In Bangladesh, New Frontiers for Energy Access Enterprises
By Mohit Anand, Director of Consulting at TFE Consulting
Access to energy in Bangladesh is improving. An estimated 62% of Bangladeshi’s have access to electricity and government estimates give a figure of above 70%. Grants and concessional loans from the Infrastructure Development Company Limited (IDCOL) have driven progress, especially in rural areas.
Energy access services in Bangladesh are primarily provided by local enterprises that are mostly private, for-profit entities. Nevertheless, there are many NGOs also involved, a number of which run operations at a scale similar to some larger private businesses. For instance, Grameen Shakti, holds a large market share and provides multiple energy access solutions including SHS, micro-grids and clean cookstoves. The presence of such NGOs is a result of long-running grant-based financing support in Bangladesh by IDCOL, international development finance institutions and donors.
Given the depth of experience of enterprises in the energy sector, energy access business models in Bangladesh are relatively advanced: some of the larger players have extensive distribution capabilities with hundreds of rural branches to reach their customers. They also offer various solutions to match the specific needs of their customers. Additionally, many provide three to five year loans to consumers to finance their purchases. It is also common for enterprises to offer product assembly and repair options as well as after sales service and warranties.
When it comes to customer payments, the market is ready to make a leap. The Pay-As-You-Go (PAYGO) model for SHS and mini-grids, which has been essential to the takeoff of such solutions in, for example, East Africa, is not yet common in Bangladesh. However, it is expected to launch soon. This is because the use of mobile money is rapidly increasing throughout the country. The market leader bKash is estimated to have over 24 million customers of whom 35% make more than one transaction per month. Network coverage is effectively universal. With the benefits of payment collections possible through PAYGO, enterprises across the board are expected to incorporate the technology into their business model.
Driven by such advances, traditional energy access enterprises are looking for new growth segments. Many are shifting their focus to urban, grid-connected areas, away from the off-grid segment. This is largely because the off-grid electrification market especially for SHS is highly saturated. Sales growth is largely available only in urban areas where industrial consumers are keen to switch to solar for greater supply reliability and lower electricity costs.
Many enterprises that are continuing their focus on the off-grid segment are looking to drive the sale of microgrids. This is because in rural areas, customers are fast moving beyond basic Tier-1 energy consumption and have greater needs. Mini-grids can be sized larger and can offer energy for commercial uses in addition to more advanced household energy uses.
Some enterprises are also focusing on the utility-scale segment. A key driver is a major government shift towards grid-connected electrification. Off-grid systems are being considered as a solution only for remote, hard to access areas.
The energy access market is ready to tackle new frontiers. With the shift in the market towards larger sized systems, packaged/hybrid energy solutions, and grid connected electrification, perhaps it is also time for a change in the grant-based model that has dominated the sector. With the increasing commercial viability of both small and large-scale solutions, the market is ready for commercially driven, low cost financing support that can enable enterprises to scale and grow the breadth of their solutions.
Mohit is an expert on energy in emerging markets. At TFE Consulting, he leads projects to help international companies and international organizations navigate the energy transformation underway globally.
The views in this article are his own and do not reflect the views or findings of any studies or organizations mentioned.
This article is part of a series of blog posts on the off-grid solar market in Asia in the run-up to the Global Off-Grid Solar Forum and Expo (22-24 January 2017 in Hong Kong). Organized by GOGLA and Lighting Global and supported by the World Bank's ESMAP program, the Forum and Expo is the world's premier off-grid solar event bringing together more than 500 off-grid solar professionals. Read more at www.offgridsolarforum.org.
Access to energy in Bangladesh is improving. An estimated 62% of Bangladeshi’s have access to electricity and government estimates give a figure of above 70%. Grants and concessional loans from the Infrastructure Development Company Limited (IDCOL) have driven progress, especially in rural areas.
Energy access services in Bangladesh are primarily provided by local enterprises that are mostly private, for-profit entities. Nevertheless, there are many NGOs also involved, a number of which run operations at a scale similar to some larger private businesses. For instance, Grameen Shakti, holds a large market share and provides multiple energy access solutions including SHS, micro-grids and clean cookstoves. The presence of such NGOs is a result of long-running grant-based financing support in Bangladesh by IDCOL, international development finance institutions and donors.
Given the depth of experience of enterprises in the energy sector, energy access business models in Bangladesh are relatively advanced: some of the larger players have extensive distribution capabilities with hundreds of rural branches to reach their customers. They also offer various solutions to match the specific needs of their customers. Additionally, many provide three to five year loans to consumers to finance their purchases. It is also common for enterprises to offer product assembly and repair options as well as after sales service and warranties.
When it comes to customer payments, the market is ready to make a leap. The Pay-As-You-Go (PAYGO) model for SHS and mini-grids, which has been essential to the takeoff of such solutions in, for example, East Africa, is not yet common in Bangladesh. However, it is expected to launch soon. This is because the use of mobile money is rapidly increasing throughout the country. The market leader bKash is estimated to have over 24 million customers of whom 35% make more than one transaction per month. Network coverage is effectively universal. With the benefits of payment collections possible through PAYGO, enterprises across the board are expected to incorporate the technology into their business model.
Driven by such advances, traditional energy access enterprises are looking for new growth segments. Many are shifting their focus to urban, grid-connected areas, away from the off-grid segment. This is largely because the off-grid electrification market especially for SHS is highly saturated. Sales growth is largely available only in urban areas where industrial consumers are keen to switch to solar for greater supply reliability and lower electricity costs.
Many enterprises that are continuing their focus on the off-grid segment are looking to drive the sale of microgrids. This is because in rural areas, customers are fast moving beyond basic Tier-1 energy consumption and have greater needs. Mini-grids can be sized larger and can offer energy for commercial uses in addition to more advanced household energy uses.
Some enterprises are also focusing on the utility-scale segment. A key driver is a major government shift towards grid-connected electrification. Off-grid systems are being considered as a solution only for remote, hard to access areas.
The energy access market is ready to tackle new frontiers. With the shift in the market towards larger sized systems, packaged/hybrid energy solutions, and grid connected electrification, perhaps it is also time for a change in the grant-based model that has dominated the sector. With the increasing commercial viability of both small and large-scale solutions, the market is ready for commercially driven, low cost financing support that can enable enterprises to scale and grow the breadth of their solutions.
Mohit is an expert on energy in emerging markets. At TFE Consulting, he leads projects to help international companies and international organizations navigate the energy transformation underway globally.
The views in this article are his own and do not reflect the views or findings of any studies or organizations mentioned.
This article is part of a series of blog posts on the off-grid solar market in Asia in the run-up to the Global Off-Grid Solar Forum and Expo (22-24 January 2017 in Hong Kong). Organized by GOGLA and Lighting Global and supported by the World Bank's ESMAP program, the Forum and Expo is the world's premier off-grid solar event bringing together more than 500 off-grid solar professionals. Read more at www.offgridsolarforum.org.
