Renewable energy: Future for greener and resilient economy in post covid-19 era

In the context of challenges in meeting the SDG targets by 2030 and forestalling the worst effects of climate change at the soonest, the costs of ignoring the relevant science would be too much to bear which were exacerbated by the COVID-19 - and if greenhouse gas emission increases, the risk of future pandemics may also increase with it. Our societies need significant overhauling so that planetary boundaries are not exhausted, and sustainability can be ensured. The unprecedented global response to COVID-19 has already proven that this transformation is possible. Current global pandemic might be a major cause, oil and gas companies have faced mounting challenges in recent years. Declining costs for clean and renewable technologies combined with ambitious emission reduction commitments and pledge of billion of dollars for green stimulus by the developed nations are indications for building green and resilient economy.

GLOBALLY CLEAN ENERGY IS PUSHING FOSSIL FUELS: In March this year, in response to the already declining price of oil, the petroleum industry may have already reached a tipping point. Daily Brent crude oil spot prices averaged $29 per barrel in May, up $11/b from the average in April mainly due to announced production cuts by OPEC and partner countries (OPEC+). US Energy Information (EIA) expects monthly Brent prices to average $37/b during the second half of 2020 and rise to an average of $48/b in 2021 which would still be much lower than the $60/b starting year price of 2020. However, Bangladesh does not have adequate or surplus storage capacity, refinery as well as standard distribution and marketing policies to take much advantage of this sudden price fall. The pattern of exponential improvement in a renewable energy (RE)technology's cost curve associated with increases in production volumes is very encouraging where the cost of solar, wind, LEDs, and lithium-ion batteries have all dropped by more than 80 per cent over the past decade thanks to the combined force of technology innovation, learning-by-doing, and scaling.

However, among various types of renewable energy technologies, the market for solar photovoltaic is especially expanding because of decreasing capital cost and levelised cost of energy (LCOE), increasing capacity factor, technological advancement and considerable influx of investment. Several international reports testify in support of this trend.

As per IRENA report of June 2020, since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82 per cent, followed by concentrating solar power (CSP) at 47 per cent, onshore wind at 39 per cent and offshore wind at 29 per cent. Next year, up to 1200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV. Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to $23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5 per cent of total global CO2 emissions in 2019. It would also yield an investment stimulus of $940 billion, which is equal to around 1 per cent of global GDP.

The same IRENA report states that electricity costs from utility-scale solar PV fell 13 per cent in 2019, reaching a global average of 6.8 cents ($0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined about 9 per cent, reaching $0.053/kWh and $0.115/kWh, respectively. Solar PV prices based on competitive procurement could reach at average $0.039/kWh for projects commissioned in 2021, down 42 per cent compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants.

More electricity has been produced from renewables globally than from coal-powered generation on 47 days so far in 2020, surpassing the 38 days across all of 2019. In Europe, renewables delivered nearly half of all electricity generation between March and April, an increase of 8 per cent compared to the same time last year. Coal use will likely recover as people go back to work and school, but the broader trend is clear. Coal is increasingly uneconomic and new energy investments will continue to focus on lower-risk clean and renewable energy. Renewable investments are stable, cost-effective, environment and health friendly and attractive offering consistent and predictable returns while delivering benefits to the wider economy, society and environment.

OPPORTUNITY TO FOCUS ON CLEAN ENERGY: Bangladesh and many countries around the world are seeking to recover their economies from the impact of COVID-19. It would be a significant opportunity to define a path, not only to address near-term challenges but also to support long-term green and low-carbon economic growth and development. Spending sufficient recovery resources to support Bangladesh's transition to clean energy will be crucial to release the burden of current heavily subsidised over capacity energy sector.

Negotiated Solar IPP Tariff in recent years in Bangladesh also clearly shows a declining trend, though there is scope of further reduction. From $0.19 per kWh in 2015, it has come down to only around $0.10 per kWh in 2019. If this trend continues for next couple of years, then solar power would become the cheapest and affordable power option for Bangladesh. If private sector does not come forward with appropriate tariff due to cost uncertainty, government may itself start large-scale investing and set the future path. Between 2010 and 2019, the global weighted-average LCOE of bio energy for power projects (fossil fuel or coal based) fell from $0.076/kWh to $0.066/kWh. With imported fuel (both coal and oil) and capacity costs, in Bangladesh, it stands at around $0.10 /kWh which is already unjustified economically-- set aside environmental costs.

Attaining a consistently high growth rate along with expansion of social safety net has enabled Bangladesh to become a lower middle-income country (LMIC; a WB measure) in 2016/17 and to meet all three criteria for LDC graduation. It is expected that the country will come out from the LDC category in 2024 provided no unforeseen global or domestic crises cripple the functioning of the economy beyond repair in the short term. The recently adopted Perspective Plan 2041 (PP2041) of Bangladesh rightly underscores the importance of following a sustainable production and consumption of power and energy resources as one of the enablers for reaching the advanced country position. The share of renewable energy-based power generation including hydro has remained stuck at around 3 per cent which is far off the target of 10 per cent by FY 2020. The fuel mix for power generation is presently heavily tilted towards fossil fuels, acknowledged by the PP2041.

An ambitious target of producing nearly 27 per cent of electricity from renewable sources (31GW) against a total installed generation capacity of 115,514 MW [35 per cent from RE including trade which would be 9GW ] by 2041 has been fixed from a paltry base of non-hydro RE (both on-grid and off-grid) electricity generation of 397.82 MW as of June, 2020 in the PP2041. This target represents a big upward jump in ambition since the 2016 PSMP targets of 10 per ent electricity from RE sources by 2020 amounting to 2000 MW and 9000 MW by 2041. It is really a high target. A recently drafted Solar Action Plan 2041 by SREDA, supported by UNDP has also advocated for 13.6 GW in medium case scenario and 30 GW in high case scenario only from Solar. In high case scenario the study also estimated the potential to generate 4075 MW from rooftop solar and 3050 MW from solar irrigation pumps by 2041 .

This represents a committed big shift in policy regarding RE expansion and sustainable development and someone may argue that this is an attempt to project a façade of green image and commitment to fulfill the target set in 2015 for the country. Even if so, this is a welcome commitment from the government.

TIME TO BUILD GREEN AND RESILIENCE: COVID-19 has brought people together in a way that no amount of advocacy or awareness raising could. We now have a shared understanding that will make it easier to take the right action; no one wants to experience this type of crisis again in near future. The last few months may have offered a preview of how a green recovery can work. In the post-COVID-19 world, a green economy must shift from being a side-effect to an objective for Bangladesh and the world.

Dr. Md. Taibur Rahman, Arif M. Faisal,

Md. Khurshid Alam work at UNDP Bangladesh