Clean energy biz suffers setback

Suppliers of renewable accessories are in difficulty opening letters of credit (LCs) due to banks' failure to finance imports with greenback amid an increased demand for solar products this year.

Even the demand for solar accessories spiked to 100- 200 per cent during the recent power crisis across the country, according to sector insiders.

The government plans to generate 40 per cent of the total electricity production from clean energy by 2041.

People familiar with the development said the credit facility for solar importers was curtailed in January.

However, they are now forced to deposit in banks 100-110 per cent of import payment in advance to bring in such solar items.

Even, some traders needed to lobby with the central bank to ensure their LC-opening process.

Higher energy prices, coupled with energy shortages in sync with geopolitical crisis, have created alacrity in industries to implement rooftop solar projects.

Garment and textile industries have higher motivation to make their systems green through both renewable energy and energy efficiency as they want to stay competitive in the international market.

Garments and textiles are under mounting pressure from buyers to use clean energy.

The government is also expecting more solar projects in near future in the form of independent power plants.

All these have led to the increasing demand for solar accessories this year, the insiders observed.

Shafiqul Alam, the energy finance analyst for Bangladesh at the Institute for Energy, Economics

and Financial Analysis (IEEFA), said: "Precautionary measures have resulted in reduced LC opening.

However, it [import] is still happening in billions of

dollars."

"We need to strike the iron while it's hot. This will eventually pave the way for the 40-per cent clean energy target by 2041…"

Mr Alam suggested that the central bank check whether good clients faced significant delays in processing LCs for solar accessories.

In such cases, according to him, the regulatory body may provide directives to the banks to promptly open LCs for solar projects of solvent clients. For a smooth LC process for solvent clients, especially in light of the

2041 clean energy goal, the National Board of Revenue may label solar accessories as essential goods, observed Mr Alam.

However, bank-client relationship matters in banking sector, too. This may affect the LC-opening process and good clients may get their LC-related jobs done easily while others may not, he opined.

The government is considering more renewable energy to feed the grid in the coming years, said Mr Alam, adding that solar energy was financially lucrative too.

Dipal C Barua, founder and chairman of Bright Green Energy Foundation, said solar business has been suffering a major setback since the Russia-Ukraine war.

Dollar-starved banks concerned are largely reluctant to open LCs to import solar products, he added.

The banks have sound commercial logic that they are mostly prioritising to import essential items.

Their regular business cycle was being disrupted, noted Mr Barua, also a former president of the Bangladesh Solar and Renewable Energy Association (BSREA).

People in remote areas were still having the load shedding problem, so the demand for solar panels was rising 15 to 20 per cent in those areas, he explained.

Mr Barua himself tried to apply for $0.1-million LC opening, but the bank concerned agreed to $30,000 only.

Md Irfanul Haq Bhuyain, managing partner (Solar Home Co) and executive member (BSREA), said solar energy entrepreneurs were facing huge complications to import solar accessories.

However, demand is soaring day by day because of the recent power predicament in the country, he added.

It takes a single day to open an LC, but banks are now taking six to seven months, according to Mr Bhuyain.

The businessman imported 20,000-25,000 units of solar panels worth $1.0-$1.3 million annually. However, it declined to 8,000-10,000 units.

The demand for solar products has increased some 30-40 per cent compared to last year's, he added.

SS Trading CEO Siddikur Rahman told the FE that he has also faced a delay in opening LC since January.

Bangladesh Bank executive director and spokesperson Md Mezbaul Haque said he had no information that renewable traders were facing setbacks in importing solar products due to greenback shortages.

However, he admitted that some tight situations persisted in most banks due to depletion of foreign-exchange reserves.

Mr Haque, however, suggested that solar accessories suppliers go to the banks that focus mainly on import issues, arguing that banks have their own independent business strategies.

Some banks adopt export-focused business policies like RMG-based while many deal with import issues, he explained.

Renewable businesses should communicate and take resorts to banks who mainly deal with import issues, he suggested.

Mr Haque, however, said some banks that deal with import issues are currently having trouble opening LCs.

He hoped such a problem would end within a short time as the flow of foreign-exchange reserves caused by export earnings and remittances are increasing again.

[email protected]