Renewable energy push lacks clarity

Bangladesh's efforts to adopt renewable energy do not have clarity over the goal, and renewable financing has also proved to be largely inadequate, according to a study.

"So, it will not be possible to attain the renewable energy goal if the targets are not aligned with reality and adequate investment is not ensured," said Shah Md Ahsan Habib, professor at the Bangladesh Institute of Bank Management (BIBM).

While presenting the findings of the study, titled "Renewable Energy Financing in Bangladesh: Alignment with the National Policies", at a workshop in Dhaka yesterday, he said, "The government should align the target first. Then the plan from where you will get the investment and resources."

The Bangladesh Institute of Bank Management (BIBM) organised the workshop at its auditorium in the capital's Mirpur.

Referring to the findings, Habib said the government has set a target for achieving a 40 percent renewable energy share in total energy production by 2041 in the Mujib Climate Prosperity Plan (MCPP).

Despite initial targets of generating 5 percent of its electricity from renewables by 2015 and 10 percent by 2020, Bangladesh has fallen well short of its goals

On the other hand, in the Integrated Energy and Power Master Plan (IEPMP) 2023, the government has set a lower target of achieving 8.8 percent renewable energy production by the same year 2041, he mentioned.

This means, he said the IEPMP was developed without taking into consideration the energy- mix suggested in the MCPP. It also shows a serious lack of coordination among government agencies, said Habib.   

Bangladesh currently incorporates 2.93 percent of renewable energy, amounting to 650.14 MW, within the country's total energy production of 22,215 MW. A substantial portion of about 48 percent, or 10,678 MW, of the total power generation relies on natural gas, according to the study.

As of June 2023, renewable resources, including solar, wind, hydro and biomass, collectively hold an installed capacity of 1,183 MW, constituting a meagre 4.5 percent of the country's total installed capacity.

Here, solar power alone takes the lead, accounting for nearly 80 percent of all renewable sources, showed the study.

Habib said despite initial targets of generating 5 percent of its electricity from renewables by 2015 and 10 percent by 2020, as of June 2023, Bangladesh has fallen well short of its goals.

Citing another study of the local think tank Centre for Policy Dialogue (CPD), Habib said Bangladesh will require an estimated investment of $1.71 billion per year from 2024 to 2041 to achieve the ambitious 40 percent renewable energy target by 2041.

The Institute for Energy Economics and Financial Analysis (IEEFA), which studies energy markets, trends and policies, also estimates the annual investment at $1.53 billion to $1.71 billion.   

This investment, however, does not cover the cost of grid modernisation and storage facilities.

INADEQUATE FINANCING

Despite improvement, financing for renewable energy production shows a visible gap, Habib shared.

He said small-scale local green entrepreneurs struggle to secure funding due to difficulties in proving creditworthiness, lack of proper documents and high transaction costs.

"Banks and finance companies often receive applications without proper documentation, eventually making it difficult to provide loans," said the BIBM professor.

Habib said banks and finance companies need to play a crucial role in ensuring adequate investment in the renewable energy sector to attain the nationally determined targets.

Habib said to achieve the 40 percent target, the country required Tk 20,520 crore investment in 2023, while banks and financial institutions disbursed only Tk 742 crore, leaving an investment gap of Tk 19,778 crore.

Whereas to achieve the 8.8 percent target set by the IEPMP, the country required Tk 4,514 crore investment in 2023, still falling short by Tk 3,772 crore from the amount disbursed in 2023, he mentioned.

Habib, who was among the five-member research team, said the yearly financing or investment gap needs to be covered by other sources like foreign direct investment (FDI) or by additional efforts by banks or finance companies.

Nurun Nahar, deputy governor of Bangladesh Bank, Md Akhtaruzzaman, director general at BIBM, Md Alamgir, associate professor, Md Ali Hossain Prodhania, supernumerary professor, SM Mahbub Alam, joint secretary of the Road Transport and Highways Division, Mohammad Delwar Hossain, joint director at Bangladesh Bank and other top officials also spoke at the event.