Ensuring fiscal space for renewable energy

Uncertainties over availability of funds to raise the renewable energy to a notable level have become a major concern. The resource constraint is seen as a hurdle in the nation's bid to produce more green energy at a time when country's gas reserve has been depleting fast and uncertainties over the overseas export and manpower markets are looming large. A recent discussion meeting, organized by a local policy think tank, Centre for Policy Dialogue (CPD), was told that renewable energy's share in the national power grid is only 3.6 per cent while fossil fuel-based power dominates with 43.4 per cent. To help reduce the huge spending on fossil fuel imports, it is essential to boost renewable energy. The country, according to an estimate, will have to make an investment of US$42 billion to achieve that by 2040.  That is a substantial amount of money.

The government does not have the capacity to invest $3.0 billion annually, on average, on renewable energy. The budget for FY 2025-26, for instance, has left little fiscal space in support of renewable energy. Though the FY '25's budget had at least a symbolic commitment worth Tk 1.0 billion for the renewable energy sector, the FY '26 budget of the interim government made no commitment as such for renewable energy. The government's Energy and Mineral Resources Division (EMRD) got a revised budgetary allocation of Tk 10.53 billion, which in US dollar at the current exchange rate is around USD 86.417 million for FY 2025. Now, what share of this budgetary allocation for EMRD would go to develop renewable energy remains a question. So, how can the government hope to achieve its renewable energy objectives as envisioned in its latest energy policy without any fiscal resources earmarked for the purpose?  Yes, there is a provision of 10-year tax exemption for renewable energy producers followed by 5 years' partial relief. There is also the provision of duty exemption on the import of equipment related to renewable energy and the facility of selling excess power to the national grid under the Net Metering Guidelines of 2018. These and other such provisions for the renewable power producers and investors are but supportive in nature. Where is the government's own involvement here?

Obviously, the renewable energy policy, 2025 looks progressive. But considering the past performance of the government on renewable energy issue, there is hardly any reason to be overly hopeful about   the future. Notably, the policy think tank CPD has termed it 'overambitious'. It is against this backdrop some experts are calling for creating a sizeable renewable energy fund by the government preferably from the national budget to reduce the risks the lenders like commercial banks might face while recovering those (loans) from recipient renewable energy producers and entrepreneurs. To meet the target of sharing 20 per cent of grid capacity by 2030, the country would be required to generate additional 18.162 GW of renewable energy. Similarly, it will have to produce 35.713 GW of renewable power to meet the target of 30 per cent by 2040. Since, mobilization of a huge volume of state resources for investing in renewable energy would be difficult, the government does not have any option other than seeking involvement of private sector and bilateral and multilateral donors.  

So, to implement its renewable energy strategy successfully, the government, in addition to drawing its own resources as much and possible, will have to create an enabling environment for investors, foreign and local. However, the interim government and any other future government should carefully shun the path the immediate past autocratic regime had chosen to distribute benefit to political cronies using the infamous indemnity law adopted in 2010 for the power and energy sector.