Setting the sun on off-grid solar?: policy lessons from the Bangladesh solar home systems (SHS) programme

Abstract

ABSTRACT After decades of growth, the Bangladesh Solar Home Systems (SHS) programme, the world’s largest domestic solar off-grid electrification scheme which has frequently been heralded as a model for other developing countries, is in danger of collapsing as end user support and installation levels have plummeted. This paper explores the reasons behind this development, tracing the programme run by the Infrastructure Development Company Limited (IDCOL) from its early expansion employing pioneering partnership and financing models, to its more recent decline. It finds that the government’s simultaneous implementation of several competing on- and off-grid energy access projects and lack of regulatory oversight alongside significant subsidy decreases which made SHS uncompetitive, led customers to abandon the programme. This, in turn, is putting at risk Bangladesh’s objective of achieving Sustainable Development Goal (SDG) 7 – affordable, reliable, sustainable and modern energy for all – by 2030. KEY POLICY INSIGHTS: The intended maturation of the market for off-grid solar did not occur alongside the gradual reduction of the SHS programme’s subsidy scheme. This resulted in a lack of service and technology providers and continued high system prices, unattainable to poor households in rural Bangladesh. The Government of Bangladesh’s unexpected grid expansion into SHS areas and introduction of free solar energy systems in 2015 further undermined the programme because it led to: o customer’s turning away from SHS and defaulting on their loan payments, leading to financial problems for IDCOL’s partner organizations. o entry of unregulated sub-standard panels into the market, resulting in a lack of confidence and distrust in the SHS by end-users. • A key role of the government is to ensure the sound quality of the systems and services from the outset to instil customer confidence in the product. • The creation of successful long-term energy access requires a comprehensive, integrated approach to coordinate stakeholders and oversee market development over time, ensuring that markets for new technologies and services such as SHS have an opportunity to succeed.