World Bank OKs Credit to Bangladesh for Solar Home Systems

The World Bank on Aug. 4 approved a US $130 million IDA credit to Bangladesh, designed to increase access to electricity through installation of affordable solar home systems in rural areas.

This credit is additional financing for the Rural Electrification and Renewable Energy Development Credit, a project that since 2003 has connected 600,000 consumers to the electricity grid, constructed about 8,500 km of new distribution, and provided 320,000 consumers with solar home systems.

Despite advances, access to electricity in Bangladesh remains low, currently around 40 percent. Power shortages and load shedding are severe, especially in rural areas, which hurt economic growth and industrial development. In addition, population growth, increased industrialization, additional connections, and rise in the use of modern, electrical appliances have boosted demand for electricity, currently growing at a rate of over 500 MW a year.

"Investing in grid electricity alone will not realize the government of Bangladesh's goal of universal access to electricity by 2020," said Rob Floyd, acting World Bank country director for Bangladesh. "This additional financing will be used to provide electricity to 300,000 households through solar home systems. Many of these households in poor areas are too remote to connect to the electricity grid and would never receive electricity through conventional electrification methods."

A part of the additional financing will be used to purchase and install about 10 million energy efficient compact fluorescent lamps in densely populated areas in the country. These will replace an equivalent number of incandescent lamps.

"Lighting coincides with the peak load hours and contributes over 20 percent of the demand," said Raihan Elahi, senior energy specialist and task leader for the project. "Replacing these lamps, which will be free of charge for residential consumers, is expected to reduce the peak demand by about 360 MW."

The project will support an ongoing renovation of the electricity distribution network as well as provide financing for renewable energy projects such as biomass and biogas power plants, solar water pump for irrigation, and solar mini grids.

The credit from the International Development Association (IDA), the World Bank's concessionary arm, has 40 years to maturity with a 10-year grace period; it carries a service charge of 0.75 percent.

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