certified by IEC standard 62257-9-5 through Lighting Global Program) supplied under this Project. The main development goals of this project were: To create necessary conditions to encourage and enable poor rural families to shift from traditional to superior modern lighting systems, Creation of awareness of the benefits of RETs, to raise the standard of living of the poor, to promote the greening of the energy economy and create green jobs, to mitigate emissions by reducing the use of kerosene. The overall program was structured as Market Intelligence, Channel Strengthening, Consumer Awareness, Quality Assurance, Access to Finance, Policy Advocacy etc.

1. Principles of EnDev’s RBF Mechanism

Main objective of the project was to make high quality lamps affordable and attractive for poorer households at a price close to the amount of money that a household can potentially save through the replacement of kerosene lamps. The Project provided financial contribution to the recipient to obtain predetermined results following the principle of "Result Based Financing" (RBF).

The RBF instruments are characterized by the following principles:

1. Disbursement of funds is conditional on obtaining sales outcomes to households in Bangladesh;
2. Whenever possible, the results are broadly defined to allow innovation product or service - that is to say, the recipient must be free to determine the best way to achieve the desired result;
3. The verification of the sales is as a trigger for the disbursement of the financial contribution;
4. Incentives are non-discriminatory, in that all potential authorized distributors are eligible to participate, and the creation of monopolies is avoided.

2. Cooperation: GIZ-EnDev and DFID

GIZ signed an MoU with DFID on 29/12/2014. Based on this MoU, the financial contributions/incentive was provided by the funds of DFID. The basis for the financial contributions for the recipient is the commission from the German Federal Ministry for Economic Cooperation and Development (BMZ) dated 14/04/2015. EnDev provided the financial contribution pursuant to this contract exclusively on behalf of and for the account of BMZ.

3. Flow Diagram

A flow diagram is attached for better understanding how the three main elements of the programme like product, information and incentive streaming throughout the entire stakeholders’ matrices:  

 

Flow Diagram for product, information and incentive

 

4. Incentive/Subsidy Mechanism

As indicated earlier that an incentive/financial contribution have been provided per lantern as per RBF principles of EnDev based on lumen-hour (lmh) output of each lantern. Following bullets and terminologies are given to clarify the incentive mechanism:

• Manufacturer Recommended Retail Price: This should include production, ex-works, shipment cost, taxes and all other cost involvement within the country including the cost of data collection from the last mile partner;
• Incentive/Subsidy was determined on lumen-hour (lmh) basis: Upto 1200 lmh/solar-day with maximum 20 US$/system;
• Special introductory price for the customer was determined by deducting subsidy/incentive from ‘manufacturer recommended retail price’;
• Incentive/Subsidy amount was paid by  EnDev at the distributor level;

5. Incentive/Subsidy Flow Diagram

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 Attached

Flow diagram for Incentive

6. Disbursement of Incentive

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Invoicing interval for the incentive was quarterly or after each 10,000 systems sold whichever comes earlier. The recipient had to submit a request for the incentive (financial contribution) through GIZ format providing the sales information of the products including a description of the products, brand, model name, product code, the name and address of the end user, his/her mobile/number, total number of sales, time period etc including contract number, project number. The financial contribution was disbursed by EnDev upon positive result on verification. 

7. Monitoring Tools

Monitoring was a vital part of the RBF project. No payment was made without verification of lanterns disseminated. The following tools were used for this purpose:

a. PicoMonitor: a real time web based data-base system, developed and managed by the author on behalf of EnDev BD project:

• Web based database for collecting and managing PicoPV customers & Sellers information;
• Distributors and last mile partners have their own interface;
• Information can be uploaded via desktop, tablets and even by first generation key-pad mobile phones.

b. EnDev Survey: a tablet based survey tools developed by EnDev HQ:

• Specialized web-based interfaces allow constructing extensions to the platform for domain-specific applications;
• A data warehouse application allows effective tracking of studies more precisely than ever;
• Specialized mobile application interfaces allow collecting data from the field with accuracy

8.Technical information of Solar Lantern

The Lumen-output of the lamps and their autonomous runtime are the most relevant specifications to calculate the amount of the subsidy for different systems. To ensure best quality products, further technical and certification requirements have been introduced.

Diagram for Lumen output

 a. Lumen-Output:

Minimum requirements for room lighting and lighting in the main living space in rural settings can be achieved with a LED lamp of 200lm, while a task-light of 80lm can meet the basic need for lighting and for complex tasks with low contrast, like sewing as well as safe orientation outdoors. The required lighting levels have been calculated to ensure useful and eye-friendly illumination according to international standards under certain assumptions regarding light distribution from the lamps and their distance from the illuminated surface:

200lm represents a light output at which a lamp, mounted at a height of 1.8m with a distribution angle of 110 degrees can provide a light intensity of 10lux on a floor area of 20.76m2. A table with a height of 80cm placed directly under the lamp would be exposed to 30lux light intensity. A LED based solar lighting system can be considered to cover the basic need for lighting in the main living space and reliably replace one kerosene lamp fully, if it delivers 200lm average lighting output over the first 210 minutes, the daily lighting time is 4hrs or more from a charge of 4 hrs under standard testing conditions (STC) and the battery can store power for full supply for 3 days of usage without a charge. Thus, more than 200lm from a single light source will not be incentivized.  

80lm represents the calculated minimum value under which a light intensity of 160lux (desk light) can be achieved at a distance of 0.4m on an area of 0.5m2 with an apex angle of about 90 degrees. At a height of 65cm above ground or a table the same lamp would provide 60lux on a 1.3m2 surface and an area of over 7m2 would still be exposed to more than 10lux at a distance of 1.5m. At an opening angle of only 15 degrees (common for torch lights) this light-output can project a light concentration of 15lux on a surface of 5.35m2 at 10m distances. A LED based solar lighting system with 80lm can therefore be considered to cover the basic need for lighting for domestic work, individual tasks or productive activities at home and reliably replace one kerosene lamp fully, if it delivers at least 80lm average lighting output over the first 210 minutes, the daily lighting time is 4hrs or more from a charge of 4 hrs under STC and the battery can store power for full supply for 3 days of usage without a charge. Light sources of less than 80lm average lighting output over the first 210 minutes will not be supported through this scheme.

b. Autonomous Runtime:

This scheme will allow a certain range of total autonomous runtime from a full battery. Total autonomous runtime should never be less than 6 hours from a full battery to ensure system reliability also on days with a higher demand. More than 12 hours of autonomous runtime will not be incentivized, as this should be sufficient to cover a stretch of 2-3 cloudy days if the battery is fully charged. The systems must guarantee a minimum of 4 hours of lighting time from a charge under 4h under STC. 

Additional loads such as light sources (for instance torches) beyond the given specifications, lights that have a performance of less than the required values or fans, radios and TVs may affect the runtime of the systems. If any of these appliances are provided, additional capacity has to be provided with the system to allow 4h daily usage of these devices without affecting the light output. Mobile phone chargers are exempt from this rule. Producers and POs will have to clarify to customers how the usage of other services influences the lighting duration.

 

c. Battery:

Environmental damage related to lead acid batteries is likely to occur over the next years since many households with SHS will experience the end of their instalment period and with it the maintenance responsibility by the POs. Even though recycling schemes are in place, many used batteries end up in unlicensed battery shops for recycling, where the components are handled under inappropriate conditions and pose a risk to human health as well as the environment. Besides illegal lead smelting, the acid (used as electrolyte in the battery) often gets discharged into the environment without proper treatment, contaminating the ground with lead particles. Other common rechargeable batteries found in small devices, like NiCd or NiMh contain toxic materials as well and pollute the environment with heavy metals.

Due to their smaller environmental footprint this subsidy scheme focuses on lithium-ion based batteries only. Furthermore lithium-ion based (especially LiFePO4) batteries last between two and five times charging cycles longer than lead acid batteries, which maximizes the benefit to customers.

d. Solar Panel: 

Based on efficient design, the solar panel (usually less than 10Wp) could be either attached with the light source (LED) or separated with sufficient connecting cable. 

e. Warranty:

In order to overcome scepticism among potential customers regarding the financial benefit and the quality of solar lighting systems, a replacement guarantee of at least two years including a total of five years after sales services had to be granted on the full system. 

9. Operational Plan

The operational plan which was initially formulated is given below:

a. Strengthening distributions channels: 

• Identifications  of sales routes/ channels partners, Engagement and onboarding of new shops/retailers
• "B2B meeting",  matchmaking events, Identifying traders/delivery mechanisms to reach the last mile
• Workshops at sub-district level, Business/ marketing training to distributors

b. Market intelligence:

• Demand analysis, Customer feedbacks/willingness to pay
• Establish monitoring system 
• Finding out pockets, captive markets, niches
• Last Mile Shop/ Retailers' Data

c. Access to finance:

• Identify need and potential providers of loans  in the supply chain (supply side)
• Matchmaking B2B (supply side), B2B with MFIs and client companies (demand side)
• Analyzing the new channel for commercial Fis (demand side)

d. Consumer Awareness: Hiring Agency & Finalizing Campaign Plan, Rolling Out Campaign

e. Quality Assurance: IEC  Standard 62257-9-5, Lighting Global  Certified Product

f. Policy Advocacy: Overcoming policy barriers (Tax rationalization)

10. Achievements

a. More than 10 private entrepreneurs engaged in implementation through their own marketing campaigns to disseminate LG certified lanterns;

b. “Lighting Bangladesh”- a joint intervention platform created by GIZ-EnDev and International Finance Corporation (IFC) for awareness creation, marketing, quality assurance for Solar Lantern; 

c. More than 41,300 SLs were disseminated under regular programme, of which more than 50% were delivered to school children;

d. 41,100 solar lanterns were given to Rohingya Refugees residing at Cox’s Bazar;

e. Each SL saves 2.7 litres of kerosene/month, saving 6.5 kg CO2/ Month (@2.41 kg CO2/Liter of Kerosene) which is leading to positive environmental and health impacts; 

f. Indicators achieved: 

• Number of Solar Lantern disseminated: 82,406  pieces
• Number of people having improved access to clean energy as a direct result: 387,308 People
• Amount of kerosene use reduced or avoided:13,349,772 Litres
• Number of tons of CO2 equivalent reduced or avoided through use of clean energy technologies as a direct result: 32,173 M.Tons
• No. of direct jobs created or supported: 118Jobs
• No. of mobile phone charging points created (75% among total sales):61,805 Mobiles

g. After this intervention, many inspiring feedbacks were received. Positive impression/perception were created among existing and potential users and distributors on quality certified lanterns. Customers confidence was built up. Whatever may be the potential growth rate of market in this intervention have been achieved, there is at least some strong market dynamics playing among the solar lanterns distributors which leads to the reduction of market price as well as inclusion of many new models in the market to attract new customers; 

h. Partner organizations have been selling solar lanterns outside our program without any incentive. This is clear indication of market development.

i. Direct jobs created;  

Relevant photos attached 

Students studying with Solar Lantern

11. Special Arrangements 

Some special arrangements were tried or initiated but could not be implemented due to many specific reasons:

a.  Special arrangement for Ultra-Poor: It was thought that quality solar lanterns had been remain beyond the affordability of the extreme poor households. In consultation with DFID, a separate concept was proposed which aimed to make solar lanterns affordable to around 40,000 ultra-poor households by providing a higher buy down grant in some specific areas of Bangladesh based on the Household Income and Expenditure Survey (HIES).  

The easiest option taken was to get back to the government’s safety net programmes  “Vulnerable Group Development” (VGD) programme and “Vulnerable Group Feeding” (VGF) programme. Under these programmes, the local governments – Union Parishad (UP)s - select certain number of households from the union areas and provide them with cards (VGD card and VGF card). The VGD and VGF cardholders are extreme poor households.

These households were planned to be motivated to purchase the solar lanterns at a subsidized rate. The households, who would be willing to pay the difference amount (retail price minus buy down grant), would have been selected as customers for the solar lanterns. The selected customer would receive a voucher provided by GIZ. 

After analyzing and proper investigation, finally, this special arrangement could not be implemented due to following reasons:

• The preparatory work for identifying real ultra-poor seemed complex, time consuming and cost intensive;
• Any voucher scheme is likely to have fiduciary risks and financial risks since it involves incentives for both beneficiaries and provider in the form of cash and/or in kind.
• As these lanterns would be delivered at a much lower price, it would hamper market approach, which would have negative impact on growing new entrepreneurs;
• There was much probability to again resell these lanterns to the areas without special incentives;
• In India, also average price of lanterns is higher than Bangladesh, there would be chances for cross border smuggling; 
• It was expected that general approach for dissemination would cover most of the poor segments considering huge investment and efforts for reaching actual ultra-poor.

b. Priority Area setting: 20% additional incentive was proposed to be given to the recipient for verified lanterns sold in specific priority districts with comparatively high poverty incidence and off-grid areas. Initially “Satkhira” district was offered for this extra incentive, but no claim was submitted for this privilege. 

12. Challenges and Limitations

a. Due to some limitations, no fund was allocated by the project for consumers awareness and market development. IFC in the framework of “Lighting Bangladesh” platform pursued consumers awareness programme within a limited scope but that had too low penetration in the niche market and off-grid areas;

b. All components of the operational plan could not be realised due to insufficient fund;

c. Government rapid grid expansion is one of the other main challenges for lantern market development. Aggressive grid expansion (sometimes without reliable power supply) apparently raised hope in the off-grid people and prevented them from investing in solar lantern purchase;

d. No support was given to partner organization for market development. They did their own, which seemed not adequate to aware people for the new technology;

e. The partner organizations could not take it a prime business to survive, most of them took it as an optional one, for this reason only RBF without market development assistance could not contribute to rapid market development;

f. The Rohingya Refugee issue had a negative impact on the dissemination of solar lanterns during this period. Partner organizations have given more attention to direct cash sales of lanterns to national and international aid organizations than to the EnDev’s RBF. One of the main reasons of which is that these sales do not include any obligation for after sales guarantee/warrantee services;

g. Some aid organizations were giving free lanterns to Rohingya Refugees. The large sales to the aid agencies depleted the available stock of quality lanterns in the country with negative impact on sales under EnDev’s RBF. 

13. List of EnDev supported Lighting Global certified Solar Lanterns (PicoPV)

SL#         Name of the Distributors                                     Brand & Model

1             ECO Distributions Ltd                                         Schneider Mobiya TS120S

2             Rentec Solar Ltd                                                 Green Light Planet Sunking Eco

                                                                                           GLP Sunking Mobile

                                                                                           GLP Sunking Pro 2

                                                                                           GLP Sunking Pico

                                                                                           GLP Sunking Charge

                                                                                           GLP Sunking BOOM

                                                                                           GLP Pico Plus

                                                                                           GLP Sunking Pro 200

                                                                                           GLP Sunking Pico 50

3            JadRoo Power Limited                                         OmniVoltaic  ovPilot-X

                                                                                           OmniVoltaic ovBeacon MB2-200

                                                                                           OmniVoltaic ovBeacon MB2-160

4           Super Star Renewable Energy Ltd.                      d.light S2

                                                                                           d.light S3

                                                                                           d.light S20

                                                                                           d.light S30 

                                                                                           d.light S300

5           ME SOLshare Ltd.                                                 Villageboom VB-012

6           Shinew Green Energy Ltd.                                    Solar Land -Solar Power Pack 5.0

 

  Written by Ratan Kumar Ghosh, National Programme Coordinator, EnDev Bangladesh

 

Further Information

• Bangladesh Energy Situation
• Publication - Result-Based Financing for Energy Access
• Energising Development (EnDev)
• First Lessons Learnt From Results-based Financing in EnDev
• NAE Case Study: Bangladesh, IDCOL Solar Home Systems