Bangladesh Energy Situation

1. Energy Situation

1.1   Energy situation ( max. 2 pages)

• Energy Supply
• Energy consumption
• Access rate
• Market situation for different energy technologies and services
• Key problems of the energy sector

1.2. Policy framework, laws and regulations (max. 2 pages)

• Poverty Reduction Strategy 
• General Energy policy, Energy strategy
• Specific strategies (Biomass, renewable energies, rural electrification, energy access strategy etc.)
• Important Laws and regulations
• Short explanation to what degree EnDev activities are consistent with the national poverty reduction and energy policy

1.3. Institutional set up in the energy sector, activities of other donors (max. 2 pages)

Please confine your explanation to areas relevant for the intended project activities

• Governmental institutions 
• Private sector (enterprises, NGOs)
• Activities of other donors, activities of NGOs
• Short explanation to what degree EnDev activities will be coordinated with other donor activities
• Short explanation to which degree EnDev will be in line with capacity development needs of the partner

1.4. Other major activities in the country financed by BMZ or DGIS (max. 2 pages)

• Activities on governmental level 
• Private sector activities 
• Activities of NGOs
• Reference to the planned EnDev activities
• Planned cooperation

General Poverty Situation in Rural Bangladesh

Bangladesh is one of the world’s poorest countries, ranking third after India and China in the extent of poverty. The population is predominantly rural, with about 80 per cent of its 155 million people living in rural areas. Most of the country is made up of flood plain, and while the alluvial soil provides good arable land, large areas are at risk because of frequent floods and cyclones, which take lives and destroy crops, livestock and property.

Since the 1990s the country has made progress towards reducing the incidence of poverty, achieving a 1 per cent drop in the proportion of people living below the poverty line every year. Estimates of rural poverty rates now stand between 53 per cent and 44 per cent. While these fig-ures represent a considerable improvement over previous levels, it is still extremely high by inter-national standards and reflects the widespread and commonplace nature of poverty and vulner-ability.

About 20 per cent of rural households live in extreme poverty. Chronically poor people suffer per-sistent food insecurity, own no cultivable land or assets, are often illiterate and may also suffer serious illnesses or disabilities. Another 29 per cent of the rural population is considered moder-ately poor. They may own a small plot of land and some livestock, but while they generally have enough to eat, their diets lack protein and other nutritional elements. This segment of the rural population is at risk of sliding deeper into poverty as a result of external shocks, such as health problems or natural disasters.

Women are among the poorest of the rural poor, especially when they are the sole heads of their households, such as widows or wives of men who have migrated in search of employment. They suffer discrimination because of their gender, have scarce income-earning opportunities and their nutritional intake is often inadequate.

One of the main causes of rural poverty in Bangladesh is the erratic and extreme climate and the fact that a large proportion of the country is low-lying and vulnerable to flooding. After flooding, many people have to resort to moneylenders in order to rebuild their lives, which opens a vicious cycle of dept service and pushes them deeper into poverty. For large numbers of rural poor peo-ple whose subsistence depends on agriculture, income and food security are highly precarious. Many farmers eke out a livelihood on small and fragmented plots. For those who are landless or almost landless, the situation is even more severe. Almost half of the population falls into this category.

Another root cause of rural poverty has been the enormous population growth. The population density of Bangladesh is the highest among all territorial states worldwide. The pressure this has placed on the environment, unleashes problems such as erosion and flooding that in turn aggra-vates the situation of rural poor people.

Due to widespread corruption and bad governed administration, public services (e.g. health care, education) are inadequate. This particularly affects poorer parts of the population as they cannot afford private provision of these services.

Bangladesh has made progress in developing rural infrastructure, but much remains to be done. Many poor people living in remote areas lack services such as education, health clinics and ade-quate roads, particularly road links to markets. Only 22 per cent of rural households have electricity.

Energy Sector

About 80% of the population of Bangladesh live in rural areas. The rural economy is characterized by slow growth, high unemployment, insufficient infrastructure and widespread poverty. Only one-third of the population has access to electricity; and access in the rural areas is lower (22%). The rural population depends mainly on biomass as a source of energy; over 70% of total primary energy consumption is covered by biomass, mainly agricultural waste and wood.
The government’s vision of electrifying the entire country by 2020 through grid expansion may not be realistic due to inaccessibility and low consumer density in many rural areas, as well as financial constraints. To reach the government’s vision of universal electrification, renewable energy sources, in particular solar energy will have to play a vital role for off-grid electrification.

Problem Situation

Bangladesh is an energy-starved country:

• Only 40% of its 155 million people are connected to the electricity grid and, in the rural areas, where 80% of the population lives, only 22% have electricity
• A mere 6% of the entire population has access to natural gas, primarily in urban areas
• Electricity supply is not reliable and peak demand cannot be met
• Substantial amount of energy is used inefficiently
• Most people in the rural areas depend on kerosene lamps for light
• 80% of all Bangladeshis cook with biomass, such as rice straw, dried leaves, jute sticks, cow dung, or wood.

Dissemination of solar home systems (SHSs) is being promoted mainly by private sector companies and NGOs; presently, projects are mainly based on the direct-sale approach. This approach is successfully demonstrated by an IDA/GEF-supported project, which provides participating organizations (mostly NGOs) with refinancing funds for micro-financing of SHSs. The concept comprises a buy-down grant and an institutional development grant for the participating organizations to build capacities for promotion of SHSs in rural areas. The buy-down grant is on a sliding scale.
As financing of the project is coming to an end in August 2008, it is proposed to apply the experiences made to continue the route to commercialization of SHS dissemination. The existing financing structures provided by the Infrastructure Development Corporation Limited (IDCOL) will be used for provision and management of refinancing loans, and the micro-finance organizations (NGOs), which are already experienced in promoting and financing of SHSs, will be involved in promotion and selling of SHSs. Funds for refinancing will be provided by IDCOL, whereas the proposed partnership project will only provide the buy-down and the institutional development grants.

The Role of Household Energy

In most Bangladeshi households in rural areas (99%) as well as urban areas (66%), biomass such as wood, cow dung, jute sticks or other agricultural wastes is employed for cooking. Ineffi-cient and poorly ventilated clay stoves produce fine particles, polycyclic aromatic hydrocarbons, carbon monoxide, dioxins and other carcinogens (ROUSE 2004). Housewives are exposed to high levels of these toxins between three and seven hours a day. Research revealed that this indoor air pollution (IAP) occurs not only in the kitchen but only slightly lower in the living area therewith affecting also other family members such as children. The World Health Organisation (WHO) has estimated that more than 46,000 women and children die each year as a direct result of exposure to indoor air pollution, while many more suffer from respiratory diseases, tuberculosis, asthma, cardiovascular disease, eye diseases, and lung cancer. Right behind unsafe water and inade-quate sanitation, indoor air pollution is the second biggest environmental contributor to illness worldwide (WHO 2007).

Due to inefficient burning of biomass for cooking purposes, biomass is becoming increasingly scarce and costly, putting pressure on the economic situation of biomass-purchasing households. Poor rural households have to spend a significant amount of time on biomass collection. Wastage of biomass is depriving the soil of nutrients, resulting in unsustainable low levels of organic matter in the soil.

Bangladesh’s reliance on biomass for cooking will continue for several decades; today only 40% of the Bangladesh population is connected to the electricity grid and in the rural areas, where 80% of the population lives, only 22% have electricity. A mere 6% of the entire population has access to natural gas, primarily in urban areas.

Existing National Strategies and Plans related to Household Energy

All mentioned problems related to inefficient biomass and indoor air pollution use are addressed in the Bangladesh Poverty Reduction Strategy Paper (PRSP) , chapters 5.H.1 ‘Conservation of Nature’ and 5.H.2 ‘Combating Pollution’:

• “The relationship between the amount of the fire wood use and level of income is clearly posi-tive and monotonic. This means that the poor has much less access to quality fuel for cook-ing. Income poverty thus translates into energy poverty.” (p. 164)
• “Population pressure on land has been leading to conversion of forest land and land under tree cover into other uses. This at the same time further lowers the supply of biomass and fuel wood for cooking raising their market value including further deforestation and cutting down of trees. Smoke due to fuel wood burning also is a major cause of a significant rise in the level of indoor air pollution affecting adversely the health of women and children.” (p.164)
• “Air pollution needs to address both the outdoor and indoor sources of pollution. […] Indoor air pollution is mainly caused by cooking fuels such as firewood and dried cow dung. Most of the poor families use these as fuel and women and children are the main victims of indoor air pollution. Due to air pollution the number of people suffering from respiratory diseases is on the rise.” (p. 167) The PRSP derives the following national strategies to address the mentioned problems:
• “For controlling indoor air pollution use of natural gas, biogas and LPG may be encouraged through various means including policy supports for their lower relative prices as well as more efficient and cost- effective cooking stoves.” (p. 167)
• The introduction of energy efficient cook stoves was set one of the key targets to control air pollution in rural settings. “Building coalitions with NGOs for wider dissemination of fuel-efficient cooking stoves” and “Promote R&D to change building and construction standards and designs for pollution-free kitchens” were the respective planned actions on the policy agenda for the fiscal year 2005/06 (p. 301).

Stakeholder Analysis

Rural & Urban Households using biomass for cooking

Biomass-dependent households in rural as well as urban areas are the main target group of the intervention. Almost all (99%) rural and a significant part (66%) of urban households depend on biomass and traditional open clay stoves for cooking. All households with traditional stoves are affected by excessive use of biomass and indoor air pollution. Rising prices of biomass puts economic pressure on households relying on biomass from local markets. This applies mainly for wealthy rural households as well as for all urban households us-ing biomass for cooking. Collecting biomass consumes a significant part of the working time of women in rural low and medium income households. A recent study of GTZ revealed an average of 80 minutes used by women and children per day for biomass collection (BLUNCK 2007).

Exposure to indoor air pollution is responsible for the high incidence of acute and chronic respira-tory diseases, tuberculosis, asthma, and cardiovascular disease; women are particularly affected (WHO 2007). With economic poverty widespread throughout rural Bangladesh, the potential for large investments in new technologies for cooking is generally low.

Participating Organisations

The Participating Organisations – NGOs and private sector companies – are implementing the project in the field by building up a profitable sales structure for ICS. The POs organise technical trainings for ICS manufacturers, produce and disseminate promotional materials, collect orders for ICS from the potential customers and assign the orders to the trained manufacturers. Fur-thermore, the POs produce or procure the material needed for ICS construction, such as chim-neys and grates. The POs are aiming at building up a financial viable ICS business with the start-up financing provided by GTZ (cp. 3.4). For some NGOs, the ICS business is an addition to other pro-poor activities such as micro financing, educational and agricultural programmes. Other POs were launched to solely work in the ICS sector. Therefore, some POs are interested in poverty reduction by their NGO mandate; others do not explicitly follow a pro-poor agenda, but want to do profitable business.

All POs which are interested in a long-term business with ICS are aiming at making enough profit to cover their investments. Furthermore, the start-up financing contract with GTZ indicates re-quired numbers of stoves to be built for full disbursements of funds. Therefore, POs might be re-luctant in taking too many financial risks such as giving micro credit to implicitly reach the poorest households.

ICS Manufacturers

The POs recruit locals – mostly unemployed youths – to participate in 5 day ICS manufacturer trainings. After successfully completing the training the POs provide the manufacturers with or-ders and material to construct ICS in the customer households. The manufacturers receive a fixed payment per built stove (about 2-3 Euro). The ICS manufacturers are the intermediary target group of the project. Previously unemployed they can now make a living with the income from stove manufacturing. Their main interest is to be able to construct as many ICS as possible to increase their income. ICS manufacturers are monitored by supervisors who are mostly members of the NGO staff.

GTZ-SED

GTZ-SED is implementing the ICS project for the German Federal Ministry for Economic Coop-eration and Development (BMZ). SED provides start-up financing, technical advice and training to the POs. The POs’ activities are closely monitored. The overarching goals of GTZ-SED are achieving the MDGs, mitigation of climate change and poverty reduction. GTZ-SED is therefore the stakeholder with the strongest interest in including poor parts of the rural population in the ICS project. Furthermore, GTZ-SED is highly emphasizing the importance of sustainability of the pro-ject outcomes. Besides reaching as many households as possible with ICS, it is GTZ-SED’s fo-cus to guarantee high ICS quality and therewith facilitate the long-term success of the newly started ICS businesses.