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The Financial Express

Renewable energy could be Bangladesh’s best option post Covid-19

Published: May 29, 2020 23:14:20 | Updated: May 30, 2020 09:48:48


Renewable energy could be Bangladesh’s best option post Covid-19

In the post Covid-19 era, renewable energy could be the best suitable option for Bangladesh to reset its power sector development policy to come out of the obligation for capacity payment to idle power plants, says a recent study.

The observation was made by the Energy Economics and Financial Analysis (IEEFA), a US-based international research and analysis organisation. Commenting on the prospect, State Minister for Power, Energy and Mineral Resources Nasrul Hamid said the government is very keen to utilise renewable energy, reports UNB.

 “If any investor comes up with a 10,000MW renewable energy plan, we’re ready to award the contract, even on unsolicited basis, but the reality is that it’s progress in Bangladesh is very slow,” he said.

 “Our Power Division so far awarded over 60 solar power projects, most of which could not be implemented because of the failure of the sponsors,” he said, noting that land scarcity as a major bottleneck in implementing solar power projects.

IEEFA report said Bangladesh’s current plan to increase power capacity, based on a switch to expensive imported coal and LNG, is putting the country on course for deeper financial stress in the power system, similar to the strains already emerging in other countries. The Covid-19 pandemic will make this situation worse.

 “Before the Covid-19 pandemic struck, BPDB expected that the subsidy required in 2019-20 would rise again to Tk 90.00 billion (US$1.1bn). This will now likely need to be even greater,” it said.

The US research organisation said Bangladesh faces significant, long-term overcapacity, and the prospect of increasing subsidies, power tariffs and capacity payments for idle plants if coal and LNG plants are built as planned.

 “With power demand growth set to be dragged down by the coronavirus pandemic, there is now an opportunity to reset the nation’s power development policy and pivot towards renewable energy (without capacity payments) along with grid investment to improve system strength and allow the addition of more renewables to the grid,” it added.

Renewables to help realise ‘Vision 2041’

In addition to grid upgrades and modernisation to reduce system losses, domestic renewable energy can also reduce overall system costs while enhancing energy security and resilience, the IEEFA observed.

To mobilise the required funding for promotion of renewable energy, it said a flexible approach to unnecessary China-funded coal power proposals may be possible if governments engage more proactively with China on a preference for renewables.

 “Proposals promoting fossil-fuels could be supplanted by more appropriate grid and renewables projects rather than simply being cancelled,” it said.

Setting a precedent for renegotiation, the IEEFA said the power minister of Bangladesh advised power division officials to negotiate with the Ministry of Finance and donor agencies for support because of the huge financial losses in the power sector.

IEEFA said that globally and regionally in South Asia, renewable energy is already less than two-thirds the cost of imported fossil fuels. Bangladesh is well-positioned to take advantage of deflationary renewable energy to reduce overall system cost and provide affordable energy to households and industry.

 “Less reliance on imported fuel avoids the ups and downs of volatile commodity markets can give valuable price stability to enable the realisation of ‘Vision 2041’ of Prime Minister Sheikh Hasina, which aims to accelerate growth in high-value agriculture, trade and industry, education and healthcare, and transport and communication,” the US research body said.

Domestic renewable energy can provide Bangladesh with more resilience to external shocks, improve its competitiveness and thus improve growth potential, it mentioned in the report.

Given likely falls in solar module prices of 5-10 per cent over the coming decade, not only will renewable energy soon be the cheapest form of new power generation in Bangladesh, it will also be quick to build while not adding to air pollution or carbon emissions.

Affordable energy over the medium and long term remains essential for Bangladesh to sustain rapid economic growth. Bangladesh should reprioritise its power system development and redirect resources at technologies that can deliver the price stability and competitiveness required to realise the goals of ‘Vision 2041’, IEEFA said.

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