The Solar Home System (SHS) programme of the state-run Infrastructure Development Company Limited (IDCOL) is losing its edge because of growing renewable energy business and expansion of electricity network.
According to a study, the sales of Solar Home System have declined by 891 units, on an average, a month over the last one year.
If this downward trend continues, the fate of the IDCOL's overall programme would be in jeopardy, said the study conducted by the Bangladesh Institute of Development Studies (BIDS). The study results were published in November 2018.
The IDCOL had earlier set a target of selling 6.0 million SHS units by 2021.
The IDCOL has a total investment of Tk 52,240 million (US$696 million) in this programme. Of the amount, US$ 600 million came from loans and USD 96 million from grant, according to the data of IDCOL.
The SHS programme has provided solar electricity to about 20 million people or 12 per cent of the total population since 2003, said the study.
The number of SHS units installed in 2005 was only 0.1 million units.
And by June 2018, about 4.13 million solar units have been installed in remote areas -- a considerable success in terms of providing access to electricity in off-grid areas of the country, said the study.
The year 2013 saw the highest-ever figure of 853,037 units installed, but the number started declining at an annual rate of 48.5 per cent since the following year.
The key objective of the study was to assess the current SHS market situation and recommend an action plan for IDCOL, so that they can make a strategy for soft exit from the programme.
Several factors are thought to be responsible for the current dwindling situation of the SHS market, said the study.
They are sales of SHS at a lower price in the unregulated open market, significant expansion of grid connection by Rural Electrification Board (REB), free distribution of SHS units under KABITA and TR (two social safety net programmes) and no new demand.
Besides, IDCOL is also facing two more challenges. Firstly, a substantial number of SHS customers have returned their SHS systems after they came under grid electricity coverage. Secondly, many subscribers did not return the units but stopped paying their due installments.
The study also highlighted the impacts of SHS programme on the welfare of households.
Under the SHS programme, about 4.13 million households are getting access to solar electricity that is being used as their main source of lighting.
The study finds that the SHS has improved household welfare in a variety of ways.
The immediate impact of SHS is the substitution of kerosene lamps used for lighting. It saves about 2.50 litres of kerosene a month for a household, which cost Tk 170.
The slump in kerosene consumption has been contributing to a fall in indoor air pollution level, thereby creating positive health benefits for household members.
The study also highlighted the default situation and the SHS market demand.
The average default amount for each customer is estimated at Tk 9077. Defaulters have yet to pay 36.5 per cent of the due amount while non-defaulters have to pay 46.2 per cent of the due amount, it said.
The survey results also show that about 65 per cent of defaulters and 86 per cent of non-defaulters are willing to pay the due installments.
The total number of default customers is slightly over 1.02 million (12 lakh) while the total default amount is estimated at about Tk 10.68 billion (Tk 1068 crore).
Considering that 65 per cent of the default customers are willing to pay and given the intense efforts of the Partner Organisations (POs), the recoverable amount is estimated to be Tk 6.94 billion (Tk 694 crore). Thus, the remaining unrecoverable amount (bad loans) is estimated at Tk 3.74 billion (Tk 374 crore).
The main reason reported for being a defaulter was financial constraints. POs' poor after-sales service, higher price of SHS compared to open market and natural disasters are also responsible for non-payment of installments.
Financial constraints were also cited by 77 per cent of both defaulting and non-defaulting customers as the main reason for the delay in paying installments, according to the study.
Dr Monzur Hossain, senior research fellow of BIDS, who conducted the study, said this programme is now on the brink of abandonment due to a huge amount owed to customers.
Uncoordinated grid electricity expansion, lack of coordination among respective agencies, failure of the programme's commercialisation, poor financial governance and the absence of a national policy oversight body led to such a situation, he added.
He also suggested building the capacity of banks and financial institutions, developing bond and equity markets, establishing a well-coordinated policy oversight body, and mainstreaming green finance to achieve sustainable development.
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