UNB :
The Bangladesh government has set targets for generating 20% and 30% of electricity from renewable energy sources by 2030 and 2040, respectively, under the country’s new Renewable Energy Policy.
Bangladesh will require between US$933 million and US$980 million annually until 2030 to meet the new target.
Post-2030, the country will need between US$1.37 billion and US$1.46 billion annually until 2040, a new report by the Institute of Energy Economics and Financial Analysis (IEEFA) finds.
“Public finance alone is unlikely to meet these funding requirements, necessitating large-scale private investment,” says the report’s co-author, Shafiqul Alam, IEEFA’s lead energy analyst for Bangladesh.
However, abrupt policy changes, off-taker risk, technology and performance risk, weak project pipelines, a cumbersome loan disbursal process, land acquisition challenges, currency volatility, and lower sovereign rating limit private sector investment in the sector, Alam notes.
By engaging with Multilateral Development Banks, international climate finance institutions and bilateral development financial institutions, the government can consider establishing a currency hedging fund to mitigate currency risk.
The current government has suspended 31 utility-scale renewable energy projects that received Letters of Intent through the non-competitive bidding process under the previous government.
This sudden shift to competitive bidding and the resulting contractual uncertainties have left investors feeling disconcerted.
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.
The report underscores the importance of reinstating the “project implementation clause” to dispel uncertainties over payment or establish a funding mechanism to provide revenue assurance to renewable energy producers, mitigating counterparty risks.
“Land acquisition challenges can be mitigated through the Public-Private Partnership model, which can help mobilise investment in renewable energy projects through special economic zones,” Alam suggests.
