Originally posted in The Business Standard on 05 April 2023
Bangladesh would require an annual investment of $1.53 billion to $1.71 billion from 2024 through 2041 to achieve its ambitious 40% renewable energy target in total generation capacity, estimates a new report of the Institute for Energy Economics and Financial Analysis (IEEFA).
The report claimed that the estimated investment is less than the power sector’s subsidy burden in the fiscal 2021-22.
It adds that a faster transition to renewable energy would free up financial resources that otherwise end up as subsidy payments.
But the report did not describe how much investment is pouring into renewable energy in the existing fossil fuel-dominated generation regime.
Meanwhile, another report released last month by Change Initiative, a renewable energy research and advocacy firm, claimed that from 2016 to 2022, renewable energy received around $6.71 billion in investment from different funding sources.
The Change Initiative also estimated the country would require around $26.5 billion in investment over the next 20 years to achieve its renewable energy target.
Meanwhile, the IEEFA report finds that high prices of fossil fuels and the resultant increase in power generation costs have led to a surge in the subsidy required by the country’s power sector.
For FY2021-22, the subsidy reached Tk29,700 crore, nearly 152% higher than the previous fiscal year.
Therefore, it suggests a path for the country to transition its electricity sector away from dependence on expensive imported fossil fuels and ease its growing subsidy burden.
“Bangladesh’s electricity generation model appears unsustainable without a clear transition pathway. Therefore, policymakers should raise their renewable energy targets and reflect the same in the upcoming Integrated Energy and Power Master Plan (IEPMP),” says the report’s author Shafiqul Alam, Energy Finance Analyst, IEEFA.
“The government should also translate the renewable energy policy target into a year-wise action plan backed by a monitoring mechanism to track progress,” he added.
The report finds that accelerating the transition of the electricity sector to renewable energy can free up financial resources and enhance the country’s energy security.
“Our analysis shows that the existing power system can immediately incorporate 1,700 MW to 3,400 MW of solar during the day and, subject to the feasibility of location and availability of sufficient wind speed, 2,500 MW to 4,000 MW of wind power at night to reduce the use of costly furnace oil-based power generation,” said Alam.
The report calls on the government to bring in policy changes to promote the adoption of renewable energy. For example, the report suggests the government lift the current cap on rooftop solar installation capacity by up to 70% of the sanctioned load of industrial and commercial buildings.
Similarly, it also recommends waiving applicable duties on fibre-reinforced polymer (FRP) walkways, imported inverters, mounting structures, and direct current (DC) cable, ranging from 15.25% to 58.6%, for rooftop solar projects.
Bangladesh had set a target to generate 10% of its total power generation from renewable sources by 2020, which was later extended to 2030.
At present, the country’s renewable energy generation capacity is only 3.61% of the total 26,700 MW generation capacity that includes captive generation, imported power, and off-grid solar power.
However, the country now has another ambitious target: to generate 40% of its energy from renewable sources by 2041, when its power generation capacity will be 60,000 MW.