Renewables sector needs long-term financing roadmap

Bangladesh urgently needs a long-term financing roadmap to promote renewable-energy projects and reach the country's target of net-zero carbon emission by 2050, experts suggested Thursday.

To achieve the goal, they said, the country that is extremely vulnerable to global warming requires framing the monetary policy in such a way that the commercial lenders can feel encouraged to support proliferation of renewable energy.

As the expansion of renewable energy requires a significant volume of investment, the experts recommended going for syndication between state-owned commercial banks (SCBs) and private commercial banks (PCBs) to finance large-scale projects.

Otherwise, the $450 billion economy cannot come out of the high dependency on fossil fuels, which are very costly and environment-destroying options, according to them.

The suggestions and concerns came up at a research dissemination session titled 'Renewable Energy Finance in Bangladesh: Trends and Ways Forward' arranged by Unnayan Shamannay in the city.

Khondkar Morshed Millat, BIBM faculty member and former director (sustainable finance department) of Bangladesh Bank, moderated the session.

In a presentation, Unnayan Shamannay Research Director Abdullah Nadvi said the contribution of renewable energy in the total installed power generation capacity now stands at 4.0 per cent while average supply cost of power went up by 41 per cent in a period between 2015 and 2020 due to excessive reliance on imported LNG.

If the current financing trend is maintained up to 2041, the researcher said, only 9.0 per cent of the finance demand can be met by local banks and financial institutions.

Managing director and chief executive officer of Pubali Bank PLC Mohammad Ali shared the bank's experience in funding two of its completed solar projects and said return on investment starts coming within four years. "These are financially viable projects to us," he added.

Once the project is financed by the bank and it has been running well, the bank's CEO said, multinational lending agencies like ADB and JICA take over the projects by offering low-cost funding.

"This creates a problem," said the experienced banker, urging the global lending agencies to provide such funds to the lending banks from the start of the project.

BB Executive Director (Sustainable Finance Department) AKM Ehsan said the issue of renewable energy has not been given expected priority. Sharing data, he said, there were 40 per cent disbursement targets for banks and financial institutions in terms of sustainable finance and the achievement was 39.66 per cent in the last calendar year (2024).

There is no financing target fixed for the emerging sector but the growth is encouraging. "The disbursement growth in 2023 was 3.84 per cent and the rate rose to 8.96 per cent in 2024."

Director of Sustainable and Renewable Energy Development Authority (SREDA) Md. Muzibur Rahman, President of Bangladesh Sustainable and Renewable Energy Association Mostafa Al Mahmud, Director and Associate Professor of the Institute of Energy at the University of Dhaka Dr. SM Nasif Shams, among others, also spoke at the event.

jubairfe1980@gmail.com