Pitch
Adopting renewable energy technologies for emission-free and low-cost agricultural irrigation and thus progressing toward achieving SDG 7
Description
Summary
In Bangladesh, the agro-food supply chain accounts for nearly 85 percent of water withdrawal. Energy-intensive irrigation system in agriculture resulting in large-scale CO2 emission due to fuel combustion that accounts for nearly 90 percent of total emission causes the sector to be inefficient in terms of production cost, sustainability and profitability. Currently, of the total number of 1.71 million irrigation pumps in the country, 83 percent are diesel engine-operated and 17 percent are electricity-operated. As a consequence, substantial increase in diesel price over the last decade has resulted in higher market price of agricultural products particularly rice, the country’s staple food.
Given the fact that 87 percent of the irrigation equipment in Bangladesh agriculture runs on diesel, the governments provide large amount of subsidy for diesel to deal with the shocks of shortages or prices hikes in fuel, which in turn raises the growth of CO2 emission. Energy subsidy in the country accounts for 90 percent of the total amount allocated for all subsidies (almost 4 percent of gross domestic product (GDP) while the country runs a budget deficit of 5 percent of GDP). Subsidy for diesel, however, comprises nearly 40 percent of the total energy subsidy. Increasing energy subsidy for agriculture will pose serious risk for sustainability of the sector disturbing the inter-linkage between water, energy and food supply system in the long run.
Considering the fact that solar irrigation system costs only 22-56 percent of operational cost related to diesel pump operation and has a payback period of about 5 years with 20 years expected life time, the project is to supply and install 1000 solar irrigation systems and 180 micro grid (6 Kw) in 100 selected upazilas helping 30,000 rural farmers and 18000 rural households have access to clean energy and safe water, thereby reducing energy subsidy and carbon dioxide emission and improving the status of food security in the country.
Is this proposal for a practice or a project?
Project
What actions do you propose?
The broad objective of the project is to enhance sustainable energy use in irrigation by replacing diesel-intensive pumps with solar irrigation systems and thus to contribute to achieving the Sustainable Development Goal (SDG) 7 and ensuring access to affordable, reliable, sustainable and modern energy in efficient irrigation system. The specific objective of the project is to improve sustainable energy usage replacing diesel fuel, reducing carbon emission and fuel subsidy by 90 percent in rural farming.
Solar irrigation system and solar power is gaining popularity in Bangladesh because of uninterrupted water supply in dry season, very low maintenance and cost advantage over diesel engine-operated pumps. In addition to low irrigation cost and adequate water supply, following problems associated with diesel engine and electricity operated irrigation system are accelerating the demand for solar pumps day by day.
- Transportation of diesel to the crop field causes the farmers to lose productive labour hour
- Supply of diesel often becomes inconsistent resulting in irregular irrigation and consequential loss of harvest
- Farmers’ dependence on middlemen for diesel in peak irrigation and cropping season make them vulnerable to financial shocks
- Diesel pumps frequently break down, and their maintenance cost is high
- The minority of farmers has limited access to electricity with persistent power outage
- Frequent load shading of electricity supply during peak hours and boro seasons
With 60 percent of land under irrigation and about 40 percent of rural people having access to on-grid power connection, a vast majority of farmers is likely to adopt solar irrigation system with an efficient mechanism for distribution of solar pump being developed. Increasing installation of solar pumps, as demonstrated in the above figure, over the last couple of years implies the potential for farmers’ high demand for solar irrigation system over diesel intensive pumps. In addition, installation projection of Infrastructure Development Company Limited (IDCOL) program suggest that the market for solar pumps in Bangladesh will expand to a great extent throughout the next decade.
Proposed Actions To Be Taken by the Actors:
Actions to be taken by Rahimafrooz Renewable Energy Limited (RREL), the implementing agency:
- Identify and select farmers’ cooperative or individual farmer with required credit worthiness
- Study feasibility of solar irrigation and household energy supply
- Agreement with banks for green financing @6%
- Agreement with farmers
- Secure and avail grant against Build-Operate-Transfer (BOT) project
- Install pump system to clients’ land and develop maintenance mechanisms by involving farmers’ groups or cooperatives
- Provide the select group of farmers with necessary training and know-how to install and maintain the pump systems
- Provide after sales support
- Provide 2 years warranty for pumps & 20 year warranty for panels
- Ensure participation of farmers equity @10%
Banks and Financial Institutions:
- Tri party agreement ( BANK-RRE-Farmer Co-Op) for BOT financing
- Assess credit worthiness
Donor Agency/Project Funder:
- Approves project financing
- Provides 50% Grant & 40% guarantee fund against green bank finance for 1000 solar irrigation systems
- Provides USD 5 million grants for 180 solar micro grids (6 KW) each
Who will take these actions?
Rahimafrooz Renewable Energy Limited (RREL) will be the implementing agency. The company will seek technical assistance from IDCOL and financial grants from donor agencies, national and international financial institutions.
The author of the proposal will work as a project consultant for RREL, which will lead all the actions related to implementation of the project.
Where will these actions be taken?
The project will be implemented in 100 selected upazilas (sub-district) of Bangladesh.
In addition, specify the country or countries where these actions will be taken.
No country selected
Country 2
No country selected
Country 3
No country selected
Country 4
No country selected
Country 5
No country selected
Impact/Benefits
What impact will these actions have on greenhouse gas emissions and/or adapting to climate change?
The project aims to install 1000 solar irrigation systems and 180 micro grids enabling 30,000 rural farmers and 18,000 rural households to deal with the vulnerabilities to water and energy insecurity, production loss, and consequential livelihood shocks. The project will generate such adaptation results as increased resilience of wellbeing through enhanced, livelihoods, water, energy and food security, and strengthened regulatory and institutional arrangements for climate responsive irrigation system in agriculture. In addition, the project will also generate mitigation results through contributing to emission reduction.
With 1000 solar irrigation pumps and 180 micro grids installed, the project will help reduce emissions by more than 20,000 tonnes of CO2 per annum.
A total of 300,000 people are expected to benefit from the project through receiving such benefits as low cost irrigation, saved labor hour, improved access to water for irrigation and resultant high profitability while 30,000 farmers and 36000 households members will be directly benefitted from the project with increasing the agriculture production by 20% and ensuring availability of food for farm households, creating green jobs both for men and women, the project is likely to benefit additional 250,000 people indirectly.
With such outcomes as access to drinking water, 99% beneficiaries’ access will be ensured to safe drinking water and clean sustainable energy addressing the adverse climate impact such as unavailability of drinking water and arsenic contamination in the shallow water level and fossil fuel based grid electricity.
What are other key benefits?
Potential for Replication and Private Sector Involvement
Given that Bangladesh aims to install 50,000 solar irrigation pumps by 2025, successful implementation of this project has enormous potential for replication. Currently, involvement of private sector in supplying and installing solar irrigation system is extremely limited. It is therefore expected that the project will help in promoting private sector involvement in supply of solar irrigation systems. In addition, successful financing of the project will also foster a financing appetite among local banks and financial institutions for investing in such projects.
Furthermore, the project will build awareness and confidence among the rural farmers about installing solar irrigation systems. Given the project’s success in providing the farmers with low cost irrigation services by reducing their dependence on diesel intensive irrigation pumps, it is likely that the cooperatives of farmers throughout the country would be willing to develop their own enterprises in solar irrigation systems. Both the government and private sector may be interested in promoting such microenterprises among the farmers’ cooperatives.
Economic
- Employment generation: While the project will require around 20-30 permanent employees for operation and maintenance, it is expected that more employment opportunities will be created throughout implementation phase since the project would enter into an engineering procurement construction contract under which would necessitate a number of skilled and unskilled workers.
- Replacement of diesel for irrigation: In view of estimation, it is expected that successful implementation of the project would save the country 9 million liters of diesel per annum resulting in foreign currency savings of approximately US$ 7 million.
- Increase of agriculture production: It is expected that at least 20% agriculture production will be increased with the supply of sustainable clean energy in irrigation and cultivation of crops throughout the years with the uninterrupted water supply while relevant agricultural training will be provided to adopt the climate change.
- Provide clean energy: The project aims to provide clean energy to households and business through mini grids and reduce the dependency of 75,000 households on fossil fuel.
Social
- Safe drinking water supply: Providing access to water, the project will help the farm households substantially reduce time required for fetching water from distant sources and ensure supply of safe drinking water
- Involvement of women entrepreneurs: In addition, successful implementation of the project will indirectly promote women entrepreneurship in supply of solar energy services by formalizing a channel for distribution of drinking water and renewable energy at household level
- Formation of farmers’ cooperative: small farmers will form farmers’ cooperative and linked to broader platform of financial inclusion.
Costs/Challenges
What are the proposal’s projected costs?
The project will provide sustainable energy in irrigation to replace use of diesel, and reduce related subsidy, supply alternate clean energy competitive to the conventional fossil fuel generated electricity and contribute in achieving Sustainable Development Goal (SDG-7) with a view to ensure access to affordable, reliable sustainable and modern energy for all. The cost of the project is competitive in compared to similar project implemented in Bangladesh. As a result, the project is expected to provide sustainable and affordable clean energy in irrigation, commercial ventures and households as well at a rate of 14% IRR. The project will supply the most advanced world class technology and products at a reasonable price with consideration of warrantee and customers services with a proven track records in Bangladesh over the past decade. The project is very much environ and user friendly, robust, durable and easy to operate and manage with minimum maintenance and operation cost, while remote monitoring is helpful for both the users and service providers.
Estimated financial structure:
- Total project cost: USD 30 million
- Tenor 8 years
- Equity: 10% (USD 3 million)
- Grant: 60% (USD 18 million)
- Guarantee fund against bank loan: 30% (USD 9 million)
The project will apply the best practices and adopt innovative business model based on Build-Operate-Transfer (BOT) model. According to feasibility assessment, the project is able to generate social-economic co-benefits and financial returns including environmental impact by reducing carbon emission by more than 20,000 Mt per year over the project period, small enterprise development using clean energy and food security ensuring guaranteed irrigation in a sustainable manner.
The project budget is estimated USD 30 million, of which 60% is sought as grant, 30% guarantee fund against bank loan and 10% equity from the end users. Since Bangladesh is exposed to vulnerability and food insecurity due to climate change in the context of geographical position in the World Vulnerability scenario, the proposed grant finance is justified. The project will support the participation of local banks to provide loan to end users against guarantee fund.
Timeline
July 2018-June 2026
The proposal is expected to start having an impact from 2022.
About the author(s)
Ebney Ayaj Rana - the author of the proposal, is a lecturer in development studies at the University of Dhaka, Bangladesh. He teaches agriculture and rural development, environmental economics, public finance, and project management at the university. He also works as a consultant for the Rahimafrooz Renewable Energy Limited (RREL), Bangladesh, and leads the preparation of various agricultural, environmental and clean energy projects at the company.
Related Proposals
References
Government of Bangladesh, 2012. Technology Need Assessment and Technology Action Plans for Climate Change Mitigation, Government of Bangladesh. http://unfccc.int/ttclear/sunsetcms/storage/contents/ stored-file-20131129151612490/Technology%20 Needs%20Assessment%20And%20Technology%20 Action%20Plans%20For%20Climate%20Change%20 Mitigation.pdf
Government of Bangladesh, 2012. Outline Perspective Plan of Bangladesh 2010–2021: Making Vision 2021 a Reality, Government of Bangladesh. http://planipolis.iiep. unesco.org/upload/Bangladesh/Bangladesh_Final_Draft_ OPP_June_2010.pdf
Ministry of Power, Energy and Mineral Resources, 2012. Energy Efficiency and Conservation Rules (Initial Draft), Government of Bangladesh. www.powerdivision. gov.bd/powerdivision/uploads/21.pdf
Ministry of Environment and Forests, 2009. Bangladesh Climate Change Strategy and Action Plan, Government of Bangladesh.www.moef.gov.bd/climate_change_strategy2009.pdf
Infrastructure Development Company Limited, 2012. Rural Electrification Board, Bangladesh: Rural Electrification and Renewable Energy Development Project II: Environmental and Social Management Framework. Dhaka: IDCOL.
Infrastructure Development Company Limited, 2012. Guidelines for Loan and Grant Application – IDCOL Solar Irrigation Program. Dhaka: IDCOL.
World Bank, 2013. Implementation Completion and Results Report. Rural Electrification and Renewable Energy Development Project. Washington DC: World Bank. www./thegef.org/files/gef_prj_docsGEFProjectDocuments/MandE/EO_TEs_FY13/ WorldBank_TEs_APR2013/1209_WB_TE_ICR.pdf
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