A mountain of obstacles weighs renewable energy transition down in Bangladesh, according to a report released on Wednesday by the USA-based Institute for Energy Economics and Financial Analysis.
Bangladesh will need between US$933 million and US$980 million every year until 2030 to meet the new target set in its new renewable energy policy.
The requirement of fund will soar between US$1.37 billion and US$1.46 billion annually until 2040 after 2030, the report estimates.
The new renewable energy policy targets to generate 20 per cent and 30 per cent of electricity from renewable energy sources by 2030 and 2040, respectively.
鈥楶ublic finance alone is unlikely to meet these funding requirements, making large-scale private investment necessary,鈥� says the report鈥檚 co-author, Shafiqul Alam, IEEFA鈥檚 lead energy analyst for Bangladesh and lead author of the report.
The report advises engaging multilateral development banks, international climate finance institutions and bilateral development financial institutions to establish a currency hedging fund to mitigate currency risk, one of the obstacles holding back renewable energy transition.
The incumbent government after assuming power last year suspended 31 utility-scale renewable energy projects passed through non-competitive bidding process under the previous regime. The previous Awami League regime in its 15 years of rule implemented almost all energy projects without bidding.
This sudden shift to competitive bidding and the resulting contractual uncertainties left investors feeling disconcerted, said the IEEFA report.
Besides policy uncertainty, the other obstacles include offtaker risk, land acquisition challenges, cumbersome loan disbursal processes and a downgraded sovereign rating limiting capital flows into the renewable energy sector.
The report highlights that Bangladesh should ensure regulatory stability, restore investor guarantees, map and allocate land for projects, and build capacity in both the banking and service provider ecosystems to attract investment.
Other steps that could also contribute to boosting renewable energy transition are introducing a credit risk guarantee scheme and a dedicated green finance facility and waiving import duty on solar components.聽
鈥楲and acquisition challenges can be mitigated through the public-private partnership model, which can help mobilise investment in renewable energy projects through special economic zones,鈥� Alam said.
The report acknowledges the government鈥檚 positive move in reducing the customs duty on imported solar inverters and calls on the government to reduce the import duty on components of small-scale solar projects, such as solar panels, FRP walkway, mounting structure and DC cable.
The report emphasises the importance of adopting a pre-finance modality of the Central Bank鈥檚 green funds to minimise delays and simplify disbursement.
Moody鈥檚 downgraded Bangladesh鈥檚 credit rating to B2 in November 2024 from B1 earlier, based on the country鈥檚 lower-than-expected economic growth in the near term, political challenges and banking sector risks.
