WB loan: Mobilising private sector participation to help expand renewable energy

In the face of growing alarm of global climate change due to the burning of fossil fuels, the concept of renewable energy is gradually gaining importance across the world. The World Bank (WB) has approved US$ 185 million to help Bangladesh add up to 310 Megawatt (MW) in renewable energy generation capacity.

This assistance will mobilise private sector participation to meet the growing demand for electricity in the country. For the Scaling-up Renewable Energy Project the support will increase the country's installed capacity of renewable energy through piloting and expanding investments in key market segments. It will build the first 50 MW phase of a large-scale solar panel energy park in the Feni district. This will be implemented by the Electricity Generation Company of Bangladesh (EGCB).

The share of the total installed renewable energy in grid supply currently is only 1.5 per cent and has significant potential for scaling it up. By avoiding burning fossil fuels, the project will give the country better access to cleaner electricity as well as air. It will help cut emissions of carbon dioxide by 377,000 tons equivalent a year.

With about 80 per cent of the country's population having access to grid electricity, Bangladesh is well on its way towards becoming an upper middle-income country. The World Bank maintains that Bangladesh also has one of the most successful off-grid renewable energy programmes in the world. This project will help expand renewable energy generation capacity. The expanded renewable energy sector by leveraging all sources of finance is ready to push the country's growth trajectory further, according to the World Bank.

The project will help mobilise up to US$ 212 million from the private sector, commercial banks and other sources of financing in the country. And to provide credit to developers of both rooftop solar photovoltaic (PV) and large-scale solar PV projects, it will establish a dedicated Renewable Energy Financing Facility. With the development of the financing facility, the project will support the country's Infrastructure Development Company Limited (IDCOL). To build market capacity and develop a pipeline of renewable energy projects, this will provide resources to the Sustainable and Renewable Energy Development Authority (SREDA) also.

Jari Vyrynen, the World Bank team leader for the Scaling-up Renewable Energy Project, says that in Bangladesh the power sector has grown rapidly from a little over 4,000 MW in 2009, with maximum generation capacity increased to more than 20,000 MW in 2018. The World Bank official hopes that a strong collaboration between the public and private sector will not only help meet energy demand of the country but also will lower carbon emissions to avert climate change. The US$ 185 million credit also includes a US$ 26.38 million loan and a US$ 2.87 million grant from the Strategic Climate Fund (SCF) of the World Bank's Climate Investment Funds (CIFs).

The World Bank's International Development Association (IDA), from which the credit comes, provides concessional financing with a 30-year term, including a five-year grace period. This is also with an interest rate of 1.25 per cent a year with a service charge of 0.75 per cent. The SCF loan has a maturity of 40 years, including a grace period of 10 years and is on Scaling-up Renewable Energy Programme (SREP) Loan terms.

However, the main attraction of the loan is that in addition to improving the cleaner electricity supply for the country it will cut carbon dioxide emission in the air. 

Sarwar Md. Saifullah Khaled is a retired Professor of Economics, BCS General Education Cadre.

[email protected]