Findings from the newly released report from Change Initiative on ‘Follow the Renewable Energy Finance in Bangladesh’ show that Bangladesh Needs to Show More Competitiveness in Power Purchase and Transparency in Tarriff Determination to Attract More Investment in Renewable Energy.
Change Initiative has released a report on ‘Follow the Renewable Energy Finance in Bangladesh’. This will be a bi-annual report on the present status of renewable energy in Bangladesh, published by Change Initiative (CI) on 14th December 2023. The report highlights the key points on progress and challenges until 2023 of Renewable Energy adoption and practices.
Bangladesh has a target of generating 40% of its electricity from renewable sources by 2041, as per the Mujib Climate Prosperity Plan (MCPP). As of the publication of the report, Bangladesh has installed 461 MW of renewable energy capacity, mainly from solar power, and has planned another 4115 MW of projects in various stages of development. During COP28, country leaders of 123 nations including Bangladesh agreed Global Renewables and Energy Efficiency Pledge, committing to a collective goal of tripling global renewable energy targets to double the global average annual rate of energy efficiency improvements from about 2% to over 4% by 2030. They also committed to prioritizing energy efficiency as the "first fuel" in policy, planning, and major investment decisions.
The Change Initiative Study revealed the inconsistency in Renewable Energy targets, inequitable approval of Renewable Energy projects in terms of potential of solar radiation and exaggerated tariffs in Renewable Energy projects.
During COP28, country leaders of 123 nations agreed Global Renewables and Energy Efficiency Pledge to double the global average annual rate of energy efficiency improvements from about 2% to over 4% by 2030. They also committed to prioritizing energy efficiency as the "first fuel" in policy, planning, and major investment decisions. Bangladesh is among the 123 countries, committing to a collective goal of tripling global renewable energy targets.
44.34% of total capacity (2020.30 MW) of solar projects are located in the Chittagong Hill Tracts Zone, most solar radiated area while solar projects in Rangpur 18% (with combined capacity of 611.3 MW) and Mymensingh 13% (with combined capacity of 551.7 MW).
One recent policy shift in Bangladesh promotes "Clean Energy" over "Renewable Energy." Nevertheless, renewable energy, including solar, wind, and biomass energy, are a safer and more reliable technology within the current scope of this report. Within the context of Bangladesh, these additional the "Clean Energy" sources remain unproven, unreliable, and expensive supply driven. Prioritizing clean energy over proven renewable energy could create unprecedented burden in Bangladesh in terms of safety, security, affordability, access to resources, and energy scarcity. IEPMP 2023 has unnecessarily created scope for unexpected economic pressure as well as input dependent energy security.
The report further analyses the ownership, finance, tariff, and implementation of renewable energy projects, highlighting the role of the private sector, the need for transparent and efficient procurement, and the variation in pricing strategies. According to the report, the private sector plays a significant role in the renewable energy sector, owning 59% of the planned projects and investing 62% of the total funds. Public investment amounts to $312 million, representing 23% of the total investment while joint venture investment of $212 million, makes up to 15% of the overall identified investment for renewable energy generation in the country.
According to M Zakir Hossain Khan, Climate Finance Expert and Chief Executive of Change Initiative, "Bangladesh's sustainable progress in dealing with the climate crisis depends on building a nature-based, cost-effective and sovereign renewable energy-based economy. Under no circumstances should the potential of renewable energy be nipped in the bud by undermining the jurisdiction of the Energy Regulatory Commission and looting immoral benefits through unreasonable tariffs. This tendency will jeopardise the immense potential of RE expansion."
There is a difference in public and private tariff rates, the private projects of RE are charging a higher tariff for power purchase, specifically at a rate of $0.13 /KWh. In contrast, public projects are offering the lowest tariff rate ($0.10/KWh). Additionally, joint venture projects are charging tariffs higher than those of public projects, indicating variation in pricing strategies across different owners. There is further an absence of clear trend in tariff rates across different capacity ranges, making it challenging to identify a consistent pattern in the pricing strategies of private power plants. The majority of the renewable energy projects are unsolicited, meaning they are initiated by developers without a competitive bidding process. There are also higher tariffs for both unsolicited and large projects.
Another major point to note from the report is that the tariff rates for renewable energy vary across different owners and capacities, with private projects charging higher rates than public and joint venture projects. In neighbouring countries, regulatory authorities have predetermined tariff rates based on size and publicly disclose comprehensive detailed cost estimates and tariff rates of various projects. This level of transparency is lacking in Bangladesh, where regulatory bodies do not provide such information.
"In order to turn the current energy and economic crisis in Bangladesh into a possibility, the government must ensure integrity and competition in the energy sector. To build a smart Bangladesh, we must prioritize building a smart and green energy-dependent green future," recommends M Zakir Hossain Khan, Climate Finance Expert and Chief Executive of Change Initiative.
The Change Initiative study offers the following key lessons learned and recommendations for enhancing the renewable energy sector in Bangladesh. These include maximizing the potential of renewable energy sources, especially in the regions with high solar radiation and wind speed; as well as ensuring the best utilization of available finance for renewable energy expansion, by prioritizing solicited and competitive projects, reducing the reliance on loans and equity, and increasing the access to grants and concessional funds from national and international sources. Measures to address financing needs should include carbon tax and products designed to specifically address risks and credit.
One crucial focus should be assessing and mapping of renewable energy resources, as well as developing a comprehensive renewable energy finance strategy which should be obligatory to follow. It is also important to improve the tariff determination process for renewable energy projects, by adopting a transparent and consistent methodology, benchmarking with regional and global best practices, and avoiding exaggerated or inflated rates. Bangladesh must also implement a strong monitoring system for renewable energy decisions, emphasizing environmental and social standards and ensure compliance and transparency in all stages of RE projects including solar-based irrigation system.
Finally, it is important to focus on strengthening stakeholder collaboration on renewable energy promotion, by involving the civil society, private sector, academia, and media in the policy development, implementation, and oversight of the renewable energy sector.